The Link Between Infrastructure And Growth

Matthew Slaughter was on the George W Bush Council of Economic Advisors so he’s probably only saying this because he’s a socialist:

Over much of the 20th century, America’s strong infrastructure investment was a major factor attracting global corporations headquartered in other countries to invest and create jobs here. Rising U.S. standards of living were fueled by a strong infrastructure system that facilitated the growth of companies in America, both global and domestic alike: transportation systems to move people and products, electrical systems to power plants and offices, communications backbones to drive computers and creativity. By 2008, the U.S. subsidiaries of foreign companies employed over 5.6 million Americans — nearly 2 million in manufacturing — and exported $232.4 billion in goods. That’s 18.1% of America’s total.

Today is very different. America’s decaying infrastructure costs the typical American worker hundreds of hours in lost productivity. It also costs companies time and efficiency in moving their products around — and also out of — the country. This decay is particularly stark for global companies, whose executives are witness to the dynamism of emerging economies like China and India that present them with ever-widening choices for where to grow jobs and investments around the world.

The word “productivity” sometimes misleads because it’s a valorizing term that suggests hard work and general awesomeness. But a truck driver stuck in a traffic jam is no less hard working or generally awesome than a truck driver who’s moving quickly. He is, however, less productive. In fact, working hard is often the sign of low productivity—you’re struggling harder than the other guy and have less output. In China, there are still people working rice paddies with no machines. That’s hard work. That’s low productivity. Inadequate infrastructure makes everything harder to do and ultimately reduces wages and prosperity.