Beyond Piketty: Putting today’s capital to work to benefit all.
Ret. Gen. Wesley K. Clark and Thierry Déau
Thomas Piketty brilliantly illustrates in "Capital in the Twenty-First Century" how our contemporary situation closely mirrors Europe before World War I. Excess savings, expressed as a multiple of GDP, sitting on the sidelines of the global economy awaiting stable and long term opportunities. With limited investment opportunities offering what investors seek as return on capital, investors pursue opportunities that potentially offer higher returns. And so we again face the risk of creating financial bubbles while simultaneously excluding capital-poor populations from the benefits of growth.
Nowhere is this more evident than in the gap between pools of capital and the need for essential infrastructure investments. The need for infrastructure development and modernization has never been more obvious: it is necessary to sustain economic growth and also to drive the transition to low carbon economies in the developed world; and to reduce poverty, encourage growth and improve resilience in the developing world. Despite the clear need, projects with sound economic and social justifications are still having difficulty in attracting financing.
The fundamental challenge we face today is reallocating these savings to productive investments, in particular in the context of ageing economies, while preserving financial stability. In other words, how do we put capital at work to the benefit of all? To meet this critical challenge, governments need to be able to engage with an infrastructure investment industry voice. The primary roadblock to these projects is not a lack of available funding, but rather the ability of governments, project developers and markets to prepare and structure projects in a way that effectively incentivizes investors.
http://www.cnbc.com/id/102087127#.