If you see a photo of Bombay a century ago, you will see wide roads and few cars, similar to this photo shot in a tier-2 city in China recently. Being ready for hundred years, is what driving infrastructure is all about and it drives growth, income as a multiplier. There are similarities with asset building in company balance sheets.
Companies are strong when the asset side of the balance sheet is built on solid fixed assets that support the efficiencies to excel. Same as countries, where the country balance sheet is built on fixed infrastructure assets. Income expands when these assets support such efficiencies to flow into income streams.
Infrastructure is at centre of all economic progress, but it cannot just play a catch up; infrastructure should be twenty years ahead of the curve. That is what drives economic activities. In many countries where infrastructure is perennially trying to catch up, they become the reason why growth falters.
Think of a balance sheet that has a weak asset side while it is trying to increase income streams. It could be worse for a country balance sheet with a bloated liability side when large numbers have to be taken out of poverty.
The realisation of this is not simple, it takes quite a bit of economics to understand this. But simply put, if infrastructure is lagging, it means you are constraining the system to operate at its potential level, so it is a debilitating force.
To understand this better you must look at China, new cities are built to be always ahead of the demand by several decades. If a city population is 10 million, the infrastructure is already ready to house 20 million and carry safely 20 million cars on road or make it possible for half a million to be treated in hospitals and at least 2 million to have access to medium to high level education.
Infrastructure is about creating capacities everywhere, for example when the average income of such a city would break the thresholds, it is only to be expected that those amenities that they would be needing from eateries to leisure must be available to them.
Just when all this sets in form of a synchronised succession of events, the prices start to catch up and it breaches the threshold level again when the next cycle of expansion or diversion must happen.
The challenge of functional democracy is not that you have to make laws such that this process can be equitably handled but in ensuring that growth is not compromised where the majority must sacrifice for a minority’s gain or vice versa. Do not make affordable housing such that the channels of communication is further stalled.
In absence of such a theorem, China takes enormous risks in ensuring that the asset side of the national balance sheet finally absorbs all the risks, while the liability side is not too much strained by the vagaries of opposing forces that questions a denouement against other alternatives.
At the end this experiment has shown that millions could be taken out of poverty and destitution, whatever the costs, the human development index by the way is not too incapacitated either.
We may have hundred questions on this, but China can still sleep on it as the cycle of growth is put in a perpetual motion thanks to the infrastructure it had painstakingly built and is still keen to focus on.
Infrastructure means everything from roads to tunnels to bridges to ports to airports to whatever you can think of.
I found a simple infrastructure index, you have to multiply everything by 20 if you want to compare India with China. Let us not forget that fifty years ago, this number was close to 1.