Nancy Alexander, Guest Blogger
The world is experiencing the “biggest investment boom in human history”, with some $6-9 trillion annually (8 per cent of global GDP) devoted to mega, giga and tera (million, billion, and trillion) dollar projects.
World leaders, specifically the Group of 20 (G20), are staking their reputation on achieving a growth target – namely raising global GDP by 2.1 per cent over current trajectories by 2018. The G20 sees massive infrastructure investment as one of the ‘silver bullets’ that can achieve its target and, by boosting trade and integration, add $2 trillion to the global economy and create millions of jobs.
The private sector, a major driver of the boom, suggests that about $60-70 trillion of additional infrastructure capacity will be needed by 2030 (see Business 20 recommendations). Under current conditions, public and private investments could provide about $30-35 trillion and $10-15 trillion, respectively, leaving a gap of $15-20 trillion. Policy-makers see long-term institutional investors, such as pension funds and sovereign wealth funds, as the key to bridging the gap. These investors control about $85 trillion and seek higher returns on their money, such as infrastructure can provide.
Another major driver of the boom is competition between the ‘West and the rest.’ As described below, the US-led World Bank is one of the institutions in the vanguard of this competition. When Jim Yong Kim assumed the World Bank presidency in 2012, staffers reported that he was presented with “Big Development” and “Small Development” approaches. Kim leans toward “Big Development” – or “transformational” projects.