On 'optimal' technology and scale in industrialization: Steel-making

Questions of the appropriateness of technology transfers from industrialized countries, and of the concomitant implications for the optimal scale of operations, have formed a persistent topic in discussions of development schmes. Some of the theoretical assumptions underlying these discussions are examined on the basis of empirical observations on the establishment of steel-making facilities in developing economies. Steel mills have become regarded as part of the necessary infrastructure in many countries; thus, a sufficiently large number of installations have occurred to permit some generalizations. It is found that the achievement of optimal plant sizes, in the sense of static economic theory, proves elusive at best in the dynamic setting of ambitious growth objectives. Completely aside from political considerations, various economic factors not only militate against the projection of an optimal scale of operations, but also make a commitment to such a scale inadvisable. Besides, little evidence is found to suggest that advanced techniques are not sufficiently flexible in terms of input and size requirements to permit their transfer to developing countries. One may hazard the conclusion , rigidities could prevent the realization of a new industry's full potential.