The Search for Infrastructure-Driven Transformation

There are infrastructure projects, and then there are infrastructure projects that transform.
by | November 2010

Upstate New York’s declining industrial landscape masks one of the greatest contributions to economic development in American history. Across it lies the old, struggling industrial cities of Buffalo, Syracuse and Utica, as well as once-proud small towns like Lockport and Palmyra. What these cities and towns have in common is a prosperous history created in large part by the Erie Canal’s opening in 1825. And that prosperous history holds a lesson for economic development today.

The Erie Canal is usually characterized as America’s first great infrastructure project -- but it was much more than that. It was America’s first great economic development effort. The canal’s pace seems glacial to us today: A 5 mph speed limit meant it took the better part of a week to get from Buffalo to Albany by horse-drawn barge. In fact, the canal transformed the time and geographical restrictions on the movement of people and goods -- connecting the Great Lakes and America’s Midwest to the Atlantic coast and Europe for the first time.

When we think of economic development, we don’t always think of the transformational infrastructure project. We think of recruiting businesses and factories. Or we imagine nurturing the ecosystem of researchers, educators, entrepreneurs and financiers. Repeatedly throughout history, however, Americans have turned to infrastructure to stimulate economic development. And at a time when voters are resistant to higher taxes and skeptical about subsidies to business, they remain enthusiastic about building big infrastructure projects.

The American Recovery and Reinvestment Act was heavily tilted toward capital projects on the theory that “shovel-ready” projects could put people back to work -- mostly for private contractors rather than government agencies. The Barack Obama administration is also using federal transportation money to promote “placemaking” -- the creation of parks, plazas and squares that attract people in addition to simply improving travel. In California -- a state that’s perpetually bankrupt -- state and local voters regularly resist taxes, but constantly vote in favor of multibillion-dollar bond issues for schools, parks, roads and even affordable housing. So if we’re going to make big progress on the economic development front in the near future, we’re probably going to have to do it by leveraging big infrastructure.

However, the record on using big infrastructure for economic development is decidedly mixed. Besides the Erie Canal, there are many other transformational examples -- both national (the Transcontinental Railroad and interstate highway system) and local (the Houston Ship Channel, Port of Los Angeles and Dallas/Forth Worth International Airport). But there are also many make-work examples. The New Deal spent billions on public works projects to keep people working and left us with many national treasures, but it didn’t pull us out of the Depression. And of course, wherever there’s big infrastructure there’s also big pork. State and federal funding for infrastructure projects is rarely distributed with long-term economic transformation in mind. Short-term political benefit is usually the order of the day.

The challenge facing state and local government today is not merely to spend money on infrastructure, but to spend that money in a way that will foster economic development. Economic development leaders often approach this in a one-off way -- an off-ramp, rail spur or property that benefits a business they’re trying to attract. Such an approach may help a specific business, and in turn, help the community. But it’s not likely to lead to transformative economic development efforts. Transformative efforts are usually systemwide, and they generally do one of three things:

Make it easier to move goods and people, as the Erie Canal, Transcontinental Railroad and interstate highway system did.

Make it easier to move information vital to commerce. Think of the telegraph, telephone and Internet.

Radically reduce the cost of doing business -- or alternatively, greatly increase the capacity to do business. The introduction of electricity as well as the Internet served both of these purposes.

Of the many infrastructure investments on the table today in the United States, only a few serve any of these three purposes. The creation of a high-speed rail system is one. The conversion of the electricity system to a smart grid is another. Both of these are not small projects and are likelier to be efforts led by states -- using federal funding in the first case and working with private electricity providers in the second.

Where does that leave localities and metropolitan areas -- today’s Syracuses and Lockports? These days, any metropolitan-level effort toward big infrastructure -- the Houston Ship Channel, for example -- is likely to include state and federal involvement. But that doesn’t mean these can’t be instigated locally. With major metropolitan areas facing unprecedented congestion, perhaps the most compelling infrastructure projects -- at least from an economic development perspective -- are those that fill small gaps but break big logjams.

Think, for example, of L.A.’s Alameda Corridor, a $2.4 billion infrastructure project, which took 30 miles of congested rail traffic out of the L.A.-Long Beach Harbor and put it underground. Or look at Philadelphia’s Center City Commuter Connection. This two-block transportation tunnel built in the 1980s, at a cost of $330 million, allowed a complete rerouting of all commuter rail traffic in Philadelphia that led to a much better use of the entire region’s rail system.

High-speed rail and the smart grid may turn out to be tomorrow’s Erie Canals. But in a mature society such as ours, it may be that small infrastructure connections -- expensive though they may be -- will be transformative in the future.

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