America in the Way
Today, developing countries and emerging markets say to the US and others: If you will not keep your promises on development aid, at least get out of the way and let us create an international economic architecture that works for the poor. Not surprisingly, the US is doing whatever it can to thwart such efforts.
NEW YORK – The Third International Conference on Financing for Development recently convened in Ethiopia’s capital, Addis Ababa. The conference came at a time when developing countries and emerging markets have demonstrated their ability to absorb huge amounts of money productively. Indeed, the tasks that these countries are undertaking – investing in infrastructure (roads, electricity, ports, and much else), building cities that will one day be home to billions, and moving toward a green economy – are truly enormous.
At the same time, there is no shortage of money waiting to be put to productive use. Just a few years ago, Ben Bernanke, then the chairman of the US Federal Reserve Board, talked about a global savings glut. And yet investment projects with high social returns were being starved of funds. That remains true today. The problem, then as now, is that the world’s financial markets, meant to intermediate efficiently between savings and investment opportunities, instead misallocate capital and create risk.
There is another irony. Most of the investment projects that the emerging world needs are long term, as are much of the available savings – the trillions in retirement accounts, pension funds, and sovereign wealth funds. But our increasingly shortsighted financial markets stand between the two.