Meet Our Researchers: Michael Bennon
The "Meet Our Researchers" series showcases the incredible scholars at Stanford’s Center on Democracy, Development and the Rule of Law (CDDRL). Through engaging interviews conducted by our undergraduate research assistants, we explore the journeys, passions, and insights of CDDRL’s faculty and researchers.
Michael Bennon is a Research Scholar and program manager of CDDRL’s Global Infrastructure Policy Research Initiative. Having served as a Captain in the US Army and US Army Corps of Engineers, he now teaches Global Project Finance at Stanford University. His research focuses on infrastructure development, specifically on the importance of restructuring incentives, public-private partnerships, legal regulation, and the shifting landscape of foreign investment in infrastructure.
What inspired you to pursue research in your current field, and how did your journey lead you to CDDRL?
I used to work for the federal government as an engineer. We were constantly running into hurdles, unnecessary red tape, and misaligned incentives — I felt there had to be a better way to do infrastructure development. So, I went to graduate school at Stanford, studying under Dr. Raymond Levitt, who focused on the cross-disciplinary intersection of engineering, international relations, finance, and law. We worked to address gaps in the research world regarding infrastructure development from a project finance perspective.
After graduate school, I continued working with Dr. Levitt and began teaching about the financing of large infrastructure projects. I began collaborating with CDDRL when researching China’s Belt and Road Initiative (BRI) and international infrastructure development more broadly. The throughline of my journey, from focusing on engineering to organization management to law, has been to follow the biggest challenges in infrastructure.
How do you visualize the creation of more effective incentive structures to motivate private companies to further global development? How can the public-private partnership work more effectively?
There's a myriad of flaws in the infrastructure development sector with incentives. The basic disconnect is that in a democracy, elected officials rely on bureaucracy and various agencies to develop complex infrastructure projects, which can lead to a convoluted system. When a government infrastructure project goes over budget, the many groups involved often don’t bear the costs — taxpayers do.
However, effective public-private partnerships can help solve these broken incentives. For example, if a project is structured so that the companies building the infrastructure are also responsible for maintaining it, then they are incentivized to create projects that last.
Internationally, in the old pre-BRI paradigm of development, there were two ways for a developing country to fund its infrastructure: either by borrowing money or financing projects through foreign direct investment. For the latter, there’s a form of private-public partnership, as international investors invest directly into the project instead of through the government.
How has infrastructure development been used to gain influence in diplomacy? How has our understanding of that tool changed since BRI, and how successful has it been for China?
Infrastructure development has always been a problematic tool for amassing geopolitical influence; it builds friendships when loans are going out, then creates enemies once they’re issued. A recent example is the 1997 Asian financial crisis when Western countries had invested in power plants throughout the continent, only for many countries to default and expropriate. This has happened repeatedly throughout history.
While China’s done quite well at protecting its economic interests in infrastructure projects, it's a mixed bag due to the prevalence of moral hazard, public backlash, and the tarnishing of diplomatic ties. With the state being so heavily involved in BRI, China intervenes when countries want to default or expropriate, protecting its interests and those of state-owned enterprises effectively. However, this can lead to a moral hazard problem because these enterprises feel too protected by China and act without the appropriate caution while building risky projects.
Today, many countries that have received BRI lending have serious relational problems with China, if not at the government level, then among the public. People tend to push back and feel taken advantage of when a foreign country comes in and builds projects, especially with rumor mills churning out narratives about China’s 'debt-trap diplomacy.' These diplomatic challenges were true long before the BRI and persist today.
Why do countries, through BRI or other means, decide to take on infrastructure projects they obviously can’t afford?
Countries often don’t behave rationally — politics, corrupt officials, and conflicting interests all affect policymaking. Also, everyone builds infrastructure projects that may bankrupt them, partly due to an ingrained optimism bias in the infrastructure sector.
We’re in the worst developing country debt crisis in modern history, and countries are having a difficult time navigating a changing infrastructure lending landscape. China is now the largest bilateral lender, and its absence from international organizations like the Paris Club prevents the unified action needed to allow countries to emerge from debt crises. Even the International Monetary Fund (IMF) is struggling to help them, as it is cautious about issuing aid to countries with murky BRI loans to pay back.
Funding for infrastructure development can be used as an incentive for democratization through conditionality on loans. However, many countries are turning away from traditional Western lending institutions in favor of alternative lenders with fewer conditions. How can we balance the importance of conditionality and incentivizing democratization while preventing the decreased reliance on Western institutions?
Conditionality can be positive in promoting democratization, but there have to be limits to it, especially because it becomes less effective when alternative lenders like China exist. Conditionality began as limited to policies that promote democratization, development, and liberalization but has metastasized to the point where lenders are pushing a wide range of policies on borrower countries. Many of these conditions, such as environmental or social protections, are good policies but can be viewed as a manifestation of Western imperialism within these countries. These programs also become futile when countries become simply incentivized to seek Chinese loans instead, which have virtually no conditionality.
Is the turn away from Western lending institutions an inevitable shift, or can policy changes encourage its prodominance again, if that’s something that we want?
Western institutions are better for infrastructure development, as organizations like the World Bank are the best at protecting human rights and preventing environmental disasters. There are also strategic and security reasons for promoting Western institutions — for example, we don’t want Chinese technology companies building telecommunications grids in other countries.
The bigger question is, what would a return to a Western-dominated model of investment look like? Pre-BRI, there was an open, liberal system of direct investment from private companies. BRI represented a pivot to more state-driven investment. Should the US shift to a similar model, or return to private direct investment fueling infrastructure development? The Biden administration’s alternative to BRI for state-driven investment was the Partnership for Global Infrastructure and Investment (PGII). Despite mutual investment in telecommunications and renewable energy, PGII focuses on developing very different sectors than BRI, building social impact projects like healthcare infrastructure.
What is the most exciting or impactful finding from your research, and why do you think it matters for democracy, development, or the rule of law?
I’m focusing on how liberal democracies can get building again, so I researched flaws in domestic infrastructure projects within the US. It revealed how the judicial system was an engine fueling how infrastructure projects are conducted; I realized the extent to which permitting regulation and environmental litigation had been driving my own incentives when I was a bureaucrat. Decisions are often made in response to case law and to ‘litigation-proof’ projects, which can incentivize inefficient and expensive project management. I believe democracies are perfectly capable of building infrastructure projects well, but problems in current building initiatives, from the California High-Speed Rail to our housing crisis, are rooted in the outsized effects of the threat of lawsuits.
How do you see your research influencing policy or contributing to real-world change?
I do research on practical public-private partnership policy in the United States, working with the Build America Center and the Department of Transportation to directly supply the government with research when needed.
There are policy changes that must occur to promote effective infrastructure development. The US will have to reform institutions that predated BRI to adapt to today’s post-BRI world. The three key institutions are the World Bank, the IMF, and the World Trade Organization (WTO). I hope that my ideas can influence their restructuring. For domestic development, I’m continuing my work with the Build America Center on how governments can more efficiently procure infrastructure projects and help public officials adopt best practices.
Lastly, what book would you recommend for students interested in a research career in your field?
The first book, which is extraordinarily boring but crucial to infrastructure development, is The Strategic Management of Large Engineering Projects: Shaping Institutions, Risks, and Governance. Written by Miller, Lessard, Michaud, and Floricel, it includes the perspectives of MIT engineers on infrastructure project case studies to understand why so many have failed. For some great history, the economist Raymond Vernon’s book Sovereignty at Bay develops the idea that relationships sour over international investment and that it’s not an effective diplomatic tool.
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Investigating how infrastructure project financing has changed amidst global geopolitical competition and how democracies can more effectively build in the future with CDDRL research scholar Michael Bennon.
