Tuesday, December 22, 2015

Infrastructure: A Matter of Connecting Networks

In a recent Harvard University article, Ricardo Hausmann approaches inequality from a somewhat unique perspective. He stressed that the real problem concerning capitalism, is that people have not been able to create capitalism in the places where populations could benefit from it the most. All too often, infrastructure needs have proven greater than what governments are able to provide, or what other institutions thus far have been able to generate. Here's Hausmann:
The poor are not being exploited. They're being excluded from the higher productivity activities. It's not that the capitalists are taking a very large share of what they produce. It's just that they produce very little in the first place. 
Hausmann continues:
Modern capitalist production requires the simultaneous access to many different inputs. The lack of any of these inputs has disastrous consequences...The conditions for high productivity are very hard to achieve everywhere, but much easier to achieve in a few places.  
He notes that governments are forced to pick and choose, which locales within a nation's borders can benefit from additional infrastructure. In summing up the article, Hausmann also makes some suggestions. Not only could technology reduce infrastructure costs (so as to provide more access); but where possible, those who benefit from infrastructure gains could share in the costs. In recent months I have stressed that local corporations would be able to generate broader economic access, in part based on those suggestions.

However, much more than innovation and reduced costs are involved. Local corporations would need to link together different networks into a single "package" - one that could reconfigure non tradable sector activity through a common perspective. Normally, fully functioning economies are difficult to construct "from scratch", because of the complexity of multiple factors.

Such factors need more than a little serendipity to occur, in that they generally operate as separate institutions with completely different goals and missions. How could multiple efforts - which so often work at cross purposes to one another - instead be internalized and combined? For the remainder of this post, I'll touch on five areas, which local corporations and their participants would seek to integrate.

1) Local monetary and fiscal union, for non tradable sector activity. In contrast to the complex organization of national government in this regard, local corporations would create a simple monetary economy (albeit with complex knowledge use) built on incremental growth, rather than loan capacity. By generating new wealth through matched time capacity, local corporations would no longer need to draw on outside time based services, subsidies, or other forms of entitlement from their surrounding governments.

2) Knowledge acquisition, maintenance, preservation, research and ongoing utilization. Knowledge use systems would coordinate knowledge sets through other communities with the same structure, and remain open to international dialogue as an integral part of long term growth strategies. These systems would also serve as repositories for knowledge sets which may not have other "homes" that they are readily associated with.

3) Physical infrastructure platforms for core and periphery. In particular, core infrastructure is where innovation and costs need to provide economic access which otherwise might not be an option for anyone with limited resources. Primary usage patterns (basic lifestyle options) would be determined at the outset of new community formation, and the core would gain its initial (unique) structure from these. Peripheral connecting networks - and the local investment patterns that are associated with them - could be completed, once communities become confident and gain their footing.

4) Asset formation. While some elements of environmental definition would be determined at the outset, building components for living and working would often remain flexible, in the sense they could be reorganized and/or possibly replaced as needs change. Incremental ownership includes the physical shares of building components, alongside the financial component in the form of local land shares which can be internally traded with other system participants.

5) Tradable goods formation. As local corporations start to mature and take on recognizable form, production possibilities beyond local community also come into play. In some instance these might include openings for non residents who wish to gain a local retail presence. Other times, either knowledge use or physical resource capacity would be coordinated for both experiential goods and tradable product that contributes to wealth beyond the actual community.

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