Every Time You Justify Infrastructure on Competitiveness Grounds, A Kitten Dies

You’ve heard it before: the US is falling behind China and Europe, and has to build more infrastructure to stay competitive in the 21st century. It’s unavoidable in almost any Thomas Friedman article. Boosters, construction industry interests, and even ordinary high-speed rail supports keep asking, how can a country grow without matching other countries’ HSR investment? Never once do they stop to ask why HSR should do anything to help increase competitiveness, beyond vague promises about reducing oil dependence and carbon emissions, issues for which HSR is roughly priority #20.

Countries do not in fact compete with one another. This is made clear in Paul Krugman’s 1994 article in Foreign Affairs, Competitiveness: A Dangerous Obsession. If China builds HSR and becomes richer as a result, the US does not suffer. It’s not competing with Chinese productivity in any meaningful way. In principle, the effect on US wages could be negative if production moves to China or positive if the larger Chinese market buys more American goods; in practice, the effect of other countries’ growth on the US is negligible.

But let’s zoom in and discuss how exactly HSR, or other large infrastructure projects, could lead to more competitiveness. They could boost productivity, but that is mostly an issue for freight transportation. Passenger transportation is mainly a consumer product, not a producer product. In fact, during its own spurt of fast growth from the 1960s to 1997, South Korea lagged in building passenger transportation, explicitly because it prioritized capital investments in industry over such consumer products as highways.

International corporations looking for a place to site a new factory will not look at the general infrastructure situation; they’ll look at what’s useful to their needs. Nissan chose Smyrna, Tennessee for its plant because it had good freight rail and Interstate access and was in a low-wage, anti-union state. The closest thing to passenger-oriented infrastructure that we could look at in such cases is international airports, and the Nashville area only has a small one; Nissan, and the other Japanese and European companies locating plants in the South, would have clustered in Atlanta, Dallas, and Houston if they’d cared.

Let’s zoom in even more, specifically on Nissan and what it’s done to Smyrna. Smyrna is a company town; Nissan even told it to zone the area around the plant as industrial-only, on the theory that commercial development would distract the workers too much. In any other context, the proponents of competitiveness and high-value-added industrial policy would decry such cases as a race to the bottom; and yet, those are among the few situations in which there’s actual competition among regions. The local drivers of a productive economy, rather than one that’s simply a passive recipient of other companies’ transplant factories, have nothing to do with infrastructure megaprojects. Silicon Valley exists because of Stanford, not because of the Peninsula Line or US 101.

At least, there’s competition among regions looking for foreign investment. In other contexts, it’s not as clear. The effects of HSR on national economic growth are too small to be visible, which means that it’s impossible to conduct a study that reliably tells if they exist. But the effects on regional development, a related trope, are decidedly mixed. It’s clear that HSR promotes development near the station; it’s unclear whether it actually develops the surrounding areas, rather than merely concentrates development near the station. Evidence from the Shinkansen as well as other high-speed systems is decidedly mixed – see for example this review.

Building public infrastructure is not a race. Other countries’ experience is a good teacher of what works and what doesn’t, and, provided adjustments for different circumstances are made, can help gauge whether HSR will be successful in the US. However, there is a very big difference between saying that HSR succeeded on a route similar to an American proposal and saying that the US must build because other countries are building as well.

As Krugman notes, the mentality of treating things as if they were races oversimplifies, and leads to bad projects. In the case of transportation, it means focusing on visibility, prestige, and spectacle rather than on cost-effectiveness, usability, and mode share. This is where development-oriented transit comes in: one of the causes of airport transit boondoggles is the insistence of cities and airport authorities that their airport access be world-class, which means a no-expense-spared people mover or, worse, premium rail link to downtown. Those projects, too, often come with promises of competitiveness, as if an airline is going to choose its hub based on the existence of a rail link with a 10% mode share rather than low landing fees or proximity to many travelers and destinations.

At least, development-oriented transit is transit. Paul Barter’s thesis explains how in the postwar period, Asian cities often started building freeways simply because that was what the US was doing and they wanted to be modern. I’m most reminded by the line from the Onion, attributed to the Chinese government: “this year, a million people in China will die from cancer – cancer is a very modern disease.” HSR exists largely because Japan National Railways President Shinji Sogo refused to accept a railway decline and instead built the Tokaido Shinkansen. Although HSR is not freeways, some of the rhetoric coming from various boosters glorifying China’s lack of environmental and community protection has the same basic problem of placing a national race over quality of life.

(Some) HSR projects are good economic and transportation development; they should be sold as good economic and transportation development. Read this summary on Reason & Rail and note how nowhere does Paulus Magnus mention competitiveness. Japan didn’t build the Shinkansen in order to compete with anyone, and France and Germany didn’t build the LGVs and ICE system in order to compete with Japan. If what they’ve done has succeeded then it’s likely that similar American lines could also succeed and should be built, but it’s not a race and the concept of being behind or of needing to imitate what others have done promotes boondoggles, not good transit.


  1. Joshua

    Is one place where you do actually have cities competing against each other, the market-place for highly qualified and highly skilled workers? Here in New Zealand we are constantly worrying about losing our best and brightest to Australia (most particularly as anyone can move there), the UK and the USA.

    A lot of the thinking is that people leave NZ because of taxes (although weirdly both the UK & Australia have higher top tax rates than NZ). But sometimes I think that many of our younger people leave simply because there are more exciting and interesting cities to live in overseas.

    What infrastructure can do is determine whether a city really works or not. Whether it’s an exciting, interesting and nice place to live and work in. I have a suspicion that many young NZers find the cities they visit overseas to be more interesting and exciting – due to their historic investment in transport alternatives to the private vehicle and how this frees up the city from cars. And they stay away.

    Just as thought, as your post didn’t really consider the competition for people.

    • Alon Levy

      The short answer: I sincerely doubt anyone has ever moved to New York and London for the quality of their infrastructure. And people in New York and London, far from thronging to Munich and Zurich, instead write nasty articles about how German-speaking cities have no culture and are not dynamic enough; even Paris and Tokyo they’ll just visit.

      The long answer: New Zealand’s issue is probably that it’s remote. Building local infrastructure isn’t going to change that. It may be fixable if New Zealand grows a local creative economy, as Australia and Canada eventually did, but doing that is hard. In remote regions, transportation infrastructure could be useful, if it links them to the core more efficiently. This is how HSR-oriented development, or freeway-oriented development for that matter, could work. The idea is that Lille was revitalized because of its fast train link to Paris and London, and therefore the same will apply to Fresno and Bakersfield. There’s really not much that can be done in New Zealand on that front, unless they invent vactrains.

      • ant6n

        I agree that ‘competing’ with China by building HSR just because they do it is somewhat silly.

        But I do think that metropolitan areas can compete better with other metropolitan areas if they offer a better quality of life. And quality of life can be improved to an extend by having better _local_ infrastructure – not just because downtowns can be made more attractive, but also if infrastructure reduces average commute times.

        • betamagellan

          I think this mostly happens within countries, though. Although this is purely a qualitative observation, in upper-middle class service industry Chicago it seems like we’re most conscious (read: insecure about our relative economic and cultural clout) of what’s going on in New York, Los Angeles, the Bay Area, and Atlanta. You might occasionally here a Chicago-Toronto comparison, but it’s pretty far behind the rest, and even there you’re talking about a city on the Great Lakes in an adjacent country that’s our largest trading partner (I’ve heard Chicago-Chongqing and Chicago-Wuhan, but even that doesn’t have to do so much with actual economic competition but more a way of illustrating their place in China’s economy). Metropolitan areas may compete with one another, but for the most part it’s still metros within a country, not across them.

  2. betamagellan

    Excellent piece! I have some experience in freight policy consulting, and competition with other countries’ freight networks was never, ever brought up. When we talked about infrastructure, it was mostly how to better use what was already there. When it came to infrastructure upgrades, almost all of them were justified on local needs—a busy rail crossing needed to be grade-separated since it interfered with rising volumes of truck traffic, for example, not because China separates their rail-truck route crossings (the only times we mentioned China at all were when talking about port access and supply lines). I don’t want to lionize publicly-funded freight rail investments—they do run into issues of public funding for private good and probably don’t get enough oversight from good-government/good-infrastructure activists—but in my narrow experience they were generally less prone to the sort of bad arguments and megastructural pathologies that plague passenger rail advocacy.

    Competition between states is definitely a big deal, though. Although a certain spectrum of industries really does rely on the quality of local rail infrastructure (the ones I have experience with), to a great degree it’s factors like wages and unionization (as Alon cited above) that drive where big foreign investments in manufacturing will happen.

  3. Pingback: A case against megaprojects | Ottawa Citizen Blogs
  4. Danny

    Excellent post. I just wanted to add that most people not in elected positions don’t care about city, region, or even state competitiveness…because for the most part, people are willing to move within their own country. If the jobs don’t come to them, they go to the jobs (if they aren’t tied down by an underwater mortgage of course).

    It is mostly politicians that care about it, because they can leverage it for future reelections…as is shown by the current catastrophe of Rick Perry’s presidential bid.

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