It is important to state the meaning of infrastructure and investment, so as to get a clear picture of what this discussion is all about. Infrastructure can be defined as the basic physical and organizational structures, which are needed for a society or an enterprise to function well. Another definition is the services and facilities needed for the functioning of an economy. The general definition is stated as the set of interconnected structural elements providing a framework supporting an entire development structure. Examples of infrastructure include: roads, water supply, sewers, rail, and electricity among others.
Investment can be defined in terms of finance and economics. In finance, it may be defined as the use of money in order to make more money. Economic investment is the amount purchased per unit time of goods not consumed, but to be used for future production.
What is the need to invest in infrastructure? America is one of the countries that should take this question into consideration. The United States system of civil public infrastructure has badly decreased over the past generation. For instance: the breaching of New Orleans’ water levees in 2005 in the wake of Hurricane Katrina, and I-35w bridge collapse in Minneapolis in 2007. These two experiences prove that public infrastructure has really deteriorated. The generation that exists today is seen to neglect this, which is the main problem facing America. It is being worked out, that after this generation, the project of rebuilding the infrastructure and investing in them should take course.
The investment in infrastructure is important for the functioning of America’s economy. To the U.S. Bureau of Economic Analysis, total assets, excluding defense, valued $8 trillion in 2007; a representation of approximately 50 percent of the stock of all non-residential private assets. This is a formidable asset base that underpins the national economy
Core infrastructure is very important in maintaining economic performance. However, since the 1970s, the rate of public investment in these core areas begun to fall. Since then, it has not returned to its previous levels. Therefore, the investment in infrastructure is important to the economy of America, as it prevents economic slowdown. It is also important since it increases the chances of employment. Unemployment should be very much avoided in a nation because it crumbles its economy. Obama proves this by announcing, in November 2008, his intentions of creating two million jobs by introducing a large-scale public investment program during his first two years as president. It is seen that since the announcement, the size of stimulus package and the unemployment have largely varied.
Infrastructure Investment and Job Creation
There are three types of job creation: direct, indirect, and induced effects. Direct refers to job creation involved in constructing the new infrastructure projects. Indirect job creation refers to jobs generated when supplies are purchased for the infrastructure projects. Induced jobs are created when the overall level of spending in the economy rises, due to income received by workers hired to build infrastructure projects, and produce project supplies.
Infrastructure investment is a job-creation tool; as noted above, all forms of spending will produce job opportunities.
Infrastructure Investment, Competitiveness, and Environmental Sustainability
Investment in infrastructure improves private sector productivity; the impact is more visible in the manufacturing sector than in the private sector. The improvement of the American infrastructure in areas of transportation systems, public school buildings, water management, and energy transmission will better the American competitiveness. It contributes towards a lower cost of environment than it would be possible under America’s aging current stock of infrastructure. Environmental sustainability is improved by some of the investment in infrastructure; thus, providing environmental benefits. The public investments that are included here are public transport, smart grid electrical transmission system (that efficiently transport electricity from renewable energy sources), and freight rail. Public infrastructure investment projects promote a clean energy economy, whereby it raises the efficiency of production, and thus lowering overall demand for energy for a given production of energy.
Infrastructure investment is an important key to succeed in the future. Investments in public infrastructure are vital to economic growth, fuel incomes, and living standards for decades in the U.S. There have been findings that a sustained 0.9 percent increase in growth rate of public capital translates into 0.5 percentage-points in private sectors growth rate.
It also creates jobs as was stated earlier; millions of Americans still suffer from unemployment and overwhelming jobs. Therefore, at this moment when jobs are needed most in America, infrastructure investments should be practiced. By doing so, there will be created of 15 percent more jobs than a payroll tax holiday, which is nearly 35 percent more than an across the border tax cut, and four times more than temporary business tax cuts.
If America invests in infrastructure, it is likely to get cheap financing. This will precipitate a flight to safety of the nation’s capital, the U.S. government bond being the safest asset. America will experience cost of borrowing cheaper with null interest rates. Improvement of this infrastructure, whether private or public, will lead to capital markets paying the American government to borrow money. This is one of the major benefits of investing in infrastructure. If America won’t take this seriously, the country will lose the opportunity of being one of the most prosperous countries. This investment will enable the United States of America to get good deals; for example, during economic downturns, the projects of infrastructure cost less. This is due to many contractors competing for work amidst slack labor and capital markets; these great deals are in form of capital.
Deferring maintenance of the American infrastructure saves money in the short run, but it is costly in the long run. In other words, it is cheaper to repair than to rebuild any infrastructure after it collapses.
Due to neglect of this type of investment, America has faced crises like the one of Mississippi River, which recently pushed relentlessly dozens of levees. There were floods, and towns were submerged. If only investment of infrastructure was taken into consideration then, there would be no destruction of the infrastructure by the floods. This, in turn, increased the cost of rebuilding. The floods would have been prevented, but the flood-defense system was poorly managed; therefore, this did not help. Investment in infrastructure prevents the constriction of economic growth, and diminishing of life quality. It is now visible that drought has raised a major concern in America; it has shown the need for better long term planning. Long term planning has helped curb drought; a soar oil price, a surge in demand for transport vessels (buses and trains) has also exposed transport system, which is ageing in big cities. It is, therefore, one of the reasons for the investment in infrastructure.
If America invests in its infrastructure, it will be able to save its aging network of bridges, roads, airports, water system, railways, power grids, and other public infrastructures that seem to be losing their value. The United States can move forward if they develop their infrastructure; this will only happen if they invest in it. From common knowledge, infrastructure is central to the prosperity of the United States. This is because infrastructures are critical assets, since, they move goods, workers and ideas quickly; they provide secure and competitive climate for operating businesses. America has taken a step further and proposed the formation of a national infrastructure bank. This is a major step taken, since it is an economy-enhancing way. In addition to increasing job opportunities, America will need to rebalance its economy on several important elements. These elements include: low carbon technology, innovation, higher exports, and greater opportunity.
- Innovation- this is to enhance growth through ideas and deploying them.
- Higher exports- this involves taking advantage of the rising demands around the globe. Due to these demands, America should take an initiative to export goods and later invest in the infrastructure; this will improve its failing economy.
- Low carbon Technology- this will lead to clean energy revolution.
- Greater opportunity to reserve troubling inequalities and decades-long rise in them.
Infrastructure investment not only improves the economic fabric, but also the social fabric. This is because it improves marketing, schools and hospitals; therefore, citizens will be pleased by the services they get and the good interaction between them. Improving the social fabric enhances great relationship between the citizens. This great relationship may later, or even immediately, improve the business world, and, therefore, raise the economy of the United States of America.
Improvement of the road, air and sea transport will help in the movement of goods and people by making the transport networks fast. This will save time and enhance the productivity level of the country. Manufacturing and marketing will be more than five times faster; compared to the period when infrastructure investment was not taken into consideration. This will fight unemployment and slowdown of the economy. What is the use of fighting unemployment and striving to save the economy? This is to improve the value of the country’s currency and to enhance prosperity of the country. Apart from fastening transport, good transport network reduces unnecessary accidents that occurred in the past; thus, saving many lives.
Tourism is another sector that is largely improved by the investment in infrastructure. Tourism generates revenue for the government; this saves the economy of America by increasing the strength of its currency. Improvement of hotels to accommodate tourist, and transport systems will encourage frequent visits of tourist.
Focusing on America’s infrastructure helps to keep America competitive and improve the leaving of all citizens. Improving the lives of the citizens does not only mean that they are going to get good housing; lives can be improved by an increased capacity to serve communities and the professional training on health. Still, it is vital to take note of the key words “If infrastructure was improved.” Infrastructures that deal with heath are compound investments. Investment in these facilities creates long lasting jobs and expands health care access; it has been noted that opportunities for career development are created by investment in infrastructure. Not only does it affect the United States of America career wise, it also saves health care money by making access to better care.
For the past years, America has experienced difficulties in terms of infrastructure; one of the key issues is the future of America’s energy. Oil price may be low, but it is no longer advisable to rely only on oil for transportation needs. Risks are too high for the U.S. to be depended on the foreign oil producers; the country should come up with a project to invest in domestic energy production and efficient technologies.
There is a great need to look for ways in which the burden on each citizen will be reduced; after the election of Obama, the burden of excruciating taxes has been dealt with. There has been experience of tax cuts for businesses and individuals; reduced tax has led to improvement of the economy, therefore, it encourages the use of investing in infrastructure (simpler tax policy).
Investment in infrastructure enhances economic growth and reduces poverty.
American government is beginning to rise to the infrastructure challenge, but as much as it does so, it has to create an awareness of this investment to the public. The public should not leave all the work to the government. They should also contribute in terms of finance and ideas. The public should not take things for granted just because they have water, roads, hospitals and schools everywhere. They should take an initiative of considering the decreasing economy and the benefits of investing in infrastructure. They should consider loss of life caused by poor anti-flood system. Who would like to see the country they live in deprecate in terms of its currency or the economy? A developing country should not have over twenty five percent of its population unemployed, or even allow poverty to curb it; this is where investment in infrastructure is advised. Unemployment is a large motivation for crime; insecurity increases in the country, and, as it is all known, insecurity is indirectly proportional to economic slump. Therefore, if insecurity increases, the economic growth decreases.
It is possible for America to invest in its infrastructure if only each and every citizen takes the investment seriously. If they are not ready to do so, then they are to suffer, due to the already worsening economy. But why do they have to sit and watch as this happens and avoid it? Do they want to see the known prosperity of the country going down? If they ignore this, the current and future generation will come to regret. It is now visible that investment in infrastructure creates jobs, improves economy, enhances tourism, fights poverty, reduces death rate, improves the social network, improves businesses (as it makes the transportation more effective), improves the cleanliness of the country, protects the environment from pollution of other kinds, and fights crime. The government of America should educate its young generation about this to prevent the misuse of infrastructure in the future. If it does not take this initiative, then the country will lose its competitiveness and, therefore, the economy will depreciate. Calamites such as floods and draught will take an upper hand in bringing down the country’s economy. There are quite a number of benefits of this type of investment , and all of them should be seriously taken.