Beyond Growth: Is investing in infrastructure good for people’s well-being?

In our last blog, we asked whether it is possible for an infrastructure investment in Latin America and the Caribbean to hit the triple win: spur growth, aid societal well-being, and help the environment.

One young woman, on the World Bank Facebook page, posted this plea: "We as citizens have to demand these types of investments from our governments: modern roads, clean energy, investments that create employment without contaminating." ("Nosotros como ciudadanos tenemos que exigir ese tipo de inversiones a nuestros gobiernos: vías modernas, energía limpia que dé trabajo y no contamine.")

I take this as a signal that we should move beyond growth, so...

We explored the first linkage and found that the bonds are indeed strong between infrastructure investment and growth, both short-term and long-term. And while growth is crucial to poverty alleviation, growth can’t do the job alone. A more holistic view of development will help us to judge whether investment in infrastructure is good for society’s well-being. From both an economic and a personal perspective, we want to know if an investment is helping to include its users in the economy, to bring opportunity or advancement to its households.

One proxy of inclusiveness is income equality, and the research shows that, yes, larger stocks and higher quality infrastructure help improve the distribution of wealth. Although income equality tugs at our sense of fairness, as a sole indicator of inclusiveness it feels very indirect and somewhat impersonal. That is, money ain’t everything. For an investment to be truly inclusive, it needs to do something… to provide a service that makes people healthier and happier.

Although the application of Economic Impact Evaluation to the infrastructure sectors is in its infancy, we can see some linkages between infrastructure and development outcomes without stretching our imaginations beyond the evidence. We can say, with some confidence, that:

• Better public transport networks get us more reliable access to job markets and create cities with less congestion and pollution.
• Better water and sanitation mean less schistosemiasis (snail fever), diarrhea and infant health problems. 
• More reliable electricity means more time to study and learn, and the freedom to work out of the home.

All season roads mean better access to markets, schools and hospital… and to cheaper goods.

But does the average citizen paying fuel taxes, utility bills and bus fees think about these indirect impacts?

If not, what do the people want from infrastructure investment? It turns out the answer is tautological: We want the infrastructure service that the infrastructure is supposed to provide. During public consultations for a national Infrastructure Strategy in El Salvador not too long ago, an elderly man in the village of Villa Belen expressed this better than I could.

“The truth is that nobody would move to this town, because there is not a single basic service here. Those who are here now are truly desperate…we are on a boat with many problems, but if we abandon it, we will drown. If somebody would offer me money, I would take it and leave everything here. There is no light, no water, no basic services.”

Time after time, when the poor are asked what their priorities are, it is the infrastructure service itself that surfaces to the top.

The “well-being” of the poor is improved when they have household sewerage connections and running tap water they can trust. Period. Their lives are better when they have reliable electricity and when they can get get to a good road easily. Period. City dwellers want better public transport because they want better public transport. It means less waiting, less stress, more time for the important things in life. Studying the impact of infrastructure services is crucial to design and to investment prioritization.

But we don’t need regression analysis or experiments with control groups to grasp the truth of the importance of infrastructure services for the poor. They tell us themselves and, ultimately, this is the link between infrastructure and inclusiveness.