Ownership and financing of infrastructure : historical perspective

The authors summarize the rich and varied experiences of private and public provision of urban services in France, Great Britain, and the United States over the past 100 years. Their main focus is on experiences in the United States and on shifts back and forth between the public and private sectors. A few of their observations: (i) The values of politically important actors as well as the working of government, political, and legal institutions have shaped decisions about infrastructure development, the sorts of public goods demanded, and the roles played by private firms. (ii) The range of choices that has historically been made with respect to the ownership, financing, and operation of different infrastructures has been far too varied to be encompassed by simple distinctions between"public"and"private."(iii) Throughout the world, many infrastructures owned and operated by governments have been built by private firms. (iv) In the United States, private firms and property-owners associations of various sorts have owned outright both toll roads and residential streets. Private firms have also collected solid wastes and provided urban transport under a range of franchise, contracting, and regulatory arrangements. The situation with mass transit has been similar in Great Britain. Although water works facilities in France are predominantly government-owned, private firms operate and manage most systems under an array of contracting and leasing arrangements. (v) Even when facilities have been owned by private firms, direct competition has been of limited importance in the provision of many kinds of infrastructure. But market discipline can arise from other sources. (vi) Privatization can get government bureaucracies out of the business of performing entrepreneurial activities for which they may be poorly suited. When market forces are weak, however, and important public interests are at stake, strengthening government institutions may be a prerequisite for successful privatization. (vii) In the electric utility industry, private firms played a far greater role in U.S. electric utilities than in Great Britain, in part because of different views about appropriate roles for government in providing essential services. For similar reasons, the state played a much larger role in furnishing telecommunications services in France than in the United States. (viii) Beliefs about the"publicness"of different goods and services have helped shape the character of regulatory franchise, and contracting arrangements. When a good is seen as mainly private, it is easier for private service providers to be compensated mainly by user fees and for most decisions about price, output, and quality, no matter what the role played by private firms in actually providing services. (ix) Goods defined as"public"have often been provided free to users, even though it would have been easy to exclude nonpayers. Examples in the United States include interstate highway systems, public parks, public libraries, and police and fire protection. Free services have been provided because it is believed that in these domains market relationships should not apply - and that denying nonpayers the public services would be a denial of rights. (x) In Great Britain and the United States, the contracting out of public services has been both supported and opposed because of its potential to break the power of public sector unions and to cut workers'pay. In the United States, privatization has also come under attack on the grounds that opportunities for minority employment may be reduced.