Governments, all over the world get money mainly from tax proceedings, investment projects and/or sale of mineral resources. In the case of
Citizens look upon the government to implement projects that are too expensive and complex to organize for them or/and private companies to carry out alone. Expressed in a different form, citizens look upon the government to carry out projects that give their lives the maximum value. The only way a reliable, competent and accountable government can achieve this (or
meet this demand) is by implementing projects that will raise “as high as possible” the standard of living of “as many people” as possible! By the phrase “as high as possible,” we mean projects of very high quality that
will benefit a large number of people, and not projects of very low quality.
The next question we need to ask ourselves is: “What kind of government projects will go a long way in raising the standard of living of the populace? I guess you don’t need to be a professor in economics in order to answer this question. All that is needed is just common sense. The answer is obvious. Undoubtedly, they are “infrastructure projects.” But, why infrastructure projects? Because infrastructure projects not only make our lives more meaningful but as well go a long way in improving our standard of living.
If you doubt this statement, try to imagine your life without a pipe borne water or electricity, to mention just a few, just for a week. If you live in
Suffice to say that the role of modern and functioning infrastructures in the economic development of any country can not be overemphasized. Developed and functioning infrastructures are an integral part of developed societies. They are the “locomotives” that drive the economy. They are the backbones or spinal cords of any economy.
However, governments, unlike private investors or companies are both financial and social investors. By this, I mean that governments are also expected to carry out social projects like the the security of our lives and properties, of course, provided that the government is reliable and competent. In addition, the government, unlike private investors or companies that use financial profit as the only yard stick to measure the value of their investments, must also take into consideration other social factors before embarking on any infrastructure. There is the need for a balance between the financial and social aspects. Thus, the other major social factor or criteria that any reliable and competent government must put into consideration before embarking on any project is “the number of its citizens” that will benefit from its projects!
However, if we are to speak “strictly” in financial or investment terms, the government is “almost” like a private investor in the sense that since it costs the government substantial amount of capital to carry out a project, therefore, the more people (citizens) the project benefits, the lesser the “marginal cost” of the project to the government. Subsequently, the higher the value or profitability of the project(s) to its citizens and the government respectively! A government that is able to achieve this result creates a win-win relationship between itself and its citizens. Therefore, the main criteria a competent and reliable government must use in measuring the value of its infrastructure
projects are:
(1) Cost of the project;
(2) Cash flows;
(3) Number of benefactors.
THE ROLE OF INFRASTRUCTURE PROJECTS IN OUR LIVES
Mere stating that infrastructure projects are locomotives that drive the economy, or are the spinal cords of our economy are general assertions. We need to be specific. Infrastructure projects play 3 very important roles in our lives and economy. They include the following:
(I) Infrastructure projects help in raising our standard of living;
(II) Infrastructure projects help in reducing the cost of doing business;
(III) Infrastructure projects are catalysts to growth and development.
Although, to the well informed, the above assertions are obvious and comprehensive and comprehendable enough, without any further explanation. Nevertheless, they must not be taken for their face values. They need to be explained, at least for the benefit of the lay men reading this article.
(I) INFRASTRUCTURE IMPROVES OUR STANDARD OF LIVING.
So, what exactly do we mean by this? Or to be more precise. How do infrastructure projects improve our standard of living? By raising the quality of our lives.
Basic human needs will be used to explain this point. By basic needs we mean things that have great impact on our lives, without which it is practically impossible to live or our lives become unbearable. So what are the basic human needs? They include water, food, shelter, electricity and efficient health service. In his ground breaking book, Motivation and Personality, the great American psychologist, Abraham Maslow divided human needs into 6 different hierarchies. In the lowest hierarchy are the basic human needs: food, water and shelter. According to Maslow, if the needs in the lowest level are not satisfied, it’s practically impossible for man to move on to the higher levels or satisfy needs in the higher level.
Water, as the popular saying goes, is life. No water, no life! We need water to cook our meals, to drink, wash our bodies, mouths and clothes, e.t.c. The importance of water in our lives can not be overemphasized. Since about 75% of the human body is made up of water, therefore, in order to keep on living and be healthy, we need to drink not just any water but “clean” water. In order for you to have water in your house, the government needs to build a water reservoirs, cleanse the water and supply it to your house through the pipes. This is not only a capital intensive project but a project that takes quiet a long period to recoup itself. Moreover, the process of cleansing, recycling and distributing water to households is such a sensitive process that is connected with the security of the populace that private companies can not entrusted with such projects. Now, please imagine that the government for one reason or the other has failed in its responsibilities to provide water for you.
Irrespective of whether the government has failed to fulfill one of its
major obligations in providing water for you, nevertheless, you still need water to live. So how do you get water for yourself? What are your option
s? You have about 3 options. Either you dig a well or go to the nearest river, spring to fetch your water or you buy it. Irrespective of the option you choose to get your water, one thing is certain. All the options are time consuming, physically demanding, stressful and very inconvenient.
What about electricity? Like water, it is practically impossible to imagine life in the modern world without electricity. It’ll be no exaggeration to say that life is basically meaningless without electricity in the modern world. The importance of electricity in our lives can not be overemphasized. Electricity has penetrated practically into all spheres of our lives. In order to appreciate the importance of electricity in our lives, try to imagine for a moment that you have gone blind. The role of electricity is so important to the extent that even God started his miracles with the creation of light! Without electricity, all your sophisticated electrical and electronic gadgets are basically useless, and serve more as decorations.
Without electricity, you can’t operate your washing machine which could have saved you hours. You are compelled to either wash your clothes manually or pay for them to be dry cleaned. Without electricity, you can’t watch your plasma TV. Without electricity, you can’t operate your computer. You are not only deprived of the opportunity to watch your favourite TV programs but you will as well find it difficult keeping abreast with national and international events. Moreover, you are denied the opportunity to work from home or use your computer for other productive activities like browsing the internet for valuable information to support your business or work. Subsequently, your output or level of productivity is reduced substantially.
Without electricity or gas, your electric cooker is of no use to you. You will have to rely on fire woods or stove to cook your meals. Without electricity, you are compelled to move around your house with candles or lanterns. Needless to say that inhaling smoke from candles, lanterns, firewood are very harmful to your health.
The alternative is to get a generator. In that case, you will have to spend a substantial amount of your time queuing to buy the fuel to run your generator. But the noise from your generator is very harmful to your health, and in most cases, it is practically impossible to sleep when your generator is on. Your health will eventually break down due to the inability to sleep for uncountable number of nights because of the noise from your generator.
(II) INFRASTRUCTURE REDUCE THE COST OF DOING BUSINESS
Two examples will be used to illustrate this point. The first is
transportation. Transportation business is all about moving as many
goods and people as possible from one point to the other as fast as
possible and with the minimum cost. Supposing you want to set up a cargo
delivery or transportation company, what is the major infrastructure
you’ll need for your business? Undoubtedly, the major infrastructure
you will need for your business is a developed and functioning
transportation network. By a developed and functioning transportation
network, I mean large networks of tarred roads, train stations and rail
lines, modern airports, water navigation routes, e.t.c. The ability to
reach your destination at the least time possible, allows your company
to deliver as many goods and/or passengers as possible. Thus, in order to
succeed in the transportation business, a transportation company must
find a balance between the two variables that its cost of operation
mainly depend on: volume of goods/passengers and transportation time.
Therefore, without a developed transportation network, it’s practically
impossible to run “efficiently” or “profitably” a cargo delivery or
transportation company. Now imagine a situation whereby there are very
few roads, and they are all practically full of pot holes. Imagine that
the rail network is in a dilapidated state. How will these factors
affect your transportation business? Even to a lay man, the answer to
this question is obvious. What this means is that your fleet of cars,
buses, trucks, trailers, e.t.c. will be stuck for hours in hold ups.
The tyres of your fleet of vehicles will wear out much faster and eventually go burst due to the pot holes on the roads. In addition, there is a very high probability that the goods to be delivered to your clients could also be damaged because of the terrible condition of the roads. As a result, you might need to compensate your clients not only for their damaged goods but they might as well stop patronising you for damaging their goods and for late delivery. Under such a scenario, your expenses in running your transportation business multiplies because you will be compelled to spend more than necessary, under normal circumstances to maintain your fleet of vehicles in order to remain in business. In the long run, your cost of running your transportation business escalates and eats up all your profits. Eventually, your company goes bankrupt and all your employees are thrown into the unemployment market.
The invaluable role of infrastructure in reducing the cost of doing
business could also be explained using electricity. Supposing you are
planning to set up a factory, due to the irregular supply of electricity, you will have to factor into your calculation the high cost of procuring, installing, protecting and maintaining a generator needed to run your machines. Unfortunately, this inevitably increases the cost running your business by at least 30% The economic consequence of this is that your product are not competitive with imported products. In the end, your company shares the same fate with the transportation company previously mentioned in our analysis. In other words, your company will be compelled to fold up because the prices of your products are high thus making them unappealing to the consumers. However, this scenario could have been avoided if the government had invested heavily in the generation, transportation and distribution of electricity. By so doing, the government would have reduced drastically the cost of doing business for entrepreneurs.
