Infrastructure Investment’s Missing Link
G20 countries have once again pledged to invest in advanced-economy infrastructure as a strategy to boost global growth. The world has heard this before, but it never seems to work out as promised, because policymakers continue to ignore the factors that deter investors.
CAMBRIDGE – It is breathtaking to watch world leaders put aside their differences and agree to a single strategy to boost global economic growth. It is heartbreaking when that strategy doesn’t do much good. At the G20’s recent summit in Hangzhou, China – its tenth since the 2008 global financial crisis – member governments once again pledged to invest in infrastructure in advanced economies to boost growth, and in the developing world to fight poverty. But it is still mainly a pledge.
According to the McKinsey Global Institute, the world still invests only $2.5 trillion annually in transportation, water, power, and telecommunication networks, well short of the estimated $3.3 trillion needed just to keep up with current trends. In fact, most G20 countries actually invest less today in infrastructure than they did before the financial crisis, even as national leaders acknowledge that these investments can spur growth.
This is still more confounding at a time when the world is awash with cash. With central banks keeping interest rates near zero – and in some cases even probing negative territory – it is hard to find another time in history when borrowing was so cheap.