Job Creation v. Increased Productivity


Thought for the day

‘Well chosen infrastructure projects contribute to job creation and increased productivity’.

Notice anything odd about this?   (Apart from the fact that it is a circular statement, since ‘well chosen’ is presumably defined by the outcomes achieved.)

Increasing Productivity

When we ‘increase productivity’ we enable the labour force to produce more.  This is normally done through investment in capital, and nowadays through increasing use of automation. When we are struggling to produce enough to meet demand, that is, in times of low unemployment and high demand pressure, increasing productivity leads to an easing in the economy, reducing inflationary pressures.  It is good.

However, in times of low demand – i.e. when we have high unemployment – increasing the ability of firms to produce more with less, may increase profits, but if there is not the demand in the economy to soak up this increased output, this is at the expense of reducing their need for labour.   Then, it is not so good, at least not for labour.  And, to the extent it is successful, increases the demand for job creation.

Job Creation

When do we wish to ‘create jobs’ – in times of high, or low, unemployment?    Clearly in times of high unemployment.   In other words, precisely at the time when ‘increasing productivity’ will lead to less job creation’.

‘Job creation’ and ‘increased productivity’ would thus seem to be incompatible goals for Government.  And hardly justification for expensive investment in infrastructure.  There must be a better argument.

Thoughts?

What’s wrong with Infrastructure Decision Making?

 

This is by way of a ‘heads up’ to coming posts on infrastructure decision making.   In June last year, the Institute for Government  in the UK produced the report “What’s wrong with infrastructure decision making: conclusions from six UK case studies”

Major conclusions were:

  1. There is no national strategy for infrastructure investment
  2. Government does not devote enough time to assessing early options and seizes apon preferred projects too soon
  3. The more ambitious the project, the more questionable the model
  4. A failure to understand project risk
  5. The difficulty of making decisions which create ‘concentrated losers’ (which can and do become vocal opposition groups)
  6. Inadequate post project evaluation means we do not learn for future projects

You can probably identify with all of these problems in your own work.  The Institute draws on mega projects in the UK such as The Third Heathrow Runway, the High Speed 1 and 2 rail proposals and the ultra expensive Hinkley Point C nuclear energy plant proposal, amongst others.   But you can think of large and small projects in your organisation, state or country.

Over the next six posts we will consider each of these and then look more closely at the way we make our infrastructure decisions here in Australia. We are all familiar with studies that argue that government decision making is abysmal and should be replaced with private sector decision making, which is assumed to be so much better ‘because it is focussed on profit making’.  But when it comes to infrastructure, both economic and social infrastructure, ‘profit-making’ is not the goal.  Here, we are really looking at ‘the social value of shared resources’ in the terms of Brett Frischmann. 

It is important to bear this in mind as we consider these infrastructure decision making problems, no matter who is making them, for when an infrastructure decision is passed to the private sector to make, it is a public sector decision that makes this possible.

QUESTION:   What other problems beside these can you identify?

Doing Different – Is there an App for that?

The 9th World Urban Forum was held in Kuala Lumpur a week ago.  This is where tens of thousands of people from across the world gather to find ‘best practice’ examples and ideas that they can take back to their countries or organisations to improve their communities. Now, apart from being different from what is being done now, what commends a particular ‘best practice’ example to any individual participant?  What should?  What do you look for in a ‘best practice’ example?  (e.g. what tells you that it IS ‘best practice’?) What would it take to develop a guidance tool to quickly assess any given example, to enable you to hone in on those with the most opportunity for success?  Considering the dangers of ‘doing different’ just for difference sake, of which we spoke in the last post, I have, over the last few months, been speaking with a couple of colleagues as to how this could be done.

Where do we start?  Firstly – Know thyself!   Those of you who were caught up in the benchmarking craze some years ago, may remember how organisations would gleefully arrange meetings with ‘best practice’ organisations to see what they could glean.  And they would do this, without first taking the trouble to understand fully what they were themselves doing.  Many changes were made that lacked understanding, and caused more damage than they avoided.

A first iteration of such a guidance app, with a strong focus on understanding our own organisations and what is driving their decision making, was trialled at the Urban Forum in KL last week which established proof of concept.

We are now considering a forum for further development and testing.

Question:

Does this idea intrigue you? And would you would like to be part of its further development?   If so, please let me know in the comments section below or write me at penny@TalkingInfrastructure.com

Next Week:  Problems with Infrastructure Decision Making.

Why Different?

Our theme this month is ‘doing different’.  But it pays to ask ‘Why’? – and what may be the consequences of not paying attention to this question.

The human mind is hardwired for novelty. We seek out what is different and exciting. And it has served us well. It has been the source of our greatest inventions. But it can also lead us astray.  When I left the University to work in the public service back in the early 1980s, every heavy engineering organisation (rail, ports, power, water, telecommunications) was headed up by an engineer – a guy (and they were all guys) who knew how to get things done.  At this time, ‘stewardship’ was the word most accorded to those who ‘took care of’ assets, asset management was still in the future. But as the administration gradually moved from stewardship into management, we saw a different face at the top. And these different faces were finance and accounting.  These guys (again!) knew what things cost.  Under this leadership, we focussed on efficiency rather than effectiveness, or, in practice, ‘getting costs down’. This was when we introduced outsourcing, later to be followed by corporatisation and privatisation.  The next move at the top was to ‘content free management’,  these were people who were not engineers who knew how to get things done, and not finance who knew how much things cost, they were people trained in nothing more than ‘management’ itself.  And now we started to see more female faces at the top. We also started to see something else.  Whereas previous heads had worked to ‘keep the show on the road’, this new crop of managers were keen to ‘do something different’.  The more radical the difference, the greater the publicity that they could expect.  The publicity they garnered was sufficient to move them on to the next top job. Few stayed around longer than a few years to cope with the damage they caused.

We continue to exhalt difference for its own sake. ‘Disruptive’ is the joyful current buzzword. As if disruption itself was the benefit.  How many times do you find new ideas presented at conferences – and how few are the times when those same presenters return a few years later to tell you honestly what the outcomes were?   In fact, In our haste to move on to the next new and shiny thing, how much time and effort do we put in to make the last change succeed?

I still believe that we need to ‘do different’ – but not for its own sake!

My question today is:  If not for its own sake – what IS the purpose of ‘doing different’?

Land remediation, cost effective infrastructure alternative

This opens up a whole realm of possibilities for using environmental science and illustrates the importance of thinking of traditional infrastructure solutions as a ‘last resort’ rather than a first!    This post is by Chris Adam, Director of Strategic AM Pty Ltd, Brisbane, Queensland

Nitrogen (TN) creates problems in the ecosystem due to the tendency to create algal blooms that can disrupt the food chain. Thirty years ago point source loads (e.g. Sewerage Treatment Plants)  were a problem. Who can forget the Sydney beaches of the 1980s when the wind turned onshore? Over the last 20 years we have made huge inroads into resolving these issues. More could be done but we are getting close to the top of the economically rational return to scale. So what ELSE can we do?

Queensland Urban Utilities

Queensland Urban Utilities have piloted a couple of nutrient offset projects in which riverbank stabilisation and remediation (leading to a reduction in sediment runoff and therefore TN into the bay). These projects have performed really well (in fact, in the recent torrential rainfall from the tropical low that was once Cyclone Debbie, the sites not only stood up to the challenge but captured sediment!!).

Making a very long story short, the cost of these schemes seem to be in the order of $25,000 per tonne of TN. The current cost of treatment for all EXISTING Wastewater Treatment Plants is in the order of $13,000/Tonne (no surprises here – the return to scale of the existing network is the most cost effective option for removing nutrients). However the cost of augmentation of treatment plants starts at $50,000/tonne. So, what does this mean? We sweat the existing treatment plants (even overloading them hydraulically if necessary) as that’s the cheapest nutrient removal option. However, the next best option seems to be nutrient offsets through land remediation.

There are challenges here in that the regulator will currently only allow offsets against wet weather flow (this is based on the logic that the offset program only removes sediment during rain events which is an assumption that we could debate). The “least best” option is augmentation of the plants (i.e. “hard engineering” that locks in a centralised service model and ignores potential technical obsolescence of the plant itself).

The US EPA have gone further and have set up nutrient trading markets as a mechanism to manage/minimise TN discharge across point and non-point sources of pollution. A similar scheme has been in operation in Lake Taupo in NZ and there are schemes (in the early stages of development) being piloted for the Great Barrier Reef).

What this means is that the water services engineer of tomorrow will definitely have to think beyond the traditional “engineered” solution and understand the issues across a much broader range of inputs/outcomes. It’s very interesting times .

Thoughts?

The Road to a Circular Economy

 

 

Our post today – with thanks – builds on an idea by Rebecca Brown, Manager Waste & Recycling at WALGA, who will be presenting at the March WA State Conference of the IPWEA. (details below).

The first stage to ‘doing different’ is to imagine!

Rebecca says: “Imagine a road that is made from completely sustainable products and when it wears out will be used as the input into another road or project. All the materials will circle through the system again and again. This is the aim of the circular economy and the direction our State is going. Instead of the current linear economy model – dig, use, dispose, in the Circular Economy approach no materials go to waste, everything is an input into another process.

That may seem like an unattainable goal, given WA currently generates about 2 tonnes of waste per household/year, but for civil works this aim is completely achievable. Using old roads for new, using innovative materials and sourcing high quality construction and demolition materials all provide us with a way to move towards achieving a circular economy in WA.”

At the forthcoming WA State Conference of the IPWEA, “Rebecca Brown, Manager Waste & Recycling at WALGA will provide a brief overview of the Circular Economy approach and how it fits into the State Government’s new direction, provided by an updated State Waste Strategy. Drawing on lessons from over 10 years of experience using a range of recycled materials, Colin Leek, an industry expert, will share his experience and present case studies of how to use these materials to close the loop. Dave Markham, Chair of the Waste Management Association C&D Working Group will explain the processes in place to ensure that high quality process.”

The second stage to ‘doing different’ is to extend.

In other words to see if we can apply what we have learned in one situation – for example, as in the above, for renewing existing roads – to totally new situations.

Can we imagine a situation where, instead of accruing more and more roads, we are able to decommission an existing road in favour of a more relevant route – return the road to arable, residential, or park lands – and re-utilise the road materials in the new location?

What would it take to make this idea reality?

Doing Different

A new month – and a new theme.   This month we are looking at ways of ‘doing different’.  To introduce this theme, what better than to use the Ted Talk presented in 2009 by adman Rory Sutherland (kindly drawn to my attention by Hein Aucamp, one of our regular contributors).

In this talk Rory argues that the role of advertising is to create intangible value (or perceived, subjective, or ‘badge’ value). His opening story tells of a group of engineers who, some ten years previously, were asked how to improve the train trip from London to Paris. The engineers come up with a solution requiring the construction of new rail tracks to the coast, costing 6 billion, to cut 40 minutes off the then 3.5 hour travel time. Rory considered this a particularly unimaginative solution and presented his alternative – employ the world’s top male and female supermodels to walk up and down the train handing out free Château Pétrus.  “You’ll still have about 3 billion in change, and people will ask for the trains to be slowed down!”  In other words, we can improve the trip by making it more enjoyable rather than simply making it shorter.  His whole TED talk, which you can find here, is a great example of this – so enjoyable, you wish it were longer!  It is also full of ideas that may be used to help change focus and produce better results – by ‘doing different’.

So this month we are looking for examples of ‘doing different’

– examples that will improve outcomes (social, environmental and economic) by reducing the draw on scarce resources, a  ‘less is more’ approach to infrastructure and construction.  Your inspiring examples welcome.  Please send them to me at penny@TalkingInfrastructure.com

And don’t forget that you can join in discussion on earlier blog posts.

The posts are designed as conversation starters.  Show your appreciation by adding your perspective, your suggestions, your experience.

Infrastructure decisions: easy choice?

For senior decision makers, infrastructure used to be a relatively simple matter – assign different teams of engineering and finance specialists to determine if it could be built and could be afforded. Infrastructure decision making is no longer simple, more a matter of juggling many factors, each of unknown severity and immediacy.  This is why I have introduced the ‘big picture’ issues now being dealt with by the world’s financial elite at the World Economics Forum, and the many practical issues essential for economic, social and environmental sustainability, that the United Nations are grappling with in the 17 SDGs, the sustainable development goals.

Being aware of the issues is clearly the first step, but then what?

How would you go about including these goals in your own infrastructure decision making?  And how would you know when you have been successful?  The Australian Senate has recently launched an inquiry into the implementation of the SDGs.  Here is what they are looking at.   (Note that the last 4 line items refer to Australia’s work in supporting other nations.)

Questions for Today:

  • Are they the right questions for the Senate?  What is missing?
  • Are they the right questions for You in your own infrastructure decision making?  What questions would you add, or modify?

Here is the Senate Inquiry’s Terms of Reference

An inquiry into:

  1. the understanding and awareness of the SDG across the Australian Government and in the wider Australian community;
  2. the potential costs, benefits and opportunities for Australia in the domestic implementation of the SDG;
  3. what governance structures and accountability measures are required at the national, state and local levels of government to ensure an integrated approach to implementing the SDG that is both meaningful and achieves real outcomes;
  4. how can performance against the SDG be monitored and communicated in a way that engages government, businesses and the public, and allows effective review of   Australia’s performance by civil society;
  5. what SDG are currently being addressed by Australia’s Official Development Assistance (ODA) program;
  6. which of the SDG is Australia best suited to achieving through our ODA program, and should Australia’s ODA be consolidated to focus on achieving core SDG;
  7. how countries in the Indo-Pacific are responding to implementing the SDG, and which of the SDG have been prioritised by countries receiving Australia’s ODA, and how these priorities could be incorporated into Australia’s ODA program; and
  8. examples of best practice in how other countries are implementing the SDG from which Australia could learn.

Infrastructure: a global game

Our January theme is ‘Getting Ready for Change’. One of the biggest changes is that infrastructure is no longer a national, but a global game.

In the last several posts we briefly looked at the issues being addressed at the World Economic Forum.  But WEF is not Australia’s only major international commitment impacting our infrastructure decisions.

The Australian Government is also a signatory, along with over 190 other countries, to the United Nations 17 sustainable development goals, or SDGs. This requires the co-operation of all levels of government, all business and really all individual Australians.  Yet how many of us are even aware of these goals?

The Senate has recently opened an inquiry into the implementation of the SDGs and we will look at this next few posts. But first, consider the goals themselves. Unlike the United Nations’ earlier Millenial Goals which focussed on developing countries, the SDGs apply to all, developing and developed alike.

One of the first steps is getting ready for change is to be aware of the global game we are now playing in.

So Three questions today:

  1. On an individual level:  how many of the goals apply to consumption choices you make?
  2. On an organisational level:  how many of the goals apply to the work your organisation does?
  3. On a government level: how many of the goals apply to the decisions our governments make (at all levels)?

If you would like to share  your thoughts on these issues, please do – just click in the menu above the item ‘leave a comment’.

Creating a Shared Future in a Fractured World

‘Experts’ have been taken to task for being ‘close focussed’, thinking only of their own area and not connecting with the wider world.  If infrastructure decisions are to improve our world, they need to take in the wider context.  How difficult this will be is, I think, indicated in the following statement of purpose for the World Economic Forum that begins this week in Davos.

Creating a Shared Future in a Fractured World

“The global context has changed dramatically: geostrategic fissures have re-emerged on multiple fronts with wide-ranging political, economic and social consequences. Realpolitik is no longer just a relic of the Cold War. Economic prosperity and social cohesion are not one and the same. The global commons cannot protect or heal itself.

Politically, new and divisive narratives are transforming governance. Economically, policies are being formulated to preserve the benefits of global integration while limiting shared obligations such as sustainable development, inclusive growth and managing the Fourth Industrial Revolution. Socially, citizens yearn for responsive leadership; yet, a collective purpose remains elusive despite ever-expanding social networks. All the while, the social contract between states and their citizens continues to erode.

The 48th World Economic Forum Annual Meeting therefore aims to rededicate leaders from all walks of life to developing a shared narrative to improve the state of the world. The programme, initiatives and projects of the meeting are focused on Creating a Shared Future in a Fractured World. By coming together at the start of the year, we can shape the future by joining this unparalleled global effort in co-design, co-creation and collaboration. The programme’s depth and breadth make it a true summit of summits.”