Energy and the new wealth of nations: A lesson for Bangladesh

Two hundred and fifty years after Adam Smith published The Wealth of Nations, the question of what makes a nation prosperous is again being debated.

At the New Enlightenment Conference in Edinburgh, former Singapore Foreign Minister George Yeo addressed this question in the context of geoeconomic competition, artificial intelligence and a fragmenting world economy. One of the most important themes of his argument was deceptively simple: throughout history, the availability of energy and our ability to use it efficiently have been fundamental to economic development.

For Bangladesh, this is not an abstract proposition. It is almost the story of our civilisation.

Civilisation began with energy

Long before coal, oil, gas or electricity, humanity's principal source of energy was the sun.

Plants captured solar energy. Agriculture enabled human beings to convert it systematically into food. Once farmers could produce more food than their families immediately consumed, societies acquired surplus. Surplus allowed populations to grow and people to become traders, artisans, administrators, scholars and builders. Villages became towns and towns became civilisations.

Few places were more naturally endowed for this first energy economy than the Bengal delta.

The great river systems carried water and replenished the land with fertile alluvial soil. Sunshine, rainfall, rivers and human labour produced rice and other crops in abundance. As the rivers shifted eastward during the Mughal period, new fertile lands supported extraordinary agricultural productivity and population growth in eastern Bengal.

Nature had given Bengal an enormous comparative advantage in the agricultural age.

But the source of economic power was about to change.

Coal changed the wealth of nations

The Industrial Revolution represented something much more profound than the invention of machinery. Humanity learned to exploit energy accumulated underground over millions of years. Coal could produce vastly more concentrated power than human beings, animals, wood, wind or flowing water. It powered steam engines, factories, steel mills and railways. Production was no longer limited by the energy that nature provided during a particular year's growing season.

Britain became the workshop of the world.

Bengal, despite its agricultural prosperity and sophisticated textile and trading economy, largely missed this coal-powered transformation. The advantages that had made the delta prosperous in an agricultural civilisation could not by themselves provide leadership in an industrial civilisation.

It is one of the great lessons of economic history: a country can lead one economic age and miss the next if it fails to adapt to a change in the source and use of energy.

Oil subsequently transformed the world again.

It powered automobiles, aviation, shipping and global commerce. Energy therefore ceased to be simply an economic input. It became an instrument of national power and national security.

The oil shocks of the 1970s made that relationship unmistakable. Nations learned painfully that the cheapest source of energy in normal times was not necessarily the most secure source in abnormal times. Diversification, strategic reserves, alternative suppliers and redundant infrastructure acquired an economic value of their own.

Bangladesh's second energy opportunity

Bangladesh fortunately received another great energy endowment: natural gas.

For decades, relatively inexpensive indigenous gas provided electricity, fertiliser and industrial energy. It supported agriculture through fertiliser and irrigation; it powered factories and homes; and it became one of the foundations upon which modern Bangladesh developed.

This should not be overstated. Our remarkable economic progress came from many sources: the hard work of our people, garments, remittances, entrepreneurship, women entering the workforce, agriculture, infrastructure and improvements in health and education.

But affordable energy was an important enabler.

Bangladesh eventually recorded GDP growth above 7% in several years. A country once synonymous internationally with poverty increasingly became an example of development.

In a sense, we had learned again how to convert energy into prosperity.

Our ancestors converted sunlight, water and fertile soil into agricultural surplus. Modern Bangladesh converted natural gas into fertiliser, electricity, industrial production, exports and rising living standards.

But today the energy equation has changed again.

From abundance to shortage

Our domestic natural gas is no longer sufficient for the economy we have created.

Demand has grown while indigenous production has become inadequate. Bangladesh has consequently become increasingly dependent upon imported LNG. That exposes our economy not only to international prices but also to shipping, geopolitics and events thousands of kilometres from our shores.

The events of 2026 have demonstrated the danger vividly. Disruption around the Middle East and Strait of Hormuz has affected LNG flows to Bangladesh. Qatar, historically an important long-term supplier, sharply reduced scheduled deliveries, forcing Bangladesh to seek replacement cargoes and alternative sources. At the same time, domestic gas shortages have affected electricity generation, industries and households.

There is an important economic lesson here.

Energy security cannot mean buying today's cheapest energy. It must mean securing competitively priced energy through a sufficiently diversified and resilient system that can withstand tomorrow's crisis.

This requires a portfolio rather than dependence.

Domestic gas exploration, LNG from geographically diversified suppliers, long term contracts complemented by spot purchases, adequate regasification capacity, reliable transportation, renewables, regional electricity trade and appropriate redundancy should all form parts of that portfolio.

Redundancy can appear expensive when everything is working. It becomes extraordinarily valuable when something stops working.

The objective should therefore be not simply "least-cost energy", but least-cost secure energy.

And now comes AI

Another energy revolution is already beginning.

For years we spoke about the digital economy as though it were almost weightless. Artificial intelligence is reminding us that the digital world is profoundly physical.

Data centres require enormous quantities of reliable electricity. Computing requires semiconductors, servers and cooling. Networks require fibre and communications infrastructure. AI therefore ultimately converts electricity into intelligence and economically valuable information.

This is why George Yeo's observation is particularly relevant today.

The countries competing for leadership in artificial intelligence are simultaneously confronting questions of energy availability, energy cost and energy security. A nation may possess brilliant engineers and abundant capital, but if its electricity is unreliable or structurally uncompetitive, its digital economy starts with a disadvantage.

Bangladesh should recognise the opportunity in this transition.

We are a densely populated country with limited land and natural resources. We cannot compete indefinitely by exporting principally the products of relatively inexpensive labour. As our incomes rise, our economic model must move progressively towards activities producing greater value from every worker, every acre of land and every unit of energy.

Data and computing present such an opportunity.

Instead of regarding electricity only as something to be consumed, we should increasingly regard internationally competitive electricity as an economic raw material.

We can convert gas and other energy into electricity; electricity into computing; computing into data, artificial intelligence and digital services; and those services into export earnings.

The export need not always leave Chattogram in a container. Some of the highest-value exports of the twenty-first century may leave Bangladesh through fibre optic cables.

From rice to data

There is an intriguing continuity in this history.

For centuries, the Bengal delta converted sunlight, water and soil into rice, sustaining one of the world's great concentrations of humanity.

We did not sufficiently participate in the next great transformation when coal was converted into industrial power.

Natural gas gave independent Bangladesh another opportunity. We converted gas into fertiliser, electricity and industrial development, helping an impoverished country achieve periods of growth exceeding 7%.

Now we face another transition.

The lesson of history should be clear: Bangladesh must not miss the next energy age.

Our immediate responsibility is certainly to overcome today's gas and electricity shortages. But our ambition should be greater than solving the crisis of the present.

We need an energy architecture capable of supporting the economy we want to have twenty or thirty years from now- secure, diversified, competitive and increasingly sustainable.

And we must simultaneously decide what we want to do with that energy.

Agriculture converted energy into food and helped create civilisation.

Coal converted energy into mechanical power and created the Industrial Revolution.

Oil converted energy into mobility and accelerated globalisation.

Natural gas helped Bangladesh convert energy into fertiliser, electricity and industrial growth.

The emerging age will increasingly convert electricity into computation, knowledge and artificial intelligence.

Adam Smith asked what creates the wealth of nations. Two hundred and fifty years later, markets, institutions, human capital and technology remain essential parts of the answer. But beneath every economic age lies something even more fundamental: mankind's ability to capture energy and convert it into something of greater value.

Muhammed Aziz Khan is the Chairman of Summit Group. 

Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the opinions and views of The Business Standard.