I recently wrote about the degraded infrastructure in Europe as a result of years of unnecessary fiscal austerity – see Massive Eurozone infrastructure deficit requires urgent redress. Not only is the public amenity degraded but when transport cannot access key international trading routes (for example, bridges across the Rhine), then industrial prosperity and exports are undermined. The Eurozone nations are sinking into a mire of both human and physical infrastructure decay and the negative consequences will reverberate for decades to come. This is a global phenomenon. Recently, the American Society of Civil Engineers (ASCE) released its – 2017 Infrastructure Report Card – for the US and the results are dire. This Report comes out every four years and provides a good guide to the “condition and performance of American infrastructure”. It gives grades (like “a school report card”) “based on the physcial condition and needed investments for improvements”. Overall, the US, the richest country in the World, was awarded a D+, which means “Poor at Risk” or mostly below standard and “approaching the end of their service life”. You don’t really have to be an engineer to appreciate this. Any drive or walk through a US city these days will allow you to see this decay. It is totally unnecessary, totally preventable and very damaging to the well-being of the people and firms that rely on the public infrastructure for their own activities. Myopic and ridiculous.
I have written about my experiences in Manchester (UK) when I was studying for my PhD during the Thatcher years.
Fiscal austerity starved essential public works maintenance with catastrophic results, which ended up requiring much higher public outlays to remedy the situation that would have been spent on on-going maintenance.
That is why the myopic quest not to spend a few dollars today is ridiculous.
Please read my blog – The myopia of fiscal austerity – for more discussion on this point.
More recently, the Cameron government in Britain demonstrated it hadn’t learned any lessons from that period – please read my blog – British floods demonstrate the myopia of fiscal austerity – for more discussion on that point.
Overall, austerity-obsessed politicians typically cut public infrastructure spending first because it is less obvious to people.
Cutting a pension cheque, or some school support has fairly immediate impacts and, as such, invokes negative political consequences almost from the outset.
But cutting maintenance spending on bridges, or failing to continue developing public transport systems is more easy to hide. The decay occurs by stealth as the infrastructure ages, or the population steadily grows to swamp the existing infrastructure.
Eventually, we realise that our quality of life has been eroded but by then the political cycle has moved on and, in many cases, the culprits have retired on fat public sector retirement pensions and are swanning around on corporate boards channeling information and networks they built up during their political careers into the pursuit of their private prosperity.
The lax rules which govern the shift of retiring politicians from Ministerial positions to private sector lobbying and
Further, when governments impose fiscal austerity during recessed times, when the non-government sector is reluctant to spend, the typical asymmetry associated with private investment expenditure is exacerbated.
The UK, for example, is suffering very low productivity growth at present. The reason is a lack of investment. But the reason for that is, in no small part, the extended austerity after 2010 and then the slow growth that followed when the British government realised the grand austerity plan was not even achieving its goals of reducing the fiscal balance.
We often focus on the short-term negative impacts of fiscal austerity, but in this case, it also has serious long-term impacts on both the rate of business investment and the potential growth rate (which falls as capital formation stalls).
The longer it takes for business investment to recover, the worse will be the long-term impact on potential GDP growth. In turn, this means that the inflation biases are increased because full capacity is reached sooner in a recovery – often before all the idle labour is absorbed.
So, while George Osborne is long gone, the negative impacts of his policy folly will reverberate for a long time to come. His failings will continue on for many years and the flat productivity growth is one manifestation of that failing.
It is the same the world over.
The US situation is no different. The various levels of governments have imposed involuntary spending constraints on themselves with devastating consequences.
I have written about the situation in Flint, Michigan before. Please read my blog – We starve the state and public infrastructure development at our peril – for more discussion on this point.
In addition, the blog cited discusses the release of an Australian Local Government Association (ALGA) report on the state of Australian infrastructure.
Conclusion: 11 per cent of total public infrastructure assets were in a “poor or very poor condition”.
So, the same the world over. The degradation of public infrastructure that hasn’t been privatised for a song and turned into profit is one of the defining characteristics of the neoliberal era and part of the process of suppressing the public and advancing the private.
Except in the this context, we have been duped into believing the ‘private’ is all of us – we were sold the myth that privatisation would benefit all. The reality is that the sell-off of public assets transferred massive wealth from the public sector (all of us) to a small private elite cohort.
And, the degradation of public infrastructure hurts most of us who rely on it for transit, education, health care, recreation, and the like.
The American Society of Civil Engineers (ASCE) note that their ‘D grade rating’ – “Poor at Risk” – indicates that:
The infrastructure is in poor to fair condition and mostly below standard, with many elements approaching the end of their service life. A large portion of the system exhibits significant deterioration. Condition and capacity are of serious concern with strong risk of failure.
It sits between C (Mediocre, Requires Attention) and F (Failing/Critical Unfit for Purpose) grades.
The ASCE use the following criteria in assigning these grades:
- Capacity: Does the infrastructure’s capacity meet current and future demands?
- Condition: What is the infrastructure’s existing and near-future physical condition?
- Funding: What is the current level of funding from all levels of government for the infrastructure category as compared to the estimated funding need?
- Future Need: What is the cost to improve the infrastructure? Will future funding prospects address the need?
- Operation and Maintenance: What is the owners’ ability to operate and maintain the infrastructure properly? Is the infrastructure in compliance with government regulations?
- Public Safety: To what extent is the public’s safety jeopardized by the condition of the infrastructure and what could be the consequences of failure?
- Resilience: What is the infrastructure system’s capability to prevent or protect against significant multi-hazard threats and incidents? How able is it to quickly recover and reconstitute critical services with minimum consequences for public safety and health, the economy, and national security?
- Innovation: What new and innovative techniques, materials, technologies, and delivery methods are being implemented to improve the infrastructure?
This graphic from ASCE shows the grades given across the different forms of infrastructure.
Can you believe that the richest nation in the World has allowed its drinking water infrastructure to lapse so badly.
Why does this matter?
Recently, I wrote about the 2017 Distressed Communities Index (DCI) for the US – see US growth performance hides very disturbing regional trends.
We learned that:
1. “millions of Americans are stuck in places where what little economic stability exists is quickly eroding beneath their feet.”
2. “17 percent of the U.S. population … live in economically distressed communities”.
3. “from 2011 to 2015, distressed communities ,,, experienced what amounts to a deep ongoing recession, with a 6.0 percent average decline in employment and a 6.3 percent average drop in business establishments.”
4. “58 percent of adults in distressed zip codes have no education beyond high school.”
And more, if you refresh your memory from that blog.
The overall conclusion is that the US is failing to provide any sense of prosperity for a significant number of their social settlements – communities, where people live.
This recent investigation by Ed Pilkington (published December 15, 2017) – A journey through a land of extreme poverty: welcome to America – is damming of the neoliberal system.
Not only is America failing its people (human resources) but the 2017 Infrastructure Report also shows it is failing to sustain its productive infrastructure.
In its accompanying – Failure to Act: Closing the Infrastructure Investment Gap for America’s Economic Future Report from 2016, the ASCE estimated that the economic impact of failing to close the infrastructure investment gap would mean:
- $3.9 trillion in losses to the U.S. GDP by 2025;
- $7 trillion in lost business sales by 2025; and
- 2.5 million lost American jobs in 2025.
On top of those costs, hardworking American families will lose upwards of $3,400 in disposable income each year – about $9 each day.
The following graphic (Table 1 from the ASCE Report) catalogues the “losses” to the National Economy Due to Infrastructure Investment Gaps:
Those estimates were in 2015 US dollars. So the 2017 estimates are higher. I estimated that the total funding gap for investment between 2016 and 2040 in the US was $US5,356 billion (up from the ASCE estimate at 2015 of $US5,182 billion).
Which makes it hard to understand why the business sector goes along with the ‘cut the deficit’ narrative pushed by the neoliberal spin doctors.
It is actually damaging to a vast number of businesses – small and upwards.
It is certainly damaging to the millions of workers who could have sustainable employment opportunities but are left either idle or in precarious, low-paid work.
As the ASCE Report concluded:
the fundamental impacts of underinvesting in infrastructure will be higher costs to businesses and households as a consequence of less efficient and more costly infrastructure services. For example, travel times will lengthen with inefficient roadways and congested airports and airspace, and out-of-pocket expenditures to households and business costs will rise if the electricity grid or water delivery systems fail to keep up with demand. Goods will be more expensive to produce and more expensive to transport to retail shelves for households or to business customers. Business- related travel, as well as commuting and personal travel, will also become more expensive and less reliable. As a consequence, U.S. businesses will be more inefficient. As costs rise, business productivity falls, causing GDP to drop, cutting employment, and ultimately reducing personal income. Higher costs will also render U.S. goods and services less competitive internationally, reducing exports and decreasing dollars earned and brought into the U.S. from sales to international customers. Impacts will be spread throughout the economy, but will fall disproportionately on technology and knowledge-based industries that drive innovation and economic development.
That is why it matters.
That is why maintaining first-class public infrastructure provision is crucial.
This is part of the real cost burden we are leaving our grandchildren.
All of this is, of course, totally unnecessary and totally preventable.
The US government has the financial resources to ensure that infrastructure provision is first-class and maintained that way.
Irrespective of the constitutional divide in spending responsibilities, the US Federal government can always ensure any level of government in America has sufficient resources to maintain this infrastructure.
The degradation reported by the ASCE is alarming and will impose massive costs to the US society in years to come.
A massive example of the ongoing failure of neoliberalism.
That is enough for today!
(c) Copyright 2017 William Mitchell. All Rights Reserved.