No, Europe doesn’t spend 5 percent of GDP on infrastructure

Over the past week, a number of Very Serious People have told us that 5 percent of GDP in “Europe” goes towards “infrastructure”.

Here’s Bill DeBlasio at the NYT:

Meanwhile, the rest of the world races ahead. Europe spends 5 percent of G.D.P. on infrastructure, and China 9 percent.

And Robert Puentes for Philly.com:

Today, infrastructure spending as a share of gross domestic product is about 2.5 percent, much lower than the 3.9 percent in peer countries such as Canada, Australia, and South Korea. The figure for Europe as a whole is closer to 5 percent and between 9 and 12 percent for China.

And John Cassidy at the New Yorker:

According to the Congressional Budget Office, in the nineteen-fifties and sixties we spent close to five per cent of G.D.P. on new transport and water projects, and on maintaining existing systems. European nations still spend about that much today, while China and other rapidly developing Asian countries spend close to twice as much.

What’s remarkable about this figure is that it’s not true at all. Like not even a little bit. It’s demonstrably false. I deal with these numbers for a living, and this doesn’t even pass the smell test — it’s way too high.

So let’s break this down. In order to say something meaningful about European infrastructure spending, we need to know: 1) what counts as infrastructure, 2) which sectors are doing the spending, and 3) who is Europe.

1) What are we considering to be infrastructure? Transportation only? Utilities? Schools and hospitals too? Turns out it doesn’t matter: Even under the most conservative assumption — that they’re referring to all government capital formation, gross instead of net — we still don’t come anywhere close to a 5 percent European average. Here’s data from the three biggest sources on this stuff:

Again, this is the broadest possible definition of infrastructure spending and it falls way short. Narrower definitions (which would be more relevant to these authors’ Amtrak-specific claims) of course fail as well. Here’s OECD data on all government transportation spending (click to enlarge):

So it’s clear that we don’t have a series definition problem.

2) But perhaps we’re coming up short because the 5 percent figure includes private infrastructure spending too. The problem with this is that it wouldn’t make a lot of sense argumentatively — why include, for instance, private freight railroad capital expenditures in a piece calling for a more activist public sector? Further, you’d be comparing apples to oranges since the US figure used for comparison includes government spending only. So this would be wrong on its merits alone.

3) And lastly, maybe there’s an issue with how “Europe” is defined. To this point I’ve been talking mainly about EU countries, but they only make up about half of geographic Europe. It’s possible that they mean all of Europe. At the margin we’d expect non-rich, non-EU countries — the Andorras and Moldovas out there — to bring up the average, as poorer countries invest less than rich ones. But this is basically impossible too, because: a) reliable data for these countries is scarcer if not nonexistent; and b) a GDP-weighted average, the correct way to make this calculation, would give little influence to these countries.

So if this statistic is flat-out wrong, why do people keep repeating it? To me it looks like some kind of ad-hominem hot potato — someone said it first, and then the next person cites that piece, and then that piece gets cited, and so on. I reached out to the editor of the NYT op-ed page and they directed me to this Senate Budget Committee report:

Meanwhile, the rest of the world is outpacing the United States in overall infrastructure investment. Europe spends 5 percent of its GDP on infrastructure, and China spends 9 percent.¹³

The footnote directs us to an article from the Economist, the one Cassidy cites as well:

Total public spending on transport and water infrastructure has fallen steadily since the 1960s and now stands at 2.4% of GDP. Europe, by contrast, invests 5% of GDP in its infrastructure, while China is racing into the future at 9%.

There’s no citation. I emailed the editor and didn’t receive a response.

I also tweeted to Puentes, who claimed it was OECD data. When I showed him that the OECD numbers tell a completely different story, again, no response.

I don’t know if there’s some big takeaway here, but this is depressing for sure. I wonder how pervasive this kind of thing is in the age of hot-take, opportunistic digital journalism.