Infrastructure as financialextraction
He goes on Sunday to the church to hear the Parson shout.
He puts a penny in the plate and takes a pound note out
And drops a conscience-stricken tear in case he is found out.
(Parody of Oliver Goldsmith’s The Village Blacksmith, Anonymous)
3.1 Infrastructure through finance’s eyes
Ask an ordinary person in the street in any large city in the industrialised world to react to the word ‘infrastructure’ and the reply (in
so far as ordinary people even think about ‘infrastructure’) is likely
to include ‘roads
A study in financialextraction: Lesotho’s
national referral hospital
Let us start with a concrete example of infrastructure as financialextraction to illustrate the types of deals being set up, quite lawfully,
that serve to siphon money towards the wealthy. This is no easy
task. Commercial confidentiality ensures that many of the financial
arrangements underlying the deals remain secret, but detailed figures
for many deals have emerged. One example is a controversial Public–
Private Partnership for three filter clinics and a new 425-bed hospital
No struggle for social justice that lacks a grounded understanding of how wealth is accumulated within society, and by whom, is ever likely to make more than a marginal dent in the status quo. Much work has been done over the years by academics and activists to illuminate the broad processes of wealth extraction. But a constantly watchful eye is essential if new forms of financial extraction are to be blocked, short-circuited, deflected or unsettled. So when the World Bank and other well-known enablers of wealth extraction start to organise to promote greater private-sector involvement in ‘infrastructure’, for example through Public-Private Partnerships (PPPs), alarm bells should start to ring. How are roads, bridges, hospitals, ports and railways being eyed up by finance? What bevels and polishes the lens through which they are viewed? How is infrastructure being transformed into an ‘asset class’ that will yield the returns now demanded by investors? Why now? What does the reconfiguration of infrastructure tell us about the vulnerabilities of capital? The challenge is not only to understand the mechanisms through which infrastructure is being reconfigured to extract wealth: equally important is to think through how activists might best respond. What oppositional strategies genuinely unsettle elite power instead of making it stronger?
Each of these moments and more are bound up in a world shaped by finance, colonialism, empire and race and so can reveal that world, even if that world is, itself, not pictured in the image.
And, as Kushinski ( Chapter 3 ) on the live-streaming of Deepwater Horizon shows, initiatives that purport to render the operations of financializedextraction visible and transparent often have the effect of obscuring
As the tragedy of the Grenfell Tower fire of 14 June 2017 has slowly revealed a shadowy background of outsourcing and deregulation, and a council turning a blind eye to health and safety concerns, many questions need answers. Stuart Hodkinson has those answers. Safe as Houses weaves together Stuart’s research over the last decade with residents’ groups in council regeneration projects across London to provide the first comprehensive account of how Grenfell happened and how it could easily have happened in multiple locations across the country. It draws on examples of unsafe housing either refurbished or built by private companies under the Private Finance Initiative (PFI) to show both the terrible human consequences of outsourcing and deregulation and how the PFI has enabled developers, banks and investors to profiteer from highly lucrative, taxpayer-funded contracts. The book also provides shocking testimonies of how councils and other public bodies have continuously sided with their private partners, doing everything in their power to ignore, deflect and even silence those who speak out. The book concludes that the only way to end the era of unsafe regeneration and housing provision is to end the disastrous regime of self-regulation. This means strengthening safety laws, creating new enforcement agencies independent of government and industry, and replacing PFI and similar models of outsourcing with a new model of public housing that treats the provision of shelter as ‘a social service’ democratically accountable to its residents.
The well-being of Europe’s citizens depends less on individual consumption and more on their social consumption of essential goods and services – from water and retail banking to schools and care homes – in what we call the foundational economy. Individual consumption depends on market income, while foundational consumption depends on social infrastructure and delivery systems of networks and branches, which are neither created nor renewed automatically, even as incomes increase. This historically created foundational economy has been wrecked in the last generation by privatisation, outsourcing, franchising and the widespread penetration of opportunistic and predatory business models. The distinctive, primary role of public policy should therefore be to secure the supply of basic services for all citizens (not a quantum of economic growth and jobs). Reconstructing the foundational has to start with a vision of citizenship that identifies foundational entitlements as the conditions for dignified human development, and likewise has to depend on treating the business enterprises central to the foundational economy as juridical persons with claims to entitlements but also with responsibilities and duties. If the aim is citizen well-being and flourishing for the many not the few, then European politics at regional, national and EU level needs to be refocused on foundational consumption and securing universal minimum access and quality. If/when government is unresponsive, the impetus for change has to come from engaging citizens locally and regionally in actions which break with the top down politics of ‘vote for us and we will do this for you’.
secondary market sales, including $350
million on one toll road in Chile and $45 million on the Ponte de
Pedra hydroelectric project in Brazil.
But the financialextraction does not end here.
4.3 Fee factories
The day-to-day operations of the funds themselves and the ‘infrastructure’ in which they invest have now become platforms from
which satellite ‘profit points’ are constructed, Meccano-like, through
elaborate forms of financial engineering. A hotchpotch of acronymladen financial products – from CDOs (collaterised debt obligations)4
to CDSs (credit default swaps)5
where it is not commodified, but new ways must be found to squeeze
more profit from it; previously unexploited forms of social solidarity must be transformed into a form that can yield profit; existing
markets must be nurtured and new markets created; old forms of
rent expanded and new income streams created from which rents can
be extracted; property rights upheld and established in areas where
property has not previously been recognised; and so on. A constantly
watchful eye is therefore essential if these new forms of financialextraction are to be blocked
public ownership in those
instances where it supported profitability and financialextraction.
More often, however, it has been outright hostile to it in almost all
forms. The building legitimation crisis (to use Habermas’ term) that
neoliberalism is currently experiencing opens the door to reappraisals and new understandings – including of public ownership. The
Financial Crisis and subsequent Great Recession of the late 2000s
may well come to be remembered as a major historical turning point
in this regard. As a highly leveraged and imploding financial sector
and its successor, the 2014 Local Audit and Accountability Act,
Safe as houses
as well as from the annual accounts for each SPV and its holding
company in 17 housing PFI schemes where data were freely
available on the Companies House website.1
PFI’s financialextraction wealth machine
As I explained in chapter 2, to build or renew public infrastructure, it is far more expensive to raise investment finance from
private financiers than through direct government borrowing.
This is for the simple reason that governments