How about a dose of innovation to ease infrastructure strains?

a-dose-of-innovation

Here is a brief excerpt from an article written by Nicklas Garemo, Jan Mischke, and Jonathan Woetzel for the McKinsey Quarterly, published by McKinsey & Company. To read the complete article, check out other resources, learn more about the firm, obtain subscription information, and register to receive email alerts, please click here.

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A huge spending tab looms. The financial pressures will prompt nations to think creatively about their needs.

As the global economy undergoes a series of transitions and strains in the years ahead, innovation will emerge in some unexpected places. Consider the case of infrastructure. Our analysis of historical and projected spending allows us to look directly at looming stresses in the form of dual financial pressures: the total spending needed to support the massive scale of maintenance, renewal, and new investment, as well as the degree of change this spending represents relative to GDP.

The United States, which has long neglected its infrastructure and faces a massive absolute and relative tab, is one place where pressures for innovation are building. Latin America and India, which have underinvested in the type of cutting-edge infrastructure required to support projected growth, will also need to think creatively. Both have to step up financing by more than two percentage points relative to GDP and to increase their total spending sharply (by factors of four and six, respectively). These challenged countries will need to dream up new ways to curb spending, boost financing, and counteract bottlenecks in planning and execution.

Both the massive scale of infrastructure investment needed and the degree of change in required spending relative to GDP diverge significantly across countries.

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Here is a direct link to the complete article.

Nicklas Garemo is a director in McKinsey’s Abu Dhabi office; Jan Mischke is a senior fellow of the McKinsey Global Institute, where Jonathan Woetzel is a director.

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