Investments, particularly in infrastructure projects such as bridges and roads, are multi-year undertakings. They require planning, environmental and engineering reviews, months or years of construction. Money is disbursed over many years. Similarly with investments in emerging technologies, it takes months and years to see whether a technology has promise and can be scaled effectively.
When Congress or a state legislature authorizes infrastructure investment, it is generally in terms of a short-term stimulus (such as in 2009) or for a one-off project, such as construction of a specific road. And authorization depends upon political consensus that is difficult to achieve. The next step, often is either raising taxes or issuing bonds to pay for the project — consuming even more time and often obliging future generations to pay for things their grandparents’ voted to build.
But infrastructure and new technology finance is a continuing requirement for a growing economy. Our ability to absorb new technology requires an ever-improving infrastructure that adapts as we progress. This year, it might be modernized electrical grids or broadband, in five years time, it might be hydrogen stations that will be key to continued economic growth.
When funding for such projects needs to go through uncertain and shifting political circumstances, the ability to plan and anticipate the next step is constrained, meaning that investment is constantly behind the curve. Much better would be a sustained process with a stable fund that can be deployed over time.
The InfraBank would be an independent organization staffed by professionals able to evaluate investments according to urgency, feasibility and utility. Some fixed proportion would go into upgrading fixed transportation and communication infrastructure (40%); another fixed proportion would be invested in emerging technologies such as efficient electrical grids (another 40%), and the rest would be available for whatever purpose the Board chose (give some flexibility for unanticipated opportunities). The InfraBank’s strength derives from the combination of low-risk, public sector, current infrastructure loans, (to be repaid from tax revenue, tolls or federal grants whenever the fiscal and political starts lined up) and investments in the higher-risk, higher potential reward investments in emerging technology projects. In this area, the InfraBank would model itself on the International Finance Corporation of the World Bank (IBRD), which invests no more than 25% of total financing for private sector emerging technology projects in Third World countries. Financing could be loans or convertible bonds, offering the opportunity for significant return on investments that become profitable.