Modern Economy, 2011, 2, 483-497
doi:10.4236/me.2011.24054 Published Online September 2011 (http://www.SciRP.org/journal/me)
Development, Poverty and Energy, in the 21st Century
Roberto Kozulj
Bariloche Foundation, Río Negro, Argentina
Received January 31, 2011; revised April 2, 2011; accepted April 29, 201 1
Abstract
This work explores the area of global interdependences and the global context. In particular it deals with in-
terdependences that seem to be absent from current literature but could be of great significance to identify
the biggest challenges that the economy and the energy sector will have to face in the next two or three de-
cades. In that sense, several issues are addressed: the dynamics of economic growth and its future; the rela-
tion between these dynamics and the foreseeable importance that urban poverty is to have at a global scale;
the lack and inadequacy of information to approach crucial interdependences; and the need for a change in
institutions and thinking habits to analyze the future. The approach focuses on the complex relationships that
link urbanization, development phases, and technological changes dependent on products with shorter life
cycles, discussing the impact of this kind of process over the genesis of urban poverty and over the structural
modifications of economy. At the same time, a view on how these interdependences will become a serious
and increasingly complex challenge for the energy sector and long term global sustainability is presented.
The author also emphasizes the fact that these interdependences will become a serious and increasingly com-
plex challenge that the energy sector will have to face if long term sustainability is to be attained.
Keywords: Economic Growth, Poverty, Dual Society, Energy, Long-Term Economics Crises, Urban Poverty
Dynamics
1. Introduction
The main purpose of this research is to characterize the
dynamics of economic growth from a long-term evolu-
tionary approach linking urbanization processes and
technological change. It aims to explore the problem of
the growing interdependences affecting real processes of
economic growth, their dynamics—which change over
time and space, their links with other aspects such as the
genesis of poverty and marginality in urban areas and the
challenges derived from such dynamics into the future,
also in relation to energy. The text has been dived into
sections in order to provide a sequenced explanation of
the complex nature of these links and because of the
need for a comprehensive approach to explain as well as
to understand th e problem.
The main hypotheses, then, are formulated in Section
2. They are an attempt at describing, from a heterodox
and evolutionary perspective, the genesis of the dual so-
ciety or, in other word s, the genesis of poverty coex istin g
with opulence in urban areas. What makes this approach
original is the evolutionary perspective from which ur-
banization and technological change processes are ana-
lyzed as specific and structural factors explaining both
the dynamics and changing nature of the economic acti-
vity, as well as its impacts on economic growth and the
factors that limit income distribution. These factors are
accounted for as a consequence of supply price forma-
tion and of large-scale rural-urban migration processes,
which also include intergenerational factors when con-
sidered in the long term.
Alongside the hypotheses mentioned above, Section 3
explores foreseen trends for urban population growth at
the regional and global levels. Two main aspects are
considered: a) urban population growth in Asia and Af-
rica will predominate in the urbanization process for the
next two decades; b) that will imply that, out of the total
increase foreseen for world population, 97% will corre-
spond to urban population, which would indicate the
proximity of a limit to the global urbanization process
and a decrease in absolute terms in the number of total
rural population.
Such projections have several consequences, but the
most important ones are related to the fact that urbanize-
tion will no longer have a role as the drive for future
growth, as was the case over more than two centuries,

R. KOZULJ 484
particularly between 1950 and the present day. This
would deepen the gap within global product formation of
activities characterized by shorter life cycles, indentified
as the ones that limit the p ossib ility of impr oving inco me
distribution and job creation. In turn, job opportunities
for those migrating from rural to urban areas will con-
tinue to decrease.
Section 4 explores succinctly some of the foreseen
consequences over the energy sector of the scenarios
suggested above. Since the consequences related to ques-
tions such as supply security, energy efficiency and car-
bon emissions are, in general, discussed at length in pub-
lic debate and in the academic field, they have not been
dealt with here. On the contrary, the impacts of such
scenario on the complex links between energy and po-
verty have been approached from an inappropriate per-
spective which does not permit the co mprehension of the
nature of future challenges.
This is why Section 5 specifically deals with the en-
ergy-poverty question, remarking the fact that the dis-
placement of poverty from rural to urban areas imposes a
new scenario whose foreseen impact is not even present
in the agenda on the topic. Emphasis is also laid on the
fact that economic and social indicators are not suitable
for a proper analysis of this scenario or for exploring
solutions. The differences between poverty in urban and
rural areas are specifically discussed here, as well as
their consequences on the energy sector from the point of
view of both the cost to be paid by consumers, the en-
ergy access question, and the cross impact of the supply
security issue, biofuel production and the cost of food
and energy.
Finally, and by way of conclusion, the need to readjust
both institutions and thought habits is suggested. The
new scenario emerging from the set of explanations pre-
sented here requires that in order to set a new world
agenda where topics such as context, interdependences
and complexity can be approached, and public policies
can thus be adapted to the emerging global situation.
2. The Current Growth Dynamics:
Urbanization, Technological Change and
the Genesis of t he Dual Society
The urbanization process involves the use of capacities
of very specific activities which are linked to technolo-
gies. Therefore, a large corpus of research has suggested
that this process should not be considered solely an effect
of growth, but also one of its main driving forces, Ref-
erences [1-17]. And, in terms of factor mobility and in-
fluence in economic growth, these technologies imply a
less flexible world than the one commonly assumed by
the economic theory, References [18,19]. So the question
is: What happens to economic growth when the urbani-
zation process becomes saturated? The answer found is
that some productive activities that are related mainly to
capital goods, though not exclusively to them, also de-
celerate. Markets become increasingly saturated and new
products, either goods or services, must be created. The
role played by innovation is crucial here, References
[20-24]. This means that each phase in the transition
process will lead to an adaptive change in productive
structures, technologies, institutions and market opera-
tion customs. This adaptive change has two main fea-
tures: 1) The typical displacement from agricultural ac-
tivities to industrial activities and from industrial activi-
ties to services of previous development stages has to
face the absence of a fourth sector capable of absorbing
employment. This situation worsens when automatiza-
tion in the other three sectors increases, Reference [25];
2) accelerated technological change or “innovation”, that
is the production of an equivalent or greater product
quantum that replaces the decrease of saturated markets
implies products with shorter life cycles almost inevi-
tably when innovation refers to the same products and
not to processes. But when it comes to supply price for-
mation, shorter life cycles require that a greater propor-
tion goes to recovering the capital, even wh en profit rates
stay the same, References [9-10]. This leads to a struc-
tural limitation of income distribution1, which literally
means lower salaries and lower taxes, a factor that, in
turn, appears in a context of reduced global dynamics as
a determining element for job levels. Service sector ac-
tivities to be created in urban areas in order to absorb
labor are generally not enough and also limited by in-
come distribution, References [25-26]. This is the world
of flexible accumulatio n that has substituted old Fordism,
References [27-29].
However, there are at least two factors that have pre-
vented this phenomenon from reaching the proportions
of a huge global economic catastrophe: 1) the accelerated
modernization and urbanization processes experienced in
Asia (China and India in particular); 2) the stabilizing
role played by the United States as when they carry out
Keynesian policies such as centralized expenditure and
quick decision making (i.e.: the increase on the military
budget and expenditure). This kind of expenditure cer-
tainly spreads activity over every industry, References
[30-31], though more on some than others; it would be
naive to believe that the so called Military Industrial
Complex consists only in bomb factories, or that its be-
coming a civil industry is a simple process, References
[32-33]. This last type of “neo-Keynesian” response has
serious implications regarding domestic and foreign fi-
1Unless technological change entails a substantial increase in produc-
tivity, which is not usually the case when already existent products are
changed.

R. KOZULJ485
nancial imbalance, the rate of currency issuance, the
creation of highly volatile financial markets, and other
questions that could not be dealt with here but that con-
form, in turn, the context of growing interdependences
and complexity approached in this paper, which focuses
rather on the real, non-monetary aspects of the economy.
The equations of definition and equivalence of Gross
Domestic Product (GDP) and Adde d Value (AV) help to
clarify this point. As it is known:
(1) , where
GDPC IXM
C = consumption; I = Investments; X = exports and M
= imports, and
(2) 0nn
, which means that in-
terannual variations, or longer period variations can be
defined as the addition of the initial product of a given
year and the variation produced during the following
period, which can be either positive or negative
GDPt GDPtGDPt
At the same time, n can correspond to varia-
tions of the components in
GDPt
,,CIX n t
(3)
A
VRCRRF where
AV = Added Value, RC = Return on Capital y RRF =
Return on the Rest of Factors, by definition being
.
GDP AV
Now, if we disintegrate equation (1) in a way that we
can distinguish investment linked to infrastructure (t
I
f),
to the creation of pr odu ctive cap acity o f tr aditio n al goods
(t
I
Ctr ) and to the creation of new products characterized
by fast innovation and technological intensity (t
I
Np ),
and we subdivide consumption into the most dependent
on incomes related to wages sum (t) and into the
sectors that are owners of production units or earn the
highest incomes due to high specialization or to privi-
leged participation in society (), Equation (1) be-
comes:
CMs
t
pCN
(4)



tttttt
GDPCMsCNpIfICtrINpX M




In turn,

,
tt t
I
fICtr Urb, t
I
f

y t
I
Ctration will pend
on
all in investment rates, no matter
th
sides, as
de
t Urb bei at a specific
momen time. If a ecline in the increase in the long
term is foreseeable, a slow down in the process of invest-
ments induced by the urbanization process is to be ex-
pected. It must be remembered that initial infrastructure is
always built with long term aims in mind and with the
productive capacity thinking of products with longer life
cycles, Reference [34].
As is well-known, a f
ng t Urb th
de urban popul t in
e reason, causes recession and economic cycles. Tradi-
tional anti-cyclical measures may not be effective when
there is a context of overcapacity in a sector whose own
intrinsic nature prevents it from liquidating stocks, as it is
not serial massive production. Therefore, a recession
caused by this kind of fall in the investment rate produces a
decrease in the tot al leve l of ac tivity. In an L recess ion lik e
this one, activity experiences a longer drop period and also
generates a threshold that is even lower than that in U re-
cession, where there is prompt recovery and the possibility
of getting back to the growing path, References [35-38,
10].
Be t
I
f and t
I
Ctr
e proproportions in the total in- vestment dimin and thportion of the t ish
I
Np type of
investment increases, RRF will occupy a l propor-
tion inside esser
A
V2. Thisaffect t CMs , aggravating the
structural crhat gives birth to asociety. The pro-
ductive sectors linked to t CMs , t
will
isis t dual
I
f and t
I
Ctr that used
to support the Fordist mo longer observe old
game rules. These rules included increased salaries and
productivity, steady employment and basic needs granted
by the Welfare State, and Keynesian anti-cyclical policies.
In such a context, if investments are influenced by the
odel can n
ur
ts and im-
po
banization process and their dynamics decline together
with it, the GDP will only be able to grow if either total
consumption or exports, or both, grow too.
At a global scale, the combination of all expor
rts are equivalent. Therefore, they could not contribute to
the global economic dynamism if products were the same.
As has already been said, consumption heavily depends on
the remuneration of the other factors, or on the access ca-
pacity that the financial system permits and can afford ac-
cording to its own rules, which, however, cannot be com-
pletely oblivious to the repayment capacity of debt holders
without undergoing a crisis. If the decrease in the invest-
ment associated to urbanization as an integral process (in-
frastructure and productive capacity creation) was replaced
by the creation of new goods, there would be an accele-
rated technological change linked to shorter life cycles. As
2Distribution function of the social product corresponding to factors
other than capital (basically salaries and taxes) is represented in a sim-
p
lified way, with a formula that considers simultaneously the prod-
uct-capital relationsh ip and the factor return on capital:

11CCiin 







or, which is the same

11GDPC iin 







since
 C = GDP
where
 is the social product that rewards factors other than capital.
 is the value of the product-capital relationship
C is the value of capital
GDP is the gross domestic product equal to added value and the ex-
p
ression [i/1-(1+i)^-n] is the factor of return on capital, being i the
discount rate and n the period for capital return.
 value increases when the relation product-capital grows (capital
intensity decreases), which is trivial; but it decreases with decreasing
values of n in a non linear way.
Indeed, obtaining  from n we get the following:
 


**ln11212 2nCiiini n  


 

 
which indicates the positive sign of the derivative ( grows when n
grows, or decreases when n does), but according to a quasi hyperbolic
function, thus showing the particular sensitivity of the function with
respect to the range of n values, specially in the cases where n values
are less than 15 years.

R. KOZULJ 486
considerations have anything to do
w
more detail: To t horoughly explai n the phenomenon
of
rural-urban migration and mar-
gi
h have conceptual, empiri-
ca
a consequence, the proportion of the product that returns to
the rest of the factors would decrease, posing an obstacle
for consumption enhancement, at least for a major propor-
tion of the population. This point will immediately be taken
up again. Before that, it is important to highlight that an
internal fracture of the productive apparatus is the matrix
for generating a dual society. It leads to a wicked dynamics:
for those who have access, the range of available goods and
services widens and becomes more diversified while, for
the rest, it beco mes h arder to s atisfy even their basic need s.
Foreign trade may boost growth in some countries but, by
definition, it is incapable of achieving it at a global scale
even though it may be acting as an incentive for moderni-
zation as the urbanization process has not yet been com-
pleted a global scale. That is the case of Asia today, spe-
cially that of China and India, maybe even Brazil in Latin
America, but it will no longer work once they complete the
process. Efforts to secure markets become a priority in
each nation, but this cannot trigger a larger global dyna-
mics if such growth does not imply involving the urbaniza-
tion process, an important part of the commodities and
capital goods market.
Do these theoretical
ith the character ization of the world economic cr isis a s of
2007 - 2008 to the present day? The answer can only come
from the theoretical framework within which these crises
have been interpreted. In general, they are analyzed ac-
cording to their financial aspects, in turn considered the
cause and not the consequence. Since the link between the
financial sector and real economy are certainly interde-
pendent, such explanations should at least be accounted for
because of their conceptual soundness, as a necessary com-
plement to formulate explanatory hypotheses of a wider
scope.
One
urban marginality in the Third World and in some cases
in the whole world—a hypothesis describing the different
stages which are produced by this dynamic and interactive
process is needed. This process includes urbanization, in-
dustrialization, “de-industrialization”, “dematerialization of
economy”, and technology and productive structure change
(Diagram 1-Section 4).
Indeed, the link between
nality can be explained in the following way: During the
upward phase, the urbanization process attracts human
masses that come from rural areas. In general, these people,
especially the less qualified, will work in the construction
sector, in services that do not require high skills or will
become industrial workers. As the urbanization process
loses its initial dynamism, the number of workers offering
their services exceeds the demand. As this process has
lasted for a while, th e migrant generation has alread y have
offspring born in the city. However, the cultural features of
the family environment make it difficult for the offspring to
develop the necessary skills and to acquire the necessary
knowledge to perform successfully in the new urban sur-
rounding at more m ature stages. These youngsters born in a
totally urban culture hope to reach a standard of life that
society introduces as attainable to all. Not only the media
suggests this through advertising, these values are fostered
in the educational system and in the modern political pro-
ject, no matter how blurred it may seem today. But their
realities at home prove the opposite. Their parents, who
used to be workers—whether members of a union or not
and were guaranteed a job, start facing a different labor
reality. Job opportunities become more sporadic and the
access to new goods more difficult, or even impossible.
Female jobs for these social sectors tend to be related to
domestic service and other badly paid sectors. The combi-
nation of wages of both members of the couple cannot af-
ford what only one of them could in the previous period.
For the generation of those parents who lived an even
harder reality in the rural zones, urban life still constitutes a
better option. They are not likely to wish to go back t o thei r
origins an d rural task s. They try that their children enjoy an
improved standard of living. But which hope can those
urban youngsters have when they sense the harsh reality
surrounding them? Is it so strange then that many of them
try to fulfill the promises that both society and their parents
have made by other means? Can the traditional values of
their parents survive this situation and perpetuate through
generations? As from 2005 at least unemployment rate for
youth double or more the same rate for the adults in most
of the countries, but in Brazil, México and Perú, the rela-
tionship can reach 250%-300% or more, despite lower
unemployement rates in this kind of “new prosperity” era
based on high prices for exported commodities (i.e.
2003-2008), Reference [39]
If these hypotheses—whic
l and theoretical support—are relatively right, then,
what will happen with the world economy once the ur-
banization processes are completed or saturated at a
global scale? There are many answers because the world,
as well as its future, is still open. What happens tomor-
row will depend on what is decided today, even when
there is an almost irreversible inertia and latency. There
might be unexpected technological revolutions; there
might be a program of systematic destruction to “rebuild
the destroyed”; wealth might be redistributed; urban de-
centralization might take place, constituting a new form
“creative destruction” (as Schumpeter said); the catas-
trophe might eventually break out which in musical
terms, according to the Greek, was the return to a point
of rest and axial equilibrium of th e lyre strings after they
have ceased to vibrate. The serious problem is that it
stays a mystery who is or are the ones who have the an-

R. KOZULJ 487
s should be ap-
pr
. The Prospective of Population Dynamics
ral
earing in mind wh at has been said ab ove, rural popula-
tre
exnt, in Latin America. It is clear that these trends
ver, the most striking fact is that, contrary to
w
the one hand, that the economic
gr
te
suppose a fast rural-urban migration process whose mag-
nitude would be unprecedented in Asia and Africa (Fig-
ure 2).
Howe
swer to these matters or at least who are analyzing them,
and which conclusions they are drawing. Therefore we
have overabundance of contradictory information com-
bined with lack of essential info rmation.
Nonetheless, all these interdependence hat happened between 1950 and 1975 and between
1975 and 2000, by 2025 the urban growth process at a
global level would represent 97% of the expected total
population growth.
This means, on
oached. The design of a “creative solution”, a win-win
scenario, would also be welcome. But this will not emer-
ge from pragmatic thought, or from economic fusion,
continuous downsizing or from speeches in favor of glo-
balization that improve microeconomic profitability but
do not improve return at macroeconomic levels. Or, of
course, from empty speeches against globalization and
its wicked effects. And even less from the current goals
regarding poverty reduction, which are based on incon-
sistent programs at a global scale (for instance, Latin
America has had to grow over 4% p.a. in order to avoid
the increase in the absolute value of the number of poor
people, Reference [40].
owth boost coming from the urbanization process and
rural-urban migration that is, the

,
tt t
I
fICtr Urb com-
ponents of the equation:




tttttt
IfICtrINpX MGDPCMsCNp





will progressively decrease in the next two decades, a
market for
ev
process that will have all the consequences described in
Section 2. But besides, urbanization will no longer have
the role it had for more than two centuries as a future
growth drive, though specifically between 1950 and the
present day. This would undoubtedly influence a large
range of productive activities related to the construction,
equipment, infrastructure sectors, and others.
At the same time, the total consumption
3and Its Consequences on Economic
Growth and the Displacement of Ru
Poverty into Urban Areas
eryday supplies, such as food, energy, services, as well
as industrial products for massive consumption will have a
much larger dimension than in the past, producing a rise in
demand and the need for continuous supply of raw mate-
rial, energy and natural resources. The dynamics of these
markets will depend, without doubt, on the access to them
according to income distribution. And by the way, the rise
in the price of raw materials (oil between them) also has to
do with this structural trend recorded as of 2003 to 2011 in
spite of the world crisis- and which is generally attributed
to the role played by Asia in global growth.
B
tion growth trends recorded and projected at a global
level and by regions (Figures 1 and 2) reveal several
aspects from which some of the main challenges to be
faced in coming decades can be established, many of
which are already present in the current global situation.
Figure 1 clearly shows that, as of 2010, projected
nds indicate a decrease in the absolute number of pe-
ople living in rural areas at a global scale and in all the
regions, except Africa. Likewise, most of the increase in
urban population would orig inate in Asia and, to a lesser
Figure 1. Historical trends and projection for urban and rural population growth in large regions: 1950-2030. Source: United
Nations, Population Division, Department of Economic and Social Affairs, World Urbanization Prospects: The 2001 revision.

R. KOZULJ 488
-200000
0
200000
400000
600000
800000
1000000
1200000
Population vari ation (thousand)
Africa
Asia
Europe
Latin America
North A merica
Oceania
Africa 87473133142 228288 196530 430898 166301
Asia 414005 675915 865711 4142031105926-66982
Europe 163764-4651853355-25688 5025 -55613
Latin America147967 22671 195870-121176731-10645
North America63356 4796 69173 399477283-9162
Oceania 7110 1350 8246 16957897 1403
Urban RuralUrban RuralUrban Rural
1955-1980 1980-2005 2005-2030
Rural population grows faster than urban in
Asia y Africa betwee n 19 55 an d 198 0 and
continues growing durning 1980-2005New trends: except in
Africa, lmigratory
pr oce sse s will b e so
relevant than rural
population will decrease
Figure 2. Historical and projected demographic trends: rural and urban population increases in three periods 1955-2030.
Source: United Nations, Population Division, Department of Economic and Social Affairs, World Urbanization Prospects: The
2001 revision.
51%
79%
97%
0
200000
400000
600000
800000
1000000
1200000
1400000
1600000
1800000
2000000
1950-1975 1975-2000 2000-2025
En miles de personas
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
% sobre el total del incremento de la poblaci髇 mundial
Urban Population Increase
Total Population Increase
% of increase attributable to urban population
Lineal (Urban Population Increase)
Lineal (Total Population Increase)
Figure 3. Increase in total world and urban population 1950-2025. Source: Source: United Nations, World Urbanization
Prospects, The 2001 Revision, New York, 2002.
Now, according to what has been said about the need
to replace yearly product quantum of one sector with that
of others (that is, the need to replace the decrease in
product quantum of the sectors linked to infrastructure
investment (t
I
f) and those closely related to the wage bill
or to income from informal labor (t
I
Ctr
CNp
t), with the
product quantum related to investment and consumption
of new products and services with a shorter life cycle and
accelerated obsolescence cycles t e t
CMs
I
Np ), there
would also be, at an unprecedented scale, a structural in-

R. KOZULJ489
crease in the restricti on on redistributi on improvements in a
context, which, as has been said, would have a lesser global
dynamics, greater physical productivity due to technologi-
cal development and, consequently, fewer job opportuni-
ties.
The hypothesis to be analysed in this case is the
following:
If it is accepted that for each consumer good, market
development in the long-term has the form of a logistical
function, its first derivative will represent the projected
demand in time for the capital goods industry for that
good. The second derivative will be the projected de-
mand for the capital goods industry for the production of
capital goods for the first good, and so will happen
indefinitely. This is so if it is accepted that the capital
goods industry is not homogeneous with regard to its
products, as generally assumed.
It is almost evident that th e concrete process of econo-
mic growth is, in fact, the overlapping of the “supply =
demand in time” function for different goods. Conse-
quently, the aggregate demand will decline at the same
pace as the decline of the capital goods demand, if there
is not a process of continuous technological change3.
In simplified terms, each product will grow endlessly
or in an exponential manner, provided there are no
restrictions according to a function of the type



et Pt Po


where  is growth (generally expressed in %), P(o) is the
initial magnitude of the market for a certain product, i.e.
the value of P in t = 0. But, actually, each product has an
exponential growth phase and it then reaches saturation
as a consequence of real demand. This saturation is
equivalent to the number of people who can afford such
product, which means that they do not have it, and that
they have the want and the means to acquire it.
Therefore, it has been usual to add corrective factors
to equations of that type, i.e.:
1Pt
k




in a way that the growth of the referred variable (in this
case a product) diminishes as the k variable is reached.
This variable represents the asymptotic value towards
which the function heads (in this case the maximum
market size for a certain product, and also the maximum
size of urban population during a certain period).
In this way, the growth equation can be expressed as
follows:
  
1
Pt Pt
Pt
dt k





i.e., as a typical logistical function.
The solution to equa tion (2) is


1e t
k
Pt

 

Now, the first derivative of this function (in this case,
the projected demand of capital goods for the product in
question) will be:
2
1
PP
PP
dtk k





 P
The main concern here is to find the maximum of this
function, because from that point on, the capital goods
industry in question will enter a phase of structural
overcapacity due to saturation (and so will some other
sectors as a result).
The maximum and minimum of this derivative func-
tion P
t


are obtained by identification of the t’s that
result in 2
20
P
t


.
2
2
22
1
dP PP PP
dt kttk t




 

 
Two of the points at which this function becomes 0 are
clearly trivial: (t = 0 and t = ), then

2
10PPtk
k
 2 , which is equivalent to


*
*1e 2
2
1e
t
t
kk





 

And hence,


*
e1*
tt 

 0


Wit h which

* o *
2
k
tt 


It means that, in this case, the t* time searched for, in
which the first derivative reaches its maximum (pro-
jected maximum capacity in the capital goods industry
corresponding to th e consumer good in question), will be
the time needed for the market to reach half of its
maximum magnitude.
This reasoning is not altered if, instead of adopting
this form, the logistical function was slightly different. In
that case, P(t*) would not be 2
k, but something similar.
The reasoning underlined here is that as long as the
markets for the different goods behave in a way similar
to a logistical function, the investments induced by these
sectors will decline at a point in which signs of great
dynamics in the industry in question can be observed,
whether it is of consumer or investment goods.


(2)
3But this “continuous technological change”, implies shorter lyfecycles
and it is not help to improve income distribution as just said above (see
footnote 2). Therefore, industries produ cing capital goods will ine-

R. KOZULJ 490
vitably reach a phase of structural overcapacity that will
affect the dynamics of economy as a whole through the
multiplying effects caused by the reduction in aggregate
demand.
The response to this will obviously be technological
innovation, which will allow the industries to remain in
the market, creating new sources of supply and demand.
But this will not be possible in all sectors to the same
extent, due to the heterogeneous and rigid nature of the
production system.
When, instead of considering one product, a group of
products is considered, related to what could be called a
paradigm of technological consumption (a cluster of
goods which characterise a certain lifestyle, such as the
modern urban style, for instance) and these products
have developed practically along the same period, the
described effect for one product, will affect economy as
a whole. This could be virtually represented as the aggre-
gation of varied logistics or similar functions, each corre-
sponding to a good or service. Th erefor e, it is not eviden t
that the process of technological change can per se main-
tain the dynamics of economy at the same level as during
the initial phase of development (for example, the first
two decades after the Second World War). This gave a
reason for the rupture point associated with the decline in
urban pop ul a t i on growth.
Though none of this is totally predictable or impossible
to change, these co mplex interdependences do not seem to
be part of present-day agendas on growth, financial crises,
poverty and the challenge all this poses also for the energy
sector, particularly in the link between urban poverty and
energy access. Nor is it frequent to assume that the dyna-
mics described here be the main cause of change in the
productive structure, with a greater impact on service acti-
vities once urbanization reaches its saturation in each n a-
tion and region and, finally, at a world scale and that
consequently—there is no other activity sector capable of
absorbing the labor that is progressively displaced, nor a
universal extension of services compatible with a dual so-
cial structure. Can “the sixth Kondratieff long waves of
prosperity” based on Environment technology, Nano-Biote-
chnology, Health care an new goods and services, Refer-
ence [41] change the structural world crisis? The previous
rationale about the complexietes and interdependences of
the global context bring out a lot of questions and weak
responses from theoretical side of the question, because
there are not a single quantitative analysis to prove how
these “new wawes” will replace the slowdown in the whole
of another “current” activities.
4. Impacts on the Energy Sector
The growth dynamics described above have many dif-
ferent impacts. Most of the ones considered in th e litera-
ture have to do with issues such as security supply, envi-
ronment and energy efficiency, concerns mainly related
to the impact of energy demand growth at a global level
which has been boosted ever since the beginning of the
past decade by China, India, Brazil and other countries
on available global resources and on carbon emissions at
a world level.
The current way of keeping up this growth implies a
great energy expense, but also growing access demands
by the sectors with little payment capacity. That is, the
progressive setting of new and larger thresholds of stable
demand, where this last factor—energy access by the
“urban poor” is just one of the multip le factors he lping to
conform such threshold.
In spite of the great effort to diversify energy supply
sources, a major part of them will continue to depend on
non-renewable ones. Likewise, the trend towards a major
use of biofuels in order to improve supply security, may
have—together with other factors related to urbanization
and implying a larger demand of agricultural and forest
products—an impact on the price of food. This may be
good if the goal is to sell more. It may be bad if the aim
is to keep the economy and the standard of living in a
state of increasing satisfaction, or at least to keep it stable
for many coming generations.
But there is another more evident aspect, and the seri-
ousness of it will become clearer the next years. The axis
of poverty is moving by leaps and bounds towards urban
poverty, Reference [42]. Even when the explana- tions of
its genesis may differ from the ones presented here, it is
acknowledged that the fact is real.
Urban poverty is different in character from that pov-
erty entailed in the traditional ways of living of the
“backward” areas of the planet, of the “rural areas”. To
satisfy the energy needs of the urban poor, non-conven-
tional sources are of limited help. Electricity, Kerosene
and LPG are basic for the urban poor. Will they be capa-
ble of affording the cost? Will the companies be capable
of satisfying this demand and recovering all their ex-
penditure without subsidies or of giving an integral re-
sponse to the phenomenon of urban poverty? Even more,
will they be able to do it if it is also necessary to reduce
carbon emissions, which implies larger generation costs
or more capital-intensive uses to capture emissions or
more costly ways of generating and supplying electricity?
This issue is partially dealt in the following section.
Meanwhile, it is important to note that we are confront-
ing a major information deficiency problem in relation to
all these matters. Many countries do no publish their
statistics about poverty when it increases because that
would be “politically in correct”. Oth ers, developed coun -
tries for example, do not consider it necessary because it

R. KOZULJ491
is assumed that they lack of poor people, which is of
course erroneous. Product statistics are a disaster, they
mix too heterogeneous numbers with prices not well-
corrected. There are not enough statistics about salaries
according to activity sectors for every country in the
world, which could be used for comparison. There are no
sufficiently detailed data on capital stocks or production
capacity according to activity sectors, and even less by
key products. There is scarce and inaccurate information
about poor people regarding their knowledge, education,
skills, and many other areas. Economy growth projec-
tions are of a voluntary nature, and never clearly ex-
plained.
It seems that we are entering a new era with practices,
tools, thought habits and action corresponding to a world
in progressive extinction. All of this does not help much
to think and act correctly in the face of the major chal-
lenges of the XXI century, or even to contrast complex
hypotheses in a complex world , full of interdependences.
5. Urban Poverty and Energy: Why Has So
Little Attention Been Paid to It When It Is
Going to be One of the Greatest
Challenges of 21st Century?
As in almost every field, there may be many hypotheses
or an exaggerated claim. An attempt to explain both po-
ssibilities will be exposed here. To find out why the rela-
tionship between urban poverty and energy has not been
dealt with the deepness it deserves. The explanation will
be once again linked to the evolutionary perspective of
the economy described in the previous section and also
to what has been claimed about the indicators and their
more notorious deficiencies to face new situations.
Ordinary indicators used to determine poverty levels
have been too vague. They have been more useful to
determine the number of people who have no access to
modern lifestyles than to identify specific poverty situa-
tions. The use of a global threshold (i.e. population that
lives with less than us$ 1 or 2 per day) has given place to
a distortion which could also be found in the dominating
approach used to deal with the energy-poverty link. Such
distortion occurred because in most cases the indicators
identified the number of poor living in rural areas (popu-
lations with insufficient monetary income, but which do
not reflect the incidence of non monetary economy ef-
fects on family economy). Therefore, they tend to create
a distorted image of the spatial location of the poverty
map. In that sense, regions such as Asia and Africa call
the attention not only as regards the issue of poverty as
such, but also as regards the links between energy and
poverty, at the core of which there was access to energy
by a rural population lacking electricity and other mod-
ern sources of energy (LPG, Kerosene, efficient use of
biomass, among others).
In a leading work carried out for the World Energy
Council, Reference [43] about this issue (focused in the
Latin America context), after reviewing over 150 docu-
ments, it was found that the greater number of works
were focused on rural poverty. Even when the relevance
of the problem of urban poverty was acknowledged, in
most cases the works contained only scarce references to
the topic and a few suggested solutions. Diagnosis was
limited, in most cases, to point o ut the different nature of
the problem: “while urban poor are at risk of having
energy services interrupted for nonpayment, rural poor
lack such services”. In that way the dominating appro ach
was basing the solution on the promotion of new sources
of renewable energy, with the acceptance that such ac-
tion requires an active government policy. The argument
was, then, about type and form of subsidies (their aim,
duration and features), and not about their need and the
benefits they would provide; these elements were just
taken for granted. On the other hand, there was no
equivalent in subsidy proposals or active policies for
urban marginal sectors. The only exception were some
references to the advantage of canning LPG in smaller
containers or installing “pre paid meters” for electricity.
As it was said, this “would enable the poor living in ur-
ban and periurban areas to obtain energy according to
their eventual and fluctuating incomes”. But the new
productive modality observed at the mature state of ur-
banization is precisely characterized by unstable incomes.
The difficulty to create stable jobs that are linked to a
high productivity results in these unstable, insufficient
and fluctuating incomes. In such a context, the above
measures are an adaptation of the market to the incomes
of the poor, but not a contribu tion that will help alleviate
energy poverty.
It is widely known that of the main obstacles for the
access to electricity services is a high cost of connection,
especially due to the meter’s cost and users payment ca-
pacity. However, the predominant issue was downsized
to how to avoid “energy non technical losses or robbery”
that is, the problem of users illegally connected to elec-
trical wiring. In the case of LPG, it refers to problems
caused by subsidized prices.
Nevertheless, there are no other thorough studies
about the energy needs of the urban poor on a global
scale, or the complex relation among the different stages
of the urbanization process, or the nature of urban pov-
erty and marginality. There is also a lack of studies de-
voted to the identification of that sector consumption
patterns or to determine their real possibility to get regu-
lar energy access that permanently satisfies their needs.
But as the urbanization process in Asia grows, the ap-

R. KOZULJ 492
proach on the problem of poverty in urban and periurban
areas and on access to energy will become increasingly
relevant as a consequence of reality dynamics at a global
scale (See previous Figures 1 and 2). This will be par-
ticularly the case in developing countries (Diagram 1).
This obviously fosters rural-urban migration, which in
time contributes to increase the rate of activity: migrated
people adopt modern patterns of consumption. Never-
theless, as cities (or the urbanization process) lose dyna-
mism, the decrease of stable employment opportunities
and the increase of required qualifications gradually lead
to the phenomenon of structural poverty. Its significance
will also depend on the nature of “adjustments” in eco-
nomic policies, but that process factors are always un-
derlying. The first migrant’s offspring will then grow in
an alien surrounding, considerably different from their
cultural background and will often be involved in a con-
text of scantier employment possibilities (in developed
countries this may happ en with the immigrants from less
developed countries). Besides, in many cases they will
be poorly prepared to attain the job positions that the
new urban context offers. In this new setting, the struc-
ture of activities shifts from building and industries to
services. Moreover, there is a trend to increase produc-
tivity not only in agriculture and industry but also in the
area of services. Total employment supply decreases and
the emergency of structural poverty takes place as “a
natural consequence of the economic growth modality”
As example more than 20 million jobs have been de-
stroyed in the recent world crisis. Only in the United
States about five milion jobs, 66 percent of them from
the construction and manufacturating sectors, Data from
Reference [39]. What will then happen with access to
energy and possibly more expensive food? How will
investors or social security systems, among other stake-
holders, deal with this?
This seems to be a worldwide process even though
there are differences depending on different factors: each
country’s previous stage of development and technology,
the quality of its institutions, the educational level of the
population, its particular insertion in the world’s trade
and the specific features of its culture (which highlights
or mitigates the phenomenon of urban structural poverty).
This is intensified by the fact that mature economies
have products with shorter lifecycles, which is in itself a
constraint to improve income distribution. Even though
the situation is more serious in developing co untries, this
whole process is affecting the developed world as well
(poverty in the EUA has increased constantly since 1980
and in Europe the phenomenon of unemployment and its
relation with immigration are clear signs of this), Refer-
ences [44-46]. There is constant debate on public budget
adjustments and the collapse of the “Welfare State” in
Europe, as well as on the role played by immigration
barriers in periods of crisis in developed countries now
facing problems that no one thought of a few decades
ago. The 2008 financial crisis does not reveal so much
and only the second ary financial market pr oblems, as the
limits imposed on consumption and access to essential
goods and services by the lack of payment capacity. This,
in turn, depends undoubtedly on structural problems with
interdependences that become gradually more complex.
A simplified representation of the phenomenon was
shown in Diagram 1, which presents the different stages
of the urbanization process through time. The links for
each stage are described according to facts that took
place in a large sector of Latin America in relation to
energy services and the nature of the poverty issue. As
regards changes in the structure of activities, trends be-
tween 1975 and 1995 should be noted for both developed
and developing countries.
Therefore, it is highly pred ictable that one of the main
problems in the future concerning energy and poverty
will be how the urban poor will be able to become con-
sumers of the modern sources of commercial energy in a
manner that is sustainable in economic, social, political
and environmental terms. Since the dominating trend is
to consider the “Welfare State” as an obstacle to a more
competitive economy in a globally integrated world, this
problem becomes even more serious –or almost insoluble
if the productive approach is not modified.
Although Diagram 1 refers mainly to Latin America
within the developing world, the dynamics shown in its
upper part are not a mere particular regional phenome-
non. They have a universal character and could be ap-
plied to almost every LDC, even to developed countries,
due to the increasing interdependences. These dynamics
are the consequence of the parallel evolution of interrela-
tional processes like urbanization, growth, and techno-
logical change that characterize modernity and are even
independent from the “socialist or capitalist” economies
References, [9,10]. The demographic predictions shown
in Figures 1 and 2 anticipate that it is very likely that
growth will slow down in a decade’s time or even before,
because the installed capacity increases to respond to
markets which are considered dynamic when decisions
are taken. But little after this, these markets may get
saturated, creating a huge gap between the financial cu-
mulative capacity and the possibilities of carrying out
that accumulation through investments where capital can
be recovered as predicted .
The likelihood of L recessions (those that produce
permanent destruction of the installed capacity and di-
minish the depth and duration of the threshold from
which economy recovers) rather than U recessions (short
cycles) will increase. In fact, growing tendencies, when

R. KOZULJ 493
Diagram 1. Representation of the process of development of urban structural poverty and the issue of access to public ser-
vices in developing countries: urban population curve rate and stage determination. Source: author’s work.
affected by factors such as energy or financial crisis
(which are usually mistakenly introduced as ‘causes”)
show a declining line as indisputable stylized facts when
the evolution of global rates between 1950 and 2010 are
represented at global scale.
China or India may grow at a rate of 9%. Angola too,
but only because of an oil bonanza. Countries such as
Argentina or Japan, are recovering from the L recessions

R. KOZULJ 494
that they have experienced after each of the changes of
the macroeconomic model that took place in the last 20
years, in the first case, or as of 1990 as a structural phe-
nomenon in the second. As for the United States, rates of
about 3 or 4% were acceptably optimistic until 2007;
nowadays, 2% - 3% rates are welcome after the 2008 -
2009 crisis. For many countries in Europe and also in
Japan, rates have been low or even negative in the last
years. Global economy grew at 3% before the crisis, but,
which will be the rate in the year 2015, not to think of
2020 or 2030? Which additional product will help to
reach those percentages, figures? Which are the sectors
and technologies capable of giving them support basis?
With which lifecycles? How will an opulent society be-
sieged by the poor around them react? We have already
seen walls falling and being erected in very few years.
By the way, Rome is a good place to think this over: The
way from Porta Pinciana to Porta Nomentana reminds
of the place where “I Galli di Brenno” came in 390 BC.;
“I Visigoti di Alarico” in 410 AD.; “I bersaglieri di La
Marmora” in1870. Walls always mean “leaving the other
outside” and “protect the ones inside”. But they are not
impassable. If violence is not the strategy underlying
some minds or the natural outcome of a situation flooded
with threatening elements, another scenario will require
lots of wisdom and joint efforts.
In his last years, Peter Drucker predicted the arrival of
a society with a new gravity center: “the greatest changes
are almost certainly still ahead of us. We can also be
sure that the society of 2030 will be very different from
that of today, and that it will bear little resemblance to
that predicted by today’s top-selling futurists. It will not
be dominated or even shaped by information technology.
IT will of course be important, but it will be only one of
the several important new technologies. The central fea-
ture of the new society, as of its predecessors, will be
new institutions and new theories, ideologies and prob-
lems” Reference, [47]. It would be interesting to note that
in such context the “prophet of management” predicted
the question of ageing in Europe and the economic prob-
lems that would afflict Japan, even when nobody talked
about that. So his comment may b e taken as the warning
from somebody who deserves special respect and should
be listened to.
6. The Inadequacy of Institutions and
Thinking Habits: Towards a World
Agenda
For the past years, a lot has been said about promoting
education and impr oving the qua lity of institution s as the
proper means to contribute to the endogenous develop-
ment in each nation Reference,[48]. But what remains a
bit unclear is if this statement is adequately considering
the implicit complexity of the current world, whether the
opinions on this subject are based on a right diagnosis of
reality. To educate for what? What knowledge is to be
transmitted? To whom? In which context?
There is still debate around issues like “market solu-
tions”, the need for more State intervention. Should sub-
sidies be granted or not? In the final analysis, these are
discussions between neoliberalism and Keynesianism.
Are these discussions useful or do they just get in the
way? The need of new indicators is also mentioned, but
do we know which? To what purpose? There is a lot of
talk going on and not much is said. And then we are sur-
prised that th is world is go ing throug h an era in which , in
Bauman words, Reference [49], “lack of protection, un-
certainty and insecurity are the key features of the pe-
riod”. However, this is not surprising at all if we think
that the global productive system increasingly resembles
a drifting ship: its direction depends on the Captain of
the moment, let it be planned movements or hazardous
alternations. But the overall perception is that the boat is
or will be sinking at any moment. And perception pre-
cedes action because it shapes thought.
Clearly, eradicating extreme poverty will become a
complex issue and it will challenge the simplicity of
those that think a redistribution of income is enough, bu t
also those that think there is not such need. Many other
modifications will be required: 1- a reorientation of the
supply and its structure; 2- changes in the investment
process and the rules of return; 3- changes in production
and consumption guidelines; 4- changes in the attitude
towards work. Apart from this, new capacities and agile
and operative institution s, based on more accurate know-
ledge, will be certainly needed. New institutions also
means a new way of thinking business organizations and
the logics that rule production, its ethics, its purpose.
This may sound utopian, but the subtlety may be that an
excess of optimism is in fact identical to the crudest
skepticism. But if we do not start to feel concerned about
all this, what is the business atmosphere going to be like
in a couple of decades? For how many people will what
be produced? W ill it b e n ice to liv e in th at world? Maybe
it will, the lucky survivors will think. But maybe they
will be dreadfully mistaken.
It is evident that the problems entailed in the future
supply of energy does not solely depend on how demand
is to be satisfied, but also on how should it be modelled
according to sustainable guidelines, which means recon-
sidering growth, social organizations, and their rules. A
known link. But feared. Thus, absent from acceptable dis-
courses. Again, the issue of information becomes crucial.
In the first place, conscious intellectual efforts should
be made to reinterpret the need of creating more detailed
and accurate indicators, based on the generation of pri-
mary information systems. These systems should, in turn,

R. KOZULJ495
be capable of assessing the running of economy by com-
bining the evolution of specific products, consumption,
real poverty and its economic and cultural causes instead
of relying -as it is usual today on generic, inaccurate and
vague data, with all that misleading aggregates, full of
omissions and with no methodological unity. Is this too
exaggerated? Anyone who thinks so should check the
quantity of … or NA in data cells according to countries
in databases like the online WDI of the World Bank or
try to search long term series. Besides, these data do not
reveal too much about the reality that should be neces-
sary to comprehend. It would be constructive if the spe-
cialists of each small area of knowledge that makes up
the previously identified interdependences provided a
synthetic view of the situation for their area. Then, the
information on interdependences should be compared to
another piece of information. The interaction of both data
will determine which new interdependences must be
studied to eventually produce a spectrum of views about
a possible and desired future –which means creating a
more precise image of an inclusive instead of exclusive
society. And so new institutions, behavior and thinking
habits are essential. As well as a reorientation in research
and in the way research resources are spent. For example,
it is usual that institutions hire studies expecting results
in three or six months. Many times, these studies are
repeated more than once, leading to many versions of the
same question. The results entail thousand s of superficial
pages on the same subject, with not very reliable conclu-
sions. Why not replacing that with long term research
programs to orientate decision making for ticklish issues
on the basis of a more detailed knowledge? Is it not bet-
ter to spend more time in what is crucial and deserves
attention instead of making urgent decisions based on
reliable knowledge? Of course it is. Unless the point is to
support a decision that has already been made. In that
case, the other option seems logical. But dangerous.
Appreciations on delicate subjects cannot be ideology-
cal, or at least not too ideological. They require aware-
ness, which is not the same as overabundance of infor-
mation or quick access to it.
The object should be a stable economy that satisfies
different needs, that reconciles social differences without
aiming at an “ideal” equality that is unattainable in the
same way as it is impossible to think of high quality of
life in a context of extreme inequality.
Automatization is within our reach, concerning know-
ledge and possibilities, but how to use it in a reasonable
way to produce a better world is not.
An economy with product life cycles that become
shorter and shorter uses up human and natural energies
and resources. Thus, we should analyze how we can go
back to longer lifecycles with high technological content,
without stopping innovation, or worsening anybody’s
position or enjoyment, but channeling it under Global
and Contextual Rationality. This involves responding in
an operative manner to the question of how production
should be reoriented in order to satisfy everyone’s basic
needs, while keeping those who already enjoy a wealth
of goods and services happy. This is not incompatible
with freedom and does not necessarily lead to a collec-
tivist society. The idea is trying to discover under which
conditions that kind of society would be possible, under
which motivation and profitability ru les. To outline a ge-
neral view, shared by nearly all, and then refine it and
eventually implement it. Only under this set of guidelines
the discussion about improving education and institu-
tions makes sense. If not, we are to expect more of the
same. And it can already be seen that “the same” poses a
serious problem to all of us. To those who are suppo-
sedly in a privileged situation and to those who do not
have and will not access to basic goods and services
unless the basis from which the productive service has
evolved until now (bringing us to a non very promising
present) is reconsid ered.
So there is urgent need of a World Agenda. This may
sound utopic, but an agenda of this kind, though imper-
fect and weak as it may be, already works for issues like
global warming, product quality norms, etc. So why
should we think that it is not feasible to prepare a future
on non catastrophic basis? Is it due to a mind habit or an
unmodifiable humane nature? In any case, doubts add
some color to the discussion, and anything that brings
color gets closer to creation, which is not either black or
white, or grey. And whether we like it or not, we are part
of it. And as part of it, we are partners, co-creators. The
ones building our reality day by day. And just as the less
aware of himself the less free and happy an individual is,
at a global scale the situation remains the same. If a bet-
ter future is possible, it will not appear from a magician’s
top hat, neither from the current approach on economic
growth or the speeches and programs to fight poverty.
The entire international community should be interested,
investors from every area, in particular the ones in the
energy sector, whose position is priv ileged at the time of
leading changes.
7. References
[1] K. Davis, “The Origin and Growth of Urbanization in the
World,” The American Journal of Sociology, March
1955.
[2] L. Mumford, “The City in History,” Harper & Row, New
York, 1961.
[3] R. Y. Herman and J. Ausubel, “Cities and Infrastructure
in Cities and Their Vital Systems: Infrastructure, Past,

R. KOZULJ 496
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