If you’ve tried to drive through Los Angeles and get out into the suburbs at 5:00 in the early evening, you would quickly come to realize that infrastructure is maxed out and decades behind. Freeways that have 65 mile an hour speed limits, look like parking lots. It’s stress-inducing, and makes commuting infinitely more impossible. And trying to truly repair the infrastructure in a timely manner would realistically require a county wide shutdown to be worked on for months to accomplish a complete overhaul to the infrastructure. We’re talking many billions of dollars and a situation that is arguably beyond repair.
This is a truth that is not unique to just Los Angeles but cities across the US and globe are congested and upside down in their finances…
I want to address why this is extremely important and what we have to truly counter this issue over the long-term.
Major U.S. cities are facing financial crises with no solution in sight. New York City’s debt mountain is rising, with $312 billion owed for retirement benefits and healthcare funds. Chicago is $42 billion in debt – $36,000 per taxpayer – and only has $9.5 billion to pay it off. Los Angeles, meanwhile, owes more than $60.6 billion in retirement benefits due to repeated instances of financial mismanagement.
In the wealthiest nation in the world, 78% of Americans live paycheck to paycheck and the ratio of U.S. household financial assets to GDP has never been higher:
The U.S. is mired in debt and plagued with internal division, and is unprepared to work out its own issues, let alone lead other nations. Infrastructure deficiencies mar the landscape and present immediate hazards in highly populated areas.
This is extremely important because it’s proper infrastructure that greases the pipelines for business to take place in our economies. If people aren’t able to move, business can’t get done.
Examples are ubiquitous: Lets take the financial capital of the world where 60% of New York’s roads are in poor or mediocre condition. Or how about Rhode Island where 23.2% of bridges are rated as deficient; and in Massachusetts, the outdated water system is facing a shortfall to the tune of $12 billion.
Of course, it’s not a problem that’s limited to the United States. Globally, around $3.7 trillion in investment will be required, per year, to meet the expected infrastructure needs through 2035, with the aggregated total investment at almost $70 trillion. Power will require the biggest investment, at $1.1 trillion annually, followed by the transportation network, at a cost of around $1.6 trillion per year.
Various world regions paint an unsettling picture of a world in crisis mode. In Brazil, roads and ports need to be upgraded and railroads are few and uncompetitive, and waterways are rarely used. Meanwhile, ten African nations, including some of the continent’s economically strongest regions, are collectively facing a $1 trillion infrastructure funding gap.
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Why are these problems mounting and urgency intensifying?
This shortfall in resources is taking place in a world that’s experiencing exponential population growth, which will only exacerbate the problem. Through 2050 at least, the population trajectory is expected to continue upwards at a steady pace:
It’s a slew of problems – a collision course that cannot and will not be averted by government intervention, which has a dismal track record in terms of solving crises.
What if anything will we use to address these crisis situations?
I do not believe our saving grace will be big government; instead, it will be human resilience and innovation, a defining element of the American spirit. Humans have been capable of many incredible feats especially when their backs are being put up against the wall.
What’s gotten us through crises of the past and will help us combat our current problems is technological innovation: the drive to invent solutions that make our lives easier and spur the economy. Farming, the light bulb and the telephone, vaccines, the automobile, the computer – these technologies have built economies, and have improved and even saved countless lives.
Even within our lifetimes, we’ve seen the inestimable impact of human innovation. The Internet, the blockchain, and artificial intelligence are technologies that were entirely unpredictable prior to their emergence, and yet they have become safety nets for the world we live in.
Beyond the benefits to our quality of life, the economic impact has been, and will continue to be, staggering. Take artificial intelligence, for example: McKinsey Global Institute reports that AI could boost global productivity growth by 1.2% per year through 2030. That amounts to $13 trillion in new wealth – badly needed capital given the expected population growth and infrastructure needs.
And let’s not forget about the impact on job growth: the Internet, smartphones, machine learning, blockchain technology, and other innovations will continue to generate jobs regardless of the vicissitudes of the economy and financial markets, and irrespective of our divided and ineffectual government.
That, ultimately, is our safety net as a nation and as a planet: the enduring power of the human spirit and our tireless drive to build novel approaches to the problems that plague us. More revolutionary technologies will come – new paradigms and new ways of thinking in a world that needs solutions more than ever.
Chief Editor, CrushTheStreet.com
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