Why Infrastructure Privatization is Moving Slowly

Jenny Anderson has an evenhanded overview of US infrastructure privatization today. In a nutshell: it’s necessary, but it’s going to happen very slowly.

The good news is that the media is moving away from "OMG the government is selling off our public assets on the cheap" and is giving fair shrift to people (including a few state governors) who point out that there’s simply no way the public sector is going to spend $1.6 trillion over the next five years on necessary infrastructure spending. If the private sector is willing to do it, either alone or in public-private partnerships, then that’s a great way of moving past the current impasse.

There’s also good reason to believe that the private sector can and will be more efficient than the public sector when it comes to things like building highways. As Virginia Postrel noted back in 2004:

Consider the choice between the immediate cost of building thicker roads in the first place and the long-term cost of repairing thinner roads as they wear down. An economic calculation would have suggested much thicker Interstate highways, even ignoring the cost of disrupting traffic with repairs.

But the Interstates were built relatively thin, in part because of political pressures to get the system spread everywhere as quickly as possible. Now they’re wearing out, and money must go for repairs. That investment, while necessary, is inefficient and yields a relatively low return.

A private-sector consortium with a 75-year or 99-year concession to build and operate a new toll road is less likely to make the same building-thin-roads mistake than a fiscally-pressured state government keen to minimize short-term costs in an environment of falling tax revenues.

But Postrel’s article also points to one reason why infrastructure privatization is likely to remain politically unpopular. Building roads has immediate and visible effects: you can suddenly get from A to B much more quickly and easily. The immediate and visible effects of maintaining roads, on the other hand, are just the traffic jams caused by construction work. And that’s not something that people really want to pay for, either in tolls or in taxes.

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