Rethinking infrastructure: not a cost, but a value

For several years now, mainstream thinking on infrastructure – and on the most quintessential of all infrastructures, the city – has been characterized by an approach tainted by a prejudice. Infrastructure is considered a sort of ‘necessary evil’ to keep cities running. It is invasive, made of steel and cement, it increases public spending, and, as we repeatedly hear in the media, infrastructure is responsible for 75% of world greenhouse gas (GHG) emissions. The first order of business is thus to promote a necessary paradigm shift to position urban infrastructure development as an opportunity to generate social, environmental, economic, and developmental value. This paradigm shift clearly and firmly underpins new global, European, and national development policies but it is only partially comprehended and applied if we look at all levels of development, use, and management of the ‘urban system’. 

First of all, we must define what we mean by ‘urban infrastructure’, starting from a definition of city: a harmoniously interworking complex of material and immaterial pieces of infrastructure: roads, bridges, bus and rail stations, ports, and airports but also housing, parks, public squares, schools, hospitals, parking lots, sports facilities, museums, places of worship, etc. In this sense, urban infrastructure is an enabler of needs-meeting functions and, as such, it is an element whence city dwellers extract economic value and social meaning. In framing this paradigm shift from urban infrastructure as a cost to urban infrastructure as a value, we must not forget that the city is the most  efficient mode for organizing and operating a social system in all its dimensions and complexity. It is the most efficient form in terms of relations among people, economic organization, service optimization, and management of consumption and emissions. It is sufficient to track data from emerging economies (where the process of urbanization can be more clearly studied) to note, for example, that not only is per capita energy consumption 15% lower, on the average, in urban centres with respect to their ‘rural’ equivalent, but the energy sources used are 100% more sustainable, on the average, than those used in rural areas. Furthermore, the development of these economies continues to show that cities – as centres of human capital – improve their productivity by an average of 5% with every doubling of the population via novel and non-conventional means, as has been seen, for example, in the Dharavi slum of Mumbai. 

This is the yardstick by which we must learn to gauge the value and meaning of a piece of infrastructure rather than merely considering, in a rather simpleminded approach, the necessary investment for building it or how much employment it will generate. We need, instead, to recognize and quantify the direct or indirect value that citizens can obtain from these investments, with particular emphasis on social returns. How much can the development of new preschools increase the percentage of workers with dependent children and thus increase the standard of living (and the economic value) of those families? How much can an investment in transportation infrastructure boost tourism or business relations in a given area over the next 20-30 years? And to what extent can this favour new trends in travel that enable novel ways of combining vacation and work? Starting from these premises and from the expertise which, as EY, distinguishes us, the question that we have asked ourselves is: What factors have to be considered when we imagine and realize a piece of infrastructure so that the work is an investment in the future, an element from which the citizens, public administrations, and businesses of today and tomorrow can extract value? 

Our framework for responding to this question has been developed out of experience gained on a day-by-day basis with global clients on issues of urban infrastructure. It is, quite simply, a version on the urban scale of the same logical process that each of us uses, for example, when we have to purchase or build a house in which to live, responding in a structured way to three questions: How do I want to live? What do I need? What can I afford? As an extension, our framework takes the concept of a ‘ home on the human scale’ to the ‘city on the human scale’ or humanopolis.

This question, underlying any ‘reasoned’ development, has historically been approached with theoretical models of varying complexity, whose success (or failure) could only be observed after the fact. Today, thanks to the combination of neuroscience, artificial intelligence, and social media, we have the ability to analytically predict what generational trends will guide the relationship between people and urban infrastructure. For the first time ever, social media and data from sensors provide us with a much more direct and data-driven relationship with future generations (GEN Z and on), neuroscience allows us to precisely assess which urban and development models are and will be perceived by users as having more value, and the new AI-driven approaches allow us to find coherence amidst the infinitude of data to which we have access. 

Once we have understood how present and future generations want and will want to ‘extract value’ from urban infrastructure, the answer to what is effectively needed, necessary, and priority can be obtained by overlaying and integrating global development trends. These trends are currently clearly and firmly focused on the many facets of sustainability and GHG emissions reduction (sustainable energy resources, sustainable transportation, reduction in urban emission, green-referenced liveability, etc.).

Defining a sustainable cost for the plotted lines of development is another process that has only recently begun to move from a qualitative approach to a quantitative approach on all levels. It is clearly only possible to define admissible costs if we know the value effectively generated by the investment. And thus the development of new cost/benefit models is indispensable not only for calculating the future value of a work but also to assess the current, dynamic (short-term), and future benefits it produces. As an example, an investment now that eliminates one ton of CO 2 (equivalent to 10 passenger hours in an airplane) will have a value four times greater in twenty years. In our work every day to assist public and private actors who are called upon to undertake these assessments and decisions, we realize how complicated it is to find a coherent synthesis of these three questions, and how important it is to assist decision-makers in achieving an integrated view, something which is enabled partly by innovative instruments such as those we now have at our disposal thanks to cutting-edge technology. Too often, the decision-making process takes the form of progressive adjustments, without understanding that if we do not have an overall design or vision harmonizing these three areas clearly in mind right from the start, we risk failing to extract from a given piece of infrastructure all the added value that it could produce in the long term, or diminishing the scope of its benefit. At this point, it is important to underscore how our approach has been driven and shaped not only by the needs of our interlocutors but also by the theoretical, legislative, and procedural framework which, especially in Europe, has been developed over the years by universities, governments, and by central and local banks to direct development funds and – as a consequence – infrastructure development itself. This enormous architectural, cultural, legislative, procedural, and economic baggage itself represents an asset without peer in the world, something that other countries are looking at with extreme interest. It is a unique framework, developed over the years, that can account for the development needs of major metropolises such as Paris, Milan, and Berlin, and also of small villages in the heart of Tuscany. 

As Europe, we are the holders of a set of laws and standards that are the fruit of two thousand years of history and culture. It represents a highly attractive ‘export product’ for entire regions of the world undergoing rapid urbanization – from the Gulf States to Sub-Saharan Africa and the Far East – that are approaching a development phase where having a good rulebook is essential for effective management. Working at the global level, we find ourselves interconnecting European know-how and perspectives with opportunities for development abroad, in both the public and private spheres: from investment funds to design studios, the tourism industry, the furnishing industry, the major energy and power generation conglomerates, and other European players that together contribute to our urban and infrastructure development. It is true that Europe, as is often said – at times with thinly veiled defeatism – imposes very strict and onerous rules and procedures as regards, for example, environmental impact. And it is true that, in any case, a 50% reduction in European emissions would only bring global improvement on the order of 5-7%. However, it is also true that these rules and procedures are an edifice and an asset unlike any other in the world and it already has a large market and enormous value. If this is implemented and channelled into a multiplier effect by countries witnessing relatively strong development, it can truly make all the difference.

Opening image: Beijing. Infrastructure is considered a sort of ‘necessary evil’ to keep cities running. Instead, they are the enabler of needs-meeting functions and, as such, it is an element whence city dwellers extract economic value and social meaning. Istockphoto