Infrastructure: A Road to Global Recovery

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Economy  |  May 11, 2016  |  

Since last decade’s financial crisis, global policymakers have mostly stood by and relied on Central Bankers to stimulate economies. Mario Draghi, for one, has repeatedly implored politicians to lend a stimulative hand. These leaders, too, possess weapons against stagnation such as boosting infrastructure building and replacing aging infrastructure. Another is pressing structural reform agendas to open up areas for increased competition and investment. A third is tax reform.

A real world example? Germany. The Economist magazine published a terrific article on (decaying) German infrastructure. Based on more than one measure, it has declined markedly in the last 25 years. Amazing, considering Germany has acted as continental Europe’s main growth engine during the same time period. The article shared anecdotes of obvious infrastructure needs in both German motorways and rail. Germany’s budget is in surplus, and the Bundesbank issues long term bonds yielding a fraction of a percent! What a good way to use cheap money to enhance a country’s economy, competitiveness, and employment.

As we witness the waning impact of incremental quantitative measures, other policymakers (read: politicians) must step up.
“Going Negative”, The Economist, April 30th-May 6th 2016