What construction sites for economic recovery? Public investments, PPP and Impact Investing
There is something irritating in the tired repetition, in the political and economic debate, of the traditional mantra that “we need to restart construction sites to boost economic growth in our country”.
Everyone, even without being Keynes’ followers, agrees that public works can activate economic growth and that, therefore, the “construction sites” must be reopened without delay. However, it would not hurt if the simplicity of these statements, too shared not to hide traps, would be surrounded by some caution and some useful clarification on “what” and “how”, to activate a real public debate on collective choices.
The “what”, first of all. The generality of the appeals on the “construction sites” seems to take for granted that the useful ones coincide with the so-called “great works”, financed by the State at the bottom of the list: mainly roads and highways, more rarely railways. Thus we go back to talking about the highway between Mantova and Cremona and perhaps the Bridge over the Strait of Messina.
On the other hand, “great works” are almost never meant to be works of “great utility”, such as the strengthening, acceleration and completion of existing and clearly necessary via ferrata: from the unique tracks of Apulian commuting to the doubling of the Palermo – Catania to the Naples-Bari high capacity.
The latter, which would connect about 75% of southern mechanics, lies as a promise since the funding arranged by the Monti government, almost ten years ago. And yet, the amateur video with the boys playing soccer undisturbed on the deserted Brebemi something should have taught something to a country that has an unenviable record of vicious soil waterproofing, with the inevitable side of hydrogeological instability and natural risks.
In disregard of that landscape (a constitutional value, let’s remember this sometimes) and quality of life, which have always been the fortune of Italy. Before public investments, to be lacking is the strategic vision on the part of the State, which is likely to be reduced, once again, to a mute paying official.
A state that seems to forget that almost a tenth of its municipalities fall within the area of greatest seismic risk: any shock, even if not devastating, can bring the now recurrent burden of deaths and heritage losses, whereas, instead, a sensible preventive work would lead to redevelopment of places, to relaunch “internal areas” of the country, as well as avoiding the loss of human lives.
A State that pretends not to see how the thousand operations, dispersed throughout the territory, of redevelopment of buildings seized from the mafia fall, then, rapidly into degradation, simply due to the lack of a medium-long term vision. This is how so many micro operations to safeguard the building heritage often become wasted funds, waiting for the next renovation.
Public investments have often been guided by a vision smuggled as “liberal”, but which has no meaning of liberalism properly understood: no public debate on choices of common interest, no constraint of rationality of decisions, no capillarity to involve individuals and local communities in jobs with a certain return in terms of safety, liveability, activation of territorial economic microsystems.
Being liberal is certainly not an obligation, but at least the scarcity of public resources would require our country to learn from practices in vogue now in more than half of the world – coincidentally the most advanced one – in the name of shared finance, in terms of public-private partnership (so-called PPP) infrastructures, and in terms of social impact finance as well. And here the “what” intersects the “how” of public investments, so much evoked.
Today, the progressive decrease in public money corresponds to an abnormal growth of private liquidity. Institutional funds and private equity funds are looking for investments that are no longer just rapacious: so-called patient investments, which could respond to the strong public demand for social infrastructures (hospitals, kindergartens, sports fields, etc.), common to all European countries, in which it took two new roads.
The first: medium / long-term PPP operations, on which the European Investment Bank (EIB) has been pushing for years and thanks to which Britain has financed half of its public works. The private person puts up the capital and the public pays an annual fee.
The second: social impact investing. First launched in Great Britain as well, it has introduced innovative financial instruments, such as social bonds (or solidarity bonds), aimed at investing in social projects that have the capacity, over time, to sustain themselves. The social no longer synonymous with unproductive spending, but an opportunity for economic development.
The public leverage, in this perspective, would in turn change skin, becoming a driving force, co-financier or guarantor of investments that can be assessed in the impact and aimed, for example, at securing territories as well as rebuilding schools.
Can we hope that a barbarous public debate will abandon the generality of the appeals on public finance “without payment” and accept the challenge of a new role for the public and the private sector?