If you build it, they will come

Sydney, the second most expensive city in the world. The new Premier, Gladys Berejiklian, declares it “the biggest issue”.

Nationals leader Barnaby Joyce tells us to accept it.

But why?

I see this as a complete failure of leadership, and of understanding.

Sydney is lovely, beaches, rivers, parks, infrastructure. There are beautiful beaches for the length of the eastern coast. There are rivers and creeks everywhere. Parks abound. So infrastructure is key to the attraction of Sydney, and to the escalating costs, congestion and other trials for our leaders.

To quote “Field of Dreams” “If you build it, they will come.” And they do, by the thousands.

I spoke to a group of young people and asked them why they moved to Sydney, “because it is close to everything” they told me.

Building more infrastructure in our capitals generates more demand to live in our capitals.

Our regional centres spend year after year, planning different ways to improve the lot of their citizens, without significant success. The deck is stacked against them.

Until our secondary cities can offer proximity to services (and that means infrastructure) they will remain a “negative good” in the minds of our young people, our new people and our businesses.

Long term planning is necessary to relieve the pressure on our exploding Capitals and bring equity to our regional centres. We don’t need a way to build more free-standing dwellings in Sydney. We need to lift the service provision in other areas.

How can this be done?

3rd industrial revolution

I am sitting in the dark, the temperature is 36 degrees Celsius. I have a radio and an iPad. I’d like to say that I’m on holiday in the tropics, but I’m in my home in the outskirts of a city and the power has been out for a 6 hours now. I’m a Telstra customer, but there is no mobile or landline service – batteries not included in their infrastructure apparently. If I were part of a local generating group I would be cool and communicating. If my group had a similar power failure I would be drawing from other interconnected communities.

My question is – who has heard of the 3rd industrial revolution, and has anyone seen a recent advance toward it in Australia?

Employment Generation

We assume that ‘big’ events and ‘big’ infrastructure create jobs.  But is this true?

In the last post I said the 1985 Grand Prix was ‘only slightly better’ – at creating income and jobs – than the ‘next best thing’ the State could have done with its money.  What was that ‘next best thing’?   Surprising as it might seem – Creating more public service jobs!    Creating jobs directly by increasing the supply of doctors, nurses, teachers, maintenance personnel and assistants of all kinds, does two things. It directly increases the services received by the community thus improving lifestyles. And it creates lasting jobs, ‘bankable’ jobs, that increase economic stability and well-being the way temporary jobs, such as those from construction, never can.

Why not stop talking ‘jobs’ in general and talk ‘good jobs’ – permanent and sufficient to support a family, as the minimum wage was always intended to do. Or better still, let us think of the outcomes that we want, and how we can get them.

 

Sports and job creation

When the first Grand Prix was held in Adelaide in 1985, government officials touted how beneficial it would be. However, they were not able to produce a shred of evidence to support their enthusiasm.  So the Economics Society of South Australia, jointly with economists from Flinders and Adelaide Universities and the Tourism Department, examined that first Adelaide event. It was the first and most complete economic analysis of any special event and was cited in every study on the subject for over twenty years. What did it find? In terms of employment and income generation the Grand Prix was only marginally better than the next best thing and then only because the Federal Government gave the State a grant!  The more enthusiastic the announcement – the more it pays to check!

The same goes for the enthusiastic job promises for new infrastructure proposals. Ask yourself how valid they are – and how they have been derived.

Reference: The Adelaide Grand Prix, 1985, published by the South Australian Centre for Economic Studies.

An Infrastructure Consensus.

Infrastructure – ‘if there is a consensus right now in American politics’, says the Economist, ‘it must be that infrastructure spending is a good thing. It employs workers, improves economic efficiency and, at the moment, can be financed at rock-bottom bond yields. So why don’t governments get on with it’  The same could be said of Australia. But just because many people believe it doesn’t make it true. (We used to believe the world was flat!) For example, how exactly does spending $1.6 billion on NSW Sports Stadiums improve economic efficiency? How does it plug the so-called ‘black hole’ of infrastructure expenditure that will stop the NSW economy going backwards? How many jobs are created?  How long will they last? .  It is about time we started asking these questions and more – demanding answers! Yes, us!

Infrastructure – what and why?

The ‘group for building stuff’  (post 20 Jan) focussed on construction.  The reserve bank idea focusses on financing. Both of these miss the point – by your traditional country mile.  What is the point?  Probably best explained in the title of Brett Frischmann’s book “Infrastructure – the social value of shared resources” The whole point of infrastructure is not so much what IT does as what it enables US to do!  That’s the social bit.  The ‘shared resources’ refers to the fact that, unlike our iPhone or car, infrastructure is not owned by any one of us alone, but by all of us together. Thus we need a representative group decision.

So rather than give the job to some group that can only do a partial – and therefore poor – job, how do we improve government decision-making?

NSW – new premier, new infrastructure direction

“Infrastructure projects means local schools and local communities; it’s not just about the mega-projects in Sydney.  Infrastructure is about upgrades to hospitals, upgrades to school halls, sporting facilities.”

Gladys Berejiklian, who is set to be voted by the Liberal Party room as the state’s new premier today (Monday), speaking to The Saturday Telegraph, 20 Jan.

I can’t help taking a two way bet on this.  On the one hand, it is definitely refreshing to see State Governments move off the mega projects.  But as school halls were a focus of the last big infrastructure spend during the economic stimulus (Building the Education Revolution), it is strange that it should still top the list of local infrastructure needs. Has this list been seriously thought through or quickly cobbled together?

Your view –  populism or good decision-making?  

Infrastructure – A group for building stuff!

In the last post I referred to the Economist’s idea for infrastructure decisions to be made by a ‘group for building stuff’ as if the real issue were ‘how to build’ rather than what to build – and, even more critically, why to build it – and why now?   It is said that during the depression, people constructed holes and others filled them in again, as a means of keeping people employed and with an income. Now, no one wanted the holes – or they wouldn’t have been filled in again.  But is it any different today, with a desire to ‘build stuff’.  Perhaps we are fooling ourselves that today’s constructions are more community-valuable than those holes?  If so, should we not focus on the value to be achieved, rather than the building of stuff?

Who should make infrastructure decisions?

The right wing think-tanks make great play with ‘mistakes’ made by governments, not excluding corruption, but ignore the fact that a large proportion of private companies fail, creating havoc for their shareholders and communities when they do. Statements such as ‘8 out of 10 entrepreneurs who start businesses fail within the first 18 months’ and ’50% of businesses fail within five years of inception’ are easy to find on the net (even if rather contradictory). Then there are the spectacular failures of older and large companies either through fraud or incompetence. Recently, there has been a flurry of suggestions that our infrastructure decisions should be made by some ‘group for building stuff’ (The Economist) or Paul Keating’s suggestion of a Reserve Bank for Infrastructure). What is the rationale for thinking that either would be superior?  Comments?

Muddling through

“I love ‘Talking Infrastructure’ – you ask questions that I have no answers to”. (recent email from an experienced asset management trainer)

Questions for which there are answers are ideal for training courses, manuals, and instructions. Asset management, where the task is to how to choose those asset activities that best achieve the organisation’s objectives, is now, after thirty years of development, at this stage. Not everyone may know the answers but an increasing number are learning the ‘how to’ from those who do. The procedures themselves may change, a little: they may be clarified, refined, improved, but they no longer need be ‘discovered’ for that has already been done. The reason I can say this with a certain amount of confidence is that the task of ‘achieving objectives’ is a technical issue, one of optimisation under constraints.

Choosing those objectives, however, is a different matter.  Clearly communicating the chosen objectives is yet another!   Here we are dealing with values, and with complexity. We are in the realm of ‘wicked problems’. According to Wikipedia. “A wicked problem is a problem that is difficult or impossible to solve because of incomplete, contradictory, and changing requirements that are often difficult to recognize. The use of the term “wicked” here has come to denote resistance to resolution, rather than evil”.   Incomplete, contradictory and changing requirements, well describes the problem facing those who need to set infrastructure objectives today.  And, yes, they are also difficult to recognise.

How could it be otherwise where, for infrastructure decisions, the need is to plan ten, twenty, or more years into an unknowable future; where we need to juggle the needs of present v future generations, of present v. future technology, of present v. future needs, demands, values and expectations. What do we favour – economic, social or environmental outcomes?  With due respect to the ‘triple bottom line’ which implies that all can be accommodated, the truth is that all conflict.

We can act as if this complexity does not exist and ‘muddle through’, a long established British tradition.

But perhaps the complexity is ‘difficult to recognise’ because we are not examining it?

‘Talking Infrastructure’ is designed to explore these difficult, complex, issues, so that we become more aware, more able to see a path through the complexity, and to debate them so that we are more able to explain whatever path we have chosen to others.

Your view?