Energy and Human Resource Development in Developing Countries: Towards Effective Localization

William Hickey
Palgrave Macmillan
2017
978-1137576309
A review by Rachel Wu

Poverty and climate change among the world’s thorniest challenges, and William Hickey, in Energy and Human Resource Development in Developing Countries: Towards Effective Localization, ambitiously seeks an overarching way to solve both.

The result is a lengthy and stimulating manifesto in favor of human resources as the best way to approach these problems. Human resource development “becomes a competitive advantage and national resource in its own right” in the effort to empower individuals to make decisions. In aggregate, that empowerment combines to create a more sustainable future for us all. Endorsing the macroeconomic concept of endogenous growth theory, Hickey writes that “the more know-how a country has, the more it can entertain a wider portfolio in the energy mix,” emphasizing the potential of nuclear power. With less knowledge, resource-rich emerging countries remain dependent on foreign companies and “simplistic but heavily polluting, fossil fuel burning to power cars and trucks, boats and planes, and spin turbines.” Indeed, abundant stores of fossil fuels too often become a resource curse. The paradoxical phenomenon and accompanying stagnant growth have afflicted societies with the most valuable commodities, extending back to the 16th century Spanish discovery of silver mines in South America and continuing to many African nations today.   

Hickey is pessimistic about the potential for economics and finance to address inequality and global warming. He posits that carbon taxes and carbon trading are easy to game in systems lacking stringent enforcement mechanisms. Developing countries with sovereign wealth funds often use them – and natural resources, by proxy – to invest in foreign capital and not their own people, even while receiving World Bank and International Monetary Fund loans. Human resource development, when implemented poorly, can exacerbate the problem by centralizing money at the top. By offering vivid firsthand accounts of the disparities he witnessed at the Kazakh national oil/gas company and Chinese power plants in Sri Lanka, Hickey drives home the urgency of implementing effective human-resources policy.

For Hickey, the key to human resource development’s success in improving the economic situation of all is localization – “finding local citizens to do the jobs that are held by many foreign expatriates in host countries.” He proposes eliminating production-sharing agreements that provide negative incentivizes for localized management, as self-regulation often leads to wasteful spending on expatriates. Another compelling policy is “spatial sectoring,” ensuring that education is local and not centered in the country’s metropolises. 

Localization is relevant as the currents of nationalism and isolationism pulse through much of the Western world. Because urban elites often siphon resources from rural areas where many oilfields and mines are located, development must be tailored on a “meso” level of communities and not just the “macro” level of nations. Another step of localization is actually delocalization, which occurs when local development becomes successful enough to go global. In keeping with the zeitgeist of populism across America and Europe, this book makes a point to vilify the elites, depicting the “gods of high finance” and corrupt politicians as myopic and selfish, an attitude that may strike readers as an oversimplification of unresolved debates.

The book provides many case studies as helpful examples for how not to implement a policy of localization. While governments can learn from the past to avoid exploitive contracts with oil companies, they cannot simply mandate localization. The similar failures of localized steel production in China’s Great Leap Forward and Indonesia’s 21st century Mineral and Coal Law, requiring local refining of natural resources, demonstrate that governments must develop knowledge about technology, not merely the physical technology itself. 

Some of the book’s most thought-provoking moments occur when Hickey approaches problems in one discipline with the perspective of another, such as history with human-resources perspectives or economics with legal ones. Although most economists decry consumer fuel subsidies as inefficient, encouraging of wasteful behavior, Hickey maintains that these have become for many citizens the only manifested constitutional right to natural resources – the sense of ownership may help citizens conserve resources. The breadth of the book also offers understanding in new fields: For instance, those approaching from an energy background can learn about meso-economics and Dutch disease, while those from economics can delve into HR theory such as the anonymous Delphi design technique. Hickey’s original, multifaceted analysis has potential for serving as a guide for policymakers in fields as diverse as the environment to education.

An entire chapter is devoted to China, fitting due to the nation’s bursting onto the global energy stage in recent decades. Hickey develops an innovative East-South paradigm, with China constructing in Africa and South America as a way to keep its citizens employed. Departing from a common geopolitical and foreign policy understanding of these efforts, he instead compares the Asian Infrastructure and Investment Bank spearheaded by China as a modern version of the New Deal. China is emblematic of “turnkey” projects for natural resources, whether dam or coal utility plants, that are built by the foreign investor without input or control from the host nation. Because China is straddling the line between developing and developed nation, lack of human resource development remains problematic – specifically in moribund state-owned enterprises – and is a core reason that the country has failed to address its structural problems. The book’s claims that currency controls and devaluation do not add value to the economy are particularly salient as many central banks begin tweaking their own monetary policy for the first time in many years. 

The chapter on China reflects a broader bias throughout the book that emphasizes the responsibilities of developing countries. “If China tries to develop living standards to the same level as the USA or EU, we would need approximately 1.5 planet earths to meet the demand,” Hickey notes. In addition, one of the conclusions of endogenous growth theory is that developing countries never catch up to developed ones. Hickey would do well to provide specific guidance for developing countries on the path to prosperity as well as more success stories beyond that of Norway. 

For all of the discussion about education and human resource development, little is said about the greatest threat to human employment: automation. Indeed, automation threatens most of the low-wage, labor-intensive jobs that the author recommends for developing countries. In advocating that the purpose of higher education is vocational, Hickey may be curtailing the long-term opportunities for people to attain jobs requiring critical thinking that robots cannot yet replace.

Given that he is dismissive of existing renewables’ potential beyond “ad hoc sources of energy,” Hickey may leave readers with questions about the details of transitioning to a world of alternative energy. Still, his argument is convincing that education and training are the best ways to add value to a nation’s economy and begin the transition to sustainability. Because he rejects a zero-sum attitude, readers close this book with an optimistic view that the gains of one country are good for all.

Rachel Wu is a fellow at the Whitney and Betty MacMillan Center for International and Area Studies. She is a sophomore at Yale University.

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