Bridges to Somewhere
More austerity won't save the global economy. Building infrastructure just might.
BY JUSTIN YIFU LIN | SEPTEMBER 1, 2011
Today's mounting anxiety over weak growth prospects is more than just a bad hangover from the financial tumult of 2008. In the United States and several
European countries, new jobs remain scarce. National incomes in some advanced countries still linger below pre-crisis levels. The medium-term outlook for
the United States and Europe is dim. Not only will this make it more difficult for advanced economies to tackle fiscal and employment problems at home,
but it will also reduce growth prospects for developing countries, many of which -- particularly in the Middle East and sub-Saharan Africa -- suffer from
a lack of employment opportunities. The result? Millions trapped in poverty, creating fertile ground for social instability. While governments on both
sides of the Atlantic are considering cutting budgets, what the world needs most right now is growth.
The Road to Prosperity
How do you end a recession? Build something.
Without growth, it will be very painful and difficult for advanced economies to increase employment and significantly reduce their debt burden. But how
to do it? The solution could take the form of a global infrastructure investment initiative, which would rest on two key pillars. First, advanced economies
would need to spend billions of dollars on infrastructure projects, whether by upgrading old facilities or building new ones that release bottlenecks to
growth. But even this might not be enough to generate sufficient growth and jobs. Thus, policymakers, entrepreneurs, and investors should also promote
and facilitate infrastructure investments in developing countries where opportunities for such investments abound. This should not be seen as charity:
Infrastructure investments in developing countries increase demand for capital goods, such as the turbines or excavators that are often produced in the
United States and Europe.
Promoting infrastructure investments in developing countries, an idea that is also being advanced by the G-20, would boost exports, manufacturing employment,
and growth in high-income countries, while reducing poverty and enhancing growth in the developing world. It's a win-win solution.