Shared Infrastructure Development

While on a recent trip to Ireland, we saw the country by car. We started on the west coast and moved our way east, and the difference in road development between the eastern hub of Dublin and the western cities of Galway and Limerick is remarkable. Dublin is surrounded by multi-car expressways, while many of the roads in the west barely have enough room for two cars to pass each other (which led to many harrowing moments). The west is the part of the country that Oliver Cromwell famously sent the eastern Irish landowners when he confiscated the land on behalf of the English crown and told the Irish to go “to hell or to Connaught,” and, due to its isolation from the rest of the country, is the home of the Irish Gaelic language and culture. Notoriously, some of the roads are unpaved and were largely developed when people primarily used horses for travel.

But, throughout the west, there were signs of large scale infrastructure development, with many roads being built, all with prominent signs proudly attributing the development to the NDP or National Development Plan. For a country that has faced its own economic crisis over the last few years, this scope of investment surprised me, especially since Moody's recently downgraded Ireland's bond rating. It surprised me until I learned of how it was being financed. Approximately one third of the financing for the Irish National Development Plan comes from E.U. Structural Funds.

The E.U. Structural Funds are grants of financial assistance that strengthen “the EU's economic and social cohesion by reducing developmental disparities between its regions.” Essentially, if there are regions within the E.U. that need infrastructure investment to improve their roads so that they can compete economically, the E.U. provides that region with a grant to bring that region on par with the rest of Europe. They know that Europe's collective economy won't grow if the laggards in the economy did not have the ability to initially develop as the rest of Europe has.

Given the recent cascading impact of the Euro’s valuation, the Europeans know that areas that have relatively weaker economies as compared with the economic leaders of the continent (Germany, France, UK) can bring down the whole house. That is why this fund to develop remote areas of Europe in order to build the overall economy of the country needs to be replicated elsewhere.

In the U.S., President Eisenhower solved the issue of the roads back in the 1950s. But, some of these roads are in need of repair or upgrade. The American Society of Civil Engineers gives the U.S. a cumulative grade of D for the current condition of our infrastructure. They estimate that a five year investment of $2.2 trillion will be needed to upgrade our collective infrastructure.
If you focus on bridges alone, ASCE states on its website:

Simply maintaining the current overall level of bridge conditions—that is, not allowing the backlog of deficient bridges to grow—would require a combined investment from the public and private sectors of $650 billion over 50 years, according to AASHTO [the American Association of State Highway and Transportation Officials], for an average annual investment level of $13 billion. The cost of eliminating all existing bridge deficiencies as they arise over the next 50 years is estimated at $850 billion in 2006 dollars, equating to an average annual investment of $17 billion.

And there are still other areas of the country that need further road and rail development to continue to remain competitive in the current global economy. The key factor here is that the E.U. is helping its member countries modernize by providing direct grants for infrastructure development. We've pumped a lot of money into the economy in the last two years but, in the larger budgetary and deficit discussions, the growing and pressing need for further infrastructure development is not being discussed.