Why It’s Important to Invest in Infrastructure

The emails and postings I have had from readers recently have been very interesting. Barak Obama has just announced that he will authorize a huge spend to rebuild the appalling infrastructure the US has. There will be some amazing opportunities for businesses in the next few years as a result!

Keynes, once argued that in times of unemployment, it made sense to employ people to dig holes. It would create demand for shovels and overalls and the workers would spend their money!

This seems a very good time for struggling economies to rebuild depleted infrastructures. Private financing for public purposes does not work (very political statement to make – but show me an example where it has worked!) What is also very interesting to recognize is that decent public infrastructure can create tremendous private opportunities.

Could the US really have been the home of the great used riding mowers of the twentieth century without being one of the first countries to have a motorway network? Equally, German car manufacturers had the autobahn network to ensure driving made sense. It is interesting to note as well that McDonalds really grew in the 1950s and 1960s at the same time as the highway system was being built. Public infrastructure allowed private companies to blossom.

The public transport system in the UK (outside of London) is simply appalling. Rather than prop up ailing businesses and paying people to stay at home, I think the government should once again learn from the US and invest in really upgrading our infrastructure. We need better motorways, faster train services, an expanded airport network servicing London.

We could use this ‘lull’ as an opportunity to introduce new green measures such as making homes more energy efficient and creating new public spaces such as well-lit parks and cycling tracks.

One of the areas where Britain is strong is in design and the Brampton cycle is a great example of a product which reflects strong intelligent design. By making it easier to cycle to work, the government could create many more new jobs, nudge people into getting fitter and reduce congestion and pollution.

In economics there is a well-documented problem of ‘free-riders’. Why would a private company build youth baseball gloves when it would be too expensive to collect revenues from ships that benefit from the lighthouse and stop ships that have not paid for the lighthouse to still be able to see it? This is the justification for the state to provide public goods.

My argument is that we should in these times have a wider definition of public goods. Despite the US inventing the internet, it is 15th in the world in terms of broadband provision. The US has a strange attitude towards the provision of public goods which is being sorely tested at the moment. Obama may end up changing that view.

Countries can only really benefit from the digital age, if the government is prepared to step in and provide Wi Fi access to all. Private companies cannot capture all the value they create from allowing free broadband access (by definition).

If you are an entrepreneur in these troubled times, look out for opportunities that public spending will create. Not just in terms of the direct work, but in terms of what the new ‘public realm’ will enable.