By Paolo von Schirach
October 19, 2012
WASHINGTON – Historian Walter Russell Mead argues in a WSJ op-ed piece that in America we are anchored to yesterday’s thinking when it comes to investing in infrastructure. There is an old fashioned, unimaginative and therefore mistaken approach about doing more of the same, he writes.
Moving information, not goods
In the past we used to think in terms of more roads, bridges and rail systems. And now we want to build more highways and possibly high speed rail systems, even when the estimated costs do not justify them. This is a strategic error, he maintains, a huge misallocation of resources because the future is about moving information and data and not goods or people. Telecommuting will replace commuting and ever more sophisticated video-conferencing will replace business travel.
Only at the end of his essay Mead concedes that America may need to spend a little on maintaining our existing infrastructure: “Yes, our existing roads, bridges and highways should be maintained, and in some cases enhanced. Even so, more physical infrastructure isn’t our main need at this point“.
It sounds sensible. Yes, maintain what we have; but readjust national priorities so that we understand that moving data will be more important than moving goods or people.
$ 2 trillion just to fix the infrastructure we have
All good, except for one detail. Do you know what the estimated bill for maintaing our “existing infrastructure” is? Well, because of decades of under investment, the best estimates vary between $ 2.2 trillion and $ 2 trillion. (See a 2011 study produced by Urban Land Institute, and a report by the American Society of Civil Engineers, among others). Yes, that is 2 “trillion”, not billion. In a country with a total GDP of $ 16 trillion, $ 2 trillion just for fixing what we have, without adding anything new, is a staggering figure. This is more than half the amount of the entire annual federal budget, ($ 3.67 trillion projected for FY 2013).
More physical infrastructure may not be the wave of the future, but unless we focus on fixing the decrepit infrastructure we have, it is certain that America will be severely penalized by the global economy.
China thrives because of modern infrastructure
China thrives as a manufacturing hub because it has gigantic factories and cheap labor. But also because it has first class infrastructure that allows manufactures to have one of the best supply chains in the world. They can guarantee deliveries in record time. And this is because the Chinese made massive investments in the physical infrastructure a modern manufacturing economy needs in order to be competitive.
India did not invest in infrastructure. As a result, India’s manufactures are severely penalized by their inability to move parts and finished goods in a fast, cost effective and reliable way. Same story for Africa. You cannot have a modern economy without state of the art infrastructure.
America used to have great infrastructure. However, decades of neglect and chronic under investment created a problem now close to a crisis that hurts our entire economy.
We still need to move goods and people
It is all well and good to say that data may become more relevant than goods in the future. But millions will still drive to work, to grocery stores and department stores. Trains and trucks will deliver needed iron ore, cement, copper wire, grain, ice cream, video games and refrigerators. Even if we assume that all shopping will move entirely on line, Amazon and all the others will still rely on FedEx and UPS to deliver the goods people ordered on line. And these logistics companies cannot exist without modern airports and highways. And if you want to visit Los Angeles or your sister in Ohio, you have to get there somehow.
America needs state of the art physical infrastructure
Doing all these things we take for granted reliably and effectively is not a given. We do need state of the art, modern infrastructure. To achieve this rather modest goal, (at least by the standards of all advanced economies), as a Nation we must decide to pony up and start investing now the $ 2 trillion we need to spend just to keep what we have in working order. We are talking basics here. This spending has nothing to do with fancy high speed rail projects in California or elsewhere. Still, if we cannot even agree on doing the basics, we are well on our way to becoming a Third World country.