tag:theconversation.com,2011:/id/topics/public-private-partnership-39180/articlesPublic private partnership – The Conversation2022-04-06T13:31:07Ztag:theconversation.com,2011:article/1802862022-04-06T13:31:07Z2022-04-06T13:31:07ZIt’s time for the Canada Infrastructure Bank to reclaim its public purpose<figure><img src="https://images.theconversation.com/files/455875/original/file-20220401-27-4gl6l0.jpg?ixlib=rb-1.1.0&rect=6%2C0%2C4236%2C2830&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">The Canada Infrastructure Bank was founded in 2017 by the Liberal Party to support revenue-generating infrastructure projects through public-private partnerships.</span> <span class="attribution"><span class="source">(Shutterstock)</span></span></figcaption></figure><p>The <a href="https://cib-bic.ca/en/about-us/our-purpose/">Canada Infrastructure Bank</a> (CIB), a federal government financial institution, opened its doors five years ago with great promise, vowing to deploy $35 billion of investments towards “the next generation of infrastructure Canadians need.”</p>
<p>But rather than investing public money in public services, the CIB has instead <a href="https://doi.org/10.1080/07078552.2017.1343008">privatized our water, transportation and electricity</a>. For every dollar invested by the CIB, the hope was that<a href="https://globalnews.ca/news/3039197/liberals-announce-canada-infrastructure-bank-what-is-it-and-how-does-it-work/"> $4 to $5 would be invested by the private sector</a>.</p>
<p>This extraordinary leap of faith in private capital and market forces was baked into the <a href="https://www.laws-lois.justice.gc.ca/eng/acts/C-6.18/FullText.html">CIB Act:</a></p>
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<p>“The purpose of the Bank is to invest and seek to attract investment from private sector investors and institutional investors, in infrastructure projects in Canada or partly in Canada that will generate revenue.”</p>
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<p>Five years later, the CIB has not been able to deliver on its promise. Of the <a href="https://cib-bic.ca/en/">$19.4 billion invested to date</a>, only about one-third has come from private and institutional investors ($7.2 billion).</p>
<p>The <a href="https://www.pppcouncil.ca/web/P3_Knowledge_Centre/About_P3s/Definitions_Models.aspx">public-private partnership model (PPP)</a> promoted by the CIB has failed. Typically, PPPs involve long term contracts where public money supports private, for-profit delivery of public services and infrastructure. </p>
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Read more:
<a href="https://theconversation.com/covid-19-illustrates-why-canada-needs-more-and-better-public-banks-154000">COVID-19 illustrates why Canada needs more — and better — public banks</a>
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<p>In <a href="https://www.wellingtonadvertiser.com/mapleton-drops-plan-to-outsource-water-wastewater-infrastructure/">Mapleton, Ont.</a>, for example, the CIB aimed to funnel private investment into public water provisioning in a form of PPP. Local authorities pulled out when the contractual terms <a href="https://www.municipalservicesproject.org/sites/municipalservicesproject.org/files/publications/22.Canada.pdf">worked against the public good</a>, underscoring the <a href="https://www.eurodad.org/historyrepppeated">problems of PPPs</a> that have been well documented around the world.</p>
<h2>Safeguarding a public purpose legacy</h2>
<p>Not all public banks operate in this way. The <a href="https://coebank.org/en/project-financing/how-access-ceb-financing/">Council of Europe Development Bank</a>, for example, recognizes PPPs as inherently problematic, noting that they can “require extensive use of consultancy and legal services at considerable additional costs”. <a href="https://www.kbn.com/en/investor/">Kommunalbanken</a>, a Swedish public bank, focuses entirely on publicly owned and publicly operated infrastructure.</p>
<p>It’s not too late for the CIB to renew its vows and become a more pro-public institution. In fact, there are signs this is already happening. Some of the CIB’s investment partnerships include projects that promote <a href="https://cib-bic.ca/en/partnerships/">public-public partnerships</a> by funding public sector <a href="https://cib-bic.ca/en/medias/articles/the-canada-infrastructure-bank-invests-up-to-30-million-in-its-first-zero-emission-school-bus-project/">zero-emission buses</a> and <a href="https://cib-bic.ca/en/projects/green-infrastructure/city-of-edmonton-building-retrofits/">municipal building retrofits</a>. The CIB also funds public interest projects, like <a href="https://pm.gc.ca/en/news/news-releases/2021/07/05/new-investment-canadas-steel-industry-create-jobs-and-build-cleaner">decarbonizing production</a>.</p>
<p>But more needs to be done to remake and safeguard the CIB as a public bank with a public purpose. </p>
<p>First, it needs a far more robust sustainability mandate. If a project cannot demonstrate how it will reduce carbon emissions or protect the environment, it should not get funded. The publicly owned <a href="https://www.ucl.ac.uk/bartlett/public-purpose/publications/2021/sep/opinion-finnish-climate-fund-ilmastorahasto-strategy">Finnish Climate Fund</a> and the <a href="https://www.invest-nl.nl/?lang=en">Dutch Invest-NL</a> incorporate such binding conditions.</p>
<p>Second, the CIB needs to improve its governance. Current provisions for the <a href="https://cib-bic.ca/en/about-us/governance/">board of directors</a> are vague and subject to political cycles. The CIB Act fails to specify who is appointed on the board and on what representational basis.</p>
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<img alt="The corner of a building with KfW visible in blue letters" src="https://images.theconversation.com/files/455867/original/file-20220401-43826-t85rye.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/455867/original/file-20220401-43826-t85rye.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/455867/original/file-20220401-43826-t85rye.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/455867/original/file-20220401-43826-t85rye.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/455867/original/file-20220401-43826-t85rye.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/455867/original/file-20220401-43826-t85rye.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/455867/original/file-20220401-43826-t85rye.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">German bank Kreditanstalt für Wiederaufbau’s board of directors includes designated representatives from government, trade unions, municipalities and other key areas.</span>
<span class="attribution"><span class="source">(Shutterstock)</span></span>
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<p>A more robust governance framework would see broad stakeholder representation written in to the bank’s legal framework, much like <a href="https://www.kfw.de/kfw.de-2.html">the German public development bank, Kreditanstalt für Wiederaufbau</a>. Its highest governing forum, the <a href="https://www.kfw.de/About-KfW/Arbeitsweise-und-Unternehmensf%C3%BChrung/Verwaltungsrat-und-seine-Aussch%C3%BCsse/">Board of Supervisory Directors</a>, includes designated representatives from government, trade unions, municipalities and other key areas.</p>
<h2>Time for change</h2>
<p>The recent Private Member’s <a href="https://www.parl.ca/legisinfo/en/bill/44-1/c-245">Bill C-245</a>, intended to amend the CIB Act, is a step in the right direction. Put forward by Manitoba MP <a href="https://canadiandimension.com/articles/view/leveraging-public-ownership-in-the-fight-against-climate-change">Niki Ashton</a>, it is pitched as “an alternative to the Liberals’ privatization agenda that uses public ownership to support communities in the fight against climate change.” </p>
<p>It starts with jettisoning the CIB’s current emphasis on PPPs by having the CIB prioritize lending to all levels of public institutions, including northern and Indigenous communities. It is also a first step in improving governance by proposing the inclusion of First Nations, Inuit and Métis members on the board.</p>
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<p>Moreover, binding <a href="https://www.ohchr.org/sites/default/files/Documents/Issues/IPeoples/FreePriorandInformedConsent.pdf">free, prior and informed consent (FPIC) of Indigenous Peoples</a> needs to be one part of a broader strategy of public financial institutions in Canada contributing to reconciliation.</p>
<p>The CIB must also take leadership from the <a href="https://theconversation.com/costa-ricas-banco-popular-shows-how-banks-can-be-democratic-green-and-financially-sustainable-82401">Costa Rican Banco Popular</a> and commit to gender equity in all of its decision-making bodies. </p>
<p>The goal should be to foster inclusive, green and democratic networks that mutually reinforce the public purpose of the CIB. Recent scholarship suggests <a href="https://t.co/5Kkgtxo4Bt">democratization and inclusion</a> lead to public banks funding <a href="https://www.routledge.com/Development-Banks-and-Sustainability-in-the-Andean-Amazon/Ray-Gallagher-Sanborn/p/book/9781032087931">better and greener infrastructure with fewer social conflicts</a>.</p>
<h2>The five-year itch</h2>
<p>The notion of changing the CIB is within reach. This year, the CIB must conduct its first five-year review and deliver it to Parliament. </p>
<p>Canadians should be aware of this opportunity and communities across Canada should be engaged in it. <a href="https://cib-bic.ca/en/contact-us/">Ask the CIB</a> about its public consultation plans, reach out to MPs, see how <a href="https://cupe.ca/canada-infrastructure-bank-10-essential-questions-ask">unions</a> are responding and <a href="https://fcm.ca/en">encourage cities</a> to demand more of the CIB.</p>
<p>The CIB has failed on its own terms, presenting an opportunity to reclaim its public purpose. Rather than underwriting private interests and the privatization of public services, the CIB can build a democratic institutional legacy of providing patient, low-cost and appropriate financing for green and just community transitions in the public interest.</p><img src="https://counter.theconversation.com/content/180286/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>The authors do not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and have disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Rather than underwriting private interests and the privatization of public services, the Canada Infrastructure Bank can build a better democratic institutional legacy.Thomas Marois, Reader in Development Studies, SOAS, University of LondonDavid McDonald, Professor, Global Development Studies, Queen's University, OntarioSusan Spronk, Associate Professor of International Development and Global Studies, L’Université d’Ottawa/University of OttawaLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1126492019-03-06T11:38:19Z2019-03-06T11:38:19ZOpioid crisis shows partnering with industry can be bad for public health<figure><img src="https://images.theconversation.com/files/262289/original/file-20190305-48423-1nk343s.jpg?ixlib=rb-1.1.0&rect=409%2C122%2C4800%2C3268&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">What is each partner looking to get?</span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/doctor-receiving-patient-office-296666489">Africa Studio/Shutterstock.com</a></span></figcaption></figure><p>“Show me the bodies!” someone demanded at the end of my lecture a few years ago.</p>
<p>As a <a href="https://scholar.google.com/citations?user=MpKuUlkAAAAJ&hl=en&oi=ao">scholar of public health ethics, law and policy</a>, I had just warned an audience of professors and university administrators about the perils of partnering with, or taking money from, corporations – <a href="https://global.oup.com/academic/product/the-perils-of-partnership-9780190907082">a common practice in public health research and policymaking</a>.</p>
<p>It’s not always possible to prove harm like that, I said. But there are other reasons for government, the academy and public health organizations to maintain arm’s length relationships with corporations. Among them, preserving integrity and public trust.</p>
<p>As I document extensively in my <a href="https://global.oup.com/academic/product/the-perils-of-partnership-9780190907082">book on corporate influence in public health</a>, partnerships distort research agendas, not merely of individual researchers but of entire fields of research. They also reinforce the framing of public health problems and their solutions in ways that are most favorable to the corporate partners.</p>
<p>These concerns are most acute when corporations are creating or exacerbating a public health problem. Think of a soda company <a href="https://www.parklives.com/">sponsoring exercise initiatives</a> to burnish its reputation and deflect attention from the role of its brands in the obesity epidemic. But close relationships with corporations can be problematic even when companies are working on medicines or other potential solutions to health problems.</p>
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<a href="https://images.theconversation.com/files/262291/original/file-20190305-48420-8prxca.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/262291/original/file-20190305-48420-8prxca.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/262291/original/file-20190305-48420-8prxca.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/262291/original/file-20190305-48420-8prxca.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/262291/original/file-20190305-48420-8prxca.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/262291/original/file-20190305-48420-8prxca.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/262291/original/file-20190305-48420-8prxca.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/262291/original/file-20190305-48420-8prxca.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
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<span class="caption">Not surprisingly, opioid manufacturers want to sell more opioids.</span>
<span class="attribution"><a class="source" href="http://www.apimages.com/metadata/Index/Opioids-Governors/9c89d0059c8e4dbba46b71391b21cfdc/1/0">AP Photo/Toby Talbot</a></span>
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<p>I failed to convince that skeptical audience member. But recent research found the bodies, or, at the very least, pointed to one place where we might start digging: <a href="https://www.cdc.gov/drugoverdose/epidemic/index.html">the opioid crisis</a>. The new study concluded that drug companies’ marketing of opioids to physicians was “<a href="https://doi.org/10.1001/jamanetworkopen.2018.6007">associated with increased opioid prescribing</a> and, subsequently, with elevated mortality from overdoses.” Recent court filings also suggest that doctors who met with opioid drug reps were <a href="https://www.documentcloud.org/documents/5715954-Massachusetts-AGO-Amended-Complaint-2019-01-31.html">10 times more likely</a> to have prescribed opioids to patients who later died of an overdose.</p>
<p>Marketing to physicians is only one of the strategies employed by opioid manufacturers. Between 2012 and 2017, <a href="https://www.hsgac.senate.gov/imo/media/doc/REPORT-Fueling%20an%20Epidemic-Exposing%20the%20Financial%20Ties%20Between%20Opioid%20Manufacturers%20and%20Third%20Party%20Advocacy%20Groups.pdf">five opioid manufacturers gave nearly US$9 million</a> to 14 patient advocacy groups and medical societies. Although this sum is a drop in the ocean for drug companies with billions of dollars in opioid revenues, these were substantial sums for the recipients. And the companies’ investments paid off.</p>
<p>Many of the groups <a href="https://www.hsgac.senate.gov/imo/media/doc/REPORT-Fueling%20an%20Epidemic-Exposing%20the%20Financial%20Ties%20Between%20Opioid%20Manufacturers%20and%20Third%20Party%20Advocacy%20Groups.pdf">issued guidelines</a> minimizing the addiction risks of prescription opioids. They also <a href="https://www.hsgac.senate.gov/imo/media/doc/REPORT-Fueling%20an%20Epidemic-Exposing%20the%20Financial%20Ties%20Between%20Opioid%20Manufacturers%20and%20Third%20Party%20Advocacy%20Groups.pdf">lobbied extensively</a> to defeat legislation restricting opioid prescribing. When the CDC issued its draft guidelines to limit opioid use in 2016, opposition was significantly higher among <a href="https://doi.org/10.1001/jamainternmed.2016.8471">organizations that had received industry funding</a>.</p>
<p>The most commonly touted solution to financial conflicts of interest is disclosure of the conflict. The <a href="https://www.healthaffairs.org/do/10.1377/hpb20141002.272302/full/">Physician Payments Sunshine Act of 2010</a> requires drug companies to disclose gifts to physicians and teaching hospitals. Democratic senator Claire McCaskill has <a href="https://www.congress.gov/bill/115th-congress/senate-bill/3565">introduced a bill</a> to extend these provisions to cover payments made to patient advocacy groups.</p>
<p>But disclosure, while necessary, is not sufficient for addressing corporate influence in science, medicine and public health. While researching my book, I found plenty of evidence that drug, food and soda companies – among others – weave powerful webs of influence when they support the work of public health agencies, universities, patient advocacy groups and health professional associations.</p>
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<span class="caption">Government and academia have responsibilities that conflict with corporate profit.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/pillars-black-white-393090355">Brandon Bourdages/Shutterstock.com</a></span>
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<p>It’s reasonable to expect corporations to exercise influence to the full extent permitted by law. But I believe governments have a responsibility to insulate themselves from corporate influence. Only by doing so can they meet their obligations to protect and promote public health. And universities should do likewise in order to protect scientific integrity. By inviting companies to partner, government and the academy play into corporate strategies of influence, imperiling their own integrity as well as science and public health.</p>
<p>When the National Institutes of Health launched a partnership initiative to address the opioid crisis in 2017, it <a href="https://www.nih.gov/research-training/medical-research-initiatives/heal-initiative/participant-list-development-safe-effective-non-addictive-pain-treatments">turned to drug companies</a> for guidance. They included an opioid company that <a href="https://www.nytimes.com/2007/05/10/business/11drug-web.html">pleaded guilty in 2007</a> to misleading regulators, doctors and patients about addiction risks and potential for abuse – and then continued its aggressive marketing for another decade, according to <a href="https://www.nytimes.com/2019/02/01/business/purdue-pharma-mckinsey-oxycontin-opiods.html">recent court filings</a>. These documents also indicate that, while running <a href="https://www.statnews.com/2017/12/22/purdue-ad-campaign/">newspaper ads in 2017</a> claiming that it was a “partner” in the fight against the opioid crisis, the company was still working on plans to expand the opioid market.</p>
<p><a href="https://doi.org/10.2105/AJPH.2018.304881">The world needs better options for pain management</a>. And the opioid industry may play a role developing some of these options. But partnering with industry is hazardous – even if, as its director has pledged, the NIH enters these arrangements “<a href="https://www.nih.gov/about-nih/who-we-are/nih-director/statements/statement-public-private-partnerships-part-nih-heal-initiative">with the utmost transparency</a>,” and does not take cash payments.</p>
<p>Money need not change hands for partnerships to create reciprocity and influence, burnish the reputation of drug companies, and defuse support for more effective regulation of the marketing and prescribing of drugs. Collaboration may also lead to the neglect of other potential solutions to the opioid crisis – and other potential pain remedies beyond drug therapies.</p>
<p>If the opioid crisis has taught people anything, it’s that the interests of pharmaceutical companies and public health inevitably diverge. While opioid manufacturers and distributors were making billions of dollars, they were sowing the seeds of a crisis that has contributed to the <a href="https://www.cdc.gov/drugoverdose/data/prescribing.html?CDC_AA_refVal=https%3A%2F%2Fwww.cdc.gov%2Fdrugoverdose%2Fdata%2Foverdose.html">deaths of more than 218,000 Americans</a> and counting. In addition, the total societal <a href="https://www.whitehouse.gov/sites/whitehouse.gov/files/images/The%20Underestimated%20Cost%20of%20the%20Opioid%20Crisis.pdf">costs of the opioid epidemic</a> exceed half-a-trillion dollars per year.</p>
<p>Given these catastrophic costs, policymakers cannot afford to repeat and compound the errors of the past. While tackling pain management and opioid addiction, they must not neglect a third public health challenge: their own “addiction” to partnerships with the private sector. But, before public health officials can wean themselves off these collaborations, they must first acknowledge that they have a problem.</p><img src="https://counter.theconversation.com/content/112649/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Jonathan H. Marks does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>The interests of pharmaceutical companies and public health are not the same. Industry dollars can distort research agendas, while framing health challenges and solutions in ways that benefit corporations.Jonathan H. Marks, Director of the Bioethics Program and affiliate faculty in Law and International Affairs, Penn StateLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/983862018-06-18T20:11:03Z2018-06-18T20:11:03ZPartially right: rejecting neoliberalism shouldn’t mean giving up on social liberalism<figure><img src="https://images.theconversation.com/files/223528/original/file-20180618-85863-ra58wl.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">shutterstock</span> </figcaption></figure><p>Richard Denniss’s Quarterly Essay, “<a href="https://www.quarterlyessay.com.au/essay/2018/06/dead-right">Dead Right: How Neoliberalism Ate Itself and What Comes Next</a>”, is a thought-provoking call to arms against an array of perceived ills – economic rationalism, market forces, small government, tax cuts, incentives, even corporate sponsorship.</p>
<p>Denniss provides a useful provocation for a much-needed debate in Australia about the proper role of government versus markets, and the interests of firms versus workers and consumers. </p>
<p>But he risks throwing out what is good about liberalism in attacking neoliberalism. One wonders whether, in his heart, Denniss doesn’t actually recognise this. </p>
<p>His conclusion seems eminently sensible. He talks of “a society with some markets” rather than “a market society”, of Adam Smith seeing “both the virtues and limits of free markets”. We – and mainstream economists – couldn’t agree more.</p>
<h2>Markets and competition</h2>
<p>For Denniss, “neoliberalism” is anti-regulation and anti-competition, and pro-crony-capitalism. Mainstream economics, however, is none of these things. </p>
<p>There are, of course, market fundamentalists who despise regulation and seek monopolies for themselves. Others want the Australian government to build new coal mines and inland rail lines and to deny climate change. </p>
<p>Mainstream economics, in contrast, not only understands but emphasises that there exist “<a href="https://www.investopedia.com/terms/e/externality.asp">negative externalities</a>” like pollution that should be taxed or regulated. Mainstream economics not only understands but celebrates competition, and many economists have <a href="http://research.economics.unsw.edu.au/richardholden/assets/ahrnetworks-4-10-18.pdf">voiced serious concerns about a lack of competition in markets with network externalities</a>, such as social media and two-sided marketplaces (e.g. Amazon).</p>
<p>Mainstream economics deplores crony capitalism. Indeed, the <a href="https://research.chicagobooth.edu/stigler/">George J. Stigler Center and the University of Chicago</a>, the cradle of free-market economics, is:</p>
<blockquote>
<p>…dedicated to understanding the interaction between politics and the economy. It is an intellectual destination for research on regulatory capture, crony capitalism, and the various forms of subversion of competition by special interest groups.</p>
</blockquote>
<p>In criticising neoliberalism, therefore, we should be careful not to throw out markets and market-based competition. </p>
<p>The market is not an end in itself. Markets need to be harnessed, and regulated, to achieve social goals. But markets also offer a means of achieving a set of goals in an efficient way. </p>
<h2>Tax, incentives and unintended consequences</h2>
<p>Denniss argues against a neoliberal conception of tax and taxes as a “burden”, rather than a critical source of revenue needed to create a fair and decent society. </p>
<p>Again, he is right to point to the importance of tax to a just society, and of justice or fairness in our tax system.</p>
<p>But Denniss does not acknowledge the potential trade-offs between fair and efficient taxation, and the need to keep both goals in mind if we are to achieve both a progressive tax system and one that can sustain progressive social investments.</p>
<p>US Supreme Court Justice Oliver Wendell Holmes was right when <a href="https://www.irs.gov/newsroom/tax-quotes">he said</a>: “Taxes are what we pay for a civilized society.” But so was President John F. Kennedy when, in <a href="https://www.jfklibrary.org/Asset-Viewer/Archives/JFKPOF-042-021.aspx">his 1963 State of the Union address</a>, he said: </p>
<blockquote>
<p>… our obsolete tax system exerts too heavy a drag on private purchasing power, profits, and employment. Designed to check inflation in earlier years, it now checks growth instead. It discourages extra effort and risk. It distorts the use of resources. It invites recurrent recessions, depresses our federal revenues, and causes chronic budget deficits.</p>
</blockquote>
<p>If personal tax rates are too high then people won’t work very much and tax evasion will be rife. If company tax rates are too high then capital will move overseas, shrinking business and jobs. </p>
<p>In both cases tax receipts will be reduced.</p>
<p>The challenge is therefore to set taxes at a rate that can maximise equity between taxpayers – and achieve the tax receipts needed to pay for hospitals, schools and bridges.</p>
<p>One of us <a href="http://research.economics.unsw.edu.au/richardholden/assets/mckell_negative-gearing_a4_web.pdf">has previously suggested that tax changes, such as a cut in negative-gearing concessions</a>, pass this dual test of equity and efficiency. </p>
<p>But Denniss also seems to support proposals, like profits super-taxes, that are highly distorting and discourage profitable companies from locating and investing in Australia.</p>
<h2>Pro-business v pro-market economics</h2>
<p>Denniss likewise raises a number of examples of governments favouring big business over the interests of workers and consumers. </p>
<p>These are instances worthy of criticism. Being pro-market is not the same as being pro-business. In many areas the pendulum has swung too far toward business rather than markets – and thus inadequate regulation of private contractors and firms that pollute and fail to pay taxes in Australia. </p>
<p>The answer, however, is for Australia to regulate the role of big business in politics, and not to move away from market-based approaches to a range of issues. </p>
<p>Australia should reintroduce serious national campaign finance regulation and limit the growth of US-style political lobbying. But it should also embrace market-based policies to major social and economic challenges like climate change. That means a carbon tax or emissions trading scheme. Not “direct action”, which is a gift to big business at the expense of the environment and the taxpayer.</p>
<p>Insisting on a government that serves people, rather than corporations, does not mean giving up on markets. Indeed, doing so would be a major mistake. </p>
<h2>Privatisation and public v private provision</h2>
<p>Denniss further raises questions about the retreat of government in many countries from the provision of core public services or goods, including in Australia. </p>
<p>We agree that there are a range of public goods that the government must guarantee and pay for in a free society. </p>
<p>There is a core set of services that a political system must guarantee its citizens. In certain areas, like shelter, clothing, food, health care and education, government must ensure that all individuals achieve a minimum threshold that affords them dignity.</p>
<p>But the government does not always need to provide these services in order to guarantee them – think of clothing. We do not have a government clothing bank, but rather a set of income guarantees that allow individuals to obtain the minimum clothing they need for a dignified existence. </p>
<p>The key is to insist on government provision where issues of quality or public values are at stake, and where it is hard for the private sector to supply the right level of quality – or in the right way.</p>
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<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/was-embracing-the-market-a-necessary-evil-for-labour-and-labor-81612">Was embracing the market a necessary evil for Labour and Labor?</a>
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</p>
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<p>Denniss rightly highlights the despicable treatment of some of the most vulnerable Australians in aged care, mental health facilities and foster care. These things rob people of a basic level of human dignity and have no place in Australian society. Period. </p>
<p>But these are also examples of where outsourcing should never have happened – even on mainstream economic understandings. These are contexts in which it is impossible to contract for quality. Mainstream economics realises this, even if neoliberal ideologues do not.</p>
<p>The 2016 Nobel Prize in Economic Science was shared by Oliver Hart, of Harvard University, whose major contribution has been to analyse economic arrangements when contracts are incomplete. An important application of this approach is <a href="https://www.jstor.org/stable/2951268?casa_token=uCj_c2THJpMAAAAA:BJx0JRLXe33hsDSZDJKkHlelbTizwsnBIMYBuyY2QE8VWALRSgjUEq1k5VkU-cI6su_qI4cE1RW3MZ5Jhnm8UfXb-HRYOQKsmvv9Bpr8fOyFEaqUukI&seq=1#page_scan_tab_contents">a celebrated paper (with Andrei Shelifer and Rob Vishny)</a> that highlights that the “quality” of service provision can be hard to measure and contract on in a range of areas, meaning that government ownership will typically be optimal. </p>
<p>In other areas it might be desirable that the government pay for certain things, but it will not be sensible to own the assets involved.</p>
<p>The private sector is typically better at cutting costs and achieving efficiencies. But they will do that even if it is not in the public interest. </p>
<p>Private prisons are a classic example. Privately owned prisons have lower costs but often underprovide services that aid rehabilitation and help reduce recidivism. Those things are extremely important, but hard to measure and monitor. Because of their importance, relative to cost cutting, government ownership of prisons is often optimal.</p>
<p>In rejecting neoliberalism and its emphasis on privatisation, therefore, we should not necessarily reject all forms of privatisation or public-private partnership – but only ones that threaten to undermine the quality or values-based dimension to public provision.</p>
<p>On this test, we certainly would reject <a href="http://www.abc.net.au/news/2018-06-16/liberal-members-vote-to-privatise-abc-move-embassy-to-jerusalem/9877524">privatisation of the ABC</a>. Quality and values-based programming is part of the core function of the public broadcaster. </p>
<p>But we might well let private contractors help build major public infrastructure projects, such as rail or stadium upgrades. Or let them help pay for it – providing that, in doing so, they don’t get a disproportionately large credit for a small gift.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/if-we-are-reaching-neoliberal-capitalisms-end-days-what-comes-next-72366">If we are reaching neoliberal capitalism's end days, what comes next?</a>
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<p>Denniss points to a number of questionable deals that Australian governments have struck when it comes to private sponsorship of public infrastructure and goods. Suncorp got its name on a stadium but may or may not have paid very much for the privilege. The same goes for the Westpac rescue helicopter, and corporate sponsorship of the Australian War Memorial. He’s right. </p>
<p>If the government pays for the lion’s share of an essential service but gives away most of the credit to a private company, that’s bad – and it de-emphasises the important role government plays.</p>
<p>Similarly, as treasurer, Wayne Swan was responsible for cutting a terrible deal on the mining tax. But incompetent negotiation doesn’t make any of these things a bad idea in principle. </p>
<p>If the government can get a large amount of money in sponsorship for something – like the entire cost of a stadium – which frees up scarce public funds for other uses, that’s great.</p>
<h2>Throwing out neoliberalism, but keeping market-based democracy</h2>
<p>There’s a lot that Denniss gets right. Neoliberalism clearly has an array of problems. </p>
<p>And Denniss is right to remind us that we have choices as a democratic society about the size and role of government, and are not locked into a one-size-fits-all view of the state. </p>
<p>But there’s also a fair bit Denniss gets wrong. His essay leaves us with little guidance about what we should keep as we move away from neoliberalism. It is important to be clearer, in this context, about what remains valuable about markets and market-based approaches – as we attempt to move toward a more “social” approach to liberalism.</p><img src="https://counter.theconversation.com/content/98386/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>The authors do not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and have disclosed no relevant affiliations beyond their academic appointment.</span></em></p>There’s a lot that Richard Denniss gets right. Neoliberalism clearly has an array of problems. But he risks throwing out what is good about liberalism in attacking neoliberalism.Richard Holden, Professor of Economics and PLuS Alliance Fellow, UNSW SydneyRosalind Dixon, Professor of Law, UNSW SydneyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/822022017-08-17T01:27:38Z2017-08-17T01:27:38ZFirstNet for emergency communications: 6 questions answered<figure><img src="https://images.theconversation.com/files/181830/original/file-20170811-13459-zr7tw1.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">FirstNet could relieve emergency workers of having to carry multiple radios and other communications devices.</span> <span class="attribution"><a class="source" href="http://www.apimages.com/metadata/Index/Associated-Press-Finance-amp-Business-Louisia-/4af76d8a48e1da11af9f0014c2589dfb/14/0">AP Photo/Ric Francis</a></span></figcaption></figure><p><em>Editor’s note: In the aftermath of 9/11, public safety officials in New York City and around the country realized that firefighters, police officers and ambulance workers needed to be able to <a href="https://supernet.isenberg.umass.edu/visuals/DOD-LSN-Final-2017.pdf">talk to each other at an emergency scene</a> – not just to their <a href="http://dx.doi.org/10.1111/j.1475-3995.2010.00785.x">supervisors and dispatchers</a>. The solution was nearly 16 years in coming, but on March 30, the First Responder Network Authority, or FirstNet, was created. It’s one of the largest public-private partnership agreements ever, between the National Telecommunications and Information Administration (part of the U.S. Department of Commerce) and a group of companies led by AT&T. AT&T and its partners will develop and manage a nationwide wireless broadband network for use by first responders. Each U.S. state and territory is in the process of deciding whether it wants to <a href="https://www.ntia.doc.gov/files/ntia/publications/sapp_opt_out_process_02162017_0.pdf">build its own towers and wired connections</a> or <a href="https://www.firstnet.gov/sites/default/files/factors-governor-decision.pdf">let the AT&T group do the construction</a>. Ladimer Nagurney and Anna Nagurney, scholars of communications and network systems, respectively, explain what this multi-billion-dollar effort is, and what it means.</em></p>
<h2>1. What is FirstNet?</h2>
<p>The system nicknamed FirstNet was created by Congress in the <a href="https://www.congress.gov/bill/112th-congress/house-bill/3630">Middle Class Tax Relief and Job Creation Act of 2012</a>. Under the contract with the government, the <a href="https://www.commerce.gov/news/press-releases/2017/03/firstnet-partners-att-build-465-billion-wireless-broadband-network">group led by AT&T</a> will build, operate and maintain a new nationwide communications network, providing high-speed wireless communications for public safety agencies and personnel. The network will be protected against unauthorized intrusion and <a href="https://theconversation.com/creating-a-high-speed-internet-lane-for-emergency-situations-79151">strong enough to withstand disasters</a> that might damage other communications systems. Emergency workers will be able to preempt other users’ traffic on the network, and will be able to send and receive as much data as they need to during their emergency work.</p>
<h2>2. Why do we need it?</h2>
<p>In the aftermath of the 9/11 attacks in 2001, public safety agencies found that the first responders had a hard time sharing critical information throughout their agencies, or between different responding organizations. In just one tragic instance, after the south tower of the World Trade Center collapsed, the Fire Department of New York ordered all firefighters to <a href="http://www.cbsnews.com/news/communication-breakdown-on-9-11/">evacuate the north tower</a>. But many firefighters didn’t hear the order over their radios – and city and Port Authority police officers didn’t communicate on the same frequencies, so they never had a chance to hear the warning.</p>
<p>Four years later, the <a href="https://m.csmonitor.com/2005/0915/p04s01-usmb.html">same problems weakened officials’ response</a> to Hurricane Katrina. Most of the early efforts to solve this problem focused on making sure emergency workers’ radios could communicate with each other properly. In the intervening years, though, first responders have increasingly used smartphones, tablets and computers. They need to do more than talk; they need to share data among those devices – such as building layouts, possible environmental hazards, information about who and where victims might be and even basic details like local weather conditions. </p>
<p>Another change over time is our understanding of who first responders are. It’s not just police, firefighters and emergency medical personnel. <a href="http://www.nfro.org/who.html">Other public agencies</a> also are involved from the very early stages of a crisis, including transit agencies and environmental protection workers. Private companies are needed too, handling <a href="https://www.epa.gov/waterutilityresponse">damage or interruptions to utilities services</a> such as electricity, water, gas, telephone, cable TV and cellular service. </p>
<p>All of those groups need wireless communications at or near a disaster site. At the moment, they must compete with the general public: People inside the disaster area are often trying to seek help by calling 911 or texting friends or relatives. They may even post videos and photos of what is happening to social media sites. Loved ones elsewhere also flood communications networks, checking in as “safe” and trying to contact people they know who might be affected, to make sure they’re OK too. After the 2013 Boston Marathon bombing, for example, <a href="https://www.fastcompany.com/3008458/why-your-phone-doesnt-work-during-disasters-and-how-fix-it">all the major cellular networks got overloaded</a> by the number of people trying to make calls and send texts at the same time. (This even happens during nonemergency situations, such as concerts and <a href="https://arstechnica.com/features/2012/08/why-your-smart-device-cant-get-wifi-in-the-home-teams-stadium/">sporting events</a>.)</p>
<p>What’s more, many mobile broadband companies <a href="https://www.cnet.com/g00/how-to/how-to-tell-if-your-wireless-carrier-is-throttling-data/">limit the amount of high-speed data</a> a user can consume in a given month, either cutting off traffic or slowing it down significantly. But a first responder using a camera-equipped drone to inspect, say, a dam that might be breached needs unlimited high-speed communications to get real-time information that can protect both first responders and the public. </p>
<h2>3. Who will pay for it?</h2>
<p>The Federal Communications Commission has been rearranging the frequencies television channels use to broadcast their signals, making room in the electromagnetic spectrum for additional wireless broadband services. The agency recently <a href="https://www.fcc.gov/about-fcc/fcc-initiatives/incentive-auctions">auctioned off the rights</a> to use some of those frequencies to <a href="http://www.commlawmonitor.com/2017/04/articles/internet/fcc-announces-the-results-of-the-19-8-billion-broadcast-incentive-auction/">50 winning bidders including T-Mobile, Dish and Comcast</a>, raising US$19.8 billion.</p>
<p>Of that, $6 billion will be paid to the AT&T group, which will spend that money, plus an <a href="http://www.reuters.com/article/us-firstnet-at-t-contract-idUSKBN171209">additional $40 billion</a>, to build and operate the network.</p>
<p>Money will also come from payments from emergency response agencies, which will have to <a href="https://www.firstnet.com/plans">buy a FirstNet service plan</a> for each device, at prices expected to be similar to today’s mobile pricing. That revenue will also help fund the network, cover the companies’ investments and help generate enough of a profit that the AT&T group has promised to repay the $6 billion to the U.S. Treasury after the FirstNet contract expires in 25 years.</p>
<h2>4. What will happen when there’s not an emergency?</h2>
<p>When there is no emergency in an area, the bandwidth on the FirstNet network in that area will be available to AT&T to sell to private or corporate customers. This revenue, in addition to that from the first responder users themselves, is expected to pay for FirstNet.</p>
<h2>5. What do other countries do about this problem?</h2>
<p>Because of the close relationship between the U.S. and Canadian broadband services, Canada is creating <a href="https://www.publicsafety.gc.ca/cnt/mrgnc-mngmnt/psbn-en.aspx">a Public Safety Broadband Network</a> using the same frequency spectrum and protocols as the U.S. so that agencies on both sides of the border can connect to each other easily.</p>
<p>The U.K. is building an Emergency Services Network, expected to <a href="https://www.ft.com/content/d7981bf4-5730-11e7-80b6-9bfa4c1f83d2">begin partial operation near the end of 2017</a>. South Korea expects to complete its public safety wireless network in time to be <a href="https://www.rrmediagroup.com/Features/FeaturesDetails/FID/482">used during the 2018 Winter Olympics</a>. Several other countries have networks that are in <a href="http://e.huawei.com/us/publications/global/ict_insights/201608271037/focus/201608271435">various stages of design and construction</a>.</p>
<h2>6. FirstNet is supposed to last 25 years. What does that mean, and how will it happen?</h2>
<p>As <a href="http://www.electronicdesign.com/4g/wireless-companies-follow-roadmap-past-4g-and-5g">broadband wireless technology improves</a>, our devices and networks will too, including FirstNet.</p>
<p>The effort is also expected to promote technological innovations. Already, some of the technical solutions that serve first responders, such as the ability for <a href="https://resources.ext.nokia.com/asset/200168">devices to connect directly to each other</a>, have been incorporated into LTE standards. Some <a href="https://www.firstnet.com/apps">apps developed for first responders</a> may also release versions useful to others.</p>
<p>It’s hard to know what we’ll need in 25 years – just as 25 years ago, it would have been very hard to envision the technical details of today’s interconnected world. But building FirstNet will help protect and serve both first responders and the public during emergencies – and it will enhance communications in times of peace and prosperity.</p><img src="https://counter.theconversation.com/content/82202/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Ladimer Nagurney, in an inherited IRA, owns approximately $1200 of AT&T stock. </span></em></p><p class="fine-print"><em><span>Anna Nagurney does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>A multibillion-dollar effort is just beginning to build an all-new nationwide wireless broadband network for emergency responders. How will it work, why do we need it and how will it last 25 years?Ladimer Nagurney, Professor of Electrical, Computer and Biomedical Engineering, University of HartfordAnna Nagurney, John F. Smith Memorial Professor of Operations Management, UMass AmherstLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/806512017-07-27T02:01:11Z2017-07-27T02:01:11ZWhen the federal budget funds scientific research, it’s the economy that benefits<figure><img src="https://images.theconversation.com/files/179810/original/file-20170726-27705-12b4ng0.jpg?ixlib=rb-1.1.0&rect=298%2C502%2C2708%2C1823&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Impacts of federal research funding can be felt region-wide.</span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/view-downtown-seattle-skyline-washington-usa-510934489">f11photo/Shutterstock.com</a></span></figcaption></figure><p>Emergency: You need more <a href="https://www.washington.edu/alumni/columns/june97/mills.html">disposable diapers</a>, right away. You hop into your car and trust your ride will be a safe one. Thanks to your phone’s GPS and the <a href="http://www.longviewinstitute.org/projects/marketfundamentalism/microchip/">microchips that run it</a>, you map out how to get to the store fast. Once there, the <a href="https://www.nsf.gov/about/history/sensational60.pdf">barcode on the package</a> lets you accurately check out your purchase and run. Each step in this process owes a debt to the universities, researchers, students and the federal funding support that got these products and technologies rolling in the first place.</p>
<p>By some tallies, almost two-thirds of the technologies with the most far-reaching impact over the last 50 years <a href="http://www.bu.edu/research/articles/funding-for-scientific-research/">stemmed from federally funded R&D</a> at national laboratories and research universities.</p>
<p>The benefits from this investment have trickled down into countless <a href="http://money.cnn.com/galleries/2011/technology/1110/gallery.government_inventions/index.html">aspects of our everyday lives</a>. Even the internet that allows you to read this article online has its roots in federal dollars: The U.S. Department of Defense supported installation of the first node of a <a href="https://www.darpa.mil/about-us/timeline/arpanet">communications network called ARPANET</a> at UCLA back in 1969.</p>
<p>As Congress debates the upcoming budget, its members might remember the economic impacts and improved quality of life that past <a href="https://nsf.gov/about/history/nifty50/index.jsp">congressional support of basic and applied research</a> has created.</p>
<h2>Federal dollars do more than fund labs</h2>
<p>Here in the state of Washington, federally funded research at both my employer, Washington State University, and the University of Washington has led to transformational innovations. It’s helped spawn not only new products that save and improve lives, but productivity growth through new businesses and services.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/179521/original/file-20170724-11166-1s8eb5f.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/179521/original/file-20170724-11166-1s8eb5f.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/179521/original/file-20170724-11166-1s8eb5f.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=382&fit=crop&dpr=1 600w, https://images.theconversation.com/files/179521/original/file-20170724-11166-1s8eb5f.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=382&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/179521/original/file-20170724-11166-1s8eb5f.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=382&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/179521/original/file-20170724-11166-1s8eb5f.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=480&fit=crop&dpr=1 754w, https://images.theconversation.com/files/179521/original/file-20170724-11166-1s8eb5f.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=480&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/179521/original/file-20170724-11166-1s8eb5f.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=480&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">The Zhang lab at WSU works on recycling carbon composite fiber materials.</span>
<span class="attribution"><span class="source">Robert Hubner, WSU</span>, <a class="license" href="http://creativecommons.org/licenses/by-nd/4.0/">CC BY-ND</a></span>
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<p>Just a few examples include new kinds of <a href="https://cmec.wsu.edu/documents/2015/04/wmel-history.pdf">composite-based lumber</a>, <a href="https://www.geekwire.com/2015/these-researchers-are-building-extra-brainy-smart-homes-to-monitor-aging-adults/">smart home technology for the aged</a>, <a href="https://nephrology.uw.edu/about/history-innovation">kidney dialysis machines</a>, <a href="https://magazine.wsu.edu/2015/08/16/the-ion-investigators/">airport explosive detectors</a> and new varieties of wheat, <a href="https://news.wsu.edu/2016/11/21/mcdonalds-chooses-wsu-potatoes/">potatoes</a> and other <a href="http://www.seattletimes.com/pacific-nw-magazine/quinoa-comes-to-the-northwest/">agricultural crops</a> that we enjoy at our tables and in numerous products.</p>
<p>All these inventions relied on federal investment combined with university research lab expertise. The important final step was commercialization. Together it all led to positive economic impacts.</p>
<p>We see this pattern again and again.</p>
<p>For instance, next time you’re on Google, remember it was founded by two Stanford University doctoral students who were funded in part by <a href="https://www.nsf.gov/discoveries/disc_summ.jsp?cntn_id=100660">National Science Foundation Graduate Fellowships</a>. Fast forward 20 years and here in my backyard, the company is busy building a new campus in downtown Seattle that may house <a href="https://www.geekwire.com/2016/paul-allens-vulcan-develop-huge-complex-google-amazons-backyard/">3,000-4,000 workers</a> by 2019. Many of those hired will likely be <a href="http://www.seattletimes.com/business/technology/google-plans-big-expansion-to-south-lake-union/">graduates from both WSU and UW</a>.</p>
<p>The fact is that <a href="http://www.sciencecoalition.org/downloads/AMI_v3_4-17-17.pdf">thousands of companies</a> can trace their roots to federally funded university research. And since the majority of federally funded research takes place <a href="https://www.cbo.gov/sites/default/files/cbofiles/ftpdocs/82xx/doc8221/06-18-research.pdf">at America’s research universities</a> – often in concert with federal labs and private research partners – these spinoff companies are often located in their local communities all across the country.</p>
<p>Just one of these firms, headquartered in Broomfield, Colorado, employs over 2,800 workers and started with researchers at the University of Colorado who create instruments, data exploitation solutions and technologies for civil, commercial, <a href="http://www.sciencecoalition.org/successstories/company/ball-aerospace-technologies-corp">aerospace and defense applications</a>. Another in Audubon, Pennsylvania develops rapid, noninvasive <a href="http://www.sciencecoalition.org/successstories/company/liquid-biotech-usa-inc">“liquid biopsy” tests</a> for cancer screening and early detection based on research from the University of Pennsylvania. And another company with 85 employees in Madison develops high-density <a href="http://www.sciencecoalition.org/successstories/company/nimblegen-systems-inc">DNA microarrays</a> for pharmaceutical research based on research from the University of Wisconsin.</p>
<p>The list goes on and on.</p>
<h2>A Washington state case study</h2>
<p>Focusing federal research funding on research universities who enjoy strong corporate and business partners has <a href="https://www.rdmag.com/article/2015/04/how-academic-institutions-partner-private-industry">strategic value</a>. There is little doubt that the state of <a href="http://247wallst.com/special-report/2016/06/16/states-with-the-fastest-and-slowest-growing-economies-2/2/">Washington’s recent economic successes</a>, for example, comes down to a cycle of innovation and discovery that feeds additional economic growth and private-public-university relationships. Federal R&D funding is a key ingredient.</p>
<p>Our two public research universities have strong relationships with federal funding agencies. Together Washington State University and the University of Washington – the largest recipient of federal research funding in the nation among public universities – form the technological and intellectual pillar around which many of our state’s successful businesses are built and sustained. Both universities graduate thousands of undergraduate and graduate students who provide a constant supply of educated, trained workers. In turn, the universities and federal R&D investment benefit from the active engagement and monetary support of business leaders and professionals. Innovative ideas and knowledge percolate back and forth between federally funded research and the private sector.</p>
<p>A recent milestone provides an example.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/179516/original/file-20170724-11666-199zx5g.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/179516/original/file-20170724-11666-199zx5g.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/179516/original/file-20170724-11666-199zx5g.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=399&fit=crop&dpr=1 600w, https://images.theconversation.com/files/179516/original/file-20170724-11666-199zx5g.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=399&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/179516/original/file-20170724-11666-199zx5g.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=399&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/179516/original/file-20170724-11666-199zx5g.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=502&fit=crop&dpr=1 754w, https://images.theconversation.com/files/179516/original/file-20170724-11666-199zx5g.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=502&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/179516/original/file-20170724-11666-199zx5g.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=502&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Gassing up with renewable, affordable jet fuel – thanks to a public/private research collaboration.</span>
<span class="attribution"><span class="source">Robert Hubner, WSU</span>, <a class="license" href="http://creativecommons.org/licenses/by-nd/4.0/">CC BY-ND</a></span>
</figcaption>
</figure>
<p>Federal research dollars helped solidify a collaboration aimed at solving a big problem: the high carbon emissions from air travel, a contributor to climate change. WSU worked together with the UW and a host of other regional public research institutions, the U.S. Department of Agriculture, Alaska Airlines, Weyerhaeuser Corp., Gevo, Inc. and a large alliance of private industry to develop a <a href="https://nararenewables.org/">renewable, affordable source of jet fuel</a>.</p>
<p>Each collaborator brought unique expertise to the innovation table. USDA provided the funding and the policy commitment to the development of biofuels that spurred matching investment from private partners. Alaska Airlines brought the need to reduce its carbon emissions and its leadership in applying clean technologies to improve its environmental performance. WSU contributed decades of pertinent experience in both basic science and applied research. UW researchers demonstrated the fuel’s potential reduction in life cycle greenhouse gas emissions. And, Gevo, Inc. brought its private-sector skills and patented technology in developing bio-based alternatives to petroleum-based products. The sum of these parts created a strong, successful partnership that took a big step toward sustainable aviation.</p>
<p>Individual researchers with their deep expertise remain the bedrock of the research enterprise. But teams of scientists – drawn from research universities, government and the private sector – all <a href="http://commons.erau.edu/cgi/viewcontent.cgi?article=1116&context=publication">working on multidisciplinary problems</a> are having an increasing impact.</p>
<h2>Recipe for amplifying R&D investment</h2>
<p>Importantly, this phenomenon is not unique to the state of Washington. The <a href="https://www.nerdwallet.com/blog/studies/americas-most-innovative-tech-hubs/">nation’s most active innovation hubs</a> and successful regional economies have similar factors that drive economic growth and resiliency, including:</p>
<ul>
<li><p>Top-tier research institutions supported by federal, state and private funding;</p></li>
<li><p>A concentration of talented and diverse workers;</p></li>
<li><p>An ecosystem of firms, entrepreneurs and intermediaries;</p></li>
<li><p>Accessible pools of risk capital;</p></li>
<li><p>A global orientation; and</p></li>
<li><p>Communities that take advantage of the area’s unique assets and advantages in creating a desirable quality of life.</p></li>
</ul>
<p>We see these conditions <a href="http://www.businessinsider.com/the-20-most-innovative-cities-in-the-us-2013-2#4-corvallis-oregon-17">coming together around the country</a>: in Silicon Valley, the Raleigh-Durham Research Triangle Park, Boston’s metro area and other innovation hubs in cities like Boulder, Colorado; Madison, Wisconsin; Austin, Texas; and Gainesville, Florida.</p>
<p>It’s this <a href="https://itif.org/publications/2008/07/09/where-do-innovations-come-transformations-us-national-innovation-system-1970">cooperative model</a> and leveraging of federal R&D dollars that have long been this <a href="https://www.brookings.edu/research/localizing-the-economic-impact-of-research-and-development/">nation’s competitive advantage</a>. With fewer federal dollars allocated to scientific R&D, the next Silicon Valley – with its potential for an economic renaissance for a new area not even on our innovation map yet – may not emerge as quickly.</p><img src="https://counter.theconversation.com/content/80651/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>In his position as VP of Research for WSU, Christopher Keane oversees projects that receive grants from DOE, USDA, NIH, NSF and DOD.</span></em></p>Research dollars don’t stay locked up in academia and government labs. R&D collaborations with the private sector are common – and grow the innovation economy.Christopher Keane, Vice President for Research and Professor of Physics, Washington State UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/786122017-05-31T20:10:59Z2017-05-31T20:10:59ZFancy government financing could still cost the taxpayer<p>No sooner is one complicated financing idea from the government batted down, than another one pops up. We can expect more of them, now that the federal budget has established a new <a href="http://www.afr.com/opinion/columnists/government-promotes-new-its-infrastructure-development-agency-20170510-gw1mjv">Infrastructure and Project Financing Agency</a>. </p>
<p>We’ll get “innovative” financing options for everything from the massive <a href="https://theconversation.com/budgets-good-debt-conversion-underpins-70b-plus-infrastructure-program-experts-respond-76936">Inland Rail project</a>, down to a <a href="https://theconversation.com/bond-aggregator-helps-build-a-more-virtuous-circle-of-housing-investment-76793">bond aggregator</a> to finance community housing. The idea is that we get new public assets, but the money spent is rather marvellously “off balance sheet”.</p>
<p>The problem is these financing schemes are not very good at meeting the government’s stated aims of minimising the public subsidy for public infrastructure and transferring risk effectively. </p>
<p>Look no further than recent enthusiasm for <a href="http://www.lincolninst.edu/publications/articles/tax-increment-financing">tax increment financing</a>, a financing scheme idea borrowed from the US. It takes the expected increase in land tax, stamp duty or council rates from landowners near a new bridge or railway station, as security for finance on the project. </p>
<p>The idea is that a private-sector financier borrows the upfront capital for construction, and makes an arrangement with the government to earmark those expected increases in future revenue. This is used to guarantee the debt used to finance the project for a set period, such as 20 years. But look a little closer: lurking in the background of tax increment financing, just as with bond aggregation, usually lies a government guarantee. </p>
<p>The idea that financing can be “innovative” obscures the central point that all capital originates in savings. As the eminent British economist John Kay puts it:</p>
<blockquote>
<p>People talk about ‘new sources of finance’ when what they mean is new ways of channelling existing sources of finance; they confuse the channels of intermediation with the origin of funds.</p>
</blockquote>
<p>Why would Australian governments want private financiers to borrow on their behalf for public infrastructure? Australian governments, state and Commonwealth, have strong credit ratings and can borrow money extraordinarily cheaply. The <a href="http://www.rba.gov.au/statistics/tables/">five-year government bond rate</a> is around 2.3% in NSW and Victoria, and an astoundingly low 2.1% for Commonwealth bonds. </p>
<p>Government borrowing is pretty close to the cheapest it’s ever been. By contrast, when a private operator borrows the capital cost of a public infrastructure project, they typically do so in the form of A-rated and BBB-rated corporate bonds. These bonds have interest rates around 1.3 to 2 percentage points higher than government borrowing costs.</p>
<p>The usual argument for involving the private sector in these financing schemes is that the sector can better allocate risks to whichever party is best placed to manage them. But there is a difference between the private sector assuming the risk and management responsibility for construction and operations on the one hand, and private sector involvement in the mere channelling of finance on the other.</p>
<p>The potential benefits of private sector involvement rely on well-specified contracts that are enforced. On this score, the history of private public partnerships in Australia is mixed. </p>
<p>Many risks never eventuate or are managed successfully. And when things do go wrong, it may be that the contract is watertight and enforced so that the private investor wears the contracted cost. But unfortunately, sometimes government wears the cost too. </p>
<p>If there’s a government guarantee behind these contracts, then the risks may not be transferred effectively, and we taxpayers don’t get what the government paid for on our behalf. Take a British example: despite millions of pounds in fees for contracts to modernise London’s underground rail network, the arrangements unravelled when one of the two principal companies behind it, <a href="https://www.theguardian.com/society/2007/jul/22/localgovernment.business">Metronet, failed</a>.</p>
<p>Metronet’s extensive borrowings were guaranteed by a US bond insurer – on the basis that 95% of payments would be met by the UK government. In other words, despite all the complication and expense, the real borrower turned out to be the UK government all along.</p>
<p>The key question is what happens if the earmarked tax revenue isn’t enough to pay the loan. Does the financier take a hit? Do the taxpayers near the new bridge or railway station get a bigger-than-expected tax bill? Or does the government step in and pay up? If the government is ultimately guaranteeing the loan, it would be cheaper for the government to borrow on its own account.</p>
<p>The many spruikers of “innovative” finance schemes argue it is too simplistic to ask who pays when things go wrong. And they are absolutely right that there’s no shortage of complications in these schemes. But consider three simple facts. </p>
<p>First, the costs of infrastructure projects in Australia are systematically under-estimated, and therefore the debt may well be bigger than expected, even if the revenues flow through as planned. Second, any revenue shortfalls are likely to happen when the economy is slowing – that is, when the government can least afford to make good on a guarantee. And third, the politicians who embrace the guarantee will probably be long gone when the dreaded call comes to make good on it.</p>
<p>In the end, the government’s own principles are clear, and they should be followed: project financing should minimise the level of public subsidy needed to deliver the project; and where risk is borne by the private sector, it should be transparently priced and deliver clear value for money for the taxpayer.</p>
<p>So let’s hear more detail about these government guarantees – the promises that bind future governments, whether it’s with Inland Rail, “bond aggregators” or tax increment financing, or the next “innovative” financing idea that pops up.</p><img src="https://counter.theconversation.com/content/78612/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Grattan Institute began with contributions to its endowment of $15 million from each of the federal and Victorian governments, $4 million from BHP Billiton and $1 million from NAB. In order to safeguard its independence, Grattan Institute’s board controls this endowment. The funds are invested and Grattan uses the income to pursue its activities.</span></em></p>The federal government keeps coming up with new ways to finance infrastructure, but it isn’t clear they will shift the cost or risk away from government.Marion Terrill, Transport Program Director, Grattan InstituteLicensed as Creative Commons – attribution, no derivatives.