Merits and demerits or advantages and disadvantages of capital intensive production techniques

Merits of capital intensive techniques

• It is associated with the production of high quality products which command high prices
• It is associated with mass production which accelerates the rate of economic growth
• It encourages the development of skills since it requires highly skilled labour hence encouraging research, innovation and invention
• It reduces the chances of labour unrest inform of strikes and demonstrations, since machines do not strike. Consequently, this increases production
• It improves on productivity and efficiency of labour due to constant research and training
• It encourages transfer of modern and efficient technology from MDCs to LDCs i.e. it bring about technological transfer
• It encourages exploitation of idle resources such as swamps, forest, minerals and lead to increased development
• It promotes industrialization and development of other infrastructure hence promoting the manufacturing sector.
• It save time because a worker who employs a machine does his job in a short time and gets less exhausted than manual labour.
• It brings high profits for the entrepreneur because it reduces on the wage bills for labour.
• It encourages specialization and production of surplus at low cost and export to earn foreign exchange
• It increases assets in the country, which can be used as securities for getting loans.
• It encourages the used of modern method of farming e.g. use of tractors and fertilizers

Demerits of capital intensive techniques

• It is costly to buy machines. LDCs depend on foreign aid and loans to finance their budget, if they adopt this strategy for their development it will make them heavily indebted.
• It leads to technological unemployment, since more machines are preferred to abundant labour; this means that human beings will remain idle without jobs
• It leads to income inequality. The few highly skilled manpower will be employed to rum machines and majority without skills will not be employed and as a result the income inequality gap widen
• Cost of maintenance in terms of repairs, replacements and depreciations are high
• It requires high expenditure of foreign exchange on raw materials, skilled labour and spare parts
• Machines are not applicable at some stages of production for example in printing books where sorting of printed paper is done manually.
• It encourages large-scale production which requires a big market for commodities, which may not be available
• It is not helpful in eradication of poverty since there would be a few people engaged in production.
• It encourages creation on monopolies that restrict output so as to charge high prices
• It is not always profitable in areas with land shortage considering use of tractors, chemicals, fertilizers which are normally costly
• It encourages rural-urban migration since it is used mainly in urban areas.