Infrastructure and Democracy

By Christopher Jones, David Reinecke

The recent bitterly contested election revealed little common ground between the major parties. Yet President-elect Donald Trump and his opponent Hillary Clinton had at least one shared priority: both agreed that America’s infrastructure was in urgent need of revitalization. Indeed, the nation’s roads, bridges, ports, sewer systems, and more are old, crumbling, and decaying. The American Society of Civil Engineers 2013 “Report Card for America’s Infrastructure” pronounced an average grade of D+ for the nation’s technological backbones with an estimated $3.6 trillion needed by 2020. To make matters worse, Americans are currently devoting less per capita investment to infrastructure than at any time since World War II.

How should the necessary revitalization be pursued? Most analyses of infrastructure consider success to be defined by technological sophistication: bandwidth of broadband Internet connections, gigawatts of electricity produced, or ton-miles of rail traffic. Better infrastructure is simply more infrastructure. Such measures of success are too limited. We argue the most important definition of success for infrastructure is how well it enables all Americans to participate in the nation’s social and economic life. Access is the hallmark of great infrastructure.

Though invisible and taken for granted (at least until they break), infrastructures form the foundation for everyday social and economic life. No individual could start a small business selling products across the country without roads, harbors, or rails. No community that lacks safe drinking water can enable its members to improve their quality of life when their health care costs increase and they are forced to miss work. And with the increasing move of political discussions to online forums, it is becoming increasingly difficult to be an engaged civic participant from the wrong side of the digital divide. To be a full-fledged citizen able to achieve the American Dream requires access to infrastructure.

Yet the history of US infrastructure development shows that broad access for all classes and groups of society was typically achieved through the activities of disenfranchised citizens, not the benevolence of private operators or the foresight of policy makers. Framing their demands in terms of rights and the public good, average Americans pressured corporations through regulatory bodies, broadcast their grievances in the media, organized politically, and even built alternative systems of their own. Infrastructure may be good for democracy, but democracy has usually been necessary to create good infrastructure.

To illustrate these points, we explore three case studies over the past 150 years: railroads, electricity, and the Internet. Each reveals a common pattern of initial deployments of infrastructure favoring the elites followed by citizen activism that demanded fairer treatment for average Americans. Broad access won through democratic struggles, not technological sophistication, made US infrastructure the envy of the world for much of the twentieth century.

If Trump’s infrastructure policies can embrace these lessons, then they can help him deliver on his campaign promises to help average Americans economically left behind. He has yet to offer the specifics of how he intends to stimulate infrastructure development, though his preliminary proposals raise some red flags. He has lauded public-private partnerships (PPPs), which are likely to exacerbate inequality, rather than improve access. Private investors typically target communities that are already well-off and exclude low-income areas. For such a model to be successful, a strong public role must be in place to compel investors to include underserved populations.

Railroads set the stage

As the first big business in the United States, the railroad was also the first industry to be regulated as a public utility. The origins of railroad regulation lay in widespread dissatisfaction with the discriminatory practices of large railroad companies. The vociferous agitation of farmers and small business owners inspired new bodies of law and public policy that created a fairer transportation marketplace.

Pioneered in the late 1820s and developed rapidly in the wake of the Civil War, America’s railroad network came to symbolize for many US citizens both the promise and pitfalls of large-scale infrastructure. Linking the rich hinterlands of the Midwest and South with the industrialized East, interconnected rail lines underpinned the formation of a single national market for US goods. On the passenger side, transcontinental carriers brought settlers westward in droves, creating hundreds of new cities and towns as steel tracks expanded toward the Pacific. Railroad companies, in turn, generated unprecedented fortunes for some investors and employed hundreds of thousands of workers in positions ranging from professional managers to manual laborers laying tracks.

US infrastructure development shows that broad access for all classes and groups of society was typically achieved through the activities of disenfranchised citizens, not the benevolence of private operators or the foresight of policy makers.

With their enormous costs and physical footprints, railroads required prodigious financing and land. From 1850 to 1871, federal authorities granted transcontinental carriers over 130 million acres of public land—an area nearly the size of Texas. Government-backed bonds worth hundreds of millions of dollars provided much-needed start-up capital. In return, politicians promoting railroad interests enjoyed generous campaign donations, railroad stock, and special passes permitting free travel, among other outright bribes. Using other people’s money, railroad speculators swelled America’s rail network from 5,000 miles of track in 1850 to nearly 90,000 miles three decades later.

The often dubious financing of railroads frequently led to mountains of accumulated debt and bankruptcy. In the 1870s alone, almost one-third of all domestic mileage fell into receivership. Pressed to pay off debts and satisfy shareholders, rail companies charged “what the traffic would bear,” using consumer demand and private negotiation to set rates. Large enterprises, such as John D. Rockefeller’s Standard Oil Company, used bulk shipments and financial sophistication to achieve preferential rates far lower than what others paid. In turn, railroads passed these costs onto other classes of consumers, commodities, and localities that lacked the bargaining power to negotiate lower rates: often rural farmers and small business owners.

High rates for small consumers soon drew public outrage. Millions of farmers who settled areas of the Great Plains and American West had no viable alternatives for getting their crops to market, yet ever-increasing transport rates squeezed any potential profit from their farms. As muckraking journalists revealed that large companies received low rates for long-distance shipments of their goods, they pilloried railroads as unwieldy monsters squeezing honest business owners at every turn. Small business owners joined the complaints against discriminatory rate policies, incensed that they were, in effect, subsidizing their more highly capitalized rivals. For these populations, railroad rates were a fundamental determinant of their economic survival.

Frustration with the railroads inspired millions of Americans to band together and push for regulating railroad abuses, with the National Grange—a fraternal organization of farmers—and the Populist Party representing the most organized efforts. Beginning first in Midwestern states such as Illinois, Iowa, Minnesota, and Wisconsin, farmers pushed legislators to introduce regulations that outlawed prevalent forms of rate discrimination and capped rate increases. Recognizing that legislators and courts were poorly suited to wade through the complex accounting and operational details of rail companies, multiple states created new government agencies devoted exclusively to regulating railroads. This state-led system expanded later to the federal level with the Interstate Commerce Act in 1887 (which created the first federal regulatory agency), the Interstate Commerce Commission (ICC), and the Sherman Antitrust Act in 1890, outlawing price fixing schemes used by railroad cartels.

Acting through the ICC, railroad regulators invented whole cloth many of the hallmarks of public utility regulation. In search of “just and reasonable rates,” railroad carriers were forced to submit their rates to public inspection and publication. Any carrier caught shipping goods under secret rates or offering private favors faced heavy penalties. Through public rate cases, the ICC created a new democratic forum to debate the fairness of rates. To aid in their rate-making decisions, the ICC pioneered new forms of data collection and publication, including standardized systems of accounts and routine financial disclosures, that have since become ubiquitous across all industries. Federal antitrust law worked toward different ends, seeking to end private railroad collusion and concentration. Major cases such as the Department of Justice’s action against the proposed merger of the Great Northern and Northern Pacific railroad companies in 1904 and the monopolistic abuses of Standard Oil in 1911 exposed the financial machinations of railroad entrepreneurs.

Though regulation created substantial legal burdens for rail carriers, the end result for passengers and shippers was greater transparency in how railroads operated and increased fairness among different commodities, localities, and users. Perhaps most important, as populist movements challenged the corrupt practices of other infrastructure industries, they could turn usefully to existing railroad precedents to similarly regulate these industries in the public interest. By the mid-twentieth century, a sizable portion of the US economy—banking, electric power, natural gas, rail, telephony, and trucking—was subject to the same price and entry controls pioneered for railroads.

Electricity illuminates opportunities

Electrification offers another compelling case of an infrastructural system that initially benefited the wealthy and spread to broad swaths of the population only after active efforts by citizens to secure fair treatment. Moreover, its history is instructive for seeing the wide array of techniques Americans have used to make infrastructure more democratic. Regulation was one approach, but citizens also invested in municipally owned facilities and in some cases even built their own networks. The slow and uneven spread of electricity clearly reveals the importance of social agitation for increasing access to infrastructure.

Thomas Edison’s pioneering of the incandescent light bulb in 1878 and the opening of the first central station in Manhattan in 1882 marked the onset of electricity as a major industry, and not just an object of curiosity. Millions were immediately captivated, and for good reason. As a source of energy, electricity offered unparalleled flexibility. It could illuminate the night, power urban trolleys, and run factories; it could extend shopping after dark, animate spectacles at fairgrounds, and make possible new forms of entertainment, such as motion pictures.

But these new opportunities were not available to all. Street lighting installations that enhanced neighborhood safety and benefited local retailers were initially concentrated in well-off parts of town. Electrified factories increased production efficiency, which enriched owners without dramatically increasing wages for workers. For homes, the story was little better. As of 1907, a quarter century after Edison opened his first plant, only 8% of US homes were connected to the grid, and virtually every one of those was in a wealthy urban area. Rural residents were almost entirely excluded.

Even when electricity was available, its price revealed comparable problems with the railroads. Homeowners and small businesses paid much higher rates than factories or large commercial establishments—often 10 times or greater—for the same wattage. Part of this resulted from the high capital costs of producing electricity that made supplying small and variable amounts of power more expensive on a per-unit basis than large blocks of continuous power. Yet it was also a product of differential bargaining power and the fact that large enterprises could negotiate more effectively than individual homeowners.

One social response to these inequalities lay in the extension of the public utility model to the electricity sector. Beginning in 1907 as a result of public dissatisfaction with electricity providers, many states formed public utility commissions that offered electrical companies exclusive access to a service area in exchange for accepting limits on the rates they could charge along with requirements to provide fair access to all in the coverage area. For many electrical companies, these rights were well worth the responsibilities. For publics, the utility model provided a promise of access and rates that could be publicly debated. For much of the twentieth century, this approach to electrical provision garnered broad acceptance: for investors, it established stability that justified large investments in the utility sector and healthy returns; for the vast majority of users, it led to cheap and reliable access to electricity. Despite recent complaints about the stultifying effects of regulation on innovation within electric utilities, for much of the twentieth century, the public utility model created a welfare-enhancing compromise with widespread benefits.

Yet it would be a mistake to assume the only form of democratic activity to ensure access to electricity came from government regulation. When private utilities failed to provide acceptable service or extend service to smaller communities, many Americans in those locations banded together to build competing systems. Among the most important of these strategies was the creation of municipal electric works. In the first decades of the twentieth century, these small and locally owned suppliers served communities that were otherwise being ignored by private capital. By 1912, over 1,700 municipal stations were in operation across the nation—about a third of the total number of electrical suppliers. Only by building their own stations could modest-sized communities expect to gain the benefits of electrification.

Municipal stations brought electricity to many small towns, but even into the 1920s, the vast majority of rural locations were entirely unwired. Meanwhile, as many observers at the time recognized, the nation’s farm communities were in trouble. Low prices for crops during the 1920s had led to economic hardship and many rural youth were fleeing to the cities in search of better opportunities. For a nation that had always considered the yeoman independent farmer to be the paragon of civic virtue, this trend was deeply disturbing.

A number of prominent Americans, including Franklin Roosevelt and Gifford Pinchot, argued forcefully that rural electrification offered a potential solution to these problems. Electricity, Pinchot argued in 1925, could bring about “the restoration of country life, and the upbuilding of the small communities and of the family.” They believed electric motors would alleviate much of the drudgery of agriculture and well-lit barns could make tending to animals safer. Moreover, radios could keep rural communities connected to broader events and provide entertainment that would encourage youth to stay local. For advocates such as Pinchot, therefore, electricity was a requirement of modern life, not a luxury.

Both public and private efforts finally began to bridge the gap in the 1930s. The Rural Electrification Administration (REA), launched in 1935, enabled millions of farmers to gather together in small cooperatives to construct transmission wires that connected their homes and farms to generating stations. Only once the rural residents took on the responsibility of building the transmission lines would private companies consent to provide them with power. Similarly, the Tennessee Valley Authority developed large public power installations designed to enhance the quality of life in poor regions of the US South.

Crucially, public utilities did not simply supply power in places that private utilities did not consider worth their time. They also acted as benchmarks and competitors to utility companies—an organizational form of checks and balances. Public power projects often demonstrated that electricity could be generated at lower costs than prevailing rates and empowered utility commissions to demand that private companies match their public competitors.

Electricity has become a taken-for-granted part of modern life. Americans live in homes dotted with outlets and expect coffee shops or airports to have stations to charge laptops and cell phones. Yet it was not always this way. Practically universal access to electricity did not emerge organically from the dictates of a free market; it was the result of an active citizenry demanding a fair shake.

Internet comes of age

Our present-day experience with broadband Internet also exemplifies many of the same tensions central to railroading and electricity. Now 20 years after many Americans got online for the first time, digital divides by race, income, education, geography, and content have stubbornly persisted. As next generation broadband networks replaced older forms of Internet access, familiar concerns over infrastructural availability and equal access have inspired renewed democratic activism.

The Internet began in the late 1960s as a government-sponsored communications network under the watchful eye of the Department of Defense. Conceived at the height of the Cold War, the original vision of the Internet was of a decentralized communication architecture capable of withstanding a nuclear attack. The system’s decentralized nature inspired far-ranging predictions by technologists, such as J. C. R. Licklider and Stewart Brand, of the Internet’s democratic capability to encourage cross-cultural communication and the spread of information, though in reality, the network primarily served research universities and defense contractors. The 1986 transfer of management from military to civilian control did not increase democratization as the National Science Foundation (NSF) limited Internet usage to “non-commercial use in support of research or education.”

By the early 1990s, both legislators and NSF officials began questioning the wisdom of a federal agency funding an increasingly expensive communications network while prohibiting nonacademic vendors and users. These pressures led the NSF to transfer ownership of the Internet to the private sector in 1995, and the agency split up and sold the various components of the Internet to multiple companies. Entirely in private hands, basic Internet access over dial-up exploded in the late 1990s thanks to an already ubiquitous telephone network due to federally mandated universal service policies, new Internet applications, and a plethora of providers that ensured competitive rates. By 1998, 92% of Americans could access seven or more Internet service providers (ISPs). Unlike in railroading or electricity, dial-up Internet availability featured little of the same rural or urban divide in terms of coverage, price, or service options since nearly all homes had a telephone connection that could dial up the Internet.

Despite nearly universal telephony and extensive competition among ISPs, many observers began to note inequality in Internet adoption among different groups of people, a phenomenon referred to as “the digital divide.” In 1998, nearly 60% of US households did not own a personal computer. Three-fourths of households further lacked an Internet subscription. Rather than bridge these inequalities, many policy makers at that time considered the Internet to be more a luxury than a necessity. When asked to comment about the digital divide in 2001, Federal Communications Commission (FCC) Chairman Michael Powell dismissed the idea, claiming that “there’s a Mercedes divide. I’d like to have one. I can’t afford one.”

Despite millions of Americans falling through the net, private-sector investment in the Internet grew enormously during the late 1990s and financial booms in the nearby telecommunications sector led to a massive overbuilding of the Internet’s fiber backbone. After the collapse of the Nasdaq Stock Market in 2000 eliminated many technology companies, large telecommunication carriers and cable television operators stepped in to take over the Internet market. Less entrepreneurial and more conservative than their dot-com rivals, these purveyors of wireline networks offered a new product: always-on, high-speed Internet connectivity capable of delivering new online experiences such as streaming video and real-time voice calling. The substantial infrastructure investment required to deliver these services in a challenging economic time led to mega mergers among broadband providers. Today, Internet access is dominated by a handful of companies (Comcast, Verizon, and AT&T).

This decline in competition among Internet access providers has been linked to higher prices and slow investment and deployment, especially in low-income or low-density areas. Almost 40% of rural areas in the United States still lack access to advanced broadband connections. Broadband adoption continues to be characterized by sharp divides in terms of age, race, income, and education. And while the telephone and electricity saw near universal household adoption by mid-century as a result of concerted government subsidies and citizen activism, broadband adoption in the United States appears to have stalled at 65% to 70% of the total US population.

No longer a luxury, broadband Internet is an essential platform for social and economic opportunity. It has become the preferred means for searching for jobs, conducting a great deal of commerce, submitting homework, researching political issues, and communicating with friends, family, and colleagues. There is no Mercedes gap; there are now fundamental gaps in access to social and economic life for millions of Americans.

As was the case with railroads and electricity, the importance of fair access to Internet services inspired a range of democratic responses to bridge digital divides and hold large data carriers publicly accountable. Like the municipally owned utilities and electricity cooperatives of the past, over 450 cities—especially those located in rural areas or with large lower-income populations—have experimented with operating publicly owned broadband networks. Many of the most successful municipal broadband networks, not surprisingly, are administered by public power authorities. Like the Rural Electrification Administration of the 1930s, consumer advocates have pushed for new federal outlays designed to eliminate the high cost disadvantages associated with rural broadband deployment. Older subsidies intended for rural utilities and telephone carriers have since 2007 been redefined to finance broadband infrastructure.

The emergence of Internet access monopolies has also inspired the rediscovery of the older public utility concept. Growing market concentration has empowered data carriers to extract higher rates from content providers to preferentially access their subscribers, violating what legal scholar Tim Wu has called network neutrality. Many consumer advocacy organizations and content providers have argued that data carriers must treat all Internet traffic equally for reasons of fairness. In 2015, after a decade-long legal battle, the FCC agreed, establishing rules for network neutrality. In justifying the rule making, the FCC acknowledged that broadband Internet was a fundamental, basic infrastructure like telephony or electricity and as such data carriers should acknowledge their public role and responsibilities like utilities of the past.

Despite these promising changes, greater, more equitable Internet access remains uncertain given anticipated structural changes in how Americans get online. Though noted critic and scholar Susan Crawford has called for massive federal investment into a national fiber project akin to the National Highway System, no serious legislative proposals are currently being considered that would dramatically expand federal involvement in broadband infrastructure. Existing federal subsidies for broadband Internet—the E-Rate Program and Universal Service Fund—are generated primarily through fees tied to long-distance phone calls. As landline customers migrate to wireless and Internet protocol-based solutions that lack these universal service fees, already modest federal money is likely to dry up, imperiling access for rural users, among others. Finally, though once considered a complement, wireless data over smartphones has become a substitute to fixed broadband access, especially among low-income users unable to afford both forms of Internet access. Unlike wired service providers, wireless data carriers operate in a lightly regulated environment in which data caps, hidden fees, and paid prioritization are standard operating procedure. As Internet access perhaps migrates away from fixed networks toward wireless carriers, familiar democratic struggles await.

Time to rethink policies

The combined histories of railroading, electricity, and broadband Internet demonstrate that although such infrastructures offer considerable social and economic return on investment, few networks were built with the wider public in mind. Only when citizens pushed for greater accountability and fairer treatment from service providers did infrastructures generate the public benefits we now take for granted. Previous democratic struggles suggest we reframe dominant narratives around US infrastructure and rethink our policy recommendations for addressing our present infrastructural predicaments.

For example, consider President-elect Donald Trump’s proposal to use approximately $136 billion in tax breaks to stimulate a trillion dollars of private infrastructure investment. He intends further for these tax breaks to be revenue neutral, meaning that taxes recouped from contractors and construction workers will ultimately offset their cost. Rather than channel public investment through government agencies, the Trump plan calls instead for a dramatic expansion in public-private partnerships to provide infrastructural services to end-users. Though details are scant, Trump likely intends for developers to build, own, and operate private networks and to further recoup the subsidized costs of construction through tolls or other user fees.

PPPs are a popular approach to policy making today. In many ways, this makes sense. They offer potential cost-savings to government and seek to bring the purported greater efficiency of markets to technological projects. Yet in the case of infrastructure, there is a great risk that too much emphasis is placed on private investment, and too little on the public good. When revenue recuperation is placed at the heart of infrastructure planning, PPPs are likely to replicate the inequalities of early deployments of railroads, electricity, and Internet systems that served the wealthy and ignored the rest of society. In search of revenue, private infrastructure providers tend to overbuild in affluent areas and underserve or altogether ignore poorer, rural locales. It is difficult to imagine how greater private participation will solve the problem of crumbling bridges, roads, and water mains that have never generated sufficient revenue to pay for their adequate upkeep. Smarter public policy would recognize the public benefits of infrastructure and seek to level the playing field for underserved areas through targeted subsidies like those pioneered for rural electrification and broadband Internet, rather than offer blanket tax credits for projects that private investors may fund even in the absence of government incentives.

Privatization itself is certainly not incompatible with publicly accessible infrastructures. Consistent across our three cases, however, is the lesson that democratic access was more often an outcome of organized struggle and protest by citizens than an initial design consideration by providers. Without a strong sense of public good, PPPs are likely to continue this trend. Conceptualized as a timely, cost-efficient way of providing high-quality public services through minimizing public sector financing risks, PPPs are not designed to maximize public accessibility or accountability unless explicitly under contract to do so. Contract terms for pricing, profitability, and service quality, among others, may be proprietary and therefore beyond immediate public inspection. By permitting private-sector entities to assume a greater role in the planning, design, construction, operation, and maintenance of infrastructure, everyday citizens are afforded less input, while state authorities frequently withdraw to an auditing or regulatory role. Policy makers should recognize that there is no one best way to structure PPPs. Instead of proprietary contracts between public authorities and private-sector operators, agreements should be structured to facilitate citizen input, define success in publicly accountable ways beyond cost and schedule, and monitor private providers to ensure they deliver services in an equitable manner.

Making US infrastructure great again is a worthwhile goal; embracing democracy is the way to get there.