Substantiation of Transportation Infrastructure – Patterns of Governance and Public Finance in Development : An Analytical Comparison of the United States and China

This paper explores patterns of governance and public finance in development through dissecting the substantiation of transportation infrastructure. We propose three propositions: modern society has increasing demands for government in promoting socio-economic progress; infrastructure is the basis for economic development and requires government coordination and balancing central planning with decentralized implementation; and transportation facilities contain public goods elements and optimal transportation financing involves using central grants together with sub-central revenues. We examine two country cases, the United States and China that have run through “great experiments,” the former with federalism and the latter socialism. Our research questions are: Is government financing of infrastructure necessary in promoting development? Is infrastructure planning an essential policy tool in promoting growth? We draw four general lessons. First, government has an irreplaceable role in infrastructure substantiation due to its long cycle, huge investment and public good elements. Second, central governments need to provide blueprints and policy direction in the substantiation process. We found that transportation planning has been stronger in the U.S. than commonly perceived while in China, central planning has been less rigid than generally understood. Third, fiscal federalism is a universal principle detached from a country's political system: China in fact has a long history of fiscal federalism. Finally, central, sub-central and local governments all have an important role in funding transportation facilities. This paper contributes to the literature in several ways: to clear government of its exaggerated negative effect on development, to provide positive evidence for overall planning in infrastructure, and to extend fiscal federalism beyond political boundaries