Transportation and Economic Opportunities

Transportation developments that have taken place since the beginning of the industrial revolution have been linked to growing economic opportunities. At each stage of human societal development, a particular transport mode has been developed or adapted. However, it has been observed that throughout history that no single transport has been solely responsible for economic growth. Instead, modes have been linked with the function and the geography in which growth was taking place. The first trade routes established a rudimentary system of distribution and transactions that would eventually be expanded by long distance maritime shipping networks and the setting of the first multinational corporations. Major flows of international migration that occurred since the 18th century were linked with the expansion of international and continental transport systems that radically shaped emerging economies such as in North America and Australia. Transport has played a catalytic role in these migrations, transforming the economic and social geography of many nations.

Transportation has been a tool of territorial control and exploitation, particularly during the colonial era where resource-based transport systems supported the extraction of commodities in the developing world and forwarded them to the industrializing nations of the time. More recently, port development, particularly container ports, has been of strategic interest as a tool of integration to the global economy as the case of China illustrates. There is commonly a direct relation between foreign trade and container port volumes. Due to demographic pressures and increasing urbanization, developing countries are characterized by a mismatch between limited supply and growing demand for transport infrastructure. While some regions benefit from the development of transport systems, others are often marginalized by a set of conditions in which inadequate transportation plays a role. Transport by itself is not a sufficient condition for development. However, the lack of transport infrastructures can be seen as a constraining factor on development. In developing countries, the lack of transportation infrastructures and regulatory impediments are jointly impacting economic development by conferring higher transport costs, but also delays rendering supply chain management unreliable.

A poor transport service level can negatively affect the competitiveness of regions and corporations and thus have a negative impact on the regional added value and employment. In 2007, the World Bank published its first ever report which ranked nations according to their logistics performance based on the so-called Logistics Performance Index. Investment in transport infrastructures is thus seen as a tool of regional development, particularly in developing countries and for the road sector. The standard assumption is that transportation investments tend to be more wealth producing as opposed to wealth consuming investments such as services. Still, several transportation investments can be wealth consuming if they merely provide convenience, such as parking and sidewalks, or service a market size well below any possible economic return, with for instance projects labeled "bridges to nowhere". In such a context, transport investment projects can be counterproductive by draining the resources of an economy instead creating wealth and additional opportunities. Efficient and sustainable transport markets and systems play a key role in regional development although the direction of causality between transport and wealth generation is not always clear.

In a number of regions around the world, transport markets and related transport infrastructure networks are seen as key drivers in the promotion of a more balanced and sustainable development of the region or even the entire continent, particularly by improving accessibility and the situation of weaker regions and disadvantaged social groups. There is also a tendency for transport investments to have declining marginal returns. While initial infrastructure investments tend to have a high return since they provide an entirely new range of mobility options, the more the system is developed the more likely additional investment would result in lower returns. At some point, the marginal returns can be close to zero or even negative, implying a shift of transport investments from wealth producing to wealth consuming. A common fallacy is assuming that additional transport investments will have a similar multiplying effect than the initial investments had, which can lead to capital misallocation.

The most common reasons for the declining marginal returns of transport investments are high levels of existing infrastructure, economic changes,and economies of agglomeration. High levels of existing infrastructure are in a context of high level of accessibility and transportation networks that are already extensive, further investments usually result in marginal improvements. This means that the economic impacts of transport investments tend to be significant when infrastructures were previously inexistent or deficient and marginal when an extensive network is already present. Additional investments can thus have limited impact outside convenience. Economic changes. As economies develop, the nature of their economies tends to shift from the primary (resource extraction) and secondary (manufacturing) sectors towards services. These sectors rely on different transport systems. While an economy depending on manufacturing will rely on road, rail and port infrastructures, a service economy is more oriented towards the efficiency of logistics and urban transportation. In all cases transport infrastructure are important. Economies of agglomeration. Due to clustering and agglomeration, several locations develop advantages that cannot be readily reversed through improvements in accessibility. Transportation can be a factor of concentration and dispersion depending on the context. Less accessible regions thus do not necessarily benefit from transport investments if they are embedded in a system of unequal relations.

Therefore, each development project must be considered independently.