Infrastructure spending to boost the economy

No pasaran is Osborne\’s reply. Nothing doing in any of these measures. \”My government\’s legislative programme will continue to build a stronger economy\” were Her Majesty\’s words: only the HS2 rail plan might save her from outright mendacity. But no shovel hits the earth until 2017, long after it\’s needed as a stimulant.

Yes, this is the problem with infrastructure spending as a boost to aggregate demand in a recession.

There simply aren\’t any large shovel ready projects. Given the red tape that infests our economy, there cannot be.

We could relax many of the planning laws of course: but then we probably wouldn\’t need to boost aggregate demand then, would we?

39 thoughts on “Infrastructure spending to boost the economy”

  1. Which suggests we ought to keep a stock of infrastructure plans ready for recessions. Plan them in the good times, build them in the bad.

  2. Dave,

    No. The thing is that “infrastructure” just isn’t necessary in the UK now.

    We don’t need HS2. We’ve seen the results of HS1, which didn’t pay off as a project. We know that people now don’t care as much about arriving a few minutes earlier when they’ve got a laptop.

    We don’t need fibre broadband across the land. We don’t need more schoolsandhospitals, or sporting facilities or community centres or universites or libraries. The road network is pretty much complete. Every river has been crossed.

    You might as well just spend a few billions on fireworks. It does the same thing – creating jobs, and at least it would be entertaining for people. The trouble is that once it gets down to “fireworks”, people can choose how to spend their own money.

  3. Surreptitious Evil

    How should politicians build a strong economy? Just get out of the way and let people get on with it.

    Unfortunately, getting out of the way is hideously unpopular with all of the special interest groups and letting people get on with it doesn’t allow politicians to announce the “big important thing” that they have caused to happen. Or to start, at least. Or, in actuality, to have its future start announced.

    Unless some other politican decides that their “big important thing” is, or requires, the cancellation of the previous bit. But not until lots of consultations have happened, consultants been paid to document other people’s opinions and, ideally, an inquiry or two.

  4. Tim Almond>

    Even if I agreed with your view that infrastructure isn’t necessary, that doesn’t mean it can’t be more beneficial than fireworks. If the spending is justified as a boost to the economy, then any additional benefits are just a bonus. (Note that’s not a view I subscribe to, but a more moderate version is that it might well be reasonable to build something during a recession that falls a little way short of being a good investment in its own right, if doing so boosts the economy.)

    To take a controversial example like HS2, improving transport links always brings economic benefits. Whether those benefits are going to be larger than the cost, given the morons in charge, is doubtful. It’ll still be more than just a boondoggle, though. (Unless you think it won’t improve transport links in any meaningful sense, which seems unlikely.)

    Aside from that, we continue to need infrastructure investment even if we’re building nothing new. There’s no reason some kinds of ongoing maintenance can’t be put off in the good times, and done in the bad. Obviously some things can’t be postponed, but others equally obviously can. If, say, traffic lights have a lifespan of twenty years, we can replace 5% a year, or do all of them at once when a recession comes along.

  5. Surreptitious Evil

    If, say, traffic lights have a lifespan of twenty years, we can replace 5% a year, or do all of them at once when a recession comes along.

    I know you prefixed that with “if, say ..” but it is a silly example. If traffic lights have an expected lifespan of 20 years, you are going to be replacing a few almost immediately (under warranty? Does the ‘simple shopper’ get warranties?), a very few in years 3 to 12, a rising number in years 13 to 24 (upper bound pulled out of hat – rabbit most annoyed) and some will soldier on until you have to replace them because the consumable items are no longer economically available or because some silly regulation forces you to.

    Or, of course, if you are a member of the political elite, you can ignore the failures for 20 years (because, statistically, there aren’t THAT many), moan incessently in the letters pages of the Guardian about the evil drivers causing all those accidents, demanding 2mph speed limits outside schools and mandatory breathalyzers installed as part of the ignition circuits, and, finally, shut the town for 2 months in year 20 to do the mass replacement.

  6. ” improving transport links always brings economic benefits”
    “infrastructure investment”

    Said like a true politician.
    There’s absolutely no reason to believe the former & spending is spending is spending. That’s all there is. Whether it turns out to have been an “investment” is a qualitative assessment only possible after the fact.

  7. SE>

    “I know you prefixed that with ‘if, say ..'”

    Oh good, so you’re not going to be a ridiculous pendant.

    “but it is a silly example.”

    I knew it was too good to be true… I specified that we’re not talking about replacement of failures, but even so traffic lights aren’t actually a terribly silly example, so much as twenty years being the wrong timescale. We are in fact currently replacing old traffic lights with a new generation of LED lights.

    BIS>

    “There’s absolutely no reason to believe the former”

    It’s not something you can reasonably argue with, I’m afraid, even if you don’t like it. Transport is a form of communications, and communications improvements increase competition, which is generally held to be a good thing economically.

    “spending is spending is spending. That’s all there is.”

    What are you trying to say there? Clearly not that fixing holes in roads is the same thing as, I don’t know, smashing windows. One is an investment in maintaining valuable infrastructure, the other is smashing windows.

  8. Dave,

    “Even if I agreed with your view that infrastructure isn’t necessary, that doesn’t mean it can’t be more beneficial than fireworks. If the spending is justified as a boost to the economy, then any additional benefits are just a bonus.”

    But the spending isn’t a boost to the economy. The economy is all our spending and if you take £400 from each person in the UK to pay for HS2, that’s £400 they can’t spend on trips to Legoland, dinners at Harvester and whatever else they want to have. Building HS2 is simply a transfer of spending from people’s bank accounts to the people involved in constructing it. No wealth is produced by that transaction.

    Now, if HS2 can transport people around quickly, and enough of them do it that the saving means they can use their time effectively, then perhaps the numbers will add up such that the £25bn spent is worth it. At which point, it is a boost to the economy.

  9. Tim Almond>

    “But the spending isn’t a boost to the economy.”

    Do you know what ‘if’ means?

    We’re assuming, for the purposes of this discussion, that the spending we’re talking about is in itself a direct boost to the economy. Whether that’s true or not is another discussion.

  10. Dave,

    “Transport is a form of communications, and communications improvements increase competition, which is generally held to be a good thing economically.”

    But it’s all about “at what cost”?

    I could switch to Virgin and get fibre optic broadband for when I’m working at home. It would be faster than my ADSL connection. But I don’t, because I really don’t need the speed. I’m uploading files of a few 100k at a time. And uploading files is a background task. Even if I’m pushing up hundreds of images (which I do occassionally), that takes a few hours, it’s not stopping me doing other things, or else I go to bed).

    So, it’s not worth me spending out for 60mbps broadband.

    And the same question has to be asked of trains: what is the value to passengers of saving 25 minutes? What is the value of new opportunties created by having a service that takes 49 minutes instead of 1:24?

  11. Tim Almond>

    Please try and remember what’s been said earlier. The original quote BiS responded to was:

    “…improving transport links always brings economic benefits.”

    My next sentence was:

    “Whether those benefits are going to be larger than the cost, given the morons in charge, is doubtful.”

    I’m not going to keep repeating myself just because you can’t keep up.

  12. Dave,

    “We’re assuming, for the purposes of this discussion, that the spending we’re talking about is in itself a direct boost to the economy. Whether that’s true or not is another discussion.”

    The problem is that it isn’t. It cannot be. It isn’t even within the realms of the hypothetical. Spending is a cost.

  13. It’s not something you can reasonably argue with, I’m afraid, even if you don’t like it. Transport is a form of communications, and communications improvements increase competition, which is generally held to be a good thing economically.

    ………………………………………

    It’s not a view generally held here. Many so called transport improvements just shift a problem from one place to another. Or create one that wasn’t there in the first place.

    …………………….

    What are you trying to say there? Clearly not that fixing holes in roads is the same thing as, I don’t know, smashing windows. One is an investment in maintaining valuable infrastructure,

    ………………………..

    How the hell do you make fixing a hole in the road investment? It’s just a cost associated with having the road. On that tortured basis you really could call smashing windows an investment in new windows.

  14. Dave,

    I’m just quoting from your words, dickhead. Write more clearly next time. I’m not going to piece together your arguments from numerous comments.

    But the thing you don’t understand is that if the cost is greater than the benefit, you don’t have economic benefits.

  15. Tim>

    Well, I’m afraid that’s not what most politicians go by. I’d tend to agree more with you than with them, but sadly they’re not letting me run the country.

    It’s not the contradiction you suggest, though. Any contradiction there is just down to my poor phrasing, or perhaps a differing interpretation of ‘direct’. More generally, the idea is that by boosting demand at a time when demand is dropping, we can reverse the trend. The debate over whether that’s true or not (and if so, over the ratio of costs to benefits) is currently a hot topic politically/economically.

    Personally I’m rather luke-warm on the idea in practice, but I still think it’s a good plan for the government to have a bunch of jobs saved up to do when the economy isn’t doing so well, if only because it’s better value to pay people to do them than to pay unemployment benefits. If, as a side-benefit, people have more confidence that any economic depression will be less bad as a result, and that increased confidence in the economy in turn actually helps lessen any depression, that would be nice.

  16. BiS>

    “Many so called transport improvements just shift a problem from one place to another.”

    I did specify actual improvements there, rather than those that are so-called but aren’t.

    “How the hell do you make fixing a hole in the road investment? It’s just a cost associated with having the road.”

    I’m not sure how else you’d classify the cost of upkeep of an asset, except as an investment.

    Tim Almond>

    “I … don’t understand … economic benefits.”

    Context is important. Taking things out of context changes their meaning. It is assumed you read the other comments in a thread, or at least the ones being quoted.

  17. “I still think its a good plan for the government to have a bunch of jobs saved up to do when the economy isn

  18. TheJollyGreenMan

    Instead of the stupid new railway the government should think about trebling the Dartford tunnel and bridge crossing! I was stuck there for more than 2 hours when I returned from Europe on a Friday afternoon.

    It is time we insist that the moneys collected from the motorists in terms of fuel duties, road tax, etc. be applied to improving our roads network.

    And I do not agree with the foul-mouthed Tim Almond who said …The road network is pretty much complete…

    Until all our main roads have six lanes going each way the job is not done. Six lanes?

    The outer lane for old pensioners and fools in their electric cars, the next two lanes for trucks, the next two lanes for passenger cars, and the inner lane for BMW, Audi, Merc drivers who pay the most tax and deserve to be rewarded for keeping the rest of us employed!

  19. “I still think its a good plan for the government to have a bunch of jobs saved up to do when the economy isnt doing so well, if only because its better value to pay people to do them than to pay unemployment benefits”

    Yes because an unemployed photocopier salesman from Slough is going to be very useful building a high tech high speed railway.

    You Keynesians are living in the 1930s. Where building a railway did indeed involve lots of blokes with picks and shovels, and basic equipment that could be operated with a minimum of training (and training consisted of ‘Here’s how it works, dont chop your leg off with it, now get on with the job’). Nowadays you need highly skilled, highly trained (and correctly paperworked) workers to build large scale infrastructure projects. I know people who work on sites and you cant fart on site these days without the correct training ticket. Infrastructure jobs are not ones that people who have never worked in that area can be easily placed into.

    And even if you spend years training up this army of infrastructure builders to build a railway, what do they do when they’ve finished? They’ll all be unemployed again. Or are you just going to continue building things until the entire UK is covered in concrete?

  20. TheJollyGreenMan

    Jim, the unions love railways. gives them more members and leverage over the government. Stupid dim Cameron hasn’t grasped this.

    They, the unions and therefore all the busybodies in government and Labour, hate cars, all you need is some traffic cops to patrol over a busy bank holiday.

  21. @Dave > I still think it’s a good plan for the government to have a bunch of jobs saved up to do when the economy isn’t doing so well

    But why only do it then? Thjere’s never a time when the economy couldn’t do better, surely?

    This is just nonsense. We need the government to get out of the way, not fiddle more. It’s not just a cliche you know, the large majority of these people have never actually run any kind of business.

  22. Jim>

    How much re-training does it take to learn to mend holes in the road – at least as a labourer, if not as foreman? I think you might be surprised how much major construction work still involves basic labouring, as well. In any case, there will be administrative jobs on any such project, and also some indirect employment created as well. What’s more, the photocopier salesman may not find a job on some construction site, but maybe he’ll get an unskilled job flipping burgers left free by a construction worker who’d otherwise have no work in construction.

    “And even if you spend years training up this army of infrastructure builders to build a railway, what do they do when they

  23. TJGM,

    And I do not agree with the foul-mouthed Tim Almond who said The road network is pretty much complete

    Until all our main roads have six lanes going each way the job is not done. Six lanes?

    Foul-mouthed? Go and hang out at a My Little Pony forum if you can’t handle it.

    But on your point, what good would having 6 lanes on all our main roads do? The M4 between J12 and J17 manages just fine with 3 lanes. Most of the M5 (except around Birmingham and Bristol) is empty with 2 lanes. As is the A429 from Swindon to Gloucester, the M26 and most of the A34.

  24. Jim>

    How much re-training does it take to learn to mend holes in the road – at least as a labourer, if not as foreman? I think you might be surprised how much major construction work still involves basic labouring, as well. In any case, there will be administrative jobs on any such project, and also some indirect employment created as well. What’s more, the photocopier salesman may not find a job on some construction site, but maybe he’ll get an unskilled job flipping burgers left free by a construction worker who’d otherwise have no work in construction.

    “And even if you spend years training up this army of infrastructure builders to build a railway, what do they do when they’ve finished?”

    By then we’d be out of the depression. They could find other work again.

    Interested>

    “But why only do it then?”

    Because there’s a finite amount of things the government can sensibly spend money on in this way?

    “This is just nonsense. We need the government to get out of the way, not fiddle more.”

    If, and I admit it’s a big if as things stand, this kind of thing was done properly and actually worked, then it’s the kind of thing government should be doing – the economic equivalent of emptying the bins.

    In practice, I don’t trust the idiots we have in charge to do anything right, and I’d much rather we could stop them spending. As long as that seems impossible, though, I figure something like HS2 is at least better than pissing it away on hot air.

  25. Well I’ve lived in a place that regards road repair as ‘infrastructure investment’. And I’ve lived in a place reckons fixing a pothole is an unavoidable cost of road usage. One fixes the holes the next day. Guess which one?

    But it does prompt some thought on what is investment & what is spending.

    If a government sees the building of a road as providing a benefit to the economy, the road is a cost of the benefit. The beneficiary is the same as the spender.
    If a private company builds a road to earn the tolls, it’s an investment. They’re not actually interested in whether the road provides a benefit to anyone. It’s whether it provides a return to the company.

    Anyone argue with that?

  26. Jim (#20) excellent riposte to Dave (various) – one comment, though. The unemployed photocopier salesman from Slough isn’t the main issue – it’s the hordes of ‘race equality commissars’ , ‘Five portions a day co-ordinators’ and suchlike, who were the main drivers behind the last Labour government which are the issue. The idea that such beings are capable of performing tasks in any construction related activity is frankly comical.

  27. Surreptitious Evil

    I knew it was too good to be true… I specified that we’re not talking about replacement of failures, but even so traffic lights aren’t actually a terribly silly example

    No you didn’t – not anywhere on this thread, anyway. You actually said:

    There’s no reason some kinds of ongoing maintenance can’t be put off in the good times

    In what world do you live where “replacement of failures” is not “ongoing maintenance”?

  28. @Surreptitious Evil

    You will get nowhere in this life by quoting Dave’s words back at him and pointing out why he’s wrong.

  29. I’m afraid the assumption of the infrastructure-ists is worse than the false reckoning about cost versus benefits.

    There is a general assumption that government (or large-scale) projects are, de facto, needed or appropriate. By these criteria Brasilia and the White Sea Canal are triumphs of infrastructure.

    To go back to basics, I may want a hole in the ground digging in Colchester, but hiring someone to dig one in Lancashire doesn’t help me. Yet a hole has been dug. Work has been done. Infrastructure has been constructed.

    Government is shit at deciding what needs doing and where it needs doing and, even worse, how to go about doing it.

  30. The people who cannot avoid depressions or are not able to see them coming, or cause them in the fist place (pretty much all politicians/central bankers/bureaucrats) would be best placed to decide and plan “recoveries”?

    How does that work exactly?

    There is also the finnicky little point that railways for example were not built by the government, but were nationalised (most things existed or got built without government involvement for a long time, history did not start in 1945). So if it was built by private investment to start with, why not anymore? Would it be perchance because of the dead weight of the state that we have to carry nowadays?

    As an illustration, I recently got paid a fairly large amount of cash. Almost 50% of it did not reach my account. So instead of having enough to invest in my house and providing jobs to builders and related industries (or subscribe to a company proposing to build HS2, as it used to be done), I’m just going to put it away for a rainy day. You might say that it will be used somewhere else, but the whole point is that I cannot fucking use it for what I want because there is not enough left. What has been taken from me will be mostly wasted on top of it.

    Finally, repairing roads is not an investment, it is maintenance. You’re not adding value of any kind.

  31. If they want to spend some money they couldn’t do much better than building some cycle lanes. No planning permission really required so it could be started almost overnight. Reduces the governments environmental and health bills, provides cheap transport for the poorest. Increases the efficiency of our cities. Reduces the amount of money we send abroad to the car and oil producing nations.

    If more journeys that can be made by bike were done so, then the remaining cars on the road would face less congestion, another economic benefit.

    For the price of HS2 we could blanket the country in cycle lanes, providing enormous benefits to the entire country and it could be started today.

  32. They have plenty of bicycles in Germany. A lot.

    They still have congestion, and I dont think they are particularly fitter.

  33. Who needs roads and broadband? Trains are for wimps.

    Bring back cart tracks and quill pens. And stage coaches. In this age of laptops, no one minds if their journey from London to York takes three days. (And no smart arse comment that we have got rid of broadband.) And every river has been crossed. Quite, who needs more than one bridge over a river? What, quite useful in London, you say? Stupid boy, London is inhabited by socialists and communists.

    You jessies will be wanting to replace ageing power stations next.

    Repeat after me. No government spending on infrastructure ever, in the history of the world, has ever improved anything at all, ever. Everyone knows that, and anyone who says otherwise is a namby-pamby poetry reading Bloomsbury gay communist married to a childless Russian ballerina. And probably does not like Rugby.

    Can I be a professor at Harvard now?

  34. Monoi

    *They have plenty of bicycles in Germany. A lot.* But also a lot of Germans.

    *They still have congestion, and I dont think they are particularly fitter.*

    Well, if Germans are not fitter, then not many Germans are using bikes very much, which might be why they still have congestion.

  35. I’m with Tim Almond’s fireworks plan. At least it’ll be nice to look at.

    HS2 is remarkable for being an obvious white elephant long before its construction begins, let alone by its end. It seems to be another manifestation of this bizarre fascination with railways. I seriously sometimes wonder whether Frank Hornby is to blame. Like millions of other little boys, I lusted after huge train layouts far beyond my financial means (and indeed the physical capacity of my childhood home). Maybe that juvenile lust ends up as this bizarre fascination with building the real thing in adults.

  36. SE>

    #28

    Are you blind, or just fucking stupid? It’s the previous sentence to the one you quoted – the one which puts it in context. Are you incapable of understanding that I was talking about hypothetical traffic lights that meet the criteria already laid, and that ‘traffic lights’ is just a placeholder?

    Boy, you must have some strange idea of what Tim’s blog is about, if you weren’t aware of how that works.

  37. Ian B

    “It seems to be another manifestation of this bizarre fascination with railways.”

    What are the other manifestations ? I can’t say that they are obvious to me. I’d also be interested to know where all the other new railways are in this country that have resulted from a childhood fascination with trains.

    @ Dave

    It’s generally true I think that railways expand to meet an existing demand, rather than stimulate that demand. This is why we had the long period of contraction from the fifties to the nineties, falling demand. Since then the growth in passengers has been rapid, hence the recent period of fairly modest expansion.
    HS2 construction will drain the rest of the network of plant and skilled workers which will mean little growth. It might well make more sense to use those resources on programmes of electrification and capacity enhancement over the whole system.

  38. Surreptitious Evil

    Dave @ #37,

    Well, clearly I’m almost as utterly fucking blind as you are because I quoted the previous sentence as well. Or did you mean the previous sentence to that:

    There’s no reason some kinds of ongoing maintenance can’t be put off in the good times, and done in the bad.

    Because that still doesn’t specify that “you are not talking about replacement of failures.” In fact, there is no mention of failures at all.

    And, of course,

    ‘traffic lights’ is just a placeholder

    It’s a placeholder for quite a specific class of thing though – one which is common and to a large extent individually replaceable, while yet forming part of a larger public infrastructure. So a dissimilar class to a new railway line, for example.

    I think, unfortunately, Interested double-tapped you in comment 22 a couple of threads ago.

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