Global Trends 2030: top report from US intelligence

My inbox regularly receives the latest ‘global trends 20XX’ reports from thinktanks and futurologists, and a lot of them are pretty bland, and the scenarios they describe threadbare and unconvincing. The new ‘Global Trends 2030’ report from the US National Intelligence Council shares the usual flaws on its scenarios, and is understandably US-centric (the NIC is a US government body), but its description of trends feels spot on, albeit a bit cursory on climate change. In Rumsfeldian terms, it summarizes the known knowns – ‘megatrends’, reflecting underlying ‘tectonic shifts’, but adds in a discussion of known unknowns, both long-term processes  - ‘game changers’,  and (mainly negative) discrete events – ‘black swans’. But you can be pretty sure that Rumsfeld’s final category, unknown unknowns, will mess up this nice arrangement. Here are some of its summary tables:

Megatrends and Game Changers

Tectonic Shifts

Black Swans

The most novel aspect for me was the focus on the political implications of demographic transitions – NIC reckons aging populations will encourage liberalization and democracy, and reduce levels of conflict. Plausible given the age range of most fighters, but a bit reductionist?

Development optimism from Justin Lin: review of ‘The Quest for Prosperity’

‘Every developing country has the opportunity to grow at over 8% a year for 20-40 years, and to get rid of poverty within a generation.’ There’s something very refreshing about listening to East Asian development economists, in this case the prolific Justin Lin, a former World Bank chief economist, launching his new book The Quest for Prosperity, at ODI just before Christmas. The contrast between his can-do optimism and the dark clouds of Eurogloom and Afropessimism could not have been greater. But is he right?

While others in development wonkland are increasingly scathing about blueprints and best practice guidelines, Justin is unabashedly a man with a plan. The book takes his paper on ‘Growth identification and facilitation’, (see my earlier review, and Justin’s reply), and boils his thinking down into what he calls a ‘six point recipe’ for developing country governments.

1. ‘Choose the right target’:  find a country that looks like you in terms of ‘endowments’ – geography, natural resources, markets etc, but that is doing much better, with a per capita income that is, say, double yours. Then imitate it. This is a straight lift from Asian ‘flying geese’ story.
2. ‘Remove binding constraints’: identify which of your own industries look like those in the target countries and find out what’s holding them back (infrastructure, credit, red tape etc). Sort those things out first. Justin draws heavily on Dani Rodrik and Ricardo Hausmann’s work on growth diagnostics.
3. ‘Seduce and attract Global Investors’: Justin goes for Washington Consensus-style openness to FDI, along lines of Bangladesh or Singapore rather than the more protectionist route followed by South Korea and others
4. ‘Scale up self-discoveries’: But he also thinks governments need an active industrial policy to spot and support local innovation and technological upgrading (eg Indian IT or cut flowers in Ethiopia)
5. ‘Recognize the Power and Magic of Industrial Parks’: he won’t make many friends among the trade unions on this one, but (drawing on China and Vietnam), he sees export-processing zones as the best way to overcome dilapidated infrastructure and get exporting quickly
6. ‘Provide limited resources to the right industries’:  a tentative support for an activist industrial policy

What this amounts to is an attempt to mash together elements of the structuralism of the 1950s, the East Asian experience, new thinking from people like Rodrik and Hausmann, and the Washington Consensus of the 1980s, not so much splitting the difference as combining the best bits of all of them. It’s politically cautious, trying to play to both sides of the aisle (for example, he says his recipe is ‘consistent with The East Asian Miracle’, the World Bank’s notorious and largely discredited attempt to rewrite the East Asian tigers as a neoliberal success story).

The ensuing discussion at ODI was pretty critical, although Justin defended his recipe with passion. ODI’s Dirk van de Velde argued that it’s no good having a good recipe if you don’t have any cooks. Justin is much stronger on the economics than the politics, and ‘assumes a tin opener’ in the shape of an effective state both willing and able to implement his recipe. That’s a big assumption. When challenged he is pretty naive on the politics, arguing that leaders will be motivated to do the right thing because they want ‘a good name in history’. Yeah, right.

Kunal Sen from Manchester argued that the political economy of growth accelerations is very different from growth maintenance. Lots of political regimes produce growth spurts followed by busts, very few can keep it going for Justin’s ‘20-40 years’ and we need to understand better why that is.

Sheila Page stressed the limits to imitation: as the technological product cycle grows ever shorter, it is becoming less viable to rely simply on imitation, because the technology will already have moved on by the time you have absorbed the knowledge. No good arriving ten years late with a really cheap fax machine.

What about finance? I wasn’t clear from Justin’s presentation what role he sees for financial integration, given that financial markets are sources of huge volatility, put pressure on economic policy-makers to follow a more free market route, and often don’t lend to the right people (eg small and medium enterprises).

Is this a genuine recipe, or does it always rely on hindsight? I asked Justin if he would have predicted in the 1960s that South Korea had a ‘latent comparative advantage’ in iron and steel. He said yes, but I have my doubts.

Beyond these concerns, I applaud the intention, but worry that the attempt is flawed on two fronts. Firstly, I share the general scepticism on blueprints, and secondly, I’m not sure it’s actually possible to mix and match such opposing schools of thought in this way.

As for the book, it’s very sweetly written, and dotted with great quotes. My favourite is from Einstein, ‘Theory is when you know everything but nothing works. Practice is when everything works, but nobody knows why. We have put together theory and practice: nothing is working, and nobody knows why.’

Who needs wisdom when you can have data? FP2P 2012 blogstats and most-read posts

Welcome back, Happy New Year to all etc. As everyone else is doing it, I thought I’d repeat last year’s exercise of kicking off the year with a look back at this blog’s stats and highlights for 2012. First the numbers:

Turning garbage into music this Christmas.

Aaah, this is too sweet to hold over until the New Year. Paraguay’s Recycled Orchestra is the creation of Favio Chavez, a landfill worker and musician. It transforms garbage into classical instruments, played by the kids of local people  (Garbage not garage?). Their story is being turned into a film (if they can raise enough cash), with the perfect title landfillharmonic. Magical. Christmas starts here. See you in 2013 (Mayan apocalypse permitting) [h/t Jenny Matheson]

Does agriculture have a future? Sonali Bisht wraps up Oxfam’s online debate

For the past two weeks, Oxfam has been hosting an online forum on the future of agriculture with a great range of viewpoints from every corner of the globe. Today is the last blogging day before the Christmas break (see you in 2013, everyone), so I’m handing over to Sonali Bisht, founder of INHERE, India, to wrap up a pretty diverse set of discussions.

The technology to produce synthetic food exists. Food pills are only one step beyond the vitamins, proteins and other food and nutrient supplements currently available in the market. We have knowledge of hydroponics and we can grow food in multi-storey production complexes. Certainly, there are plenty of alternatives to traditional farming for food and other needs. Does agriculture, as we know it have a future?

The experts who contributed to the Future of Agriculture debate, all eminent persons, leaders in their field, chose not to address such radical alternatives, and the comments received did not dispute that choice. Clearly, food grown by people living in rural areas, especially smallholders, is seen as important for the future.

“The technology to produce synthetic food exists.”

Smallholders currently constitute the majority of agricultural producers, the bulk of the poor and half the world’s hungry. They are expected to continue producing for a growing and more affluent urban population, and to do so in ways that keep food prices low, preserve the environment and manage the multifaceted risks they face, including vulnerability to shocks from the natural, socio-economic and political environment. The risks and vulnerabilities faced by women and indigenous populations, and expected to be managed by them, are even greater.

The experts generally offer optimistic visions for the future of agriculture, though the reasons for their optimism vary. Experts with a background in agriculture research and industry put their faith in fossil-fuel and chemical-based agriculture to achieve the increases in productivity needed to feed the population of the future. Or they champion comparative advantage, open trade and functioning markets.

Experts with a civil society background, on the other hand, believe high production levels can be obtained without chemical- or fossil-fuel-based inputs. They cite evidence that organic and sustainable agriculture achieves equivalent production in normal years and higher in drought or abnormal years. They also see sustainable and organic agriculture as empowering for women farmers, valuing their role and knowledge in agriculture, and helping to keep them and their families out of crippling debt. And several view food sovereignty as more important than markets.

The primacy of smallholders was acknowledged by almost all the experts. Several maintained that smallholders can generate research knowledge and use it for their prosperity, noting that peasants already make an enormous contribution in that regard.

“The primacy of smallholders was acknowledged by almost all the experts.”

If farming is to continue, youth need to pursue it as a career. But at present, farming is not an occupation young people aspire to and smallholder farming is not perceived to be a respected occupation. Agriculture is not given the status of a skilled craft in most countries, and thus wages of unskilled labour apply. This situation can and must change in developing and developed countries alike.

Farms need to be managed as profitable businesses if they are to attract a new generation of farmers. Perhaps, as Nicko Debenham suggests, some form of community or group enterprise would offer a sustainable business model that could generate a “more-than-acceptable living.” I wonder if that would appeal to Susan Godwin, who wants secure land tenure and more access to information for her daughter. Or to Rokeya Kabir, who says women farmers deserve more for the hard work they put in.

The views expressed were many and too rarely did those of opposing views engage each other. Pro- and anti- food sovereignty views were

left unresolved. Much of the debate resided in the realm of hope, perhaps best expressed by John Ambler, who envisaged institutional reforms leading to healthier eating and a healthier food system.

“The reality is that it has been difficult to build political will that favours smallholders.”

The underlying challenge has always been politics. As Prem Bindraban observed, power structures, vested interests, economics and other

drivers influence decisions in agriculture. Participants in the debate voiced this sentiment in different ways to express skepticism as well as hope. But the reality is it has been difficult to build political will that favours smallholders.

There is an Indian saying that the one who is thirsty goes to the well. The well does not come to him. Yet, without exception the experts feel farmers should produce for the market, conduct market intelligence, take their produce to the market.

One would think that if food is a priority need of consumers the initiative would come from them or their representatives. The consumer, who is generally urban and has higher income, should take responsibility for creating reserves to account for the vagaries of weather and for insurance against price fluctuations. The farmer should be in the position to decide whether he or she can produce at the price consumers offer or if further negotiations are needed. Community-supported agriculture, where communities invest in farmers by subscription, is a model that is worth more attention, as it guarantees farmers a fair price and assures consumers of clean and safe food, while sharing the risk.

“The one who is thirsty goes to the well. The well does not come to him.”

Mostly this does not happen. Politicians have their constituencies to please, and most of these are non-farmers living in wealthier areas of the country. Private companies view agriculture as an unending stream of business and profits. The political power of the fossil-fuel industry and the lobbying clout of agribusiness keep agriculture dependent on fossil fuels.

Nonprofit NGOs, though always strapped for resources, can create models of excellence which demonstrate the success of innovations. But these are rarely replicated at scale. Research institutions create knowledge which the poor are unable to access and use, while private companies can and do, often at a fraction of the real cost.

The consumer, especially the urban consumer, tends to be king in agriculture. Companies vie for a percentage of his or her essential spending and governments pander to the needs of this majority. Good intentions tend to get lost in this realpolitik. Until aware consumers change their behaviour, the smallholder farmer will get good words, symbolic gestures, and little else.

“Farmers need to be recognized as co-creators of knowledge in agriculture, encouraged and respected for the innovations they develop.”

It would not cost very much to make changes that, by common consensus, would transform the future of agriculture for rural poor people. Farmers, especially women, need security of land tenure or land ownership and protection against land grabbing. Farmers require fair prices for their produce and ways of farming which do not get them into debt and food insecurity.

Above all, most experts and respondents agree, farmers need to be recognized as co-creators of knowledge in agriculture, encouraged and respected for the innovations they develop. Farmers and research institutions must be linked in a web of knowledge creation and application, with joint responsibility for improving production and productivity through joint trials, participatory innovation, and farmer validation of scientists’ claims. This is the key to meeting production challenges in the agriculture of the future.

“Agriculture not only feeds people, it, builds close-knit families and societies.”

National systems and multilateral agencies should support this process with NGOs and farmers’ organizations facilitating accountability. Planning of production for local markets and according to local needs would avoid mismatch and waste. Application of force majeure clauses in production agreements would eliminate much of the risk. Subsidies and artificially lowered prices of commodities as social welfare measures have proven to be hotbeds of corruption and disincentives to farmers and should be avoided.

Agriculture not only feeds people, it creates engagement and employment in sustainable livelihoods, builds close-knit families and societies (especially smallholder and family farming) and supports cultural and social engagement as well as social stability. In today’s world it provides an alternate way of living from the stress and strain of urban areas. It preserves our farm landscape, traditions and heritage. We all have a responsibility to preserve and enhance our agricultural heritage—and that means not allowing a single farmer or farm labourer to go hungry or to suffer for being involved in agriculture.

How we saved agriculture, fed the world and ended rural poverty: looking back from 2050

As Oxfam’s two week online debate on the future of agriculture gets under way, John Ambler of Oxfam America imagines how it could all turn out right in the end

It is now 2050.  Globally, we are 9 billion strong.  Only 20% of us are directly involved in agriculture, and poor country economies have diversified.  Yet we all have enough food.  Technological innovation has played its part, but increased production has been largely driven by institutional reform.  For example, industrialized countries have eliminated the subsidies that once undercut poor country agricultural production and exports.  Land reform has spread in Latin America.  Water reform has proceeded in Asia.  Irrigation, which once constituted 70% of freshwater use, now consumes less than 50%.  New agronomic practices are taking hold worldwide. The world is eating more healthily and locally.   The sustainability of our agricultural systems is taken as non-negotiable by the world’s politicians.

The key?  Institutional reform.  And the key to institutional reform has been placing citizens and primary producers in more central oversight and ownership positions, with governments stepping back and taking more responsibility for managing at watershed and ecosystem levels.

The institutional structure of innovation

Governments are investing more in public sector agricultural research, while multi-stakeholder “trustee panels” provide broad oversight.  Public agricultural research institutions rely for 15% of their budget on licensing their innovations to farmers, creating an additional accountability linkage.  In poor countries, farmer-to-farmer innovation is partially subsidized by the government, as is improved agricultural information.

Private agricultural research is encouraged, but publicly-funded innovations are jealously preserved for the public domain. Local “agricultural boards”, with a mix of government, farmer, and civil society representation, have a large say in setting the research agenda.  Income from agricultural patents accrues to the creators, but the state sometimes intervenes for the public good, as it once did for HIV/AIDS medicines.

Biological or chemical innovations in agriculture are now supervised by FDA-like mechanisms at national and global levels, which assess potential impact on human, animal, and environmental health. Patents produced from government-funded programs are held in public trust. Income from such patents is divided equally between inventors and state agricultural programs. Special efforts are taken to advise government and communities on the economic and social implications of agricultural innovations produced by public research.  Major breakthroughs have occurred for crops that grow well under saline conditions and under the higher temperatures associated with climate change.  New drought and heat tolerant varieties especially suited for the tropics and for some breadbasket areas of the North have been developed.  GMOs are selectively used but heavily regulated, and are limited primarily to industrial crops.

Investment in innovative water-saving technology is flourishing, incentivized by better valuation- worldwide, water is now acknowledged as an economic good and has a price.  Water use efficiency for agriculture is up 50% compared to 2012.  The state has stepped up in its oversight roles, and guarantees base flows for ecosystem sustainability.

The institutional structure of production

Small-holder farmers now get significantly more attention.  Governments support cooperative storage facilities – to manage stocks, flows, and prices.  They have also improved transport links to major agricultural areas and provide loan guarantees for agricultural cooperatives. Both rich and poor countries have developed a clearer understanding of the role of the state in all this: where markets already function reasonably well, they should be left alone, within the confines of reasonable regulation.  Where the markets themselves are not functioning properly, as in many poor countries, the State should play a role, not least to ensure that the very large number of poor people who are still dependent on agriculture benefit from their involvement. In consequence, rich countries have stopped subsidizing food production, leaving market forces to determine agricultural prices, while poor governments have extended their assistance to small-scale agriculture fourfold, primarily through co-investment rather than through full subsidy. Market systems, even in statist countries, are allowed to signal supply and demand.  Most countries have disbanded their inept and corrupt ministries of cooperatives, replacing them with wholly farmer-owned “cooperative companies,” which have at least the same status and legal persona as any corporate entity.

All over Latin America, major land reform has peacefully taken place, with compensation to the former owners. The beneficiaries, mostly peasants, pay for the land over time at a discounted rate. Land reform has served the triple bottom line: higher productivity, more equitable income distribution, and greater ecological sustainability.  Strengthened regulatory safeguards govern the buying and selling of agricultural land.

Heavily dependent on irrigation, Asia, home to nearly half our population, has accomplished major reform in water management, including revamping its water rights frameworks.  Significant water rights have been invested in companies controlled by farmers.  But multi-stakeholder water boards closely supervise transactions and form the first point of adjudication for disputes.  Even large irrigation systems formerly run by government are now managed by farmer-owned cooperative companies or by public utilities. Irrigation engineers work for the companies, not the government, thus increasing the incentives to raise productivity, reduce water consumption, increase equity, and tackle waterlogging and salinity.  Water cooperatives sell the water they save to other users, including growing urban areas. Proceeds from sales are reinvested in irrigation infrastructure and in research.  For its part, governments now focus on issues above the individual irrigation system, especially ecological sustainability and inter-system water distribution.

In many countries, some agricultural extension services have also been privatized, providing the incentive for agronomists and extension agents to develop and disseminate products that the farmers want and are actually willing to pay for.

The debate is over about whether large-scale mechanized production is more efficient than small-scale peasant production.  We acknowledge that both are necessary. In countries such as the USA, grain production stays under large mechanized farms. However, fruits and vegetables, which respond more to higher inputs of labor, is increasingly managed by smaller farms.  Many developing countries have benefitted from selective mechanization, such as power tillers and small tractors, but except for areas with major labor shortages, wholesale mechanization has been found to be neither necessary nor advisable.  And, in some places, such as terraced rice fields, the mechanization possibilities remain extremely limited.

The proliferation of advanced agronomic techniques continues. The plant root management techniques that started with the system of rice intensification in Asia have spread to new crops and continents.  For many crops, combinations of newer and older agronomic wisdom appear to yield superior results.  Restructuring the incentive and ownership frameworks for agricultural research and extension has been instrumental in producing new knowledge appropriate for the small holder.  GMOs have gone through periods of alternating approach, avoidance, and ultimately cautionary adoption mostly limited to industrial crops.

We have mostly organic solutions on how to enrich the soil. Even soil-rich countries had, mistakenly, often considered soil as inexhaustible. When the nutrients disappeared, treatment overly relied on chemical fertilizers. Now, chemical fertilizer consumption is down 75% because of reduced  costs to spread organic material (largely through new solar and hydrogen-powered transport vehicles), better recycling of organic urban waste, improved crop rotation, and more widespread use of nitrogen-fixing cover crops.

Fisheries and watersheds/forests are now under new management.  In the case of the former, international bodies with advanced surveillance equipment now monitor fishing fleets in open water to make sure they comply with stricter international fishing quotas; while artisanal fisherfolk have stronger legal rights and technology to protect their coastal fishing rights.  Regarding watersheds, the practice of downstream urban areas paying for upstream environmental protection services is now widespread. In selected areas, urban areas also pay agricultural producers to use less climate changing production techniques. New solar and hydrogen-based energy and better battery storage technologies greatly reduce the use of arable land for bio-fuels.

The institutional structure of consumption

Over 1 billion farmers are both sellers and buyers of food; and another billion rural people must buy all their food.   With rising incomes, we have faced the severe challenge of high grain prices due to rising demand for grain-fattened meat animals.   We still produce large quantities of grass-fed beef, lamb, and goats, but we have managed to reduce per capita consumption of grain-fed meat through public education, new “grain-meat” taxes, and social programs that emphasize the reduction or elimination of meat in the diet.  Grain-fed meat consumption in emerging economies has grown relatively slowly due to good public education.    Health professionals have helped reduce grain-fed meat consumption in the West, while poor countries have been able to better meet their protein needs through new crop-based amino acid combinations rather through grain-fed meat.

In conclusion, politicians around the world have learned that for agriculture to successfully produce food, stabilize the ecosystem, and generate employment, institutional reform is critical.  This particular reform path is difficult because it requires nuanced policies—selective mechanization, appropriate application of artificial fertilizer, judicious GMO use, equitable land reform, improved valuation of water, fairer structure of knowledge creation, and more citizen control over regulation and enforcement.  The underlying policies and institutions are the product of continual negotiation.  And, new technology has been at the service of these institutions rather than the institution being driven by the technology.  Special efforts are needed to ensure that poor farmers and women benefit from the new structure of ownership and authority.  These changes have gotten us to a new place, one more meaningful because it centers around equity, sustainability, and distribution, and not so much on profit, extraction, and comparative advantage, as it did back in 2012.

What would a global campaign on production and industrial policy look like?

Regular readers will know that I am a big fan (as well as friend) of Cambridge economist Ha-Joon Chang (right), whose most recentbook,23 Things They Don’t Tell You About Capitalism should be at the top of any policy wonk’s reading list. Last Saturday, he gave a brilliant keynote at the annual conference of the UK Development Studies Association. Its title, ‘Bringing Production Back into Development’, was a deliberate challenge to those in the room, as he argued that the discussion on development has become like Hamlet without the Prince.

The Prince, according to Ha-Joon is ‘productive capabilities’ – the steady upgrading in skills and industry that has characterized virtually every successful experience of national development, including of course his native Korea. From Adam Smith to the 1980s, the consensus was that such upgrading was the core business of development. No longer:

Left and Right both ignore the issue: Neoclassical economics only concerns itself with how to improve the efficiency of market exchange. It assumes away the problem of how to build productive capabilities in the first place. The ‘Left’ is only concerned with regulating capitalism, taxing it properly, then spending the proceeds on the things it cares about – health, education, poverty reduction.

That focus on health and education is important in enhancing individual productive capabilities, but it is not enough. Most upgrading takes place inside large firms, so you need to consider systemic issues via industrial policy and building institutions.

I’m not sure if those in the room realized what a bombshell Ha-Joon was delivering. He was arguing that most of development’s sacred cows – Amartya Sen, the MDGs, basic needs, poverty reduction are missing the main point. I won’t rehearse his arguments any further (just read 23 Things), but over lunch, we discussed the implications for NGOs and others. Is a campaign on industrial upgrading just too weird and abstract to work? Not if you break it down into its components:

At the multilateral level, lots of NGOs have bought into this, for example, criticising intellectual property rules for blocking technology transfer, or pressing to defend ‘policy space’ within the WTO or regional trade agreements, where the powerful countries are actively seeking to reduce the ability of less powerful ones to conduct industrial policy. This is the heart of Ha-Joon’s breakthrough book, Kicking Away the Ladder, and also the subject of a South Centre pamphlet we

wrote together back in 2003, The Northern WTO Agenda on Investment: Do as we Say, Not as we Did. Ha-Joon also wrote a South Centre/Oxfam paper on WTO industrial tariff negotiations. To that could be added international campaigning for a minimum level of corporate taxation (to prevent the race to the bottom), against tax havens etc.

At a national level, NGOs could campaign for natural resource revenues to be used at least partially for industrial upgrading (which would mean they oppose the CGD proposal to spend them all on social protection). This could involve incentives to upgrade technology, train

workers and promote a decent jobs agenda. See second half of this paper by Ha-Joon for more.

More traditional NGO territory such as advocacy on strengthening welfare systems would fit in here, as social security is central to

reducing the human toll of the kind of ‘creative destruction’ involved in industrial upgrading, as firms and jobs rise and fall. Ha Joon also argues that cooperativization is a good way of pursuing upgrading, by adding value to primary products, improving marketing etc.

Politically, such a shift might well be problematic. From my experience working on codes of conduct in supermarket supply chains, I would say that trades unions are more likely to see NGOs as competitors than allies. Arguing that the state should build what we used to call a ‘national bourgeoisie’ – a class of entrepreneurs with a commitment to national upgrading, rather than ‘rent-seeking’ rip off merchants – might well be hard for staff and partners committed to working with grassroots organizations of poor people, who sometimes have a tendency to see all large private sector firms as the enemy.

You could argue that this is not our thing, that we should leave industrial policy issues to governments and other grown-ups. Ha-Joon’s point is that outside national governments, no-one in the system is trying to put the Prince back into the play – not the multilaterals, not the aid donors (who still largely oppose industrial policy as distorting the wonders of the market), and only very few heterodox economists (who he memorably likens to the heroes at Helm’s Deep in Lord of the Rings, fending off an army of neoliberal orcs).

What do you think?

Which ones support industrial policy?

To close the energy poverty gap, we need ideas, investment…and natural gas. Todd Moss responds to Hannah Ryder

CGD’s Todd Moss responds to Hannah Ryder’s critique of his ‘let them burn fossil fuels’ line on energy poverty

Thanks to Hannah for raising some good questions about my proposal that the US agency OPIC partially exempt the world’s lowest-income, lowest-emitting countries from the greenhouse gas cap. I think we both agree that 1.3 billion people without access to electricity in the 21^st Century is inexcusable. It’s a development problem that can and should be solved. We also agree that the past approach to power has been insufficient, and that to close the energy poverty gap we need new ideas and new technologies. Here’s where we disagree:

• Greater investment is necessary if we want to close the energy poverty gap. The data on additional generation capacity and access do not, as she suggests, show that increases in the former have no relation to decreases in the latter. Rather those IEA graphs in an apples-to-apples (global-to-global) comparison show the opposite: a clear decline of roughly 25% between 1985-2000 in the total number of people without access to electricity. Yes, this decline is driven by East Asia, but this is also likely to be precisely where the bulk of the investment and capacity additions have occurred (IEA doesn’t provide ungated data on capacity addition disaggregated by region – I’d love to see that). More recent estimates (in World Energy Outlook 2011) show that the number of people without electricity has continued to decline by some 300 million in the past decade. In other words, is seems safe to assume that where massive investment takes place (e.g., China), millions of people are gaining access to power. Thus, the conclusion, including in the paper Hannah cites, is that even more investment is needed (they suggest 5x current levels). If this is the case, it seems odd that we would question whether capacity should really increase or, worse, hamstring our agencies tasked to boost this investment with environmental mandates that have nearly zero effect on global emissions targets.

• Off grid renewable may be better, but it’s not realistic everywhere. Certain populations may benefit from new technologies and new models, such as off-grid renewable sources. We should absolutely leverage our policy tools to deploy these where we can. But the scale of the problem is such that sizeable populations will still require old-school on-grid power that is (at least based on current economics) probably going to come from fossil fuels. This is especially likely for underserved urban populations and heavy industrial projects. This World Bank paper reports that barely half of poor residents in Dakar and Nairobi have access to electricity.  Reaching the rest will come, not from some high-tech solar system, but from hooking up more homes to the grid and boosting generation capacity in big power plants. Ditto for the 97% of large firms in Nigeria that rely on (costly, inefficient, and polluting) diesel generators to provide nearly 2/3 of their power. Similarly, Ghana’s Valco aluminum smelter in the industrial port of Tema is running at 20% capacity for the sole reason of a shortage of low-cost power. Getting Valco to capacity, with all the jobs and spin-off industries that would accompany full production, is going to require new power investments in large-scale power.

• Natural gas will be part of the solution. My proposal specifically excludes coal, but not natural gas. This distinction is partly political, but it’s mainly pragmatic: many of the same countries that have substantial energy poverty gaps also have natural gas reserves that could be transformed into domestic energy.  Just in Africa in the past few years, Kenya, Tanzania, Mozambique, Ghana, and Cote d’Ivoire have had major new gas finds. And Nigeria still flares much of its gas. Why should we stand in the way of these countries turning these resources into electricity and jobs for their people? We shouldn’t—especially when we have placed no such constraints on ourselves.

Why high carbon energy is the wrong solution for low income countries

DFID staff break their duck as guest writers on FP2P with this post from Hannah Ryder (right), a regular blogger on the DFID site and Senior Economist specialising in climate change and low carbon growth

Economists have a reputation for being sceptical – there is even a book called “the Skeptical Economist”. This has a lot to do with how it is taught. For instance, we are encouraged to be sceptical of the idea that one thing (a “variable”) might directly cause another variable to change. A number of development economists have recently been stressing that “complexity” should make us even more sceptical of these relationships.

Now, I usually avoid wearing the sceptic’s hat. But the other day I came across an article that assumed a linear, causal relationship between two variables. The article was by Todd Moss at the Center for Global Development. He was arguing that the American organisation that provides investment to developing countries “OPIC” should be able to help low-income countries invest in high-carbon energy – such as coal or diesel powered stations, to help stimulate access to energy in those countries. He argued that the limits that OPIC has on this kind of investment are “strategically counterproductive and morally dubious”.

I, like Todd, certainly feel strongly about access to energy. Around the world, 1.3 billion people have no access to electricity. Over 80% of those people live either in sub-Saharan Africa or in South Asia. Access can vary dramatically within regions – over 95% of people lack electricity access in Chad and Liberia versus 25% in South Africa. Although problems are currently worse in rural areas than urban areas, even so about 56% of urban dwellers in Sub-Saharan Africa lack access to electricity.

Han’s Rosling’s latest TED talk cleverly explains why increasing energy access helps reduce poverty. It can expand people’s choices and productivity, particularly for women. It also helps business. A recent survey of manufacturing firms in Nigeria showed that 83% of respondents identified electricity as their top problem. In many cases, even when people or firms get access to electricity they still suffer from blackouts (such as experienced recently in India) and lack of affordability. Related problems exist in developed countries. In the UK, around 19% of households were “fuel poor” in 2010 – meaning they had to spend over than 10% of their income on fuel for adequate heating. Energy poverty matters.

The problem is that, from a quick skim of historic data, there is no good reason to expect that investment in conventional high-carbon energy will solve the energy access problem. These two graphs from the 2003 and 2002 IEA World Economic Outlooks (respectively) illustrate:

Although the dollars invested in the power sector and installed capacity – most of it based on conventional fuels such as coal, gas and oil – have increased strongly since the 1970s, the number of people with access to electricity has increased somewhat, but not a great deal.

Of course, the problem couldsimply be population growth outpacing investment growth, but the data suggests it isn’t. A 2011 study by a set of global energy experts foundno distinguishable relationship between investment in energy infrastructure and the degree of energy poverty once you control for total population. These expertsinsteadsuggestedthe problem was inequality.  Effectively, in many countries, new energy investment tends to benefit people that already have access. They therefore recommended a five-fold increase in overall energy sector investment in low-income countries, particularly in grid extensions, off-grid solutions and renewable energy – rather than the conventional, high-carbon methods used to date.

Added to this, looking forward, reports such as the European Report on Development and McKinsey’s Resource Revolution provide evidence that commodity prices are likely to rise and become more volatile in future. A number of economists such as Shalizi and Lecocq think some developing countries might regret building infrastructure now that locks them into needing to buycoal or oilor relying excessively on their volatile revenues. While there isn’t much evidence on this yet, it’s probably sensible for most countries to begin to plan for a diversified energy sector, especially if they are also going to try to target poor energy consumers more strongly in future.

These are the reasons why I was sceptical when I read Todd Moss’s article calling for OPIC to invest in high-carbon energy. It’s also why the UK supports the UN Secretary General’s Sustainable Energy For All Initiative, and why DFID specifically helps low-income countries invest in diverse sources of energy, particularly through vehicles such as the Scaling Up Renewable Energy Program, the Results-based Financing Facility and Green Africa Power. Pushing OPIC and others to look in new directions and help forge a new relationship between investment and energy access might actually be a good thing. And with that, I shall remove off my sceptic’s hat.

Todd Moss responds tomorrow

Building Active Citizenship and Accountability in Asia: case studies from Vietnam and India

Last week I attended a seminar in Bangkok on ‘active citizenship’ in Asia, part of an ‘Asia Development Dialogue’ organized by Oxfam, Chulalongkorn University and the Lee Kuan Yew School of Public Policy and supported by the Rockefeller Foundation. It brought together a diverse group of local mayors, human rights activists and academics, and discussed a series of case studies. Two in particular caught my eye.

In India, Samadhan, an internet-based platform for citizens to directly demand and track their service entitlements under national and state government schemes, is being piloted in two districts in Madhya Pradesh and Orissa. The pilot is supported by the UN Millennium Campaign and implemented by the VSO India Trust. Here’s the blurb from the case study:

‘The way Samadhan works is simple. Citizens can file a complaint into the Samadhan system through phone calls, SMS, or the web about any delayed entitlements owed by the government. Once their complaints are filed, the computer registers it by location, time, date, type, and other classifications. A local administration official then reads the complaints and deems an appropriate course of action. Citizens can then track these complaints through their registered number via website or SMS. Once it has been resolved, the citizen receives a message indicating that action has taken place.

The key contribution of Samadhan is that it saves time and increases efficiency for both the citizens and the district administrations. Traditionally, the process of grievance redressing was a lengthy and tedious undertaking. Citizens were required to submit a written application in person at the district headquarters during weekly public hearings. The onerous cost of travel alone can be burdensome to citizens who often have limited resources and time. Now, through Samadhan, citizens can file a complaint with a click.’

It’s early days yet – the complaints are coming in, but the investigations are just getting going (see screengrab from the website). The obvious question is ‘why should officials take more notice of an online complaint than they do of poor people turning up in person?’ There is a huge assumption inherent here that the state wants to hear and redress complaints. When asked about this, Praveen Kumar G, VSO’s India programme manager, said that the primary pressure is political – the fact that the complaints are in the public domain fosters scrutiny and pressure, because bureaucrats are pulled up by their elected bosses if they’re underperforming. But he conceded ‘If we have district leaders who want to do this, it’s easy. If they’re opposed, it’s very difficult.’ Quite. I also assume there is UN dosh funding the government staff required to read and respond to the online complaints, which raises issues of replicability.

The other project is the Provincial Governance and Public Administration Performance Index (PAPI), from Vietnam (why does everything interesting always seem to come from Vietnam?). This is a public index that ranks local government performance. It piloted in 3 provinces in 2009, but now covers the whole country.

The methodology is rigorous (a lot of international experts are advising). Local researchers are recruited and trained to interview a carefully selected sample of 13,000 people all over Vietnam on their experience in dealing with local government in areas such as health and education, the level of petty corruption, and participation.

According to Giang Dang, of CECODES, one of the organizers:

‘The researchers arrive at the village and show a list of names to the village head and say ‘we want to talk to these people’ – they insist on those names, even when the leader says ‘he lives a long way from here, why don’t you talk to this guy who lives closer and is more knowledgeable’.

‘When Vietnam opened up, the two things that arrived first were beauty contests and Coca Cola. So we decided to organize beauty contests. Most opposition came from the contestants in the beauty contest – the public servants.’

Besides the rigour of the research methodology, the secret of PAPI’s success lies in the way it actively recruits champions inside thesystem. Its advisory board has representatives from the National Assembly, ministries, government inspectorates and academia. A key role is played by the Vietnam Fatherland Front (VFF), a mass organization of the Party which supports the project, and ‘opens doors – the VFF goes all the way down to commune level’.

The results are already impressive: ‘higher ranking provinces are keen to keep their position and feature their ranking in all their documents. Some of the lower ranking provinces are starting to set up task forces, and asking us for advice on how to improve performance.’

USAID in Thailand visited PAPI last month and are interested in replicating the project in Thailand (an interesting transfer from a less to a more open political system).

Dr Dang thinks another key to PAPI’s acceptance is that it is run by local researchers, and so is not subject either to the whims of the aid industry, or accusations of foreign meddling in Vietnam’s internal affairs (the project was initiated by UNDP, which is seen as fairly neutral). He thinks this kind of intra-Vietnam comparison between provinces exerts more traction than cross country comparisons, which can be dismissed on the grounds of Vietnam’s unique conditions.

‘There has been a positive response from the public, but we do get some hostile phone calls from officials – ‘who the hell are you to do this!’. At the end of the day, it’s about pressure, and the naming and shaming gets media and creates pressure. We have to make a wave big enough to move the province.’

The interesting question here is why hasn’t this model replicated more? According to Dr Dang, China has something similar, but run by the Party, and Mexico has a comparable project, but that’s about it. He says it took two years of piloting to get the methodology right, find out what way to ask the questions etc and that that approach would have to be repeated in any new country. Funding may be an issue – in this case it comes from the Swiss Agency for Development and Cooperation (SDC), which seems particularly good at these kinds of long term experiments. Given the response from local government, I wonder if PAPI could become self financing, offering to help the laggards catch up in exchange for a consultancy fee? That raises issues of neutrality/money contaminating the research, but I imagine these could be resolved.