Are we satisfied with the health of our nation’s infrastructure?
“Too few people in the public and private sectors regard infrastructure as a system at all, but rather think in terms of single projects.” McKinsey Global Institute (MGI)
America needs an integrated approach to ensuring our infrastructure can deliver for a twenty-first century economy.
On the average day, we turn on lights, fill our cars with gas, drive to work, send emails, and perform all sorts of tasks that rely on the energy, communication, and transportation networks that make our lives and standard of living possible. In the United States we have an incredible infrastructure that supports our economy, including:
- 3.9 million miles of public roads
- 2 million miles of oil and natural gas pipelines
- 200,000 miles of high voltage electric transmission lines
- 120,000 miles of major railroads
- 25,000 miles commercially navigable waterways
A systems approach to infrastructure development
If our nation’s infrastructure is like a person’s body, are we a finely tuned athlete or out-of-shape and struggling with illness? Our systems are probably more like a middle-aged, somewhat out-of-shape athlete. Our athlete is capable of competing in a triathlon with the proper training, diet, and equipment. Yet we also can’t expect our athlete to perform effectively while carrying an extra fifty-pound regulatory weight either.
The United States has an enviable infrastructure; however, to remain globally competitive, the U.S. must renew and develop systems required for a twenty-first century economy. A new concept, FutureStructure, advocates that communities take a systems approach to making effective infrastructure decisions. The FutureStructure website provides a visual representation of the interdependencies of the many components of infrastructure and drivers of change.
Beyond just the linkages between sufficient infrastructures to allow economic activity, we need to look at the opportunities resulting from societal and technological changes. According to McKinsey, smart grids could avoid $2 to $6 billion a year in power infrastructure costs. However, smart grid advancements depend on a growing and more complex computer network.
Infrastructure creates economic benefits
In a July 2013 study by McKinsey Global Institute, investment in infrastructure was identified as one of five potential game changers for the U.S. economy. The McKinsey analysis shows that the United States needs to increase infrastructure spending by one percent of GDP ($150 billion to$180 billion) annually to make up for past underinvestment. This increase in infrastructure investment would add 1.4% to 1.7% to annual GDP through 2020 and result in up to 1.8 million jobs. The study also notes the importance of raising the productivity of investments through better project selection and cost management. The study noted that the potential long-term GDP impact would be even greater, adding another $600 billion to GDP by 2030.
Private sector funds much of the infrastructure
Fortunately, the private sector effectively funds much of the infrastructure, including oil and natural gas pipelines, electric transmission, and railroads. For roads and other public projects, the McKinsey study identified the growing use of public-private partnerships as one way to accomplish investment in new projects and manage costs.
One constraint on new investment is regulatory approvals. The timeline for obtaining permits for a new pipeline or an electric transmission line is measured in years. The regulatory process is exceeding the construction time for these projects. Reducing the permitting timeframe and providing project investors with regulatory certainty is essential to continuing investment in privately funded infrastructure. We need this investment to create jobs and for the security of a reliable and modern infrastructure system.
Infrastructure in the future means more than traditional transportation, energy, and communications networks. Infrastructure will increasingly include the technology to integrate our businesses and our lives. It will include the institutions and structures for managing vast amounts of data and building the talent to create and manage tomorrow’s systems.
With good choices in infrastructure investment, streamlining regulatory approvals, and taking advantage of new opportunities such as public-private partnerships, we can create a world-class infrastructure for our twenty-first century economy. These investments will contribute significant jobs for our struggling economy in the near term and be important enablers of future growth.