Infrastructure is the backbone of economic expansion, but its impact hinges not on size and quantity but relevance and quality. President Donald Trump proposes up to $1 trillion over a decade on building roads, bridges, ports, schools and hospitals to make America’s infrastructure “second to none.” Studies indicate how infrastructure spending in advanced economies like the U.S. can boost incomes, but it depends on getting three things right.
First, the additional spending must fill gaps that are holding up the expansion of local economies, rather than just get money out the door. The cracks in infrastructure — especially in Maryland, New Jersey or New York — are glaring. Nationwide, two-thirds of major roads are in poor condition, and a quarter of bridges require major repair. Fixing these problems could create jobs, adding to 14.5 million existing jobs in fields ranging from construction to plant operation.
Note, however, that growth depends not only on physical infrastructure but also education systems, health services and environmental care. The outgoing administration’s stimulus package of $830 billion during 2009–2019 rightly included transport, energy, social sectors and the environment. But it did not focus sharply on growth impediments. Rather, the rationale has been that, during economic downswings, the government can offset the decrease in private spending with more public spending. This approach helped stave off a depression, but it didn’t target growth obstacles like raising worker productivity.
Vinod Thomas is a visiting professor at the Lee Kuan Yew School of Public Policy, National University of Singapore, and former director-general of independent evaluation at the World Bank and Asian Development Bank.
This article was first published on The Baltimore Sun on 13 February 2017.