Infrastructure finance : the business of infrastructure for a sustainable future.

Abstract

Every society must work through its political system to decide how it will respond to the basic needs of its citizens. The needs begin with safety and security and extend to health, education, and opportunity for a good life. As a society becomes more affluent, the needs become open-ended and require public choices to avoid sinking under too much debt. Deciding how to meet it drives political debate about the allocation of resources and the roles of government, business, and individuals. While the debates proceed, it remains clear that infrastructure is a solid investment that is essential to meet human and environmental needs, whether they involve safe drinking water, effective transportation, pollution control, or public school buildings. Now infrastructure finance is in the limelight because the nation is challenged to maintain its support systems during the financial crisis. Although the crisis is tough, it seems we have been here before, even if the problems were different, such as the oil embargo of the 1970s or the savings and loan debacle of the 1980s. Through these, our financial systems have held our economic system together. The central issue in the debates involves shades of an old question: Does capitalism or socialism reign? If a society views infrastructure as purely a private good to be available only to those who can afford its services, life would be unfair and miserable for many, many people. If it views infrastructurerelated services as purely tax-supported public goods, the result would be inefficiency, waste, and lack of public choice. So, the answer is somewhere in between: Infrastructure involves both private and public goods. The solutions are based on neither capitalism nor socialism but on a mixed approach. Infrastructure decisions are not simple because, as society has become more complex, so have its infrastructure systems and the values and institutions that determine society’s choices. Gone are the days when a community could get by with a few narrow streets and a basic water system. Today, complex networks of infrastructure systems traverse cities and regions to provide networks of energy, water, transportation, and more. These are connected by cybersystems, and their reliability affects everything from national defense to the health of newborns.