When political interests block new infrastructures: evidence from party connections in the age of Britain’s first transport revolution

New research shows how party politics and connections slowed the diffusion of much-needed improvements in river navigation in Britain during the early eighteenth century. The study by Dan Bogart (University of California Irvine), which is forthcoming in the Economic Journal, reveals that modern concerns about powerful interests coalescing to block infrastructure projects that will benefit the wider economy are nothing new.

The famous economist Adam Smith noted in The Wealth of Nations that landowners close to London petitioned Parliament against the extension of transport improvements because it threatened their rents. Was Smith right: do ‘downstream’ interests use their political connections to block ‘upstream’ transport improvements? The new research addresses this question in the context of river navigation, which before the development of canals and railways, was a key part of Britain’s early transport system.

A river navigation act established a company with rights to levy tolls and purchase land necessary for improvements in navigation. Through their statutory powers, navigation companies played a key role in the extension of inland waterways. Improved navigation lowered transport costs since freight rates by inland waterway were approximately one-third of the freight rates by road.

In light of their economic importance, it is significant that the diffusion of navigation acts was slow. It took nearly 50 years to extend navigation on most rivers in Britain. One immediate reason is that projects were proposed several times in Parliament as bills before being approved, and some were never approved.

In general, bills proposing infrastructure projects had high failure rates in Parliament. Opposition from interest groups was the most direct reason. Interest groups would appeal to their MP for assistance, and as this research shows, it was significant whether their MP was connected to the majority political party.

The Whig and Tory parties were in intense competition between 1690 and 1741, with the majority party in the House of Commons switching seven times. The two parties differed in their policy positions and their supporters. The Tories were favoured by small to medium-sized landowners, and the Whigs by merchants, financiers and large landowners.

This study is one of first to test empirically whether Britain’s early parties contributed to different development policies and whether they targeted supporters. The research uses new town-level economic, political and geographical data to investigate how party connections and interest groups worked in this important historical period.

The results show that the characteristics of river navigation supporters and opponents in neighbouring areas had a large effect on their diffusion. For example, more towns with roads in upstream areas (generally supporters) increased the likelihood of a town’s river bill succeeding in Parliament and more towns with harbours downstream (generally opponents) reduced the likelihood of the bill succeeding. Such factors were as important as project feasibility, measured by elevation changes.

Another important factor was the strength of majority party representation in neighbouring political constituencies. Having more downstream MPs in the majority party (a measure of opposition connections) reduced the likelihood of a town’s bill succeeding in Parliament and getting blocked from navigation acts. The identity of the majority party was also relevant. Whig majorities increased the probability of river acts being adopted.

These findings confirm the forces highlighted by Adam Smith and show that the institutional environment in Britain was not always favourable to rapid adoption of infrastructure. Interest groups were powerful and could block projects that went against their interest. The Whig and Tory parties contributed to the blocking power or bias from interest groups, although the Whigs appear to have been more pro-development.

More generally, this case focuses attention on the distributional effects of infrastructure and efforts to block projects. Political connections matter and can have important economic consequences.

‘Party Connections, Interest Groups, and the Slow Diffusion of Infrastructure: Evidence from Britain’s First Transport Revolution’ by Dan Bogart is forthcoming in the Economic Journal.