Infrastructure
Infrastructure (also known as "capital goods" or "fixed capital") is a platform for governance, commerce, and economic growth and is "a lifeline for modern societies." It is the hallmark of economic development [Goldsmith, p.23].
It has been characterized as the mechanism that delivers the "..fundamental needs of society: food, water, energy, shelter, governance ... without infrastructure, societies disintegrate, and people die." Adam Smith argued that fixed asset spending was the "third rationale for the state, behind the provision of defense and justice." Societies enjoy using "...highway, waterway, air, and rail systems that have allowed the unparalleled mobility of people and goods. Water-borne diseases are virtually nonexistent because of water and wastewater treatment, distribution, and collection systems. In addition, telecommunications and power systems have enabled our economic growth."
This development happened over several centuries. It represents several successes and failures in the past that were termed public works and, even before that, internal improvements. In the 21st century, this type of development is termed infrastructure. Infrastructure can be described as tangible capital assets (income-earning assets) owned by private companies or the government.
Infrastructure may be owned and managed by governments or private companies, such as sole public utilities or railway companies. Generally, most roads, major ports and airports, water distribution systems, and sewage networks are publicly owned, whereas most energy and telecommunications networks are privately owned. Publicly owned infrastructure may be paid for by taxes, tolls, or metered user fees, whereas private infrastructure is generally paid for by metered user fees [Roumboutsos, Voordijk, p.62]. Major investment projects are generally financed by the issuance of long-term bonds.
Hence, government-owned and operated infrastructure may be developed and operated in the private sector or public-private partnerships in addition to the public sector. In the United States, public spending on infrastructure has varied between 2.3% and 3.6% of GDP since 1950. Many financial institutions invest in infrastructure.
Goldsmith, H. (2015). Actors and innovations in the evolution of infrastructure services. Venice: The Economics of Infrastructure Provisioning.
Roumboutsos, Voordijk. (2020). The decision-making process for infrastructural investment choices. Business models for transport infrastructure assets? Some experiences in Europe. Milan: FrancoAngeli.