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Is ageing core sector slowing in US

Is ageing core sector slowing in US
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First Published: Thu, Jun 28 2007. 12 01 AM IST
Updated: Thu, Jun 28 2007. 12 01 AM IST
For roughly a century, the United States has had the world’s biggest economy. One of its strengths has been its infrastructure, from the rails and telegraph lines laid in the 19th century to the airports and fibre-optic networks of today.
But as the US struggles to stay ahead of China, is its ageing infrastructure slowing it down?
In almost every area—from waterworks to bridges and dams, highways to mass transit—many experts have answered “yes”. A report card by the American Society of Civil Engineers, issued in 2005, gave the nation Cs and Ds in 14 out of 15 categories, with an “incomplete” added for security.
Some of these deficiencies have very real costs to economic growth. The poor condition of roads, the engineers estimated, costs $120 billion (Rs4.9 trillion) a year in repairs, operating costs and time wasted in traffic—that’s equivalent to a full percentage point of the economy.
“There’s a tremendous need,” said Larry Roth, a professional engineer who is deputy executive director of the engineers’ group. “Not only are we not keeping pace with growth, but we’re not keeping pace with the maintenance that’s required. As a result, our infrastructure is simply crumbling.”
To eliminate its weaknesses, the US would have to spend about $160 billion a year over five years, Roth added. That total of $800 billion is not so different from the $700 billion in estimated direct spending on the war in Iraq. Yet, like investments in basic research and higher education, which may not pay off for decades, spending on infrastructure can be a tough sell for politicians.
Their time horizon is usually the next election, not the next generation. And at the national level, infrastructure has hardly been an issue.
“The American public is really aware of infrastructure,” Roth said. “However, their view of infrastructure is very local and focused. They don’t look at infrastructure as a broad, statewide issue, and certainly they don’t look at it as a national issue.”
In this respect, one could argue that authoritarian regimes like China’s, if sufficiently farsighted, could have an advantage. With a stranglehold on power in Beijing, the Chinese government can make decisions centrally and with a view towards the long term.
But for a government playing catch-up, like the US, it can be difficult to set priorities.
“One of the difficulties in evaluating any list of backlogs is determining whether they are needs or wants,” Patricia Dalton, managing director of the physical infrastructure team at the Government Accountability Office, the national watchdog agency, said by email in response to questions. “This type of analysis is not easy; benefits and cost can be difficult to determine.”
Infrastructure investments do offer one obvious plus for politicians, though: They often create jobs, both directly and indirectly. “Each billion dollars that we invest in infrastructure creates over 47,000 new jobs,” Roth said. “Obviously job creation is important to the economy, and those tend to be long-lasting, stable jobs as well.”
But infrastructure investments are also, in part, a victim of their own bad reputation.
One of the biggest current projects in the US—the interstate highway improvements, new bridges and tunnels around Boston—began construction in 1991 and lasted 15 years.
The project, called The Big Dig, was racked by scandal, though; an investigation in 2003 by The Boston Globe blamed Bechtel (also a prominent contractor in Iraq) for over $1 billion in cost overruns. The Federal Bureau of Investigation even created a task force to investigate the contractors.
Still, the need is undoubtedly pressing, as anyone in the United States who has recently passed through an airport, sat in traffic or lost electrical power can tell you.
Even at Houston Intercontinental, the US airport ranked top among major hubs in the latest report from the Bureau of Transportation Statistics, only 83% of flights arrived on time in 2005.
The New York City area’s three hubs all made the bureau’s bottom five, with only about seven in 10 flights arriving punctually. Perhaps it’s no wonder when you consider that London, in a metropolitan area of roughly similar size, is served by commercial flights at five airports: Heathrow (which may soon have a third runway), Gatwick, Stansted, Luton and City. Houston may have a relatively good airport, but electricity has been a problem.
The past few years have featured rolling blackouts during the hot summer months, worsened by damage from Hurricane Rita, in a city where everything except the sidewalk seems to be air-conditioned.
And Houston is not alone. The White House’s National Energy Policy suggests that the nation will need a whopping 1,300—1,900 new power plants in the next two decades.
The costs of these improvements are clearly enormous, but Roth (whose organization, it must be noted, would certainly benefit from a surge in infrastructure spending), also warned of the cost of doing nothing:
“I would contend that to ensure that we have strong economic growth, and that we preserve our quality of life and prevent people from being hurt or dying from rumbling infrastructure, that $160 billion a year is a reasonable investment.”
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First Published: Thu, Jun 28 2007. 12 01 AM IST