The benefits of infrastructure investment are shown both for old-style economies (ports, highways, railroads) as well as for the new age (high speed rail, airports, telecommunications, internet...).
By showing that public capital plays an important role in private sector production, Munnell helps Aschauer establish that infrastructure investment was a key factor to “the robust performance of the economy in the ‘golden age’ of the 1950s and 1960s.”[3] To prove his point, Aschauer builds a model, using the data for the time period from 1953 to 1988, to simulate the effect of higher public investment on the aggregate economy.
[6] Roller and Waverman,[7] utilizing data for 21 OECD countries, including US, over a 20-year period, from 1970 to 1990, examined the relationship between telecommunications infrastructure investments and economic performance.
[7] Some European and Asian economists suggest that “infrastructure-savvy economies” [1] such as Norway, Singapore and China have partially rejected the underlying Neoclassical “financial orthodoxy” that used to characterize the ‘Washington Consensus’ and initiated instead a pragmatist development path of their own[8] based on sustained, large-scale, government-funded investments in strategic infrastructure projects: “Successful countries such as Singapore, Indonesia and South Korea still remember the harsh adjustment mechanisms imposed abruptly upon them by the IMF and World Bank during the 1997-1998 ‘Asian Crisis’ […] What they have achieved in the past 10 years is all the more remarkable: they have quietly abandoned the “Washington consensus” by investing massively in infrastructure projects […] this pragmatic approach proved to be very successful.”[9] Research conducted by the World Pensions Council (WPC) suggests that while China invested roughly 9% of its GDP in infrastructure in the 1990s and 2000s, most Western and non-Asian emerging economies invested only 2% to 4% of their GDP in infrastructure assets.
[1] The Beijing-based Asian Infrastructure Investment Bank (AIIB) established in July 2015 and corollary One Belt, One Road Chinese-led initiative demonstrate the PRC government’s capacity to garner the financial and political resources needed to "export" their economic development model, notably by persuading neighboring Asian nations to join AIIB as founding members: “as Asia (excluding China) will need up to $900bn in infrastructure investments annually in the next 10 years (which means there’s a 50% shortfall in infra spending in the continent), many [Asian] heads of state […] gladly expressed their interest to join this new international financial institution focusing solely on ‘real assets’ and infrastructure-driven economic growth.”[10] In the West, the notion of pension fund investment in infrastructure has emerged primarily in Australia and Canada in the 1990s notably in Ontario and Quebec and has attracted the interest of policy makers in sophisticated jurisdictions such as California, New York, the Netherlands, Denmark and the UK.
[11] In the wake of the Great Recession that started after 2007, liberal and Neo-Keynesian economists in the United States have developed renewed arguments in favor of “Rooseveltian” economic policies removed from the ‘Neoclassical’ orthodoxy of the past 30 years- notably a degree of federal stimulus spending across public infrastructures and social services that would “benefit the nation as a whole and put America back on the path to long term growth”.
[12] Similar ideas have gained traction amongst IMF, World Bank and European Commission policy makers in recent years notably in the last months of 2014/early 2015: Annual Meetings of the International Monetary Fund and the World Bank Group (October 2014) and adoption of the €315 bn European Commission Investment Plan for Europe (December 2014).
[13] The Nurly Zhol program applies to such sectors of infrastructure as transport and logistic, tourism, housing and communal services, education, support of export, agriculture, etc.
[14] He views the modernization of American infrastructure as an extension of his career as a real estate developer and a concrete item to add to his legacy as President.
Trump's aim with this funding policy is to realize his promise during the 2016 presidential campaign to bring jobs to rural areas, where employment prospects have been dim, and to transfer wealth from states that tend to vote Democrat to those that helped him win the election.
[16] On June 20, 2017, at the SelectUSA Investment Summit in Washington, Treasury Secretary Steven Mnuchin said that financial help from foreign investors will probably be necessary in order for President Trump's $1 trillion infrastructure plan to "upgrade U.S. roads, bridges, airports and other public works", to succeed.
[17] Trump's successful presidential bid was to a large extent based on an ‘unorthodox’ economic plank bringing together supply-side policies and infrastructure-based development planning: “the deliberate neglect of America’s creaking infrastructure assets (notably public transportation and water sanitation) from the early 1980s on eventually fueled a widespread popular discontent that came back to haunt both Hillary Clinton and the Republican establishment.
Donald Trump was quick to seize on the issue to make a broader slap against the laissez-faire complacency of the federal government: ‘when I see the crumbling roads and bridges, or the dilapidated airports or the factories moving overseas to Mexico, or to other countries for that matter, I know these problems can all be fixed’ (June 22, 2016 New York Speech: ‘We Will Build the Greatest Infrastructure on the Planet Earth’).”[18] This unconventional (by American standards) policy mix favoring renewed federal government involvement in infrastructure investment and co-investment across the board (at national, state, municipal and local level) is known as Trumponomics.
On January 31, 2019, President Trump issued an executive order encouraging the purchase of U.S.-made construction materials for public infrastructure projects, especially those that need funding from the federal government.
[22] Donald Trump's policies aim at harnessing private capital to leverage government spending on infrastructure at federal, state and local level.