Wednesday, December 7, 2016

Public-private partnerships without public-public partnerships?

Some conservatives are delighted to support an agenda of private involvement in infrastructure financing and operation, usually in the form of so-called Public-Private Partnerships. The academic literature, well summarized in a book by Chilean authors Engel, Galetovic and Fischer, stresses that for these partnerships to achieve good social results, they must be accompanied by a robust regulatory system and by an institutional framework that guarantees public control and accountability at all the stages of a project. Something that is missing in most analyses (perhaps because Chile is a centralized democracy behind the Andes) is the public-public dimension of such control and accountability mechanisms. Many of the operators involved in PPPs are multinational corporations, and many of the PPP projects go beyond traditional administrative boundaries: they cross state lines in federal countries, or they cross national boundaries in continents that make an effort to integrate their economies, or they cross old municipal boundaries to integrate metropolitan areas. Many conservatives are less comfortable with this part of the deal. Some progressives also seem to live in a simple but no longer realistic world where they believe that by switching from some form of ownership to another at the purely local level is going to change the world. They would all like to work in a simpler world with public-private partnerships or pure public operation without public-public partnerships. But we live in an interconnected world. A key dimension of the public-public partnerships that are required for a good regulation of public-private partnerships is the checks and balances provided by multi-layered government, as many in the USA are discovering as a way to avoid becoming a huge banana republic under Donald Trump.

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