The era of the enormous government project is now upon us. Never in human history has so much money been committed by so many governments to build so many very big things. The question of 2016 will be whether our governments and corporations can avoid the horrendous big-project mistakes of the past.
Currently budgeted infrastructure-project spending will bring about "the biggest investment boom in human history," according to an analysis by Oxford University business professor Bent Flyvbjerg, who estimates that 8 per cent of all government spending, or between $6-trillion and $9-trillion (U.S.) worldwide, is now committed to megaprojects. "If we consider as projects the stimulus packages launched by the United States, Europe and China," he writes, as well as climate and defence commitments, "… then we can speak in terms of trillion-dollar projects and thus of 'teraprojects.' … Projects of this size compare with the GDPs of the world's top 20 nations, similar in size to the national economies of, for example, Australia or Canada."
Megaprojects had long been out of fashion. During the two decades before the 2008 economic crisis, many governments shifted away from enormous rail, electrical and city-building initiatives and generally stuck to local, incremental things: no more CN Towers and high-speed rail lines. Western foreign-aid spending shifted away from dams and superhighways and focused on digging wells, handing out mosquito nets and inoculating children – pointillist initiatives that avoided the corruption, overspending and ambiguous economic outcomes of big-brush projects, but also avoided confronting serious infrastructure shortfalls, such as Asia's dependency on coal or Africa's lack of goods-shipping highways.
Two big decisions at the end of 2015 guaranteed that big-money projects will return in a big way. In November, the Group of 20 countries agreed in Antalya, Turkey, to expand their commitment to restore economic growth by pledging tens of trillions in infrastructure spending – a pledge that includes the promise by Canada's government to double infrastructure spending to $125-billion (Canadian) over the next 10 years.
Then, in December, the UN Paris climate summit saw 195 countries pledge investments in energy efficiency, climate-change protection and low-carbon technology totalling $13.5-trillion (U.S). An analysis by the Toronto-based G20 Research Group, titled Mobilising Climate Finance, estimates that keeping global warming within the UN's two-degree limit will require infrastructure finance in developing-world countries of $3-trillion a year within the next decade.
The Paris summit did not produce anywhere close to the sort of spending pledges required to stop the warming trend. But it did mark a starting point, in which the world's countries all agreed that the only way to escape climate catastrophe is for both public and private sectors to spend big money on co-ordinated projects to roll back carbon emissions and to protect cities and farmlands from the climate damage that will occur.
And the commitments that were made in Paris included an expansion of the Green Climate Fund, intended to pay for climate protection and green-energy projects in developing countries, which saw pledges of $10-billion (U.S.) last year (including $300-million from Canada), but is expected to raise $100-billion a year by 2020. We won't be saving the atmosphere by scaling back our ambitions and abandoning industry (as one branch of the environmental movement would prefer), but by building even bigger: Big projects got us into this mess, and big projects – we hope – will get us out of it.
The problem, in the Age of the Teraproject, is that governments are still really, really bad at managing even mere billion-dollar projects. Huge infrastructure projects have a consistent record of coming in over budget, very late and often with significant levels of corruption, both in the governments involved and within the big engineering firms that carry them out. Environmental projects have an even worse record: One of the few city-sized defences against ocean-level rises, Venice's MOSE Project, will be finished two decades late and $2-billion over budget.
As Dr. Flyvbjerg notes, megaproject management has not improved over the 70 years of his analysis, and still relies on what he calls the "break-fix model:" Plow ahead until a crisis arises, then spend more to rescue the project. Better models are emerging, he says, but there are few who are aware of them.
As much as the world may need these trillion-dollar babies, we should be ready for the age of the terascandal.