The Case for a New Old Approach

In November 2021, I had the honor of attending the signing ceremony for the Infrastructure Investment and Jobs Act (IIJA) at the White House. It had been a long road to the signing, and it represented a milestone accomplishment. The administration’s efforts to rescue US infrastructure have been absolutely necessary and monumental, but the reality is that government spending will not get the whole job done, and as long as the state maintains its monopolistic power over US infrastructure, some of our foundational issues will go unsolved. The United States should be on the verge of a new infrastructure decade, but to fully realize this transformation, we will need more than just federal and state investment.

As praiseworthy as the Infrastructure Investment and Jobs Act was, it was still well short of the American Society of Civil Engineer’s recommendation. Of the $1.2 trillion the IIJA provided in total spending, only $550 billion was new investment, less than a fifth of what the US needs. In the wake of the IIJA, the IRA, and the CHIPS and Science Act, it would be easy to let infrastructure slip from our minds, but the US needs a more thoroughgoing kind of intervention. There is so much more we can achieve by unleashing our potential through private sector participation, reforming the state agencies responsible for managing our infrastructure by giving them more resources and investing in human capital, by looking for example at new pricing mechanisms to address congestion issues (which have been on the table since the 1950s), or by integrating technology into the delivery of our infrastructure services…

Over the past fifty years, the United States has hardly diversified its approach to infrastructure investment. We remain trapped in an outmoded and, in many instances, ideologically doctrinaire model… For too long, the United States has been stuck in a false debate about whether privatization is a legitimate means for investing in and expanding our infrastructure, while the rest of the world has gone beyond the United States in not only resolving that debate but establishing the most pragmatic and efficient ways to use capital through public-private partnerships. That isn’t to say that this debate is not ongoing in the Europe or other economies, but simply that industrial economies as well as high growth economies such as China, have adopted the view that whoever is able to deliver efficiently and productively over a long period of time should manage infrastructure, whether in the waterworks, roads and bridges, or the airports sector. That is what we need to do in the United States: go beyond the rhetoric and take the actions that will allow us to not only catch up but become a leader in infrastructure development and management on a global scale…

In the first half of US history, infrastructure was by and large owned by private operators. The delivery of water, for example, which is today typically controlled by public authorities (federally chartered corporations) and financed through user fees and state and federal subsidies, was mostly private in early American history, or else managed through public-private partnerships. From the earliest days of the colonies and into the 19th century, many communities relied on private wells, cisterns, and private delivery systems.

In 1652, Boston officials granted the first corporate charter for a water transportation company, which allowed James Everill and Joshua Scottow to install pipes throughout the city and transport water from Scottow’s private well. This pre-revolutionary water company operated in the Boston area until 1817. The system of granting water delivery rights to owners of private wells spread to other cities in New England, as a series of similar charters in Providence shows. In Providence, city records indicate these private companies didn’t merely build the systems and transfer them to the government in a BOT structure. Rather companies were granted the indefinite right to levy user fees, in a build-own-operate contract. Such utility corporations proliferated across the country in the 19th century. Some became the water utility companies that still exist today, while others were later bought out by state governments.

This arrangement was common to roadways, as well. Prior to the 20th century, and especially before the expansion of railroads, most American roads were privately constructed and owned. In the early 1800s, efforts to federalize road funding were repeatedly beaten back in Congress in favor of private toll roads. This attitude toward infrastructure investment naturally carried over into railroads when they first began to appear in the 19th century. The first railway systems were all privately owned and operated. Why wouldn’t they be? Transregional wagonways were private, as were urban tramways. It was only logical that railroads would be privately owned, too. The development of the railway sector followed a similar path to the organic evolution of private water services. Those with the ingenuity and resources to create an infrastructure system were granted rights to exclusive ownership of those systems.