New Directions: Bridging to the Twenty-First Century

The period from the 1980s into the early 21st century saw the emergence of the Third Industrial Revolution. The Second Industrial Revolution did not stop, of course, but it did change, as manufacturing jobs gave way to automation and cheap labor overseas.

The Vietnam War in the 1960s and 1970s forced lawmakers to shift funds away from economic development into military procurement. After the 1980s, the national debt grew to unprecedented heights. Congress responded by reducing expenditures on infrastructure, keeping levels well below inflation levels and increases in GNP.

A graph depicting the U.S. federal debt as a percentage of gross domestic product from 1940 to 2015.

Chronic deficits and high inflation rates, prevented lawmakers from sustaining portions of the infrastructure that had made the affluent society possible. Cans were kicked down increasingly bad roads.

Although government funding of the older infrastructures lagged after the 1980s, four other infrastructure stories since the 1980s merit consideration: the communications, energy, and financial sectors (all of which were deregulated in the late 1970s and 1980s) and the Internet.

“Deregulation” was a combination of an ideological movement emphasizing “free markets” and of political groups in the 1970s who believed federal regulations impeded economic growth.

Deregulation of railways, trucks, and airlines brought economic benefits, especially in the form of lower prices for consumers. Deregulation of communications unleashed innovation on a number of fronts. Deregulation of the energy and financial sectors had mixed results.

Communications

After World War II, government policies separated one communication system from another (data, voice, and video). This artificial separation discouraged cross-fertilization and integration of technologies. Economic growth and global trade strained the communication infrastructures and forced changes.

The logo for the American Telephone and Telegraph Corporation from 1983-1996 (left). Apple’s Macintosh computer, released in 1984, was the first mass-market personal computer with a mouse and integral graphical user interface (right).

AT&T had maneuvered early in the 20th century to become a regulated monopoly, which protected it from competition. By the 1980s, however, AT&T could not keep up with demand. The Federal Communications Commission (FCC) allowed other private systems into AT&T’s market.

By 1984, AT&T realized that it could be more profitable if it gave up its monopoly (and along with it the prohibition against manufacturing communication devices).

IBM, Microsoft, and Apple, along with numerous start-ups that were swallowed up into larger firms, used government-sponsored research to produce new products, the most ubiquitous of which was the mobile phone .

Energy

After deregulation of the energy sector in the late 1970s, exploration for oil and gas expanded, and the increased supply led to generally lower prices over time for both. Government subsidies in the form of tax breaks shored up the expansion, as did technological developments, particularly horizontal drilling.

A fracking operation in the Bakken Formation, ND run by Halliburton (left). The Smoky Hills Wind Farm in Kansas (right).

By the early 21st century, drillers combined horizontal drilling with “fracking” to unleash immense amounts of crude and natural gas. Energy utilities and producers began constructing LNG plants in order to transport natural gas overseas. Oil pipeline firms requested permits for even more pipelines to transport the extra crude being produced.

Meanwhile, a variety of subsidy programs on the local, state, and national levels—touted by environmental groups—supported energy efficiency programs (improved construction techniques, better insulation) and the adoption of non-carbon-based energy sources, such as wind, solar, and geothermal.

The rise of these alternative energy sources recently led to a reduction in the use of coal, which had sustained the generation of electricity for much of the 20th century. In addition, environmental groups—worried about rising levels of CO2 in the atmosphere and resulting climate changes—succeeded in litigating against the expansion of coal-fired electric plants .

A 2009 protest against the coal fired Capitol Power Plant in Washington, D.C. (left). A graph based on data from 1989 showing the relationship between overall urban density and transportation energy use (right).

By the middle of 2010s, government subsidies and consumer choices had altered the American energy mix. Natural gas was replacing coal-fired plants. More and more consumers were choosing to put solar panels on their roofs or in their yards or chose an electricity provider who purchased from alternative energy sources.

Today, the use of home-based solar panels is challenging the prevailing infrastructure system of centralized electric generation: Should customers with solar panels be able to sell back electricity to the utility? How much should they pay to be connected in case their local generation fails? Are customers without the ability to purchase solar panels at a disadvantage? Will the centralized, large-scale, twentieth-century utility model continue?

A graph depicting U.S. energy production by type in 2014 (left). Solar Panels on the roof of a house near Boston, MA (right).

Finance

The deregulation movement for banks spanned from the 1960s to the late 1990s. Bankers wanted freedom to offer more services to customers, from checking and savings accounts to credit cards to stock brokerage accounts so that they could earn more profit for themselves and their stock holders.

The Clinton administration oversaw the final move to eliminate one of the most important New Deal laws—the Glass-Steagall Act of 1933. Now banks could be both investment and commercial banks, and could link the two together. Since the 1980s, regulatory oversight of most banking activity had been relaxed, either through legislation or executive action.

A protestor at the Occupy Wall Street Protests in 2011 with a sign calling for the re-regulation of banks (left). A vault at the former Poughkeepsie Savings Bank in Poughkeepsie, NY decorated with a quote from Democratic presidential candidate Bernie Sanders in 2016 (right).

To stimulate more home ownership, politicians relaxed oversight of mortgage-granting institutions and the secondary markets for mortgages . More and more Americans bought houses they could not afford.

This lack of regulatory oversight contributed to the financial crisis of 2007-2008 and the subsequent Great Recession. Lawmakers scrambled to recover control and came up with the cumbersome Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010.

The Internet

The most significant infrastructure development of the late 20th and early 21st centuries is without a doubt the Internet.

It began with government employees exchanging memos in the early 1960s and expanded through sponsorship from the Defense Department’s ARPANET, which connected scientists at universities and government agencies who worked cooperatively on R&D through DARPA (Defense Advanced Research Projects Agency).

The BBN Interface Message Processor sent the first ARPANET transmission between the University of California, Los Angeles and the Stanford Research Institute in 1969 (left). A map depicting the places connected to the Internet in 1972 (right).

Satellite communications and telephone wires, connected initially to four computers in the late 1960s, expanded to 2,000 computers in the 1980s. The Internet, as the system became known, allowed its academic users to “chat” on “bulletin boards” to exchange ideas and concepts.

The U.S. government really did invent the Internet. The National Science Foundation (NSF) administered it in the 1980 but did not allow commercial use of the system. Business applications were so apparent and compelling that the NSF gave up its role in 1995, about five years after the Internet had been privatized.

Where there had been 25 linked networks in the early 1980s, there were 44,000 by the mid-1990s. In 1993, 90,000 Americans used the Internet regularly; by 2000, 90 million did so. By the end of 2015, 3.2 billion used the Internet globally (of a population of 7.3 billion).

A 2014 map showing global Web Index scores—a composite statistic assessing various measures such as universal access to the World Wide Web.

The Internet morphed into an economic and cultural phenomenon that served the private sector and inspired entrepreneurship around the world.

This could not have happened without the invention of the World Wide Web in the late 1980s and 1990s. The Web is the method for storing documents and other content “online” (or on “servers”) and allowing others to access that information from other networks.

Economically, the Web and Internet present extraordinary opportunities for entrepreneurs to develop and sell products and services. Amazon.com—like Sears, Roebuck in earlier times—has taken full advantage of the new infrastructure of the Internet, along with transportation infrastructures, to enable people to buy and receive products from anywhere in the world at any time of the day.

The first web server with a note still attached reading: “this machine is a server, do not power it down” (left top). Servers for the Wikimedia Foundation (right top). The logo for Amazon.com, the largest internet-based retailer in the world (bottom left). A drawing of the Internet of Things, web-connected devices like a drone, a plant, a home, music, and clothing (bottom right).

Perhaps as important is the so-called Internet of Things. Sometime in 2008 or 2009 there were more things connected to the Internet than people: home control systems, banking accounts, security video cameras, automobile systems, dogs, cows, and so much more. In 2015, it was estimated that 25 billion things were connected to the Internet.

Private-Public Infrastructure Today and Tomorrow

Since the 1980s, there have been movements to “privatize” infrastructure and to shift away from the public-private relationship that has worked so well for so long.

Some argue that the private sector, being mindful of profit, will hold down costs and thus furnish infrastructure more efficiently than can governments.

However, road projects in Indiana, Texas, and California have shown that not to be the case. Privatization of municipal and state infrastructures (water, parking meters, police and fire, prisons) has not always gone well.

Built in 2015, the Orchard Pond Parkway in Tallahassee, FL is the state’s first privately built toll road (left). The toll plaza of the Dulles Greenway—connecting Washington Dulles International Airport with Leesburg, VA—opened in 1995 and was Virginia’s first private toll road since 1816 (middle). The city of Chicago leased out the Chicago Skyway for 99 years in 2006 for $1.8 billion (right).

But some of the P-3s (Public-Private Partnerships) have. These successes have included emphasis on transparency throughout the process of bidding, construction and operation, and on hiring private specialists.

There is another approach that has been successful. The American air traffic control (ATC) system and airport services are woefully inadequate and behind the times in large measure because lawmakers have not invested enough and bureaucracy has stymied innovation.

The remodeled Pope Field Air Traffic Control Tower in Pope Field, NC opened in 2013 to replace the tower built in the 1970s for the U.S. Air Force (left). Built in 1957, the air traffic control tower at the John F. Kennedy International Airport handles over 1,000 flights a day (right).

Canada may have found a solution: In 1996 lawmakers created a private, non-profit group, the Canada Air Navigation Service Provider , to manage and expand the nation’s ATC system and to improve airports. Installation of the latest technology has made the airlines safer and more economical in Canada.

The mixed public-private approach is a strength, but not spending enough on infrastructure maintenance and expansion is a weakness that has plagued the American political economy since the 1980s.

During that same time, moreover, some Americans have grown fabulously wealthy while many others have stagnated in wealth or even fallen down the economic ladder, with almost one in five children now living below the poverty line in the U.S. History suggests that if Americans really want to attack today’s skewed wealth and income-distribution problems, they could invest more in their nation’s infrastructure.

As part of the American Recovery and Reinvestment Act, President Barack Obama announced a $28 billion infrastructure plan in 2009 at the start of the Great Recession (left). Soldiers with the Texas Army National Guard move through flooded Houston roads as floodwaters rise in August 2017 after Hurricane Harvey (right).

A good time to have done something more dramatic and helpful was lost to politics during the Great Recession, which began with the financial crisis of 2007-08. Arguably, the lack of more infrastructure spending at that time slowed the economy’s rebound from the Great Recession and led to today’s sluggish growth.

President Trump campaigned on the promise of large-scale infrastructure projects. However, the financial support being discussed for the recovery from Hurricanes Harvey ($180 billion and counting) and Irma, along with the current lack of political leadership, will probably delay action further.