infrastructure

“The mountains are high and the emperor is far away”

by on November 17, 2011 @ 12:25 am · 0 comments

in (Austrian) Economics, Business

Reason.com has posted an excellent article on Wenzhou, China, a city built almost entirely upon private enterprise:

For the last 30 years, private citizens in this southeastern China metropolis have largely taken over one of the least questioned prerogatives of governments the world over: infrastructure.

Driving down the cluttered and half-constructed streets of this 3-million-strong boomtown requires frequent U-turns and the patience of Buddha, but every road eventually leads back to a factory. Each factory is in turn surrounded by a maze of roads filled with hundreds of small feeder shops selling spare parts, building materials, and scraps. Every haphazard street in this town seems to have an economic purpose….

Wenzhou shopping districtThe official channels of financing and investment are routinely bypassed, replaced by local institutions with their own governance and lending rules.  It all works, if a bit haphazardly:

Gray-market lenders are often established, though technically illegal, financial institutions that lend primarily working-capital loans at rates as high as 10 percent a month. Contacts often modify interest rates based on how well you know them. Forms of repayment enforcement differ. Weng points out that in a community so dependent on guanxi—relationships—defaulting on a contact’s loan could blackball you from future business opportunities….

Lending also takes place through a number of formal lending institutions that have become informal depositing institutions. Pawnshops in Wenzhou are very different from those in the West. The shops can give out loans of millions of dollars backed by property and stocks, and they can pay depositors interest rates three to four percentage points higher than the official lending rate at banks.

It’s a vivid example of what can be achieved when the central planners are too far away to have much influence and local bureaucrats learn to simply get out of the way.  If only U. S. bureaucracy was so ineffective!

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Putting the Highway in Information Superhighway

by on December 3, 2010 @ 3:07 pm · 2 comments

in Podcast Picks, Technology

In a recent episode of This Week in Google, Jeff Jarvis, with some support from Leo Laporte, suggested that perhaps, given the incredible importance of the Internet, it should be treated like the highway system, with the government paying companies to build it out, but having state guaranteed access. I enjoy listening to TWIG, and many other programs on the TWIT network, but this idea immediately made me think of an old SNL skit:

Compared to turning the Internet into something like the highway system, the ideas in that clip are absolute genius. Consider what the government routinely does on the highway:

  • It limits speed, sometimes in opposition to highway engineers’ opinions
  • It sends out patrols searching for contraband
  • It claims the right to stop and inspect travelers’ cars based on the judgment of the police officer (probable cause)
  • It levies taxes on machines which use the highways, above and beyond the taxes it already collects on the purchase
  • It licenses users, charging them for the right to drive, on top of the taxes it already levies on the sales of vehicles and license plates
  • It mandates insurance, corrupting the insurance industry and incentivizing them to support government policies and donate to political campaigns
  • It forbids the use of technology to hide the interior of the car (window tinting laws) as well as technology to avoid speeding tickets (bans on radar jammers and detectors)

Turning the Internet into something like the highway system would mean government inspecting Internet traffic, blocking it, or even arresting users for things like copyright violations, setting policies on how traffic is prioritized, banning encryption except for approved encryption which the government can decrypt at will, taxing users for the right to use the Internet, and mandating the purchase of security programs. It is hard to imagine a finer example of a Bad Idea.

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