The Covid-19 pandemic has caused a widescale economic downturn due to legislative restrictions.
To revitalise domestic economies, government toolkits include spending to support national infrastructure as a platform to boost future economic growth.
The US Perspective
The US has recently approved a $1.2tn infrastructure bill named the “Bipartisan Infrastructure Framework” focused on helping the country become more sustainable, resilient and egalitarian in the wake of the pandemic.
This bill focuses on financing vital transport sectors in the economy, such as roads, bridges, public transit, rail services and many other areas.
Furthermore, the US government has introduced a financing source for new investment, covering a range of items.
This includes the reduction of the IRS tax gap, an unemployment insurance integrity programme, unused unemployment insurance relief funds, broadband infrastructure, 5G spectrum auction proceeds, and strategic petroleum reserve sales – among other initiatives.
The Expected Benefits
The US $1.2tn new infrastructure bill is due to be rolled out over an eight-year time frame. The bill is the single most substantial infrastructure investment in the history of the US.
The act comprises an original sum of $621bn, with an additional $579bn, to be targeted at two main areas of infrastructure: transport at $312bn, and other infrastructure projects at the remaining $266bn.
Transport expenditure will focus on many different sectors: developing roads, bridges, and other projects will total $109bn, while passenger and freight rail investment will cost $66bn with public transit at $49bn. There are other smaller transportation projects also planned.
The transport aspect of the bill is a focal point in the US government’s mission to improve the infrastructure of the country. One study found that the $49bn investment in public transit will produce a 10% rise in transit capacity in metropolitan areas and a 10% gain in rail service miles per capita.
This increase in capacity could generate up to $1.8bn per year in increased wages. Another study found that improved transit access increases labour force participation.
Other infrastructure projects form a lesser percentage of the US government’s infrastructure bill. The most significant other component is installing power infrastructure at $73bn, followed by broadband and water infrastructure at $65bn and $55bn dollars respectively.
There are up to 10 million homes with service lines and pipes made of lead and 400,000 schools and childcare facilities.
The risk of exposure to lead is high, and the bill brings about a significant improvement in health and safety for the general quality of life of the American population.
International Infrastructure Projects
The signs of a positive recovery are evident globally, as other countries plan to develop their infrastructure with varying levels of fiscal dedication. For example, the UK has plans for numerous infrastructure projects worth over £350bn (roughly $486bn), ranging from civil infrastructure to housing, hotel and leisure facilities.
Most of this capital will be invested in civil infrastructure. For example, the Euston HS2 high-speed railway network costs $3.1bn and connects Euston, Crewe, the West Midlands, and Leeds. The UK government pointed out that the project will create 16,000 new jobs and 2,200 new homes, in turn helping the recovering economy to flourish in the wake of the pandemic.
The UK government has also invested heavily in private housing such as the Durieshill Stirling and the Stag Brewery Regeneration. The Durieshill Stirling project will generate over 3000 new homes in the UK.
The Stag Brewery Regeneration will deliver a new secondary school for 1200 pupils as well as local amenities, comprising a cinema, hotel, and community facilities including boathouses, shops, and restaurants, in the process creating many jobs.
The German government is not far behind with a $324bn investment in roads, railways and waterways.
In contrast, countries (comparatively) less affected by Covid have plans for more timid investment. For instance, the Australian government has pledged a meagre $86bn for infrastructure projects that are primarily set to establish new railways.
There appears to be a one-dimensional approach to Australia’s investment strategy. Australia plans to invest in railway projects such as WestConnex and Sydney Metro for a combined total of $28bn.
Significantly less capital is allocated to other projects such as roads, airports and bridges. This focused approach could be due to Australia’s geography which shapes the unique needs of the Australian people.
Mexico also has plans for $22.5bn worth of major infrastructure projects for 2021. Similarly to Australia, Mexico focuses most of its capital on domestic and long-haul rail networks as well as a small proportion of air travel infrastructure.
Mexico’s railway investments, such as the Mexico-Toluca interurban train and the T-MEC corridor, at a combined $4.5bn, will provide service to over 300,000 passengers per day – thus aiding travel and increasing the capacity for local and international journeys across a broader stretch of Mexico. As a result, the country will open to greater footfall, aiding economic growth.
German needs are no different, with plans to invest a significant proportion of the infrastructure budget on railways and roads to support high-speed travel.
Germany’s transport infrastructure is poor: 44% of Germany’s rail bridges are over 100 years old and require renewal. Furthermore, the roads are congested and 40% of the population feel that cyclists are unprotected. The government considers that upgrading roads would be a critical investment to help preserve life.
Waterways in Germany also require investment: many bridges, locks, and dams are in need of repair. The government has pledged $10.7bn to modernise and renovate infrastructure in the hope of enabling the systems to function at total capacity and therefore meet the needs of the German people.
Conclusion
The allocation of government spending in a given region depends on several factors: the geography of the land, the socioeconomic climate, governmental views on the growth and outlook of the country, and the need to replace obsolete infrastructure.
Despite varying degrees of investment, the aforementioned government decisions in the pandemic world have been both inevitable and expected as countries prepare for recovery.
Nonetheless, whilst this should be taken as a positive sign of the incoming recovery, there is no guarantee that the projects will be entirely beneficial.
England’s controversial decision to build HS2 for example has left many asking questions about budget and timing.
Will the benefits of investment revolutionise infrastructure around the world?
Only time will tell.
