Back To Building Blocks

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Terms of Agreement

15 min readDec 21, 2019

Building blocks, train sets, cars, and airplanes are staples of childhood play. These toys introduce children to concepts of infrastructure at a young age. Deepening human understanding of how people and goods get from one location to the next is fundamental to understanding the modern world. Nevertheless, in adulthood infrastructure and transportation are often taken for granted. Once people become acquainted with status quo they frequently neglect to push back against failures to improve and build upon the roads, bridges, trains, and airports that characterize much of modern day life.

This series has set out to explore how the United States, despite increased spending, has failed to invest in a competitive, sustainable future. The previous article explored the role policy makers play in both establishing a strategic vision and supporting research and innovation. This second article will explore how infrastructure investment contributes to national competitiveness and spurs economic development.

Research and Innovation
Sustainable Infrastructure Investment
Human Capital Development
Non-Discretionary Funding Investment and Innovation

SUSTAINABLE MODERN INFRASTRUCTURE INVESTMENT

Central to the growth and productivity of an economy are the networks that support the movement of goods and services. This includes not only the roads, airports, waterways, and rail networks that enable the physical movement of goods, but also the broadband, telecom, and satellite networks that transmit information around the globe. Infrastructure also encompasses the power grids, sewage networks, and public water systems that people and corporations rely on to efficiently produce goods and services.

Over the past decade, US infrastructure has come under increasing scrutiny as more stories regarding bridge collapses, waterway contaminations, and road congestion hit the news. According to the World Economic Forum’s latest Global Competitiveness Report, the United States now ranks 13th in terms of infrastructure connectivity, density, quality, and accessibility. This represents a steady decline since its 2nd place ranking in 2002.[i]

Given the importance of infrastructure to economic output, it is unsurprising that falling grades in infrastructure have come with quantifiable impacts to the economy. Research organizations, government institutions, and trade groups warn of worsening economic impacts if major infrastructure projects are not put in place.

THE ROLE OF INFRASTRUCTURE

Modern, sustainable infrastructure has the capacity to do far more for the economy than simply facilitate the movement of goods. Infrastructure investment and innovation will play a major role in determining how the United States performs on a spectrum of strategic imperatives.

TECHNOLOGICAL COMPETITIVENESS

Much like the freeway system spurred innovation and competition in the automobile industry, new advancements being made in transportation and telecommunications will require expanded infrastructure networks. Maintenance-focused investment strategies will not be enough to ensure the United States has the infrastructure necessary to remain technologically competitive in the global environment.

TRANSPORTATION — The mobility of both physical and human capital is a major factor determining economic growth and equal opportunity. As such, there is a significant business opportunity for companies that define the future of efficient transportation.

RAIL: Globally, the demand for high speed rail solutions has continued to rise as governments seek lower carbon emissions and more efficiently connect city centers and suburbs. To meet this demand, under its Made in China 2025 plan, the Chinese government has invested hundreds of billions of dollars in high speed electric railways that help combat overcrowding in its largest urban areas. These trains connect most of China’s major cities and have top speeds of 350 km/hour. The scale of investment has enabled the Chinese business community to work its way up the technological learning curve and innovate new and more efficient methods of laying tracks.

BUSSES: China’s 2025 initiative also plans to make China the number one country in electric vehicle technology. China has already given its major cities deadlines to make their public bussing system 100% electric. As a consequence, 30 Chinese cities are on track to meet this goal by 2020.[i] Shenzhen, China’s major tech hub, was the first city to achieve this goal and now runs an entirely electric public bussing system. Looking forward, this is an industry China intends to dominate in the years to come.

CARS AND ROADS: Electric vehicles pose a unique challenge to countries like the United States where the population is highly disbursed across a large geographic area. Driving distances tend to be longer. Distance intensifies the need for a wide-scale, disbursed network of time-efficient charging stations. Addressing this demand will require large-scale public and private sector investment as well as innovation in charging technologies.

In Sweden the government has taken a different approach. In April 2018 the country opened its first electrified road with much success. Given the results, the Swedish government has plans to electrify its roads nationally. Elways, the owner of the electrified road patent, has reduced the cost of road electrification such that it is 50 times less expensive to implement an electrified road than to build an urban tram line.[i]

Similar to electric car adoption, the widespread use of fully autonomous transportation will require enhancements to modern infrastructure. Smart technologies will need to work their way into roads, bridges, construction equipment, and related infrastructure. Henry Petroski, in The Road Taken, describes a future in which a bridge with a low clearance could communicate with oncoming autonomous trucks, bringing oversized vehicles to a stop before hitting the clearance. Smart traffic cones and speed limit signs could enable similar forms of communication.

In addition to communicating with autonomous vehicles, sensors have the ability to improve road safety by detecting and predicting infrastructure deterioration. In the future sensors may also have the ability to automate routine tasks such as spraying anti-icing agent on roads when ice is detected.

Beyond electrification and the implementation of smart technologies, many new innovations in infrastructure are waiting for widespread adoption. In recent years we have seen the introduction of patented technologies such as self-healing asphalt and concrete. These technologies have the ability to improve road safety and reduce maintenance costs.

UTILITIES: In the world of smart connected devices and machine learning, utility infrastructure also stands in need of a major upgrade. New technologies, if implemented, can help more efficiently detect safety concerns as well as provide real time diagnosis. Smart energy grids are better equipped to forecast demand, perform load balancing, and prevent down time. Technological upgrades to waterways, sewage systems, and electrical grids will be an important part of infrastructure investment going forward.

TELECOMMUNICATIONS — Modern day telecommunications networks have redefined how we work and engage with others in our community. Internet access and cell phone ownership are now prerequisites for taking advantage of educational and professional opportunities. Innovation in telecommunications has enabled global logistics networks, made the workforce more mobile by enabling remote work environments, and spurred innovations in smart connected technologies.

Continued innovation in, and market penetration of, fields such as artificial intelligence and Internet of Things (IoT) will require a network built to support the massive amount of data transmission required to be competitive in these industries. 5G promises to be the network on which we will be able to build the future of telecommunications and broadband services. Countries able to quickly roll out these networks stand to gain considerable strategic advantage relative to global peers.

The new network promises to both create jobs and boost to economic output within the communities ready to adopt the new technology. To realize economic benefits from this merging technology, the federal government and local municipalities must play a major role in the proliferation of a 5G network. The transition from large scale towers to numerous small-cell sites will require the streamlining of regulatory approval processes and the reworking of acquisition and application fee structures. Continued federal support for fiber deployment in rural areas will also be critical to laying the foundation for 5G.

RETOOLING THE WORKFORCE

Infrastructure investment’s capacity to create jobs and spur economic growth has generally garnered support among economists and politicians. So much so, economists have pushed for automatic stabilizer legislation that would stipulate the automatic release of money for preapproved infrastructure projects when specified indicators of economic distress are reached.

Infrastructure projects inclusive of the emerging technologies described earlier promise not only to create jobs, but to create jobs relevant to the digital age. Such projects will generate demand for workers trained in electric and smart technologies. The demand for smart sustainable building materials and process innovation will spur the emergence of supporting businesses, further driving demand for workers with skills relevant to globally competitive industries.

Assuming the United States is able to play a dominant role in the infrastructure-related technologies of the future, exports will increase thus generating the additional jobs needed to meet global demand. As jobs in exporting sectors on average pay better than jobs in non-exporting sectors, these jobs stand to increase the living standards of workers.

MOVING HUMAN CAPITAL

In the age of ecommerce and globalization the cost of transporting goods has declined precipitously. Compared to a few decades ago, the cost of moving physical goods from one location to the next has decreased by more than 90%. However, as the United States has continued to de-industrialize and become more of a service economy, a new transportation problem has emerged.

We now live in a society where our greatest available resource is human capital. In this age of transition, where the mobility of human capital is more important than ever, researchers have observed a severe drop off of labor mobility since the early 2000’s. At least partially driving this trend are factors such as rising housing costs in densely populated areas, an increasing presence of two income households, and an aging population requiring more of the working class to locate near older family members.[i]

Failures to expand the availability of efficient labor transportation networks are born most significantly by low income households and small businesses. In the absence of transportation networks, low income workers struggle to procure housing within a reasonable commuting distance to cities with the largest concentration of jobs. Given prohibitive costs of housing in city centers, small businesses in turn often struggle to compete to attract workers with the necessary skillsets.

COST IMPLICATIONS — The need for an expanded transportation network that reaches more affordable suburban areas has been driven by a number of exogenous factors including urbanization, rising costs of real estate, and decreasing subsidies for affordable housing. However, due to lack of supply and the frequent presence of local transportation monopolies, transportation costs remain exceedingly high for many workers in the United States.

In the United States, commuters face transportation costs that constitute a much larger proportion of their income relative to the rest of the modern world. The latest US data shows that US citizens spend, on average, 13.4% of their incomes on transportation. This figure makes it the second largest expense in a household’s annual budget. In the United States the poorest citizens pay the greatest proportion of their income on transportation expenses. Workers in the bottom 20% of incomes paid on average 29% of their annual incomes on commuting costs. In Europe, not only do commuters pay less on average, but due to widely implemented transit subsidy programs it is ensured that the lowest earning citizens pay the smallest proportion of income on commuting expenditures.

ACCESS IMPLICATIONS — For many places in the United States, car ownership is a prerequisite to being able to hold down a job, attend school, and provide for one’s basic needs. In part, higher transportation costs in the US stem from the country’s reliance on roads and a lack of attention to public transportation alternatives.

Car ownership not only carries the cost of owning a car, but also the cost of insurance, gas, public parking, and increased fees required of car owners in apartment complexes. Car accidents, speeding violations, and spikes in auto insurance can be catastrophic to people living paycheck to paycheck.

For those unwilling or unable to take on the costs and risks associated with car ownership, public transportation in the United States often carries with it substantial barriers. Geographic dispersion, environmental impact regulations, and a political system that increasingly plays to short term benefits all contribute to the lack of funds being directed towards expanding the US’s public transportation infrastructure.

CLIMATE CHANGE

Around the world, communities are being forced to consider how they will adapt in the face of increasingly intense storms, melting ice caps, rising sea levels, hotter temperatures, changing disease patterns, and shifts in agricultural patterns. This test of adaptation will involve decisions around how infrastructure must change to protect residents and the local economy. The degree to which communities are able to effectively adapt will influence their future safety, access to opportunity, and overall level equality.

In the Goldman Sacks article, Taking the Heat, researchers emphasize the need for:

“extensive urban planning, with investments in coastal protections, climate-resilient construction, more robust infrastructure, upgraded water and waste-management systems, energy resilience and stronger communications and transportation systems.”

Given climate concerns, sustainable infrastructure projects must have a second imperative beyond carbon reduction. Investment efforts must also be implemented in a way that helps residents and businesses brace for a changing climate.

Globally, cities are already taking steps to build infrastructure that will lessen environmental impact while minimizing the damage wrought by weather events. Copenhagen has adjusted its building codes to ensure infrastructure is able to sustain increasingly severe weather events. It has also spent money building dikes and bolstering sewer capacity and storm water management systems. China has begun implementing “sponge cities” which are built with reservoirs and sewer systems designed to collect and purify rain and wastewater.[i]

GOVERNMENT SPENDING

This series began as an evaluation of the most recent federal budget and the shortage of funds dedicated to investing in the future of the US economy. As has been discussed, investment in infrastructure is the foundation from which the country will continue to grow and innovate.

Research institutions have shown the current level of infrastructure spending is insufficient to maintain existing infrastructure. The American Society of Civil Engineers report, Failure to Act, estimates that by 2020 America’s infrastructure needs will be underfunded by $1.1 trillion. By 2040 that number is anticipated to escalate to $4.7 trillion.[i]

Still, this deficit is not simply a lack of appropriations. It is also being driven by an escalation in the cost of maintaining the infrastructure already in place. Rising costs are a product of forgone maintenance, aging infrastructure, and political decision making.

FOREGONE MAINTENANCE: In the same way an illness can escalate over time if ignored in its early stages, a failure to maintain America’s infrastructure has created problems far exceeding the cost of routine maintenance. For example, clean up costs, transport delays, and the 46 lives lost in the Silver Bridge collapse were far more costly than the routine maintenance procedures that could have been conducted to prevent it. Dam failures, power grid outages, and sewer line breakages are all examples of catastrophic events that can cost millions of dollars to repair once broken.

Even before the occurrence of catastrophic events, poor maintenance can result in materials corrosion that costs many multiples more to maintain. The annual direct cost of corrosion to infrastructure is estimated at $22.6 billion dollars in the United States.[ii]

AGING AND REPLACING: As infrastructure continues to age there is an ongoing evaluation of whether at any given point a structure should be repaired or replaced. An aversion to the latter can have serious consequences to budgets and overall infrastructure safety. The cost of maintaining a road or bridge built for a time when traffic, automobiles, and weather conditions were very different, can quickly become more expensive than building a new bridge to modern standards.

The decision to maintain rather than replace is often driven by factors that extend well beyond economics. For example, certain elements of infrastructure carry significant historical value and are maintained to preserve that value. Overly strict zoning and environmental impact laws can also serve as roadblocks in the effort to replace decaying infrastructure. The decision to not replace can also be hearted in how funds are raised for infrastructure maintenance versus entirely new projects.

POLITICAL DECISION MAKING: Election cycles, inappropriate contractor relationships, inadequate regulations, and acquiescence to lobbying groups are all examples of how political decision-making can lead to higher costs and forgone projects.

The need for politicians to garner the support of constituents for reelection cycles married with the methods in which new projects are funded can serve as a deterrent for new infrastructure projects. Unlike maintenance projects, which are largely funded through existing taxes, new infrastructure projects generally require the implementation of new taxes or the issuance of bonds. These fund-raising efforts require significant buy-in from the community.

Furthermore, many large-scale projects will extend beyond the next election cycle distorting incentives in the decision-making process. Given the upfront costs and inconveniences endemic of new transportation projects, there is ample opportunity for the project to become unpopular thus risking the public perception of a candidate running for reelection.

An earlier article on defense spending spoke to the problematic relationships governing officials and military contractors. Similarly inappropriate relationships frequently emerge between construction contractors and the government officials who hire them. Failure to hold contractors accountable to deadlines and quality standards often results in misaligned incentives. A preference for recurring work or the increased profits made possible by less expensive building materials are examples of such misalignments. The cost of such misalignments is ultimately born by the taxpayer.

Standard setting bodies also frequently fail to update safety and quality standards as the transportation landscape continues to evolve. In today’s world, cars are heavier, weather conditions more volatile, and traffic more congested than in the era when much of America’s infrastructure was constructed. Standards around building materials and vehicles allowed to use certain roads generally lag far behind these developments. The damage wrought by such decisions increases maintenance costs in the long term.

Finally, effective infrastructure spending can be thwarted when lobbyists, not engineers, are driving major regulations and standards. Trucking companies are not interested in regulations that limit the weight of vehicles allowed to travel on roads or bridges. Construction companies are not interested in the retraining or increased costs new building techniques or materials require. Wealthier neighborhoods often oppose public transit projects that would increase foot traffic in their neighborhoods. Toll road operators are not interested in competing with new public alternatives. And the automobile manufacturing industry is not interested in widespread public transit alternatives.

Most major players in the automotive industry retain lobbyists, hoping to influence infrastructure decisions. For infrastructure to achieve maximum impact, cost benefit analysis must begin to take precedence in the decision making process.

NATIONAL SECURITY

Transportation, oil and gas, water supply, banking and finance, electrical power, and telecommunications infrastructure are critical to the safety of the United States. The state of that infrastructure determines the country’s ability to respond to both natural disasters and human initiated attacks.

PHYSICAL INFRASTRUCTURE — Much of today’s infrastructure was not built to withstand the weather events and types of attacks now possible in the 21st century. Bolstering the resiliency of this infrastructure will be vital to ensuring the safety of US citizens. Beyond increased resiliency, infrastructure’s detective capabilities must be improved. For example, water management systems must be outfitted to detect attacks as soon as they occur.

As currently designed, much of today’s infrastructure is vulnerable to cascading failures in the event of an emergency. According to FERC, even the loss of a small number of critical generators in the United States could result in a widespread blackout.[i] The 2019 Worldwide Threat Assessment indicated that China has the ability even now to disrupt natural gas pipelines for days to weeks.[ii]

DIGITAL INFRASTRUCTURE — The increasing digital interconnectedness of critical infrastructure networks makes them vulnerable in new ways. New forms of cyber warfare leave many critical systems vulnerable to attack. Even in its 1997 report, when the digital revolution of infrastructure was just beginning, the Commission on Critical Infrastructure stated that, “Computerized interaction within and among infrastructures has become so complex that it may be possible to do harm in ways we cannot yet conceive.”

The proliferation of sensors and smart technologies embedded in modern infrastructure produce data that is vulnerable to attack. National security is becoming ever more reliant on this data and the artificial intelligence programs that process data into actionable insights. Cybertheft and data poisoning represent major security risks demanding that digital infrastructure be outfitted with improved security systems.

LOOKING FORWARD

As has been discussed, GDP can only grow through either an increase in the population or improvement in the productivity of each worker. Infrastructure innovation is critical to increasing the productivity of US workers and can not be ignored as a strategy to ensure growth and opportunity in the years to come.