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Infrastructure

Uploaded by

Kevin Drar
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© © All Rights Reserved
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Infrastructure: Definition, Meaning, and

Examples
What Is Infrastructure?
Infrastructure is defined as the basic physical systems of a business,
region, or nation and often involves the production of public goods or
production processes. Examples of infrastructure include transportation
systems, communication networks, sewage, water, and school systems.1

Investments in infrastructure tend to be costly and capital-intensive, but


vital to a region's economic development and prosperity. Projects related
to infrastructure improvements may be funded publicly, privately, or
through public-private partnerships.

KEY TAKEAWAYS

 Infrastructure is the basic facilities and system serving a country,


region, or community.
 Examples of infrastructure include mass transit and
telecommunications networks.
 Large-scale infrastructure is usually produced by the public sector
and funded by tax revenue.
 Infrastructure can often be produced on a smaller scale by private
firms or through local authorities.
 Infrastructure can be classified as soft or hard and both are essential
to the economy and quality of life of a society.

Investopedia / Sydney Burns

Understanding Infrastructure
The term infrastructure first appeared in the late 1880s, derived from
French, with infra- meaning below and structure meaning
building.2 Infrastructure can mean the foundation upon which the structure
of an economy is built.

Infrastructure includes a variety of systems and structures where physical


components are required such as the electrical grid across a city, state, or
country. While the facilities, equipment, or similar physical assets like
bridges and roads are essential to an economy, infrastructure also enables
citizens to participate in the social and economic community and provides
them with necessities such as food and water.
Because infrastructure often involves the production of either public
goods or goods that lend themselves to production, it is typical to see
public financing, control, supervision, or regulation of infrastructure. This
usually takes the form of direct government production or production by a
closely regulated, legally sanctioned entity. The first federally funded
infrastructure project was the Cape Henry Lighthouse, built in 1792 at
Virginia Beach, Virginia.3

Sometimes private companies choose to invest in a country's infrastructure


development as part of a business expansion effort. For example, an
energy company may build pipelines and railways in a country where it
wants to refine petroleum and this investment can benefit both the
company and the country.

Individuals may also choose to fund improvements to certain pieces of


public infrastructure. For example, an individual may fund improvements to
hospitals, schools, or local law enforcement efforts.

Types of Infrastructure
Infrastructure is often categorized as hard or soft. Hard infrastructure is the
tangible, physical assembly of structures such as roads, bridges, tunnels,
and railways. Soft infrastructure is the services required to maintain the
economic, health, and social needs of a population.

Hard Infrastructure
Hard infrastructure is the physical system needed to run a modern,
industrialized nation. Examples include roads, highways, and bridges, as
well as the assets required to make them operational such as transit
buses, vehicles, and oil refineries. Technical systems such as networking
equipment and cabling are considered hard infrastructure and provide a
critical function to support business operations.

According to the Brookings Institution, 16.6 million people have jobs in


fields directly related to infrastructure. From locomotive engineers and
electrical power line installers to truck drivers and construction laborers,
infrastructure jobs account for nearly 11.8% of the nation’s workforce.4

Soft Infrastructure
Soft infrastructure represents human capital and institutions necessary to
maintain an economy that delivers certain services to the population such
as healthcare, financial institutions, government offices, law enforcement,
and education.

Investments in soft infrastructure target how people thrive and participate


in daily life. In 2021, President Biden's Build Back Better Plan targeted soft
infrastructure proposals like expansions to Medicare and tuition-free
community college.5

Maintaining Infrastructure
How infrastructure is maintained and funded generally depends on who
owns it. The government owns a lot of infrastructure for transportation,
water, and public education. Most infrastructure is owned by state and
local governments, often partially supported through federal subsidies, and
some infrastructure may be entirely privately owned.

Additionally, public-private partnerships exist in maintaining infrastructure.


In 2004, Cintra entered into a 99-year lease with the City of Chicago to
operate and maintain the Chicago Skyway Bridge. As part of the
agreement, Cintra receives all toll and concession revenue generated by
the bridge, while the city benefited from a $1.82 billion cash infusion and is
no longer responsible for maintaining the bridge.6

The United States has embarked on many infrastructure plans


including The American Recovery and Reinvestment Act of 2009 and, in
2015, the $305 billion transportation infrastructure bill.78On November 15,
2021, President Joe Biden signed the Infrastructure Investment and Jobs
Act, which allocates $1.2 trillion to fund the rebuilding of roads, bridges,
water infrastructure, internet, and more.9

The 2021 package also includes new incentives and investment in


developing infrastructure components such as $7.5 billion to
support electric vehicles and $65 billion to ensure every American has
access to reliable high-speed internet.10 In 2022, the White House
announced that AT&T, Comcast, Verizon, Spectrum, and 16 other
providers will offer high-speed internet plans of at least 100 megabits per
second “for no more than $30 per month” to eligible low-income
households citing the new government subsidy established by 2021
legislation.11

What Is the Digital Divide?


As highlighted by the COVID-19 pandemic, many areas within the United
States have limited or no internet broadband access, creating a digital
divide within the country. Included in the Infrastructure Investment and
Jobs Act (IIJA) of 2021 is funding to ensure every American has access to
reliable high-speed internet.11

Are Electric Vehicles Considered a Part of Infrastructure?


The Investment and Jobs Act (IIJA) provides funding to develop the
country’s EV-charging infrastructure and install 500,000 publicly accessible
charging stations compatible with all vehicles and technologies by 2030.12
Why Is Infrastructure Important to a Society?
Infrastructure powers businesses and connects workers to their jobs and
citizens to opportunities for healthcare and education. It creates
opportunities within communities and an economy needs reliable
infrastructure to connect supply chains and move goods and services.

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https://www.investopedia.com/terms/i/infrastructure.asp

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