Let capitalism — not government — build needed infrastructure

When it comes to rebuilding the nation’s infrastructure, our elected officials keep emphasizing the obvious and missing the important.

During a Dec. 4 appearance on Hill.TV’s “Rising” program, Congressman Paul Mitchell (R-Mich.) called for a more comprehensive approach to infrastructure, saying that lawmakers in Washington don’t always know how to best address the nation’s dire need for repairs on a local level.{mosads}

Mitchell, who serves on the House Transportation and Infrastructure Committee, argues that a “one-size-fits-all” approach doesn’t do enough to address the various needs of urban, suburban and rural districts across the nation when it comes to rebuilding America’s failing highways, bridges, airports and water systems.

This is the “obvious.”

The “important” is that the federal government is already $20 trillion in debt, and state and local governments have exhausted their borrowing power. The so-called Public Private Partnership (P3), which is a program of introducing private investment into government ownership, is incommensurable to the enormity of the undertaking. So, if it isn’t the government or PPP, then where is the money going to come from?

Despite some substantive ideas, Rep. Mitchell, just like most of his conservative colleagues, suffers from conservatism — conservatism of thinking, that is, and thus missing a host of very significant developments in the capitalist system that have been taking place over the last 20 to 30 years.   

What distinguishes this period from others is that, until recently, only the government could handle projects on the scale of the Hoover Dam or the Interstate Highway System. At present, however, large corporations and investment funds have accumulated enormous amounts of money and have sufficient resources to build projects on any scale.

This state of affairs has set up some interesting dynamics. There is no longer an imperative for the government — federal, local or otherwise — to finance, own and maintain the country’s infrastructure when private capital is available. Opening the infrastructure market to private ownership would ensure sufficient funding and would introduce innovation and cost-effectiveness.

The effect of privatization could be massive. It has the potential to create a long-term economic expansion that will dwarf the scale of the Pacific Railroad and of the National Interstate and Defense Highways acts combined.

The chief obstacle to privatizing is an ingrained quasi-socialist mentality, making state and local governments the principal owners of the nation’s infrastructure. Beginning in the 1980s, these owners started treating the assets as a revenue stream. As a result, nationwide, tolling has become a familiar feature of the American landscape. The fundamental flaw of this policy is that the government, as law enforcer and protector of consumers from inherent warts and blemishes of the capitalist system, has become part of the system – it owns and operates for-profit enterprises. In those mutually exclusive capacities, the government is in a position to abuse its power with impunity. It is, therefore, not surprising that the owners have embraced monopolistic behavior – manipulating supply and demand to justify constantly raising taxes, user fees and tolls, ostensibly for building and maintaining roads while neglecting the assets’ maintenance and repair.

Whereas the product is being sold regardless of quality and costs, governments have no incentive to keep projects on schedule and within budget. Paradoxically, lenders love it: Since there is a low risk of borrowers going bankrupt, whatever is spent will, eventually, be covered by the taxpayers, with interest. 

There is a number of fully permitted and “shovel-ready” but stranded (in some instances for more than 30 years) infrastructure projects. Yet, despite numerous proposals from firms with expertise and financial backing, the state governments would rather have the projects remain stranded for another 30 years than yield their ownership to a private entity.

Privatization of infrastructure is a product of the evolution of our economic system and historical inevitability. Nevertheless, the system has to overcome the government monopoly that has created nearly insurmountable hurdles to private enterprise entering the field as owners and operators of the facilities.

Rebuilding the nation’s infrastructure by private enterprise could be the most brilliant political move of our lifetimes. However, given the current political environment it will take time before this country is ready to usher in this multitrillion-dollar frontier of capitalism.

Alex Markovsky is a senior fellow at the London Center for Policy Research, a conservative think hosted at King’s College, New York City, which examines national security, energy, risk-analysis and other public policy issues, He is the author of “Anatomy of a Bolshevik” and “Liberal Bolshevism: America Did Not Defeat Communism, She Adopted It.” He is the owner and CEO of Litwin Management Services, LLC.