The Not-So-Boring Basics

Even in the era of the New Economy, a successful economic development strategy still depends on plain ol' infrastructure.
April 2001
William Fulton
By William Fulton  |  Columnist
Director of the Kinder Institute for Urban Research at Rice University and former mayor of Ventura, Calif.

The laptop computer I am writing this column on is plugged into the wall socket in our daughter's bedroom. She is playing the soundtrack from "Boys on the Side" on her CD player. The overhead light is on so everybody can see while I write and my wife helps our daughter pack for winter camp.

This is all a pretty ordinary American scene, with one exception: We live in California--once the land of limitless potential, now the land of rolling blackouts. And no longer do we take it for granted that Sara's songs will play when the CD player is switched on, or that Dad's words will flow when the laptop is plugged in. This is Phase 3-- the most brutal phase so far--in our understanding of how the New Economy works.

Phase 1 came when we realized that computers and the Internet could create whole new business empires--the Microsofts and the Intels, 21st-century equivalents to the New York Central and Southern Pacific. Phase 2 came when we realized that the real power of the New Economy was to transform the Old Economy--so that manufacturing, shipping, and other boring, old-fashioned things became fast-growing and exciting again.

But in Phase 3, the cold, hard truth has set in. It's not just that the New Economy can transform the Old Economy. The New Economy is dependent on the Old Economy and, in particular, on the boring old "hard" infrastructure that we long ago stopped worrying about because it seemed too expensive, too cumbersome and too environmentally destructive. Like power plants.

Even a decade ago, the conventional wisdom was that the future growth in our nation's power requirements was flat. Now, however, the estimate is that it takes 1 pound of coal to process 2 megabytes of data. That means it will take about one ounce of coal for me to write this column, store it in my computer and transmit it across the country to Governing's office in Washington, D.C. That may not seem like much, but--kind of like traffic--it adds up quickly to a major increase in the demand for new generating capacity, and, indirectly, for more airport capacity, more road capacity, more processing and shipping facilities, and lots of other big-time bricks-and-mortar items.

Nowhere is this more obvious than here in California, where for 20 years we have managed to defy the basic law of economic gravity by growing rich without investing in our basic infrastructure. Ever since Jerry Brown declared an "era of limits" almost a quarter-century ago-- and equity-rich NIMBYs began opposing all kinds of things--we have resisted the expansion of virtually everything. Our roads are crowded. Our airports are so inadequate that a few clouds in the San Francisco sky can confound air travel in the entire Western United States. Our college campuses are exploding with the legacy of a population that has doubled since Ronald Reagan was elected governor. We live in constant fear of a drought. And we are dependent on the kindness of outsiders such as Gary Locke, the governor of Washington, who was able to keep the lights on in California by lending us power.

California is unlikely to build more dams or freeways or airports soon, but we do seem to have a handle on the electricity crisis. Despite our strict environmental laws and a plant-siting process controlled by a state commission rather than local governments, more than a dozen power plants are under construction. Mostly, they're natural gas-powered plants being constructed near Bakersfield, an oil- producing town that often seems more like Texas than California.

Even for those of us who live on the Left Coast--in an environmentally oriented Democratic state that went solidly for Gore in the last election--there's a lesson here about the basis of our own comfortable prosperity. Without the basics, we're sunk. And that means that the fundamentals of good economic development in the era of the New Economy are a little trickier than we thought.

It's not enough to have a few landscaped business parks where you can park credit-card processors, or even some funky urban neighborhoods where those dot-com "content providers" can commute via Razor scooter. These economic development success stories--and others as well--are far more dependent than we thought on the basic accoutrements of urban life: airports, highways, power plants, water lines, sewage treatment plants and all the rest of it.

A century ago, the modern metropolis bloomed when the engineers of urban life figured out how to create big, centralized public works systems that move people, electricity, water, waste, goods and all the rest of it. Today, plain ol' infrastructure is still one of the keys to economic development success.

Tax breaks are great and quality of life is important, but no executives are going to be very interested in you if the lights don't come on when they flick the switch and water doesn't come out of the faucet when you turn on the tap.