Two Billion Light Up: The South Asian Electric Wave

 

 

 

…In the electric age, platinum, and quartz, and every existing substance can be melted and distilled or sublimed. Thus, mighty new industries have grown up, and many new materials made available to man, as alumnium, silicon, calcium, chromium, the carbides, cyanamid, acetolyene…

 

Charles Proteus Steinmetz, Scientific American, 1914

 

 

 

 

 

What is the most fundamental force that drives the modern global economy?.

If you were to put this question to a gathering of modern day economists, ‘debt’ would likely emerge as a prevalent response. Those of a macroeconomic bent might lean more towards another ‘D’ word, ‘demographics’.

But although these forces undoubtably cast a long shadow across the globe, shaping economies and driving the ebb and flow of all manner of prices, not all major economic drivers are of a nature so abstruse.

The tangible contrivances of human ingenuity have also shaped economies over history, giving rise to entirely new industries and spurring demand for all manner of exotic raw materials.

In the past century, one such synthetic force has been conspicuous in its singular capacity to positively electrify economic growth.

Unseen yet ever-present, Electricity is the life-blood of a modern economy. In the modern world, any community that is without reliable access to electricity is not a fully functioning player in the global economy.

Hidden in plain sight, being bound irrevocably to the infrastructure that carries it, electricity is both difficult to quantify and tricky to store. Yet, despite its elusiveness, it remains the bedrock upon which modern civilisation stands. Regions without it are worlds apart from those that bear the torch.

If you were to draw up a list of the largest economies in the world half a century ago, the list would be dominated by just four regions: North America (the USA and Canada), the Soviet Union, Japan, and several Western European nations. China and India, despite their vast populations, barely make it onto the top ten.

Why was it that these four regions were miles ahead of everyone else?. The one thing these regions had in common was that by 1970, their populations had broad access to electricity.  At this time, only a slight majority of Chinese households had electricity, and the number of Indians with reliable access to electricity was miniscule.
_{⁽¹⁾⁽²⁾}

Electricity is a force to be reckoned with. It improves the prosperity and well-being of entire populations, and lights up intellectual advancement like the candescent flicker-on of a city block at dusk. Its transformative power is inordinate, capable of rejuvenating backward nations and thrusting them into the league of titans. But more subtle still is its influence as an arbiter of prices, which makes it, by extension, a driver of human behavior.

While the significance of mass electrification may have faded from the forefront of economic and financial discourse today, towering figures of industry and politics of the early 20^th century, such as Henry Ford and Vladimir Lenin, were staunchly convinced of its transformative potential. History has unequivocally vindicated their conviction.

Since the beginning of the 20^th century, rapid increases in electrification have been associated with periods of strong economic growth: The Roaring Twenties in North America, the stellar growth of the Soviet Union in the post-Stalinist era, Japan’s Economic Miracle after World War II, and more recently, China’s rise as an economic power, all followed on from a wave of electrification in these regions.

Significantly, at time of writing, a new crop of electrified nations have just emerged from the shadows. In the early years of the 2020s, a swath of countries, spanning from India to the densely populated archipelagos of south-east Asia, have finally seized the economic holy-grail of universal electrification. This accomplishment, shared by a collective population of some two-billion people, carries profound implications for the economic growth of these regions, the prices of all manner of commodities, and the global economy as a whole.

The expansion of electricity into the world’s less developed zones has been a proven catalyst for change since the early years of the 20^th century, and the consequences of the electrifying of two billion across the Indian Arc will undoubtably send ripples far and wide.

Has the world entered into another ‘roaring twenties’, this one centered on the humid tropics of Asia?

To adequately address this question, we would best turn our attention to the last one. Running a magnifying glass over the first decade to bask in the glow of electric illumination will help unravel the cause-and-effect dynamics of the age.

This will, however, just serve as a starting point: as history’s labyrinth of interwoven narratives does not readily yield to the human longing for surety, our review will span a succession of ‘electric waves’ from across the globe, from the transformative 1920s, up to, and concluding with, an instructive example from the wellspring years of our present century.

The evidence from these case studies leads us to one unmistakable conclusion. The case for electricity as a powerful driver is unequivocal.

Electricity is no ordinary trend, it is the primum movens of our age. The spread of electrification into new frontiers stands as one of the most important, if one of most underappreciated, catalysts for change in modern times.

In this article, we will make the case for the continued significance of the trend once known as ‘electrification’, demonstrating that the march of electrictity across the globe should be ranked among the most influential forces that has shaped, and continues to shape, people, prices, and the world around us.

 

 

 

Table of Contents, or

 

Milestones of Modernity: How Electricity made the World Modern

 

Chapter 1 : The Roaring 20s

Chapter 2 : The Great Depression

Chapter 3 : The Rise of the Soviet Union

Chapter 4 : Deng and the Modernisation of China

Chapter 5 : India³: The Lighting up of South Asia

Chapter 6 : Macro Overview: Electricity and the March of Prices

Chapter 7 : The Integrated Machine: Networks of People and Power

 

 

 

 

Chapter (1):
 
Why the 20s Roared

 

 

Why did the 1920s roar?

A pair of novel technologies are commonly cited as being the twin drivers of the age, but only one of them really deserves the spotlight.

Were you to wander down the streets of any American metropolis in the 1920s, you would not have been able to miss the din of the internal combustion engine. If there was a literal ‘roar’ of the 20s, it would surely have been that of the motor car. No wonder, then, that the automobile is commonly cited as one of the two catalysts that drove change in the era.
_{^{(3) (4)}}

But while the ascendency of the motor-car would have been unmissable to any pavement-pounder over that decade, in terms of its aggregate economic influence, it was but a side-walk shadow compared to the potent force that was powering the luminous street lights overhead.

In the free-wheeling 1920s, for the first time, millions of people across the globe were ushered into the age of electricity.

It wasn’t Jazz, but the hum of electricity that called the tune in the twenties. Almost everything else that went on in the era was influenced by this potent force to one degree or another.

The 1920s was when cities lit up. It was the decade of the never-sleeping city and of the neon-light, an age when distant city skylines glimmered enticingly on the horizon, and when the downtowns of cities across the developed world glittered with gaudy neon signage.

It was in the United States where the lights shone brightest. By the 20s, half of the world’s electrical energy – every other joule – was being produced by, and consumed within, the borders of the United States. While the trend of electrification played out across cities of the Western World to varying degrees, in the early 20^th century, the USA was the buzzing central hub._⁽⁵⁾

As cityscape vistas across North America were being transformed into a feast for the eyes by night over the century’s formative years, electricity’s radiant energy was also being put to practical use, harnessed to stoke the fires of industry.

Contemporary accounts, such as that of John Clark in 1920, underscored the magnitude of this trend. Clark noted that horsepower consumption in the United States had risen from just half-a-million in 1900, to 18 million in his day. Behind this staggering growth lay insatiable industrial demand for electrical energy. _⁽⁶⁾

Clark observed that while in the year 1899 “…electric horsepower equalled only 5% of that for all primary horsepower…” in his present day, the percentage had increased to 60%. Electric motors had won out over their steam- and gasoline-powered counterparts because of the greater advantages of central station service. While at the start of the 20^th century, most manufacturing establishments generated their power on-site, by 1920, most of the energy being used in manufacturing was being purchased from independent electric utilities. _⁽⁷⁾

It was a shift on a monumental scale, with the tendrils of electricity worming their way into all corners, leaving few industries untouched and giving rise to entirely new ones.

Factories, the end-point of most of this energy,_⁽⁸⁾ initially employed electricity solely for lighting, but by 1920, the widespread adoption of a range of electrical innovations such as time clocks, control devices and motors necessitated increasing amounts of power. In concert, these advancements made possible new modes of production, the most revolutionary of these being the assembly line. _⁽⁹⁾

The name of Henry Ford, who was among the first to fully appreciate the game-changing potential of electrical energy, has ever since been associated with this innovation.

Ford had been employed as an electrician at Thomas Edison’s Illuminating Company early in his career, which had opened his eyes to the untapped potential of electricity._⁽¹⁰⁾ The insights gleaned from his experimental tinkering in the Edison substation at the end of the 19^th century would profoundly shape his vision in the early years of the next one. These would find full expression in the revolutionary factory that Ford would open in Deroit’s Highland Park in 1910.

As he later remarked, productivity in a factory could be dramatically increased if parts, rather than workers, were set in motion.

“Let the conveyer do the walking. Save ten steps a day for each of the 12,000 employees, and you will have saved fifty miles of wasted energy and misspent energy…”

Electricity was key to his vision. The Ford Motor Company introduced an electric-powered moving assembly line into its Highland Park facility in 1913, with dramatic results.

By 1914, production of Model Ts at the Ford Motor Company factory was nearly triple that of 1912, but with only double the workforce. The synchronised dance of automotive components in Ford’s factories was only possible thanks to reliable and regular electric power._⁽¹¹⁾

Ford, who had long identified as a ‘son of the soil’ would also apply the same formula to the fabrication of tractors, with production his signature model, the Fordson, commencing in 1917 _{^{(12) (13)}}. Ford’s venture into the tractor space would have significant implications, both for agricultural commodities and, in the long run, for the global economy.

 

 

Ford had showcased the remarkable potential of electrical energy in automotive manufacturing, and this would be the catalyst for the then seed-industry to grow, with astonishing speed, into a dominant one. A back-shed hobby in the early 1900s, the auto industry had evolved by 1930 into the biggest in the United States, netting 15% of all retail dollars in small urban centres across the USA. _{^{(14) (15)}}

The lubricant greasing the wheels of this growth was provided by an industry that sprung from the tussle between emerging automotive players: the auto-financing industry. Pioneered by the General Motors Acceptance Corp, a spinoff from General Motors, GMAC brought consumer credit to the masses, an instrument it employed to erode the dominant market position of Ford as the 1920s wore on. _⁽¹⁶⁾

Like the mass-produced Model T, the GMAC model evolved out of the emerging ecosystem of electricity.

Early electrical utility companies faced the challenge of marketing a product unlike any seen before: one that was immediately available, used the moment it was produced, and difficult to store. As the utilites would find, these peculiar dynamics necessitated economies of scale, and they devised a sophisticated sales innovation, the installment plan, that married with their natural expansionist tendency. GMAC simply applied the idea to the auto-space. But while the GMAC business model was borrowed, their bold application of it took it to an entirely new level. _⁽¹⁷⁾

The auto financing industry would be just one of many innovative new industries to emerge into this brave, new electrical world. The assembly-line thinking that had been showcased by Ford quickly began to permeate society, sparking innovation in entirely unrelated industries, as well as stimulating new ones. Fast food chains, with their kitchen operations grounded in Fordist assembly line priciples, were one such novelty to emerge in the era. _⁽¹⁸⁾

But just as novel industries emerged, so too did entirely new classes of commodities. Aluminium, once considered an expensive oddity, suddenly became a mainstay of everyday life, weaving its way into everything from kitchen cabinets to the engines of motor vehicles.

As with the automobile, electricity was key to its abrupt diffusion into society. The production of affordable aluminium hinged upon the availability of abundant electricity. It was not happenstance that the dawn of the North American electric grid and the establishment of the world’s first profitable aluminium enterprise in Buffalo by The Pittsburgh Reduction Company, the predecessor to modern-day Alcoa, coincided._⁽¹⁹⁾

Both were connected, quite literally, to the establishment of North America’s first large scale power plant at nearby Niagara Falls in 1895. The first long distance point-to-point connection with nearby Buffalo was established shortly thereafter._⁽²⁰⁾

But in the commodity space, perhaps the most surprising impact of the permeation of electricity throughout the economy was on the oil industry.

From the latter years of the previous decade and into the 1920s, the adoption of electric power steadily increased in oil fields across the United States, as the oil-driven engines that were a mainstay of the early years of the century gave way to electrical installations.

In 1919, one Wyoming oil operation who opted to replace their oil-powered engines with electric-driven pumps, saw their power bill plummet from $35 per day to just $6.35. _⁽²¹⁾

The oilman’s enthusiastic embrace of electricity underscores its paramount importance over the internal combustion engine as the prime mover of the era. While the internal combustion engine powering automobiles is commonly cited as a second pillar behind the growth of the era, in truth, its significance pales in comparison. Rather than being a second pillar, the motor car was more akin to a third wheel in the grand scheme of industrial progress.

From the aluminium components essential to their fabrication, to the cheap oil that fed their internal engines, to the factory assembly-lines that facilitated mass-production: All these relied on abundant electricity. The primordial soup from which the motor car emerged thus needed an electric spark to kick-start its evolution.

As conspicuous as the motor car may have been in 1920s America, it was electricity that was the true driver of innovation.

From aluminium to oil, from eating to entertainment, electricity undercut the price of almost everything. This fed through to booming corporate profits, and although the wages of workers lagged well behind over the 1920s, the steep falls in prices did lead to workers having more discretionary income to spend on consumer goods.

An economic boom sans inflation: for corporate America, this was nirvana.

The good times, however, would not, and could not last. Electricity’s bounty would prove to be just too much of a good thing.

 

Figure 1.

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Chapter (2):
 
Electricity’s excess: The Glut-of-Everything and the Great Depression

 

 
 

As previously contended, electrical energy was overwhelmingly the motive force that underpinned the ebullient twenties.

However, as with the deity Shiva, sublime forces can be both creators and destroyers, and so would be the case with electricity. As will be illustrated below, electricity and its close relative, electrical innovation, while widely celebrated as wealth-creators in the 20s, were equally culpable for both the souring mood and souring economy in the decade that followed.

The debate surrounding the causes of the 1930s crisis is truly well-chartered terrain, having been scrutinised and contested by economists of competing philosophies almost since the crisis first emerged.

Was it the fall-out from government actions, such as the Smoot-Hawley Tariff act of 1930, that precipitated an international trade war? Or was it simply a classic credit crunch, the result of over-ebullient and over-leveraged consumers?

As will be argued here, the severity and duration of the Great Depression was almost entirely a by-product of electricity’s runaway growth over the 1920s, which led to a period of destabilising economic imbalance.

Commodities are key to understanding the depth of the economic malaise during the Depression years. These years serve as an instructive case study, illustrating the awesome power of electricity in shaping the prices of commodities.

 

---

 

The revolution that took place at Ford’s Highland Park facility in the 1910s transformed the motor-vehicle from a luxury and exclusive item, to one that was unremarkable and commonplace.

But for every automobile that rolled off the assembly line, there needed to be a buyer waiting to ride it off into the sunset.

The profits of mass production could only be assured if its rhythm was continuously maintained. Various contrivances were employed by the automotive foundries in the 1920s to grease the wheels of the process, but instalment plans increasingly became the order of the day. Even Ford Motors, long the hold-out on account of Herny Ford’s hostility to credit, had set up their own auto loan subsidiary by 1928. _{^{(22) (23)}}

While GMAC may have been the first to make financing available to middle-income car buyers, others followed its example, and such instalment plans were soon extended to household appliances and other paraphernalia, and the increasingly available credit for durable goods found plenty of ready takers. _⁽²⁴⁾

Consumer credit, however, was no novelty in the 20s, being as hoary as the pawn shop. Thus, while debt undoubtably contributed to the unwinding of the 1920s boom and the subsequent downturn, it doesn’t explain the ‘when’.

The critical ‘when’ was the year 1929. The stock market crashed in the autumn of that year, and between October 1929 and November 1932, the US economy began a precipitous slide into what would become the worst industrial depression of its history.

While it is undoubtable that over-extended consumers exacerbated the downturn, this does not adequately account for why a cyclical economic slump devolved into a downward spiral and eventually, a depression, nor the significance of the trigger-point year, 1929.

Why, for example, was it that the 1920s boom was followed by the most terrible depression in history, while that of the 1990s brought about only the mildest of recessions? The severity of the Great Depression deviates so sharply from the textbook ‘credit cycle’ model of traditional economics that it compels the search for an alternative explanation.

The Great Depression, aptly named, was marked by greatly depressed commodity prices, on a scale that has never been repeated since.

Indeed, the chain-dragging ghost that haunted the world over the 1930s is less to be found in excessive debt, but in the unrelentingly- and unprecedentedly- low commodity prices, which persisted over most of the decade.

In modern times, economic booms have been driven by the seesawing interplay of technological innovation and commodity prices, with one driver typically taking up the reigns after the other runs out of puff.

In the interwar years, something went awry with this pattern. The first part of the sequence, the tech boom, certainly played out over the 1920s, with electrical utility stocks – consistently the most profitable investments from the 1890s to the 1920s- reaching the peak of their fervor._⁽²⁵⁾ But as this boom faded, it was not followed by a rise in commodity prices. Indeed, the very opposite came to pass.

It is thus impossible to entirely seperate the Depression from the persistently low commodity prices of the interwar years.

That said, while the leaden commodity prices of the era were a significant handicap on economic growth, they can only account for one half of the equation in understanding the severity of the Depressionary years.

The ‘Roaring Twenties’, after all, were principally an urban affair, with the pulsating cities, flush with electricity, serving as the principal engines of growth of the economy, as well as for the profits of the electrical utility companies.

Indeed, if we were to zero in onto a specific trigger-point for the Depression, the most likely culprit is the stalling growth in the expansion of the electricity grid.

The advance of electrification was the chief vector behind the prosperity of the 1920s, but this relied on the continued expansion of electricity to new population centres, and this was, at heart, a profit-driven venture.

With the electric utility business model based on economies of scale, even from the very outset, the expansion of electrical infrastructure across the United States was uneven, concentrated in areas with high population densities.

Wherever there were densely populated landscapes to electrify, the profits of utilities could be assured of an ever-increasing rise in demand, and in such urbanised zones they embarked on a strategy of grow-and-build to fill the void. As a result, initially, electrification spread like wildfire across North America, with household electrification soaring from just 10% in 1910, to 35% in the early 1920s, to nearly 70% in 1930. _{^{(26) (27)}}

But this growth strategy was headed for a collision course with a stark reality. This reality became apparent after the publication of the results of the 1930 US census: the figures revealed that just over half of the population of the United States lived in places far removed from the bright-lights, and as many one-in-four of these resided in isolated farms._⁽²⁸⁾

Thus, of the 30% of households who were missing out on the benefits electric power in 1930, almost all were in outlying regions, beyond the reach of the grid. As President Roosevelt would later relate, at the time of his inauguration in 1933, as few as one in ten farms across America had access to electricity._⁽²⁹⁾

With electricity grids having reached the city limits by 1930, the electric utility companies faltered. They had reached the end of the growth speedway, and the electric tailwind that had been propelling the economy began to sputter out.

The stagnating growth of the new-fangled utilities sector was compounded by the parallel slowdown in America’s oldest industry, agriculture. In this instance, the automotive industry was no bit player, its sudden emergence bringing about profound but unforeseen consequences.

The agricultural landscape became increasingly mechanised over the 1920s. The Ford company proved to be just as efficient as building tractors as it was automobiles, and as increasing numbers of mass produced tractors rolled off the assembly lines, farm productivity improved.

With all the tractors, trucks and cars proliferating across America, beasts of burden, the traditional backbone of farm operations, were increasingly rendered superfluous. The estimated 22 million horses across the United States in 1910 were easily outmatched by the 28 million automobiles in the country in 1929._⁽³⁰⁾

The ever-increasing automobiles weren’t just replacing riding horses: farmers who purchased Model-Ts in the 1910s were as likely to use them as portable power sources on the farm as for travel._⁽³¹⁾ But the pace of the attrition accelerated further around 1920, as tractors began to proliferate. Every new tractor that was introduced on a farm potentially displaced more than ten work animals. _⁽³²⁾

Over the 1920s, millions of acres of cropland, once dedicated to producing fodder for horses, would be converted to the cultivation of other crops. The mechanisation of agriculture thus not only resulted in greater productivity, it also significantly expanded the land bank._⁽³³⁾

More land, combined with mechanised efficiency: the result, predictably, was an unprecedented glut of soft commodities, setting into train a downward spiral in prices.

The declining reliance on animal-muscle on the farmyard was of course being substituted for mechanical grunt, and the engines powering these tractors and cars increased demand for a new commodity, oil. This did not, however, translate into a surge in the oil price, for, as we have seen, over the 1910s and 20s, electricity also slashed the cost of producing oil.

By 1930, the rural population was thus being hit with a double-whammy. Already electrical ‘have-nots’, they were savaged as the price of agricultural commodities fell through the floor, and with agricultural products still making up an outsized share of world trade at this time, the downturn in prices would also have global consequences. _⁽³⁴⁾

The stalling growth in electrification across America by the late 1920s in concert with the plunging commodity prices that precipitated the Depression appear, at face value, to be unrelated.

But as has been outlined above, these two prongs were driven by the same underlying force: electricity.

It was the agent of change that sparked both the birth of the mass-produced motor vehicle, which would power agricultural efficiency on the land, while in the ever-brighter cities, it was doing the same for increasing numbers of households.

A virtuous circle had been set in train, with businesses benefiting from the unprecedented efficiency gains that electric power unleashed, and consumers benefiting from the consequent fall in prices. But the expansion of the electricity grid and mass production were both being carried by the same wave.

This electric wave was in recession by the close of the twenties. Electric efficiency had created a glut, which weighed down on commodity prices like a milestone as the decade wore to a close. The last, critical peg that had been propping up the economy, the spread of urban electrification, then suddenly found it had run out of runway.

 

 

Roosevelt, Recovery and the Electric Reset

 

Electricity had thus both driven the American boom, and onward into the subsequent bust. But it would also offer a way out.

Assuming the mantle after his election in November, 1932, President Franklin Roosevelt embarked on a mission to extract the United States from the morass of economic despair.

The ‘New Deal’ recovery plan spearheaded by the new administration placed a significant emphasis on investing in regional infrastructure, and as the 1930s wore on, these recovery plans evolved to place a steadily growing emphasis on electrification.

The test-run would be the Tennessee Valley Authority bill of 1933, an unprecedented government infrastructure investment involving the construction of a series of dams aimed at rejuvenating the sprawling Tennessee watershed, both through mitigating seasonal flood damage and by providing affordable power to hundreds of thousands of deprived families. _⁽³⁵⁾

This bold experiment proved to be a tremendous success. Importantly, it would also serve as a roadmap pointing to a way forward.

The TVA initiative was thus followed by an even more ambitious rural electrification project, the Rural Electrification Act, the bold objective being nothing less than completing the electrification of the United States.

To this end, it was ultimately met its aim, with rural electrification reaching 43% of farms in the US by 1945, and nearly all of the remainder by the mid 1950s._{^{(36) (37)}}

Electrification was thus a central plank in the policy initiatives aimed at stabilising the economy in the 1930s, and undoubtably contributed to the strength of the economic recovery over the 1940s.

A key question arises from this, however. How did the Roosevelt administration come to view rural electrification as being the pathway out of the abyss?

Politically, it was far from a conventional route. The extensive government intervention and spending necessitated by the pursuit of rural electrification was quite discordant with the capitalist ethos of the United States.

However, for those who lived at the time, the answer was glaringly obvious. By 1930, the electrical divide between city and country was so vast that the impact of energy poverty was laid bare for all to see.

By that year, household electricity had become ubiquitous in the cities, yet it remained a rarity in rural America. This stark contrast was immediately apparent to any visitor travelling through the countryside, where the effects of energy privation were strikingly evident.

The consequences of the gaping electrical divide was particularly evident on one half of the population.

In 1935, this was earnestly articulated by Senator George Norris, a fervent advocate for rural electrification and one of the architects of the Rural Electrification Act. After the signing of the REA act in that year, he reminisced:

…I had seen first-hand the grim drudgery and grind which had been the common lot of eight generations of American farm women.

…I had seen the cities gradually acquire a night as light as day.

…I could close my eyes and recall the innumerable scenes of the harvest and unending punishing taste performed by hundreds of thousands of women, growing old prematurely; dying before their time; conscious of the great gap between their lives and the lives of those whom the accident of birth or choice placed in the towns and cities….
_⁽³⁸⁾

Norris’ comments sharply illustrate the stark difference between the lives of the electrical ‘haves’ and the ‘have-nots’.

Electricity eliminates countless hours of punishing toil. Equally importantly, the time and energy liberated from this drudgery can be redirected towards more fruitful endeavours.

The time savings can be converted into increased income, and by breaking the cycle of backbreaking labour, the overall health of the population improves. Electricity makes people both wealthier, and healthier.

As Norris thought it would, impoverished regions of America became more productive and prosperous once the powerlines of the REA formed a new skyline backdrop.

But the hip pocket benefits, as welcome as they are to those at the receiving end, just represent the start of the life-affirming advantages of electricity.

Indeed, the economic synergies associated with mass electrification are on a scale like no other known to humanity.

Henry Ford was amongst the first to appreciate this. In time, President Roosevelt would arrive at the same conclusion.  But these men were not alone in this revelation.

On the opposite side of the globe, and of the political spectrum, another influential figure had also come to the same understanding.

The United States would not be the only superpower of the 20^th century to harness the power of electrification to rise to greatness. Before the 1920s came to a close, another future power, a mighty federation born of Bolshevism, was rising out of the ashes of war and revolution.

This, the first major nation to stake everything on electrical energy, would go on to soar to unprecedented height on the strength of its transformative energy.

 

 

 

Chapter (3):
 
Snatching God’s Thunderbolts: Lenin’s Electric Dream

 

 

 

Last century, in the span of just four decades, one of the most backward regions in Europe, a land long associated with darkness, illiteracy and poverty, would lead the world into the space age.

What fundamental force could ignite such a dramatic turnaround, enabling the Soviet Union to emerge from the tumult of war and revolution, to rise to the status of an economic and military superpower?

The answer to this question is not to be found in Marxist ideology. Rather, it lies in the very same force that powered the growth of its future capitalist arch-rival: Electricity.

Vladimir Lenin, the architect of the nation, was under no illusion that ideology alone would be sufficient to buttress the new regime. Achieving greatness required a sound material underpinning, and he plainly stated as much, in November 1920:

“Communism is Soviet power plus the electrification of the whole country. Otherwise the country will remain a small-peasant country, and we must clearly realize that.”
_⁽³⁹⁾

Lenin’s fixation with elektrifikatsiia was grounded in personal experience.

Observing electrical contrivances while on a trip to Germany in 1908, he commented that electrical technology would evolve into “the strongest instrument of capitalist economy in the age to come”. Presciently, Lenin anticipated the revolutionary industrial developments that would transform Henry Ford’s Highland Park plant some five years later.
_⁽⁴⁰⁾

Lenin’s electric dreams were seen as being exactly that by some contemporaries, _⁽⁴¹⁾ but ultimately, he was right. Electrification would be the backbone of Soviet Power.

Lenin understood something that almost all other leaders of his day did not: Electrification was a race, not a leisurely stroll. A reader of the Scientific American magazine, Lenin grasped the crucial link between the United States’ burgeoning economic muscle and the electrification of its industrial base._⁽⁴²⁾

This obsessive interest in electrification fit snugly into the context of the deeply ingrained hostility of the Bolsheviks towards religion. Electricity is an awesome, supernal force, but one that is very much the product of human hand, rather than of a divine creator.

The spread of electrification across the Soviet Union was thus part and parcel of the Leninist ideology: the light and wonder of electricity was intended to replace that of the traditional divine kind.

As one Soviet playwright of the day would pen-

“We must snatch away God’s thunderbolts.
Take ‘em
We can use all those volts-
for electrification.”

Curiously, in the preface of the same play, the authour speculates that in fifty years time Communist ‘airborne battleships’ would be attacking distant planets, preempting Elon Musk’s interstellar fixations by around a hundred years. _⁽⁴³⁾

In the meantime, here on the earthly plane, the new regime soon found it had its work cut out. At the time of the Russian Revolution, the region that would encompass the soon-to-be Soviet Union was an economic basket case.

A report produced by the fledging Bolshevik government in 1919 revealed that there were just 220 electric stations operating in Soviet Russia: In the United States, which then had a comparable population to Russia, there were more than twenty times as many._⁽⁴⁴⁾

If we were to measure technological progress by the yardstick of the practical application of the internal combustion engine, the divergence was starker still.

In 1924, there were only around 1,000 tractors throughout Soviet Russia; _⁽⁴⁵⁾ By comparison, even as early as 1920, 250,000 tractors had been sold in the United States, produced by scores of manufacturers._⁽⁴⁶⁾

Both in the electrical industry, and in the automotive space, the territories of the once mighty Russian Empire had been left in the dust.

Fortunately for the fledging Soviet leadership, the fierce competitiveness between the tractor manufacturers in the United States would serve to correct the latter handicap.  Ford’s entry into the tractor market in the late 1910s transformed what had already been a competitive sector into a cut-throat one, and as a result, most operators in the segment were forced to turn greener pastures abroad, with the Soviet regime a notable beneficiary._⁽⁴⁷⁾

Lenin, keen to establish business ties with Ford, directed an American contact, businessman Armand Hammer, to facilitate the import of Ford tractors into the Soviet Union._⁽⁴⁸⁾

This démarche from the Soviet leadership eventually proved fruitful, and Ford Motors had sold tens of thousands of tractors to the Soviet Union by 1927. By 1934 there were over 200,000 tractors in the Soviet Union, most of them American-made. _⁽⁴⁹⁾

Imports of such machinery improved the efficiency of Soviet agriculture, and output doubled between 1926-27 and 1930._⁽⁵⁰⁾

 

 

While Henry Ford would be an unlikely benefactor in helping redress Soviet backwardness in agriculture, on the electrification front, the Soviet leadership forged on independently. The solution they would formulate was a comprehensive plan, an initiative that that was dubbed GOELRO.

GOELRO was the plan commissioned, initiated and overseen by Lenin for the electrification of Russia, laying out a roadmap for the for the construction within a decade or more of a network of hydroelectric and thermal power plants._⁽⁵¹⁾

The ultimate goal, as Lenin expressed it, was the organisation of industry on the basis of advanced technology, remediating the division between town and country, and overcoming ignorance, poverty, and barbarism throughout the land. Electrification was to be the bedrock for economic and societal reconstruction.

Lenin gave his nod of approval in November of 1920, signaling the Communist Party’s acceptance the initiative, and it was voted for unanimously the following year by the Soviet Union’s supreme governing body._⁽⁵²⁾ Given the parlous state of the Soviet Union, progress on the electrification front was to move at a slow pace. Urban electrification was realtively quickly achieved, though Lenin, who died in 1924, did not live to see it.

By 1926, however, the GOELRO plan had started to bear fruit, with the first hydroelectric power station in Russia, Volkhovskaya completed that year, and three such power plants in operation by the early 1930s. _⁽⁵³⁾

An aluminum smelter was bult alongside the Volkhovskaya plant. The region had been a significant importer of aluminum, and now, for the first time, the Soviet Union could begin to meet its civil and military needs domestically. From this small step, the industry would grow, leading the Soviet Union to become the world’s largest producer of aluminum by the 1960s.

The Soviet Union’s mastery of this metal would prove pivotal in facilitating another great leap forward.

Lenin had perceived that electrification would take the Soviet Union to new heights, but even he could surely not have imagined the extent of these heights.

In 1957, the USSR launched Sputnik 1, its first artificial satellite, into orbit. Aluminum produced with the flow of electricity from the Volkhovskaya plant played a crucial part in this achievement, as aluminium proved to be absolutely critical in the construction of spacecraft such as the Sputnik 1._⁽⁵⁴⁾

Forty years after the October Revolution, what had been one of the most backward nations in Europe was winning the space race. Nothing could more illustrate the game-changing potency of electricity.

The budding years of the Soviet Space program in the 1950s and 60s coincided with an economic boom across the union. While Western scholars often questioned the official Soviet growth figures in the decades after World War II, this scepticism is probably unfounded._⁽⁵⁵⁾

As we contend over the course of this piece, periods of rapid electrification have always been accompanied by remarkable economic growth, and when one of the most underdeveloped regions in Europe took up the electric gauntlet, light-speed growth was always going to be inevitable.

One bridge remained to be crossed, however.

While the Soviets were grabbing the attention of the world with their space exploits, millions of people across vast tracts of the Soviet Union were still living in conditions little removed from those their Grandparents had endured in the days of the Tsarist era.

The Soviet leader, Leonid Brezhnev, would prove to be the Soviet Union’s Roosevelt. Brezhnev would launch a ‘war on poverty’, with the underserviced rural folk being the focus of his attention._⁽⁵⁶⁾

To rectify the glaring imbalance, Brezhnev pushed the rural electrification project through to completion. The proportion of electrified farm homes rose from 74% in 1965, to 98% in 1971, and 99% two years later._⁽⁵⁷⁾

This surge in rural electrification was accompanied by a commensurate rise in wages: the average wage of a state peasant rose by 84% in the Brezhnev period. This correlation between rising wealth and electrification is a pattern that has consistently played out since the early years of the 20^th century._⁽⁵⁸⁾

In bringing electrical light and heat to the most remote households across the endless tracts of the Soviet Union, Brezhnev had completed Lenin’s dream of universal electrification. But in the very same decade of this momentous achievement, Brezhnev, unknowingly, was following a course that was to fatally destabilise the entire Soviet project.

Brezhnev presided over a dramatic expansion of nuclear capacity in the nation, aiming to transform the Soviet Union into a world leader in the nuclear industry._⁽⁵⁹⁾

On the face of it, this would have seem to have been in accordance with Lenin’s vision: Lenin was obsessed with electrical energy, and in the 1970s, nuclear power represented its newest manifestation. Fatefully, however, one of the nuclear power plants commissioned in his time, Chernobyl, would become renowned for all the wrong reasons.

In June of 1986, the Chernobyl plant melted down. Tens of thousands of people living in the area were forced to evacuate, and subsequent fires dispersed airborne radioactive contaminants across vast swathes of the USSR. _⁽⁶⁰⁾

The psychological impact of this catastrophe on the population of the Soviet Union should not be casually dismissed.

In the year that the disaster struck, anyone in the Soviet Union over the age of seventy had clear memories of the conditions that prevailed when the Bolsheviks first seized power.

At the dawn of the Soviet Union, their region was cloaked in darkness, both literally and figuratively. Many had seen, first hand, the glow of the ‘Ilich lamp’, the symbol of the Soviet’s promise of progress, and witnessed the Soviets deliver on their promises, as successive Soviet infrastructure projects were rolled out over the decades.

Electricity was the beating heart of Lenin’s dream. The very legitimacy of the regime was founded on their ability to harness electrical energy – ‘God’s thunderbolts’- through human labour and ingenuity, channeling the supernal power of electricity to create earthly wonders to raise the population out of poverty, kindling the light of knowledge by means of electric lamps, transforming darkness into light.

At Chernobyl, the awe and wonder surrounding electricity was transformed into a sense of horror- a shocking awakening from which the regime would struggle to recover.

The disaster at Chernobyl undermined popular confidence in the legitimacy of the Soviet Union. In the years that followed the incident, the Soviet project started to unravel, eventually ending in its dissolution in 1991.

Electricity had made the Soviet Union, but it would also contribute to its undoing.

It is, however, debatable if the Soviet Union would have emerged as a major power at all had it not been for Lenin’s fixation with electrification.

Although the Soviet Union was technologically moribund at the time of the Russian Revolution, even in the most advanced countries in Western Europe, the progress of electrification had lagged well behind that of the United States.

In the 1920s, Britain’s electrical supply system was a parochial embarrassment _⁽⁶¹⁾, and even in Berlin- known as Elektropolis on account of its reputation as a centre of electrical innovation- _⁽⁶²⁾ just one in two households were connected to an electricity supply as late as 1927. _⁽⁶³⁾

Thus, the obsessive focus on electrification in the formative years of the Soviet Union positioned it to leapfrog over its more developed European rivals, setting into motion its ascent into a superpower.

The early embrace electricity would be the rocket fuel that powered the Society Union to greatness.

It is a mistake to assume that there was any inevitablity about this.

Indeed, as we will see below, the next major communist power to emerge was initially quite lackadaisical in its pursuit of electrification.

As a result of this apathy, it would not be until the dawn of the 21st century that another populous nation would be brought into the electric fold. But when it did, electricity would once again prove to be a force that both shakes, and shapes, the world.

 

 

 

Chapter (4):
 
China searches for an elusive magic elixir, Modernisation

 

 

In October 1978, Deng Xiaoping, then the senior Vice President of China and the soon-to-be national leader of the world’s most populous nation, embarked on his first major state visit abroad. His ultimate destination was unexpected. It was certainly not a country that would seem to be a natural choice for the figurehead of a communist nation.

Rather than visiting a fellow communist brother-in-arms, Deng’s journey took him to a nearby archipelago nation that, within his lifetime, had been at war with his homeland: Japan. _⁽⁶⁴⁾

It would be a historic moment, and not only because Deng was to be the first senior leader from the People’s Republic of China to visit Japan. It was also the first meeting between top-level leaders of the two nations at any time in 2,000 years. _⁽⁶⁵⁾

The purpose of Deng’s precedent-breaking visit was not simply to extend neighbourly goodwill.

As Japan entered the 1970s, the economy of Japan was a wonder to behold. Like a phoenix rising out of the flames of Nagasaki and Hiroshima, Japan had emerged from the horrors of World War II to become the world’s third largest economy in as little as a quarter of a century. By the time of Deng’s arrival in 1978, Japan’s economy was on the cusp of an industrial wave, with many believing it was set to overtake even the United States.

For Deng, Japan thus represented an ideal model. Conveniently, the template for China’s future path was right on its doorstep.

A day after touching down at Tokyo’s Haneda airport, Deng met with the Japanese Prime Minister and attended a formal welcoming ceremony. Later, he articulated to his hosts the three reasons behind his visit: to exchange documents ratifying the Treaty of Peace and Friendship between the nations, to express China’s appreciation to Japanese friends dedicated to improving Sino-Japanese realtions, and to find the ‘secret magic elixir‘ that the legendary Xu Fu had long ago sought.

The Japanese listeners before him laughed. All were all familiar with the story of the alchemist Xu Fu, who, over 2,000 years earlier, had been dispatched to Japan by the Chinese Emperor to find an elixir for eternal life. Deng went on to explain that what he really meant by his reference to a ‘magic elixir’ was the secret of how to modernise. _{^{(66) (67)}}

Images of Deng’s visit to Japan were broadcast across Chinese television, revealing to millions the high standard of living in Japan. It was obvious that their East Asian neighbour had done far better economically over the past three decades. _⁽⁶⁸⁾ But what was the secret ‘elixir’ that had propelled the Japanese economy to power ahead of China?

Deng would eventually determine that the all-elusive philosopher’s stone of modernity that he sought was electricity.

As has been demonstrated above, the early adoption of electrical energy was fundamental to the rise of the two greatest powers of the 20^th century, the United States and the Soviet Union. Japan, the first nation in Asia to fully embrace electricity, had likewise leveraged its early mastery of this transformative technology, chanelling its transcendant power to achieve unprecedented economic prosperity.

Large-scale electrification would prove no less critical in the emergence of a new great rising power of the East at the dawn of a new century.

It is perhaps not particularly suprising that the next major country to successfully harness the power of mass electrification would be another nation hailing from the 20^th century’s communist block.

The top-down command and control system of communism was, in theory, ideally suited for rolling out vast infrastructure projects. This governmental characteristic was undoubtably a critical factor in the Soviet Union catapulting ahead of more its more developed Western European peers.

But we can only take this comparison so far. The pursuit of electrification calls for top-down drive and vision, and without government patronage, progress will stall. Even in capitalist America, the last, most difficult phase of the electrification drive depended on Government intervention.

But while Roosevelt’s rural electrification drive and the subsequent Soviet efforts to electrify its vast hinterland would ultimately prove to be a victory of perseverance, these initiatives pale in significance to the herculean task of the electrification of the 20^th century’s most populous country.

It was an achievement decades in the making, but finally, by the year 2000, 99% of China’s population had been brought into the electric fold, and within five the next years, almost everyone else._⁽⁶⁹⁾ For the first time in history, a nation of more than a billion people had entered into an age of electric plentitude.

Electricity was hardly a novelty in China by the turn of the millennium, but a combination of top-down apathy and the indomitable challenge of electrifying China’s vast population meant that this achievement would bridge generations.

Even in the early decades of the 20^th century, Western observers visiting China were often struck by the ubiquity of electric lighting in Chinese shops and markets, a phenomenon that was as apparent in outlying regional towns as in the largest cities.

So bright and voluminous were the lights of Shanghai that one British report of 1926 determined that the per capita electricity consumption of that city was even higher than in Britain._⁽⁷⁰⁾ By the 1920s, in the retail industry at least, electricity has become du jour in China, part of the expected everyday shopping experience._⁽⁷¹⁾

However, while China’s cities were radiant with electric light in the early years of the 20^th century, the same could not be said for the interior of most homes.

In Shanghai, for example, probably the most developed Chinese city of the time, only 10% of workers used electricity for lighting in the 1930s._⁽⁷²⁾ The full synergies of electrification only accrue to a nation when it stretches into all corners of life, and China was far removed from this circumstance in the first half of the 20^th century.

The 1930s and 40s were years of turmoil in China, dominated by a Civil War that was interspersed, and further complicated by, the Japanese invasion. Only after the foundation of the People’s Republic in 1949 was China in any kind of position to pursue large scale electrification.

Unsurprisingly, China’s electrical infrastructure was inchoate in 1949. The country had only 6,500 kilometres of transmission lines, roughly equivilient to the United States’ grid coverage in 1914, and this sparce network serviced a population more than five times the size. _⁽⁷³⁾ Decades of war had retarded the development of China’s infrastructure. As it transpired, the dawn of the new era would not translate into much effort to recover lost ground.

While Mao’s leadership in the Long March during the Chinese Civil war would earn him prestiege and, eventually, a place in the pantheon of the PRC, he faltered on China’s other critical long march – the march towards electrification. The newly-established Mao regime did not display any particular fervor towards the extending electrification across the country, a nonchalance that stands in curious contrast to Lenin’s electrical obsession.

While household electricity became the established norm in China’s urban centers over the 1950s and 60s, this was as much a product of the newfound stability than it was of government policy. Urban electrification had always been the low hanging fruit.

As a consequence of this apathy, by the late 1970s, at the close of the Mao era, 25% of the Chinese population, all rural dwellers, remained entirely devoid of access to electricity._⁽⁷⁴⁾.

It is striking how closely the state of electrification in China at the end of the Mao years mirrored that of the United States in 1930, where comparable proportion of the population had been bypassed by the march of progress.

Clearly, China was in need of a Roosevelt, to push through a Chinese ‘New Deal’.

Whereas the United States had FDR, and the Soviet Union Brezhnev, China’s agent of change would be Mao’s eventual successor, Deng Xiaoping.

Deng Xiaoping had worked and studied in Europe as a young man in the 1920s, and this experience would influence his later vision for China. Working in various industries in France, including a Renault automotive plant, _⁽⁷⁵⁾ Deng gained first hand experience of industrial processes. His move to Moscow in 1926 allowed him to witness the initial stages of Lenin’s GOELRO plan unfolding.

Lenin’s grounded approach to nation-building seems to have influenced him deeply. Deng’s oft-repeated slogan ‘Crossing the river by touching the stones‘ is Leninist to the core, and his leadership was characterised by a pragmatic philosophy of seeking truth from facts.

There was one aspect of early Soviet policy in the 1920s that clearly left a lasting impression on the young Deng.

As has been previously related, the early Soviet leaders had a particular fixation with cultivating relationships with leading industrialists of their day, with the connection established with Henry Ford being the most notable example.

Deng’s choice of Japan as the destination of his first major trip abroad should be seen in this context.

While the United States was the crucible of industrial innovation in the 1920s, by the 1970s, Japan had seized the crown. But Japan’s economy stood out for another reason: it was the regional shining star, the first significant Asian country to achieve first-world status.

Japan’s apparent exceptionalism, however, masks a familiar narrative. Like the United States, Japan’s remarkable success was rooted in its early and enthusiastic adoption of electricity.

In 1914, the power lines installed between the Inawashiro Lake power station and Tokyo formed one of the longest distance transmission systems anywhere outside of the United States (see figure 1, above). Household electricity was commonplace in Japan as early as the 1930s, and by 1947, more than 90% of Japanese homes were wired for electricity. _⁽⁷⁶⁾

The ‘secret elixir’ that powered Japan’s rise in the 20th century was thus one that was hiding in plain sight: electricity. It would, however, take years for the new regime in China to fully unravel the enigma of Japan’s success.

Determined to uncover the secret, Deng made it his mission to harness Japanese industrial know-how during his tour of the country. He visited industrial giants like Nippon Steel and Panasonic, seeking assistance from Japan’s corporate leaders to help China recover from the chaotic shambles of the Mao years.

His earnest request made an impression upon Matsushita Kōnosuke, the founder and chairman of Panasonic, who subsequently started a joint venture in China. Deng’s appeal to Nippon Steel would also prove fruitful, as the company played a crucial role in the emergence of a future Chinese giant, Baosteel, known since 2016 as Baowu. _⁽⁷⁷⁾

 

 

Rising from rice, to riches

 

After finding his muse in Japan, Deng, who had become the paramount leader in China by the end of 1978, embarked upon a series of experimental but evidence-driven modernization initiatives to jump-start China’s languid economy. The goals of Deng’s reforms were encapsulated by ‘Four Modernisations’: That of agriculture, industry, science and technology, and the military._⁽⁷⁸⁾

But as Deng would discover, there was a weak link in this grand plan: Electricity. _⁽⁷⁹⁾

The plan to modernise agriculture, aimed at boosting China’s per-capita grain production, depended on reliable electricity. Electricity is indispensable to modern agriculture, required for tasks as diverse as the powering irrigation pumps, for processing equipment such as grain-driers and for climate control systems.

Given the paucity of electrical power across vast swathes of China’s agricultural heartland, Deng’s proposed revamp of the agricultural sector was out of the question. By the late 1970s, energy shortages had become so severe in rural areas that many households depended on wood to meet their everyday cooking and heating needs. _⁽⁸⁰⁾

Likewise, electricity was the very backbone of the heavy industries that Deng aimed to stimulate in the industrial leg of his program, but a shortfall of this critical element almost derailed the entire scheme.

The first large-scale project of the ‘Four Modernizations’ was a massive steel complex, what was to become the Baosteel plant near Shanghai, the most ambitious industrial endeavor in China since the founding of the PRC. _⁽⁸¹⁾

After construction commenced in 1979, the initial enthusiasm for the grand venture was soon tempered by a dose of hard, cold reality: It was discovered that the electrical supply in the area was woefully inadequate. A steel complex that was built in Hebei ran into similar difficulties, ultimately resulting in its cancelation._⁽⁸²⁾

In truth, electric power was integral to all the pillars of Deng’s modernization plan.

As China’s new reformist regime was forced to realise, electricity is synonymous with modernity. It was painfully clear that the legacy electrical infrastructure inherited from the Mao era was simply not fit for purpose.

China’s deficiency in electric power was proving to be a stumbling block on the path to progress. As Lenin and Roosevelt had realised, electricity underpins modern progress. The horse needed to be put before the cart.

Headway was finally made on this front through a series of dramatic reforms that were spearheaded by Deng Xiaoping in the 1980 draft of what would become China’s sixth five-year plan. This new plan, the first presided over by the new President, promoted the development of energy infrastructure as well as enhancing energy efficiency measures._⁽⁸³⁾

Power stations were rolled out, and the capacity of smaller plants increased. _⁽⁸⁴⁾

Electricity was unchained from the central government, allowing local governments, with their intuitive understanding of local conditions, to become actively involved in the rural electrification process. Outside investment in electricity infrastructure was encouraged, in line with Deng Xiaoping’s broader ‘Open Door’ policy. _⁽⁸⁵⁾

 

Source: Background photo by Elisa Leonelli. Used with permission. (View Link)

 

As these reforms were implemented, the Chinese government steadily bridged the gap. Electricity production in China grew by over 35% between 1980 and 1985, and the much-delayed Baosteel plant near Shanghai was finally able to open its doors in 1985.

As China gradually awoke from its Maoist slumber over the 1980s, the quality of life began to steadily improve.

People began to eat better, dress better. Ration coupons disappeared, as did the ever-present fear of saying something the party disapproved of. Dreary markets that once stocked only cabbages and potatoes burst into corncopias of colourful fruits and vegetables. Expressions of cultural life began to emerge, including dances, music, poetry and real films. The paltry pay packets of workers steadily became fatter, and increasingly Chinese people could imagine buying cars, electronics and even going on overseas holidays. _{^{(86) (87)}} Like in 1920s urban America, daily life became less of a grind, more interesting, and more hopeful.

For the first time in the history of PRC, rural-urban inequality decreased. Farmers’ per capita income increased, rising from 133 yuan in 1978, to 355 yuan in 1984._⁽⁸⁸⁾

This rising tide of optimism and affluence was against the backdrop, and intimately connected to, the steady improvement in access to electricity. By the end of the 1990s, rates of access to electricity had surged to 99% for regional townships, 98% for villages and 97% for rural households._⁽⁸⁹⁾

As the wave of electricity swept across China, industry began to blossom across the nation.

Despite its rocky start, China’s steel industry steadily advanced. Over the next decade, China gradually came to dominate the global market, with Baosteel, the world’s largest producer by 1996, leading the charge._⁽⁹⁰⁾

As in the Soviet Union and the United States before it, the gradual transition from electrical scarcity to superabundance across the land also ignited the growth of another metallurgical industry with an intimate connection to electricity: aluminium.

China’s production of this metal surpassed Russia’s in 2002 exceeding 4.3 million tonnes. Thereafter, aluminium production in China grew exponentially, reaching nearly 10 million tonnes by 2006- one third of the global production volume. By 2020, China’s aluminium smelters were producing more than half of the world’s output. _⁽⁹¹⁾

As China’s steel mills and aluminium smelters ramped up production, the ever-increasing electricity supply similarly bolstered the efficiency of China’s mining industry. However, to the world beyond,  the most conspicuous effect of China’s ballooning productive capacity was the rapid-expansion of the manufacturing sector.

By 2001, China was producing 36 million television sets a year, but was only selling 15 million. It churned out 20 million refrigerators, despite domestic demand stagnating at 12 million._⁽⁹²⁾

What was true for high-end goods was also true for those on the lower end of the spectrum. By the end of 2001 China was already the dominant producer of toys. Within five years, China’s lead had extended even further, with the country producing 75% of the world’s total supply. _⁽⁹³⁾

In fact, by 2005 roughly 90 per cent of all manufactured products were in chronic oversupply. _⁽⁹⁴⁾

As in the 1930s, electricty’s excess had once again led to a glut of goods, and this growing influx of commodities of all kinds bore down on prices, delivering deflation to the rest of the world. By the early 2000s, the annual rate of inflation in the United States fell to levels not seen since the early 1960s. _⁽⁹⁵⁾

But while the initial phase of the ramp-up of electrification results in bounteous plentitude and falling prices, as this initial jump-start transits into electrification en masse, the final stage of the process finds expression in a sudden, and very dramatic, shift in prices.

This pattern unfolded in China at the close of its electrification drive, and the final, shakedown phase resonated across the ends of the earth.

In the early 2000s, just as China’s rural electrification drive was coming to a close, the prolonged stagnation of commodity prices abruptly ended.

This about face commenced around 2003, with most commodity prices -gold, copper, iron ore, oil- continuing their upward trajectory year-on-year until being finally upended by the shock of the Global Financial Crisis.

The surge commodity prices would prove to be a windfall for major commodity producing nations, particularly Australia and Brazil. During these heady years, a vast network of freighters spanned the breadth of the Pacific Ocean, ferrying over 160 million tonnes of iron ore to fuel to China’s booming construction industry. _⁽⁹⁶⁾ China’s appetite for iron ore seemed insatiable, and the world’s two largest producers of this commodity would reap the rewards.

However, it should be highlighted that the tonnes of Australian iron ore feeding Baosteel’s steel mills was only possibly because China’s landscape of electrical scarcity in the 1970s had completely transformed.

In its early years, Baosteel almost floundered on account of the dearth of electricity in China at the time. The limited pool of electric capacity of the Mao years had, however, grown into a vast reservoir by the dawn of the new millennium.

This transformation would prove a boon for the Australian economy, ostensibly on account of the unprecedented rise in the iron ore price. But in truth, the Australian economy was riding an electric wave, as much as a China wave.

The year 2003, traditionally viewed as the starting point of the ‘China Boom’, largely overlaps with the completion of China’s rural electrification drive.

While it would be wrong to perceive a direct cause and effect relation at play in this, the correlation is not coincidental, either. When electricity has become so pervasive across a nation that it is accessible to even remote and isolated households, it is symptomatic of a region that is awash with electric power.

In modern times, this state of electrical abundance is a prerequisite for elevating economic growth to a new level.

As is evident from the account relayed above, the rise of China as an economic superpower, like that of the Soviet Union and United States, was built on large-scale electrification. Electricity has become the force that underpins the wealth of nations.  To echo the colourful expression employed by Deng Xiaoping’s during his 1978 trip to Tokyo, electricity is truly the magic elixir of modernisation.

Today, China no longer stands alone in reaching this critical juncture in history.

By the early years of the 2020s, several major nations across South Asia have followed in China’s footsteps, extending wall-to-wall access to electricity across their entire populace.

But whereas China’s shift from a nation where electricity was a priviliege for the few, to one where access became a fact of life was a long and grueling march, the last stage of the journey towards comprehensive electrification in the newly electrified crop of South Asian nations has proceeded at an altogether different tempo.

Blink, and you might well have missed it.

 

 

 

Chapter (5):
 
India³: From the Subcontinent to the Archipelagos, the Indies alight

 

 

In June 2003, India’s poet-Prime Minister, Atal Bihari Vajpayee boarded a plane bound for Beijing. It was not his first trip to the country. The last time India’s leader had visited Beijing, nearly a decade earlier, China was a nation of countless bicycles and colourless buildings, struggling to propel its economy into the twentieth century before the twenty-first arrived.

But even before his plane descended, the sights taken in by the Prime Minister must have seemed, at first glance, to be a mirage.

The Beijing of before was scarcely recognisable. The once-traditional inner city had completely transformed, expanding vertically while the rest of the city seemed to have extended itself horizontally. A cobweb of superhighways reached out in every direction, veering off into the distance across the city, cutting through the freshly constructed Fourth Ring Road and extending into the outer city. Then, thousands of factories surrounding Beijing suddenly came into view.

Most of these factories were new, built since his last visit to the country, and they collectively represented the promise of steady employment and the chance of economic advancement for millions of Chinese people. China had leapt from the past straight into the future.

He stepped into a new ultramodern airport, just one of many in China. As the prime Minister and his delegation drove into Beijing on a smooth new highway, the silhouettes of hundreds of cranes loomed over the cityscape. An endless stream of sleek, top-end cars sped past, while on both sides of the congested roads were miles of the shining skyscrappers that had sprouted along Beijing’s wide boulevards, almost all of them, like the highways and factories he had observed from above, built over the preceding ten years as the Chinese economy took off at breakneck pace. As Mr Vajpayee’s took all of this in, the reality sunk in: China had left India behind. _^(97)(98)

For much of the 20th century, the Indian and Chinese economies had muddled along, isolated from and overlooked by the rest of the world. Their people were poor, with little hope for a better life. But in 1978 China opened its door to the wider world and India did not, and their fortunes began to diverge.

By the year of Mr. Vajpayee’s eye-opening trip in 2003, China, then the world’s most populous nation, had effectively completed its rural electrification drive. _⁽⁹⁹⁾ By then, 99% of the country’s rural population had moved into the electric age. Excluding a handful of communities of remote pastoralists living on the barren fringes of the nation, electrification had become mainstream across the country, paving the way for its then 1.29 billion people to ascend into the ranks of the globe’s middle-income earners.

The anecodote above about Mr Vajpayee’s visit serves a purpose beyond offering a glimpse into a moment of history. It also pointedly illustrates how acutely access to electricity serves as an indicator of a nation’s industrial progress.

One would not have needed to take in a real-time panorama of the country, as did Mr. Vajpayee in 2003, to understand that China was on the move. Had you been monitoring the progress of China’s rural electrification drive in the early 2000s, it would have been possible to recognise that the Chinese economy was galloping ahead, and indeed, was on the cusp of a boom.

The growth trajectories of the two Asian giants during the late 20th century present an interesting comparison. Founded just a year apart, both republics entered the twenty-first century as leviathans, being the only countries in the world boasting populations exceeding the billion mark.

But while the Chinese dragon entered the new millenium with a roar, the Indian elephant was plodding far behind, seemingly stranded in the past. In stark contrast to China’s shiny new infrastructure, India’s airports were decades old and crumbling. There were no new expressways, and the nation’s potholed, gridlocked streets were lined with squalid shacks.

However, underlying this facade of destitution and dilapidation was a deficiency in another critical factor, the often overlooked, invisible force that has been our focus here: electricity. India’s paucity of this vital force relative to China largely explains the divergent experience of the two countries.

From the time of Deng Xiaoping onwards, China’s leaders made a concerted effort to extend the umbrella of electrification across the entire nation. India’s leaders, on the other hand, dragged their heels.

By the time of Prime Minister Vajpayee last term, from 1999 to 2004, China’s narrow lead over India had grown into a yawning gulf. The surging tide of Chinese goods swamping world markets was a particular shock to India’s business community, finally forcing India’s political class out of their complacency._{⁽¹⁰⁰⁾} Just as Deng Xiaoping took Japan as his exemplar, the rise of China represented an example that India should follow, and indeed, needed to follow.

India’s central government finally launched its own rural electrification drive, the Rajiv Gandhi Grameen Vidyutikaran Yojana or the Rural Electricity Infrastructure and Household Electrification Scheme in 2005, dedicated to providing electricity to all rural households._{⁽¹⁰¹⁾}

While India’s leaders were slow to recognise the criticality of electricity to modernity, this outcome was never predestined.

As India crossed the bridge from colonialism to independence in the 1940s, Mahatma Gandhi, the father of the nation, appreciated the crucial importance of electrification. _{⁽¹⁰²⁾}As a staunch believer in in the centrality of the village to Indian society, he was a natural advocate for rural electrification, though his vision was cut short by his assassination in 1948.

Subsequent Indian governments would lose sight of Gandhi’s aspirations, leaving India’s predominantly rural population neglected, even as vast swathes of the wider world became increasingly luminous with electric light.

As a consequence, by the 1960s, India’s electric capacity was stunted, and electric power a coveted commodity. Even an oil lamp was a luxury, and a flashlight was decidedly ostentatious._{⁽¹⁰³⁾} Those fortunate enough to live in a home connected to the grid faced regular power outages. A generator set was, by necessity, a standard piece of equipment for any manufacturing firm operating in the country._{⁽¹⁰⁴⁾}

Such an environment was hardly conducive to industrial development, and India was almost entirely reliant on imports for the fertilisers and tractors that were essential to feeding the nation._{⁽¹⁰⁵⁾}

Few Indians living in the 1960s could have imagined that their country would one day become one of the largest world’s largest fertiliser producers,_{⁽¹⁰⁶⁾} and that the same country that struggled to produce enough tractors just for its domestic market, would in time become the largest global exporter of tractors._{⁽¹⁰⁷⁾} Yet, such is precisely the case today.

These industrial achievements are indicative of a nation that is flush with electrical energy.

2020s India is not, however, analogous to China in 2003. India’s exports remain modest by global standards, accounting for only 2% of global goods exports in 2022._{⁽¹⁰⁸⁾}

This is not to say that India lacks manufacturing success stories; the tractor industry is a stand out in this regard. Whereas in the 1920s, the Fordson tractor was ubiquitous worldwide, fast forward to the 2020s, and it is India’s own Mahindra tractor models that dominate the global agricultural landscape. _{⁽¹⁰⁹⁾} But tractors aside, unlike early 21^st century China, India in the 2020s cannot be described as a ‘factory for the world’.

That said, on two measures, 2020s India does align with China twenty years prior.

Firstly, India today stands as the most populous country in the world, having inched ahead of China in 2023.

Secondly, and more significantly, in the early 2020s, India finally bridged the electricity divide between its largely poor rural dwellers and the more affulent city folk.

The progress of developing nations is tracked by the International Energy Association, who periodically release updates on energy access levels around the world. The IEA World Energy Outlook Report, released at the end of 2023, covers the progress that has been made across the globe up until the year ending in 2022, including details on the state of electrification in India._{⁽¹¹⁰⁾}

By that year, India had crossed the threshold, bringing its entire population into the electric age.

From coast to coast, from the Himalayas in the north to Land’s End at Kanyakumari in the south, India is now, quite literally, aglow with energy.

 

 

A Rising Tide

 

But strikingly, the IEA report also makes clear that India is not the only country in the region to have attained full electrification for its population by the end of 2022.

The 2023 IEA report reveals that Indonesia, the fourth most populous country in the world, also reached the same goal by the end of last decade. India’s neighbor, Bangladesh, likewise cleared the last hurdle in its drive for universal electrification, its rate of access to electricity surging from 75% to 100% between 2015 and 2022. Finally, Indonesia’s northern neighbour, the Philippines, has also attained complete electrification, only a few years short of its larger archipelago neighbor to the south.

The rising tide of electrification sweeping across South Asia is arguably of greater consequence for the global landscape than China’s transformative power surge, that propelled it from economic laggard to leader between the 1980s and the early 2000s.

For one, the combined population of these South Asian nations at the time of writing stands at approximately 1.991 billion, significantly surpassing China’s 1,290 million at the onset of its entry into the realm of electric ubiquity early this century.

Moreover, the final phase of South Asia’s electrification drive across South Asia has also touched the lives of a much larger proportion of the population of the region.

In the late 1970s, when China commenced its rural electrification push, a quarter of Chinese households lacked power. In contrast, at the dawn of this Millenium, only 43% of households across India had access to electricity.

In Indonesia, the figure was slightly higher, 53%, while in Bangladesh, as few as one-in-five households were connected to the power grid in the year 2000. Both in scale and in speed, this transformation in South Asia can be aptly described as an electric wave.

Prior to the year 2000, mass electrification was a drawn out affair. China’s case typifies this pattern: when China finally completed its rural electrification drive in the early years of the century, it marked the culmination of a process that had been unfolding for more than half a century.

But since then, the pace of electrification has markedly speed up.

In the space less than 25 years, countries with a collective population of nearly two billion souls have raised hundreds of millions of people out of energy poverty and into the electric age. India’s estimated 1,428 million people,  Indonesia’s 279 million, the 170 million or so residents of Bangladesh, and a further 114 million people in the Philippines: all have joined the ranks of the electrified world.

Never before in history have so many gained access to electricity, in so short a time.

Although the lions’ share of these people reside within India, we should not underestimate the significance of electrification in even the smallest of these countries.

The Philippines, the least populous of these four nations, has a population only slightly smaller than that of Japan, which currently ranks as the fourth-largest economy in the world.

But demographically, the Philippines is Japan’s polar opposite: while Japan’s peak year for births was 1949, the Philippine’s did not reach its ‘peak baby’ year until as recently as 2012.

This example illustrates that even the very smallest of this quartet holds significant economic potential in its own right.

The impact of the lighting up of these four populous South Asian nations will have global ramifications. Some of the potential consequences of this monumental development have been hinted at over the course of this essay.

The complete electrification of regions has tended to signal the emergence of major new economies and new global powers. But mass electrification has a tendency to set off fireworks in the prices of commodities, triggering dramatic fluctuations in both directions.

At time of writing, we have already witnessed one example of this stemming from this seismic shift across South Asia.

While the electrification of new frontiers leads to an increase in the consumption of commodities over the long run, it can dramatically escalate their production in the near term, consequently driving down prices.

This trend has been evident since the early days of North America’s electrification, notably when the massive Niagara Falls power plant effected a plunge in the price of aluminium at the close of the 19^th century.

Other instances of this phenomenon have been highlighted: The surplus of soft commodities during the 1920s and 30s, and the decline in the steel price around the turn of the century, as China intensified its production of both electricity and steel.

Adding to these historical examples, we can cite one more recent case directly relating to the region in focus: Indonesia’s ramp-up of nickel production over 2022 and 2023, with a predictable knock-on effect on the price of that metal.

In 2019, the then president of Indonesia, Joko Widodo, banned nickel ore exports from the country, to promote the development of domestic metal processing, instigating a surge in foreign investment. Indonesia, newly awash with electricity, leveraged its energy abundance to boost the production of its leading commodity export, nickel._⁽¹¹¹⁾

The invigorated metals and mining industry ramped up production, and Indonesia’s nickel production doubled over 2021 and 2022, sending the price of the metal into a tailspin._⁽¹¹²⁾

Australian nickel miners were caught out by this development. BHP opened Australia’s first nickel sulphate processing plant in 2021, _⁽¹¹³⁾ only to have its entire nickel division thrown under a cloud just two years later on the back of the Indonesian surge in nickel production and the ensuing price collapse. _{⁽¹¹⁴⁾}

Australia’s nickel miners were discovering what American oilmen of a century earlier had come to appreciate: The sheer enormity of the gains unleashed by the power of electrical energy often seem to defy even the most febrile imaginations.

 

South Asia Rising

 

Figure 2.

_⁽ⁱⁱ⁾

Throughout this article, a theme that has recurred is the close relationship between electrification and rising affluence.

The electrification of emerging economies dramatically improves the quality of life of their inhabitants. As countries in undeveloped regions steadily bridge the electric divide, the per capita GDP of these nations climbs higher. However, the full benefits of electrification are realised only when electricity becomes universally accessible, with the benefits persisting long after this milestone is achieved.

This well-established pattern has been evident in Asia since the turn of the millennium, as is outlined in the table, above.

The GDP per capita of each country featured here strongly correlates with the decade in which full electrification was attained. The first three countries of the region to achieve this goal -China, Thailand and Malaysia- boast the highest standard of living.

Among the three major Asian countries that became fully electrified shortly after the turn of the Millenium, the range of per capita GDP spans from $37,083 (Malaysia) to 22,491 (Thailand), compared to an average GDP per capita of just $9,727 for South Asia’s three most recently electrified nations.

These examples illustrate the dramatic improvement in quality of life that flows from universal electrification and also highlight the significant economic potential for the newly electrified South Asian countries in the years ahead.

 

---

 

Large-scale electrification is a monumental trend that, since the first great upsurge in the early 20th century, has never failed to send reverberations across the globe. For most of the world’s population, the most immediate impact of mass electrification is felt through prices.

Before concluding this article, we will investigate the link between electricity and the movement of prices, highlighting compelling evidence suggesting that since around the turn of last century, electricity and electrification have served as the unseen agents instigating inflationary trends.

 

 

 

Chapter (6):
 
Electricity and the march of prices

 

 

For anyone born into the age of electricity, inflation is hard-wired into their thinking. Today, we take it for granted that a dollar, a euro or a yuan will carry less clout in a decades time than it will today.

But it hasn’t ever been thus.

In the 19^th century, the very opposite prevailed: deflation was the order of the day.

In the late 19th century, prices steadily declined for decades. Such was the extent of the decline, that in 1897 one British pound sterling had more purchasing power than the same coin in 1819. _{⁽¹¹⁴⁾}

But when did the worm turn? When was this deflationary world turned upside, making way for the typical experience of the 21^st?

Historians of economics can precisely pinpoint the exact year the winds of change swept across the world: 1896. _{⁽¹¹⁵⁾}.

From that point on, inflation began to become the norm. The pace of it was initially languid, but in the early years of the 20^th century, the trickle became a rushing rivulet. By the middle years of the 20th century, the stream had become a torrent.

What was the mystery parameter that prompted the deflationary turn-about in the late 1890s?

Population growth is a common, if unconvincing, explanation for the shift.

A more compelling argument is that the key variable in this turnabout is the force that has been the focus of this essay: electricity.

In 1896, the critical crossover year, being the last of the Victorian-era deflationary period, North America’s first large scale hydroelectric plant at Niagara Falls commenced point-to-point transmission to Buffalo, marking the start of the expansion of the electricity grid in North America._{⁽¹¹⁶⁾}

Electricity was not a novelty in 1896, nor were electric power-plants. Indeed, the Niagara project didn’t even represent the first long-distance transmission of electricity._{⁽¹¹⁷⁾}

The significance of Niagara Falls was that it represented the emergence of scalable, long-distance and point-to-point transmission, enabling ever-increasing numbers of people to harness electrical power. More importantly, Niagara Falls served as an exemplar, inspiring the emergence of new grids, both in the United States and abroad.

As more people and industries hooked up to the emerging grid systems, ever more power was called for, which found expression in steadily increasing prices.

The surging inflation that characterised the second half of the 20^th century makes sense in this context, with the most potent inflationary periods occurring against the backdrop of waves of people gaining access to electricity.

This pattern is represented in the chart below, which tracks the inflation rates of Britain, the dominant power of the 19^th century, and the United States, the leading power of the 20^th century.

 

Figure 3.

_{⁽ⁱⁱⁱ⁾}
Over the 19th century, and into the early 20th century, inflation followed a cyclical course, with periods of sharply higher prices associated with the major conflicts of the era. The prolonged Victorian deflationary spell in the latter decades of the 19th century was at least partly due to the absence of large scale wars from the 1870s to the 1890s.

This pattern of ‘peaks’ and ‘troughs’ begins to steadily change shape over the course of the 20th century.

For someone born at the dawn of the electric age, witnessing the the unfolding of the decades around them, initially it would have seemed as though the 19th century pattern was persisting, with a significant price-spike correlating with the First World War, followed by substantial declines in the 1920s and 30s. However, had our 20th century eye-on-the-ground lived to an advanced age, it would have become increasingly evident that the old paradigm had shifted.

This change had become unmistakeable by the 1970s. Inflationary surges were no longer solely related to the disruptions resulting from major conflicts. Rising energy consumption from both the developed and the rapidly developing nations meant that demand-pull had become an increasingly important factor.

Electrification represents the gateway to development, and as waves of humanity were ushered into the electric age, it unleashed potent inflationary pressures.

The first wave of electrification, overwhelmingly urban, surged through the cities and towns of the Western World over the 1910s and 20s. By 1930, electricity had become ubiquitous in, though largely restricted to, North American and European cities. Beyond the city limits, electricity remained a novelty, and thus this initial wave of electrification only reached a small fraction of the global population.

The next wave was far more potent. The great wave of electrification commenced at the close of World War II, continuing up until the 1970s. By the early seventies, half the worlds population had gained access to electricity.

This rapid surge in electrification coincided culminated in the ‘stagflationary’ seventies, when central banks struggled in vain to control runaway inflation. Appropriately enough, the ‘Great Inflation’ followed on the heels of a ‘Great Wave’ of electrification. It is illustrative of the extent to which electricity seems to call the tune on inflation.

The close relationship between the spread of electrification and prices, as suggested by the chart, becomes clearer when we consider the nature of electricity.

Electricity itself is a commodity, but it is a peculiar one. It cannot be boxed, stored, or shipped. It is used the instant it is generated, even if the user is thousands of kilometres from the source.

To reach the user from its point of generation, it relies on a vast machine. The most conspicuous manifestation of this machine are the powerlines, that serve to channel broad halos of electromagnetism in a direction determined by something as simple the flick of a switch.

In essence, electricity is inseperable from the extensive infrastructure that carries it. The infrastructure upon which it relies must be constructed, and like all temporal structures, it needs to be maintained. Failure to do so results in its degregation: The eventual fate of the Niagara Falls power plant, which in 1956 was dashed to pieces by the same natural force that it sought to harness, is a case in point._{⁽¹¹⁸⁾}

The generation of electricity, of course, also requires power. This is frequently provided by some form of fossil fuel, which needs to be mined, but even renewable or nuclear energy sources are embedded in their own specific infrastructure paradigms, which likewise require constant maintenace.

The energy requirements, as well as the constant maintance of electrical infrastructure, represents a constant inflationary pressure. Most of the time, this pressure is a barely perceptable hum, but when a rush of people are added to the world’s electrical grids, what had been a low background hum amplifies into a scream.

As the 21st century unfolds, humanities relationship with electricity is becoming more intimate. Whereas in the 20th century, electrical devices were primarily stationary household objects, such as lamps, telephones and refrigerators, today, such objects have evolved to become akin to personal accoutrements, mobile devices designed to be carried with us.

These devices, of course, require regular recharging, underscoring how deeply intertwined humans have become with electricity.

Today, not only does most of the world’s population have access to electricity, the majority also carry a smartphone. In 2023, for the first time, more than half the world’s population owned such devices. Most of the world’s population now carries about them a power-craving device that needs to be constantly recharged._{⁽¹¹⁹⁾}

The crossing of the 50% benchmark of smartphone ownership, coinciding with the sweeping electrification across South Asia, is suggestive of some symbiosis, rather than coincidence. Adding weight to this suspicion is that a similar pattern of rapid mobile phone adoption played out in China around the turn of the Millenium, rising from just 7% of households in 1997 to nearly 50% in 2004. _{⁽¹²⁰⁾}

The penetration of smartphones into developing regions of the world might offer a clue as to why the pace of electrification has accelerated in the 21st century. The benefits of owning a multi-purpose device such as a modern phone are so manifold, that the drive for electrification becomes undeniable.

At time of writing, the world is in the thick of its third wave of electrification, with South Asia the centre stage. This latest wave commenced with the completion of China’s rural electrification drive around the year 2000, only concluding when the giants of South Asia, most notably India and Indonesia, attained the same milestone around 2020. Arguably, the last stages of the South Asian wave are still unfolding, with Pakistan, the third-largest nation in the region, still to attain universal electricity access for its population.

As has been outlined thoughout this article, since the early 20^th century, such waves of electrification have always been associated with strong economic growth.

As countries ascend the GDP per capita ladder, rising affluence drives increased consumption, which in turn boosts demand for all manner of manufactured goods, with flow-on impacts on demand for the raw materials further down the chain. This pattern is partiuclarly evident in the latter stages of waves of electrification, such as the 1970s in Western Europe and the Soviet Union, and in China in the early 2000s, where price pressures escalated into commodity booms.

 

 

 

Chapter (7):
 
Conclusion: Rise of the Integrated Machine: Networks of Power/ Networks of People

 

…The relation between the steam engine as a source of power and the electric motor is thus about the same as the relation between the individualist and the socialist … the one is independent of everything else, is self-contained, the other, the electric motor, is dependent on every other user in the system. That means, to get the economy from the electric power, co-ordination of all industries is necessary, and the electric power is probably today the most powerful force tending towards co-ordination…

Charles ‘Proteus’ Steinmetz
_⁽¹²¹⁾

 

For decades, the unfulfilled potential of India’s economy confounded economists and casual observers alike. Even as China’s economy grew at stellar rates in the late 20^th century and into the 2000s, India’s economy lagged behind, sputtering along at a tepid rate of less than 4% per annum.

So pronounced and enduring was this pattern, that one economist dubbed India’s characteristic lackadaisical growth as ‘the Hindu rate of growth’, a turn of phrase that stuck. _{^{(122) (123)}}

In truth, the starkly different experiences of the world’s two population leviathans had little to do with the religion or culture of their respective regions. The difference, does, however, owe much to a single potent trend: electrification.

We commenced this article with a quote from the pioneering early-20th century electrical engineer Charles Steinmetz, and so it is fitting we end with another from the same pivotal figure, one which happens to be apropros to discussion at hand.

In the passage above, Steinmetz’s reference to ‘… the electric motor, is dependent on every other user in the system… to get the economy from the electric power, co-ordination of all industries is necessary…’ alludes to the vast machine which is known today as the electricity grid. An effective grid is built upon economies of scale, and the greater the scale, the more efficient the machine.

When an electric grid spreads across a region or a nation, that nation becomes part of the machine: Every factory, every business, and every household wired up to the grid becomes embedded into the machine. The bigger the scale, the more efficient the machine.

The differening growth trajectories of China and India in the late 20th century fit into this framework. China, with its centrally-planned economy, had more a single-minded focus on electrification and got its grid in order more expediously than did India, particularly following the reformist years of Deng Xiaoping. By the end of the century, energy poverty in China had been driven to the margins, while the numbers of Indians without access to electricity remained vast.

In the electricity network, all of the population of a region form part of the ecosystem, and the machine can not functioning at full capacity when large numbers of people are left out. The levels of access to electricity of a given population thus stands as a fairly reliable proxy for the state of a region’s electricity grid.

When every household in a country can tap the benefits of electricity, it is a sign of a robust grid, and industry, as well as households, stand to reap the rewards.

It is worth reflecting on the comment from John Clark in 1920, who noted that the manufacturing establishments, which had largely generated their power on-site two decades prior, were increasingly transitioning to a grid-fed power supply.

The circumstance that prevailed in North America at the turn of the 20th century was not far removed from those in India at the turn of the 21st. Out of necessity, most manufacturing operations in India had onsite generator sets because the local grid could not be relied upon._{⁽¹²⁴⁾}

An effective electricity grid eliminates the need for such capital-intensive setups, reducing business costs and lowering barriers to entry to up-and-coming players, and thus levelling the playing field. This in turn is a boon for jobs, reducing the ranks of the unemployed, which flows on through to a higher average income across the board.

When countries drive the electrification process to conclusion, extending electricity to households in every nook and cranny across the nation, it thus creates maximum efficiency. Such countries stand to enjoy the dividends of strong economic growth for years thereafter.

This is essentially why, since the early years of the 20^th century, universal electrification has always been a prerequisite for greatness. No nation can raise itself from mediocracy unless it is first able to bring up all its people with it. As the early electric utilities would realise, the game is about scale, and on the national level, the full synergies of electrification are released only when the tendrils of electricity have embraced even the most remote and far-flung communities across the land.

In the late 20^th century, China was a league ahead of India in the electric field, and it showed in the starkly different growth rates of these respective countries. Now that India has lit up its last villages in darkness, on this crucial front, the gulf between these two countries has been bridged.

In this, India is not alone. It is a rising tide that is evident all over South Asia. India’s neighbor, Bangladesh has also been captured by the electric wave. It has also swept the south east of Asia, raising up the archipelago nations of Indonesia and Philippines.

India, the most substantial of these four nations, has some echoes of China in the early years of the 21st century. Like China at that time, it has extended electrification across the country, and it is also the most populous nation on earth.

However, India of the early 2020s can not be viewed as a ‘China analogue’. Its industrial capacity lags far behind that of China a generation ago, and it would be challenging for India to catch up to China’s lead.

However, it is possible that one initiative might lead to a closing of the divide.

With so many nations in the South Asian region rapidly electrifiying, the logical next step would be to join up the grids, taking economies of scale to an unprecedented level.

The Bangladesh-India Electrical Grid Interconnection Project represents a step in this direction.

This tripartite proposal involves setting up power transmission corridors between Bangladesh and India’s norther-eastern states, allowing Bangladesh to employ India’s grid to import power from Nepal. India would benefit through the construction of power lines, establishing a connection between its ‘seven sister’ states in the north-east to the rest of India via a corridor in Bangladesh. _{⁽¹²⁵⁾}

Could this project pave the way for even closer integration between the grids of these three nations? Were this taken to its logical conclusion, it could open the way for an electricity network covering 1.6 billion people- a network of unprecedented scale.This would create massive economies of scale, to the benefit of India, Bangladesh and any other neighbouring country forming part of the network.

How this development will pan out remains to be seen. But as it stands, the four countries that have been our focus encapsulate a population of some two billion people. By itself, this is a significant milestone.

At the time of writing, early in the 2020s, close to a quarter of the world’s population have just joined the electric fold.

The wave of electrification that has swept across South Asia is of profound importance. Some implications can be predicated with a measure of surety.

Based the comparable waves to have unfolded over recent history, we could expect such a trend to set off volatility in all manner of prices, with extreme movements in both directions.

The Urban electrification coincided with deflation in the 1920s, followed by even steeper deflation in the 1930s. However, the successive decade saw explosive price growth, as both the United States and Japan concluded their electrification drives. Likewise, the last-leg of China’s electrification push drove down prices in the 1990s and early 2000s, to be promptly followed by a second phase of higher prices.

This pattern suggests that the closing phase of the South Asian wave will likely exert upward pressure on prices over the second half of the 2020s. Of course, there are also implications that will be harder to fathom.

In 1900, for example, few would have predicted that electricity would lead to automobiles dominating city streets. A quarter of a century later, it would have seemed unlikely that the Soviet Union would rise to become a major power. Similarly, in 1950 the idea that the Japanese economy would overtake most of the major Western economies in the years after the devastation of World War II would have been considered fanciful. The same held true for China in 1975: No locals of that country would have believed that within a generation, China would be on its way to becoming a dominant world economy.

Yet as has been relayed above, all these major trends could have been percieved by an industry observer of the day who had been closely monitoring trends in the growth and the application of electricity.

As has been posited here, electrification is a time-tested driver of economic growth, or at least going back a century. And conspicuously, hefty increases in the rates of access to electricity have strikingly correlated with periods of strong commodity growth.

The trend of electrification is not one that garners much attention in the 21st century. But how many of the trends that do rate today would even be conceivable without it?

 

---

 

The last ‘Great Wave’ of electrification peaked with the price surges of the the late 1970s, before gradually dissipating as the last century drew to a close.

As the new century dawned, a new electric wave emerged, steadily sweeping across the populous nations of South Asia. Now, with this wave having reached a crescendo in the 2020s, it throws up some critical questions: is history set to repeat itself? Half a century later, might history’s blueprint indicate that the second half of this decade will be similarly characterised by a buoyant trend in the prices of commodities?. And if so, which commodities should we bring into the focus of our perspective glass?

The potential impact of this major trend on individual commodities is too narrow a concern to be addressed in the scope of this analysis. However, it is a follow-up topic that warrants deeper exploration, and in the not-too-distant future, our panoramic perspective shall give way to one more granular, with the dymamics of indivdual commodities becoming the focus of our analytical microscope.

 

 

Special thanks to David Nye, Ellen Parsons and the Linda Hall Library for assisting with this article. Any mistakes are the authour’s own.

Featured graphical art by S. Silva

 

 

Footnotes

(1) He, G & Victor, D, 2017, Experiences and Lessons from China’s Success in Providing Electricity for All, Resources, Conservation, and Recycling, p 1

(2) Nath, K, 2008, India’s Century, McGraw-Hill, New York, p 15

(3) Marling, K.A, 1994, As Seen on TV: The Visual Culture of Everyday Life, Havard University Press, Cambridge, p 134-135

(4) Cooley, T.F, The Soaring Twenties, 2009, Forbes, (view link)

(5) In 1914, for example, 27 out of 55 of the worlds high-capacity transmission systems were located in the United States. Hughes, T.P, Networks of Power: Electrification in Western Society, 1880-1930, John Hopkins University Press, Baltimore, Table p 282-283

(6) Clark, J. A, 1920, Sale of Motors for Industrial Uses, Electrical contractor-dealer : official journal of National Association of Electrical Contractors and Dealers, Volume 20, No. 2, Utica, New York, p 67-69

(7) Smiley, G, 2004, US Economy in the 1920s EH.Net Encyclopedia, edited by Robert Whaples (view link)

(8) Nye, D.E, 1998, Consuming Power: A social history of American energies, MIT Press, Cambridge, p 198

(9) Nye, D.E, 1998, Consuming Power: A social history of American energies, MIT Press, Cambridge, p 188

(10) Batchelor, R, 1994, Henry Ford, mass production, modernism and design, Manchester University Press, New York, p 17

(11) Beaudreau, B.C, 1996, Mass Production, the stock market crash, and the great depression: The macroeconomics of electrification, Greenwood Press, Westport, p 4-5

(12) Brinkley, D, 2004, Wheels for the world: Henry Ford, his company, and a century of progress, 1903-2003, Penguin, New York, p 209

(13) Batchelor, R, 1994, Henry Ford, mass production, modernism and design, Manchester University Press, New York, p 27-28

(14) Brinkley, D, 2004, Wheels for the world: Henry Ford, his company, and a century of progress, 1903-2003, Penguin, New York, p 272

(15) Bureau of the Census, 1933, Fifteenth Census of the United States: Small City and Rural Trade Series, United States Government Printing Office, Washington, p 2 (view link)

(16) Trentman, F, 2016, Empire of things : how we became a world of consumers, from the fifteenth century to the twenty-first, Allen Lane, London, p 411

(17) Nye, D.E, 1991, Electrifying America: Social Meanings of a New Technology, 1880-1940, MIT Press, Cambridge, p 16

(18) Kelly, K, 2016, White Castle Hamburgers: The Story, America Comes Alive!, Accessed 30 June 2024, (view link)

(19) Schwarzmueller, A, 2014, Niagara Gorge Industrial Heritage, HMdb.org, Accessed 30 June 2024, (view link)

(20) Bakke, G, 2016, The Grid: The Fraying Wires Between Americans and Our Energy Future, Bloomsbury, New York, p 53

(21) Peake, A.W., and F.O. Prior, 1927, Use of Electricity for Oil-field Operations in Wyoming, Trans. 77, p 194–195 (view link)

(22) Trentman, F, 2016, Empire of things : how we became a world of consumers, from the fifteenth century to the twenty-first, Allen Lane, London, p 411

(23) Smith, S, 2016, The American Dream and Consumer Credit, American Public Media, Accessed 30 June 2024, (view link)

(24) Ibid.

(25) Nye, D.E, 1991, Electrifying America: Social Meanings of a New Technology, 1880-1940, MIT Press, Cambridge, p 75

(26) Nye, D.E, 1991, Electrifying America: Social Meanings of a New Technology, 1880-1940, MIT Press, Cambridge, p 16

(27) Higgs, K, 2021, A Brief History of Consumer Culture, The MIT Press, Accessed 30 June 2024, (view link)

(28) Bohannan, C, 1933, Analysing the Small City and Rural Market Area, Fifteenth Census of the United States: Small City and Rural Trade Series, United States Government Printing Office, Washington, p 2 (view link)

(29) Peters, G, and Woolley,J.T, Franklin D. Roosevelt, Statement on Signing a Rural Electrification Bill, The American Presidency Project, Accessed 30 June 2024, (view link)

(30) Higgs, K, 2021, A Brief History of Consumer Culture, The MIT Press, Accessed 30 June 2024, (view link)

(31) Brinkley, D, 2004, Wheels for the world: Henry Ford, his company, and a century of progress, 1903-2003, Penguin, New York, p 128

(32) Nye, D.E, 1998, Consuming Power: A social history of American energies, MIT Press, Cambridge, p 188

(33) Petett, Z.R, 1933, Census of Agriculture, Fifteenth Census of the United States: The Farm Horse, United States Government Printing Office, Washington, p 1 (view link)

(34) Kindleberger, C.P, 1987, The world in depression, 1929-1939, Penguin, Harmondsworth, p 86

(35) Badger, A, 1989, The new deal : the depression years, 1933-40, MacMillan, Basingstoke, p 172

(36) Nye, D.E, 1998, Consuming Power: A social history of American energies, MIT Press, Cambridge, p 191

(37) Badger, A, 1989, The new deal : the depression years, 1933-40, MacMillan, Basingstoke, p 176

(38) Arkansas Valley Electric Cooperative website, 2023,REA Celebrates 88 Years, Accessed 30 June 2024, (view link)

(39) Banrjee, A, 2011, L’Ere Electrique- The Electric Age, University of Ottawa Press, Ottawa, p 289

(40)Ibid, p 290

(41) Wells, H.G, 1920, Russia in the Shadows, Hodder & Stoughton, London (view link)

(42) Fischer, L, 1965, The Life of Lenin, Lowe and Brydone, London, p 558

(43) Mayakovsky,V, 1956, Mystery-Bouffe (view link)

(44) Banrjee, A, 2011, L’Ere Electrique- The Electric Age, University of Ottawa Press, Ottawa, p 290

(45) Dalrymple, D. G, 1964, The American Tractor Comes to Soviet Agriculture: The Transfer of a Technology. Technology and Culture, 5(2), p 191–214.(view link)

(46) Nye, D.E, 1998, Consuming Power: A social history of American energies, MIT Press, Cambridge, p 188

(47) Ibid

(48) Flanigan, J, 1988, Soviets Failing a Lesson Taught by Henry Ford, Los Angeles Times, (view link)

(49) Dalrymple, D. G, 1964, The American Tractor Comes to Soviet Agriculture: The Transfer of a Technology. Technology and Culture, 5(2), p 191–214.(view link)

(50) Service, R, 1997, A History of Twentieth Century Russia, Penguin, London, p 177

(51) Fischer, L, 1965, The Life of Lenin, Lowe and Brydone, London, p 582

(52) Coopersmith, J, 1992, GOELRO: The Creation of a Dream, 1920–1921. In The Electrification of Russia, 1880-1926, Cornell University Press, p 185-187 (view link)

(53) The History of Aluminium Industry, Aluminium Leader, Accessed 30 June 2024, (view link)

(54) Williams, D.R, Sputnik 1: NSSDCA/COSPAR ID: 1957-001B, Nasa Space Science Data Coordinated Archive, Accessed 30 June 2024, (view link)

(55) Rosefielde, S, 2003, The Riddle of Post-war Russian Economic Growth: Statistics Lied and Were Misconstrued. Europe-Asia Studies, 55(3), p 469–481. (view link)

(56) Hough, J.F & Fainsod, M, 1979, How the Soviet Union is governed, Havard University Press, Cambridge & London, p 266

(57)Ibid

(58)Ibid

(59) Semenov, B.A, Nuclear power in the Soviet Union, IAEA Bulletin, Vol. 25, Np. 2, p 47-48, Accessed 30 June 2024, (view link)

(60)?

(61) Hughes, T.P, 1983, Networks of Power: Electrification in Western Society, 1880-1930, John Hopkins University Press, Baltimore, p 350

(62) Hughes, T.P, 1983, Networks of Power: Electrification in Western Society, 1880-1930, John Hopkins University Press, Baltimore, p 177

(63) Hughes, T.P, 1983, Networks of Power: Electrification in Western Society, 1880-1930, John Hopkins University Press, Baltimore, p 190

(64) Dikkoter, F, 2022 China after Mao: The rise of a superpower, Bloomsbury Publishing, New York, p 22-23

(65) The Harvard Gazette, Vogel hopes to help expedite Sino-Japenese detente, News.harvard.edu, 24/05/2007, Accessed 30 June 2024, (view link)

(66) Van Fleet, J.D, Mr. Deng goes to Tokyo, The China Project, 21/10/2021, Accessed 30 June 2024, (view link)

(67) ?

(68) Perkins, D, Barnett, Doak and Clough ed., 1986, Modernizing China: Post-Mao reform and development, Westview Press, Boulder, p 58

(69) IEA

(70) Hughes, T.P, 1983, Networks of Power: Electrification in Western Society, 1880-1930, John Hopkins University Press, Baltimore, p 352

(71) Dikotter, F, 2007, Exotic Commodities: modern objects and everyday life in China, Columbia University Press, New York, p 138

(72) Dikotter, F, 2007, Exotic Commodities: modern objects and everyday life in China, Columbia University Press, New York, p 142

(73) Meisen, P & Cavino, N, 2007, Rural Electrification, Human Development, and the Renewable Energy Potential of China, Global Energy Network Institute, p 3, Accessed 30 June 2024, (view link)

(74) Peng, W & Pan, J, 2006, Rural Electrification in China: History and Institution, China and World Economy, Vol 14, No. 1, p 77, Accessed 30 June 2024, (view link)

(75) Shambaugh, D, 1995, Deng Xiaoping: Portrait of a Chinese Statesman, Oxford University Press, New York, p 38

(76) Erselcuk, M.M, 1946 (May, 1947), The Far Eastern Quarterly, Vol. 6, No. 3, Far Eastern Bibliography, pp. 283-293

(77) Van Fleet, J.D, Mr. Deng goes to Tokyo, The China Project, 21/10/2021, Accessed 30 June 2024, (view link)

(78) Baum, R, ed. 1980, China’s Four Modernizations: The New Technological Revolution, Westview Press, Boulder, p 1

(79) Cheng, C, in Baum, R, ed., 1980, China’s Four Modernizations: The New Technological Revolution, Westview Press, Boulder, p 27

(80) Peng, W & Pan, J, 2006, Rural Electrification in China: History and Institution, China and World Economy, Vol 14, No. 1, p 77, Accessed 30 June 2024(view link)

(81) Peng, S & Li, C, 2010, Reforming China: Major Events (1978-1991), Volume 3, Enrich Professional Publishing, Singapore, p 83

(82) Findlay, C & Xin, L, 1985, China’s iron and steel industry policy : implications for Australia, Research School of Pacific Studies, Australian National University, Canberra, p 22

(83) Van Fleet, J.D, Mr. Deng goes to Tokyo, The China Project, 21/10/2021, Accessed 30 June 2024, (view link)

(84) China Daily.com.cn, The Sixth Five-Year Plan (1981-1985), 23/02/2011, Accessed 30 June 2024(view link)

(85) Meisen, P & Cavino, N, 2007, Rural Electrification, Human Development, And the Renewable Energy Potential of China, Global Energy Network Institute, Accessed 30 June 2024, p 4(view link)

(86) Ikels, C, 1996, The Return of the God of Wealth: The Transition to a Market Economy in Urban China, Stanford University Press, Stanford, p 1

(87) Stevenson-Yang, A, China’s curse is to raise hopes and dash them, Australian Financial Review,6R, 24 May 2024

(88) Xue, Y, Mao, K, Weeks, N, & Xiao, J, 2020, Rural Reform in Contemporary China: Development, Efficiency, and Fairness, Journal of Contemporary China, 30(128),p 266–282,(view link)

(89) Peng, W & Pan, J, 2006, Rural Electrification in China: History and Institution, China and World Economy, Vol 14, No. 1, p 80, Accessed 30 June 2024, (view link)

(90) Yap, C, 2018, How China Built a Steet Behemoth and Convulsed World Trade, The Wall Street Journal Accessed 30 June 2024, (<https://web.archive.org/web/20210125221639/https://www.wsj.com/articles/how-china-built-a-steel-behemoth-and-convulsed-world-trade-11545668295″>view link)

(91) The History of Aluminium Industry, Aluminium Leader, Accessed 30 June 2024, (view link)

(92) Dikotter, F, 2022, China after Mao: The rise of a superpower, Bloomsbury Publishing, New York, p 237

(93) Meredith, R, 2007, The Elephant and the Dragon: The rise of India and China and what it means for all of us, W.W Norton & Company, New York, p 16

(94) Dikotter, F, 2022, China after Mao: The rise of a superpower, Bloomsbury Publishing, New York, p 237

(95) Dikotter, F, 2022, China after Mao: The rise of a superpower, Bloomsbury Publishing, New York, p 238

(96) Dikotter, F, 2022, China after Mao: The rise of a superpower, Bloomsbury Publishing, New York, p 246

(97) Based on a passage taken from Meredith, R, 2007, The Elephant and the Dragon: The rise of India and China and what it means for all of us, W.W Norton & Company, New York, p 9

(98) Li, L.M, Dray-Novey, A.J, Kong, H, 2007, Beijing: From Imperial Capital to Olympic City, Palgrave Macmillan, New York, p 237

(99) Jiahua, P, Wuyuan, P, Meng, L, Xiangyang, W, Lishunag, W, Zerriffi, H, Victor, D, Elias, B & Zhang, C. 2006, Rural Electrification in China 1950-2004: Historical Processes and Key Driving Forces, Working Paper #60,Program on Energy and Sustainable Development, Stanford University, p 26, Accessed 30 June 2024, (view link)

(100) Meredith, R, 2007, The Elephant and the Dragon: The rise of India and China and what it means for all of us, W.W Norton & Company, New York, p 50

(101) ?

(102) Srinivasa Rao, Y, 2010, Electricity, Politics and Regional Economic Imbalance in Madras Presidency, 1900-1947, Economic and Political Weekly, Vol XLV, No. 23, p 62, Accessed 30 June 2024, (view link)

(103) Nath, K, 2008, India’s Century, McGraw-Hill, New York, p 15

(104) Nath, K, 2008, India’s Century, McGraw-Hill, New York, p 172

(105) See also- Sahai, S, 2024, Remembering the 1960s- Growing up in a small town in India, Medium, Accessed 30 June 2024, (view link)

(106) Fertilizer Production by Country 2024, World Population Review, Accessed 30 June 2024, (view link)

(107) Mahindra Farm Equipment website, Accessed 30 June 2024, (view link)

(108) The Economist

(109) Mahindra Farm Equipment website, Accessed 30 June 2024, (view link)

(110) IEA ,2023, World Energy Outlook 2023, IEA, Paris, Licence: CC BY 4.0 (report); CC BY NC SA 4.0 (Annex A) Accessed 30 June 2024, (view link)

(111) ?

(112) ?

(113) Jamasmie, C, BHP opens Australia’s first nickel sulphate plant, Mining.com, 01/10/2021, Accessed 30 June 2024, (view link)

(114) Smith, E & French, E, 2024, BHP’s Nickel West closure could mark end of Australian nickel industry, analyst says, Australian Broadcasting Corporation, Accessed 12 July 2024, (view link)

(114) Fischer, D.H, 1996, The Great Wave: Price Revolutions and the Rhythm of History, Oxford University Press, New York, p 180

(115) Fischer, D.H, 1996, The Great Wave: Price Revolutions and the Rhythm of History, Oxford University Press, New York, p 181

(116) Bakke, G, 2016, The Grid: The Fraying Wires Between Americans and Our Energy Future, Bloomsbury, New York, p 53

(117) Hughes, T.P, 1983, Networks of Power: Electrification in Western Society, 1880-1930, John Hopkins University Press, Baltimore, p 135

(118) Bakke, G, 2016, The Grid: The Fraying Wires Between Americans and Our Energy Future, Bloomsbury, New York, p 56

(119)GSMA website, 2024,Smartphone owners are now the global majority, New GSMA report reveals, Accessed 30 June 2024, (view link)

(120)Trentman, F, 2016, Empire of things : how we became a world of consumers, from the fifteenth century to the twenty-first, Allen Lane, London, p 387

(121) Nye, D.E, 1991, Electrifying America: Social Meanings of a New Technology, 1880-1940, MIT Press, Cambridge, p 167

(122) Sinha, A, 2005, The Regional Roots of Developmental Politics in India : a Divided Leviathan, Bloomington, Indiana University Press, p 4

(123) Manjul, P, 2023 The history behind ‘hindu rate of growth’, in charts, Livemint.com, Accessed 30 June 2024 (view link)

(124) Nath, K, 2008, India’s Century, McGraw-Hill, New York, p 171-172

(125) Sharma, A, 2024, Power Links: Regional interconnections to strengthen cross-border trade, Powerline.net, Accessed 30 June 2024, (view link)

(The Economist, ‘A New Formula’ pg 19, also ‘Engine Repair’ p 73)

Supplements

(i) The table is based on one compiled by Selby Haar for Electrical World, 25 April 1914, and republished in Hughes, T.P, Networks of Power: Electrification in Western Society, 1880-1930, pages 282-283.

(ii) Data sourced from IMF figures, World Economic Outlook Database, (view link)

(iii) Inflation data sourced from Measuring Worth.com(view link)