Pension Funds and Infrastructure Investment Post author By Philip Lane Post date November 26, 2011 The FT reports on UK developments here. Categories In Uncategorized 4 Comments on Pension Funds and Infrastructure Investment ← Revealed preferences for climate → WSJ on Irish and Portuguese situations 4 replies on “Pension Funds and Infrastructure Investment” Public / private infrastructure investments have with a few exceptions been a disaster from both a planning / corruption and return on investment when looked on from a Holistic rather then narrow monetory sense. With the British shopkeeper mentality coming out in the force once again I see something similar to the gross misallocation of capital that occurred during the private rail boom of the 19th century , with different rail gauges , multiplication of effort etc. etc. Utilities are not present to make a profit in a economic ecosystem !!!! – they are a Utility…………….. get it ? However maybe the French corporatist / town council thingy is dangerous also. Again there is huge campaign to put Trams into every French town worth a damn. I see the same forces at work as the French Nuclear drive of the 70s & 80s – very enlightened ideas but perhaps a slight overcapacity because other Euro countries refuse to transition to the new reality – creating malinvestment when looked on from the Holistic European perspective. New Tram projects have been announced for the 40,000 + city ? in Aubagne north of Marseilles , in Avignon (-100,000 Pop) and another in the French coal / canal country near Lille /Belgium border – Lens Bethune. The French state is in full panic mode regarding peak oil in my opinion – our country is being depreciated so that the core can survive this coming oil diet. Our only hope is for China to implode first but alas it appears we are first on the chopping plate. Imagine how much Irish austerity we will be asked to do to counter Chinese consumption……………. Ps Aubagne will be the first free of charge urban tramway in the world……….austerity ? Something is happening here …….what it is ain’t exactly clear……….. The Channel Tunnel is being brought up to full capacity – they are going to need another Tunnel soon. http://www.rail.co/…/rail-freight-group-welcomes-new-channel-tunnel-steel... http://www.rail.co/…/gb-railfreight-opens-first-daventry-to-italy-novarro-se... http://www.rail.co/2011/…/21/modalohr-wagon-authorised-for-use-in-the-c... http://www.rail.co/2011/…/european-rail-freight-history-made-as-db-schen... They are even using the existing tunnel infrastructure to build a new electricity inter – connector for surplus French electricity. http://www.rail.co/…/eurotunnel-to-develop-electricity-interconnector-in-c... All this stuff would not be possible if the “private” loss making venture known as the channel tunnel did not exist – you see it is a Utility……………………. it makes other companies work profitably …………….. Fund managers have pretty mixed feelings about this. It will only happen if they get the good bits and the UK taxpayer gets the rubbish. I’m sure the Tories are quite capable of making that happen. PFI and PSI. Far too close for comfort. I expect we’ll have to wait and see what detail, if any, is in the Chancellor of the Exchequer’s statement on Monday. The key point, however, that is ignored in all tese efforts, is that final consumers collectively pay, and implicitly make a long-term, almost indefinite, commitment to pay for the essential services prvided by these infrastructure investments. This commitment in the past has provided the basis for efficient, low-cost, long-term financing of this investment. But, in many instances the actual investment was not efficient and, in attempting to improve the efficiency of investment, policy-makers in most developed economies (and in most utility and infrastructure sectors) have destroyed access to this long-term commitemnt by final consumers and the required financing of investment is either not forth-coming or. if forth-coming, only at an excessively high cost of capital. The irony is that the continuing commitment of final consumers to pay for these services is probably more solid that the ability of many governments to extract taxation revenue to service sovereign debt. If this consumer commitment were re-accessed the cost of capital on this finance could be lower than some governments’ cost fo debt – and only some bps above the cost of debt for the most solvent. However, having broken this link governments and regulators are forced to make commtments in its place. This results in putting taxpayers, once again, in the firing line and in regulators being compelled to ramp up the cost of capital. Policy-makers and regulators in the rst of the EU are slowly becoming aware of this, but it is totally lost on Irish policy-makers and regulators with their obsession with public ownership and control, with the favouring of well-positioned insiders and the infinite desire for political meddling. Comments are closed.