The Optimist

Let There Be Light

How a new kind of bulb will transform the developing world.

We in the developed world are preoccupied with the consumer technologies of the 21st century -- ubiquitous high-speed Internet, the iPad, and the Wii Fit. We forget that vast swaths of the developing world have yet to be transformed by a technological upheaval we experienced more than a century ago: the advent of electric lighting. But the latest illumination innovation could change that, bringing not just greater efficiency to the well-wired West but also better quality of life to everyone else.

The first lighting revolution was powered by gas. As gaslight replaced candles over the course of the 18th century, the amount of artificial illumination produced in Britain each year shot up more than 100-fold. In 1879, Thomas Edison began the second lighting revolution when he strung his Menlo Park headquarters with electric lamps using carbonized bamboo filaments. By 1881, a few blocks of southern Manhattan were illuminated by electricity, and the West has never looked back.

Over the past 100 years, there have been many bulb innovations -- including tungsten halogen, metal halide, sodium, and compact fluorescent. And thanks to improved manufacturing and design, it costs 1,000 times less to light a room today than it did 100 years ago.

Still, the vast majority of light bulbs worldwide today --12 billion of them -- use a filament system similar to Edison's. And for all the progress over the last century, these bulbs remain very inefficient. The amount of energy pushed through a filament that actually emerges as visible light is around 2 percent -- most of the rest is lost as heat. This inefficiency is the big reason why in the United States, the power used to light Edison bulbs produces half as much carbon dioxide as the country's car fleet. And it is why governments around the world are so keen for consumers to switch to more efficient bulbs like compact fluorescents.

But the compact fluorescent is yesterday's news. The new technology leader that will spark the third lighting revolution is the light-emitting diode, or LED. The amount of energy converted to visible light by an LED already climbs as high as 14 or 15 percent. That's a thousand times higher than diodes managed in 1968, and considerably better than today's compact fluorescent bulbs. And efficiency is expected to double again by 2020. Diodes have an array of other advantages: they last five times longer than compact fluorescents (50 times longer than the Edison bulb), they are smaller, less fragile, and inert. That all adds up to a lot less expense in manufacture, storage, shipping, and disposal. And it's likely to mean a considerably easier task for those trying to end our addiction to the filament in the rich world.

Whatever its impact on developed countries, however, the real LED revolution will be in the developing world, where billions of people still live without access to networked electricity. Take Africa -- there are about 110 million households in the region without access to the grid, compared with only 20 million who are connected. The most common way for people offline to get light is to burn something. About half of those homes use kerosene lamps for illumination, while most of the rest still use candles. More than one in ten just pile extra wood or dung on the fire if they need more light. In other words, nearly half of African households are stuck using technologies that were largely abandoned in the United States before the Civil War, and most of the rest use a technology that had passed its prime before World War I.

The technologies of burning stuff to produce light make the Edison bulb seem a model of efficiency. For each joule of energy a candle turns into visible light, 2,500 joules are wasted. That makes traditional lighting expensive and environmentally hazardous. Off-grid households in Kenya and Ghana spend about $80 a year on fuel-based lighting -- and the great majority of that is on the fuel itself. Some households spend as much as 30 percent of their income on lamps and fuel -- this for two or three hours of poor quality light at night. Worldwide, kerosene is a $38 billion industry, and kerosene lamps emit the same carbon dioxide each year as 15 million cars.

Inefficiency also means people have less light to use -- a candle or basic kerosene lamp produces less than one third of a percent of the illumination of a single-watt LED. Fuel lamps are also dangerous -- in India, 2.5 million people are severely burned by overturned kerosene lamps each year. And traditional sources emit harmful fumes and soot. Working under kerosene light exposes people to the toxic equivalent of two packs of cigarettes a day.

But, until recently, more efficient lighting that didn't require networked electricity just wasn't practical in developing countries. Lamps that use compact fluorescent bulbs and run off a battery charged by solar power during the day are available, but they're very expensive. Even though you save on kerosene, it takes more than three years after purchase for the total cost of running a compact fluorescent lamp to drop below that of a kerosene lamp and fuel. Poor people in developing countries often can't afford to make such long-term investments. Today, only around 1 percent of houses use solar lamps or solar household systems as a result.

That is about to change, thanks to the LED. The lesser power demands of these more efficient lights mean that you need smaller batteries to run them -- which means that it is possible to charge a battery long enough to provide hours of light using a smaller solar panel. Diodes are also harder to break -- a real advantage for a technology that must endure a bumpy truck ride over the rutted roads of Africa. That means lower manufacturing and distribution costs, which means cheaper products: The new lamps are already priced at around $20, considerably less than the fluorescent version. And between 2010 and 2015, the price is predicted to fall by another 40 percent -- not least because LED prices will fall by three quarters thanks to new manufacturing techniques. The payback period for buying a basic solar lantern over a kerosene lantern will fall from seven months today to below two months in 2015. Going diode will make overwhelming financial sense even for the poorest people.

With decent and affordable lighting, people can work -- or shop, or relax -- further into the evening. In India, the introduction of better lighting was found to increase the amount of time students spent studying at home by over an hour, with a significant impact on test scores. And added to the advantages of a longer day, greater health, improved security, and a lower environmental impact, solar lamps increasingly come with mobile phone chargers -- an important benefit considering off-grid users in Africa spend as much as $155 million annually charging their phones. At long last, the LED will take Edison's revolution global.

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The Optimist

What Resource Curse?

Is it really true that underground riches lead to aboveground woes? No, not really.

Bad news: Mozambique has just discovered between 6 trillion and 8 trillion cubic feet of gas sitting off its shoreline -- quite enough for commercial production. This on top of a recent coal-mining boom is destined to make the country a major natural resource exporter. Joining the East African country in recent misfortune is Papua New Guinea, scheduled to start exporting $30 billion worth of natural gas, and Afghanistan -- particularly blighted by the discovery of iron, copper, cobalt, gold, and lithium deposits with a combined value over $1 trillion. Oh, lackaday. Whatever chance they had of sustaining a stable, economically robust democracy is surely down the pit latrine now.

How so? Enter the resource curse -- the idea that the more stuff dug out from on or under a country, the slower it will grow and the higher the risk it will descend into civil war. Versions of the curse have been around for some time. Back in the 1970s, economists worried about "Dutch disease." Countries that exported a lot of gas or oil would see their exchange rates go up as a result. This, in turn, could make their manufacturing exports uncompetitive. But the idea really picked up steam in the mid-1990s, when Jeffrey Sachs and Andrew Warner, then both at Harvard University, found that countries that exported more agricultural products, minerals, and fuels saw slower economic growth.

Sachs and Warner highlighted Dutch disease and its knock-on effects as the likely cause. But other researchers looking at the same data argued that the link might be through empowering kleptocratic leaders with resource rents or the destabilizing political impact of easy money. In a matter of a few years, resource exports were charged with a host of ill effects -- not least, low education spending, unstable government, civil war, corruption, and poor governance.

The curse is the type of counterintuitive idea that makes for a great newspaper op-ed. Nonetheless, the curse is also the kind of counterintuitive idea where intuition may have been right to begin with. In 1997, the World Bank produced some measures of total natural resource wealth -- including agricultural land, mineral and oil resources, and protected areas. The richest countries in terms of resources per citizen were Australia, Canada, New Zealand, and Norway. Their average income per head in 2008 was $24,430. Jordan and Malawi were at the bottom of the list. Jordan has a per capita income of $5,702; Malawi's is $744. Looking at mineral wealth alone, Venezuela and Norway were at the top, while Belgium, Benin, Ghana (before the recent oil discoveries), and Nepal were at the bottom. While Ghana's oil discovery suggests one problem with the rankings -- rich countries have been better explored for mineral deposits -- nonetheless, the list hardly suggests that resource scarcity is the secret to rapid growth.

Looking at recent growth across countries, Swiss economist Christa Brunnschweiler concludes that economies with greater resource wealth actually grew faster between 1970 and 2000 than resource-poor countries. She also finds no evidence that greater resource wealth is associated with weaker institutions, a finding repeated by Daron Acemoglu at the Massachusetts Institute of Technology.

Together with her colleague Erwin Bulte, Brunnschweiler also looked at the link between natural resources and civil disorder. They found that countries with more natural resource wealth were less likely to descend into civil war in the first place. The same result held whether they were using a broad measure of resource wealth or focused only on minerals or oil. Elsewhere, Stephen Haber and Victor Menaldo of Stanford University and the University of Washington, respectively, studied the relationship between oil revenues and democracy over time across countries. They found that democracies were actually made more resilient by growing oil revenues -- while they couldn't find an impact one way or another when it came to autocracies. Sure, there are cases where oil revenues and autocracy increased together. It is just that there are at least as many cases where that didn't happen -- and more cases where democracy strengthened as revenues went up.

How to reconcile these results with all the papers and articles that find a curse? Earlier studies looked at the importance of natural resource exports at a particular moment in time. There, the relationship holds -- high dependence on resource exports is associated with lower growth and risk of civil war. But that's a strange way to measure "the curse of resources." According to the usual story, the curse involves the misfortune of sitting atop an oil field or diamond-bearing rocks. It's a story of abundance -- as examined by Bulte and Brunnschweiler -- not dependence.

And dependence has got to do with a lot of other things besides mineral reserves. It is true that many countries that rely heavily on natural resource exports are poor and unstable. That's because poor and unstable countries are rarely globally competitive in banking or computer design (it's hard to develop a flourishing microchip industry as the bullets fly). Natural resources are pretty much the only thing such countries have a comparative advantage in trading. Again, countries don't get rich if all they do is produce crops and dig stuff out of the ground. Getting rich takes a vibrant services sector and at least some manufacturing. So countries where digging stuff out of the ground is an especially large part of what goes on in the economy are in trouble. But they are in trouble because they've failed so miserably to create an environment where services and manufacturing can flourish -- not because they happen to have a diamond deposit.

Do kleptocratic regimes exploit natural resources to pad their bank accounts, buy off opponents, and purchase weapons to cow holdouts? Of course they do. Exploiting, padding, bribing, and bullying are what kleptocrats do best. But they are equal-opportunity exploiters. If natural resource rents aren't available, they'll find something else -- and maybe do something worse to get it. For every Gen. Sani Abacha skimming billions off Nigeria's oil wealth, there is a Field Marshal Idi Amin massacring Ugandans by the thousands without the aid or incentive of significant mineral resources.

Happily for those countries stuck atop piles of diamonds or lakes of oil, then, it turns out the resource curse must have been enchanted by a pretty feeble witch. Once you look at the evidence more carefully, the usual argument is turned on its head. Countries that rely on natural resources for a large part of their output are indeed cursed -- by poor quality government and an institutional environment that stifles the growth of manufacturing and services. That's the good news for Afghanistan, Mozambique, and Papua New Guinea: They won't necessarily get any poorer or more unstable thanks to their massive mineral reserves. But bad news follows, too: Given the comparatively weak state of their current institutions, the countries are unlikely to use the money generated to become the next Norway, either.

That's why the most heralded talisman against the resource curse -- improving institutions through greater transparency and oversight -- makes sense regardless. In fact, because so much of the revenues from extractive industries flow through governments, improved oversight might be a particular help after a mineral find. The Extractive Industries Transparency Initiative, for example, publishes audited statements regarding payments from industry to government in royalties and taxes. Another approach, championed by Todd Moss at the Center for Global Development, is to pass on oil revenues directly to citizens -- a model adopted in Alaska. These are good ideas, and it is great news that Mozambique and Afghanistan have signed up to the Transparency Initiative.

But at heart, they are good ideas because all governments should be more transparent and increase the flow of resources to communities, no matter what's under their land. Blaming oil wealth for poverty, though, is like blaming treasure for the existence of pirates.

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