January 27, 2004

The Roads Must Roll!

The roads must roll! Justin Fox writes in Fortune about the Interstate Highway System:

Justin Fox: But in the process of laying 42,793 miles of limited-access pavement, the Interstate builders changed America in ways few could have imagined in 1939 or even 1956. The Interstate system was sold as a savior for both rural America and declining urban cores; instead it speeded the trend toward suburbanization at the expense of both city and country. It was heralded as an antidote to traffic jams; instead it brought ever more congestion. It was seen as a shining example of progress and good government; by the 1970s it had helped sour Americans on the very idea of progress and good government. And who would have thought that better highways would help make us all so fat?

For American businesses, the Interstates literally and figuratively transformed the landscape in which they operated. Some of the changes were foreseeable: No one should have been surprised that construction-equipment maker Caterpillar did spectacularly well during the big years of building in the 1960s, or that railroads struggled. And in the 1950s America was already becoming a nation of chain restaurants, chain hotels, chain stores, chain everything--although the Interstates certainly accelerated that transformation.

But other changes in which the Interstates played a role came out of the blue. The FORTUNE 500 has become the standard measure of corporate power. In 1955, when we first published the list, it included only industrial companies and was dominated by a few massive ones, with General Motors far and away the biggest and most profitable. The size and seemingly insurmountable market positions of GM and its co-behemoths--rounding out the top five were Standard Oil of New Jersey, U.S. Steel, General Electric, and Swift--led some observers to suggest that we'd progressed from a capitalist system to a sort of corporate socialism. Or as GM chairman Charlie Wilson put it during his 1953 confirmation hearing to become Eisenhower's Defense Secretary, "For years I thought what was good for our country was good for General Motors and vice versa. The difference did not exist. Our company is too big."

The Interstate Highway System--together with another 1956 innovation, the shipping container--helped change that. Thanks to the new road network and containers that could easily be moved from ship to train to truck, overseas manufacturers and domestic upstarts were able to get their products to market in the U.S. more quickly than ever before. New distribution networks arose that were vastly more efficient and flexible than the old. They made it possible for Toyota to order parts for its plants in Kentucky, Indiana, and California just as they are needed, for Dell to build personal computers to order, and for WalMart to replace products on its shelves as quickly as shoppers take them off.

That was good for America. It wasn't always good for General Motors...


So was the $114 billion worth it? Probably. John Fernald, a senior economist at the Federal Reserve Bank of Chicago, has studied the performance of "vehicle dependent" industries like construction, trade, and services during the Interstate-building boom and found that they made huge productivity gains. "Building an Interstate system that tied the economy together turned out to be extraordinarily productive," he says. "Highways complemented the flexibility of the internal combustion engine, so that firms found it much easier to do business away from train lines or natural ports." But as far as Fernald can figure, the productivity boost was a one-time event. Once most of the highway network was complete, more road spending didn't generate similar productivity gains.

Whatever its overall impact on economic growth, the $114 billion clearly steered that growth in new directions. Before the 1956 Interstate Act, states footed most of the bill for highway construction. That meant poor states in the South and Southwest couldn't build superhighways. The wealthy states of the Northeast and industrial Midwest could, but the spectacular cost of building new limited-access highways through already built-up urban areas meant that they usually went about it cautiously.

The Interstate program changed that equation. For the South, which never had much of a transportation network--one of the reasons it lost the Civil War--that amounted to a huge windfall. With the building of the Interstates, the region's transportation disadvantage disappeared and it began to attract heavy manufacturers and spawn retailing (WalMart, Home Depot) and shipping (FedEx) giants. In Al Gore Sr.'s home state of Tennessee, per capita income rose from 70% of the U.S. average in 1956 to almost 90% in 2002.

Posted by DeLong at January 27, 2004 08:11 PM | TrackBack

Comments

A worthwhile read about the road system is a book named "Getting There", which was written ten or so years ago. It is centered around the career of Tom (or it may be Tim) McDonald who founded the predecessor agency of the Federal Highway Admin (or whatever the official name is) around the end of World War I and headed it until his retirement about 1950. McDonald was one of the several bureaucrats who had major influences on the shape of the American landscape in the first half of the 20th centurey but who are largely unknown to the public. Floyd Dominy of the US Bureau of Reclamation was another one.
McDonald facilitated the creation of the highway lobby by organizing the state highway departments and contractor organizations. By the time Eisenhower put his weight behind the Interstate project, of course, McDonald was retired but his disciples were in the saddle at the FHA, the preliminary plans were in the file drawer at the ready and the Lobby was ready to go.
All in all it's a good read.

Posted by: Chuck on January 27, 2004 09:27 PM

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But wasn't possible military use one of the main reasons for building the interstate highway system? I seem to remember reading somewhere that every so many miles, there's a straight stretch of interstate/freeway that's long enough for planes of the 50's-60's vintage to use as a landing strip. And it's fortunate for Manhattan (NYC) and Portland, OR, that Robert Moses and his Portland equivalents were not able to force through all their highway projects. Both cities are more liveable and viable for that reason.

Posted by: sh on January 27, 2004 10:10 PM

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I felt myself thinking back to the highway-construction themed books my grandparents bought me when I was a kid.

I live in an area where the highways from this era are falling into disrepair and decay. The cost estimates to renovate are mind boggling. Maybe it was worth building them in the first place, but I don't know if it's worth rebuilding them in the city where I live. Who's going to pay for it? The conflicting constituencies are the suburban drivers that use the roads get to their city jobs and don't want to spend a dime on transit, and the city dwellers that are starving for transit and don't want to waste a dime on highways. $4.00 a gallon gasoline would end the debate.

The interstate highway program of our era seems to be all that fiber cable laid in the late 1990's. The investment and jobs are again moving down the new highways, this time to India.

Posted by: P. Burger on January 27, 2004 11:28 PM

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P. - Over Here in Germany, $4-a-gallon gasoline has not ended the debate. Just so you know.

Posted by: Doug on January 28, 2004 12:09 AM

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My house was built in 1950. The only change since then was the addition of a cable and a computer. Perhaps we could have skipped the freeways and gone straight to the cable and computer.

Posted by: Matt Young on January 28, 2004 02:37 AM

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One interesting conversation I had recently with the head of a metropolitan planning organization was about the importance of dedicated funding streams for transit.

this gentleman was saying that it was very helpful to him that we had such things, because if the choice of how to allocate highway vs. transit dollars were left to his MPO, he'd be faced with highway contracters vs. transit workers in the lobbying game, and the highways contractors always win.

Posted by: praktike on January 28, 2004 02:48 AM

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Great stuff.

Makes me wonder about the impact on unions, too.

The South has forever been less unionized than the North. I suspect that the build-out and completion of the Interstate Highway system aided the decline in unionization by improving access to cheap labor in the South.

Posted by: Anarchus on January 28, 2004 05:01 AM

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I would like to point out a major indirect impact of the interstate system on manufacturing productivity. Pre-1960, roughly, plants were built near railroad hubs in urban areas. so
they had to be in multi-story building that
created many inefficiencies moving materials from one floor to another. After the interstate plants moved out of urban hubs and into rural locations. So the new plants could be built
on a much more efficient single story plan.
This shift accompanied the movement of such industries as textiles and shoes, but also many others, out of high labor costs New England to
low labor costs southern states. In the 1950s and 1960s New England suffered the economic statnation many are now seeing in other sectors as it was on the losing end of a major shift of economic activity. But, the interstate played a major role in this shift of traditional manufacturing out of New England to places like TEnn., KY, & N.C.. So indirectly the interstate played a much bigger role in the capital spending boom and productivity rebound of the 1960s then the above article implies. In many ways it was comparable to the building of the rail roads in the late 1800s.

Posted by: spencer on January 28, 2004 05:52 AM

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"...the $114 billion clearly steered that growth in new directions", which I agree with, however, there are so many costs external to the actual construction costs that I wonder if we have any real idea of what it cost. I still haven't seen any formulas that effectively capture the social, environmental, health and possibly even political costs of our highway system. And, I don't know how you could establish an 'acceptable' baseline from which to measure these costs.

And, history really does not help in capturing opportunity costs. What if we had spent the money on different infrastructures? It all seems to devolve into speculation similar to "What if the South had won the war".

So, as P. Burger above speculates - is it worth repairing/rebuilding this infrastructure? Are there better alternatives today? We won't know, because congress is likely to pass this new transportation funding regime, which looks an aweful lot like business (and graft) as usual.

Posted by: Rick on January 28, 2004 07:18 AM

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The every fifth mile (or whatever) of an interstate being straght for aircraft landing is an urban myth. You can read all about it thanks to the good people at snopes

http://www.snopes.com/autos/law/airstrip.asp

Posted by: Dave on January 28, 2004 08:24 AM

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The hydropower buildout in the west is credited by many historians as a major factor in winning WWII by providing the vast amount of energy required to rapidly and continuously mobilize war materiel production after Pearl Harbor. Much of the construction is today under threat of decommission for environmental reasons.

‘Smart Growth’ planning policies that emphasize dense urban centers mobilized by public transit as a more efficient land use development pattern are encountering abject failure in cities like Portland, OR where centralized planning is meeting individual demand in a nasty battle for life style choice.

I can’t draw much of a conclusion except to say that the critics of centralized planning have some ammunition at their disposal. I think, in many respects, we - Americans - have relied on the wisdom of our founding fathers and the durability of the institutions they built for too long without providing any critical insight of our own to supplement these institutions that are now under pressure. It is time for innovation in building new private-public relationships that meet the objectives posed by modern technological development. One objective is knowledge transfer. How best to accomplish this? It is interesting that the increased corporatization of academic research institutions is reducing the sharing of knowledge for reasons of market competition. New technologies require a multidisciplinary approach in all phases of development from research to implementation, but academic institutions are still polarized with very little cross pollination among technical disciplines (aside from the unfortunate intrusion of Foucault into the sciences.)

It is not so much what we do (with obvious limits) as it is the way we do things. Our traditional procedures are busting at the seams.

Posted by: KLA on January 28, 2004 08:50 AM

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$114 billion - is that 2004 dollars or 1950-60 dollars? I assume the latter.

Posted by: JM on January 28, 2004 10:00 AM

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I frankly tend to be skeptical of arguments that lay such stress on a single event. The impact of Interstate Highways on southern development and manufacturing-belt decline is a case in point. First, the movement of industry to the South didn't begin in the 1950s; the "runaway shop" issue was roiling northern industry and labor from the 1920s forward, and played a major role in shaping New Deal-era labor legislation. By the 1940s the Interstate Commerce Commission was finding that rising railroad terminal costs in major manufacturing belt cities had cancelled out the traditional cost advantages of so-called "Official Territory," and used that finding to justify the elimination of regional railroad freight-rate disparities. Multistory plants were already growing obsolete thanks to electrification [which eliminated the need for centralized drive trains] and more flexible materials handling. Southern convergence on national income levels began around 1940, well before the Interstate System was begun. Finally, one must remember that it took a long time to get the Interstate system built; as one who was in the late 1960s a young southerner going to school in New England, I can attest to the numerous gaps that remained in the system at that time. I'd argue that the nationwide system of hard-surfaced highways [most of which was in place by WWII] and the concomitant rise of interstate trucking is more important than the Interstate system per se.

Posted by: David on January 28, 2004 01:04 PM

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David and KLA,
Some of the points you make are supported in Michael Lind's recent book, "Made In Texas: George W. Bush and the Southern Takeover of American Politics", as background to the thrust of the argument explicit in the subtitle. Lind points out that the development of the South into an industrial economy was driven by the New Deal as well as later programs like the Interstate Highway system. He also has some interesting ideas on development. The book is much broader in scope, and much deeper in analysis, than the title would suggest.

I strongly recommend this book to anyone concerned about where the "clown show", as Brad would put it, is taking this nation and how we got on this path. This guy is one of the most insightful people writing about the broad sweep of national affairs today.

Posted by: Chuck on January 28, 2004 04:06 PM

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