Wealth Warning.  Infrastructure can seriously disrupt your future

Wealth Warning. Infrastructure can seriously disrupt your future

by Eben Wilson
article from Wednesday 7, March, 2018

DO WE REALLY need more infrastructure? Driving from Edinburgh to Dumfries & Galloway two days after the “red warning” storm across the central belt I was informed, repeatedly, by overhead gantry signs declaring “Winter weather; potential traffic disruption”.

With snow-clad hillsides surrounding me, a dashboard temperature gauge showing minus two degrees in a glowing warning triangle and the urgency of news and weather reports on the radio – the signs offering a maximum of 24 text characters were clearly stating the bleedin’ obvious.  

Which got me to thinking, why do we retain these signs?

They were certainly redundant; they could have said – “strong wind gusts from East”, or “wind chill enough to freeze roadway” but whoever was in charge thought it enough simply to tell me it was winter and bad stuff could happen.

But would even specific localised information be enough to make their 24 character displays of any value? I also had beside me a website on a tablet that auto-updates a radar plot of all snow and rain precipitation across the UK down to one hundred metres and a live feed from Scotland’s trunk route CCTV cameras that showed the state of the road surface. 

For an economist, there is an important wider lesson here about infrastructure spending. There is a general consensus among the political and economic chatterati that “infrastructure” is a good thing for the economy.  I demur, and here is why.

These gantry signs are a symptom of a political and economic reality.  The infrastructure lobby is a cabal between four separate interest groups; politicians who like to have monuments built to their genius; central planning quangos who demand control over and delight in an integrated plan; wealthy civil engineering interests who like large centralised construction contracts; and, bureaucrats who like to gold-plate such contracts to minimise their risks.  

That this grouping exists is unavoidable, merely being a reflection of human self-interests, but that the state lets the cabal operate in the way it does is avoidable and, indeed, it’s a legal responsibility of government to direct what is done with the goal of obtaining best value for the taxpayer.

In this context the rot starts with differing perceptions of “infrastructure”.  What comes to mind for politicians are visible physical objects; for construction companies diggers, labourers and materiel for which they can invoice; for quangocrats designs that they can hone within a grand plan; and for bureaucrats months of high-paying new professional work and administration.

All of these goals miss the real point relevant to taxpayers footing the bills; all infrastructures are systems with servicing costs that run far into the future.  In civil engineering these costs, as a general rule of thumb, are six times that of their capital cost.  It is not some vague notion of infrastructure that governments should be supporting but “sustainable serviced infrastructure systems”. 

How this disparity of self-interest expresses itself is in a peculiar stasis; infrastructure set up years ago carries costly baggage.  The overhead gantries that tell us it is winter are examples of this.  They were conceived before the advent of smart phones, universal wireless communications, and in-car digital technology that can display information that is more useful, of greater detail and much more frequently updatable than a control room full of old-fashioned hardware that can pump 24 letter characters to a distant sign’s LED matrix display.

This stasis is determined by detail; specifications worked on by duplicated effort across the planning, operational and supply engineers who develop our infrastructure. Overhead gantries cost around £100k to build and install, and the rule book is here.

This document will be studied at great length and cost by specifiers, administrators, procurement managers, fabricators, installers and servicers. It is, by the way, worth looking at if you are struggling with what is meant by “regulation” in the Brexit debate.  Scattered around its mixture of obvious generalities are multiple references to highly specific EU dictats and standards. This tells us an important story about the infrastructure ecosystem. Regulatory oversight grows like fungus; with each appraisal by yet another bureaucrat adding a little more risk aversion; and more mandatory actions creating more overheads. Who would have thought that these gantries, specified for working life of 30 years in England, are required to last for 60 years in Scotland? Aye, ye hae to go canny wi’ wur windy wet places.

And more importantly, why, when ten years into that lifespan along comes the smart phone; providing the same service for near to nothing; flexible, updateable, extensible. What we call today a disruptor.

There is an important policy lesson here.  Government has led consumers into a false market in infrastructure, directed by a self-interested multi-agenda cabal, leaving taxpayers with the maintenance costs of redundant technologies.  Think of the focus here within the cabal on personal and professional self-preservation; using mandated detail as armour. How could we ever get change? Those in charge of the status quo will fight tooth and nail to retain their present wage-earning responsibilities.  And don’t forget, if Mr Corbyn or other Scottish centralising socialists get their way and, say, nationalise our infrastructure,  a fifth cohort would enter the cabal; the worker interest that would have us keep their self-interest well lubricated in non-productive work practices.

The policy need is to re-think how “infrastructure” is provided – but viewing the objective as the need to develop sustainable systems.  The first step in this is to re-think the purpose of the guiding state and its institutions.  There are collective impacts to infrastructure systems so the state has a role as director, but to set rules rather than be the manager of detail.  The second step is to take the operational franchise away from the state. 

This is not an easy task; there is a natural tendency for quangocrats and bureaucrats to cover their backs against career risk by returning to the role of detailed specifier; what we need are clear legislative obligations put into statute that limit the role of state institutions – what is sometimes called economic constitutionalism.

The tools to do achieve this do in fact exist.  Property rights in infrastructure system provision can be re-allocated using trusts owned by users, while operations and servicing can be contracted; in both cases the risk of loss introduces incentives to innovate and be more productive. However, in the political arena the tyranny of the status quo within the cabal is more difficult to quash.

The answer lies in statutes that do not use the state to legislate for some constructed design, but only against outcomes that are detrimental.  If a policy goal is to prevent personal harm through a shortfall in information to inform decisions about personal safety, then providing information on weather and road conditions becomes desirable to avoid prosecution for negligence, based on a general statutory rule of a duty of care for road users.  You do not need to specify gantries.

Importantly, if the release of rights to run infrastructure systems does have well drafted general rules, their operators would provide such services without the huge centralised overhead of mandated detailed specifications.  Where competition in provision can be introduced; or even contract models that emulate competition; operators would also choose flexible, extensible and changeable methods of provision.   They might well spend large sums on concrete platforms with steel superstructures to send a 24 character message, but the incentive would be to dismantle such obsolete systems as soon as they became redundant.  

The next time you drive down a motorway with overhead gantries ask yourself whether these grand structures costing millions are going to be there for ever – and why.  The smart phone beside you has a WiFi connection that downloads data at 100 megabits/sec. The chip that does that costs less than ten pounds.  WiFi delivered updates, including intelligent alerts tailored to immediate events, can be delivered by a roadside box costing a few hundred pounds.

Those wonderful people who collect your income tax have locked you into a boondoggle out of which they cannot escape – in their self- interest and at your expense.  Don’t let them persuade you that it is important you are told it is winter, or to wear a seatbelt, check your tyres, or to watch your speed.  Your car already knows.

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