Superhighways to Prosperity

  • 2000-06-15
  • By Vid Beldavs
The information superhighway is integrating the global economy. The
rich are getting richer. UPS, FedEx and DHL deliver packages
overnight as e-commerce speeds up the pace of business in the United
States and Western Europe. But East Central Europe is being left
behind. With poor roads - where delivery times sometimes stretch to
weeks - the value added of business-to-business e-commerce to Russia
disappears in the noise level, the clackety-clack of trains and bumps
in the road.

Much of the region continues to stagnate at levels below the economic
performance achieved in 1989, before the collapse of the Soviet
Union. There is no clear vision as to how the decade-long
transformation to free enterprise and market economies will lead to a
prosperity matching that of the West. Mired in stagnation, the region
looms as a threat to the stability of the entire continent.

There is a saying that the country suffers from two things: duraki i
dorogi - fools and roads, meaning, of course, bad roads. Time will
tell if something can be done about the first of these banes. As for
the second, a superhighway system that would link all major towns and
cities from the Urals to the Atlantic and the Baltic to the Black Sea
would fundamentally change the economic prospects of East Central

This is the necessary ingredient to fulfill the promise of the
Internet for the region. Physical goods need to be delivered to
customers whose location is real and not in some virtual realm.
Achievement of real prosperity demands good roads, superhighways.
Superhighways foster economic integration, create jobs and stimulate
industrial development.

On June 29, 1956, U.S. President Dwight Eisenhower signed the
Federal-Aid Highway Act, which provided for 90 percent of federal
financing of the 68,000-kilometer Interstate Highway System Act.
Eisenhower had early direct experience in the need for a superhighway
system. In 1919, he took part in the first transcontinental military
convoy, which took 62 days to go from Washington, on the Atlantic
Coast, to San Francisco, on the Pacific Coast. Today, though, fresh
lettuce is carried from California to grocery shelves in Washington
in about two days by truck. The Interstate Highway System created a
continental market that enabled the United States to achieve a more
than ten-fold increase in national prosperity in the following

Eisenhower's vision enabled integrated development that linked major
road construction projects in all of the states of the continental
United States. The alternative - to develop an interstate highway
system piecemeal, state by state, without unified authority - would
take much more time, ultimately cost much more, the roads would not
be fully integrated, and the economic benefits a fraction of what
would be possible. It was crucial to have an interstate organization
to plan, finance and develop the U.S. Interstate Highway System.

What if the countries of East Central Europe decided to build their
own Interstate Highway System? The U.S. system was built at a cost
roughly equal to that of the Marshall Plan: $24 billion in 1956
dollars, perhaps $200 billion in year 2000 dollars, factoring in both
inflation and improvements in road construction methods and
technology. The number of people in the region is roughly comparable
to that of the United States, more than 250 million. The number of
direct jobs created would range upward of 200,000; indirect jobs from
all the supporting and benefiting industries would grow to millions
of new jobs in the region in the coming decades. A transportation
financing and construction authority representing the participating
countries in the region would foster unprecedented collaboration that
would have spillover effects in other sectors of the economy and life
of the people.

The network is the solution. Economic impact multiplies rapidly with
a fully integrated system that links the total region and is
integrated with other modes of transport. U.S. experience shows that
truck and intermodal rail-truck systems are far more efficient in the
delivery of goods than rail alone. Rail has a clear place and would
benefit from the increased economic activity in East Central Europe
that would result from the construction of an integrated superhighway
system to serve the region.

Could East Central Europe interest its neighbors to the West in this
project? Western Europe already has good roads. And superhighways in
East Central Europe are not likely to be a high priority for farmers
in France. But high unemployment is a concern for all of Europe. A
massive construction project can generate jobs in the West as well as
the East, benefiting Chelyabinsk, Ural Mountains; Turin, Italy;
Stuttgart, Germany; and Peoria, Illinois. Western Europeans would
benefit through sales of equipment and engineering expertise, as
would Americans. The construction of the superhighways would give a
major boost to push countries in the region out of stagnation,
generating greater demand for production elsewhere in Europe. Mere
knowledge of where the roads would be built would stimulate the
economic development of the affected regions. The interstate highway
system itself would promote economic integration of the region, from
the Atlantic to the Urals, helping to eliminate the threat of war on
the European continent.

Construction of the U.S. Interstate Highway System was made possible
through 90 percent federal financing, based on a fuel tax. The
additional 10 percent came from the individual states in which the
highways were to be built. At present, few countries in East Central
Europe could step up to the construction of superhighways on their
own territories, especially if linking roads were not already planned
in neighboring countries. But if only 10 percent of costs had to be
borne through the national budget and other countries in the region,
the project would be workable.

How could the other 90 percent share of construction costs be
financed? There are many options: Superhighway bonds can be sold to
the public for long-term financial security to supplement pensions.
Use charges could be collected from fuel sales and smart tags that
the driver would periodically renew through his or her bank. The
technology for such systems already exists. Such a project would be
perfect for the World Bank, the European Bank for Reconstruction and
Development and other development-financing institutions that can
offer the required financing over 20 years or more. The borrower
would be a regional highway authority backed by member governments.

The primary question here is not the feasibility of the project - it
is manifestly feasible. The question is this: Where is the Eisenhower
who could provide the leadership to bring together the countries of
East Central Europe to build a superhighway system that benefits them

Vid Beldavs is managing director of Enterprise Investments
International Ltd. He contributed this essay to The Moscow Times.