12 Mar 2009

We Find that We Are Necessary

This World Bank paper concludes (without irony!) that
Illustrative calculations show that just cutting in half the infrastructure quantity gap between African much countries and those of comparable income levels in other regions could require as as 15 percent of GDP in additional investment... Barring a massive increase in aid flows, the sheer magnitude of these figures likely places a fast infrastructure catch-up beyond the financial reach of most African countries. Even a more gradual approach to infrastructure catch-up would pose considerable demands on fiscal resources over several years, competing with other pressing expenditure needs – such as education and health.
So there's a "quantity gap" that will be too hard to finance (cut spending on health and schools?!?) unless a "massive increase of aid flows" arrives.

Gee, I wonder if these World Bank authors know of any organization that can supply LOTS of aid money for infrastructure? (Maybe we should ask Bill Easterly what he thinks...)

BTW, the paper uses some fancy statistics to estimate that:
The largest contribution of infrastructure development to growth was achieved in South Asia, where it reached 2.7 percent per annum. Of this total, enlarged stocks increased growth by 1.6 percent per year, and enhanced infrastructure quality raised growth rates by 1.1 percent per year in 2001-5 relative to 1991-5.

Finally, infrastructure development made, on average, a smaller contribution to growth in Sub-Saharan Africa than in other regions – just 0.7 percent per annum. While the expansion in infrastructure stocks raised the growth rate by 1.2 percent per annum, the deterioration of the quality of infrastructure services in the region
contributed to reduce the growth rate by 0.5 percent per annum.
Bottom Line: There is NO "infrastructure gap" in sub-Saharan africa or any other place. Existing and future infrastructure levels reflect political and economic reality. Additional spending that is NOT the result of market forces (e.g., IS the result of Bank programs) is likely to be wasted. (Note the 0.5% deterioration; they can't even maintain what they have!)