Infrastructure in Theory and in Practice

By Kevin D. Williamson

Thursday, April 15, 2021

 

The American theory of infrastructure was for much of our history — and to a limited extent still is — an idea about multiplying the value of the assets and resources we already have. It’s a conversation we keep repeating — with the same truths and, unhappily, with the same errors.

 

In the beginning, it was “improvements,” meaning canals at first and then, famously and controversially, the construction of the railroads, as heavy-handed an example of corporatism as U.S. business history has to offer. But it was based on a sound idea: There was a great deal of interior land in the 19th century that hadn’t been brought under cultivation because there was no satisfactory way to get local farm produce to the distant urban centers where the hungry people were. The railroads were built in part to serve those interior agricultural producers, as well as industrialists who needed a better way to move their products than the canal system had provided. Between 1860 and 1900, U.S. track-miles of railroad increased almost sevenfold, from approximately 30,000 to more than 200,000; at the same time, the amount of land dedicated to farming more than doubled, and its output rose even more than that as the intensity of cultivation increased. U.S. farmers produced plenty to feed the growing country securely and economically while also building an enormously profitable export trade.

 

Infrastructure mission accomplished.

 

Inevitably, even as the railroads were being built out, the you didn’t build that!–ism set in, culminating with President Woodrow Wilson’s outright nationalization of the railroads under military pretext in 1917. The railroads were operated as a federal monopoly until 1920, when they were returned to notional private control under heavy regulation and a federal plan to create an entrenched cartel through consolidation. A tremendous sum was laid out in infrastructure investments and in direct subsidies (in the form of guaranteed profits) for the railroad interests.

 

Writing in 1922, Secretary of Agriculture Henry C. Wallace (not to be confused with his controversial son, the far-left vice president under Franklin Roosevelt) argued for more-aggressive federal intervention in regulating railroad prices on the theory that market rates would produce outcomes that were, from a nationalist point of view, inferior to the arrangements that central planners might arrive at.

 

Wallace, like many Republicans of his time, was at heart a progressive who viewed the U.S. economy as a vast chessboard upon which the powers that be in Washington (and this was in the days when secretary of agriculture was a big job rather than a place to park farm-state political allies) might move around the pieces at will. He was irritated by the fact that “freight rates were based on what the traffic would bear” — i.e., by market rates — and offended by the way the railroads had set prices for cattle transport “just within the point at which the stockman could better afford to ship than to make his stock walk to market.” Like many progressives of his time, he argued that the government would better serve the country by imposing price controls based on “operating costs and a fair return upon the capital invested” than by allowing market competition to set prices.

 

In Wallace’s view, everything was at stake in this infrastructure question, not just the interests of farmers and other shippers but U.S. competitiveness vis-à-vis foreign rivals (Argentina and Australia were the big ones in his mind) as well as the nature of the economy itself, the “national well-being,” patterns of settlement and population distribution, wages (too high, in his view!), and much more. Writing in 1922, he sounded a great deal like today’s “economic nationalists” and protectionists, complaining that the operation of free markets would have a “disastrous effect” upon “the greatest industry of the country,” by which he meant the business of growing potatoes and corn.

 

It is not difficult to hear an echo of Wallace on freight rates in Joe Biden’s complaints about the price of broadband Internet service. Indeed, the administration’s slogan “Broadband Is the New Electricity” is an intentional echo of the Tennessee Valley Authority and its rural-electrification efforts. The overwhelming majority of Americans already have access to broadband service, but it is relatively expensive in some markets and unavailable in some remote and rural areas. Repurposing the thinking of Wallace on the railroads a century ago, the Biden administration proposes to address the broadband problem (which is not in fact much of a problem) by trying to push profit out of the equation, giving preferences and subsidies to government-run providers and nonprofits. And rather than increasing access for low-income people by offering them vouchers (or even cash) and letting the markets work, Biden, sticking to the best, cutting-edge thinking of the 19th century, wants to regulate broadband rates in much the same way that progressives of an earlier generation sought to regulate rail charges.

 

Like railroad corporatism in the 19th century, Biden’s broadband-infrastructure agenda already is being shaped by favoritism toward the most politically influential players in the market. For example, his proposal to “future-proof” the broadband network in effect means giving preferences to fiber-optic networks over other technologies (satellite, etc.) that are in many cases better suited to serving sparsely populated remote areas. And because big-spending initiatives require big political constituencies, there is reason to believe that Biden’s throw-money-at-it approach will not achieve its desired result — because there is too much money on the table rather than too little. Arguing for a more focused approach, Michael Powell of the NCTA (the former National Cable & Telecommunications Association, which today calls itself the “Internet & Television Association”) has suggested that we simply “dedicate all the funding to communities with no broadband service or areas that won’t get built without government help.” Powell’s reasoning:

 

Past programs have often failed to put up adequate guardrails that direct funding where it is most needed and, naturally, when that happens the money is diverted from where it is needed most and ends up going to build in markets that are more lucrative — where the costs of deploying are cheaper and the number of paying customers greater. The result is that the money gets wasted on building networks in areas where consumers already have access to broadband thereby leaving unserved communities still waiting. When a high dollar program like this one is proposed, there is temptation to think there is enough cash to do any and everything without making hard choices. Such a lack of discipline is what often leaves unserved communities without a chair when the music stops and the money runs out.

 

As with other areas of infrastructure, the sniper approach is better than the shotgun approach, but scatterguns are all Washington has in its arsenal.

 

And there is a bigger conceptual problem that cannot be solved by better program design.

 

There was much in the 19th-century railroad project to offend the libertarian sensibility, but there really was a vast interior of arable land, along with other economic opportunities that would be brought to life by infrastructure connecting the natural resources to the markets and people. Biden et al. argue that there is a vast interior workforce that is similarly cut off from the opportunities in the wider economy by lack of affordable broadband access. But there is very little reason to think that is the case. Rural areas are not, for the most part, full of highly skilled and educated workers ready to jump into 21st-century knowledge-economy opportunities. As the U.S. Department of Agriculture reports, rural counties are among the least educated places in the United States. Rural America accounts for the vast majority (about 80 percent) of the counties in which 20 percent or more of the potential workforce lacks a high-school diploma. Our two biggest metros (New York and Los Angeles) by themselves account for more economic output than all of rural America — even though crops such as soybeans and corn account for tens of billions of dollars in annual production.

 

From that point of view, connecting more rural areas to faster Internet service is not an investment in the labor market — it is an indirect subsidy for Netflix and Amazon.

 

The United States does have pressing infrastructure needs. But these should be dealt with methodically and regularly rather than lumped together in gigantic, unwieldy omnibus packages. And most of our infrastructure needs are unsexy things such as road maintenance and airport improvements, not high-tech digital-economy fantasies. We can do something about crumbling I-35 overpasses and the hours it takes to clear customs at JFK without trying to reorganize the entire U.S. economy — and without the slush-fund thinking that insists that everything from child-care subsidies to minimum-wage hikes is a species of infrastructure.

 

Ironically, it is the Biden administration and its allies that are standing in the way of the big infrastructure projects that really would improve the overall state of the economy and create a great many high-wage jobs in the process. It stands in the way because these projects are privately funded initiatives in the energy industry, from the Keystone XL pipeline that the administration has sabotaged to efforts to build export facilities on the West Coast that would enable U.S. producers to connect more efficiently with markets in Asia and elsewhere that have a keen appetite for the hydrocarbons we produce in such abundance. Because these projects do not require trillions of dollars in federal expenditures, there is little juice in them for Biden or congressional Democrats; more important, they are opposed on ideological (and quite nearly religious) grounds by hard-core environmentalists who object to building any new infrastructure connected to traditional sources of energy — even though more widespread reliance on natural gas would be a meaningful improvement relative to coal when it comes to greenhouse-gas emissions. In 2020, the Trump administration approved plans to export liquefied natural gas (LNG) from a facility in Oregon, a project that has long been resisted, and in the end may very well be blocked, by Democrats such as Governor Kate Brown and Senator Ron Wyden, both of Oregon.

 

Contra Senator Kirsten Gillibrand (D., N.Y.), paid leave isn’t infrastructure. West Coast LNG-export terminals are infrastructure. Pipelines are infrastructure. Refineries are infrastructure. And, as with the railroads, expanding these will significantly increase the economic value of the assets and resources we already have — which is what infrastructure is supposed to do.