Sunday, 15 January 2017

The Great Infrastructure Myth

In East Devon, we are promised 'infrastructure'
Futures Forum: Community Infrastructure Levy projects for housing and economic growth to be considered at Town Council: Monday 9th January
Futures Forum: Brexit: and the future of infrastructure projects in the South-West

- although it is not clear who will pay for all these goodies:
Futures Forum: Investing in roads in East Devon: who pays ... and who benefits?
Futures Forum: What transport infrastructure do we want for East Devon?

In the country at large, more 'infrastructure' is promised:
Futures Forum: Brexit: and infrastructure projects 

- although at a price:
Futures Forum: Energy infrastructure @ Hinkely C >>> losing control and paying tithes to Direct Foreign Investors

And in the United States, promises are always being made:
Futures Forum: We are all truck-drivers now ... The free movement of goods, increased carbon emissions and the destruction of manufacturing industry
Futures Forum: For community and against sprawl ..... 'Strong Towns' and 'the end of the suburbs'
Futures Forum: Techno-promises unfulfilled >>> Where did the future go?

- and are being made afresh:
Futures Forum: Brexit: and Trump and infrastructure projects

The notion of 'spending on infrastructure' is fraught with politics:
Futures Forum: "You can't take the politics out of infrastructure planning"

This piece is from just after the elections in the States:

The Great Infrastructure Myth

Marc Scribner

President-elect Donald Trump has promised to boost infrastructure investment by $550 billion-$1 trillion because there is supposedly an “infrastructure crisis.” Never mind that the number of structurally deficient bridges has been steadily declining for 25 years while pavement roughness has been improving. If there is a transportation “infrastructure crisis,” it exists due to a failure to maintain mass transit facilities and municipal streets, neither of which can be fixed by increasing federal capital spending (as a general rule, maintenance projects and non-National Highway System road segments are ineligible for these funds).

A sketch of this plan by Trump advisors Wilbur Ross and Peter Navarro can be found here. The Trump transition website touts the $550 billion figure. House Minority Leader Nancy Pelosi has pledged to “work together [with Trump] to quickly pass a robust infrastructure jobs bill.”

I won’t critique the financing specifics here, many of which are dubious. Instead, I’ll focus on the assumption underlying the assumptions: that more public infrastructure investment is a surefire way to boost the economy. Contrary to the dominant political narrative from members of both parties, which is parroted uncritically by most of the press, there is little evidence that these public works projects promote long-run economic growth.

Infrastructure Isn't Magic

As Bent Flyvbjerg, Nils Bruzelius, and Werner Rothengatter document in their indispensable Megaprojects and Risk, the large development effects claimed by project boosters rarely materialize (or are so small and diffuse that they are undetectable to researchers), operational viability is generally overstated, cost overruns of 50 to 100 percent are the norm, and demand forecasts are frequently off by 20 to 70 percent. These problems exist worldwide at all levels of development.

Any infrastructure plan that isn't ultimately redistributive isn't going to serve its social purpose.As economist Andrew M. Warner noted in a 2014 International Monetary Fund paper evaluating public infrastructure investment in developing countries, “Overall, it is difficult to find a clear-cut example that fits the oft-repeated narrative of a public investment boom followed by acceleration in GDP growth. If anything, the cases of clear-cut booms illustrate the opposite – major drives in the past have been followed by slumps rather than booms.”

Yet, despite the lack of evidence supporting the claim that public infrastructure investment is an important economic catalyst, there is a near-consensus among the professional commentariat that infrastructure is economic magic. In attempting (and largely failing) to critique Trump’s plan, progressive writer Jeff Spross regurgitates the Great Infrastructure Myth: “Any infrastructure plan that isn’t ultimately redistributive — that finances itself entirely from the people that use the infrastructure — isn’t going to serve its social purpose. It’s also unlikely to serve the broader purpose of reviving the national economy.”

A major problem with public infrastructure projects isn’t that the benefits aren’t redistributed to a level Spross would prefer; rather, it’s that the costs of the projects are usually completely divorced from the primary purported beneficiaries—users. (In reality, the primary beneficiaries of infrastructure projects often turn out to be the construction contractors and the politicians they support.) As noted by Flyvbjerg et al., measuring the economic benefits of infrastructure investment is already exceedingly difficult due to the diffuse nature of the benefits distribution. Spross is essentially arguing that project proponents should work harder to make these benefits even less detectable — and more illusory.

None of this is particularly controversial within the development, transportation, and urban economics research communities. The infrastructure-as-productivity-booster narrative has been around for many years — see this undated 1994 paper by Douglas Holtz-Eakin and Amy Ellen Schwartz if you want to see how stale this “debate” is. Microeconomists who focus on infrastructure generally reject this narrative. The macroeconomists such as Larry Summers who promote the Great Infrastructure Myth are being fooled by their unreliable macro models.

Instead of promoting expensive infrastructure investment plans that are unlikely to produce their claimed benefits, Congress and President Trump should work to reduce the large misallocation of infrastructure resources and improve the efficiency of existing infrastructure networks. This would involve prioritizing maintenance over expansions, restoring the users-pay/users-benefit principle, removing regulatory barriers to construction, and adopting road pricing. Unfortunately, the Great Infrastructure Myth is unlikely to die as long as politicians place ribbon-cutting ceremonies before the truth.

This first appeared at Competitive Enterprise Institute.

The Great Infrastructure Myth | Foundation for Economic Education
Will Trump Turn his Bully Pulpit Rhetoric Into Policy? | Foundation for Economic Education
Why One-Size-Fits-All Infrastructure Spending Doesn't Work | Foundation for Economic Education

And it's not just on the right that we have these objections:
Center for a Stateless Society » Infrastructure is Not “Progressive”

It's largely about corportatism and cronyism:
Futures Forum: Subsidies and social engineering: or why we build roads.
Center for a Stateless Society » But Who Will Build the Roads? (Maritime Edition)
Futures Forum: Who owns the water?
Center for a Stateless Society » Capitalism’s Running Out Of Water — And Everything Else

A very interesting couple of pieces featured on this blog question our relationships with the 'megamachine': 

Tarmac, and other such substances used for paving,are, as the Mundi Club point out,little more than coagulated oil slicks. These substances are products of levels of the catalytic cracker process in the same way that oil is. They underwrite oil production — make it an economically viable enterprise when otherwise it would not be.
For while “The oil industry is mainly interested in gasoline production and profits ... refineries must run at high utilisation of capacity to be efficient and profitable. Refineries must produce great quantities of asphalt and various chemicals which must go somewhere ... thus asphalt and herbicides are spread about the land making it possible for refineries to function...near full throttle.”

Stopping The Industrial Hydra: Revolution Against The Megamachine | The Anarchist Library
David Watson: “Against the Megamachine” (1981-1985/1997) | radicalarchives
Whose Streets? Anarchism, Technology and the Petromodern State | Uri Gordon and Michael Truscello - Academia.edu
Futures Forum: Alternatives to asphalt for building roads
Futures Forum: The triumph of the commons

Because, without huge investments from the state, projects such as Hinkely would not be 'viable', as this recent piece points out:
An alternative to Hinkley - Without the state

It gets tricky when making promises over 'sustainable development' and 'green infrastructure jobs'.

From 2008:
A Green New Deal | new economics foundation 
A 'Green New Deal' can save the world's economy, says UN - Green Living - Environment - The Independent 

From 2013:
The green new deal is the antidote that UK desperately needs | Andrew Simms | Environment | theguardian.com 
The Green New Deal 
Green New Deal: Home 
OP-ED: A Global Green New Deal for Sustainable Development - Inter Press Service

It's not about massive projects which promise politicians ribbon-cutting ceremonies:

The perennial calls for a new moon shot or Manhattan Project assume that large-scale centralized projects, by either government or Ma Bell-style corporate monopolies, are necessary for technological leaps. 
But as Ralph Nader pointed out, even in the twentieth century dominated by such goliaths, “[t]he firms which introduced stainless steel razor blades (Wilkinson), transistor radios (Sony), photocopying machines (Xerox), and the ‘instant’ photograph (Polaroid) were all small and little known when they made their momentous breakthroughs.”

Center for a Stateless Society » Who Stole Yesterday’s Tomorrow?
Who Stole Yesterday’s Tomorrow? | Politics

See also:
Futures Forum: Ralph Nader: UNSTOPPABLE
Futures Forum: "Where are the flying cars?" or, "What happened to derail so many credible ideas and prospects?"
Futures Forum: Of Back to the Future and the promise of flying cars

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