Urban Infrastructure
In both mature and emerging countries, global urban infrastructure is a mess.
As Vice President Biden once said:
“If I took them blindfolded and took them to LaGuardia airport in New York, he would like ‘I must be in some third world country.’ I’m not joking.”
According to McKinsey, the world needs to spend $3.3 trillion annually on infrastructure just to support expected growth. Another report, from PwC, estimates that global infrastructure spending will be ~$78 trillion between between 2014 and 2025. Asia will account for most of global infrastructure spending, representing more than 60%, followed by Africa.
The World Economic Forum estimates that every dollar spent on capital projects returns between 5–25%. Capital spending has a multiplier effect that benefits commuters, shipping and logistics, and the efficient movement of people and goods.
When infrastructure is in disrepair, urban economic activity suffers. Look at New York City — the roads are impassable, the subway is slow and overcrowded, the bridges are crumbling, the airports are embarrassing, and the number of users increase by the day. For a local or a visitor, this impacts overall quality of life and slows down spending.
For many years, top American scholars have argued for an American Infrastructure Bank. This bank would develop public-private partnerships, provide low-interest financing, and establish a roadmap for large, high-value infrastructure projects. By providing the “first money in,” the United States government would attract capital from all over the world.
As a rising power with large urbanization challenges, China recently developed its own infrastructure bank. Launched earlier this year, the Asian Infrastructure Investment Bank, and its many partners, sent a clear message: We are open for business.
The bank, known as the AIIB, is starting out with $100 billion in capital and was conceived as China’s answer to the World Bank and Asian Development Bank, institutions dominated by Washington and Tokyo, respectively. The AIIB has delivered a propaganda coup for China by attracting 57 founding members, far more than expected, including such U.S. allies as the U.K., Germany, France and Australia.
With historically low interest rates, America should make a significant investment on infrastructure. This investment would spur economic growth, job creation, and urban innovation. It would bring together the business and labor communities. It would send a strong signal to the world.
