Trains, Planes, and Automobiles: What American Runs On

August 8, 2011

 

America’s infrastructure just isn’t what it used to be.  That bridge you drove over today on your way to work?  On average it’s nearly a half century old. The water you’re drinking?  It coursed through pipes likely built just after World War II.  Something must give.  The Treasury Department is now saying that we should instead change how we pay for American infrastructure, lest that something be another collapsed bridge or burst pipe.

With this challenge in mind, the National Chamber Foundation, the think tank of the U.S. Chamber of Commerce, held “Infrastructure: What We Want, What We Need.” The idea was to bring together public sector resilience experts and private sector financiers and builders to figure out how to move American infrastructure forward. What was the conclusion? As the panelists noted, “We need to find new ways to talk about infrastructure. There is no complex problem in the world today that one person or group should solve alone. We must collaborate to solve these complex issues.” With this in mind, how can the past inform our present work to build for the future? Transportation is the most visible manifestation of American infrastructure.

Four phases to transportation development stand out in American history.  The first is in what I’ll call Agrarian America.  This phase thrived on waterways and pure horsepower and built with the needs of the farmer in mind.  From the moment America declared independence, canal projects were begun that would soon reach far into what was then the American frontier.  Road projects followed this frontier expansion, linking farmers to markets and to new arable land. The mid-19th century saw the rise of Industrial America and the construction of coast-to-coast railroad networks.  Rail and industry were made for each other: rail requiring vast quantities of metal and machinery and industry needing the hauling power and speed of rail. Postwar America was cemented through the highway system, a project begun at the turn of the 20th century and ramped up with President Eisenhower’s signing of the Federal-Aid Highway Act in 1956. Finally, Globalized America took off with the first jumbo jet and the creation of airways crisscrossing the sky, not to mention the advent of containerized shipping (the first real change in shipping practices since antiquity).

The surprising thing is how differently the first two phases of American infrastructure came about compared to the latter two.  From roughly 1780 to 1930, infrastructure projects were funded through public-private partnerships.  Private investors put up most of the cash, while the public sector used taxpayer funds to directly push key projects and granted land in response to private sector demand (pull projects).  These initiatives were approved at local or county levels.

In deciding what to partner with the private sector on, the central question for government leaders (like in the case of Georgia) was “how can we best facilitate trade and what is the most efficient route to achieving that?” Transportation financing started to change though once America’s railroads were built.  Infrastructure became a social project by the 1930s – a public good built by the public sector.  With vast unemployment during the Great Depression and the lingering memory of railroad robber barons, perhaps this was not too surprising.  The emphasis turned to pushing projects through state financing.  The building of the interstate highway system solidified the dominant role of the state in infrastructure building.  Revenue sources, like motor vehicle and fuel taxes, were put in place to fill state coffers for this (very expensive) purpose. 

At the same time, the private sector’s traditional source of road revenue – tolls – was barred from all interstate highways. As decades passed and America entered its globalized age, the financial and regulatory straightjackets fitted on the private sector since the 1930s gradually began to fall away.  Airlines, once subject to price controls, were allowed to freely compete for passenger revenue.  Railroads were given more flexibility in pricing and routes too.  And you can thank $1.00 bus fares to New York City on the Bus Regulatory Reform Act of 1982.

Lost somewhere in the shadow of this dawning reform were America’s roads and bridges.  Reform has since come in fits and starts, but the basic state-driven model of the 1930s remains, along with its entire aging infrastructure.  At the same time, government has less of an ability to pay for the projects that are needed, let alone those necessary for the future.

We know which infrastructure projects are needed and the private sector wants to invest for the long term.  That means collaboration between the public and private sectors in funding and building infrastructure projects may be more necessary than ever before.  Moreover, a recent survey by the Rockefeller Foundation found that two-thirds of Americans believe that improving America’s infrastructure is “highly important” and that we need to change the way we invest in infrastructure.  In short, public-private partnerships might just be the way of the future.  In light of American history, such an approach may have more precedent than we realize.