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US Infrastructure Is Underrated, but It Could Still Use an Upgrade
McKinsey Global Institute is out with a big report on infrastructure. I think what you can conclude about the state of things in the US is that while our infrastructure could use a big upgrade — especially given our national wealth — it’s not a crisis. This chart pretty well sums things up:
So while US infrastructure is pretty good, it underperforms a bit versus what you might expect given our per capita GDP. Norway is in a similar position, according to McKinsey: “The country has very good infrastructure, but its road network in particular does not attain the quality rating that would be expected for a country at such a high income level. Switzerland, on the other hand, “has the highest-quality infrastructure in the world; it outperforms even among other very high-income peer economies.”
The report also look how some disruptive technology will affect infrastructure needs:
Published in EconomicsAutonomous vehicles. Cars available on the market today are already taking us to the edge of autonomous driving. Broad adoption of fully autonomous vehicles over the next decades could shift traffic from public transit systems back to cars, increase road traffic, and change patterns of traffic flow. It could eventually even reshape city design, urban layout, and real estate investment if proximity to public transit becomes less valuable or travel time becomes less costly to commuters who can work or watch videos during the trip. Self-driving vehicles could also substantially increase road capacity as vehicle-tovehicle communication allows tighter spacing between cars and as street crossings gain more efficient protocols than today’s traffic lights.
Drone deliveries. Companies like Deutsche Post and Amazon are already experimenting with this approach, which could take some delivery vehicles off the road while requiring new approaches to air traffic control.
Additive manufacturing technologies and advanced automation. 3D printing and automated production could shorten manufacturing supply chains, reducing demand for container shipping as more goods are produced near the point of consumption. We already see a trend of nearshoring.
Advanced materials and renewable or unconventional energy. The patterns and volumes of bulk freight traffic for commodities like coal and oil could be disrupted as more of the world’s energy needs are met with renewable sources. Volatility in electricity production and new sources of demand from electric vehicles and grid-scale storage facilities will require an overhaul of grid infrastructure. And, of course, shale gas and light tight oil exploration requires new access and transport infrastructure as well as changes in the electricity production mix.
Digitization. E-commerce can change demand across logistics networks. Smart cities can better direct traffic flows. Digital technologies can track and price the usage of roads and public transit systems in a more accurate and convenient way; this could influence traffic volumes and modes as well as providing a more accurate reading of the demand for new infrastructure. At the same time, demand for mobile and fixed broadband infrastructure and bandwidth will undoubtedly continue to increase.
There will also be disruptions in the way infrastructure is built, and these could have significant implications for costs and investment needs. Modular and industrial construction techniques could dramatically cut project time; China’s Broad Group, for example, erected a 30-story tower in just 15 days. Applying more advanced digital tools to construction planning and monitoring and even deploying drones for site surveying are just a few of the possibilities.
Reform Conservatives: We are all Mike Huckabee now.
Two thoughts on this:
I don’t know if I quite go along with #2. I don’t think the graph can tell us anything about our efficiency, however I think it does show that whenever liberals talk about “investing in infrastructure” its just talk and a way for them to push for more spending as if it ever goes toward infrastructure.
Infrastructure spending is rather simple. If a project has a high return it should be built and built and paid for by people as close to the project as possible–its beneficiaries. However, nothing is simple for liberals because everything is corruptible. So liberals want all the infrastructure anyone can think of and they want it paid by the Federal government first, State government second and local government only if they must and by long term debt. The reason is simple. Remote government is less accountble; if local tax payers don’t feel the increased tax bite they don’t care. Infrastructure construction can be handed out to supporters, built by supporters, take customers to supporters. Moreover, liberals believe that just digging a hole and filling it in is good for a weak economy so any road must be better than no road. Even Keynesians had rejected infrastructure spending as counter cyclical over 50 years ago because by the time a project was planned, budgeted for and construction begun, recessions were over. I guess liberal economists came back to it because in their hands recessions don’t end. It seems Keynesian Macro economists still dominate academia so politicians can always find lots of expert support for their pork no matter how nonessential or nonsensical. If the spending is counter cycliclal then politicians can rush it out the door without scrutiny. They are a sorry lot.
I’ve also seen stats (though I don’t remember where I saw the article) comparing the rate at which different countries are building/repairing/improving their infrastructure (roads/bridges/etc). The United States was pretty close to the top of that list.
While US infrastructure may be out-of-date, (arguably) it would be pretty much impossible to speed up the current rate of improvement.
It is obviously a very crude metric and I admittedly don’t have the details of the underlying calculation but if we are generating higher GDP per unit of infrastructure (basically below the trend line) that leads me to believe that we are more efficient in use of infrastructure resources…at least in a relative sense. Infrastructure is a “cost” to the economy, it is not the goal. A bridge is worthless if it doesn’t enhance commerce.
Lots of our infrastructure spending is worthless, which drives our efficiency even higher.
Example – Milwaukee is currently spending in excess of 100 million dollars building a streetcar to drive in a 2-3 mile circle around the downtown area. This undoubtedly falls under the heading of “infrastructure spending” (and a good portion of the funding is Federal money), but is utterly wasted on a system where existign wheeled buses could serve the (alleged) need just as well at a fraction of the cost or disruption to other infrastructure (relocating utilities underneath where the tracks are being laid).
I am not following this at all. How can worthless infrastructure spending drive efficiency higher per the analysis above? The chart is a metric of gdp per some relative unit of infrastructure. Your example would cause the efficiency metric to decrease and for the US dot on the graph to move vertically.
Yeah, that didn’t make much sense.
I think what I was trying to say was that we are relatively efficient in our use of infrastructure:GDP ratio, even though so much of what we spend is wasted/useless.
:Facepalm: When did they start that? At least Walker killed the money pit of the “high speed” rail between Milwaukee and Madison.