Public motorways for public purpose
by Simone Gasperin | @S_Gasperin
This morning, the greatest public work of the post-war period has been completed: the Autostrada del Sole [Sun Motorway] is finished. The North and South of Italy are finally closer. During the times of Jules Verne, it seemed as if circumnavigating the world in 80 days was a miracle. Nowadays, Italian car drivers will find it pretty easy to traverse Italy in 8 hours.
These words come from a 1964 documentary , “Autostrada del Sole, primo giorno” [Sun Motorway, first day] by Vittorio Mangili and Emilio Ravel. Together with other similarly epic representations, they were celebrating with great pride perhaps the most visible industrial achievement of the Italian economy during its “Economic Miracle” years. Italians find it rather difficult to abstain from attributing miraculous elements to what eventually has rational explanations. In fact, the building of such an impressive engineering work had more to do with Leonardo Da Vinci and Galileo Galilei than with Manzoni’s Divine Providence. A country which is still renowned for the Renaissance, and for the birth of commercial capitalism and modern banking in the XV century, was later to become a synonym with “motorways”. In the early 1970s, Italian motorways were the wonder of foreign commentators. In his The State as an Entrepreneur (1972), Stuart Holland described the contribution of the State holding company IRI (Istituto per la Ricostruzione Industriale) to the “construction of the most difficult and most spectacular sections of the new motorway network”, through its controlled Società Autostrade. The latter was a highly professional and competent enterprise, founded by IRI in 1950, which would later be responsible for the building of half of the Italian motorways, included the Autostrada del Sole, from Milan to Naples. This is how the narrating voice of the above mentioned documentary described its realisation:
We are at the beginning of the longest and most important Italian road, which connects Milan to Naples for 755 kilometres. 19 May 1956: San Donato Milanese. The first stone is “laid”. 4 October 1964: the last section of the motorway is opened to the public. This long motorway has been built in 8 years by a company of the IRI Group. The completion was supposed to be achieved by the end of the year [1964], but the motorway is already accessible, 3 months in advance. It costed 272 billion liras [about 4 billion euros in 2017], of which only 30 [around 0.4 billion euros in 2017] comes from the State. Thanks to the “IRI formula”, it has been possible to obtain a classic example of positive collaboration between State enterprises and the private sector.
Later in the 1980s, with most of the motorways already completed, Società Autostrade became involved in another public-private venture that could be defined as “mission-oriented”. In 1990, Italy was set to host the football World Cup. In the preceding years, the IRI Group and Autostrade recognised that it was essential to find a technological solution to the inevitable traffic jam that would appear at various tool booths, given the likely increase in the volume of transit among major Italian cities. The engineers and technicians of Autostrade, Olivetti and other private firms joined together to develop the Telepass technology, the first large scale system of dynamic tolling in the world, currently the most diffused in Europe.
Private-public cooperation and the development of internal technical capabilities were essential features of the State-owned IRI group. For instance, Società Autostrade was the only concessionary company that planned and designed their motorways through an in-house company made of specialised engineers (SPEA). Its experienced and competent engineering personnel would be later deployed for the construction of other domestic, but also foreign motorways. These acquired and nurtured technical and organisational capabilities led IRI to specialise in road building projects abroad, through another of its subsidiaries, Italstrade.
Nowadays, these and other stories appear distant memories of what a certain model of State ownership used to be. In 1999, Società Autostrade was privatised and sold to the Benetton Group (those who sell those fancy coloured jumpers) for 6 billion euros. Autostrade per l’Italia, as it is now called, inherited all of the specialised staff, the technologies (Telepass included), as well as the decennial concession (until 2042) on almost half of the national network of motorways. Yet, the results of this passage into private hands has been rather unfortunate. In 2002, the Benetton family took complete control of Autostrade with a debt-financed takeover, which was later repaid by their “clients” (crucially not “users”) via higher tolls, as described by Giorgio Ragazzi in his book “The Masters of Motorways” (2008). In the past ten years, motorway tolls have increased twice as much as the inflation rate, justified by planned investment and maintenance which have not effectively been implemented, as tragically demonstrated by the fall of the Genoa bridge last August. Autostrade makes on average 700 million euros of net profit each year. This represents a profit margin over total revenues of around 15–20%, which is why the motorways business has now become a rent-extracting activity in the hands of few privileged shareholders. A striking difference with the era of State-ownership, when IRI’s Società Autostrade was forced to return to the State budget a given amount of extra profits, beyond a certain threshold, while receiving a financial State guarantee for new infrastructure investments.
The need for a new system of management for the Italian motorways is compelling. As in many other cases, previous examples have a lot to teach in terms of how to establish a symbiotic eco-system with the State leading the way and the private sector actively contributing and serving itself a public purpose. On the 20th of October, there was an important demonstration in Rome, asking for the re-nationalisation of the motorways. The solution invoked resound the establishment of the publicly-owned Network Rail in 2002, at that time motivated by the inefficiency of the private network operator which was responsible for the terrible crash in Hatfield in 2000. But it is also not very dissimilar to the scheme proposed by Adam Smith in his Wealth of Nations, that among the duties of the “sovereign”, a crucial one should be the realisation and management of “public works” (i.e. infrastructures), bridges and roads above all. Only the State could do that, it was argued, because it was the only institution that could represent the general interests of the nation, facilitating “commerce”, thus increasing its overall wealth. If Adam Smith was alive today, it would not be surprising to see him championing the “IRI model” of public management for the Italian motorways.
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