Infrastructure Services

Infrastructure Services

Infrastructure, the services regarded as the essential basis for creating a modern economy: transport, power, education, health services. housing. It is also described as 'social' or 'public' overhead capital where the emphasis is on the capital assets that provide the services: roads, bridges, railways, houses, schools, reservoirs, etc.

The 'infrastructure' requires extensive capital for its initial creation, but if it does not attract funds from private enterprise it may need to be financed by the state or other public authority. In the nineteenth century British private investors financed most of the railway development in North and South America; roads have seldom been financed by private capital although they can be paid for by tolls; mass education usually requires state aid in the underdeveloped countries but can be financed privately as incomes rise. Investment in social capital thus does not always yield a profit though it may benefit the economy as a whole. It may be particularly necessary in starting the development process in under-developed countries. A road which links the interior of a country to its main ports will open up possibilities for production of specialized crops that can be transported to the coast and sold in exchange for goods manufactured in the towns or imported from overseas. The development of an efficient transport system and means of communication can rapidly extend the potential market for the product and promote further specialization.

For most under-developed countries the creation of the 'infrastructure' is best achieved by borrowing from the richer countries because

(a) income per head is too low to permit much saving, (b) even when domestic saving is possible the transfer of resources is often blocked by primitive commercial and fiscal systems. Where for political reasons the pace of development is forced, or where the political unit is small and its economic future doubtful, or where local laws do not secure security for lenders, private foreign loans may be difficult to arrange. Hence the growth in recent years of alternative sources of loans or direct grants such as the World Bank, the Special United Nations Fund for Economic Development, and the government s of the richer countries.

Some economists have argued that just as the industrialized countries advanced by their own efforts, the under-developed would be more thinly based if they did likewise, developing theft human as well as their physical resources by creating a framework of laws and institutions in banking, insurance, property, etc., that encourages effort and enterprise, and learning from the industrialized countries the arts of initiative and the capacity to recognize and provide for risks. This process may take longer, but the under-developed countries probably cannot achieve in a decade what took a century in the West unless they sacrifice the individual liberty and initiative that is thought to be at the root of long-run economic development. In so far as outside loans are desirable, they need not be channelled through government s but could go to widely dispersed private centres of initiative independent of Government patronage and control.

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