Who Will Build the Roads?

Who will build the roads if government does not do it?  Most roads, bridges and other infrastructure in the United States are, in fact, built by private companies from engineering and design to final finishes.  Governments do not, in many cases, build the roads.  It is true that, through near full, if not complete, control and monopolization of road and infrastructure planning and state property ownership or eminent domain, that governments do control the supply of roads and infrastructure in the United States.  It is misinformed at best, disingenuous at worst, however, to make a claim that if government did not build the roads and bridges there would be none.  Equally, to say that someone who favors private infrastructure ownership to state or government ownership of infrastructure, opposes infrastructure.

Personally, I do not have a problem with a community electing, appointing or delegating in some way development and infrastructure planning and implementation to a designated group or board, whether that be part of a government or not.  That is part of what a free society is about, free association.  Roads, and other infrastructure, have and will continue to be built, regardless.  The question is not, who will build the roads?  The better question is who will pay for the roads and who will bear the loss if the roads do not turn out to be a good investment? A good investment being defined as the roads or infrastructure return adequate profits to cover the cost or outlay of capital.  This would necessitate enough users or customers willing to pay enough of a price to ensure the resources expended are efficiently used.  If a proposed project cannot meet this standard ex-ante, it should not be started, ex-post, the resources expended would have been better used in some other way.  It is irrelevant, as some claim, that money is circulating through the economy so that it simply boils down to spending money or putting money in people’s hands.  The key is that real natural resources, capital and labor must be expended to complete any project, infrastructure, or otherwise.

When considering the basic question of who will build the roads, or develop the infrastructure, in general, there are several stakeholders.  Who has the idea?  Who signs the agreements and commits those that will be liable for payment even if the project does not work out?  It’s easy to spend other people’s money, but from whom will the money be taken?  Who will benefit from the infrastructure economically and/or for use?  Under a typical set up, it is likely that state and/or local officials and bureaucrats will work with private contractors and their employees on approved projects using funds appropriated by politicians from taxpayers and lenders, secured by collateral comprised of the future incomes and assets of current and future taxpayers.  It is that one particular stakeholder, the taxpayer, who is often, by necessity, left out of the decision making process.  Why?  Because many state projects including infrastructure, aptly termed boondoggles, would never see the light of day if those stuck with the liability, the taxpayers, were properly clued in and were permitted to have the final say on whether a project is agreed to, or not.

What if we made just one simple change to financing roads and infrastructure?  Whoever has the idea, a private person, company, or government planners, the entrepreneur, would need to raise the capital, both equity ownership and debt financing, with no taxpayer funding or liability.  Through voluntary arrangements my proposal is to involve every stakeholder up front to determine whether a project can be profitable.  Of course, there is no guarantee of success, but everyone understands up front their commitment and ultimate liability.  The stakeholders in my system are the entrepreneurs, whether that be a governmental or private institution, the owners, the lenders, the employees and contractors.  Traditional government models typically lack an ownership perspective and do not clearly, if at all, make a connection between the outlay of investment and the profit or benefits to those that are actually making the investment.  In simple terms, not nearly as much care goes in to spending other people’s money, compared to spending one’s own.

Some may read this and say, hey that’s a public-private partnership!  I like those.  No, that’s not what this is.  A public-private partnership is the traditional government approach to infrastructure or government finance in general.  This is where current and future taxpayers are not invited to participate in the planning.  Without the ultimate bearer of the liability present, union representatives are free to bribe politicians and bureaucrats with personal and campaign contributions in exchange for mandating that the contractors pay higher-than-market wages.  The contractors simply raise the price to cover the additional costs of labor and pad the bill further to cover their own share of payments to politicians and bureaucrats.  Bankers and bondholders split virtually risk free profits through priority repayments on loan advances.  Before any government service can be provided, the banks and bondholders must be paid.  It’s a win-win-win-win-lose situation.  Everyone looks with amazement as government, labor union officials, private construction company owners and money lenders raise clasped hands in victory at the ribbon cutting ceremony while taxpayers, and the public in general, who are on the hook for the bill, are completely unaware of how they have been plundered.  Just how much pain and suffering the waste of natural resources, capital and labor on public-private partnerships has caused is incalculable, though the signs are everywhere in the form of over-indebted governments, scaled back or inferior government services, rusted out factories and abandon buildings.  It is only by bringing in private owners that the most publicly beneficial projects are undertaken and that the costs and benefits are borne by those responsible for said projects, not the general population, specifically, the taxpayers.

 


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