Resumo:
China’s three-decade infrastructure investment boom shows few signs of abating. Is China’s economic growth a consequence of its purposeful investment? Is China a prodigy in delivering infrastructure from which rich democracies could learn? The prevalent view in economics literature and policies derived from it is that a high level of infrastructure investment is a precursor to economic growth. China is especially held up as a model to emulate. Politicians in rich democracies display awe and envy of the scale of infrastructure Chinese leaders are able to build. Based on the largest dataset of its kind, this paper punctures the twin myths that (i) infrastructure creates economic value, and that (ii) China has a distinct advantage in its delivery. Far from being an engine of economic growth, the typical infrastructure investment fails to deliver a positive risk-adjusted return. Moreover, China’s track record in delivering infrastructure is no better than that of rich democracies. Investing in unproductive projects results initially in a boom, as long as construction is ongoing, followed by a bust, when forecasted benefits fail to materialize and projects therefore become a drag on the economy. Where investments are debt-financed, overinvesting in unproductive projects results in the build-up of debt, monetary expansion, instability in financial markets, and economic fragility, exactly as we see in China today. We conclude that poorly managed infrastructure investments are a main explanation of surfacing economic and financial problems in China. We predict that, unless China shifts to a lower level of higher-quality infrastructure investments, the country is headed for an infrastructure-led national financial and economic crisis, which is likely also to be a crisis for the international economy. China’s infrastructure investment model is not one to follow for other countries but one to avoid.
Fonte: Atif Ansar, Bent Flyvbjerg, Alexander Budzier, and Daniel Lunn. Does infrastructure investment lead to economic growth or economic fragility? Evidence from ChinaOxf Rev Econ Policy (2016) 32 (3): 360-390 doi:10.1093/oxrep/grw022
Conclusão:
The question of whether infrastructure investment leads to economic growth must be answered in the negative. Owing to uncertainty surrounding costs, time, and benefits parameters, a typical infrastructure project fails to deliver a positive risk-adjusted return. There is a common tendency for the benefit-to-cost ratio of major infrastructure investments to fall below 1.0. Such unproductive projects detract from economic prosperity. We thus reject the orthodox theory that heavy investment in infrastructure causes growth. There is an even more detrimental boomerang effect of overinvestment in infrastructure. Unproductive projects carry unintended pernicious macroeconomic consequences: sovereign debt overhang; unprecedented monetary expansion; and economic fragility.
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Conclusão:
The question of whether infrastructure investment leads to economic growth must be answered in the negative. Owing to uncertainty surrounding costs, time, and benefits parameters, a typical infrastructure project fails to deliver a positive risk-adjusted return. There is a common tendency for the benefit-to-cost ratio of major infrastructure investments to fall below 1.0. Such unproductive projects detract from economic prosperity. We thus reject the orthodox theory that heavy investment in infrastructure causes growth. There is an even more detrimental boomerang effect of overinvestment in infrastructure. Unproductive projects carry unintended pernicious macroeconomic consequences: sovereign debt overhang; unprecedented monetary expansion; and economic fragility.
[...]
The pattern of cost overruns and benefit shortfalls in China’s infrastructure investments is linked with China’s growing debt problem. We estimate that cost overruns have equalled approximately one-third of China’s US$28.2 trillion debt pile. China’s debtto-GDP ratio now stands at 282 per cent, exceeding that of many advanced economies, such as the United States, and all developing economies for which data were available, such as Brazil, India, and Nigeria. Because many corporations and financial institutions in China are state-owned, our revised calculation of China’s implicit government debt as a proportion of GDP suggests that China’s is the second-most indebted government in the world. Extraordinary monetary expansion has accompanied China’s piling debts: China’s M2 broad money grew by US$12.9 trillion in 2007–13, greater than the rest of the world combined. The result is increased financial and economic fragility. We conclude that, contrary to the conventional wisdom, infrastructure investments do not typically lead to economic growth. Overinvesting in underperforming projects instead leads to economic and financial fragility. For China, we find that poorly managed infrastructure investments are a main explanation of surfacing economic and financial problems. We predict that, unless China shifts to a lower level of higher-quality infrastructure investments, the country is headed for an infrastructure-led national financial and economic crisis, which—due to China’s prominent role in the world economy—is likely to also become a crisis internationally. China is not a model to follow for other economies—emerging or developed—as regards infrastructure investing, but a model to avoid.
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