Is Investing In Infrastructure Needed?
Infrastructure is one of those political topics politicians only bring up when they don't care if the room tunes out, or reporters stop asking pointed questions. Because while we all admit that we need safe bridges, reliable roads, and power we can depend on, no one really wants to talk about it. Why? Well, despite being necessary, these aren't "sexy" topics. The public largely doesn't care about them, as long as the government handles the costs, and gets the job done.
The problem is that infrastructure is falling apart in America. The report from Last Week Tonight back in 2015 showed just how badly America's infrastructure was falling apart, and things haven't improved much since then. For years now collapsing bridges, power outages, crumbling highways, and other infrastructure problems have been showing up on the news, but no one seems compelled to fix these issues. Especially since infrastructure spending tends to come out of government coffers, and America seems to be one of the only countries in the world that cut spending on its infrastructure before it cuts private subsidies according to the Economist.
Even if the government made infrastructure spending a priority, though, it's a massive undertaking. Which is why there are a lot of people claiming that it's time to let private investors fund some of these projects.
Why Would Someone Invest in Infrastructure?
The reason governments typically invest in infrastructure is that it's a public interest. People need roads, and power lines, and bridges to make the wheels of the nation turn on. However, these things also represent potential for investors who have money, and who want to see that money grow. And because infrastructure is a necessity, there is going to be a guaranteed demand for it. That demand means a return on investment, and that phrase is music to the ears of those looking for a low-risk way to make their money count.
Take a toll road, for instance. Seen from an investor's perspective, this road is an ideal solution for investment. The investor (which typically refers to a large pension fund, or to groups of high-powered individuals pooling their resources) takes on the cost of maintaining and repairing the road, and any of its bridges. In exchange, drivers using the road pay a toll. This toll goes to the investors and allows them to make a profit in exchange for maintaining the highway. This is typically done by the government, but with less spending being done on infrastructure, arrangements like this are becoming more common with private investors.
According to Amp Capital, infrastructure is an attractive investment because of how stable it is. The price of gold, or oil, or stock in a shipping line might vary wildly depending on the market, but infrastructure is something people need and will use. Even better, infrastructure typically has hard numbers of how many people use a given service, allowing solid predictions to be made when it comes to how much of a return investors can expect once they loosen their purse strings.
Investment is Needed, But Infrastructure Shouldn't Be Privatized
While it's true that the money to run these necessary features needs to come from somewhere, it's important to remember that private investment isn't a silver bullet. Governments should remain involved in caring for and expanding, a nation's infrastructure for the benefit of the people. However, cooperation between the public sector and private investors has the potential to do a lot of good. Especially when there is a big hole in the budget which everyone agrees should be filled, but which no one wants to pony up the cash for.
Photo by Steven Mercedes