What’s Not Infrastructure About Social & Environmental Infrastructure?

Economic geeks tell a joke about Microsoft billionaire Bill Gates that goes a long way to explaining why so many cities face a budgetary crisis that can result in serious tears in the city’s social fabric while undermining its ability to invest in projects that beautify and restore the environment.

Gates was crossing a border point, the joke goes, when a customs officer pointed to his suitcase and asked if Gates had anything to declare. Gates said no.

True economics geeks don’t need more of a punch line. The joke is on an obsolete system of counting valuables, which fails to take account of the fact that economic value is no longer measured by things that can be transported in boats, cars and planes. The wealth-creating ideas, talents, and assets valued in today’s economy travel inside heads.

It’s not just customs officers who didn’t get the memo about the seismic shift to a creative knowledge and information economy. Accountants and statisticians weren’t in the loop either. As a result, an enormous accounting ledger error is at the bottom of much of the mayhem that cities now confront as they face prospects of major budget cuts to social and environmental programs.

Former Toronto budget chief Shelley Carroll, a leading promoter of local and sustainable food programs in the city, thinks the bean-counting mentality behind many of those pushing budget-balancing -at-any- price is wrong on two counts.

It’s important to have budgeting leaders who think like economists rather than accountants, says the woman who’s balanced seven billion dollar budgets.

Revenue, not spending problems

More often than not, cities are in a financial mess because of a revenue, not a spending problem, Carroll insists.

To be as livable for local residents and at the same time world-class lively for tourists and businesses is too much multi-tasking for any city that has to rely entirely on property taxes. Property taxes are rigid – they don’t go up quickly in good times like sales and income taxes do, and so never provide anything to bankroll for rainy weather. As well, property taxes aren’t as equitable as income taxes; seniors who bought homes long ago often can’t carry taxes reflecting values that went way up long after their incomes went way down.

Caught between a rock of high property taxes and a hard place of civic cuts, some cities consider new taxes for revenue. Some levy a payroll tax on non-residents who work in or for the city, thereby taking advantage of the largesse a highly-taxed city offers while paying lower taxes that a distant suburb offers. Some cities add a hotel tax on tourists to cover the true costs of city-funded leisure.

I interrupt Carroll to ask if cities don’t also have an even bigger, but invisible, accounting and budgeting problem that comes from the failure to recognize health, social and environmental programs as infrastructure. We hide the problem with our everyday language as much as in our accounting ledgers. We call some city programs social services, instead of social infrastructure, for example. Likewise, we call environmental expenditures spending, rather than investing.

“Exactly,” Carroll says, as I think out loud on this issue.

Bear with me if this sounds technical and turgid. Billions of dollars in taxpayer savings and social and environmental benefits are at stake, and turn on the name and budget column we slot these in. Using the right words is the key to a new understanding that can get us out of the squeeze between the rock and hard place.

Here’s why: if some social and environmental programs can be defined as infrastructure, they can be classed as part of a capital budget rather than yearly operating expenses. That means the costs can be spread over many years and can be funded by city bonds – available at very low interest rates now and at least partly repayable when the economy picks up.

Carroll blames the provincial government’s Ontario Municipal Act for the obsolete definition of infrastructure, based on a 19th century civil engineering view of what infrastructure is – bridges, roads, sewage pipes, rail tracks, and the like.

The taboo against soft infrastructure

Such a narrow view of infrastructure overlooks soft or social infrastructure, as well as natural landscaping, which can often outperform machines and construction projects when it comes to managing storm water, strong winds, flooding, erosion, and the like.

For my money, there could not be a worse time for the toxic combination of bean counting-based budgeting attached to outdated hardware-based definitions of infrastructure.

On a technological level, the present era of computerization and digitalization puts software – an expression of what used to be called human brain power and creativity – at the forefront of new sources of wealth. Consequently, any society that neglects nourishing the human capital that creates software will find itself in a low-wage economy locked into production of cheap commodities.

On an environmental level, runaway damage costs from an onslaught of tornadoes, floods and mudslides casts doubt on the conceit that leads some analysts to call this the ultra-modern “anthropocene” or human-created era of geology. In fact, uncontrollable natural forces still trump human vanity. City-based naturalizing programs that take carbon out of the air and store it in plants and the soil – tree-planting and green roof campaigns, for example – are economically timely and cost-effective, as well as beautifying and job-creating. There’s no reason why they can’t be called and accounted for as infrastructure programs.

Whatever happened to old social infrastructure?

On a social level – which makes all the difference when it comes to how well cities work as a habitat for the social animals known as humans –it’s long past time we took into account that the traditional forces of social cohesion and social capital have withered on the vine over the last 50 years.

At-home mothers, with time to double as informal volunteer leaders of neighborhoods, were a bulwark of social infrastructure until the 1870s. So were churches, which offered a wide range of recreational as well as religious services to communities. Neighborhoods themselves often functioned as infrastructure, providing informal ways of raising kids in a street-based commons based on sharing and mutual responsibility. Workplaces, often quite tightly-knit and based on traditional artisanal values and solidarities, also served as part of the informal or “moral economy” that underlay social cohesion.

All four pillars of traditional North American social structure have gone the way of the dodo since the 1970s. Continuing lack of respect for what these free and low-cost soft infrastructures once provided accounts for the failure to recognize that more formal and publicly-funded infrastructure programs need to be built.

Programs of city governments, non-profits and community agencies are among the few remaining institutional bases to fill the breach and nourish today’s and tomorrow’s social capital.

If public funding for such programs is cut, North American society will soon have a laboratory demonstration of how well an economy and healthcare system function without nourishing forces of social relations. The whole world saw what happened during riots throughout southern England this summer, and a repeat laboratory demonstration should not be necessary.

Recognizing and funding social and natural infrastructure properly is especially crucial for the emerging food movement and economy. Soft infrastructure is what the new food economy needs – think of support for pregnant and breastfeeding moms, school and community gardens, composting programs, farmers markets, community food centers, innovation hubs. Yes, they are mostly social constructions, but the labor that goes into them has to be paid for every bit as much as the cement and steel that goes into hard infrastructure.

One other thing these projects share with conventional hard infrastructure and capital works: they all generate savings, jobs and wealth that repay the investment many times over, year after year.

The theoretical case for identifying such social constructions as infrastructure is supported by prominent U.S. economist Michael Hudson, a prominent blogger and author of over 30 books on economic history and theory. Hudson shows how well-funded social, educational, transportation, and environmental programs underlay the spectacular creation of wealth in the US before 1950, just as disappearance of such programs underlies the public squalor there since.

Economists who publish COMER, newsletter of the Toronto-based Committee on Monetary and Economic Reform, have long highlighted the centrality of investment in human, social, and environmental capital.

Correcting the distortions of an obsolete way of defining infrastructure is an important step toward ending the discrimination against public funding of social projects that are as indispensable to today’s emerging food economy as canals and railways were to the emerging food economy of the mid 1800s.

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