Long Term Investments

Part of why it matters for governments to invest heavily into infrastructure is not just about the public good nature of it allowing those investment to uplift the poor, or to increase the economies’ capacity. Infrastructure is long term, sized for the future demand, and takes time and effort to put together. These long term investments reflects a government and a community’s confidence in the future, as well as commitment to work towards that future together.

Infrastructure involves massive coordination and while the market is a greater coordinator, the market failure in the inability to provide the public good means that government will always have to somehow lend a hand into the project. They would not be able to take off by themselves even if there might be some kind of business case involved because the government may have to enforce some kind of monopoly and provide regulatory safeguards to prevent fly-by-night operations taking demand away from the main project. For example, investment into a new water supply network where the operator earns water tariffs from supplying the local populace may require the government to temporarily regulate the bottled water industry locally to facilitate adoption and make the supply network commercially viable.

Certain seemingly draconian actions might be necessary to make the infrastructure to be invested in some local monopoly, thereby enhancing its commercial case to attract the much needed financing. We previously thought about digital monopolies somehow taking and of course making money out of it by supplying digital products and solutions. Here’s another industry where you have to create a monopoly at some level to make it work out.