Tag Archives: Public Investment

In Connecticut, Has Risk Management Gone Awry?

Connecticut has always been known as the Land of Steady Habits. Last week, however, it also became known as the Land of Miserably Unhappy Commuters.

That’s because the high voltage feeder cable that powers the New Haven (Connecticut) to Grand Central Terminal (New York City) commuter train line failed last week. Stranded passengers were told to expect little or no train service for up to three weeks.

So why is this a prime example of risk management gone awry? It appears that the Metro-North rail system has always maintained a secondary electrical system. But two weeks before the failure, engineers removed the secondary system from service for maintenance upgrade work without replacing it with any other temporary resource. Thus, when the primary feeder cable failed last week, there was no other system in place to power the train line.

Regrettably, Connecticut Governor Dan Malloy noted that Metro North officials appeared to have been taken by complete surprise. He said that “there appears to have been little plan(ning) for this type of catastrophic failure.”

The discipline of Enterprise Risk Management (ERM) embraces a few key principles. Organizations must identify potential crises before they occur. For crises that are relatively likely to occur, preventive controls must be implemented to reduce the likelihoods. And for events that will be relatively costly if they occur, crisis response functions must be implemented to contain the costs of failure.

Did the folks at Metro North follow these principles? Because a failure of the primary feeder cable could inflict so much damage on commuters, one may question whether the secondary system should ever have been removed without the temporary implementation of another crisis response function. And because the severe aging of the electrical fleet and infrastructure makes such failures relatively likely to occur, one may ask whether the primary system (as well as, or perhaps in place of, the secondary system) should have served as the focus of preventive maintenance work.

In other words, Governor Malloy’s own observations reveal that the public transportation agency was following a risk management plan that was bound to go awry. And now the commuters of Connecticut are bearing the brunt of that failure.

Space Travel: Back To The Gilded Age?

The Gilded Age was a spectacularly colorful era in American history. Originating with the close of the Civil War and extending through the 1890s, the era was marked by rapid industrialization and the emergence of a small number of extraordinarily wealthy families. It also featured a number of mediocre (and barely remembered) American Presidents like Chester Arthur and Benjamin Harrison, so-called leaders who often deferred their policy decisions to industrialists like Andrew Carnegie and Cornelius Vanderbilt.

Other societies experienced similar developments, of course, with the British people living through the Victorian Age and French citizens doing likewise in La Belle Eqoque. But it was America, an emerging nation in the process of realizing its own self-described manifest destiny, that began to muscle its way onto the world stage.

Was there actually any space travel during the Gilded Age? No, of course not, although the French author Jules Verne did imagine a voyage From the Earth to the Moon in an 1865 novel, followed by the British author H.G. Wells’ The First Men in the Moon in 1901. And yet the very economic forces that drove the emergence of transportation technologies during the Gilded Age are now impacting the evolution of the world’s space programs today.

Twentieth Century Aberration

During the twentieth century, most of the world’s great public works projects were built by national governments or their affiliates. America’s Hoover Dam and interstate highway system, for instance, were government ventures. The supersonic airplane Concorde was likewise a state financed project, albeit one that was jointly developed by Britain and France. And all of the world’s programs of space travel, from America’s NASA Apollo missions to the Soviet Sputnik project, were launched by government agencies as well.

But the twentieth century might have represented an aberration in world history, a figurative “high water mark” of government leadership in public works and engineering programs. After all, in the nineteenth century, American capitalists were the parties who developed the railroads and electrical power itself. Private British merchant steamships were the adventurers who sailed the oceans and opened the world to global trade. And the highways themselves were often owned by private parties who established toll booths and “turn pikes” to stop travelers from crossing until fees were paid in full.

Prior to the twentieth century, most national governments relied on customs duties and user fees, eschewing the income, sales, property, estate, and value-added taxation programs that currently transfer wealth from the private sector into the public purse. With such immense aggregations of wealth under private control, industrialists were empowered to “dream big” and build massive projects.

Back To The Future

Today’s emerging twenty first century, however, is increasingly resembling the nineteenth century (instead of the twentieth) in terms of the balance of wealth between government and private capital. Federal governments are limiting their spending programs, taxation levels are falling rapidly, and the wealth gap between the fabulously rich and the desperately poor is soaring in societies from America to China.

It should come as no surprise, then, that many types of public works projects are shifting from public control to private ownership. The City of Chicago, for instance, has sold its street level parking meters to for-profit investors. Nonprofit community hospitals across the United States are being purchased by private equity investors. And entrepreneurial billionaires from Virgin’s Richard Branson to Amazon’s Jeff Bezos are developing for-profit corporations that are dedicated to the business of space travel.

Are Branson and Bezos destined to become the Cornelius Vanderbilt of the skies? President John F. Kennedy never could have dreamed of such a possibility when he launched America’s space program in 1962 with his epic declaration “we choose to go to the moon … and do the other things, not because they are easy, but because they are hard.” Nevertheless, it certainly does appear to be a possibility today.

Into The Sunset

Last week, residents of New York City were treated to the sight of the space shuttle Enterprise flying across the Manhattan skyline on its way to its permanent retirement home on the outdoor deck of the U.S.S. Intrepid Museum. And earlier, denizens of Washington DC enjoyed the spectacle of the shuttle Discovery as it flew past the White House towards its new home in the Smithsonian’s Air and Space Museum, to share the space with Charles Lindbergh’s Spirit of St. Louis and the Enola Gay.

Ironically, while these symbols of America’s government financed space program were flying into the sunset, Secretary of State Clinton was telling Richard Branson about her desire to become a space tourist in his fledgling Virgin Galactic program. Clinton declared about Branson “I think he may be my last chance to live out that particular dream.”

She may indeed be correct. In fact, the entire era of private sector space travel may coincide with the decline of government as a driving force of technological development, and the return to a Gilded Age model of private investment.