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McKinsey: Infrastructure Productivity: How to Save $1 Trillion a Year

Authors: Richard Dobbs, Herbert Pohl, Diaan-Yi Lin, Jan Mischke, Nicklas Garemo, Jimmy Hexter, Stefan Matzinger, Robert Palter, and Rushad Nanavatty
January 2013

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The McKinsey Global Institute explains how to increase and create a better American infrastructure while saving money.

Insufficient or inadequate infrastructure—and the resulting congestion, power outages, and lack of access to safe water and roads—is a global concern. Typically, the debate about the growing need for infrastructure focuses on whether financing is sufficient to meet it. But, in fact, there are clear ways to create more and better infrastructure for less.

Just keeping pace with projected global GDP growth will require an estimated $57 trillion in infrastructure investment between now and 2030. That's nearly 60 percent more than the $36 trillion spent over the past 18 years, according toInfrastructure productivity: How to save $1 trillion a year, a report from the McKinsey Global Institute and McKinsey's infrastructure practice. The $57 trillion required investment is more than the estimated value of today's infrastructure. And this figure does not include costs such as clearing maintenance backlogs, meeting development goals in emerging countries, and making infrastructure more resilient to climate change. But given widespread fiscal constraints in the wake of the global financial crisis, even assembling the minimum investment required to meet growth predictions is a challenge.

Yet practical steps could boost productivity in the infrastructure sector—a long-time laggard—by as much as 60 percent, thereby lowering spending by 40 percent for an annual saving of $1 trillion. Over the next 18 years, this would be the equivalent of paying $30 trillion for $48 trillion worth of infrastructure.

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