Published in Volume #30: Privatize!

With a global infrastructure crisis looming, there is much debate as to how our roads, sewers, and power lines will be financed in the future.  While privatization was heralded as the solution a few years back, the current economic situation has cast doubt on the strategy. What do we do when the state can’t afford it and the private sphere doesn’t want the risk? Architects are complicit in this debate – affordability is a design issue.  Can we design a new breed of infrastructure that pays for itself?

Nations around the world are facing an infrastructure crisis. Ageing and inadequate infrastructure is not being updated, replaced, and improved, at a reasonable enough pace to accommodate for the demands of a growing population. Sometimes this manifests in sensational and tragic events – a bridge collapses in Minneapolis, chunks of concrete fall on a Montreal underpass, dykes fail in a New Orleans hurricane. But more often it results in subtle yet pervasive phenomena – longer commutes, more pollution, delayed deliveries – inefficiencies of all sorts that affect our economies, our environment, and our daily lives.

For the most part of the early and mid-twentieth century infrastructure was conceived as a public good that should be financed and delivered through the public sector. However with the neo-liberal tide of the eighties, that opinion began to shift with more and more experts calling for the deregulation and privatization of state-owned infrastructures. Under privatization, so the story goes, infrastructure would run better and cost less because of the inherent incentives and logic of the market. Thirty years later though and the jury is still out, with privatization having yielded mixed results. Meanwhile we now find ourselves at a crossroads, where infrastructure all over the world is in a dangerously decrepit state. Given the economic climate, how do we improve our infrastructure when governments can’t afford it and the market won’t invest? Is there a way to conceive infrastructure differently in a way that can overcome the cost problem?

The Infrastructure Crisis in Numbers

In 2009, the American Society of Civil Engineers (ASCE) published a report card, which gave the country an overall grade of D for the state of its infrastructure.(1) The evaluation included infrastructure related to aviation, bridges, dams, drinking water, energy, hazardous waste, inland waterways, levees, public parks, rail, roads, schools, solid waste, transit and wastewater. Not one of these individual categories was able to score higher than C+ for its performance. The potential hazard associated with such poor infrastructure in any of these categories is paramount.

With regard to transport infrastructure alone, the costs are difficult to swallow. America currently has a backlog of 3 trillion dollars in unfunded surface transportation needs, a 2.2 trillion dollar backlog for highways and bridges, and 86 billion dollars in unfunded transit capital infrastructure needs.(2) Added to this are the external costs of deteriorating transport infrastructure – higher operating costs for vehicles, trucks, and trains; longer transportation times; additional costs of replacing as opposed to maintaining infrastructure; environmental and safety costs; and unreliable transportation times – all of which affects overall economic performance. In 2010, for instance, it was estimated that deficiencies in America’s surface transportation systems cost households and businesses nearly 130 billion dollars. This included approximately 97 billion dollars in vehicle operating costs, 32 billion dollars in travel time delays, 1.2 billion dollars in safety costs, and 590 million dollars in environmental costs. By 2040 massive job losses will likely occur due to losing more than 72 billion dollars in foreign exports because of the above-mentioned inefficiencies. The only silver lining that the study offers is that if infrastructure were restored to decent standards people would have higher incomes and businesses would be more productive.(3)

This problem is not unique to the US however. All over the world, developed nations are struggling with upkeep of their infrastructure.(4) Canada’s local governments face a sixty billion dollar annual infrastructure deficit. The infrastructure needs for the European Union run into trillions of dollars. The energy sector alone in the EU requires 1.2 trillion dollars over the next twenty years. The developing economies in Asia need to invest 165 billion dollars per year over the next five years for electricity, telecommunications, major inter-urban roads, rail routes, water, and sanitation. This amounts to nearly 6.2 percent of the GDP for the region – 4.0 percent for investment and 2.2 percent for maintenance. China, with its enormous electricity needs, is expected to account for 80 percent of all regional infrastructure expenditures.(5)

Additionally, inadequate infrastructure has been a pervasive leitmotif of the developing world. Cities like Lagos are faced with the double pressure of a depleted tax base and a massive rural immigration to the city centre.(6) Faced with massive growth, and no way to pay for the infrastructure needed to manage it, cities like Lagos have become Gordian knots of ad-hoc measures of daily survival.

Finally, the infrastructure crisis is not just about restoring infrastructure to a pre-existing standard. Concern about environmental impact means infrastructure is expected to operate at a higher performative level than it ever has before. Building more ecologically sensitive systems will no doubt offer cost savings in the long run, but testing out new methods of sustainable design will have higher up-front costs.

Paying for Infrastructure

So how will we build it and who will pay for it? There is no shortage of policy papers that discuss possible finance and governance strategies that could deal with this issue. Paul L Posner, in ‘Infrastructure: Policy Challenges Facing the Nation’, sums up these ideas succinctly.(7) In terms of financing methods he suggests we can fall back on traditional methods of bonds and tax subsidies; come up with new taxes targeting energy consumption and carbon emissions; establish legislation that enables public-private partnerships; calibrate pricing strategies through user fees; and charge additional fees for ‘Vehicle Miles Travelled’. What all of these have in common – and the main problem with all of these – is that they are regressive taxes, and thus fail in addressing another criteria of good infrastructure – social equity.

Similarly Posner’s suggestions for American governance strategies that address the issue seem to ignore a fundamental revenue problem. Sorting out intra-government responsibilities, creating a national infrastructure bank, and establishing a capital budget for infrastructure all seem sensible, but without a decent revenue stream, they will likely amount to little.

Compounding the problem is the demographic issue.  With an aging population worldwide, healthcare costs are only going to increase, taking up a larger and larger portion of government and personal expenditures.  What money will be left over for infrastructure?

The most common refrain in the policy papers concerning this issue is privatization. From an ideological perspective many people have taken the stance that the failure to maintain adequate infrastructure is a problem of inefficient bureaucracy – as opposed to a problem of insufficient budget and revenue. Given over to the private sector, infrastructure could be both built and operated more efficiently given the inherent efficiencies that market competition generates.

To be fair, private infrastructure is nothing new. Much of America’s infrastructure has historically been privately owned, including most rail lines, air transport, water, natural gas, electricity, and telecommunications. Problems however in coordination of services, redundancies in multiple competing infrastructures, and the rise of monopolies and windfall profits, led most states to regulate infrastructure, either through the nationalization of infrastructure companies, or the direct state provision of infrastructure in the early twentieth century.

With the looming debt crises of the 1980s many pundits saw the opportunity to reverse this trend through privatization and divestment of state assets. Through organizations like the International Monetary Fund, the developed world could test out this theory first on indebted developing world nations, simultaneously spurring markets in the developed world, as new markets for infrastructure provision opened up. Between 1990 and 2003 more than 890 billion dollars was invested – in the form of divestitures, green field projects, and management and operational contracts with major capital expenditures – in approximately 2,700 private infrastructure projects in developing and transition countries alone.(8)

Ioannis Kessides points out that most empirical evaluations of privatization and restructuring seem to be favorable, “At the microeconomic level, the emerging empirical evidence provides support to the view that privatization has positive effects on efficiency (labor and total factor productivity), financial performance of utilities, and service expansion.”(9) For examples he points out how in many Latin American rail systems output per employee has doubled, tripled, or even quadrupled after privatization. Privatization generated significant efficiency gains in the operations of Kelang Port Authority, Malaysia’s largest port as well.(10)

Still, privatization makes many feel uncomfortable. The main concerns associated with privatization are loss of jobs, increased prices, and loss of control.(11) While the loss of jobs is a concern difficult to justify – if an operation can be done safely and effectively with fewer people, then so it should be done – the other two concerns are legitimate. While it’s to be expected that a private enterprise would adjust pricing to reflect the real costs of an infrastructure and to allow for profit margins for business growth, it is a legitimate question to ask if this cost should be passed on wholesale to the user. Again with the question of user fees, there is the associated question of social equity. If infrastructure is a public good, should everyone pay the same price, or should it not be somehow geared towards one’s income?

While privatization of infrastructure has managed to create more efficiencies in some service delivery, complete monopoly control, as evidenced with the example above can have deleterious effects on the overall management of an infrastructural system. The solutions offered by most infrastructure policy pundits have either suggested increased regressive taxation, primarily through forms of user fees, or through privatization. But the real issue at hand might be a fundamental problem of income redistribution. One can hypothesize a relationship between the state’s increasing difficulty in funding services with an increased slipperiness of private equity in the hands of the wealthy to avoid taxation. As the Occupy movement reminds us of an elusive one percent, we should question why policy recommendations seem to saddle the infrastructure burden on an increasingly disenfranchised lower and middle class.

Architectural Responses

Although seemingly far away from the offices of policy institutes, architecture has not been complacent to the situation. While it would seem improbable that architecture should address larger issues like income redistribution head-on, there is particular agency in the field to suggest new ways of designing and managing infrastructure to adapt to these tightening budgetary conditions.

Evidence that infrastructure is on our collective minds can be seen with a cursory overview of design competitions that have been organized in the last few years. These competitions have challenged us with finding new sustainable uses for decommissioned highways in the south of Italy, developing new bridge links on the Bering Strait, managing animal migration through wildlife overpasses, and a host of other issue related to the basic use of water, food, energy, and transportation. While notions of sustainable development have been the driving force behind these competitions, they have inevitably led us to questioning the way we design our infrastructure. Most notable was the WPA 2.0 competition inspired by Barack Obama’s 2009 American Recovery and Reinvestment Act, which itself injected 150 billion dollars into infrastructure spending. In the words of the organizers WPA 2.0 was a design competition seeking innovative, implementable proposals that would place infrastructure at the heart of rebuilding our cities during this next era of metropolitan recovery.(12)

But cost is also on our minds and a host of initiatives have been trying to get architects to think more in fiscal terms. In fact there seems to be increasing resentment towards project proposals that ignore the cost issue. It is no longer good enough to simply design something both beautiful and functional, but is also incumbent on designers to come up with a strong business argument, or at the very least demonstrate the value-added of a project. This is clearly manifested in Ole Bouman’s call for an Unsolicited Architecture (UA) discussed at length in Issue 14 of Volume.(13) Initially conceived as a way to subvert the traditional client-architect relationship UA emboldened architects to seek out their own projects or sites of intervention, formulate a business plan, and then seek out investors willing to partner on the project. These projects usually involve discovering some untapped value of a site, and finding a design solution that helps facilitate the exchange of that value to finance the project. While we are unlikely to see unsolicited bridges and highways pop-up in the landscape, it is the thought process of UA, one that forces a designer to discover new value opportunities, which could be applied to infrastructural design as a way of mitigating costs.

One or the more interesting cases included in the issue was a proposal for turning the Golden Gate Bridge into a cemetery, tackling three problems at once – the need to prevent suicide on the bridge, the need for an adequate revenue stream for the bridge’s upkeep, and the need for a locally accessible cemetery, since the city outlawed burials in 1902. By attached a flanking lower platform to the bridge, plots could be stacked in a wall underneath the bridge’s surface. The flanking platform itself would act as the suicide barrier, and the revenue from the cemetery would help finance the bridge’s upkeep.

Toronto-based Infranet Lab/Lateral Office have taken cues from both the environmental demands of infrastructure as well as the cost limitations. In Issue 30 of Pamphlet Architecture, they call for an expanded field of infrastructure, mimicking Rosalind Krauss’ ‘Sculpture in the Expanded Field’.(14) This field includes productive surfaces, civic conduits, and programmed containers – where surfaces are plains that are thickened and intelligent, containers are shells of enclosure which process and perform, and conduits are carriers of matter and energy. Throughout their projects they continually attack cost and efficiency issues through strategic coupling – sometimes tripling or quadrupling – of different infrastructures, employing and layering the above-mentioned conduits, surfaces, and containers.

For instance, with the proposal ‘Ice Link’, a new bridge along the Bering Strait couples high-speed rail with ice harvesting and environmental monitoring. With ‘Land Reservations’, resurfaced landfills act as public space connectors to a larger open space network. In ‘Ice Road Truck Stops’, truck routes along ice roads in the far north employ a reinforcement mesh, which acts as a self-maintaining road building process, energy harvester, and a support habitat for lake fish. This kind of ‘killing two birds with one stone’ thinking is necessary in a world of infrastructure where resources are low and contingency is high.

Perpetual Infrastructure Machines

While we are running a global infrastructure deficit, with debt-ridden states unable to maintain existing stocks, let alone build new ones, there is no certain path ahead in terms of financing the problem.  Privatization has often been posited as the only solution – the only way to shed the cost burdens of an inefficient bureaucracy that controls the majority of our current day infrastructure.  But privatization has had a poor track record as well.  Now with both the market and the state exercising utmost financial prudence, it seems unlikely that either will come to the rescue.

Finding that delicate balance between regulation and competition, in generating the most optimal way to maintain and finance our infrastructure, is something policy experts will have to prioritize in the next few years.  Meanwhile architects can contribute to the cause in a very different way.  It is incumbent on us to drastically re-think how we design infrastructure. It is quite possible that mono-functional infrastructure is dead. Infrastructure cannot just do one thing anymore – it must do many things – ecologically, socially, and financially. It must produce as much as it exhausts. It must seek out new ways of generating value. It must couple, triple, and quadruple functions wherever possible.

Like the scientists of the past, on a quest to discover a perpetual motion machine, our new mission should be to search out an elusive perpetual infrastructure machine – an infrastructure that once built, will no longer require any additional inputs to keep it going.  And while the scientists ultimately failed in their quest, their mission brought them a thousand-fold closer to their goal.  And so it should be with infrastructure.

Sources

1 The American Society of Engineers, ‘2009 Report Card for America’s Infrastructure’. At: http://www.infrastructurereportcard.org/ (accessed Oct 3rd, 2011).
2 The American Society of Engineers, ‘Failure to Act: The Economic Impact of Current Investment Trends in Surface Transportation Infrastructure’. At: http://www.asce.org/uploadedFiles/Infrastructure/report_Card/ASCE-FailureToActFinal.pdf, (accessed Oct.3rd 2011).
3 Ibid.
4 Charles Thompson, et al. ‘The Problem is More than Money: Global Infrastructure Crisis’ Deloitte LLP, 2008. At: http://www.deloitte.com/assets/Dcom-UnitedStates/Local%20Assets/Documents/us_consulting_globalinfrastructurecrisis_0708.pdf (accessed Oct.15th 2011).
5 ibid.
6 Matthew Gandry, ‘Planning, Anti-planning and the Infrastructure Crisis Facing Metropolitan Lagos’ in Urban Studies, Vol. 43, No. 2, 371–396, (2006).
7 Paul L. Posner, ‘Infrastructure: Policy Changes Facing the Nation’. At: http://web1.millercenter.org/debates/whitepaper/deb_2009_0221_infrastructure.pdf, (accessed Oct. 10th 2011).
8 Ioannis N. Kessides, ’The Challenges of Infrastructure Privatization’ in CESifo DICE Report (2005).
9 ibid.
10 ibid.
11 Asieh Mansour and Hope Nadij, ‘US Infrastructure Privatization and Public Policy Issues’, RREEF Research, (2006).
12 WPA 2.0 At: http://wpa2.aud.ucla.edu/info/ (accessed Oct.15th 2011).
13 Volume 14: Unsolicited Architecture, (Winter 2007).
14 Infranet Lab/Lateral Office (Eds), Pamphlet Architecture 30: Coupling: Strategies for Infrastructural Opportunism, (Princeton Architectural Press, 2010).