no third solution

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But Who Will Build the Bridges?

October 12th, 2007

The Ambassador Bridge is the most important thoroughfare in terms of trade between Canada and the United States – and its in the news of late, because some people would like to build another bridge nearby, to augment the traffic capacity and alleviate congestion. The row of course, is a battle between the public and the private sectors, with at least one private financier willing to undertake the $1 Billion (USD) investment to build another international bridge across the Detroit river.

Experts suggest that the cost will be about $1B regardless of how the financing is obtained – and that the cost of construction will eventually be covered by the bridge’s tolls. Except, that’s not entirely true. When the government builds the bridge, the cost of construction is financed by taxpayers either through higher excises or reductions in other goods or services provided by the government. The government then collects the tolls, and spends that income on maintenance and upkeep, or socks it into the general fund. It never returns to the taxpayers in the form of return, or dividend, or profit. In fact, the very taxpayers who paid to build the bridge will have to pay the toll in order to use the bridge. Whereas when a private company builds the bridge, the funds are obtained from investors willing to take a risk, in the hopes of earning a future return.

Ambassador Bridge from Detroit

One such man is Manuel J. Moroun, who has owned the Ambassador Bridge through the Detroit International Bridge Company for some three decades. In fact, the bridge has been privately owned since it opened, 78 years ago.

The success of the DIBC, however, doesn’t prevent people from chastising Mr. Moroun’s company, or private enterprise in general:

“This man is making billions of dollars on that bridge.” said Raymond E. Basham, a Michigan state senator and a Democrat, who said that only a public bridge could ensure the structural inspections and domestic security needed. “When it comes to dollars and cents, there is every incentive for him not to tell us if something is wrong. We have an obligation for the safety of people.”

No, Mr. Basham – you must’ve flunked economics. The Ambassador Bridge’s private owner has every incentive to A) not let things go wrong, and B) to right them immediately. Case(s) in point: Private firms inspect and certify the bridge annually, which reports are made available to both governments, and private security guards were hired in the wake of 9/11. Moreover, just because the bridge is held privately doesn’t (or need not) exempt it from probably thousands of regulations, fees, taxes, and jurisdictional oversight from state or local governments. But this is the typical, anti-capitalist point of view, where the evil capitalist is financially and economically near-sighted – always willing to forego the future for the present, which passes for enlightened public policy these days.

Yet everything we know about capitalist entrepreneurs suggests otherwise, their very essence is a greater time-preference, and willingness to accept risk, which allow them to undertake investments which won’t break even until some time in the distant future, if they ever do. Entrepreneurs, by their very definition are those people who will forego the present in favor of the future, but this hack of a politician paints him as an extortionist – a mere opportunist. Futhermore, there is absolutely no reason to presume that mere public ownership will prevent disaster from striking, as we’ve recently seen in Milwaukee, where:

[L]awmakers diverted billions of dollars in transportation money from road work to pet projects.

The President of the DIBC, Dan Stamper, makes this argument:

“To the people who say that they’re uncomfortable with this being private, I say, ‘We are a success story.’”

Yes, Mr. Stamper, I agree that the DIBC is septagenarian success which is now being assailed by the “what-if-everything-goes-wrong-and-there’s-nothing-you-can-do-about-it?” argument, which is facially absurd. Some people shudder at the idea of having a privately operated bridge of such tremendous economic importance. But the bridge didn’t become privately owned overnight – the most important thing to consider is that as a private bridge it became the single most important trade artery between the U.S. and Canada, during 80 years of service.

Here’s to hoping that the DIBC maintains its ownership of the Ambassador Bridge, and that they are allowed to construct and operate another concurrent span.

no third solution

Blogging about liberty, anarchy, economics and politics