Infrastructure and Productivity: An Unchartered Territory

Abstract

There is typical competition among industrialized countries where some would like to establish leadership in economic and industrial performance. Without proper development and maintenance of a dynamic infrastructure there is unlikely to be any kind of industrial, trade, economic, or quality of life related leadership. Traditionally economists have considered only three components of economic activity: land, labor, and capital. From the perspective of this author, during 1970s, 1980s, and 1990s, Japan added one more element to the traditional three: management. Without management the traditional three cannot be put together and show economic advancement and industrial leadership. I would add even one more component: infrastructure. In the past, when the four components were discussed, infrastructure may have been a given, but in the twenty-first century this phenomenon must be separated from the above four. If a country has the traditional three and even an adequate management, but it does not have an appropriate infrastructure the country is not likely to go anywhere. Until recently, China and India suffered from that type of deficiency. I believe that the USA is losing its industrial leadership at least partly because it is not developing and maintaining a necessary infrastructure that would enable it to expand its GDP and enhance the quality of life for all of its citizens. This chapter explores just how the infrastructure contributes to the country’s productivity. It explores the conditions under which the infrastructure is likely to play a critical role in enhancing GDP or blocking its advancement.

Appendix: Managing Infrastructures

Introduction

The mechanics of maintaining a daily management of the Infrastructural system is critical. However, many industrialized countries, just because of sheer negligence or because low prioritization, do not put enough emphasis on this critical issue. In some of the developing countries, because of the lack of knowledge, infrastructure managements are neglected. Thus, infrastructures are not maintained well. They are not updated or improved. They are not adjusted to changing needs. In short, Infrastructures typically are mismanaged. It must be reiterated that benefits from investing in infrastructures are not likely to materialize or continue unless those infrastructures are managed properly. The proper management of an infrastructure includes: from the design of it to its location and from its regular operation to its careful daily maintenance (Satish 2007). Exhibit A.1 establishes first the general parameters of proper infrastructure management and second, lists the critical tools of management.

Exhibit 6 A.1 Managing the infrastructure

Management tools	Implication
Design	Developing most practical and versatile system
Location	Making sure that proper locations are considered
Original plan for implementation	Preparing a plan for optimal use
Daily operation	Making sure that everything is working smoothly on a daily basis
Careful maintenance	Systematic maintenance examinations should take place before things become a public hazard

Developing a Proper Governance

Above everything else, the question that must be raised is if the infrastructure is performing the way it is expected to perform and if this performance is adequate for the economic goals? As a necessary component of the national development plans the infrastructure must be evaluated regularly as a social institution.

In such an institutional orientation the infrastructure must be examined at least in regards to four key areas. These are shown in the upper portion of Exhibit 6.3. These are: increased efficiency, improved service delivery, increased productivity, and proper accountability.

Increased efficiency needs to be analyzed in two different ways. First, is the infrastructure facilitating the expected and hoped increase in efficiency? Meaning basically that the key industries of the country are producing more output for the given input. Without such an increased efficiency the infrastructure is being inactive. It is expected to facilitate, contribute, and increase the output of the identified industries. In other words, the infrastructure must be proactive as a major component of the national economy. Second, is the infrastructure increasing its own efficiency? Is it performing in such a way that its output is regularly increasing and hence it is being proactive within itself in addition to being proactive in the country’s economy?

Since services are not tangible, there needs to be a different way to measure how well services are delivered with the existing infrastructure. Furthermore could this delivery performance be improved? Meaning, for instance, that emergency vehicles can get to their destinations faster, people who are in a hurry can move fast enough for whatever they are in a hurry for, or perishable products can get to their destinations without losing their quality and freshness. These are only a few simplistic examples.

As opposed to increase in efficiency, increase in productivity implies not only improving the input output relationships as efficiency concept indicates but going beyond that. It is not only using the infrastructure’s capacity fully but creating much more capacity for the economic activity.

Accountability is perhaps the most critical and practical aspect of infrastructure governance. Any existing infrastructural system that is avoiding the political and corrupt influences, is bound to perform better than before. Proper governance of infrastructures requires proper institutional orientation and capacity development. Such institutional orientation and capacity development leads to increased efficiency in resource utilization in that it would minimize waste because of optimal use of facilities and avoidance of political influences and corruption. Improved governance also leads in the direction of service delivery and service improvement. Improved service delivery and better quality of service helps increase national productivity. Perhaps the most important item in infrastructure governance is clearly identified accountability. Here not multiple institutions or regions must have accountability but a nationally identified one organization must be responsible for the whole infrastructure development and management. Particularly, if different organizations are making different decisions about the infrastructure and infrastructure development is localized in different parts of the country and if these different parts do not attribute the same level of importance to infrastructure development and management the results are likely to be devastating in the sense that the national infrastructure will not function optimally.

Management Tools

The second part of Exhibit 6 A.1 identifies five critical tools that must be considered and carefully used to generate the optimal benefits form the infrastructure system.

The design of the infrastructure must be most functional with the least cost but also must be flexible enough to respond to the changing demands rapid shifts of technology and pressures from advances in information technologies. Additionally the design might facilitate the infrastructure to connect with the practice intimately (Hansman et al. 2006). Location of infrastructure is critical in that if it is not located optimally it will not function to the utmost capacity. This is a major cost factor for the country as a whole. Implementation in some ways is the combination of the above two tools. Carefully planned infrastructure system must be implemented as a plan that the most adequate performance can be obtained from the infrastructure system.

Operationally the infrastructure must perform as expected. Clearly, operator of the total infrastructure system must be well-trained and experienced. Finally, the maintenance of the whole system must be of the highest priority for the country’s economic progress and by definition the consumers’ quality of life. This appendix is critically placed in this book with the hope that this most important aspect of infrastructure management will be taken extremely seriously. Most industrialized countries appear to be neglecting this all important activity to the point that the existing system is functioning sub-optimally and being a danger to the population. Once again here the cost of not doing it is much greater than the cost of doing it.