5 lessons for developing countries from the history of infrastructure investments in the United States

A historic infrastructure bill is winding its way through the U.S. legislative process, seeking to modernize the nation’s infrastructure while helping grow the economy and create jobs. It would help fund major upgrades for worn-down roads and bridges, modernize public transit, expand high-speed broadband, invest in clean water and lead pipe replacement, as well as expand clean energy, electric vehicle charging stations, and public transit to help fight climate change.

Notably, rather than solely fund projects through government spending, the draft bill asks that cities and states seeking major federal funding show they have considered using public-private partnerships (PPPs) to procure projects—though it does not obligate them to use PPPs after conducting a value-for-money analysis.

To better understand how public works can help address a country’s economic and infrastructure crises, here are five lessons that I came to consider most important when studying the New Deal public works projects  created under U.S. President Franklin D. Roosevelt in the 1930s. This initiative resulted in the construction of much of the U.S.’s large-scale public works—such as dams, bridges, hospitals, and schools—that exist today.


1.Public works programs need strong oversight and management to safeguard against waste and corruption. 

New Deal public works projects did not just give money to the states with the hope that it would reach the local level. Rather, public works agencies were involved throughout various stages of the projects. For example, the Public Works Administration (PWA) rooted out waste and corruption by having their officials present, together with local officials, when a contract was offered for a project. This ensured the lowest bid was received. After accepted, the PWA official would confirm the chosen contractor’s qualifications were in line with the work. The PWA then assigned a resident engineer to ensure work was conducted at high standards. In addition, the PWA and Works Progress Administration (WPA) created investigative divisions that were active in combating waste, fraud, and corruption.
 

2. The federal government must work together with local and state partners.

A second lesson is there must be a partnership among the local, state, and federal governments, with each playing a particular role: local communities initiated and planned the vast majority of projects, the state determined whether they fit under public works regulations, and the federal government selected the projects—providing oversight to ensure project completion and protect against corruption.
 

3. The contract model and the government-hiring model are both effective ways to build infrastructure, but the most effective way to create millions of jobs is the government-run model. 

Even though both these models were successful at building infrastructure, the government-run model was more successful at hiring massive numbers of unemployed workers. The government-run model also put more money into workers’ hands, with 80 percent of the WPA allocation going towards worker salaries versus 36 percent for the contract model.
 

4. Funding for public works projects must be large enough to create the number of jobs needed. 

During the Great Depression, a quarter of the U.S. working population was unemployed, roughly 13 million people. The combined public works projects (PWA, WPA, Civil Works Administration, and the Civilian Conservation Corps) hired about 3 to 4 million people a year. Yet although public works, along with other New Deal measures, decreased unemployment to 9.5 million in 1935 and 7.6 million in 1936, these measures were not enough to end the unemployment crisis; another 5 million-plus jobs were needed. Even so, the New Deal public works played a major role in producing the single greatest unemployment rate drop in U.S. history.
 

5. Public works projects must take into consideration issues of equity.

A fifth lesson is that equity issues must be considered when contractors and workers are chosen. This lesson covers a broad range of topics, but includes the following questions:
 

1.  Who will receive the jobs (women, people of color, the poor, immigrants)?

2.  Who will receive the contracts (small businesses, people of color, women)?

3.  Which communities will get infrastructure projects (uptown, inner city, rural areas)?

4.  Will workers be paid a living wage?

Language should be included in requests for infrastructure proposals to ensure a broad range of workers have access to these jobs. Another way to ensure equity is to require contractors to provide a minimum of 20 percent of the jobs to people with incomes at or below 200 percent of the federal poverty level and to the long-term unemployed. As a way to employ more women, we can expand the notion of public works to include such areas as child and elder care. In addition, small businesses should receive about a quarter of the government contracts.

Countries across the globe need to meet the inter-related issues of unemployment and under-unemployment, poverty, inequality, and the global pandemic. Fortunately, there’s a solution that has been shown to work if the five above lessons are followed.

 

Disclaimer: The content of this blog does not necessarily reflect the views of the World Bank Group, its Board of Executive Directors, staff, or the governments it represents. The World Bank Group does not guarantee the accuracy of the data, findings, or analysis in this post.
 

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