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Will infrastructures become monopolised and, if so, who will own them?

Posted By Administration, Tuesday, September 25, 2018
Updated: Tuesday, February 26, 2019

Daniel Bonin has written his seventh installment in our Emerging Fellows program. Here, he explores infrastructures in the light of monopolies. The views expressed are those of the author and not necessarily those of the APF or its other members.

Monopolies have a long and varied history. As regulators start to fear the misuse of market power by monopolistic companies they develop policy tools to regulate and unbundle markets. Still different types of monopolies like natural or geographic monopolies continue to exist. What will their future look like and could it be that new infrastructure monopolies and even outright state monopolies emerge by 2050?

Monopolies are not bad per se, they can help to cope with the problems which a free market economy fails to deliver. Until 2050, more and more governments may decide to tolerate a monopoly to ensure equal access to vital infrastructures in their depopulating rural areas. A monopoly provides also a certain amount of security, an environment in which the issue of costly upfront costs in new infrastructures could be solved. There is another argument for infrastructure monopolies that stems from technological change.

The past showed that monopolies have been responsible for miss-allocation in the economy. But what if new monopolies are the only way to allocate resources amid increasing connectivity and complexity by 2050? Artificial intelligence provides us a tool to handle complex systems like the supply and demand of infrastructures. However, it could work best if the monopolistic infrastructure operator has access, power and authority to change all of the variables that are relevant to the system. Think of an intelligent transport network that balances different modes of transport and movement of freight. With full access to real-time data and relevant infrastructures, such a network could even adjust traffic management systems and even the width of traffic lanes to accommodate the different users like humans, trams, autonomous vehicles and drones alike. Would a country be able to resist the tender of a monopolistic company that promises to provide such a smooth and cheap infrastructure or would it drawback and tolerate or even nurture new monopolies?

Would countries even have an incentive to create state monopolies? Governments are always concerned about the interference of other countries in their domestic affairs. Considering the growing connectivity of infrastructures and the role of data. It seems that concerns over interference of other countries in domestic affairs could provide such a reason. Countries would otherwise risk foreign competitors gaining access to vital information and the ability to manipulate infrastructures.

It is not only about the access to data, but the risk of the manipulation of data and news. Caught in this crossfire of threats, a state controlled telecommunication infrastructure monopoly could be a rational move for a liberal country to clear the situation. One strong state monopoly could also allow a country to strongly influence global infrastructure standards and win the race for new key enabling technologies like 5G. Thinking further ahead until 2050, a state monopoly for satellite operation becomes a first step to monopolise space and exercise geopolitical power. Earlier than one thinks, owning world’s first space debris management infrastructure might become of importance for the balance of power in space.

If countries decide to accept or even promote infrastructure monopolies, they need to develop a toolkit to regulate private infrastructure monopolies before it is too late. Financial institutions became too big to fail and monopoly-like platforms became too big to be regulated. In a similar way, private infrastructure monopolies could become too efficient to be regulated and too security-related to be not nationalised. To prevent some of this risk, state monopolies could be considered. However, as politics becomes more and more involved, it needs to be critically reflected that political interests and cycles are at odds with the life-cycle of infrastructures and the speed of innovation. Could state monopolies become the grit in the gears of future-proof infrastructures?


© Daniel Bonin 2018

Tags:  government  infrastructure  monopoly 

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Growth or sustainability: Which response to the wicked problem will we choose?

Posted By Administration, Thursday, April 12, 2018
Updated: Monday, February 25, 2019

Polina Silakova‘s fourth post in our Emerging Fellows program explores sustainability and the wicked problem of the limits to growth. The views expressed are those of the author and not necessarily those of the APF or its other members.

Grow not stop. Where shall we put the comma in this sentence? For a long time, growth has been the key focus of countries’ GDPs, business plans, and individual’s bonus schemes. But is it really a good way to measure our progress towards a better life? What is a “good life” anyway? And what does our good life mean for its key enabler – the Earth?

A group of British scientists recently tried to answer some of these questions, namely: is it possible for everyone to live a good life within our planet’s limits? They defined a good life very modestly – the satisfaction of basic needs – yet the result of their analysis of 150 countries is quite disheartening. Put on a map, the countries we know as well developed (Germany, Australia, Sweden, US, Japan) are clustered in the dangerous corner, having surpassed multiple biophysical boundaries. Moreover, if we were to try to equally distribute this modest standard of living for every person on the planet – without putting the very planet in danger – we would need to use up to six times more resources than what we currently consume. Quite a sobering calculation, isn’t it?

This study is not the first to address issues concerning our growth-oriented society. Back in 1987, the Brundtland Report called for changing the quality of growth. It stated: “Sustainable development involves more than growth. It requires a change in the content of growth, to make it less material and energy-intensive, and more equitable in its impact.” The report alerted that growth combined with acute inequality can be worse for a country’s development than the lack of growth. Currently, in 2018, we are obviously a long way from either reducing inequality or growing sustainably.

A contemporary economist, Kate Raworth addresses the same growth-related issues and warns about the obsolescence of the economic theory taught in schools and universities. In her book “Doughnut Economics” she urges us to shift the focus from the growth in GDP towards creating a more just society instead. To treat natural resources as an integral part of economics, not some loosely related externality. Although her book was shortlisted by the Financial Times as one of the best business books of 2017, Ms. Raworth points to the challenges of getting outdated academic views replaced by a more accurate and holistic understanding of economics. In an attempt to make this change happen, Ms. Raworth invites us to start a guerrilla campaign to fight against the invalid economic dogmas in a non-traditional way.

At the same time, students in Oregon, US have chosen to act even more radically to ensure their voices are heard. They took the federal government to court for “profoundly damaging our home planet by subsidizing fossil-fuel production which violated [the government’s] public-trust responsibility and threatens the plaintiffs’ fundamental constitutional rights to life and liberty”. This accusation probably goes beyond any other environmental case so far. The outcome of this case is still pending, but other similar cases initiated by plaintiffs between 10 and 20 years old may start to see some success around the world.

What is an appropriate response when the traditional structures are so imperfect? When teens who compete to study in the best universities, hoping to get the knowledge they need to change the world, graduate from their courses to be disappointed by the obsolete theory they were taught. When representatives we elect to act on our behalf go astray, blinded by the short-term goals linked to their terms of power; is it a revolt like the one in 2014 organised by economics students in 30 countries against a curriculum disconnected from reality? Is it a guerrilla campaign to stealthily re-draw diagrams in university books like Kate Raworth proposes? Do we have to go as far as taking to court the very government we elected, like the boys and girls from iMatter and other environmental groups do? What actions should citizens take to make sure that the voices of future generations are heard at the tables where big decisions are made?

Something that each of us could do is at least to make sure that our own children get a systemic, big picture view of the world, as opposed to narrow opinions dictated by short-term capitalistic values. Knowing what the choice actually means of a comma’s position in the “grow not stop” sentence might become a much more important knowledge in our kids’ life than many other things in their curriculum. The question remains though – is it enough?


© Polina Silakova 2018

Tags:  economics  environment  government 

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Why do we need to think about the infrastructures of tomorrow?

Posted By Administration, Thursday, December 28, 2017
Updated: Sunday, February 24, 2019

Daniel Bonin is one of our Emerging Fellows. He and our other Emerging Fellows will be posting throughout the year. His first article discusses the importance of futures thinking for building infrastructure.

By 2050 the face of our built environment will have changed. While this seems to be a long way off, there is good reason to start thinking about tomorrow’s infrastructure today.

Infrastructures outlive civilizations, country borders, and governments. It can take years until they are up and running. Infrastructures have been symbols and indicators of power: from the Egyptian Pyramids to the Golden Gate Bridge in the U.S. or the One Belt One Road Initiative of China. Infrastructures are physical legacies for the generations to come and constitute the framework conditions we innovate around. In some sense, our thinking is not only shaped by bounded rationality but bounded by the existing infrastructure. We tend to think of new ways to use streets, but not about alternatives to streets. As a part of a complex system, partially aged infrastructures cannot be simply removed and re-inserted without risking disruptions. The inert nature of infrastructures is also at odds with faster innovation cycles in technology. These characteristics are at stark contrast with the evolving needs of people and business and the global challenges on our way to 2050.

Depending on whom you ask, you will get different answers to the question of what infrastructures are. Some will spontaneously name airports, high-speed trains or broadband internet access, while you can hear the dreaming in the voice of others when they say wastewater disposal, uninterrupted power supply or well-equipped hospitals. Infrastructures are the physical backbone that allows people and businesses to fulfill their needs and desires. And even a fully digitized world with telecommuting or tele-education would still require some sort of physical infrastructure. The access to infrastructures means somehow destiny – reducing or exacerbating social inequalities. It is evident we need to think about infrastructures in order to meet the UN’s Sustainable Development Goals in areas like health, education, renewable energy, environmental protection, justice, and peace. A more sustainable world would ultimately be a world where infrastructure converges both between and within countries.

This is clearly an ambitious goal, considering a perfect storm of weaker economic growth, growing governmental debt, workforce ageing and a reduced taxpayer base due to labor automation. These factors will greatly reduce the ability of governments to fund and maintain infrastructures up to the year 2050 and beyond. At the same time, less developed countries and their energy and resource hungry middle classes will grow. Besides the unprecedented demand for expansion in less developed countries, developed countries are starting to fall behind in infrastructure quality as their century-old infrastructures continue to age.

The resulting infrastructure investment gap could be even larger than previously thought, given that economic growth forecasts have shown to be way too optimistic in the past. But infrastructure development comes not only at an easy measurable monetary cost. Each additional square meter of sealed surface, deforestation and land grab of the world’s most fertile soils puts our ecosystem under more and more pressure. Yet the irony is that we will need to expand and adapt our infrastructure to tackle challenges like climate change and push decarbonization efforts. With tighter governmental budgets, economic costs might well trump environmental impacts. It is all the more urgent to develop business models for sustainable infrastructures that are attractive for private investors. On the positive side, higher efficiency technologies and decentralization of knowledge, power, and production might reduce some of the expansionary demand.

The overwhelming majority of our infrastructure for the year 2050 has yet to be built. Each additional infrastructure must be well planned as it adds complexity to the inert infrastructure systems. We have to anticipate tomorrow’s needs to understand future investment requirements. Moreover, we need to design infrastructures in a way that they can be adapted over their lifetime to keep up with the changes ahead and beyond 2050. Otherwise, we will find ourselves drawing upon yesterday’s infrastructure to cope with the challenges of tomorrow.



© Daniel Bonin 2017

Tags:  government  infrastructure  politics 

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