Infrastructure and Economic Development

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Each year, the World Economic Forum publishes a Global Competitiveness Report that evaluates the economic competitiveness of countries around the world. To determine the competitiveness — defined as the set of institutions, policies and factors that determine the level of productivity of a country — researchers evaluated a number of criteria linked to economic performance. These include legal and administrative institutions, health, education, financial markets, workforce efficiency and innovation. The Forum bases its evaluations on 12 key “pillars” — one of which is the focus of this publication: infrastructure.

According to the report: “Extensive and efficient infrastructure is critical for ensuring the effective functioning of the economy, as it is an important factor determining the location of economic activity and the kinds of activities or sectors that can develop in a particular instance. Well-developed infrastructure reduces the effect of distance between regions, integrating the national market and connecting it at low cost to markets in other countries and regions.”
Unfortunately, the United States is lagging behind. The United States ranked 5th in overall competitive according to the 2011-2012 study, down one spot from 2010-2011 and down from its No. 2 overall ranking in 2009-2010. In the overall quality of infrastructure evaluation, the United States ranked 24th (of 142 countries evaluated).

Canada was ranked 12th in overall competitiveness (down from 10th in 2010-2011, and ninth in 2009-2010) and 15th in overall quality of infrastructure. Seven of the top 10 spots were Western European countries (Switzerland, 1; Sweden, 3; Finland, 4; Germany, 6; Netherlands, 7; Denmark, 8; United Kingdom, 10), with Singapore (second) and Japan (ninth) also cracking the top 10.

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While there are many factors that go into the rating, it is clear that we in the United States have some catching up to do with regard to our infrastructure. ASCE’s Report Card for America’s Infrastructure cites a five-year infrastructure investment funding need of $2.1 trillion, compared to estimated actual spending of $900 billion – a shortfall of nearly $1.2 trillion.

With the overall economy in a general malaise with no clear sign of when it will recover, governmental officials are understandably reluctant to initiate large capital improvements projects. Yet the question remains: Can we afford NOT to invest in infrastructure? According to ASCE, failing to invest in roads and bridges alone could lead to $3.1 trillion in lost GDP growth by 2020.

But some cities are finding ways to get projects built, either through sales tax increases or through some combination of public-private partnership. In Los Angeles, city leaders successfully pushed for Measure R, a sales tax that will be used to fund accelerated mass transit projects. Not only does the investment help lay the foundation for future economic sustainability, it is also expected to create 160,000 jobs.

In Florida, a public-private partnership (PPP) is being used to design, build, finance, operate and maintain the Port of Miami Tunnel, a project that will increase the efficiency of the port as well as alleviate traffic congestion in the downtown core. In Virginia, another partnership that includes private equity is being used to build a new Midtown Tunnel in the Hampton Roads area. The private investment would be repaid by instituting tolls in the new and existing tunnels.

These are just a few examples of the innovative strategies that need to be implemented to remain economically competitive without relying on existing funding streams or federal investment. There is an old saying, “Where there is a will, there is a way.” There is a need. Is there a will?

Regards,

Jim Rush
Editor

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