THE BLOG
02/27/2012 05:10 pm ET Updated Apr 28, 2012

Obama's Not So New Deal

President Barack Obama's new budget would almost double spending on U.S. infrastructure over the next six years while slashing the appropriations of most other domestic agencies. The blueprint proposes $476 billion through 2018 on highways, bridges and mass transit projects, funded in part by the savings from pulling out of Iraq and Afghanistan. When added to an immediate $50 billion boost for roads and bridges, transit systems, border crossings, railways, and runways, it comes to an 80 percent increase over the last such request. It also includes $47 billion over six years to build up a high-speed rail network; and more than $1 billion in fiscal 2013 for the Next Generation Air Transportation System, which will update air traffic control systems. The budget would also create a National Infrastructure Bank to lend money for infrastructure projects including a next-generation, wireless broadband network. The concept is crystallized by the president, "We can't cut back on those things that are important for us to grow. We can't just cut our way into growth." The logic is simple -- we have a problem with accumulated capital where our major institutions and companies won't inject capital into the economy because they are still afraid of the systemic risks in our economy. Corporations are sitting on $2 trillion of cash but nobody's willing to step up. So, the government needs to take the first step -- build the nodes around which new corporate investment can (more safely) take place. So, the reasonable question is "how has this worked in the past?". The Keynesian notion of government spending to stimulate the economy is usually described by detractors and proponents as the second coming of the New Deal. But the truth is that top-down government spending is as old as capitalism and not an invention that starts with Roosevelt and the WPA of the 1930s.

Remaking Paris

Perhaps the most dramatic example of Keynesianism was the rebuilding of Paris in the mid-19th Century. In his magisterial essay, The Right to the City, leading social theorist David Harvey, describes the situation in 1848 where massive unemployment and their own version of the Occupy movement were threatening the monarchy. Picking his moment, Napoleon III (nephew of the original Bonaparte), staged a coup and ascended the throne in 1852. His response to widespread dissension was to launch a massive infrastructure program. "Abroad this meant the construction of railroads throughout Europe and down into the Orient as well as support for grand works such as the Suez Canal... at home it meant consolidating the railway network, building ports, draining marshes... but above all it entailed the reconfiguration of the urban structure of Paris." And the man who made it happen was Baron Georges Haussmann, the Daniel Burnham of his age. Haussmann was a big-picture man who once famously responded to a plan for a new boulevard, saying "You have it 40 meters wide and I want it 120." He created the quarters and the arrondisements that we try to recreate in every shopping-mall bistro and at Epcot Center. These debt-financed infrastructure improvements were exorbitant and touched every part of the city, uprooting and dispossessing people who had lived there for generations. It also created a consumer society and a pleasure principle that still define social climbers and high society today. But as Harvey tells us, the holiday ended: "The overextended and increasingly speculative financial system and credit structures on which this was based crashed in 1868." In a couple of years, Napoleon and Haussmann were both out and the Occupiers took over briefly in the form of the Paris Commune.

New York's Building Boom

From here, we fast forward to the New Deal after the New Deal: Robert Moses taking a "meat axe" to the Bronx. The situation in 1942 was the same: capital which had no place to go and massive unemployment. As Harvey tells us, Moses, the "Master Builder of New York" was a fan of Haussmann and vowed to do to the NY metro area what the Baron had done in Paris. Before him, there was no Triborough Bridge, Jones Beach State Park, Verrazano-Narrows Bridge, West Side Highway ,Long Island parkway system or Niagara and St. Lawrence power projects. He built all of these and more. Harvey tells us "Moses changed the scale of thinking about the urban process and through the debt-financed highways and infrastructural transformations, through suburbanization, ... and the engineering of the whole metropolitan region... helped to resolve the capital surplus absorption problem. To do this, he needed to tap into new financial institutions and tax arrangements (subsidies to home ownership) that liberated the credit to debt-finance the urban expansion." As Harvey tells us, the Moses method spread all over the country and this nation building stabilized the financial system and powered the world economy as the US became the preeminent economy, albeit running trade deficits with the rest of the world. As in Paris, it also raised generations of anxious consumers and made defense of property the reigning social impulse. As Harvey says "debt-encumbered home owners are less likely to go on strike" Like Haussmann, Moses fell from grace as suburbanization was picked apart by everyone from Betty Friedan to activist Jane Jacobs to the hippies as the reason for American decline. And then came the bursting of the property bubble in 1973 and the bankruptcy of NY in 75.

Infrastructure In Deed

I am not decrying master planners. Both Haussmann and Moses did extraordinary things. Before Moses, for example, New York State had a modest amount of parkland; when he left his position as chief of the state park system, the state had 2,567,256 acres. And I am not suggesting that Obama has it wrong. Infrastructure spending is fundamentally sound. High-speed rail can revitalize mid-sized cities in flyover America such as Rockford, IL or Lynchburg, VA. They can also generate a profit as South West Transport and Virgin Rail in the UK and the Acela Express, Amtrak's high speed rail service along the Northeast corridor demonstrate. And with Buy America provisions written into the rules, infrastructure spending usually has a multiplier effect for suppliers and subcontractors. Plus, it's a great time for Keynesian economics -- people need work, financing is cheap, the private sector isn't hiking up prices or soaking up materials and, quite simply, we need it. Infrastructure may be the least superfluous thing in our budget outside of healthcare. The American Society of Civil Engineers calls our infrastructure "embarrassing," giving it a D grade overall in its 2009 report card. It is calling for $2.2 trillion in spending over the next five years, way more than allotted. That would translate into better roads, schools, and waterways. The Washington Post points to "A 2010 report by 80 experts, led by former transportation secretaries Norman Y. Mineta and Samuel K. Skinner, calling for an annual investment of $262 billion in the nation's deteriorating transportation infrastructure... that estimate may even be on the low side."

The Meaning of Peacemaking

So, in the end it's not the if, but the how that we should be cautious about. As Moses and Haussmann remind us, massive building programs reorient economies but also engineer initiate capital flows, cultural patterns and behavior. If there is one salutary thing that both the Occupy and Tea Party movements share, it's what they have done to the political process -- putting the issue of the ordinary person who feels marginalized back on the table. At the risk of sounding a trifle mystical, let us also consider that changing our physical environment should come with an appreciation for what places mean. They are sites of memory, documents of our national narrative and a map of our aspirations and values. When we redirect traffic or tether a city to the grid for the first time, we shift its metaphysics. British social scientist and geographer, Doreen Massey, has written about how global capital flows and the transportation infrastructure have caused a compression of time and space. She says, "How, in the face of all this movement and intermixing, can we retain any sense of a local place and its particularity?" But it is important to note that she is no anti-growth activist. It isn't so simple. Places, in her eyes, should evolve and change. "If it is now recognized that people have multiple identities then the same point can be made in relation to places. ... what gives a place its specificity is not some long internalized history but the face that it is constructed out of a particular constellation of social relations, meeting and weaving together at a particular locus. ... And this in turn allows a sense of place which is extroverted, which includes a consciousness of its links with the wider world, which integrates in a positive way the global and the local.

Globalization (in the economy, or in culture, or in anything else) does not entail
simply homogenization. On the contrary, the globalization of social relations is yet
another source of (the reproduction of) geographical uneven development, and thus of
the uniqueness of place. There is the specificity of place which derives from the fact
that each place is the focus of a distinct mixture of wider and more local social
relations. There is the fact that this very mixture together in one place may produce
effects which would not have happened otherwise. As we build our way to growth, let us ask the right questions but let us not look for simple answers. In the end that's probably the best deal we can make.

Research for this article was provided by Collins B. Yearwood. A Chicago-based public relations and communications consultant, he has worked with firms such as BMO Harris Bank, Chicago 2016 and the University of Chicago Medical Center. He can be reached at collins.yearwood@sbcglobal.net.