A hierarchy of applications when it comes to promoting economic growth: above all access to energy, secondarily to markets for other goods, and only then to labour

From Age of Invention: Freight Expectations by Anton Howes.

With many countries’ recent productivity woes, there’s been a lot of focus lately on trying to build more transport infrastructure. Buses, railways, tramlines, airports and roads are seen as essential tools for boosting growth.

Certainly, everybody loves using great transport infrastructure (even if they don’t always enjoy having it built near them). In Japan a couple of months ago, I was gobsmacked at the speed and convenience of the famous bullet trains. They pull up to a platform like a spaceship from the year 2100 sliding effortlessly into a docking station. And if you happen to be walking onto the platform not expecting there to be an express about to pass through, it really is like a gigantic bullet — the shock of it was enough to make me actually take a whole step back. Meanwhile in Britain we apparently can’t even build a single high-speed line between our two largest cities without it taking well over a decade and tens of billions of pounds.

But as nice as it is to enjoy fast and convenient travel when you happen to want to visit a place, it is not always necessarily going to lead to much growth. We look back, of course, to the dramatic infrastructure-building projects of the eighteenth and nineteenth centuries. In 1600, England and Wales had only about 950 miles of river that were navigable by boat, rising by 1835 to about 4,000 miles. Less well-known, between 1680 and 1830 over 14,000 miles of road were improved to drastically shorten travel times. And that’s before we get into the rise of steam-powered locomotives on railways from the 1820s onwards. In 1830 there were just over 125 miles of railway in Britain, rising by 1871 to over 13,000 miles — a more than hundred-fold increase in just four decades.

This expansion, however, had very little to do with moving people. Although today the most visible use of transport infrastructure is for passengers, we’d be committing the historian’s cardinal sin of present-ism to assume that that was always the case. The overwhelming use of this infrastructure, instead, was to do with transporting goods and energy — especially grain, for muscle energy, and coal.

[snip]

But the history of transport infrastructure reveals to us a sort of hierarchy of applications when it comes to promoting economic growth: above all access to energy, secondarily to markets for other goods, and only then to labour. The convenience of other passenger transportation, beyond commuting in and out of major cities, is instead a benefit in and of itself — it is certainly a nice-to-have, though less obviously a basis for further growth. You’d be amazed at how many governments’ decisions and pronouncements on infrastructure-building fail to reflect this.

I frequently comment on the dramatically under-discussed revolution in logistics circa 1400-1600 which is most easily conceptualized in the first navigation to India in 1498 by Vasco da Gama or the first circumnavigation of the globe 1519-1522 by Magellan.  

The capacity to move large volumes and weights, cheaply, for long distances is a central element of economic development and of increased productivity.  I cannot think of an example of an advanced civilization which did not demonstrate this capacity.  

Howes' concluding paragraph sets up a provocative insight.

We know from history and science, the transformational role of transportation in terms of increased productivity and prosperity and we can see that the most critical stages are the increased access to cheap energy, then the increased access to markets (freight) and then, most inconsequentially, then access to labor.  Indeed, I suspect that labor transportation is almost purely contingent on the capital infrastructure necessary for energy and markets.

In other words, once the infrastructure is built (justifiably) based on energy and markets, the marginal cost for increasing capacity for labor transportation is relatively minor.  Are there instances where large scale transportation infrastructure has been built solely for labor prior to infrastructure justified solely for energy or markets?  Perhaps, but I can't think of any.

In the US, being a continental economy, and despite the shifting proportions from agriculture to manufacturing to services, our transportation infrastructure is still largely dominated by energy and market transportation.  Virtually all our rail system is devoted to energy and market, most of our riverine logistics, and much of our interstate highway system.  

Labor transportation dominates only at a very local level.  And even there, it is dominated by personal vehicles, with mass transit (rail and bus) only constituting some 5% of labor movement.

A couple of speculations.

I wonder whether the dominance of labor transportation in Europe is primarily an historical artifact.  Western Europe is much more densely populated than the US and industrialized earlier.  I wonder whether the artifacts of early canal systems, toll roads, and railroads in those compact dense areas created the conditions for a path dependent transition.  Once the economy shifted from agriculture then to industry and agriculture then to the present where we are 78% Services, 19% manufacturing and 1% agriculture, did the development of mass labor transit occur because they were cannibalizing the sunk capital created for the early energy and market stages of the economy.

And perhaps the lack of mass transit in the US is in part a function of our never having the density of that early transportation infrastructure for energy and market.  There was no embedded capital infrastructure to repurpose to labor transportation as there was in Europe.

This would explain a longstanding mystery.  I have been perplexed that England, home of the industrial revolution and landscape of thousands of miles of toll roads, canals, and railroads, should so struggle nowadays with affordable and financially viable labor transportation.  

Ever since the 1960s, railroad lines have been disappearing and labor transportation has struggled with rising costs and lower service.  This was most dramatically visible during the Thatcher years but it has been true for decades.  Compared to the US it is expensive and unreliable to plan trips of even shorter distances (in American terms).  My weak hypothesis would be that Europe ended up cannibalizing and repurposing a massive sunk capital from energy and market transportation that had been accumulated up to the 1930s into a labor transportation system.  

For perhaps three or four decades, there was a window of time, as the economy moved to the dominating role of services, when the old energy and market transportation infrastructure could be repurposed to labor transportation at relatively low cost.  The rails are laid and engines already purchased.  You just have to switch from freight cars to people friendly carriages.  

That is cheap and efficient and lasts until the accumulating maintenance costs of old infrastructure begin to catch up with you.  Perhaps mass transit in Europe wasn't a function solely of density but was also a function of the ability to repurpose pre-existing old transportation infrastructure for labor transportation.

I have always thought in European terms of mass transit as function of efficiency.  Rail and bus make sense in a very dense environment.  Now I wonder whether I was distracted by too short a cost perspective.  Perhaps labor transportation has always been a marginally profitable business and mass transit systems only seemed viable because their cost structures were essentially subsidized by the capital expenditures in the heyday of energy and market transportation from 1600-1950.  

The hidden subsidies and twisted national accounts makes it hard to compare apples-to-apples, but my impression, having lived and worked in Sweden, England, France, Netherlands and the US, is that US labor transportation is actually a good deal cheaper than in the US.  Far less mass transportation and much more atomized.  Much more adaptive to changing local circumstances and with a much shorter time horizon of change.

So that is one hypothesis - American and European mass labor transportation characteristics differ for historical path dependent reasons reflecting Europe's dependence on repurposing older energy and market transportation capital infrastructure into labor transportation which was only economically viable for two or three decades before it became prohibitively expensive.

The second though deriving from Howes' piece is less hypothesis and more observation.

But the history of transport infrastructure reveals to us a sort of hierarchy of applications when it comes to promoting economic growth: above all access to energy, secondarily to markets for other goods, and only then to labour. 

If national productivity and prosperity depends primarily on cheap, safe, fast, reliable energy and market (freight) transportation and only secondarily on labor transportation, then how well does that match with the priorities of the clerisy and government?

In terms of national transportation, the last major initiative was the building out of the interstate highway system from the 1960s to, say, 1980.  

We have sunk hundreds of billions if not trillions into labor transportation by rail in the northeast and mass transit systems in several dozen cities.  None of these have proven financially viable and have ended up absorbing ever greater amounts of local, state, and national subsidies with little or nothing to show for it.

In addition, most of the urban planning talk is about walkable cities, reducing car traffic, getting rid of parking spaces, etc.  

Instead of ensuring that energy and market transportation is safe, cheap, fast, and reliable, the clerisy seem to be focusing on making labor transportation more expensive, slower and less reliable.  

Why?

UPDATE:  A few hours later the same day.  By coincidence I come across, “Balancing the budget with service cuts would require eliminating two-thirds of Metro’s existing service, with no service after 9:30 p.m.”.  

“Metro today detailed its future financial planning to address structural funding issues that will leave a projected $750 million shortfall in the fiscal year 2025 budget when federal covid relief funding runs out. Without an increase in funding, Metro would be forced to make drastic cuts to rail, bus, and paratransit services across the region.

The long-term financial issues facing Metro, come amid improving service, investments in modernization, and growing ridership. As of May, weekday ridership on Metrorail and Metrobus is at 50 percent and 88 percent of pre-pandemic levels, respectively, with ridership as high as 800,000 trips or more combined on bus and rail.

Sounds like a lot of capital for a system that is still underperforming.