Pure idiocy

Many economists warn of a classic mismatch of incentives. Governments may have good reason to invest in projects that yield no profit, building roads to nowhere that ultimately open up undeveloped land for job-generating commerce. Government alone has the incentive to upgrade shoddy wastewater treatment and supply systems for drinking water. Absent public guarantees for profits, private companies have no inducement to bring such works into creation.

“Private investors need to have a decent rate of return,” said Louis Kuijs, head of Asia for Oxford Economics, based in Hong Kong. “They cannot wait 40 years, and they are simply not able to take into account the additional tax revenues for the government.”

Complete twattery in fact.

Did water investment go up or down upon privatisation? Up.

Further, we do not control prices to guarantee a profit, we control them to stop a natural monopoly ripping the consumer off. And what the fuck is this guy at Oxford Economics on about? He’s living in a place where the metro system funds itself from the rise in land values around a new station.

Jeepers.

13 comments on “Pure idiocy

  1. By contrast, China has engineered one of the most effective economic transformations in modern history in part through relentless investment in infrastructure, traditionally financed and overseen by an unabashedly powerful state.

    So there are no white elephants in China’s infrastructure boom?

    Besides, building a transport network from scratch (as China did) is completely different to upgrading an existing network. Look at how much money France is spending on expanding its TGV network.

  2. Absent public guarantees for profits, private companies have no inducement to bring such works into creation.

    That explains the utter lack of private roads in France.

  3. Littered with lies.
    Cambridge Water is majority-owned by the various colleges*; Christian Aid/Tear Fund/CAFOD, in co-operation with the villagers, have provided thousands (probably tens of thousands) of villages in the third world (and dozens of slum chanty towns on the edge of their cities) with clean water supplies and sewage systems.

    The “Bridge to nowhere” has *not* opened up anything.

    * Why? Well they have a vested interest in the health of their students unlike the local authority-owned water company that caused an ourbreak of dysentry while I was taking my ‘A’ levels.

  4. So there are no white elephants in China’s infrastructure boom?

    Saw an article the other day on China’s magnificent looking bridges carrying 8 lane highways with nobody one them. Down at the very bottom of the piece was a remark, prompted by a shit-poor farmer, that perhaps building a network of smaller roads would have been better than a handful of grandiose projects.

  5. So there are no white elephants in China’s infrastructure boom?

    Saw an article the other day on China’s magnificent looking bridges carrying 8 lane highways with nobody one them. Down at the very bottom of the piece was a remark, prompted by a shit-poor farmer, that perhaps building a network of smaller roads would have been better than a handful of grandiose projects.

    Nonsense. What incentive does a government have to build infrastructure, except to get praise from prominent publications for boosting their own egos? Anybody can build a network of smaller roads — heck, pesants practically end up building them on their own — but it takes a powerful public servant to make a big honkin’ 8-lane highway of the sort that Thomas Friedman cites as evidence of effective government.

  6. Before privatisation, the water coming out of my and my neighbours’ taps was brown and slightly unpleasant to taste, despite numerous complaints to the water board. After privatisation, one complaint and we were assured the problem would be solved. Within three months, we had water that was clear and pleasant to taste.

  7. an unabashedly powerful state

    He doesn’t realise what he’s saying, or what he’s excusing.

  8. To be fair to the guy from Oxford Economics, it is very difficult for the private sector to fund long term infrastructure projects, not least because they will almost certainly entail multiple changes of government while under construction. They need government or at least supra national bodies like the world bank or the new Asia Infrastructure Development Bank to effectively provide the guarantee. Then when the project is up and generating cash flow, the private sector can then effectively buy it off the government via asset backed securitisation. Indeed this is exactly the model that China is now pursuing. The massive One Belt One Road infrastructure plan by China to effectively provide the financial backing to build high speed rail and road networks, as well as ports throughout Asia is a case in point. If you haven’t read about the Pakistan Economic Corridor already you should ask Dr Google.

    Whether or not the private sector is more or less incompetent (or corrupt) in actually building the stuff has more to do with the institutional framework of the country concerned, but the point is well made that China has no problems with endless appeals and legal cases about destroying the habitat of some rare endangered tree moth or some such.

  9. Clearly the harbour tunnels, the Lion Rock tunnel and the Peak Tunnel in Hong Kong, built and operated by private companies on 30-year leases don’t exist.

  10. “funds itself from the rise in land values” Timmy’s Georgite rhetoric at the max.Likewise Kensington could have built safe social housing with the proceeds of a tax on land values.But in this country we have uncouth middle and upper classes that insist on keeping these windfall capital gains and maintaining house prices so high that the housing market is officially “broken.”And the whole economy with it (according to Henry George’s rhetoric).

  11. @ DBC Reed
    Kensington and Chelsea built the housing estate including Grenfell tower using the proceeds of a tax on the value of buildings because the value of Kensington as unimproved farmland is trivial relative to the rateable value of the buildings.
    “Uncouth” is a description of much of the lower class (as distinct from the working class which it overlaps) but rarely applies to any member of the upper class.
    From what has been reported it seems that Kensington did build safe social housing – what made the tower unsafe was a change made by the KCTMO, a company controlled by elected representatives of tenants, exacerbated by the failure of the KCTMO and the tenants to replace the batteries in the fire alarms.
    What is broken is the concept of the TMO, based on the assumption of the natural goodness and brotherly solidarity of the working class.

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