economic crisis will be with us for a generation, not just a
year or two, because it is really a transition to
sustainability. The scarcity of primary commodities and
damage from climate change in recent years contributed to
the destabilization of the world economy that gave rise to
the current crisis. Soaring food and fuel prices and major
natural disasters played an important role in undermining
financial markets, household purchasing power, and even
this way, an essential policy that developed and developing
countries should pursue in overcoming the crisis is to build
infrastructure suitable for the 21st Century. This includes
an efficient electricity grid fed by renewable energy; fibre
and wireless networks that carry telephony and broadband
Internet; water, irrigation, and sewerage systems that
efficiently use and recycle fresh water; urban and
inter-city public transit systems; safer highways; and
networks of protected natural areas that conserve
biodiversity and the habitats of threatened species.
These investments are needed in the short-term to offset
the decline in worldwide consumption spending that underlies
the global recession. More importantly, they are needed in
the long-term, because a world crowded with 6.8 billion
people (and rising) simply cannot sustain economic growth
unless it adopts sustainable technologies that economize on
scarce natural resources.
In practice, the global crisis means that sustainable
investments are being curtailed rather than expanded in the
developing world. As access to international bank loans,
bond flotations, and foreign direct investment is lost,
infrastructure projects talked about in the past are now
being shelved, threatening the political and economic
stability of dozens of developing countries.
In fact, every part of the world has a huge backlog of
vital infrastructure investments. It is time for a concerted
global effort to bring those projects on line. This is not
easy to do.
Most infrastructure investment requires public-sector
leadership to forge partnerships with the private sector.
Typically, the public sector must enter into contractual
agreements with private firms not only to build the
infrastructure, but also to operate it as a regulated
monopoly or on a concession basis.
Governments generally lack the needed technical capacity to
design such projects, opening up possibilities of
favouritism and corruption when major contracts are awarded.
Such charges are likely to be hurled at governments even
when they are not true, though all too often they are.
Still, the backlog of such projects is now wreaking havoc
with the world economy. The world's major cities are clogged
with traffic jams and pollution. The atmosphere is filling
with greenhouse gases from heavy use of fossil fuels. Water
scarcity is hitting virtually every major economic centre,
from North America to Europe, Africa, India, and China.
Governments should thus strengthen their ministries of
infrastructure - including power, roads, water and
sanitation, and information and communication technologies -
as well as their national development banks, so that they
can properly design long-term infrastructure projects and
programs. The ability to offset the crisis in a constructive
manner through expanded public-private partnerships will
determine the subsequent success of countries and regions.
Interestingly, the US is about to create a National
Infrastructure Bank for the first time.
Nevertheless, American and European economic advisers
generally believe that a short sharp stimulus will be enough
to restore economic growth. This is wrong. What will be
needed is an overhaul of the world economy towards
Moreover, policymakers in the rich world believe that they
can continue to neglect the developing world, or leave it to
its fate in global markets. This is also a recipe for global
failure, and even future conflict. Developed countries will
have to do far more to help poor countries through the
transition to sustainability. Whereas most of the "stimulus"
legislation to date has been short-term and inward-looking,
increased funding for sustainable infrastructure in poor
countries would provide a powerful boost to rich-world
Developed countries should agree to channel considerable
savings to developing countries to finance the scale-up of
sustainable investments. This can be done directly on a
bilateral basis, for example, through long-term loans from
developed countries' export-credit agencies. It can also be
done multilaterally, by raising the infrastructure
investment flows from the World Bank and the regional
development banks (including the Inter-American Development
Bank, European Investment Bank, African Development Bank,
and Asian Development Bank). Both channels should be used.
Developed countries also fail to recognize that without
much greater financing of sustainable infrastructure in the
developing world - especially sustainable power generation
and transmission - a global agreement on climate change
later this year (or any time soon) will be impossible. The
rich world somehow expects poor countries to restrict their
use of fossil fuels without any significant help in
financing new and sustainable sources of energy. In almost
all of the rich-country proposals about targets, limits,
commitments, and permits for greenhouse gases, there is
hardly a word about helping poor countries to finance the
transition to sustainable technologies.
The G-20 meeting in London on April 2, 2009, offers hope
for a true global effort to repair the failing world
economy. This is the time and place to launch the global
drive toward sustainability. If we fail to meet the
challenge, the global crisis will endanger the world for
years to come.