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Article Summary

Sclar, Elliott, 2009. The Political Economics of Infrastructure Finance: The New Sub Prime , New York: Center for Sustainable Urban Development, The Earth Institute Columbia University. Click here for full article.

In this 2009 article, Sclar assesses the long ‐ term environmental, political, and economic implications of the Public-Private Partnership (PPP) model of infrastructure provision. In particular, he takes into consideration the public good characteristics of infrastructure and the importance of comprehensive planning, as well as citizen participation.

He opens the article by drawing a clear line between the goals of government and those of private investors by examining the conventional model of infrastructure provision. Traditionally, the public sector funded infrastructure networks in response to industrialization. The ubiquity and invisibility of these networks led many urban academics to conceive of the city as a unified spatial socio-economic entity. The second wave of urbanization the present period has placed a much more important role on communication nodes and social networks; unlike the previous wave, urban life is no longer simply defined by the importance of place. This second wave has also been marked by a neoliberal assault on public service monopolies, calling for the deregulation and privatization of public goods.

Although Sclar states that many ideas of the privatization movement have been discounted, one of its most significant contributions the PPP persists. Sclar uses three interconnected theories culled from existing literature to help explain the perseverance of the PPP model. The theories work together to challenge to the impossibility argument (a PPP project is undertaken because the public sector lacks adequate resources) and the government inferiority argument (a PPP project is done because the government is inefficient or ineffective).

1) Characteristics of public goods : Public goods demand a provision for equity, cross-subsidization, and the capture of externalities by policy maker.

2) Democratization in the provision of infrastructure : The size, shape, and placement of infrastructure should be decided by the voices of citizens.

3) Comprehensive Urban Planning: The field of planning provides a comprehensive vision regarding the interconnection of systems within urban space.

Next, Sclar provides a series of specific examples ranging from Texas, to Australia, to Chicago - that explicitly go against the three theories listed above. By pointing out the faults of these respective schemes, Sclar effectively demonstrates the lack of comprehensive planning and the resultant loss of equity and democratization in PPP formation. However, good models do exist; our author concludes by using the Port Authority of New York and New Jersey as a lens through which to view the key components of successful PPP infrastructure provision. First, the partnership needs to create a public agency that is separate from local politics. This condition is not only forms an unbiased commitment to public goals, but also has the ability to lower capital costs significantly. Second, the project should consider the long-term view of the regional infrastructure network, both in provision and in maintenance. Finally, the resultant infrastructure project should be financially self-sufficient. Overall, Sclar believes that a central public service mission similar to that carried out by Port Authority can help define successful PPPs, but care must be taken to consider the underlying public goods purpose of infrastructure provision.