Academic journal article The Journal of Central Asian Studies

Energy Consumption and Economic Growth: An Analysis of Central Asian States

Academic journal article The Journal of Central Asian Studies

Energy Consumption and Economic Growth: An Analysis of Central Asian States

Article excerpt

(ProQuest: ... denotes formula omitted.)

Introduction

Energy is the engine of economic growth, as all production and consumption activities involve energy as basic input1. On the production side, conventionally, economists since Adam Smith have talked about land, labor, and capital as major inputs for economic activity. These inputs were significant ingredients of agrarian economies of 18th and 19th centuries. However, in 20th century, the growth of industrial nations has observed a fourth major input i.e., energy. On consumption side, in the John Maynard Keynesian framework where consumption and income are significantly correlated, similarly energy consumption in all forms drives economic productivity. It leads to economic growth and prosperity which ensures expansion of the economy in terms of higher Gross Domestic Product (GDP) and GDP per capita. Economic growth and prosperity, however, does not simply depend upon the availability of energy input, but how energy be utilized. In the current global competitive atmosphere, it is the judicious use of resource which matters and same is true of energy input.

Conspicuously energy consumption and economic growth are interrelated in two respects as energy is consumed for two purposes. One, it is a production input and the other, is one of the important means of human comforts. As a production input it is a causeway to development process. An increase in its consumption means a higher level of economic activity and greater production of goods and services and vice versa. As a means of providing comforts it is necessary fallout/outcome of development2 process. Such a relationship between energy use and economic growth are often exposed in terms of the relations between energy consumption to gross domestic product or E/GDP ratio or energy intensity. However, the main aim of this study is to testify whether energy consumption (EC) leads to economic growth or economic growth causes the energy consumption.

Importantly the growing pattern of global economic development has influenced the whole world so much so that energy security has emerged as one of the major developmental goals of any nation whether it is in the economic Take off Stage3 or has reached the Stage of High Mass Consumption(Walt Whitman Rostow).4 Without having sufficient energy resources "nations can neither initiate the process of economic growth and development nor sustain it for long".5 It is because of this realization of the importance of energy security that nations all over the world are now developing sophisticated and appropriate technology to harness both the renewable and non-renewable sources of energy. While doing so these nations are not only involved domestically but also externally through bilateral and multilateral ties in their immediate and extended neighborhoods as well as in the far off regions and continents. However, nearer the source of energy to a country, the greater is comparative advantage in actualizing that resource potential.6

In recent years, as the list of countries among the emerging economies category are increasingly characterized by high rates of economic growth, which has also led to difficulties in achieving a sound balance between demand and supply of energy resources necessary to maintain their national economic growth and development. Although, they are trying hard to arrive at an appropriate energy mix, increase in their energy efficiency and diversify their sources of supply and the question of maintaining a stable supply of fossil fuels continue to pose several security challenges. One is to boost one's own production, another to diversify one's sources of import, and a third to secure the transportation of hydrocarbons (oil and natural gas) on vulnerable sea routes or overland through pipelines that depend on long-term strategic relationships with the producing countries. This may result in the formation of such a system of mutual relations in the world that in totality of its volume and scope may most effectively serve the interests of both the manufacturers of energy resources as well as their consumers. …

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