This year’s Group of Seven Leaders’ Summit in Germany was the most critical since the group’s inception in 1973 in light of Russia’s continued invasion of Ukraine, an underperforming global economy and many other intertwined global challenges. Still, the outcome of the summit turned out to be second-rate.
The most notable, but costly and potentially unnecessary, product of the G-7 gathering is a new $600 billion infrastructure funding program, the Global Infrastructure and Investment Partnership.
President Joe Biden underscored his commitment to the global infrastructure program by offering America to pay a third of the $600 billion.
The program aims to provide public and private financing for infrastructure projects in developing countries over the next five years, but risks being as infrastructure-agnostic as Biden’s. related domestic policyof which less than 10% actually went to traditional infrastructure projects.
While indeed in the mutual interest of the United States, other G-7 countries, and the many developing countries with which they would work, the partnership for global infrastructure and investment is deeply flawed.
Rather than targeting policy areas strongly correlated to improved economic freedom and prosperity, the Global Infrastructure Initiative intends to fund projects in areas such as gender equality, ‘equity’ and climate change, among other left-wing fronts.
The program was touted in particular as the G-7’s plan to provide an alternative to communist China’s 9-year-old Belt and Road Initiative. However, the potential of the Global Infrastructure and Investment Partnership to pursue unsuccessful investments with its leftist agenda overshadows its potential to create a powerful geopolitical advantage for the West and a more developed world as a whole.
The G-7’s response to China The multi-trillion Belt and Road Initiative could prove ineffective if competing priorities are not properly ordered. Prioritizing areas such as gender equity and climate indicates a fundamental misunderstanding of both the predatory intent of our competitors like Russia and China and how economic development is achieved.
The strategic goals of Russia and China are almost identical. They both want weak and divided western nations. Western investments aimed at countering China’s infrastructure development and technological advances in developing countries would respond to China’s attempts to supplant the United States and the current rules-based order in the world. But using US foreign aid to instead export US domestic policy priorities such as gender and environmental issues is completely disconnected from what needs to be done to address the Chinese threat.
Biden has tried to assure world leaders at the G-7 Leaders’ Summit that the global infrastructure agenda “will deliver benefits for everyone”. Indeed, the investment strategy must be results-oriented. But using American economic power for the Biden administration’s political agenda contradicts Biden’s assurance that foreign investment would not serve charity. There is no evidence that social justice initiatives generate a return on investment.
Where the US$200 billion comes from and how it will be spent should be based on how it will contribute to economic freedom in the nations it supports. This means working with host governments to make their business environments more welcoming to foreign investment by adopting pro-growth policies that focus on regulatory efficiency, open markets and other key aspects of economic freedom.
The proposed initiative would best ensure that the United States and its G-7 partners pragmatically strengthen concrete trade, energy and geopolitical relationships with critical parts of the world (such as the Three Seas region of Europe central and eastern), rather than focusing on things like equity, gender and climate change policies.
Moreover, the private sector is a proven catalyst for real and meaningful economic transformation and should therefore be considered more than bureaucratic central planning apparatuses.
Fundamentally, a nation’s ability to grow and prosper depends on the quality of its institutions and economic system. Blindness to this reality will result in the federal government losing $200 billion of taxpayer dollars in investments, as might be expected. Americans already cannot afford the bloated federal government we have. Surely the American people cannot afford any more careless spending.
Practical global economic engagement is in America’s interest. Greater mobilization of private sector to this end makes sense. Unequal, thoughtless and wasteful policies do not.
This piece originally appeared in The daily signal