We’ve all heard the joke of the traveller asking a local how to reach a certain town and being told ‘Well now, you can’t get there from here’. We laugh, but when it comes to infrastructure sustainability, our starting point also determines where we can arrive.
At a time when I was an advisor to the Minister of Construction, a new dam was proposed. I looked into the proposal. It did not permit extension of the growing area, nor, because of the weather conditions, did it permit extension of the growing time. At best it would provide a fall back for famers in case of drought. However the benefits of that for the few farmers involved came nowhere close to covering the costs involved. No matter which way I looked at it, on economic, social or environmental grounds I could not make it stack up. What really puzzled me was that the major advocate for the dam was no idiot. He was, in fact, a Rhodes Scholar. I said it was a money losing proposition – and he agreed with me!
“Then why on earth do it?” I exploded in frustration.
“Well”, he said, “the money’s going to be spent on something, so it might as well be here!”
Today we tend to start from the assumption that we have to build something which we can see by the fact that governments determine their capital budgets separately from their recurrent budgets. And we often hear anxiety around the notion that ‘we have to keep up the pipeline of construction projects’.
Why? Why is it important to keep UP the capital spend, but keep DOWN the recurrent spend? Is it even possible?
If we want sustainability, maybe we need to look at where we are starting from.
President Trump’s protectionist stance has been cemented by executive order withdrawing from the Trans-Pacific Partnership (TPP). Protectionism has swept Europe; Trump is not an isolated believer.
Much of the world’s infrastructure is built by international firms, their success built on scales of economy and expertise.
In the new protectionist environment, major infrastructure will increase in expense and/or decrease in quality.
My question is – where are the economic advisers, educators and leaders that help people understand the facts of globalisation, rather than the beliefs about globalisation?
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?
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?
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.
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.
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!
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?
“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?
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?
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