The G20, which comprises the world’s largest economies, offers the natural setting for global policy coordination. The next G20 meeting in London in early April is a crucial opportunity for timely action. The leading economies — especially the US, the EU and Japan — should establish new programs to finance infrastructure investments in low-income countries. The new lending should be at least US$100 billion per year, directed toward developing countries.
The new financing would include direct loans from rich countries’ export-credit agencies to enable poor countries to borrow long-term (for example, 40 years) to build roads, power grids, renewable energy generation, ports, fiber optic networks and water and sanitation systems. The G20 should also increase the lending capacity of the World Bank, the African Development Bank and other international financial institutions.
Japan, with a surplus of saving, a strong currency, massive foreign exchange reserves and factories without domestic orders, should take the lead in providing this funding for infrastructure.
Moreover, Japan can boost its own economy and those of the poorest countries by directing its own industrial production to the infrastructure needs of the developing world.
Cooperation can turn the sharp and frightening decline in worldwide consumption spending into a global opportunity to invest more in the world’s future well-being. By directing resources away from rich countries’ consumption to developing countries’ investment needs, the world can achieve a “triple” victory.
Higher investment and social spending in poor countries will stimulate the entire world economy, spur economic development and promote environmental sustainability through investments in renewable energy, efficient water use and sustainable agriculture.
Jeffrey Sachs is professor of economics and director of the Earth Institute at Columbia University.
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