Infrastructure-based development

Infrastructure-based economic development combines key policy characteristics inherited form France’s Gaullist and Neo-Colbertist centralized economic planning, Scandinavian social democracy and Singaporean state capitalism : it holds that a substantial proportion of a nation’s resources must be systematically directed towards long term assets such as transportation, energy and social infrastructure (schools, universities, hospitals…) in the name of long term economic efficiency (stimulating growth in economically lagging regions and fostering technological innovation) and social equity (providing free education and affordable healthcare).

Some European and Asian economists suggest that “infrastructure-savvy economies” such as Norway, Singapore and China have partially rejected the underlying Neoclassical “financial orthodoxy” that characterizes the ‘Washington Consensus’ and initiated instead a pragmatist development path of their own based on sustained, large-scale, government-funded investments in strategic infrastructure projects: “Successful countries such as Singapore, Indonesia and South Korea still remember the harsh adjustment mechanisms imposed abruptly upon them by the IMF and World Bank during the 1997-1998 ‘Asian Crisis’ […] What they have achieved in the past 10 years is all the more remarkable: they have quietly abandoned the “Washington consensus” by investing massively in infrastructure projects […] this pragmatic approach proved to be very successful.”

While China invested roughly 9% of its GDP on infrastructure in the 1990s and 2000s, most Western and non-Asian emerging economies invested only 2% to 4% of their GDP in infrastructure assets. This considerable investment gap allowed the Chinese economy to grow at near optimal conditions while many South American, South Asian and African economies suffered from various development bottlenecks: poor transportation networks, aging power grids, mediocre schools....