Question

based on America's crumbling infrastructure:

1.consider whether nations should place more emphasis on infrastructure projects to support growth through trade?

2. As you formulate your response, consider how other nations are handling this issue. (provide sources)

Answer 1

Infrastructure projects facilitate the trade and economic activity in any country that helps the country to achieve higher levels of growth rate in the economy. It reduces, unemployment as infrastructure projects not only create new jobs, but also, the increase in production activity, brings new jobs in the economy. It increases the purchasing power that further increases the aggregate demand. It makes a cycle of positive economic activities that economy achieves a potential output level and it is only possible when focus is given to the infrastructure projects. For example, the development of road, rail and port infrastructure, reduce the distance between the target market and the manufacturers besides reducing the time to access the market. Power sector growth creates power to be used in the manufacturing sector. Without this, manufacturing activities cannot take place. On a similar note, telecommunication infrastructure brings connectivity and information technology to the economy and the economy grows at a faster rate. Further, the educational infrastructure, develops human capital that feeds the labor requirement of the industry.

Here, each infrastructure project has unique roles to play in the economic growth of the nation. So, it is important for the economy to invest in the infrastructure projects.

A research conducted in OECD countries has found that there is a definite linkage between the infrastructure and the economic growth, more specifically in the long term. It is also observed that there can be two way causal effect also. It means that initially infrastructure projects fuel the economic growth and later on, economic growth initiates the next level of infrastructure growth to achieve sustainability in the growth. Even countries like India and China give strong focus to develop infrastructure to get efficient utilization of resources.

Reference:

Linkages between Infrastructure And Economic Growth. Retrieved from: http://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.184.9839&rep=rep1&type=pdf