I have become more and more skeptical about how strong the links are between infrastructure spending and economic growth/strength. What got me thinking about this recently was the opening last June of longest and deepest tunnel in the world, the Gotthard tunnel in Switzerland. The Interesting photos in this post are from the opening celebratory ceremony for that tunnel. The ceremony looks like it was a real Swiss cultural experience of sorts. The tunnel took 17 years and over $12 billion dollars to build but was it worth it?
An economic argument can be made for many infrastructure projects like a bridge that cuts travel time and eases congestion. It can be done with figuring the cost of the time and money it takes to build the bridge and the cost savings in time and personal economic benefit to the population benefiting. In many cases I think it is hard to make the case for any real strong economic benefit for some projects. One case that comes to mind was a very expensive bridge in Alaska that very few people would of likely used nicknamed the bridge to nowhere.
With the Gotthard Tunnel opening it will cut the journey from Zurich to Milan by an hour making the trip take a little under 3 hours. 65 passenger trains and 260 freight trains will make the trip a day. 9 workers died during the building of the tunnel. I am not sure how to calculate the value of time savings and the economic valued here. The tunnel seems to of mostly just save a little time for passengers (about an hour on the way to Italy) and I am not sure about added capacity. Switzerland’s population is growing slightly because of immigration and Italy’s is in decline. I doubt there is going to be that much more people and goods moving back and forth between the two countries in the near future.
When spending time in Europe I have had many conversations with locals where it comes up that I live in a city of around 2 million people that has just 2 intercity passenger trains a day. Austin also has one suburban train line which is not used much. I mostly get a reaction of I must live in a really underdeveloped area of the United States. In Austin, TX we have one train in morning that goes north to Dallas and one in the late afternoon going south to San Antonio. Besides that Austin has historically under invested in other transport infrastructure such as roads in the hope of delaying grow. We have some of the worst traffic for a city our size from under investment in the road system. Unlike other major cities in Texas, Austin does not think BIG. In spite of the lack of infrastructure investment in Austin the city still has been one of the strongest economically and one of the fastest growing in the USA for years. Texas in general has not invested much in infrastructure and has had one of the strongest state economies in the USA in recent years. Energy infrastructure spending is still there. The lack of investment in some areas will certainly damage growth in the future. Water infrastructure was shown to be seriously needed a few years back during a serious drought.
A lot of the rumors and thoughts about what the Trump economic growth plan consist of has a lot to do with Infrastructure spending. We know Trump likes to build things but will the money be well spent?