Governments Can Create Jobs And Returns By Investing In Groundbreaking Infrastructure

From Roman aqueducts to Chinese rail, enormous infrastructure has the potential to transform a society. To fix these economic doldrums, the government should partner with the private sector to solve society's problems.

Aqueduct

We are living in an uncertain time. The global economy’s recovery from the recession of 2008 seems fragile. Financial markets all over the world are in turmoil. Bank stocks are being hammered in Europe and the United States. Private sector employers are slow to hire due to growing speculation of a double-dip recession.

In the midst of these uncertainties, one thing is clear: The key to sustained economic recovery and long-term job growth lies in rebuilding our infrastructure. We need a global "impact economy" in which governments, corporations, entrepreneurs, and investors team up to solve the big environmental and social problems of our time while generating compelling financial returns—not just average returns. As Nobel Prize winning economist Joseph Stiglitz says, "The real answer, at least for countries such as the United States that can borrow at low rates, is simple: Use the money to make high-return investments."

The big problems of our time—as they always have been and always will be—can be traced back to aging, obsolete, or non-existent infrastructure. From the Roman Aqueduct of 312 BC to the railway between Beijing and Hong Kong completed in 1997, successful infrastructure projects have always helped make nations great.

But actually commencing these groundbreaking projects is becoming increasingly difficult and complex in the modern world. With shrinking government budgets, lowest cost is trumping common sense planning. As a result, we are more susceptible to volatile fossil fuel prices, changing commodity prices, and even climate change. Furthermore, the multi-national and cross-border nature of most transport, water, waste, and communications infrastructure projects infuse them with political challenges and of red tape. In short, governments that are low on cash and high on debt are having a hard time building infrastructure.

On the plus side, large-scale infrastructure projects have a long history of being funded with both public and private money. But for infrastructure-focused public-private partnerships to succeed, governments must have a clear vision of what they are striving to achieve and a plan for engaging the right partners in the right ways.

For the private sector—corporations, entrepreneurs, and investors—this means reasonable assurance that government policies underpinning the plan will not be held hostage by politics or fall victim to election cycle partisan posturing; that risk will be properly shared between private and public entities; and that innovation and investing will be rewarded with compelling financial returns.

Unfortunately, too many countries—the United States chief among them—lack leaders with a clearly articulated vision and the ability to communicate national policies and plans well enough to gain widespread support. And now we are running out of time. More than ever, we need infrastructure visions and plans that support new sources of energy, solve the world's growing water and food scarcity issues, and create new markets and industries.

The amazing thing is that we already have private sector businesses with solutions that are scaling rapidly. The scary thing is that governments do not know who they are and have no good way to coordinate with them.

In the realm of public-private partnerships for impact economy infrastructure development, Europe is leading the way. The United Kingdom, for example, published a National Infrastructure Plan last year that lays out goals and priorities for infrastructure investing of 200 billion GBP over five years—funds that will be raised through "smarter use of public funding, improving private sector investment models, encouraging new sources of private capital and addressing the regulatory failures that stand in the way of greater private sector investment in our country’s infrastructure."

As the U.K. plan shows, high-impact environmental, social, and economic returns will come when the public and private sectors work together on large-scale infrastructure projects. Now the U.K. has to find fearless change-makers to implement this plan.

It's time to go the distance. Let's build a global impact economy, one million new jobs at a time. Who’s with me?

Jigar Shah is CEO of the Carbon War Room, a nonprofit that harnesses the power of entrepreneurs to implement market-driven solutions to climate change and create a post-carbon economy. 

[Image: Wikipedia]

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2 Comments

  • Andy Strote

    The challenge with the scale and scope of these required infrastructure plans is democracy and the elections that come with it. Many of these projects are multi-year and the reality is that for any elected official, you have at best, 3/4 of your term to do anything before you start running for re-election. In Roman days they had emperors to create big projects. Napoleon III could order Haussmann to completely redo Paris without worrying about the upcoming election. It will be interesting to see how long the U.K.'s infrastructure plan lasts, especially if there is a change of ruling party. What party wants to carry out the plans of their predecessor? And given the current political climate in the U.S., is there any common ground for long-term projects? What private corporation would be secure in making the commitment that would be required?

  • atimoshenko

    The problem with getting government to commit on infrastructure is that infrastructure projects are typically lost in the rest of the cacophony of the political systems. When people vote for a candidate, they are forced to vote for the whole 'package' of the candidate's positions on a broad range of issues.

    You are right about the importance and challenges of major infrastructure projects. So important such projects are, in fact, that it would almost make sense to hold 'infrastructure elections' (in which people vote for long-term commitments to specific projects) in addition to presidential/congressional/etc. votes. Certainly, the former would actually have much more real impact on the course of the country than most political fights.