After years of austerity economics, talk of big infrastructure projects are back in vogue. Trump has made fixing America’s crumbling infrastructure a pillar of his Make America Great Again agenda. But the Trump administration is missing the bigger picture when it comes to what makes a smart infrastructure investment – and what doesn’t.

Infrastructure isn’t all the same. Depending on what it is, it impacts the economy in different ways. If infrastructure is simply about more bridges and roads, it will steer the economy in a emissions-heavy direction. If the infrastructure is electric trams in cities and battery storage facilities for electric vehicles, this could pave the way towards a low carbon future. This is the future that was imagined in the Paris agreement, which the US tragically pulled out of.



The future imagined in Paris requires not only an informal agreement but concrete visions and plans on how to line up policies for infrastructure with policies for innovation, green growth, and financial market reform. Patchy policies won’t do.



How to line up the infrastructure agenda to the innovation agenda, and the green growth agenda is key to our future. Improvements in broadband should not be seen as simply a “speed” problem, servicing a digital agenda, but as an opportunity to use IT to create healthier and smarter lives. How to connect digitalization, with a sustainability agenda, is perhaps one of the most interesting questions that can be asked today.

Innovation can be used to fundamentally change the high carbon content of production, distribution and consumption. Germany – as usual – is an interesting model. Its Energiewende policy has created a vision on how to steer the economy towards green growth across all sectors, not just renewable energy. Transport infrastructure has been planned at city, regional and national levels in ways that lower the carbon footprint of the country.



Traditional industries like steel have been forced to innovate to lower their material content, through strategies of repurpose, reuse and recycle. In the UK, instead, the steel industry remains highly polluting and has not undergone a modernization agenda.



Indeed, it was recently left to rot so badly that it needed to be saved by Tata, the Indian conglomerate. Similarly, it was left to the Chinese to invest in the UK’s nuclear infrastructure. But it is not surprising that in a country with such impatient finance, foreigners end up investing in its infrastructure which requires patient finance.

Countries with patient finance are better able to finance long-term investments. Public banks, like the China Development Bank, or the KfW in Germany, have been playing a leading role world wide in climate protection projects and green infrastructure. Obama had plans for the nation’s Export-Import bank to become an innovation bank but those plans have been put on hold as Trump has decided to bet on private not public actors to foster US growth.

But green growth requires both public and private actors. And while the austerity seems to be fading, the wave of privatization has not. Teresa May’s government – if it survives – has been behind the plans to privatize the Green Investment Bank, one of the only sources of patient finance for green infrastructure in the UK.

Similarly, Trump’s infrastructure plan is increasingly one seen to be driven by private investments – while also cutting the agencies that can help steer progress in clean energy. Darpa, a public agency inside the Department of Defense, was the engine behind the internet, and Arpa-E has been a source of innovation inside the Department of Energy. But his plans are to cut its budget to such an extent most experts believe it will not survive.



Infrastructure should not be seen as a quick fix, and it should equally not be seen as an opportunity for the private sector to make a quick buck. In the same way that speculative finance led to the financial crisis, speculative infrastructure is not the solution. What is needed is a vision for the economy that lines up financial market reform with innovation policy, and infrastructure plans.



As the US retreats from the Paris accord, China and Germany continue to provide global leadership. But others are learning quickly. The UK Labour Party’ recent election manifesto emphasised the need for a green ‘mission’ to drive innovation and industrial strategy, and the need for a public banks to provide the patient finance for innovation that private financial markets are not providing.

Public and private must work together, but this will only work if the process is steered, towards the type of growth we want. Only this way will the world economy have hope for a future that is both smart and sustainable.