Is spending money on infrastructure always a good idea? Many apparently think so based on reaction last week to my criticism of spending $2.3 billion for new locks on the Mississippi River. A typical e-mail argued, Maintaining/upgrading our infrastructure is … the only way to be competitive.”
In general terms, this view is correct. Modern industrial economies need effective railroad, highway, pipeline, electric power, telecommunications, potable water and sewer facilities to function. Construction of canals and railroads fostered economic growth in the United States in the 1800s. Lack of transportation infrastructure is a drag on growth in many developing countries.
Even so, spending public or private funds on any infrastructure does not ensure that society is necessarily better off. It is possible to waste money on such facilities as easily as on subsidies to businesses or individuals.
That certainly was apparent as I drove down to our farm near Chandler, Minn., recently. Along Interstate 94, I saw access boxes for fiber-optic cable conduits buried three summers ago to link the downtowns of Minneapolis and St. Paul. My understanding is that virtually none of the capacity in this multi-million-dollar project is actually in use. For the nation as a whole, some sources say that less than a fifth of all the fiber optic cable installed in the last decade is actually “lit.”
Crossing the Mississippi, I looked upstream and saw the locks at St. Anthony Falls. Getting millions of federal funds to build these locks was a key accomplishment of Hubert H. Humphrey’s early years in Congress. Advocates thought the locks would spur industrial development in northeast Minneapolis. Now the city is trying to drive the same riverfront businesses out of town. Any cost-benefit study would show that this infrastructure investment was a bad one.
In the country, I passed farm after farm where concrete stave silos built in the 1970s, for $10,000 to $20,000 each, stand empty, unfilled for decades, in many cases. Many never paid for themselves.
Each of these investments increased our nation’s capacity to produce goods and services. Yet none really was needed. Money spent on such infrastructure would have yielded greater returns to society if spent on many alternatives.
Fiber-optic companies and farmers who make bad infrastructure investments go bankrupt. When government makes bad physical investments, elected officials and agency careerists have a common interest in hiding evidence of the error.
In the 1970s, we spent billions constructing the Tennessee-Tombigbee Waterway, justifying it with fanciful benefit projections. After 20 years, tonnage remains less than a fourth projected.
The same dismal returns apply to nearly every other recent river navigation project, including the Red River in Louisiana, locks making the Arkansas navigable to near Tulsa, Okla., and the 9-foot barge channel up the Missouri to Sioux City, Iowa. All involved infrastructure spending, and all made us poorer as a nation rather than richer.
© 2004 Edward Lotterman
Chanarambie Consulting, Inc.