Chicago, 21st to 25th April, 2015
Graham Thrower, Doctoral Researcher, CURDS/ GPS, Newcastle University
The slow, rumbling journey on the Blue Line from O’Hare Airport into the heart of Chicago leaves you in no doubt as to the age of the rolling stock. Likewise a leisurely walk under the L (the Elevated rapid transit system) of Chicago’s Loop reveals a railway infrastructure from the late 1800s (the Green Line still uses tracks from 1893), and one that appears to be visibly corroding in parts. Factor in the pot-holed city roads, crumbling sidewalks and deteriorating bridges; and you have to ask ‘how did it come to this’?
Chicago is one of America’s venerable old cities; a city of bold engineering solutions that saw the birth of the skyscraper and the reversal of a river’s flow to solve a wastewater problem. Infrastructure has always been at the heart of Chicago’s being.
What better venue then for the AAG 2015 Geographies of infrastructure Finance and Governance ‘all dayer’ curated by Andy Pike and Peter O’Brien of CURDS, and our iBUILD compatriot Phil O’Neill of the University of Western Sydney.
First up was Phil O’Neill and Infrastructure’s stubborn spatiality, arguing the case that the rise of perpetual funds (thereby reducing the need for capital exit events), the increasing presence of former private sector actors within regulatory and policy institutions, and the emergence of globally pervasive forms of infrastructure financing such as PPPs, are all indicative of capitalism’s well documented dislike for competition.
In a sense this theme was taken up later by Heather Whiteside in her paper Constructing infrastructure markets: private finance for public austerity. The thrust of her research was a forensic examination of the taxonomy of the spread of PPPs. Almost defining the increasingly hegemonic spread of PPPs as one might a virus, her thesis was that it is a market that has been intentionally and painstakingly constructed by large scale private interests (notably in finance and construction) and compliant national and international organisations. The recent injection of additional impetus that accounts for the huge growth of infrastructure as an asset class has come from a growing infrastructure investment deficit and the pressures of enduring austerity rendering it ever more tempting for governments to ‘rent the money’ (Boardman and Vining, 2011: 35).
As Whiteside states, however renting the money may solve an upfront financing issue but does not address the knottier problem of how infrastructure investment gets funded. She cites Chicago’s recent experience in this regard: the $1.83bn Skyway Toll Road, the $563m lease of downtown parking garages, and the now infamous $1.15bn lease on public parking meters. This latter example was the focus of Stephanie Farmer’s paper Having it both ways: Planning and financing the high tech city in Chicago. As she pointed out, not only do transactions like this represent a significant undervalue to the taxpayer; there is also a considerable impact on a city’s ability to govern itself, and on future policy and planning flexibility. As we had separately observed at the recent iBUILD Manifesto (Are you being served?, 2015) launch in London in late March; such transactions not only fix the technical solution to any given infrastructure issue for the concession lifetime, they also essentially fix the business model. In the case of Chicago’s parking meters this business model turns out to be much to the liking of the private investors; a constituency Farmer observes with echoes of O’Neill, that is increasingly embedded in city and state-wide planning and budgeting. A later paper by Pryke, Allen and O’Neill Finance–Topologies and Infrastructure Assets: Disassembling and reassembling the investment qualities of a ‘desal’ plant (2015) makes a similar point about corporate influence, observing the growing strategic importance of water in drought challenged environments.
A measure of balance regarding the potential benefits of PPP was provided by first, Brittany Montgomery with her paper Critical Infrastructure Project continuity: survivors in the volatile Mexican context, and then Michael Klein with PPPs in infrastructure – promise and hype. Klein first of all sought to explode the myth that there is either a pure public or private solution to infrastructure, arguing reasonably that all infrastructure projects involve a measure of both. In this sense he was picking up on O’Neill’s desire to see an end to the ‘political cul-de-sac of the public-private binary’. An important insight in Klein’s paper, however, lay in the underlying role that can be played by PPP. He asserts that where a state or national government has little money, the act of concluding a PPP for a project actually confers credibility on that project and, by implication, the sponsor. Where, however, governments have the financial means, a PPP may still be an optimal solution to cut through administrative inefficiencies and procurement creep. In such instances, Klein asserts, ‘PPPs are a mechanism to deal with failure, here government failure’. Montgomery also cited government failure but in a Mexican context. She addressed the time horizons of infrastructure projects and the vulnerabilities of lead times exceeding the lives of government sponsors. In her paper she examines the profile of open infrastructure projects that successfully transitioned across government timelines. Her findings disclose the importance of political patronage in the context of the Mexican economy, but interestingly she concludes that there is some evidence (albeit from a small data-set) for the private financing aspect of a PPP to act as an insulating factor protecting projects from political short-termism.
It is important to note that these two papers were primarily concerned with developing economies or the Global South. Giles Mohan also noted the relative under-representation of that hemisphere in the wider debate in his paper The politics of Chinese funded infrastructure projects in Africa. Here we were confronted with a form of alliance capitalism or economic diplomacy (Haberly, 2011) wherein Chinese corporates are following the national government’s ‘go out’ strategy backed by highly preferential state financing solutions, to secure reserves of critical natural resources and to build assets in strategic industries. These transactions exploit a ‘South-South’ narrative in which the Chinese leadership have successfully exploited the Marxist geopolitics of parts of Africa to create an anti-Western discourse as these states liberalise their markets.
Bringing the theme of new ways of looking at infrastructure markets much closer to home, Stephen Hall of Leeds University and iBUILD made a compelling case for a fundamental re-engineering of local energy delivery networks utilising a localised scalar solution to capture values traditionally absent from the large scale incumbent grid model; issues such as energy poverty, energy efficiency, social equity, environmental protection, and renewable commitments. He sees strong ties between empowered local government actors, aligned local finance providers (he cites Sparkassen and the Volksbanken in the German example) as being capable of ‘providing positive non-economic outcomes’ in terms of local energy provision.
And with these thoughts on governance and empowered local policy actors, we come back to the day’s curators Andy Pike and Peter O’Brien, and their paper Deal or no deal? Governing infrastructure funding in the UK city deals. Building on the insights of Harvey’s urban entrepreneurialism redux (The urban experience, 1989) Pike and O’Brien examined deal-making as public policy and the extreme discrepancies across the UK urban landscape of this method of ‘centrally prescribed inter-urban competition’. Kevin Ward also picked up on the theme of urban competition in his paper On the waterfront: experimentation, innovation and speculation in the financing of urban infrastructure. Also referring to Harvey’s prescient understanding of a shift to a more entrepreneurial state, Ward looked at five tendencies in the redesign of the UK’s welfare state: its uneven design and delivery; decentralization and devolution; centrally prescribed inter-urban competition (eg city deals); trans national searching for new financial and funding models; and the financialisation of public infrastructure. Ward’s comments were in the context of largely abandoned attempts to re-imagine Leith’s waterfront area via an intended usage of TIF.
The question that he poses, however, is one that was a recurring theme not only of the day, but of all the infrastructure sessions that I attended at AAG 2015. The central question is the extent to which the public purse receives value from its interaction with globally sourced private capital. The ability of the liberalised marketplace to provide risk transfer, private sector efficiencies and, critically, positive societal outcomes, in return for its enhanced yield seems to be a case that is still struggling to be made. This very point was made by Jonas and Goetz in their paper Public-Private finance and the territorial politics of extra collective provision: the case of regional rail transit in Denver, CO and again by Allan Cochrane’s Who needs infrastructure? Building suburban spaces on the edge of the London city region?, and Laura Deruytter’s Financialising Brussels Airport: the shifting ownership of infrastructure and implications for the provision and control of infrastructure services. The debate therefore goes on. It will be interesting to see where we have all got to in our respective thinking on this topic by the time of next year’s AAG. In the meantime I have a very old train to catch…
Details of 2016 AAG Conference
March 29 – April 2, 2016 – San Francisco