Labour Unrest and the Introduction of a Direct Labour Management System

Abstract

The First World War and the Great Extension Scheme (GES) jointly provided the opportunity for the Tata Iron and Steel Company (TISCO) to improve labour productivity based on an unprecedented enlargement of its plant and equipment; but it would turn out that the additional production capacity alone was insufficient to attain the desired goals. According to the growth accounting analysis for the interwar period presented in Table 1.1, the rise in TISCO’s capital growth rate of 28% per annum during the period 1917/18–1922/23 was nearly cancelled out by negative total factor productivity (TFP) growth of −17% per annum during that same period, resulting in a low productivity growth rate of just 5% annually. Because TFP is linked with management efficiency, negative TFP growth suggests that TISCO suffered from severe managerial inefficiency after the implementation of GES. This means that TISCO could only have enjoyed the fruits of that internally financed Scheme if supplemented by significantly large improvements in managerial efficiency.