NREL ANALYSIS FORUM

# SPEECH #2

"International Development Implications: Development Challenges"

I.  [Is the world gaining or losing ground in the international economic
    development effort? What are the implications for the
    U.S.?]{.underline}

-   The scorecard on how well we're doing in the international economic
    development effort is a very mixed one. Let's look at some of the
    data:

    -   40 years ago the world's richest nations had per capita incomes
        20 times greater than the per capita incomes of the world's 20
        poorest nations. Today, the difference is 37 times greater. =\>
        Suggests a widening gap between the rich and poor

    -   In 1990, 29% of the world's population lived on an income of
        \<\$1/day;

> In 2000, 23% =\> a 6 point drop

-   From 1990 to 2000, adult illiteracy rates for males 15+ in low
    income nations decreased from 35% to 28%; for females 15+, 56% to
    47%

-   In 1970 malnourishment in developing countries was 35%; in 1990
    --20%

-   In 1970, only 30% of people in the developing world had access to
    clean drinking water, today its 80%.

-   With respect to political development, the proportion of electoral
    democracies has grown from 39 out of 142 countries in 1974 to 121
    out of 192 countries in 2001. =\>a growth of 27% to 63%.

-   However, as Fareed Zakaria reminds us in his new book: The Future of
    Freedom, electoral democracy is sometimes a weak indicator of the
    presence of those democratic values such as justice, liberty and
    equity that we all hold dear. In this case, there remain close to
    60% of the world's population living in less than free societies.

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-   [Implications for U.S.]{.underline}

    -   Well we've certainly heard much in the last 1 ½ years regarding
        how an impoverished world presents security threats to the U.S.,
        but as we've heard the causal arrows are not as bold as some
        would have us believe.

    -   Nevertheless, there is both a moral and an economic imperative
        for the U.S. doing a better job in this field. Morally, this
        country has always been the beacon of liberty and the steward of
        democratic values around the world. Commercially, well, to put
        it bluntly, poor people make poor customers. If you believe in
        the verities of global markets and the dynamics of trade, we are
        all better off --producers and consumers---with growing GNPs
        throughout the developing world

    -   That's the beauty of energy

    -   Need for a new paradigm in development

    -   The above numbers cited where economic progress was being made
        was during a time when ODA was being reduced 30%

    -   There is no solid relationship between economic growth and ODA

    -   USAID==GDA==public private partnerships

    -   Totals for US foreign assistance==USG=22B; private=33B including
        foundations, industry, PVOs, universities

    -   Millennium Challenge Account

II [What is the role of local energy systems development in local
economic development?]{.underline}

-   Expand on the point I made this morning regarding the convergence
    between the decentralizing trends in political, administrative and
    fiscal affairs and the technological ability to produce energy
    services at the neighborhood, localized levels.

-   First, let's look at the Decentralization trends:

    -   Essentially 4 kinds of decentralization: political,
        administrative, fiscal, and economic/market

    -   Estimates are that 80% of developing countries are experimenting
        with some form of decentralization.

    -   Using sub-national elections as an indicator of political
        decentralization, in 1999, 96 of 126 countries included in the
        World Dev. Rep. Had at least one elected sub-national level of
        government; 42 had 2 or more.

    -   In 1998, of the 75 developing and transition countries with
        populations greater than 5 million, all but 12 claimed to be
        embarking on some form of fiscal decentralization.

-   Localization of political and fiscal decision making is a result of
    several things, ranging from widespread recognition of the inability
    of central states to adequately provide requisite services to the
    populace, to the resurgence of local cultural, ethnic and political
    voices making claims on their right to autonomy and liberty.

-   The merits of decentralized decision-making go back as far as
    Aristotle who actually calculated the optimum number of citizens for
    any single polis. The argument is that the closer the centers of
    power are to the people, and the more centers of power there are,
    the greater the likelihood for individual freedom. The objective is
    to reduce both the scale and scope of the concerns of society that
    are determined and administered by centralized state authorities.
    This doesn't absolve the state of certain key functions, but it does
    diminish the control it wields in the day-to-day affairs of the
    individual and local community that now assert greater and more
    meaningful responsibility.

-   Conclusive empirical data remains elusive and the results so far are
    mixed. However, what we do know is that decentralization is not a
    policy-neutral endeavor and does indeed have significant
    implications for the structure of public spending and investment.
    For example, in Bolivia, decentralization resulted in increased
    spending on education, civil works and water, and decreased spending
    on industry, tourism and communications.

-   Nevertheless, the premise is that devolving power and resources to
    smaller administrative units result in better decision-making, due
    in part to its greater inclusivity and an increase in social
    welfare. My argument is that tethering distributed energy systems to
    this phenomenon will result in greater levels of success both for
    the goals of political decentralization and for the goals of
    expanded provision of energy services.

-   This is to say that there is a symbiotic relationship between
    Distributed Generation and Democracy and Governance (DG2). Now,
    local authorities that have the responsibility of providing
    infrastructure services to their local populations can unshackle
    themselves from distant, unresponsive utilities that have in the
    past provided poor quality of power when they provided power at all.
    Now the local authorities possess the autonomy and the ability they
    need to improve the social welfare of their communities.

-   In biology, coevolution refers to an evolutionary process based on
    reciprocal responses of closely interacting species (the evolution
    of beaks of hummingbirds and the shape of flowers from which they
    feed). Well, it seems to me that what we now have is a similar
    example of coevolution the effects of which can have profound
    results for democratization and economic well-being.

-   Just about everywhere you turn, the concept of network is there,
    being used to define or characterize the organizational and
    behavioral traits of society. The former editor of Wired, the
    leading magazine on the digital age, maintains that "network" has
    become the central metaphor around which our thinking and our
    economy is organized. Thinkers and practitioners from all walks of
    life proclaim that we are living in the Age of the Network, where
    our thought and actions are increasingly reflecting the bio-logic of
    natural systems.

-   The best way to understand the workings of our technological world,
    say such leading thinkers, is to understand the biological world
    that preceded it. In the words of Kevin Kelly, "The world of our own
    making has become so complicated that we must turn to the world of
    the born to understand how to manage it. That is, the more
    mechanical we make our fabricated environment, the more biological
    it will eventually have to be if it is to work at all." In other
    words, we need to mimic nature; something the ecologists have been
    telling us for some time.

-   Kelly uses the swarming of bees and the flocking of birds as
    metaphors to describe how, in his words, "dumb parts, properly
    connected into a swarm, yield smart results." Distributed,
    decentralized systems are self-regulating and self-optimizing, just
    as they are more resilient and flexible. Again, we see the verities
    of localism and decentralization whether its in biological,
    technological or human systems. As William Taylor stated in the
    Harvard Business Review several years ago, "The story of the last
    decade in business has been the triumph of distributed brains over
    centralized brawn," I think its pretty clear that we can extend that
    dualism to other spheres beyond the business world.

III. [What are the pros and cons of different energy resources or
     technologies in local economic development?]{.underline}

-   For me, the answer to this question lies in viewing energy
    technologies as extended systems. And that in pursuing the
    democratic path to economic, social and political development, too
    little attention as been paid to the impact of our technological
    choices and the systems they give birth to.

-   Our lives are shaped in a variety of ways by the technologies we
    use. Machines have a direct bearing on how we eat, play, and work.
    From automobiles and telephones, to televisions and computers, the
    tools we employ have continually transformed us as individuals and
    as societies. Furthermore, technologies themselves possess certain
    characteristics that address the perennial questions of political
    thought, such as the nature of justice, freedom, and equity. My
    point here is that we need to redefine the terms of discourse within
    the current debate on development to include the forces of energy
    technology, democratization, and scale.

-   Beyond the obvious and immediate benefits of economic growth, health
    and education, another benefit of energy service delivery to local
    economic development is that this process gives us an exciting and
    necessary prism through which to view development processes.
    Because: =\>

-   Technological devices are developed and diffused in response to
    problems or needs of society \-- they answer questions posed by the
    polis. This is a relatively straightforward and seemingly benign
    truism, yet, the repercussions of the technical answers given to
    political questions are far from politically sterile. Invariably,
    the devices result in systems or networks that affect the social
    organization of power and authority, either by design, or through
    unexpected consequences that often follow in the wake of
    implementation.

-   Thorstein Veblen refers to technological adoption as changes in the
    "habits of thought". We claim that the changes in the "habits of
    thought" brought about through the introduction of renewable energy
    technologies ultimately leads to what Tocqueville refers to as
    "habits of the heart": the acceptance of civil attitudes and
    behavior.

-   In this fashion therefore, energy technologies constitute "political
    things". They cannot be viewed solely through the economic or
    technical lens, but rather embody sources of economic, social and
    political power. The need to transform nature into usable units of
    energy has traditionally provided the means of consolidating power
    whereby some members of society come to possess control over others.

-   The discovery of new energy sources and technologies translates into
    new patterns of discipline, authority, and economic and political
    organization. The source, amount and form of energy upon which a
    society depends influence, to a surprisingly large degree, the
    ultimate political and social composition of that society.

-   The transformation of energy resources into energy services that can
    reap democratic fruit is not without its historical analogue.
    Throughout time, water projects, which are ultimately energy
    systems, have either concentrated or diffused power, thus
    strengthening local autonomy and reinforcing local political values,
    or generating distant bureaucracies and thus denying the local
    population the right of self-determination. Energy systems also
    possess such characteristics.

IV. [What are the key energy/economic developments issues deserving of
    additional study?]{.underline}

-   Same as earlier this morning