Infrastructure Renewal and the Recession

As the months passed and the depth and severity of the 2008 financial crisis became clearer, I thought, "This is exactly the disruptive change needed to force us to re-engineer the economy on a global scale." It looked like the perfect impetus for addressing climate change in real terms, for replacing our industrial-age mindset and infrastructure, and for creating a healthier environment for our kids. To me it was obvious: the Green Tech Revolution was the logical "engine" to pull the economy out of the ditch and set the world on a more secure, sustainable path.

The early signs were there:

• Warren Buffet was buying railroads, one of the most fuel-efficient modes of long-haul transport;

• President Obama announced a U.S. high-speed passenger rail plan;

• China was investing heavily in renewable energy sources;

• Solar panel manufacturing costs were dropping; and

• Electric cars and smart grids were hot topics.

Reflecting on the ambitious goal announced by JFK on May 25, 1961 – to put a man on the moon by the end of the decade – I got excited just thinking about the opportunities and ground-breaking clean-tech innovations that lay just ahead. I'm convinced that this is not only THE moment in time to transition to a sustainable green economy but our moral responsibility as well.

By now, the United States should already be making headway on another ambitious goal on the scale of Kennedy's – to renew the very foundations America needs to keep pace and protect its citizens in the future, setting the bar high and leading by example. “The first and basic task confronting this nation this year was to turn recession into recovery.”

I was just a kid in my "But why?" phase when Kennedy made that speech. Today my question to U.S. policymakers is, "Why not?"

A perfectly good crisis is going to waste

Here in Canada, we're still weathering the global economic crisis relatively well, thanks to a bunch of good policy decisions introduced after the Great Depression and largely kept intact by successive Liberal and Conservative federal and provincial governments. Of course, our good fortunes are still inextricably tied to the ongoing turmoil of the Euro crisis, U.S. political gridlock, and now a slowdown in China. The world's financial follies haven't been addressed, and doing what's really required to stabilize it for the long term is deemed too politically risky by U.S. and European policymakers pursuing rigid ideologies and protecting short-term legacies.

Meanwhile, here in North America and the United States in particular, we have a vast infrastructure, much of it dangerously past its "best before date," in dire need of retrofitting or replacement. The list is endless: energy-wasting homes and public buildings, crumbling roads and rusting bridges, an overburdened electrical grid, and water treatment facilities will all require decades of research and development, planning, renovation, manufacturing, construction, and maintenance. Our children's lives will literally depend on it.

Never again in our lifetimes will we have more pressing reasons or a better opportunity to undertake the massive job of infrastructure renewal.

• A large skilled workforce is unemployed, readily available, and at risk of becoming permanently unemployable with each passing month.

• Discouraged older workers are being forced out of the workforce prematurely, with meager retirement incomes, adding to social welfare strains.

• Young workers, currently shut out of the workforce or delayed entry, will earn less over the courses of their lives.

• An unprecedented opportunity exists to increase targeted technical skills for workers through apprenticeships and mentoring programs.

• Reliable infrastructure is crucial to security and establishing a modern and efficient U.S. manufacturing base.

• Rapid climate change is now forcing us to switch from an offensive to defensive posture.

• Government borrowing costs will never be lower.

What are we waiting for?

It's the austerity, stupid

I use "we" in the global sense because as (presumably) the smartest species with opposable thumbs, we're all in this together.

I believe we can all agree that the global economy needs "an intervention" of some sort to get it moving again. The real problem is that we can't agree on how to get "there" from "here." When Adam Smith introduced the concept of "an invisible hand" to describe the self-regulating nature of the marketplace more than 250 years ago, I'm sure he didn't anticipate the negative consequences of that very hand having its "thumb on the scale."

So that's where government is supposed to come into play – setting the rules of the market through policy and regulation and looking after public interest through investment (spending) funded with revenues (taxes). Unfortunately, the U.S. federal government service elevator is maddeningly stuck in the K Street lobby, fully occupied by Wall Street bankers and Big Oil interests.

It's now been four years since the 2008 meltdown. The European Central Bank continues to inadequately fight banking "fires," and now-profitable U.S. banks hesitate to lend money because it's too "risky." After shedding millions of jobs in the last four years, many corporations are more profitable than ever and sitting on piles of cash. Stock traders continue to profit as their computers quickly dash in and out of the market, reacting to minute-by-minute reports of European half-measures, dribbling out in a 24/7 news cycle.

It's also now abundantly clear, as several economists have been predicting, that European austerity measures, invoked to attack chronic deficits, have failed to instill the confidence in the markets envisioned by policymakers. Not surprisingly, austerity measures are driving Europe back into recession, dragging the United States and, more recently, China with it.

To add insult to injury, there seems to be plenty of money out there that could pay for some the work that urgently needs to be done. It just happens to be vacationing in Switzerland and the Cayman Islands. One percent of the economy is doing just fine, thanks.

What does "confidence" look like?

Let me put it this way. When the world's largest economic and military power, which also holds the world's reserve currency, isn't "confident" enough to invest in its own future, it's sending a message that reverberates around the world.

Seventy percent of the U.S. economy is driven by spending by a populace that's lost 20 years of net worth since 2007, setting them back financially to 1992. Middle class skilled labor is "trickling down," filling minimum wage jobs traditionally populated by younger, entry-level workers. Wages and pensions are falling, so businesses are not hiring because demand just isn't there. It's a vicious downward spiral some economists have already labeled "America's Lost Decade."

Simple logic (and many economists) suggests that a properly targeted, large-scale infrastructural investment is the shot of adrenaline needed to revive the ailing U.S. economy. It's a labor-intensive endeavor that can't be sent off-shore. It would put the architectural, engineering, and construction trades back to work in their skilled fields and create new opportunities in the communications and technical sectors, all of them injecting money directly into the neighborhoods and communities in which they live, across the country.

Main Street businesses would see the immediate benefits as plumbers, electricians, contractors, truckers, software engineers, suppliers, office staffers, and their families regain confidence while household incomes return. It spreads upward from there as businesses of all types start hiring to accommodate increased demand. Tax revenues rise with incomes, helping to pay the costs.

Tax incentives directly tied to creating jobs and improving energy efficiency would keep the momentum going.

For the "but we can't afford it" contingent who claim that spending will leave a huge debt burden for their grandchildren, I have two questions:

1. Can you afford not to?

 

2. If not now, when?

 

“Preparing for 21st Century Risks,” a recently released report issued by the Alliance for American Manufacturing, outlines the stark reality:

"The American way of life is dependent upon a vibrant economy, the existence of which is based upon a skilled work force, innovation and a world-class critical infrastructure. Much of this critical infrastructure is vulnerable to attack, catastrophic weather events and obsolescence and deterioration. Immediate national security, preparedness and economic needs require an equally strong domestic manufacturing base which, for many reasons, has eroded over the years."

The cost of government borrowing right now is essentially 0% percent, possibly even less. It doesn't get any better than that. Congressional leaders need to climb out of the sandbox, shake hands, and get serious about their jobs. You can bet that corporations, bankers, and private investors are going to be jumping at any opportunity to invest some of that excess cash in a large-scale initiative that will unfold over decades. They're just looking for a signal.

And we really don't have time to waste.

Climate change is here

We've blithely ignored the warnings of climate scientists for a couple of decades, citing the negative impacts on the economy. Now the alarm bells are ringing in the heart of America. Right on the heels of a record 2011 Texas drought, the largest drought since 1956 has devastated corn and soybean crops throughout the Midwest, meaning higher food prices in the coming year. Record-breaking heat waves have buckled rail lines and highway pavement. In the wake of yet another Enbridge pipeline failure, I have to wonder if the thousands of miles of pipelines across the continent can stand the coming heat.

In 2006, the GAO estimated total property damage and economic impacts from the 2004 hurricane season at $45 billion; in 2011 the National Oceanic and Atmospheric Administration (NOAA) ranked the costliest hurricanes from 1900 to 2010 and found that all but one of the top ten occurred in the 21st century. Although it was easy to delay action when climate change was a future "probability," we now must address it head on. Water and energy conservation are critical issues that can't wait. Extreme weather events are now being directly linked to climate change. A report released by the White House in Sept 2011, “Federal Actions for a Climate Resilient Nation,” acknowledges the effects of climate change and lays out the plans that need to be put in place.

The U.S. military is already going green in a big way, having experienced the strategic vulnerabilities of fossil fuel supply convoys in Iraq.

“There’s a direct relationship between energy and the military. The more energy consumed, the less effective you are militarily because you’re more vulnerable. They love to take out our field trucks. They make a big boom when they do.”

– Retired Brig. Gen. Steven Anderson

Since then, Brig. Gen. Anderson, like many military leaders, has realized that guzzling oil makes the United States vulnerable in other ways. “I’m a soldier,” Anderson says. “Why should I be concerned about climate change? Climate change brings about global instability. That makes the world more vulnerable and it’s more likely that soldiers like myself will have to fight and die somewhere.”

Plenty of battles lie ahead before a global “Green Tech Revolution" gains any traction but, ironically, they'll be waged in Washington D.C., not overseas. If U.S. policymakers can ever come together to "green light" real action to address climate change through clean infrastructure initiatives, the rest of the world just might gain the confidence we all need to adapt our priorities and economies to a more sustainable future.