When I first looked at construction costs, I looked exclusively at developed countries. Eventually I realized that the difference in average costs between rich and poor countries is small. But then I noticed a different pattern in the third world: some places, like India, Bangladesh, Nigeria, and Indonesia, spend much more than China does. Why is that? While I’ve had a bunch of different explanations over the years, I believe today that the difference concerns local expertise versus reliance on first-world consultants.
The facts, as far as I can tell, are as follows:
- Construction costs in China are about $250 million per km, a little more than the average for Continental Europe.
- Construction costs in post-communist Europe are all over, but are the same range as in Western Europe. Bulgaria is pretty cheap; in this post I bring up a line that costs around $200 million/km in today’s money but other extensions built this decade are cheaper, including one outer one at $50 million/km. In contrast, Warsaw’s Line 2 is quite expensive.
- Latin American construction costs have the same range as Europe, but it seems more compressed – I can’t find either $50 million/km lines or $500 million/km ones.
- Africa and the parts of Asia that used to be colonies have high construction costs: India and Egypt are expensive, and here I give two expensive examples from Bangladesh and Indonesia. The Lagos Metro is spending subway money on an el in the middle of a wide road and is reminiscent of American costs.
- When the first world had comparable income levels to those of the third world today, in the early 20th century, its construction costs were far lower, around $30-50 million per underground km. First-world cost growth in the last 100 years has mostly tracked income growth – it’s been somewhat faster in New York and somewhat slower in Paris, but on average it’s been similar.
For a while, I had to contend with the possibility that Chinese autocracy is just better at infrastructure than Indian (or Bangladeshi, or Indonesian, or Nigerian) democracy. The nepotism and corruption in India are globally infamous, and it’s still well-governed compared with Indonesia and Nigeria, which have personality-based politics. But then, in the developed world, authoritarian states aren’t more efficient at construction (Singapore’s construction costs are high); moreover, post-communist democracies like Bulgaria and Romania manage low construction costs.
What I instead think the issue is is where the state’s infrastructure planning comes from. China learned from the USSR and subsequently added a lot of domestic content (such as the use of cut-and-cover in some situations) fitting its particular needs; as a result, its construction costs are reasonable. The post-communist world learned from the USSR in general. There’s a wide range, with Romania near one end and Poland near the other, but the range is comparable to that of Western Europe today. Overall it seems that Eastern Europe can competently execute methods geared to the middle-income world (as the second world was in the Cold War) as well as, thanks to assistance from the EU, the high-income world.
Latin America, too, uses domestically-developed methods. The entire region is infamous in the economic development literature for having begun an inward economic turn in the Great Depression, cutting itself off from global markets and generally stagnating. Government functions are likewise done domestically or maybe outsourced to domestic contractors (and if international ones are involved, it’s in construction, not planning). Evidently, Latin America developed bus rapid transit, a mode of transportation optimally designed for countries with low incomes (so paying armies of bus drivers is cheaper than building rail tracks) and relatively strong currencies (so importing buses from richer countries isn’t ruinously expensive).
The situation in the ex-colonies is completely different. Even relatively protectionist ones outsource much of their planning to the developed world or increasingly to China, out of a combination of cultural cringe and shortage of domestic capital. The metro lines I have data for in India, Bangladesh, and Indonesia all involve Japanese technology and planning, with no attempt to adapt the technology to local conditions. So insistent is Japan on following its domestic recipe exactly that India’s high-speed rail construction is using standard gauge rather than broad gauge and Shinaknsen-size trains rather than larger Indian trains (which are 3.7 meters wide and can fit people 6-abreast). Elsewhere, China contributes capital and planning as part of the Belt and Road Initiative, and then its methods are geared toward middle income and not low income.
The correct way for countries in the per capita income range of Nigeria, India, and Bangladesh to build subways is to open up their main roads, which are often very wide, and put in four tracks in a cut-and-cover scheme similar to that of early-20th century New York. If they can elevate the tracks instead, they should use the same methods used to build Lines 2 and 6 in Paris in the early 20th century, which use concrete columns and are quiet enough that, unlike in New York, people can carry a conversation under the viaduct while a train passes. If the line needs to deviate from roads, then the city should buy property and carve up a new street (as New York did with Seventh Avenue South and Sixth Avenue in the Village) or else learn to implement late Victorian and Edwardian London’s techniques of deep boring.
However, actually implementing Belle Epoque construction methods requires particular knowledge that international consultants don’t have. Most of these consultants’ income comes from the first world, where wages are so high that the optimal construction methods involve extensive automation, using machinery rather than battalions of navvies with shovels. The technical support required for a tunnel boring machine is relatively easy in a rich country with a deep pool of qualified engineers and mechanics and a nightmare in a poor one where all such expertise has to be imported or trained from scratch. Thus, the consultants are likely to recommend the first-world methods they are familiar with, and if they do try to adapt to low wages, they may make mistakes since they have to reinvent ideas or read historical sources (which they are typically not trained to do – they’re consultants, not historians).
The result is that even though open economies tend to grow faster overall, economies with a history of closure tend to do better on this specific topic, where international consultants are not very useful for the needs of the developing world. India in particular needs to get better at indigenizing its construction and avoid mindlessly copying the first world out of cultural cringe, because even though it is almost a middle-income country by now, its wages remain a fraction of those of North America, Western Europe, and Japan, and its future growth trajectory is very different, requiring extensive adaptations. Both the overall extent of planning and the specific construction methods must be tailored to local conditions, and so far India seems bad at both (hence the undersized, expensive high-speed trains).