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A WORLD OF TROUBLE

5 The Vulnerability of Peripheries by A. Wess Mitchell & Jakub Grygiel The United States must disprove the thesis of its decline, now being tested in three global hingepoints.

17 Tipping Point in the Indo-Pacific by Michael Auslin Little things can indeed mean a lot in China’s challenge to U.S. 5 pre-eminence in the Pacific. 25 Playing the Long Game by Samantha Ravich America’s most important challengers are organized for protracted competition. But America itself is not—yet.

NATION-BUILDING IN AMERICA

34 Re-imagining Infrastructure by Mark Gerencser America is rich in expertise and dollars, but a desperately needed 34 infrastructure renewal depends on something else. 46 Bank on It A conversation with Bernard Schwartz and William A. Galston on options for financing U.S. infrastructure renewal.

FABRICS OF AMERICAN LIFE

53 Quilted America by Virginia Gunn How the Smithsonian tried to outsource an American icon (and failed, thankfully).

104 60 The Apron Chronicles by EllynAnne Geisel An apron can tell a great story, if you know how to tie one on.

Sp r i n g (Ma r c h /Ap r i l ) 2011 3 MAIL CALL

66 King Solomon’s Vanishing Temple by Yitzhak Reiter The Palestinian denial of Jewish historical roots in Jerusalem is a denial of their own history, as well.

EXECUTIVE COMMITTEE 73 Neo-Feudalism Explained , chairman by Vladislav L. Inozemtsev Charles Davidson, publisher & CEO The flight of the best and brightest from Russia is no accident. Walter Russell Mead, editor-at-large & director, The American Interest Online Eliot Cohen 81 The Rootless Roma by Diana Muir Appelbaum The benefits of nationalism, as illustrated by its absence. Adam Garfinkle, editor Daniel Kennelly, senior managing editor Mark Nugent, associate editor Noelle Daly, assistant editor Damir Marusic, associate publisher REVIEWS Katherine Hall, assistant to the publisher Erica Brown, Michelle High, 90 Send in the Clones editorial consultants by Norihiro Katō Simon Monroe, R. Jay Magill, Jr., illustrators cover design by Damir Marusic Kazuo Ishiguro hangs suspended between two cultures and two languages—a tension that enriches Never Let Me Go. EDITORIAL BOARD Anne Applebaum, Peter Berger, 97 We Like to Watch , Tyler Cowen, Niall Ferguson, Robert H. Frank, by Andrew Erdmann William A. Galston, Owen Harries, Jerzy Kosinski’s Being There is too biting to be funny anymore. G. John Ikenberry, Stephen D. Krasner, Bernard-Henri Lévy, Sebastian 104 France Pressed Mallaby, C. Raja Mohan, Ana Palacio, by Daniel Vernet Itamar Rabinovich, Ali Salem, Lilia Shevtsova, Takashi Shiraishi, Mario Print media is under siege in France, too—but with a Gallic twist. Vargas Llosa, Wang Jisi, Ruth Wedgwood, James Q. Wilson 109 For a Little Room Behind the Shop by Ian Brunskill How Montaigne found happiness: He helped himself. ADVERTISING & SYNDICATION Damir Marusic [email protected] 113 Busytown Blues (202) 223-4408 by James Rosen There’s a seamy underside to children’s book author/illustrator Richard Scarry’s busy, busy world. website www.the-american-interest.com

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RE-IMAGINING INFRASTRUCTURE

Mark Gerencser

hen we turn on a faucet or flip a nation proud of private initiative and responsi- light switch, we rarely consider the bility, and of government both small and Fed- W vast networks and complex systems eral, infrastructure has long forced us to adapt behind them. But vast and complex they are: our ideology to necessity. Roads and canals, and More than 160,000 miles of high-voltage trans- eventually railroads, telegraphs and electricity mission lines bring power to the farthest reaches grids, all evolved over the course of our nation’s of our country; people and goods travel to their history into government obligations requiring destinations along nearly four million miles of varying degrees of investment, management roads; our water comes to the tap by way of and maintenance on behalf of what was well nearly 55,000 separate drinking water plants. understood to be critical to both our economy One of the more remarkable aspects of infra- and national security. Our infrastructure’s his- structure is how little we think about it. Hardly tory is thus composed not just of invention, en- anyone grasps that infrastructure is to a society gineering and construction, but also of finance, what the circulatory system is to a human body: management and planning. It reflects a synergy a series of vital, interwoven transmission belts for of action between a variety of players from the moving not just things but also people, services market economy and in government at the mu- and ideas. We think even less about the history nicipal, county, state and Federal levels. of this vast circulatory system as an expression These days, Americans are noticing infra- of our political culture. America’s power, water structure more than usual, and at least some are and transportation infrastructures have long trying to think about it—because it’s failing, been correctly regarded as marvels of the mod- with disturbing consequences. The American ern age. More important, perhaps, is that in a Society of Civil Engineers (ASCE) generously awarded it, in its 2009 Report Card for America’s Mark Gerencser, co-author of the bestselling book Infrastructure, an overall grade of D. This is not Megacommunities, leads Booz Allen Hamilton’s only a problem because the U.S. military counts Infrastructure Center of Excellence. on our infrastructure as part of its increasingly

34 Th e Am e r i c a n In t e r e s t complex and far-flung global supply chains, More than a quarter of the nation’s bridges but also because America’s economy can only are structurally deficient, and by every measure grow if those infrastructures allow it. Studies the quality of highways and roads continues to have shown, for example, that a 30 percent in- decline. Transportation congestion has wors- crease in air passenger volume in just one region ened to the point that Americans now spend of our country could create more than 50,000 some 4.2 billion hours a year in traffic delays. new jobs.1 Total fuel wasted on the road has climbed from Many observers attribute our infrastructure 1.7 billion gallons in 1995 to 2.9 billion gallons deficit mainly to inadequate government fund- in 2005. Drinking water systems in dozens of ing, which has left us with crumbling bridges major metropolitan areas are contaminated, and a dearth of the cutting-edge technologies corroded water pipes leak as many as seven bil- needed to meet the challenges of the future. It lion gallons of clean drinking water per day, and is certainly true that we have not spent enough broken sewage systems send billions of gallons on infrastructure in recent years. The United of untreated wastewater into streams and rivers States today spends less than 2 percent of its each year. Of the 85,000 dams in the United GDP on infrastructure, while China and India, States, more than 4,000 are deficient, includ- admittedly starting from a much lower base of ing 1,819 high-hazard-potential dams, and the fixed assets, are spending 9 and 5 percent, re- average age of all dams is about 51 years. Fi- spectively. Our underinvestment has not been nally, electricity distribution lines have become caused by a lack of money, however. Serious “bottlenecks”, with outages costing more than funding constraints on government investments $180 billion annually and getting worse, render- are of relatively recent vintage and so cannot ex- ing many parts of the electrical grid stressed or plain underinvestment in key systems over the unreliable. past quarter century. Furthermore, there is still Along with its sobering grade of D, the enough money in the hands of private investors, ASCE report card defined the infrastructure if not government, to meet our infrastructure crisis as a $2 trillion problem and growing. In needs. So, it’s not the money nor is it any signifi- some ways, the report’s specific findings are cant deficits in technology, skill or know-how. even more alarming than the stark $2 trillion What, then, has gone wrong, and how can we figure itself: make it right? • America’s drinking water systems face an annual shortfall of at least $11 billion to re- Things Fall Apart place aging facilities that are near the end of et’s start with the basics. The U.S. gov- their useful lives and to comply with Federal L ernment defines 18 of America’s infra- water regulations. structures as “critical” to the nation (see figure 1).2 Each is governed independently • Of the 257 locks still in use on the nation’s and each now finds itself in a different stage inland waterways, thirty were built in the of its lifecycle. Some are mature, old even 1800s and another 92 are more than sixty (water and waste water systems). Others are years old. The cost to replace the present sys- new (information technology). Still others tem is estimated at more than $125 billion. are now being transformed (banking & fi- nance). Of the 18 categories, three are basic, 1Booz Allen Hamilton, “Analysis of Changes to underlying “lifeline” infrastructures: energy, Passenger Capacity and Airline Operating Costs transportation and water. As it happens, all with NextGen Technology” (May 2010). three are beyond mature; they are nearing 2Department of Homeland Security, National In- the end of their useful operating lives and frastructure Protection Plan (Energy, Water, and are in desperate need of recapitalization and Transportation Systems Sectors). modernization to accommodate both new 3The Census Bureau projects a U.S. population needs and the increased demands of our of 439 million by 2050, a 46 percent increase population growth.3 from 2006 (300 million).

Sp r i n g (Ma r c h /Ap r i l ) 2011 35 Nation-Building in America Figure 1

Agriculture & Food Banking & Finance Communications

Commercial Chemical Critical Facilities Manufacturing

Emergency Governmental Dams Services Facilities

Information National Monuments Postal & Shipping Technology & Icons

Defense Healthcare Nuclear Reactors, Industrial Base & Public Health Materials & Waste

Transportation Energy Systems Water

The Water sector includes both drinking water and wastewater utilities. • 160,000 public drinking water systems serving 84% of the United States • more than 16,000 publicly-owned wastewater treatment systems serving more than 75% of the United States

The Transportation Systems sector consists of six key subsectors: • Aviation: aircraft, air traffic control systems, and about 450 commercial airports and 19,000 additional airfields • Highway: more than 4 million miles of roadways, supporting infrastructure and vehicles • Maritime: 95,000 miles of coastline, 361 ports, more than 10,000 miles of navigable waterways, 3.4 million square miles of Exclusive Economic Zone to secure, and intermodal landslide connections • Pipeline systems: thousands of miles throughout the United States • Rail: hundreds of railroads, more than 143,000 route-miles of track, more than 1.3 million freight cars, and roughly 20,000 locomotives

The Energy sector includes three interrelated segments: • Electricity: more than 5,300 power plants; 211,000 miles of high-voltage transmission lines • Petroleum: more than 500,000 crude oil-producing wells, 30,000 miles of gathering pipeline, and 51,000 miles of crude oil pipeline; more than 130 operable petroleum refineries, 116,000 miles of product pipeline, and 1,400 petroleum terminals

• Of the 100,000 miles of levees in the coun- • About a third of America’s major roads are try, 85 percent are locally owned and main- in poor or mediocre condition, and 36 per- tained and of unknown reliability. Many are cent of the nation’s major urban highways more than fifty years old. Rough estimates are congested. The current spending level of put the cost at more than $100 billion to $70.3 billion for highway capital improve- repair and rehabilitate these levees. ments is well below the estimated $186 bil- lion needed annually to substantially im- • The Environmental Protection Agency es- prove the nation’s highways. timates that the nation must invest $390 billion over the next twenty years to update But despite the staggering size of these fig- or replace existing waste water systems and ures, money is not our biggest problem, even build new ones to meet increasing demand. in times of fiscal austerity. Our real problem is

36 Th e Am e r i c a n In t e r e s t Re-imagining Infrastructure

at the same time conceptual, institutional and current business model isn’t suited for making a political—all summed to the issue of trans- truly smart grid work. This explains why prog- formational leadership. History shows that ress toward creating one is going approximately modernizing infrastructures tends to be more nowhere, despite the funds, rhetoric and atten- problematic than creating them, thanks to the tion thrown its way. We have the money and the drag caused by legacy hardware and its hu- technology; what we lack is a integrative lead- man “software.” Infrastructure officials get so ership that understands the need to re-imagine locked into old engineering designs and asso- the entire system, including its business models, ciated management paradigms that they often stakeholder roles, relationships and purpose. cannot conceive of new ways of doing things. By historical standards this is a relatively And even when some do manage to think anew, new problem for the United States. In the past, they are confronted with a stark reality: While we Americans were very good at imagining incremental investments are organizationally new infrastructures. For example, in the early and financially within reach, major transfor- 1800s, the Erie Canal opened up the Midwest mations are dramatically harder because of to development. More than a century later, ru- both sticker shock and entrenched institutional ral electrification made farming in America’s interests. Efforts to overcome bureaucratic ag- heartland vastly more productive. By the mid- ing of this sort thus require transformational 1950s, infrastructure acquired a new dimen- leadership, and that is precisely what we have sion: national security. President Eisenhower lacked in recent years. played a key role in promoting our national On the conceptual side of the problem, highway system after he failed to convince the everyone realizes that infrastructures, like all auto industry to make the investment in roads machines, eventually reach a point where incre- in order to sell more cars. He envisioned the mental adjustment simply makes no sense. Few highway system not just as a public benefit and people will pay to repair a transmission in an an economic driver but as a critically important old car when it would cost more than the value mechanism for mobilizing troops and their of the whole vehicle. But infrastructure is more equipment across the country. complicated than that. Upgrades demand major As a rule, American leaders of all parties shifts in business models and operations as well as have understood that massive projects require new technologies and materials. Unfortunately, leaps of imagination. Their imaginations have we tend to focus on the hardware (the technolo- been agile enough, too, to realize that people, gies and materials) and ignore the software (the and organizations of people, are the critical vari- people, management processes and institutional ables for success. Such imaginative sprightliness arrangements) that makes it all work. has been a natural component of the American For example, when politicians and policy psyche, along with its boundless energy and wonks alike speak of the “smart grid”, they optimism. This is not the place to speculate usually mean it as shorthand for incorporating about why recent generations of American lead- more sophisticated metering and command and ers seem to have lost the knack. But clearly, we control technology into our electrical produc- tion and distribution systems. While metering 4Reactive Power is the loss of power arising from and flow control is important, those improve- the production of electric and magnetic fields. ments don’t even begin to encompass what a Although reactive loads dissipate no actual “smart grid” would need to work. The goal is power, they drop voltage and draw current, to create a resilient network that efficiently and giving rise to the term “phantom power.” Re- reliably stores and transports energy to consum- active power is essential for continuous, steady ers, regardless of where the producer or con- voltage on transmission networks and is pro- sumer of that power is located. To achieve that duced to maintain the system rather than for goal, we need more reactive power.4 But since end-use consumption. If elements of the power reactive power serves no tangible purpose to a grid cannot get the reactive power they need consumer, utility companies lack any incentive from nearby sources, they will pull it across to generate something they can’t sell. Thus the transmission lines and destabilize the grid.

Sp r i n g (Ma r c h /Ap r i l ) 2011 37 Nation-Building in America must become as good at re-imagining infra- many kinds in this arrangement, but since the structures as we once were at imagining them economy was growing and the technologies at for the first time, or we risk harming our quali- hand suited our purposes for long periods of ty of life, economic competiveness and national time, these inefficiencies were absorbed more security. or less smoothly into the system. Thanks to the There is no mystery as to how we must pro- stability of these arrangements, we could also ceed. Our re-imagination must devise new busi- ignore most decisions about which level of gov- ness models and stakeholder roles that will cre- ernment was most appropriate for overseeing ate the right behaviors and avoid any perverse various infrastructure systems as technology incentives (when incentive and accountability changed. structures inadvertently lead to self-defeating This arrangement, along with its business outcomes). Currently, those most affected by in- models, is now obsolete for three interwoven frastructure (individual citizens) lack the direct reasons: The role of government has become authority to approve it. And those who approve muddled; the stability of stakeholder equities it (government commissions and/or utility reg- is no more; and the velocity of technological ulators) are not primarily the ones who use it. change now outpaces the political and admin- Furthermore, those who use it most (citizens, istrative rhythms of the old system. corporations) often don’t pay for all of its costs. In the post-Reagan era, it is easy to forget And those who benefit from the construction of that the 20th-century American political econ- infrastructure (developers, construction firms) omy was considerably more regulated than it usually have the greatest voice in how it is de- is today, informally if not also formally. Gov- signed and operated. As a military commander ernment infrastructure monopolies or govern- might describe the situation, there is no unity of ment-abetted monopolies-in-effect dotted the command, and hardly even any unity of effort, socio-economic landscape. For example, the in the infrastructure business these days. Tennessee Valley Authority, or TVA, was creat- To some extent, inefficiencies are built into ed in 1933 by an act of Congress to help allevi- our way of building, operating and maintain- ate the effects of the Depression. Its charter was ing infrastructures due to American political to provide navigation, flood control, electricity culture. Countries from China to France see no generation, fertilizer manufacturing and eco- problem with government owning and operat- nomic development to the region. Hence, TVA ing most or all of a nation’s major infrastructure, was envisioned to be more than an electricity but most Americans do have a problem with producer; it had become a driver of regional that. American preferences have given rise to economic development. Other examples are utility monopolies—privately owned operations the power administrations such as Bonneville, that are regulated by government. This logic is Southeastern and Southwestern that market unassailable; no American would want to sweep electricity from hydro-electric power plants on aside all the safety, environmental, zoning and public lands operated by the U.S. Army Corps public health concerns associated with a full- of Engineers. These were created by acts of bore privatization of these utilities. But that Congress between 1927 and 1950, and still ex- same logic creates the need for hybrids of pri- ist as Federal agencies today, delivering power vate industry and government relationships, and to 34 states. these hybrids have proved delicate, if not elusive, Deregulation, which began in earnest in the creatures. mid-1970s and accelerated into the 1980s and There was a time when the political econ- 1990s, may well have bequeathed short-term eco- omy of U.S. infrastructure operations was not nomic benefits, but it has also made long-range particularly problematic. Government at vari- management, planning and investment decisions ous levels played a dominant role, and all stake- for infrastructure systems far more difficult. The holders benefited from a relationship rendered parts of government that once took on this role stable by the predictability of the technology have been overcome by a combination of this and the social organization of the services in- changing landscape as well as technological dis- volved. No doubt there were inefficiencies of continuities and mission creep. At the same time,

38 Th e Am e r i c a n In t e r e s t Re-imagining Infrastructure

the globalization of finance and capital flows has build new infrastructures with more capacity changed the stakeholder landscape almost be- and capability than ours. We are chagrined, for yond recognition in only the past twenty years. example, that it has taken longer to complete a The infrastructure-related industries of the Unit- rail link from downtown Washington, DC to ed States used to be part of a relatively stable pub- Dulles Airport in Virginia than it took China to lic utilities market, but deregulation, corporate build three entirely new airports from scratch. mergers and acquisitions, and outsourcing trends While other nations are forging ahead, we have put an end to that stability. are reduced to incremental improvements. The biggest destabilizer, however, is new This failure to see over the transom of our own technology, which is rapidly forcing decisions imagination is compounding our problems. on government and other stakeholder roles. To Simply inserting incremental technology fixes take only one example: Our next-generation without re-conceiving the whole often creates air traffic control system, NextGen for short, unintended consequences elsewhere in the in- promises that air travel will use less fuel, create frastructure. Consider the initiative launched in less noise, cause fewer delays and be safer. To Texas in the 1990s that attempted to bring new realize NextGen, however, the air traffic control wind-generated energy from the breezy plains infrastructure needs to migrate from the ground and mesas of west Texas to the most populous (radars, controllers and the like) to a distributed eastern part of the state. Energy developers architecture across the ground, air and space. and entrepreneurs began building a series of This will require major shifts in mindsets and wind farms and planned to piggyback distribu- operations. Local or Federal government cur- tion on extant power lines. As the wind farms rently owns ground assets that need to be part proved successful, they multiplied to the point of NextGen, but commercial industry owns at which existing power lines lacked the capacity most of the airborne assets. Different commer- to carry the additional load. This led to legisla- cial businesses, along with various government tion mandating additional power transmission entities, either own or control the space-based lines at a cost of $5 billion. The project was ul- elements of the system. So NextGen is much timately stalled by unexpected opposition from more than a technology challenge; it’s a com- landowners, who had aesthetic, environmental bined systems, business model and stakeholder and cost concerns. challenge. As with the Smart Grid, astute lead- Another pitfall with incremental upgrades ers need to re-imagine governance system de- is that it makes an infrastructure more vulner- signs as a whole and then apply political power able to natural disasters or deliberate attacks. As to induce the necessary changes. we automate older processes, for example, we The same basic requirement applies to vir- create more complexities in the system without tually every infrastructure innovation we need “baking in” security precautions or adding ca- to make. Indeed, as we shall see, the point also pacity and redundancy for enhanced resilience. applies to the idea of a conceptually integrated This vulnerability is most pronounced when infrastructural “system of systems” that must we place new control and administration sys- guide our way through this century and into tems on top of old processes and aging technol- the next. ogy in critical infrastructures such as the trans- mission of electricity, transportation of gas and oil in pipelines, water distribution and traffic Compounding Problems control systems. Doing this not only runs a risk he destabilization of our stagnant infra- that old systems will not fit with new moni- Tstructure business models and the admin- toring and control devices; it sometimes creates istrative processes associated with them has left unplanned or unforeseen interdependencies, a us confused. We are saddled with legacy systems trend has been building for decades and has that generate their own, often dysfunctional accelerated dramatically in recent years as we momentum, and we are at a loss for how to re- introduce more sophisticated cybernetic con- new them. We envy countries with emerging trols. Incremental upgrades have already cre- economies that now rapidly design, fund and ated failure points hidden in one infrastructure

Sp r i n g (Ma r c h /Ap r i l ) 2011 39 Nation-Building in America that can jeopardize the reliability of others. For What We Need to Do example, we often use the telecommunications infrastructure to carry the control signals that e in the United States have the capabili- facilitate the automation of other infrastruc- W ties in hand for developing innovative tures. Hence, a disruption in telecommunica- and effective infrastructures. We have the tal- tions could impair our water systems. ent, the engineering capacity, the construction This raises two critical issues—the inter- know-how, materials, processes and experience connectivity of infrastructure systems and what to complete major new infrastructure projects that implies for our governance processes. Half of all sorts. Indeed, the irony is that much of the a century ago, the degree of causal interdepen- best infrastructure now being developed around dence between our electrical power, transpor- the world is based on American invention and tation, water and communications systems was technology. Contrary to popular impressions, modest at best. We could afford to segment too, we also have the money to fuel major proj- these functions and apply the principle of sub- ects, especially when we take into account new sidiarity to their management. Today, howev- financing models and the vast private capital er, the information technology revolution has that can be unleashed.5 What is lacking is an caused infrastructure systems and functions to integrating calculus and governance mecha- converge and overlap such that it is difficult to nism to achieve the ends we desire. treat them as independent functions. This is no easy task, to be sure. Since in- This tendency toward integration offers frastructures are complex systems that involve great opportunities to introduce new ef f icien- a number of disparate stakeholders across gov- cies and to realize gains in performance, reli- ernment, industry and society, integrated lead- ability and safety, but it requires us to think ership is central to renewing them. The govern- and manage very differently than we have in ment piece of the puzzle by itself is complex the past. It requires those in charge of differ- because our federal system recognizes state and ent infrastructure functions, in industry and local municipality rights. Thus we need lead- government, to talk to one another and to ership that works across these jurisdictions as budget and plan together. At the conceptual well. In short, we need to recreate government’s level, the challenge resides in learning how to integrator role without creating either new mo- take advantage of a systems approach to in- nopolies or a larger, more centralized govern- frastructure as a whole without disrupting the ment. Four key steps can lead us there. efficiencies afforded by distributed networks. First, we need to re-imagine the form and Centralized conceptual approaches are fully function of our old infrastructures. We must compatible with decentralized management view infrastructures as a single network of com- processes, but we have yet to work out how plex systems comprised of different assets, juris- to do this in the course of our infrastructure dictional authorities and stakeholders. Second, renewal. We lack the integrative leadership we need design principles that make future in- that understands the new imperatives, and, frastructures robust and adaptable as technolo- consequently, we lack a governance venue in gy advances, funding changes and the needs of which we can even discuss the problem. Ask our citizens evolve. Third, we need leadership yourself this simple question: Where in the U.S. government, at any level, do stakehold- 5A 2008 New America Foundation study estimat- ers in infrastructure regularly come together ed that $400 billion in global funds is available to review, assess and plan for the future of for equity investment in infrastructure, with the system as a whole? At the Department the funds available to support the debt com- of Transportation? Homeland Security? In- ponent amounting to several trillion dollars terior? The FAA? Any single Congressional if global central bank reserves, global pension committee? If you know your government funds and sovereign wealth funds were includ- well enough to have answered, “There is no ed (as they are in Europe, unlike in the United such place”, then you understand the crux of States, which relies significantly on municipal the challenge. bonds to for debt investment).

40 Th e Am e r i c a n In t e r e s t Re-imagining Infrastructure Figure 2 Integrated Vision Multi-Layer Communities: and Leadership Federal Government, State & Local Jurisdictions, Local Community Interests, Private Industry, Financial Institutions

The purpose of the infrastructure and its models, principles, human capital, policy, and operating Mission/Business Layer concept necessary to achieve its desired performance.

Activities associated with deploying or inserting technology to ensure the efficient functioning, 3 optimal performance and smart behavior of the Technology/C Layer system.

The planning and execution needed to ensure compliance with regulatory guidelines and the Environmental & Sustainability community’s interest in being environmentally Layer friendly and responsible.

The protection and security of people, assets and Resilience Layer mission, including building for adaptive capacity, redundancy and graceful degradation.

The planning, design, acquisition, integration, Physical Layer transition and maintenance of the physical assets.

Infrastructure System

that succeeds by convening, integrating and communities of stakeholders, each with their aligning the interests and actions of disparate own interests and motives. When we re-imag- sets of stakeholders. Finally, we need a national ine infrastructures, we must take all layers into vision for America’s infrastructure that defines account, as each needs to change as part of the the function and performance of the whole sys- renewal of the whole system. It’s not just about tem over its entire lifecycle. Only with such a the technology or physical assets layer. More of- vision can we devise an integrated policy that ten than not, the business model piece of the spans government bureaucracy silos and enables puzzle is more important. key stakeholders (public, private, non-profit) to Re-imagination requires optimizing and in- operate in alignment. Only with such a vision tegrating all these layers as a unified whole and can we ensure long-term, stable funding that effectively engaging the stakeholder communi- benefits from private capital and appropriate ties, convincing them to take the long view and levels of government investment. Let’s look at move beyond their near-term self-interest. The these four steps in more detail. Department of Defense Base Realignment and Closure (BRAC) process has set the precedent Re-imagining Complex Infrastructures: Infra- for this. It can be done. structures are complex networks of people, pro- cesses and technology that range across multiple Design Principles of Future Infrastructures: We jurisdictions to deliver a needed end-service. It need a set of design principles that accommo- helps to view this network as a complex system date future technological change and the new having multiple, interdependent “layers” rang- needs of our citizens. In other words, infra- ing from its physical components at the founda- structure systems must be easily upgradable tion to its purpose at the top. Figure 2 depicts when new technologies come to fruition. They this interdependent multi-layer notion and de- must also be sustainable and environmentally scribes each layer. Surrounding the layers are friendly to pass political muster and meet the

Sp r i n g (Ma r c h /Ap r i l ) 2011 41 Nation-Building in America needs of future generations. And they must be is either ready or affordable. Using P3I, we can resilient enough to recover from disruption. field infrastructure projects as phased solutions These qualities don’t emerge by accident; they that anticipate additional capabilities, innova- must be designed in. They are integral to our tions or upgrades. telecommunications and computer industries A third design consideration is sustainabil- today, but they are largely absent in our lifeline ity. Sustainable infrastructure benefits the en- infrastructures. vironment, the economy and social well-being, One important means of accelerating in- now and for future generations. Environmental frastructure adaptability is modularity within design features should include reduced use of an open architecture design. Modularity al- potable water, increased use of recycled water, lows the larger infrastructure system to adapt reduced emissions of greenhouse gases, use of to changing conditions without disrupting its renewable energy sources, and systems that al- function as a whole. There is some modular- low disassembly, recycling and material reuse. ity in current support infrastructures, but this Economic design considerations include life- has resulted more from happenstance than de- cycle costs, community growth and economic sign. We must strive to achieve the same level development (employment gains are important, of modularity that makes the iPhone work— too). Social design considerations address im- a common operating system that runs a set of proved access for communities, protection and constantly improving applications. enhancement of cultural features, social equity Modularity is also good for resilience—the and improved availability to the public. capacity to absorb or mitigate the impact of haz- ardous events while maintaining and restoring Integrative leadership—Megacommunities: Lead- critical services. While a relatively new concept ership of infrastructure renewal requires a collec- to engineering, achieving resilience requires cre- tive vision. Stakeholder communities are wired to ating capacity and redundancy in infrastructure pursue their own self-interests; this is as it should systems to rapidly return to normal operating be, more or less. It is leadership’s job to broker levels under duress. Designers of resilient sys- and enforce a functional common ground by tems analyze all the ways a system could lose which stakeholders can align their interests with functionality, and then devise counter-measures the common good. There is no invisible hand to deal with each possibility in a series of if/then that will make this happen all by itself. scenarios. Such measures are often automatic A new engagement type, known as a mega- responses that may resolve the problem on their community, recognizes that complex problems own—or prompt the system’s operators to take and transformational projects cannot be re- immediate action. If that action is fast enough, solved by a single stakeholder or even by cir- it can be as effective as a redundant or backup cumscribed groups of stakeholders.6 All sectors system. Building in resilience is more effective must participate: business, government and than managing risks, but it introduces addition- civil society. The idea of a mega-, or larger, al cost without initially appreciating the benefit community is critical—forming an expan- of the investment—that is, until we need it. sive, self-sustaining network that puts people A second design consideration borrows the with the right resources in the right place at Defense Department’s planning philosophy, the right time. A megacommunity is not just called pre-planned product improvement (P3I), another term for a public-private partnership. or evolutionary acquisition by another name. A public-private partnership focuses on a rela- This approach yields a system design that in- tively narrow purpose and is formed, governed corporates technologies known to be important and constrained by a static legal agreement. A but not yet mature or affordable enough to include in the current implementation. Provi- 6Gerencser, Reginald van Lee, Fernando Napoli- sions, interfaces and accessibilities are included tano, Christopher Kelly and Walter Isaacson, in the system’s design and plans so that the de- Megacommunities, How Leaders of Government, ferred technology, process or capability can be Business, Non-profits Can Tackle Today’s Global incorporated in a cost effective manner when it Challenges Together (Palgrave-Macmillan, 2008).

42 Th e Am e r i c a n In t e r e s t Re-imagining Infrastructure

megacommunity is a sphere in which stake- A national vision would provide an explicit holders voluntarily join together around a road map that sets priorities. Each of our in- compelling issue of national importance and frastructures is governed independently, but, follow a set of practices and protocols that as mentioned earlier, many are mutually de- make it easier for them to achieve results. The pendent, and increasingly so. Accordingly, we participants remain interdependent because recommend launching a presidential commis- their common interest compels them to work sion (comprised of members of the Executive together, even though they might not see mu- Branch, Congress, state and local governments, tual problems in the same way. the private sector, universities, nonprofit orga- Perhaps the most powerful aspect of the nizations and associations) to formulate major megacommunity is that it does not discourage recommendations for action. This commission self-interest; it actually promotes it. Overlapping should convene several national fora to elicit vital interests, the essential goals the stakeholders broad stakeholder involvement and build mo- share, unite megacommunity members around mentum for the long-term campaign at hand. a common purpose and encourage them to act.v The monumental achievements of our past were This allows organizations to participate with- made possible by a clear vision and focused ef- out worrying about giving up their identities or fort on a national scale. Such a vision will be a betraying core constituencies, whether they be critical first step in creating the stable founda- voters, stockholders or contributors. Through a tion for a modern America. collaborative approach, stakeholders “optimize” Vision is vital but not sufficient. An accom- rather than “maximize.” That is, they see how panying regimen of laws, regulations and poli- working toward the good of the whole pays bet- cies at the Federal level may be necessary to in- ter than a parochial, competitive approach. duce integrative changes. Given that Congress itself is segmented by its committee structure, An Infrastructure Vision: We need a national a special congressional infrastructure commit- vision that brings together a definition of our tee could ensure integrated policy and budget long-term needs, a policy framework that inte- formulation. grates the separate policies of energy, environ- National infrastructure legislation will need ment and transportation, and stable financing to set new integrated policy mandates, autho- throughout the renewal lifecycle. We must cre- rize a range of financing approaches, refine new ate more stability in long-term funding, per- agency responsibilities, provide oversight and formance requirements and functionality, and target specific appropriations. Coordinated leg- policy leadership. Every successful large infra- islative enactments need to create a menu of ap- structure program requires stability in all three proaches for infrastructure development by Fed- of these areas. eral agencies, states, localities, utilities and the Developing a clear vision is the sine qua private sector. One size will not fit all, and it is non. The magnitude of the challenge we face imperative that policies, programs and funding requires bold thinking and the mobiliza- mechanisms remove barriers and create mean- tion of our national political will. President ingful incentives for bold actions. Obama and several Congressional leaders on Above all, this unified approach to new reg- both sides of the aisle have proposed creation ulations must provide a framework in which of a National Infrastructure Bank, initially the private sector can invest in our nation’s capitalized at $50 billion. Other proposals infrastructure. The action plan will require would fund, separately, the Department of regulatory reform across all agencies to deliver Transportation, the Department of Energy, the Environmental Protection Agency and the 7See Reginald Van Lee, Mark Gerencser, Chris- Department of Defense (the largest Federal topher Kelly, and Robin Portman, “Collective energy user). These efforts, though laudable, Leadership and Overlapping Vital Interests: do not match the magnitude of the challenge The Unrealized power of Megacommunities”, at hand, nor do they enable the integration of Innovations: Technology, Governance, Global- national efforts toward a common vision. ization (April 2009).

Sp r i n g (Ma r c h /Ap r i l ) 2011 43 Nation-Building in America Table 1 Finance Mechanism Notes

Acquisition/Direct Funding • Highest first-cost approach; limits “skin in the game” among megacommunity members • Most easily enables application of conditions for award, including performance specifications, and use of auctions/reverse auction acquisition methods

Grants with • Traditional federal approach for transportation Matching Requirements • Matching level requirements may vary to reflect social good or appropriate federal role (theoretically) • May include other conditions on infrastructure development (service levels, technical performance, business model)

Revolving Loan Funds • Existing uses include state water/wastewater treatment facilities • Repayment provides liquidity for future loans, and may spur additional private investment • Loan terms and conditions may reflect social objectives for project

Loan Guarantees • Usually justified by need to correct perceived market failures by which borrowers, regardless of creditworthiness, lack access to credit • Issuer backstops either the credit risk of the borrow or the performance risk of the project, thereby unleashing private capital • Guarantees contain significant terms and conditions regarding project performance and other matters

Other Credit Enhancements • Beyond loan guarantees, other actions that would reduce risk associated with the deployment of private capital • Examples could include funding a loan loss reserve, or providing a letter of credit for a specific project

Self-finance via Bond Issuance • Historically low default rates of municipal bonds were tested by economic crisis of 2008–09 • Extensive legal restrictions on use of bond issuance proceeds

Self-finance via User Fees • Most appropriate for transportation and water/wastewater treatment, but still not commonly deployed • Offer significant benefits in revenue generation, resource allocation, conservation incentive, and others • User fees can take many forms depending on the infrastructure, including tolls (roads), landing fees (aviation), public benefits charges (utilities), and others

more impact from existing grant funds and to be adapted to monitor new performance formulas, while enabling the use of significant metrics. private capital. Specific areas of focus for regu- lation must include: Finally, there may be merit in creating a per- manent commission to oversee our infrastructure • Integrated grant funding to deliver more renewal agenda. An alternative approach would impact from existing grants and formulas. be to elevate this role to the Council level, similar Grants must span agencies, be allowed to to the National Economic Council or Domestic combine with private capital, and permit Policy Council, both of which are responsible for grant-winners to use any technological solu- coordinating, overseeing and reporting on prog- tion that will achieve the grant’s goals. ress to the President and Congress. A third alter- native would be to constitute a congressionally • Private sector investment in U.S. infrastruc- mandated interagency task force, as has been ture. Acquisition processes must reflect ser- done with the 13 agencies comprising the U.S. vice- and performance-based projects where Global Change Research Program. Whatever the lowest cost is not usually the best value. option is selected, coordination and accountabil- Program management processes will need ity for the system as a whole are key.

44 Th e Am e r i c a n In t e r e s t Re-imagining Infrastructure

Who’s Got a Dollar? A re-imagined approach to infrastructure fi- nance needs access to a spectrum of these mech- ne thing is certain about America’s infra- anisms, to ensure that every dollar of funding Ostructure renewal: It will be costly. There are comes from sources in proportion to the benefit compelling strategic reasons to invest in a re-imag- and engagement enjoyed by those sources. Used ined infrastructure, with economic competitive- in combination or alone, these approaches are the ness and national security foremost among them. keys to reinforcing the megacommunity engage- But the measurable economic return on infra- ment model for infrastructure development. structure spending can be compelling in its own right. It could produce $1.59 in additional GDP he United States is locked into an obsolete for every dollar spent, by some estimates.8 First- Tpattern of dealing with infrastructure invest- class infrastructure technology and development ment and renewal at a time when our population know-how are also exportable and promise to help growth and technological advances have raced right our trade imbalances. The key question right ahead. Standard patterns of government interac- now is where will that dollar come from? tion with business and other stakeholders in infra- Re-imagined infrastructure needs re-imag- structure have not changed appreciably in many ined approaches to funding that recognize the decades, and the business models that have arisen megacommunity nature of infrastructure and from these bureaucratic habits now misalign in- unleash private capital. A megacommunity centives among those who build and produce in- engagement model for infrastructure finance frastructure, those who buy it and those who use it. would offer at least two key benefits. We have abdicated the key design function of gov- First, it would better allocate risk and reward ernment: the need to re-examine the way we work. among members of the megacommunity. As long Now we are paying the price for that failure. as a range of f inancing methods is available, private We owe it to ourselves to think hard about how sector gains would be matched by an appropriate we proceed, for our infrastructure crisis also pres- level of risk for private sector members. Likewise, ents a great opportunity. We have it within our social benefits would be matched by an appropri- power to re-imagine America’s infrastructure as ate level of public sector funding and risk. a system of systems, with revolutionary advances Second, it would provide better project selec- in information technology as the nerve center of tion. In a megacommunity, giving a greater voice that new multi-layered system. We have it within to members produces a sense of commitment, our power to adjust the relevant business models ownership, and thus oversight. This would help that will enable the system to work with the prop- to avoid the mistakes made during Japan’s infra- er balance of centralized and decentralized func- structure investment during the 1990s. tions. But to seize that opportunity we need a new At a practical level, there have been many legis- form of leadership to re-conceive the relationships lative proposals to increase infrastructure develop- of infrastructure stakeholders and then to institu- ment funding. The idea of a National Infrastruc- tionalize a new path forward. If we fail at this, we ture Bank, which would use a variety of finance risk our nation’s future—not only our quality of mechanisms to encourage significant private capi- life, but our economic competiveness and our na- tal investment and would also complement exist- tional security. We will also miss the opportunity ing funding programs, has received the most atten- to benefit from recreating a world-class industry tion. Regardless of whether the selected approach to renew or build the infrastructures desperately is a stand-alone entity requiring new legislative needed both here and abroad. We must not fail. action (such as National Infrastructure Bank), or We have too much at stake. a centrally orchestrated approach to integrate the activities of existing agencies (as described above), 8Mark Zandi, Chief Economist at Moody’s, 2008 what matters most is the availability of a full range testimony before Congress: “The boost to GDP of financing mechanisms. This would also apply from each dollar spent on building new bridges to a megacommunity convened and led by a non- and schools is large—an estimated $1.59—and federal entity. Table 1 provides a significant but there is little doubt that major infrastructure in- not exhaustive list of financing mechanisms. vestment is needed.”

Sp r i n g (Ma r c h /Ap r i l ) 2011 45