0.5 Perspectives on the role of capital in development: physical  (Page 4/10)

1. A powerful factor in increasing private investment (lowering transport costs), and
2. In creating new jobs and,
3. In promoting long term growth in all five of Portugal’s regions, and
4. Positive impacts on the government’s budget.
   How positive? New tax revenue generated by the road projects exceeded the costs of road investments by government.

Interesting corollary¬—Portugal along with Greece and Spain are in a bad way in 2014 – high fiscal deficits and debt owed to other European nations. If to decrease the deficit Portugal sharply cuts spending in roads, this could decrease long term growth.

Also you will see that technological advances everywhere, and especially in emerging nations require huge amounts of investment, both human and physical capital. Change, when it occurs, now comes fairly swiftly, due to technological innovation made possible by investment in human capital.

Traditionally, the World Bank and the U.N. have divided the world’s countries into 3 categories:

• Developed
• Developing
• Under Developed (definition now obsolete?)

With the kind of rapid technological change underway, combined with globalization and increasing inter-connectedness of world markets, these categories will be obsolete by 2025.

In 2025, nations will not be categorized as developed or developing, but as smart, smarter and smartest.

With advances in Biotech, Nanotech and Infotech, and with increasing degrees of competition flowing from globalization, most people will have to change not just jobs, but careers 2-3 times in a lifetime.

Only the well-educated, highly adaptable will thrive. Keep focused on India . Today one South Korean produces as much as 20 Indians (and have some GDP but S. Korea 1/20 the number of people). But India has a large, growing reservoir of smartness. Combine this with democracy plus a higher education system still superior to China = Great Prospects, provided India finally begins to rectify a very large deficit in one type of physical capital – infrastructure, including roads, ports, harbors.

Models of economic growth

Increasingly, nations seek to increase not merely economic growth, but sustainable economic growth over time. We postpone until Chapter___ discussion of issues on sustainable growth, such as air and water pollution, sensible use of natural capital (energy, forests, water and fisheries) and climate change.

In the past six decades economic growth in emerging nations has been substantial, but not always sustainable. However, it is undeniable that such economic growth as has occurred in emerging nations has had very significant beneficial effects on the world’s poorest.

Growth has sharply reduced the incidence of immizzeration and deprivation. The international definition of poverty on income per person of less than U.S.$1.25 per day. The share of the world’s population living on less than $1.25/day has dropped from 30% in 2000 to 10% in 2014. Growth has helped to drastically increase life expectancy. A century ago, life expectancy at birth worldwide was but 30 years. By 2014, life expectancy had reached 70 years, and in developed nations such as Sweden and Italy, 82 years. "The Headwinds Return" ,Economist, , September 13, 2014. Infant mortality has also fallen very sharply especially in emerging nations, from China to Peru. In 1990, an infant mortality rate (under 5 years) in Ethiopia was 200 deaths, Bangladesh 149, Cambodia 120, Peru 88 and China 50. In all these nations’ rates in infant mortality in 2002 were at least 60% below 1990.