Macroeconomists broadly agree that productive infrastructure spending is welcome after a deep recession, especially when interest rates are at record lows. But in advanced economies, any new project typically requires navigating difficult right-of-way issues, environmental concerns, and objections from apprehensive citizens.

CAMBRIDGE – Encouraging news about more effective anti-viral treatments and promising vaccines is fueling cautious optimism that rich countries, at least, could tame the COVID-19 pandemic by the end of 2021. For now, though, as a brutal second wave cascades around the world, broad and robust relief remains essential. Governments should allow public debt to rise further to mitigate the catastrophe, even if there are . But where will new growth, already tepid in advanced economies before the pandemic, come from?

Macroeconomists of all stripes broadly agree that productive infrastructure spending is welcome after a deep recession. I have long shared that view, at least for genuinely productive projects. Yet, infrastructure spending in advanced economies has been declining intermittently for decades. (China, which is at a very different stage of development, is of course another story entirely.) The United States, for example, spent only 2.3% of GDP ($441 billion) on transportation and water infrastructure in 2017, a lower share than at any time since the mid-1950s.

Perhaps this reluctance to embrace infrastructure investment is about to fade. US President-elect Joe Biden has pledged to make it a priority, with a strong emphasis on sustainability and combating climate change. The European Union’s proposed €1.8 trillion ($2.2 trillion) stimulus package – comprising the new €1.15 trillion seven-year budget and the €750 billion Next Generation EU recovery fund – has a major infrastructure component, particularly benefiting the economically weaker southern member states. And the United Kingdom’s chancellor of the exchequer, Rishi Sunak, has set out an ambitious £100 billion ($133 billion) infrastructure initiative, including the establishment of a new national infrastructure bank.

Given many countries’ decaying infrastructure and record-low borrowing costs, all this seems very promising. But, after the 2008 financial crisis, macroeconomists universally regarded the case for infrastructure spending as particularly compelling, too, and the experience then counsels caution about assuming a significant boost to long-term growth this time around. Microeconomists, who look at infrastructure costs and benefits on a project-by-project basis, have long been more circumspect.

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