Table of Contents
- What Is Infrastructure?
- Understanding Infrastructure
- Important Note on U.S. Spending
- Types of Infrastructure
- Hard Infrastructure
- Soft Infrastructure
- Maintaining Infrastructure
- What Is the Digital Divide?
- Are Electric Vehicles Considered a Part of Infrastructure?
- Why Is Infrastructure Important to a Society?
- The Bottom Line
What Is Infrastructure?
Let me explain infrastructure to you directly: it's the basic physical systems that keep a business, region, or nation running, often producing public goods or supporting key processes. Think of examples like transportation systems, communication networks, sewage, water, and school systems.
You should know that investments in these areas are expensive and capital-intensive, but they're crucial for economic development and prosperity in any region. These projects can be funded publicly, privately, or through public-private partnerships.
Key Takeaways
- Infrastructure is the basic facilities and systems serving a country, region, or community.
- Examples include mass transit and telecommunications networks.
- Large-scale infrastructure is usually produced by the public sector and funded by tax revenue.
- It can also be produced on a smaller scale by private firms or local authorities.
- Infrastructure is classified as soft or hard, both essential to the economy and quality of life.
Understanding Infrastructure
The term infrastructure came about in the late 1880s from French roots, with 'infra' meaning below and 'structure' meaning building—essentially, it's the foundation for an economy's structure.
It covers various systems and structures that need physical components, like the electrical grid across a city, state, or country. While things like bridges and roads are vital to the economy, infrastructure also lets citizens engage in social and economic activities and provides essentials like food and water.
Often, infrastructure involves public goods, so you'll typically see public financing, control, or regulation. This can mean direct government involvement or oversight of a regulated entity. The first U.S. federally funded project was the Cape Henry Lighthouse in 1792.
Private companies sometimes invest in a country's infrastructure for business reasons—for instance, an energy firm might build pipelines and railways to refine petroleum, benefiting both the company and the nation.
Even individuals can fund public infrastructure improvements, such as enhancements to hospitals, schools, or local law enforcement.
Important Note on U.S. Spending
Since 2009, the United States has averaged over $400 billion annually on infrastructure at local, state, and federal levels— that's a key fact you need to grasp about the scale involved.
Types of Infrastructure
Infrastructure falls into hard or soft categories. Hard infrastructure includes tangible structures like roads, bridges, tunnels, and railways. Soft infrastructure covers services for economic, health, and social needs.
Hard Infrastructure
Hard infrastructure is the physical setup for a modern industrialized nation—roads, highways, bridges, plus operational assets like transit buses, vehicles, and oil refineries. It also includes technical systems like networking equipment and cabling that support business.
According to the Brookings Institution, 16.6 million people work in infrastructure-related fields, from engineers to construction laborers, making up nearly 11.8% of the workforce.
Soft Infrastructure
Soft infrastructure involves human capital and institutions that deliver services like healthcare, financial systems, government offices, law enforcement, and education.
Investments here focus on how people thrive daily. In 2021, Biden's Build Back Better Plan proposed expansions to Medicare and tuition-free community college as soft infrastructure initiatives.
Maintaining Infrastructure
Maintenance and funding depend on ownership—government handles much of transportation, water, and education infrastructure, often with federal subsidies, while some is privately owned.
Public-private partnerships are common, like Cintra's 99-year lease on the Chicago Skyway Bridge in 2004, where they get toll revenue and the city got $1.82 billion without maintenance duties.
The U.S. has launched plans like the 2009 American Recovery and Reinvestment Act, the 2015 $305 billion transportation bill, and the 2021 Infrastructure Investment and Jobs Act allocating $1.2 trillion for roads, bridges, water, internet, and more.
That 2021 act included $7.5 billion for electric vehicles and $65 billion for high-speed internet access. In 2022, providers like AT&T and Verizon offered plans at $30/month for low-income households via subsidies.
What Is the Digital Divide?
The COVID-19 pandemic showed many U.S. areas lack broadband, creating a digital divide. The 2021 IIJA funds reliable high-speed internet for all Americans.
Are Electric Vehicles Considered a Part of Infrastructure?
The IIJA funds EV-charging infrastructure, aiming for 500,000 stations by 2030. Trump's election as the 47th President has raised doubts, as he's moved to delay EV funding.
Why Is Infrastructure Important to a Society?
It powers businesses, connects workers to jobs, and links citizens to healthcare and education. A reliable infrastructure supports supply chains and moves goods and services.
The Bottom Line
Infrastructure covers hard elements like roads and bridges, and soft ones like government and education systems. It's seen as a public good that boosts economy and quality of life, with government playing a key role in its expensive maintenance through investment and oversight.
Other articles for you
Yield on earning assets measures how effectively a financial institution generates interest income from its assets to ensure solvency.
Landlocked property is real estate inaccessible by public roads except through adjacent lots, often requiring easements for access.
The present value interest factor of an annuity (PVIFA) helps determine the current value of future annuity payments to compare with a lump-sum option.
Electronic retailing, or e-tailing, involves selling goods and services online through B2B and B2C models, with examples like Amazon and Alibaba highlighting its workings, types, advantages, and disadvantages.
Moving averages are technical indicators that smooth stock price data to identify trends and support trading decisions.
This text explains insurance coverage, its workings, and main types including auto, life, and homeowner's insurance.
The Clayton Antitrust Act of 1914 regulates unethical business practices to promote fair competition and protect labor rights in the U.S.
Impaired credit describes a decline in creditworthiness that makes borrowing harder and more expensive, but it can often be repaired.
Time value is the part of an option's premium that reflects the time left until expiration, influencing its overall extrinsic value.
Hyperdeflation is a rare economic phenomenon involving rapid and extreme decreases in prices, increasing currency's purchasing power, with Bitcoin as a potential modern example.