Author of machiavelli.net, proud father of three, interested in shaping network society. Welcome to my blog.Mainstreaming Project Finance
As a political scientist, I believe, that project finance is too important and relevant in today’s world to be left to the economists. If we assume that public value creation today depends on multi-sectoral and multi-level coalitions and legitimacy is derived from achieving specified results, then (as political theorists) we have to assume a structural/institutional bias towards the instruments of project finance, such as ring-fencing projects, allocating risk to the parties that can best carry them, securitizing future revenue streams, and the developing of financial architectures that fit the specificities of the project. Therefore, as analysts, advocates, policy makers, and citizens we need to become conversant in this vocabulary.
The political scientist in me was puzzled, by how the basic idea of ring-fencing projects and the parceling out of risks to the parties that can best manage them (thereby reducing overall project risk and cost) has not had a greater influence on debates in political theory and policy making. Political theorists like Ulrich Beck (risk society), Susan Strange (casino capitalism), Oli Kessler (Epistemic vs. Aleotoric Risks), Donald Rumsfeld (Unknown Unknowns) have a fairly sophisticated understanding of the nature of risk, but the simple and powerful idea of risk-allocation not being a fixed-sum game has not been well developed in political science or in public policy making.
As an observer of the project finance world, I am puzzled by how it introduces transparency and accountability in complex projects, while keeping the greater public in the dark. I am not sure who is to blame, however, with an increasing share of economic activity governed by the principles of project finance automatically comes greater accountability to the general public. Therefore, I strongly feel we need learn how to teach the powerful vocabulary of project to policy makers and the public, to increase the legitimacy of the approach.
