How Infrastructure Investments Alleviate PovertyOn Friday, Sept. 25, 2015 the U.N. General Assembly embarked on a milestone in development history. Its new Sustainable Development Goals (SDGs) set an ambitious agenda to work toward ending extreme poverty and boosting prosperity by 2030. The SDGs’ platform consists of a collection of 17 global goals each aimed at addressing economic and social issues in developing countries. One such goal was infrastructure, as it has been proven in many different countries that infrastructure investments alleviate poverty.

How Infrastructure Investments Alleviate Poverty

The Industry, Innovation and Infrastructure goal aims to “build resilient infrastructure, promote inclusive and sustainable industrialization and foster innovation.” Infrastructure is the backbone of any country as it generates jobs, boost economic growth and improves the quality of life for the poor.

Take, for example, a hospital in the Democratic Republic of Congo that needs electricity to ensure the safe and healthy delivery of a newborn. A young, rural Cambodian girl needs to have a safe road to walk to school and Bangladesh needs clean water for the essential livelihoods of its citizens. These are just a few of the myriad of ways that infrastructure investments alleviate poverty.

The Costs of Infrastructure Resistance

However, when governments push back on certain infrastructure plans, it comes at an enormous social and economic cost. Roughly 663 million people lack access to clean water, 2.4 billion people do not have adequate sanitation, one-third of the world’s population is not served by an all-weather road and over 1.1 billion people, or almost 16 percent of the world’s population, still have no access to electricity.

The Industry, Innovation and Infrastructure goal has seen a tremendous impact in diminishing these issues and others in emerging countries. Mobile services have spread rapidly and have allowed people to join the global information age. In 2016, 85 percent of people in the least developed countries were covered by a cellular signal. Transportation services also drive economic development and generate wealth and employment. In 2015, the global economic impact of air transport was an estimated $2.7 trillion, or about 3.5 percent of the global gross domestic product.

Infrastructure to Overcome Debt Cycles

One recessive point in global infrastructure came in the wake of the 2008 Great Recession. The West began exporting debt to emerging markets while also purchasing debt from emerging markets. Western fund managers sold forms of credit to developing markets and the total debt rose to $49 trillion in 2014.

Unfortunately, many fail to realize that selling endless cycles of debt will make it incredibly difficult for emerging countries to service their own dollar-dominated debt at home. They will be unable to pay back these loans and growth ultimately stagnates. Fortunately, multilateral development banks are uniquely placed to assist countries in closing these long-term financing gaps. They can help identify failing market areas and create incentives in for the private sector.

Infrastructure investments alleviate poverty in developing countries through the application of projects such as bridges, roads, communication, sewage and electricity. These projects enable both public and private investors to gain on capital appreciation. While servicing the vital infrastructure needs of billions of people, these countries will, along with their booming populations, generate significant prospects for long-term growth and profit for generations to come.

– Aaron Stein
Photo: Flickr