Why Are Baths, Hospitals, Railways Being Washed Out in Slovakia

disappear-fog-forest
Magda Smolen via Unsplash

The famous Art Nouveau hotel Rónai, later Royal, later Slovan, is now a preserved ruin in the center of Slovak Piešťany. During socialism it was completely “washed out”, like many other buildings that were either nationalized by socialism or built by socialism itself.

Socialism collapsed because of the fact it could not build, but because it could not maintain. This problem is repeated today with the material capital under state management. Bridges, hospitals, railways, airports…

We often witness paradoxical situations where at one end of the rails bombastic investments for speeding up worth millions of euros are made and at the other end trains are slowed down to 30 km/h so as not to derail. Or when new hospitals are planned while there is no one to change the light bulb in the toilets in the existing ones.

This is also common case of euro-funded projects. Ribbon are being cut, advertisements run, but once the project funding ends, the result quickly goes down the drain. Sometimes not even a website with €2/mo. hosting can survive. Unfortunately, the Recovery Plan has the potential to be a grandiose new exercise in burning precious capital on projects for which viability will not be a priority.

Any proper capitalist knows that it is not a miracle to build, but to discover a business model that will keep a project alive in the long term. That ugly word (only the English “business model” is uglier) means that my project produces resources for both actual operations and capital depreciation over the long term.

To set it up, I need business acumen, good financial management, a long-term vision, or the ability to gather market feedback and continually innovate.

However, a quality business model can’t be shoehorned into a campaign video. A ribbon cutting on a new building, however, can. That’s why public institutions are tragic investors, and why their projects end up getting flushed out sooner or later. That is why I am always shaken when I hear that this or that sector is too important and must be in the hands of the state.

Can market conditions for public projects even be simulated? Partly. A “project” (imagine, for example, a public hospital or a hydrogen train filling station) must meet several attributes.

As much independence from politicians as possible, i.e. legal separation of assets and management (e.g. by incorporation in LLC or joint-stock company, ideally with multiple shareholders), good financial management (independently audited double-entry accounting) with a long-term plan, set measurable goals (KPIs), or resources beyond the initial equity raised exclusively on the market (commercial credit, partner input).

Is it difficult to achieve something like this? Well, yes, but after all, that’s the point! Doing things well is hard, and there’s always someone watching you while you’re doing it. But it’s the only way to survive in the long run and not end up getting “washed out”.


Continue exploring:

Those Who Want Four-Day Workweek Believe in Santa Claus

Rationed Health Care and COVID-19

avatar
INESS