Our fragile infrastructure

Friday the 13th was a traffic and commuting nightmare in the center of Washington, D.C. A power outage in the neighborhood of the White House, plus two fires along the subway tracks, created a traffic mess. Few intersections had traffic police to sort out the traffic chaos. Electricity was cut to scores of office buildings and several subway stations. Subway patrons were trapped in dark tunnels, but subway officials had no flashlights to hand out. New emergency backup generators weren’t used. Three pedestrians were hit by cars where traffic lights were out.

In other words: total bedlam. Emergency response was terrible. Communications was poor.

No terrorism was involved.

As The Washington Post (14 June 2008) put it:

A single switch in a Pepco substation failed yesterday morning, cutting power to the heart of the nation’s capital, including the White House and downtown offices. The outage shut down Metro stations, threw rush-hour traffic into a state of bedlam and highlighted how vulnerable the city can be.

“It was like each man for himself. Trucks were pulling out in front of buses; people were on the street. It was like a Third World country,” said David Zaidain, 34, a city planner who was stunned by the level of anarchy he encountered while walking to work along Ninth Street NW. “We’re living under this veil of potential terror, and this is how the city responds to something like this?”

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Time for a national infrastructure bank?

Douglas Rediker and Heidi Crebo-Rediker at the New America Foundation have released a policy paper suggesting a novel way to fund improvements in America’s crumbling infrastructure. They recommend two financing initiatives (beyond direct government grants):

[W]hile we have enormous infrastructure financing needs, there are also enormous pools of capital available for investment. The trick is to bring the two together in a commercial, sustainable, and politically acceptable way.

First, we suggest the enactment of legislation and the development of regulations to facilitate the origination and issuance of public sector covered bonds in the United States, which will provide a market-based, efficient, and secure mechanism to attract capital for infrastructure investment.

Second, along the lines of a proposal by Congresswoman Rosa DeLauro (D-CT) last year, we recommend that the federal government consider the creation of a new, government-owned and -capitalized infrastructure financing entity — a National Infrastructure Finance Enterprise — that would pool, package, and sell existing and future public infrastructure securities in the capital markets. The proposed entity would also seek to develop an in-house capability to originate infrastructure loans and would be able to fund itself through the international capital markets. We believe that the entity should be capitalized at a far higher level than proposed in the DeLauro bill. Further, its scope should extend beyond that of the National Infrastructure Bank as currently proposed by Senators Christopher Dodd (D-CT) and Chuck Hagel (R-NE).

The need for much greater investment in U.S. infrastructure should be obvious. But if you’re new to this issue, here’s the intro:

America’s basic infrastructure is outdated, worn, and in some cases, failing. Most experts agree that it is inadequate for meeting the demands of the 21st-century global economy. If we are to remain competitive, we must invest in capital assets like roads, ports, bridges, mass transit, water systems, and broadband infrastructure. Many other countries — both rich and poor — see investing in infrastructure as imperative for economic survival and success in an increasingly competitive economic environment. But the United States has lagged in infrastructure investment, in both relative and absolute terms. We are spending less than 2 percent of GDP on infrastructure, while China and India are spending 9 percent and 5 percent of GDP, respectively.

Related: Rebuilding and Renewing America: Toward a 21st Century Infrastructure Investment Plan (Wilson Center event summary)

Update: (23 February 2009) NYTimes.com Op-Ed columnist Bob Herbert on the need for a U.S. infrastructure bank: http://idek.net/3RJ (via @michaelgoldberg)

Maybe what we need is a Financial Services Corps

Melissa Koide, an analyst at the New America Foundation, has an interesting idea for helping low- and middle-income American households make more-informed financial decisions. The idea is to create a Financial Services Corps of financial advisors to counsel households on today’s rather complex financial landscape.

The policy proposal has four key elements:

  1. Enlisting financial experts and advisors to deliver personalized financial counseling and planning to low- and middle-income households;
  2. Providing the tools, resources, support to local, regional, and workplace-based initiatives to ensure these families are effectively reached;
  3. Collecting & analyzing data to understand the short-, medium- and long-term financial education, counseling and planning needs of these households; and
  4. Exploring new strategies and approaches to financial education & advice — through an innovations fund.

I have a few concerns, such how to make sure the financial advisors provide unbiased advice, i.e., not biased towards certain investment strategies where the advisor has a conflict of interest (e.g., gets a commission). I also wonder whether this will be a magnet for lawsuits, filed by families upset that the well-meaning advice ended up losing them money.

But I applaud the fresh thinking that went into this. It’s an improvement over the Bush administration’s volunteer initiative for financial literacy.

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The resurgence of anti-business populism; more regulation ahead

We’ve already seen the U.S. presidential candidates embrace populist, anti-corporate appeals. Mike Huckabee, a Republican, has taken whacks at Wall Street. John Edwards, a Democrat, lays out his “stop corporate abuses” manifesto here. There’s a reason they do this: It really resonates with the public, at a time of globalization, job insecurity, outsourcing, mass layoffs, a looming recession, corporate scandals, congressional earmarks for contractors, $100/barrel oil, election campaigns funded by corporate interests (need I go on?)….

And now comes a survey, from public-affairs polling firm Ipsos-Reid, showing that it’s not just a U.S. phenomenon but a global one. Important note: The firm polled 22,000 people in 22 countries — but they didn’t interview just any warm body. The respondents are what the firm calls the “Intelligaged,” people who are online, vote in elections, discuss politics, etc. (see methodology below).

The pollsters concluded that:

…a majority of the world’s most engaged citizens is letting it be known that large companies have too much influence on the decisions of their government and they want a more aggressive crackdown on the activities and influence of national and multinational corporations…

…public opinion among the most active, connected and engaged global citizens is putting global and national corporations at risk for potential government interventions and tighter regulatory incursions because its most elite citizens will back such moves.

Specifically, the Ipsos poll found that:

  • Three quarters (74%) of the “intelligaged” citizens agree that large companies have “too much influence on the decisions” of their government. This was especially true in Latin America (83%) and North America (81%).
  • A full majority (72%) of the “intelligaged” citizens believe that the government of their country “should be more aggressive in regulating the activities of national and multinational corporations.”

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Anticipating wild cards in world affairs

An article in the latest The Futurist magazine (January-February 2008) summarizes an essay by Peter Schwartz & Doug Randall about wild cards in world affairs. (For futurists, a wild card is something that was thought to be a low-probability, but high-impact, event. Example: the collapse of the Soviet Union.) Some of the “strategic surprises” they see on the horizon that world leaders need to contemplate:

“The warning signs are there if one’s eyes are open to them,” Schwartz & Randall write. “The world’s business and government leaders will be immeasurably better off if they carefully consider how these scenarios could come to pass and act today to create maneuvering room for the radically different world that these game-changing events could create.”

The Futurist summarized “Ahead of the Curve: Anticipating Strategic Surprise,” by Peter Schwartz & Doug Randall, an essay in Blindside: How to Anticipate Forcing Events and Wild Cards in Global Politics, edited by Francis Fukuyama (Brookings Institution, 2007).

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