The Stupidity of Libertarian Privatised Roads

Note to libertarians: the argument against privatised roads is not that no roads would ever be built by the private sector, it is that leaving it to the private sector would be more inefficient and unnecessarily raise costs.

First, it is quite obvious that to design a system of efficient public roads not only at a community level, but also at a regional and national level (e.g., highways), you need good information on population, traffic flows, the needs of trade and commerce, likely population growth and usage of roads.

Governments are in a much better position to plan roads and highways and transport systems generally, precisely because they tend to have access to much better information than the private sector. They are also in a position to collect such information when it is lacking in a way that it is difficult for the private sector to do.

Secondly, private sector businesses would be perfectly capable of building roads to nowhere or roads people do not really need, so just because a government might occasionally make mistakes of this kind, it does not follow that the government is necessarily inferior to the private sector.

Thirdly, once roads are built they become a public good, and above all a kind of public capital good for private business for their transportation needs, free at the point of delivery, which enormously add to trade, commerce and business, and lowering costs.

But once constructed roads only require relatively minor costs to maintain and repair. This can be done well by the state, or by the state planning with private contractors.

By privatising roads, roads are no longer a free public good at the point of delivery, and the private fees will raise costs not only for businesses but also for ordinary members of the public. The latter would face much higher living costs if they had to pay to use dozens of private roads every day, just to go to and from work. This would raise the cost of living and put pressure on businesses to pay higher wages. This would in turn raise the costs of export goods also given the higher transport costs as well, and a society privatising its roads would essentially be making its exports less competitive and possibly gutting its export sector if the rest of the world provides roads and transport infrastructure as a public good free at the point of delivery.

And, even domestically, those higher wages and the additional income would flow to a class of parasitic rentiers extracting profits over and above the money needed for maintenance and upkeep of the roads.

Privatised roads are exactly an instance of the worst type of parasitic rentier capitalism, in which rentier middlemen obtain an unearned income from mere ownership of an asset that would be more efficiently organised as a public good free at the point of delivery.

If you doubt the inefficient aspects of rentier capitalism, look at the worst areas of your country where slum-owning landlords extract profits and high rents for merely owning substandard and wretched houses, sometimes even houses unfit to live in.

All in all, the set of arguments above isn’t even particularly left-wing: given the long and successful history of public goods in the West, we could just as easily defend it as a conservative argument against lunatic radical libertarians and their fanatical pro-market theology.

Of course, there are some conservatives who do understand this, as we see below in this video of the idiosyncratic conservative Peter Hitchens, brother of the late Christopher Hitchens.



Note Hitchens’ Tory opponent in this video who says that the railways were built by private enterprise in the 19th century. That is true.

But the private-sector construction of them involved remarkable waste and inefficiencies in that railway overinvestment and oversupply occurred (Hutchison 1994: 225–226), and there were instances where this oversupply caused economic problems, especially when combined with railway stock becoming a speculative asset in stock market bubbles. When such bubbles burst, this affected the subsequent health of the railway sector and the economy at large.

Yet another problem illustrating the inefficiency of the private sector was that different companies built different railway gauges, and when they met this naturally caused a great deal of inconvenience. This problem was resolved by government regulation in the 1846 Gauge of Railways Act. Rational state planning of a standard railway network, even in the mid-19th century, would have been a much more efficient system, and subsidised railway fares would have decreased costs for businesses and the public at large. It would also have stopped destabilising speculative asset bubbles in railway stock.

BIBLIOGRAPHY
Hutchison, Terence Wilmot. 1994. “Hayek, Mises and the Methodological Contradictions of ‘Modern Austrian’ Economics,” in T. W. Hutchison, The Uses and Abuses of Economics: Contentious Essays on History and Method. Routledge, London. 212–240.