In 2015, the Business Round Table, a lobbying organization promoting the interests of large U.S. corporations, published a report on the nation’s transportation infrastructure, which briefly summarized the “history” of the situation.

After a mid-20th-century spending spree on America’s highways, railways, waterways and harbors, and airlines, expenditures dropped precipitously and remained low for several decades. Even though the nation’s population doubled during the last half of the century, Congress had not supported repairs or expansions.

As part of a national spending spree on highways, a portion of the Hollywood Freeway opened in 1951 with much fanfare.

The report noted that the quality of the U.S. transportation infrastructure ranked only 16th in the world. It argued that expenditures on infrastructure would produce jobs and significant economic growth. “It’s time to strengthen our economic foundation by reinvesting in transportation infrastructure,” the report concluded.

The report mirrored many others that had been produced during preceding decades.

The ASCE (American Society of Civil Engineers) has continuously beat the drums for increased infrastructure spending, awarding a D+ grade this year to the nation’s transportation infrastructure. In June 2017, after an accident that injured many, the governor of New York declared the condition of the New York City subway system a public emergency and pledged another $1 billion for its ongoing capital campaign.

Workers survey the damage after a commuter train crashed into a passenger car near Valhalla, NY in 2015 (left). In 2007, the Minneapolis I-35 Bridge collapsed during rush hour, killing 13 and injuring 145. In 1990, the federal government rated the bridge—and 75,000 others—as “structurally deficient” (right).

These urgent reports focused narrowly on transportation, which is only one of the many infrastructures that have made possible the extraordinary success of the American economy. Infrastructure includes a much wider range of systems, technologies, and institutions: the financial sector (banks, insurance companies, mortgage firms, stock exchanges), energy delivery systems (electric and natural gas utilities; natural gas and petroleum pipelines; LNG (liquefied natural gas) ports; and wind and solar panel farms), communications (telephone, radio, satellite, and the Internet, both wired and wireless), and municipal infrastructures (water, sanitation, schools, and trash disposal).

In fact, these infrastructures have made possible the modern abundance that Americans often take for granted by enabling and accelerating all three stages of industrial change.

The First Industrial Revolution in the 18th and 19th centuries was supported by rivers, roads, canals, the postal system, and Alexander Hamilton’s financial system.

The Second Industrial Revolution (mid-19th century) was characterized by railroads, telegraph, telephone, electricity and natural gas, local banks, and national and international stock exchanges.

Chartered in 1791, Alexander Hamilton designed the First Bank of the United States to stabilize and improve the nation’s credit (left). The 1993 unveiling of the road sign for the Dwight D. Eisenhower National System of Interstate and Defense Highways (right).

And the Third Industrial Revolution (mid-20th century to the present) was pushed forward by all of the above plus highways, the Internet, and interstate banking.

The American capitalist system is a mixed economy, part private and part public, and its infrastructures are built through private-public relationships. While the private sector has dominated, the public sector has lent key support through establishing a legal system, encouraging banking expansion, and offering direct and indirect subsidies to speed up development.

The mixed approach to infrastructures has worked well over the course of American history. Government investment has been an economic multiplier, empowering private enterprise to prosper.

Infrastructure history is incredibly complex and unpredictable. All infrastructures were shaped by economic and political forces that played out through public-private debates at the local, state, regional, and national levels. No one predicted railways would supplant canals so quickly; no one saw the Internet coming.

An 1846 map of the United States with roads, rails, and canals from John Calvin Smith’s The Illustrated Hand-book for Travelers through the United States (left). A 2010 map depicting the availability of Broadband Networks in the United States by county (right).

What is clear, though, is that when the government invests in infrastructure, there are often many private-sector spinoffs and profitable winners. There is often waste, but that is how the American political economy has operated from the beginning. And without public investment, infrastructure is neglected, with devastating ripple effects across the economy.

Building America’s Infrastructure, the Nineteenth Century

The dire warnings and predictions from the Business Roundtable and ASCE are not new in the history of transportation infrastructure in the United States. In the early 19th century, “internal improvements” led to spirited debates in Congress on the proper role of government in the economy.

Roads and bridges in the youthful United States were often privately owned but required government charters. Since the government was essentially granting a monopoly, it could set the terms of service (rates and hours).

An 1848 cartoon depicting a split within the Whig Party as the party’s traditional issues of tariffs, banks, and internal improvements fill a wagon being pulled in opposite directions with Henry Clay and Horace Greeley on one side and Zachary Taylor and an Uncle Sam-figure on the other.

Canals took a momentary lead in large-scale transport investment, but lost out quickly to the emerging railway industry. As with canals, many of the local and state railways failed. In most cases, both private and public actors underestimated the total costs of construction and operation.

Later in the century, federal land grants to railways, especially in the West, occasioned much debate and not a little chicanery. About 50 percent of interstate railway investments in the 19th century came from the federal government in the form of land grants. (Much of the private investment came from Europe, especially the United Kingdom.)

An 1855 lithograph of the Erie Canal at Lockport, NY (left). A ceremony in Promontory Summit, UT in 1869 for the completion of the First Transcontinental Railroad (right).

On the local level, urban areas underwent transformations as business leaders invested in city services, such as streetcars, electric grids, and water and wastewater systems. These not only made money for private investors but also contributed to improved living standards for more citizens.

Other businesses took advantage of the local, state, and national infrastructures to invest in new ventures. Farm equipment, sewing machines, clothing, processed foods, and countless other products poured out of American farms and factories into the growing national and global economies. Infrastructures enabled raw materials and crops to get to the factories and processors and finished products to arrive at retail stores.

New technologies replaced older ones. This 1917 photograph shows one of the last horse drawn carriages in New York City as it moves alongside a “Modern Electric Car.”

By the late 19th century, for example, Sears, Roebuck and Company took advantage of the national infrastructures to expand its initial watch business into a mail-order catalog and delivery enterprise that listed thousands of products, eventually including entire house construction kits in its famous catalogs.

The mail system delivered the catalog; customers could use the telegraph, telephone or mail to order products; and the railways and local delivery firms or the post office would deliver the goods.

Rural consumers (and retailers like Sears and Montgomery Ward) were helped when Congress created rural free delivery (RFD) in the late 19th century and allowed the post office to deliver parcel posts in 1913. In that year, Sears sold five times the items it had the year before.

Akin to Amazon Prime's free delivery, Sears, Rosebuck & Co. offered free delivery through the Post Office's Rural Free Delivery service for its thousands of mail-order goods (top). The Post Office encouraged its Rural Free Delivery (RFD) carriers to adopt automobiles instead of horses and wagons as this driver did in 1910 (left). The 1904-04 Montgomery Ward & Co. catalogue had over 1,000 pages of merchandise (right).

The significance of these public and private investments in infrastructures and economic activity throughout the 19th century is clear. Sometime around 1900, the United States surpassed the United Kingdom as the largest economy in the world. 

Roads and Electricity: 1910-1940

Development of the American consumer economy took off between 1910 and 1940, a period in which Americans experienced a world war, a sharp postwar recession, and a decade of prosperity for many but not all, followed by the most severe depression in the nation’s history.

As before, politics shaped government promotion and regulation of infrastructure expansion. Some infrastructures thus received more government and private support than others: electric utilities more than natural gas; highways and airport construction over railways.

A photograph of a road construction crew in the 1920s building the Yolo Causeway in the San Joaquin Valley of California as part of the state highway system.

Experience from World War I encouraged some expansion of road construction during the 1920s. Funding of highways during the first half of the 20 th century came from both state and federal budgets. In the 1920s, the percentage breakdown between state and federal spending was about 57 to 43. User fees (gasoline taxes and automobile licenses) were the main source of funds. But conflict between the many government entities involved in road-building—city, county, state, and national governments—slowed that growth.

Expenditures for national highways under the New Deal increased but not as much as one might expect, given that a quarter of the workforce was unemployed and given the poor coverage of the national highway system.

New Deal reformers were more successful in shoring up the financial infrastructures of banking and securities (the stock market). New federal regulations held off another great financial crisis for more than 80 years. The American financial industries rebounded so strongly that they helped fund the costs of World War II and the Cold War, not only at home but also abroad.

The Norris Dam under construction in 1936 through the Tennessee Valley Authority (left). A 1940s advertisement for the Rural Electrification Administration, a federal loan program for installation of electrical systems in rural areas through cooperative electric power companies (right).

Meanwhile, a movement that began in the 1910s to expand electricity to all Americans picked up in the 1930s, with the Tennessee Valley Authority (TVA) leading the way. The TVA was the only “socialistic” program from the New Deal, as the government owned and managed the dams and lakes comprising the system. It has also been tremendously successful.

Before the 1930s, private utilities had not seen profits in stringing lines to sparsely populated rural areas. TVA and government-promoted rural electrical cooperatives showed private utilities that they could make money, and most rural Americans had electricity by the late 1940s. In 2017, electric cooperatives still deliver about 11 percent of all kilowatt hours of electricity, the remainder supplied by private providers.

Farmers gathered at a foreclosure auction in Iowa during the 1930s. Military police attended to ensure that the farmers would not prevent the auction from occurring.

Government programs to help middle class Americans keep their houses during the Depression expanded over time to promote home ownership. The Federal Housing Administration (FHA) and Federal National Mortgage Administration (FNMA, or Fannie Mae) were joined by other programs later in the century to make the housing industry an important infrastructure.

The Era of Affluence: 1940-1980

Together, the New Deal and World War II ushered in the era of “Big Government.” This led to the mid-20th-century spending spree noted above and underlay the so-called Era of Affluence (1945 to 1970s).

War spending caused the national budget to increase from just under $10 billion (1941) to over $98 billion (1945). The Revenue Act of 1942 exponentially increased the amount of money available to Washington by bringing almost every working American into the income tax system.

Politicians gave the government more and more responsibility for shaping the macro economy. The Federal Reserve System was tasked with controlling inflation; other government agencies regulated insurance companies, S&Ls, and commercial and investment banks. The financial system of the United States was known as the safest in the world.

An Office of Emergency Management poster promoting the educational benefits available to veterans through the GI Bill (left). An advertisement for home loans available to veterans through the Federal Housing Administration (right).

The Servicemen’s Readjustment Act of 1944, or G.I. Bill, encouraged 16 million veterans to go to college, start their own businesses, or enter job-training programs set up by the government and the private sector. This investment in human capital was one of the most important factors in creating the Age of Affluence.

Depression and war delayed many Americans’ decisions to raise children, but the Baby Boom began in 1946 and lasted until 1964. The surge in population underscored the need for expansion of many infrastructures—the highway system; suburban housing; water and wastewater systems; electricity grids and natural gas systems; and school districts. Much of the increased population occurred in the South and West, which had already been growing because of demographic shifts that began in the 1920s.

A graph depicting U.S. births by year with the “Baby Boom” generation in red (left). In 1962, NASA began construction on the Vehicle Assembly Building, one of the largest buildings in the world by volume (right).

The Cold War also prompted the federal government to pour money into research, often on university campuses, in telecommunications, computing, and nuclear energy. When the “Space Race” took off in the 1960s, NASA’s facilities benefited Florida, Alabama, and Texas, and out of that race came advances in satellite communication and weather forecasting that now constitute essential infrastructure.

The Federal Aid Highway Act of 1956 was a classic investment in infrastructure.

President Dwight D. Eisenhower had been impressed with the German highway system during WWII, and he said the 1956 Act would support national defense. User taxes went into a highway trust fund to be used for construction and upkeep, but general taxes were also employed. The national government came up with about 90 percent of the costs (the states picked up the rest) to design and construct 41,000 miles.

A 1957 map depicting the routes to be added to the National System of Interstate and Defense Highways (left). President Dwight D. Eisenhower discussing plans for the interstate highway in 1955 (right).

The economic benefits of the interstate highway system included creating construction jobs, reducing transportation costs for manufacturers and retailers, and stimulating new businesses along and near the interstates.

Not all was positive.

Interstate highway designs were created by engineers who devised “loops” so that truckers could avoid urban congestion. The problem with using this efficiency approach was that the loops undermined connections between urban cores and the suburbs. More often than not, the interstate highway designs cut off older, mostly minority neighborhoods from the interstates and connections to the urban core. Thriving urban business districts died.

The Pulaski Skyway in Newark, NJ, with the Lincoln Highway’s two black bridges that cross the Passaic and Hackensack Rivers and the Manhattan skyline in the horizon (left). The High Five Interchange in Dallas, Texas uses a complicated five-level stack interchange to accommodate the traffic volume (right). An aerial view of the highway system in Seattle (bottom).

Americans’ reliance on cars increased, along with pollution, as they no longer lived close enough to walk to stores and schools.

Mass transit systems were losers in the quest to connect urban centers to nearby suburbs and to other urban centers. The interstate highway system encouraged the American cultural fetish of individuality embodied in the automobile. Mass transit, on the other hand, smacked too much of socialism, which of course was the enemy in the Cold War. As late as 1989, expenditures from the trust fund for highways totaled $13.5 billion, while mass transit projects received only $3.5 billion.

Railroads faced difficulties as well after WWII. Passenger traffic dwindled to a trickle, having lost out to the automobile and, for cheaper transportation, intrastate and interstate bus systems. Railway freight operations continued to lose out to the motor truck and water carriers, which received support from the Army Corps of Engineers.

A graph depicting U.S. petroleum production and imports from 1920 to 2005 (left). A gas station in Portland, OR during the oil shortage in 1973 with long lines of cars waiting for gas (right).

The energy infrastructure also suffered because of political stalemates in Congress and the effects of international politics. National regulation of natural gas production through the Federal Power Commission (FPC) restrained exploration for new gas. Complex international Cold War politics created a two-tiered price system for petroleum (imported and domestic), and that, too, slowed down exploration for new oil.

Then came the Energy Crisis of the 1970s.

Evening news programs showed long lines of cars at the nation’s gasoline stations and prices soaring well above previous highs. Middle East oil producers had taken control of their national resources, raised prices, and reduced deliveries overseas. Domestic producers did not have enough oil on hand to lower prices.

Students at the University of Michigan listen to a speaker at the first Earth Day in 1970 (left). Senator Edmund Muskie, a Democrat from Maine and author of the 1970 Clean Air Act, delivering the keynote address at the first Earth Day in Fairmount Park, Philadelphia in 1970 (right).

Less apparent on the news but real to those suffering were the natural gas shortages, particularly in the Midwest. To meet acute shortages, the FPC scrambled to re-route gas from manufacturers to residential customers during severe winter weather. At least the energy infrastructure was flexible enough to do that.

At about the same time, the environmental movement emerged as a major force in American politics. Arguments for reducing carbon-based energy systems (that is, petroleum products) gained more legitimacy over the late 20th and early 21st centuries.