TheMarketForIdeas

There is a phenomenon jokingly associated with Steve Jobs, called a “reality distortion field”, whereby he did not just happen to be right very often with regards to his products, but the Universe itself conspired to make him right, regardless of what he said when it comes to what the consumers want or need. A similar phenomenon has been observed with Donald Trump, ever since he announced his candidacy for the US Presidency. Some pundits have taken to calling it “Trump’s luck” and, were there any possible means for him to do so, the coincidences have been so “fortuitous” that one expects him to have arranged them himself. His announcement speech spoke about illegal immigrant criminals and was widely derided by the media for not bearing any relation to their preferred reality. Just two days later, an illegal immigrant who had been previously deported a number of times shot and killed girl-next-door archetype Kate Steinle in the “sanctuary city” of San Francisco, making for a crime whose perpetrator defies the politically correct consensus, but which was also hard for the media to hide down the collective memory hole, as others have been over the years. Trump later spoke about vetting and terrorism and intolerance towards sexual minorities. Lo and behold, the Orlando nightclub shootings, targeting a gay disco, took place with the highest victim toll since 9/11. He spoke about a broken immigration system and chain migration, and the San Bernardino shootings happened, where an American born Pakistani (a “native”) and his imported wife raised in Saudi Arabia shot up a Christmas party and killed over a dozen people. 

Trump has also spoken about the state of American infrastructure and specifically linked its decline to the opportunity costs of the trillions of dollars spent on foreign wars, occupations and also the continuous low intensity conflict (dronings and Special Forces operations) that America engages in on a daily basis and which Trump will have to perform as well. Statista.com created an infographic on 11 billion dollar cost of the fight against ISIS/Daesh between August 2014 and December 2016, which was waged almost exclusively through surgical airstrikes and undisclosed levels of material support for US proxies in the Syrian Civil War[1].

We have spoken about this continuous warfare against asymmetrical combatants in which the US engages in an online feature analysis for The Market for Ideas called “The Genesis of a President and the Four Horsemen of the Establishment's Trumpocalypse”[2]. In that article, we also mentioned the issue of infrastructure and quoted relevant reports on its decay. 

At the same time, Donald Trump has discussed the issue of infrastructure decay across the US, which is important not only for the most visible infrastructures with which the public may interact, but also for what economist Tyler Cowen called “unsexy infrastructure”, such as the US channel system and its locks and dams.

Again, Trump’s Luck springs into action. No sooner had he become President and both his Party and the Democrats had rung alarm bells on the fiscal consequences of his infrastructure-based stimulus plan as a cynical way of derailing part of his populist agenda, than the inevitable struck. The tallest dam in the United States, the Oroville Dam in California (245 meters tall, the largest earth-fill dam in the world until the Aswan Dam in Egypt was inaugurated) also has the second largest reservoir in the California State Water Project. It is faced with serious problems due to a perennial lack of maintenance, faults in construction philosophy and the heavy rains which have affected the usually drought-prone California. In order for the water to not spill over the edge and erode the concrete top of the dam, the emergency spillway was put into action, which is lower than the dam itself and had been inspected recently for suspicion of weak spots. The force of the water has started eroding the spillway itself, with cracks appearing in its walls and the authorities fearing that its earthen side will be washed away by water, which will undermine the integrity of the whole spillway. The LA Times has a graph describing the process.

If it will give way, the lake’s water volume to a depth of ten meters would be sent as a torrent downstream of the Feather River towards Oroville and, further onward, to the state capitol in Sacramento. The true worst case scenario, which authorities do not consider a credible threat, is for the dam itself to be undermined by the erosion until it gives way, sending the entire lake volume downstream. The authorities reversed themselves after trying to perform political damage control, and ordered an immediate evacuation of over 160 thousand people, though not in the Sacramento. As of the writing of this article[3], the spillway had not given way completely and the water levels in the artificial lake have started going down by a meter every ten hours through the controlled release of over 3,000 cubic meters of water per second, possibly with the help of further actions afield in California’s extensive water management infrastructure to limit the intake to the lake. However, heavy rains are expected to start beginning with February 16^th, putting enormous pressure on the entire system. Interested readers may follow the real-time statistics reported on the dam at this website and this website. As a result, despite the temporary reprieve, people have not been given leave to return to their homes. The danger will not pass until de dry season starts in May and the authorities can confidently start working on permanent repairs and reinforcement. Until then, snowmelts and rains will pose a continuous risk of overloading the system. 

The psyche of Californians is attuned not only to earthquake risks, but also risks from their civil infrastructure. In 1928, the St. Francis Dam broke because of the inadequate geology of the construction site, sending a 46 m tall wave downstream. It killed between 600 and 1000 people, many of them unregistered migrants, and levelled entire towns. The remains of the burst dam looked like ruins from an ancient civilization, and were eventually torn down because they had become a morbid tourist attraction.

Around the time of the Oroville Dam’s inauguration, the Banqiao Dam in China broke (1975), killing over 171 thousand people and displacing 11 million, though it was eventually rebuilt. The Californian accident ended the career of William Mulholland, America’s preeminent civil engineer (for whom the famous Mulholland Drive is named), who oversaw the extensive water works that California needed to become an agricultural powerhouse and increase its population. He was the builder of the Los Angeles Aqueduct, the project that allowed it to become one of the largest cities in the world by bringing water from almost 300 kilometers away in the Owens Valley. The mass settlement of California’s dry interiors was only made possible by some of the largest civil engineering projects in the world[4],[5], including the diversion of much of the Colorado River that had carved the Grand Canyon. Water in California is so important that it has led to “water wars” (and water bandits), to legal and political battles between cities and rural areas, between environmentalists and growth maximizers, to the development of strong property rights and a form of water politics that, in any other part of the world, might have resulted in civil war. 

It is the loss of the builder mindset (which could build the Empire State Building in 9 months and the Pentagon in 2 years) that Donald Trump laments and nostalgia for which he has tapped into politically. The country that built transcontinental railroads, the interstate highway system, canals (including the Panama Canal, but also the Erie Canal), dams and numerous skyscraper has not only lost its ethos, but has replaced it with an obstructionist mindset that has seen it pass the torch to places like China and, before it, Japan. Even more worrying is the limited ability of the government to maintain the infrastructure it built in the past, which is why the American Society of Civil Engineers gives the country a D grade overall^[6]. 

Of course, China’s infrastructure seems shinier and better because it is newer and was built from the ground up, rather than having to replace existing prior infrastructure like in the US, whose existing assets must either be amortized or can be exploited indefinitely as a counter-argument to new investment. Sometimes, the older infrastructure may even work better, because its personnel and procedures are more finely tuned by time and experience. However, California is a useful example for the problems that America is facing as a whole. It is a state whose population growth has exceeded the natural limits imposed by the environment and has had to build extensive infrastructure as a result. 

That infrastructure presupposes maintenance costs, which do not ensure votes for any politician, meaning that they are neglected[7]. The politicians “kick the can down the road”, hoping that a catastrophe will not happen on their watch. Even if it does, a disaster might offer a canny politician ways to increase his political capital and extort the government for assistance and recovery funding that eventually becomes a source of political patronage, as happened in the wake of Hurricane Katrina and its 18 billion dollars in aid. The state also adopted policies (proposition 18) which limited the revenue of the state government and left a lot of the maintenance costs in the charge of the local governments. In what is generally considered a fiscally irresponsible state, the local governments are even more so, and many hover on the brink of bankruptcy because of liabilities stemming from overly generous state pensions or hugely inflated operating and building costs. With regards to the Oroville Dam in the highly agriculturally productive Central Valley, a number of watchdogs had reported the possible issue with its integrity in case of unexpected water flows over 12 years ago, only to be ignored by the state government[8]. 

Three environmental groups — the Friends of the River, the Sierra Club and the South Yuba Citizens League — filed a motion with the federal government on Oct. 17, 2005, as part of Oroville Dam’s relicensing process, urging federal officials to require that the dam’s emergency spillway be armored with concrete, rather than remain as an earthen hillside. The groups filed the motion with FERC, the Federal Energy Regulatory Commission. They said that the dam, built and owned by the state of California, and finished in 1968, did not meet modern safety standards because in the event of extreme rain and flooding, fast-rising water would overwhelm the main concrete spillway, then flow down the emergency spillway, and that could cause heavy erosion that would create flooding for communities downstream, but also could cause a failure, known as “loss of crest control.”

The time of the great infrastructure build-up of California also stopped decades ago, while the population grew rapidly, first due to internal migration from the American Midwest, then legal immigration and illegal immigration. This places growing pressures on roads, power plants, water infrastructure and other critical infrastructures. For instance, California is still an important importer of energy (over a third of consumption), despite building nuclear power plants in what is effectively one of the more dangerous seismic risk areas in the world. Its hydro energy potential has also been maxed out, though the California State Water System is one of the most extensive civil engineering feats in the history of mankind. Therefore, California needs more of everything, as well as replacing infrastructure that has not only aged, but has surpassed its lifespan and will grow increasingly more erratic until it breaks down. This is the conclusion of both governmental and nongovernmental assessments of the state of California’s infrastructure. For instance, in areas of the state, the water mains serving various neighborhoods were installed almost a hundred years ago. The American Society of Civil Engineers gave California the following report card in 2013[9].

The full report is available to the public[10]. It contains a useful list of key facts about California’s infrastructure, which makes particular note of the state of its 678 high hazard dams.

Overall, in the United States, out of 87,359 dams (as of 2013), about 14,726 dams or 17% are classified as high hazard potential, since their failure would result in loss of human life. One of the last bills President Obama signed into law was the Water Infrastructure Improvements for the Nation Act[11], setting aside hundreds of millions of dollars for water infrastructure projects around the country and also enabling the US Army Corps of Engineers to work on projects such as levees in flood plains (levees that broke in New Orleans during the Katrina crisis, for instance). The National Inventory of Dams compiled by the US Army Corps of Engineers shows exactly how potentially serious the situation is[12]. 

California was also notable for being highly amenable ideologically to high speed rail schemes that are, supposedly, more environmentally friendly than flying or travelling by car. However, billions of dollars have already been spent without any portion of a high speed line between Los Angeles and San Francisco ever entering the build phase. 

In this regard, California is emblematic of a problem that is found, in lesser or greater degrees, all over the West – a complex mix of factors, costs, preferences and policies which render grand projects either impossible or impossibly expensive, fueling the sense of stagnation or even decay compared to nimble competitors relying on catch-up growth and pre-existing technologies to jumpstart their way to the front of the infrastructure pack. China is the most noteworthy, but Japan, South Korea, Taiwan and even Thailand make the list. In general, an authoritarian but functional country will avoid many of the problems that the West has. 

Some of these factors are:

• A lower tolerance, both legal and financial, as well as emotional/political, for the casualties that accompany every great building project. This has something to do both with the easiness and rapidity with which we access information, and the degree to which our cultures encourage empathy with those in dire straits. Military casualties have become harder to stomach as well. A project that has to be built will find that worker safety is very expensive and measures must be adopted even as they grow more expensive and less effective (or even self-defeating), because no one wants to be blamed for an accident and suffer legal and financial repercussions in litigious societies. This is also due to more individualistic cultures and lower family sizes;
• Greater regulations, especially with regards to obstacles for environmental reasons, which impose an even greater cost, not just for implementation, but also to obtain approvals and certifications;
• New ways for unscrupulous actors to skim money off the top of the project in a way which delays rather than accelerates its completion;
• NIMBY syndrome – “not in my backyard” – which sees significant opposition to almost any new project because of inconvenience (legitimate or not) to neighbors and fear of the effects (pollution, crowding, lower property values from destruction of natural beauty) associated with the project. Economist Tyler Cowen has theorized that greater property rights and the means of their enforcement in the West have resulted in the empowerment of NIMBY tendencies to the detriment of all projects, not just legitimately offensive ones. This is a very plausible theory;
• New technologies and techniques cost more money, but are more efficient and offer advantages in other ways; therefore the higher costs should be expected and supported;
• With regards to civil projects, civil engineering does not have the same prestige and glamour (or financial rewards) it had in the time of William Mulholland. True talent is more likely to go into computer engineering or other fields which are more popular and offer avenues for accomplishment. This factor is in a vicious cycle with the growing impairment of civil engineering projects. No talent will enter a field just to perform maintenance on what others have built and the lack of talent in the field makes it less likely for effective advocacy to take place for great public works;
• The greater dysfunctions that are manifesting in Western societies and the public policy choices which spawn them or which they engender are imposing civilizational maintenance costs which must be borne through the allocation of intellectual capacity, which might have otherwise been assigned to areas such as research or creating public works. For instance, a society at war puts other manpower intensive projects on hold, as well as the allocation of productive capacity to consumer goods, since it has to allocate those resources for the war effort. In the same vein, Western societies are accumulating a large overhead that limits the energies for other projects;
• At the same time, a country that already has an extensive inventory of infrastructures must devote significant resources to their maintenance, rather than building new ones. There may be political barriers to the allocation of resources for replacing infrastructure one already has and which is, apparently, working. Countries building their infrastructures from the ground up do not have those in-built costs. This is easily illustrated by the Solow Model’s explanation for physical capital and diminishing returns in the simple presentation from Marginal Revolution University below.

https://youtu.be/SljsIacQDbc

Finally, the discussion related to what’s happening right now in California leads us to an even more complicated issue to ponder – that of the risks associated with critical dependence on frail and aging infrastructures. My own PhD studies touch on this field and in-depth knowledge of it often leads to pessimism regarding the possibility of uninterrupted continuity of life as we know it, simply because the complexity of the whole system makes breakdowns inevitable. At least a Dam is a physical object whose dangers are readily grasped by the public, but the distributed transport and supply networks running “from farm to plate” to put food on our tables, especially in non-agricultural countries, is less easy to understand, while no less deadly should anything happen to them. Not to mention the energy infrastructures and anything having to do with them. I hope that Romania, as a country that has to build new infrastructure, not just account for the decay of its prior inventory, will also lead the way in discussing the risks, vulnerabilities and threats arising from the infrastructures it is building and consider how best to avoid or mitigate the damage that accidents, attacks or simple attrition could lead to. One may even factor into the infrastructure design process the possibility that future generations will neglect its maintenance, replacement or adequate decommissioning and see whether the cost of such neglect does not exceed the benefits that the builders hoped for.

As for California, it is a bitter defeat for Governor Jerry Brown to be undermined by nature at the moment of his defiance of Donald Trump. For all its bluster regarding secession from the United States or becoming fiscally non-compliant, California was quick to ask for federal help in managing the developing Oroville disaster. It is Donald Trump which orders FEMA into action and the aftermath of the Oroville episode, whatever its end results will be, will certainly feature in the wars of rhetoric between Trump and the states that overtly oppose his policies, especially those regarding immigration.

[1] https://www.statista.com/chart/7889/cost-of-war-against-isis-reaches-dollar11-billion/

[2] http://www.themarketforideas.com/the-genesis-of-a-president-and-the-four-horsemen-of-the-establishment039s-trumpocalypse-poverty-alienation-conflict-and-decay-combined-to-set-off-a-popular-revolt-a73/

[3] http://www.latimes.com/local/california/la-live-updates-oroville-dam-crisis-at-oroville-dam-was-new-never-1487024882-htmlstory.html

[4] http://bancroft.berkeley.edu/ROHO/collections/subjectarea/natres/ca_water.html

[5] https://archive.org/details/califwatertapere00chalrich

[6] http://www.infrastructurereportcard.org/

[7] http://www.hoover.org/research/californias-crumbling-condition-past-present-and-future-infrastructure-california

[8] http://www.mercurynews.com/2017/02/12/oroville-dam-feds-and-state-officials-ignored-warnings-12-years-ago/

[9] http://www.infrastructurereportcard.org/california/california-infrastructure/

[10] http://www.ascecareportcard.org/citizen_guides/Citizen's%20guide%202012_Revised.pdf

[11] https://www.congress.gov/bill/114th-congress/senate-bill/612/text

[12] http://www.citylab.com/politics/2017/02/oroville-dam-flooding-california-infrastructure/516417/