For that reason, Corbyn’s QE looks like one of those ideas that is superficially attractive because it seems to kill two birds with one stone, but on reflection turns out to be a bad idea. If we want to keep an independent central bank we do not want the government putting the bank under pressure to do QE because the government wants more investment, and if that does not happen we do not want the central bank deciding whether extra investment happens.
And that’s a lefty talking there.
And there’s a problem here too:
Suppose that a NIB is created, not on the back of QE but using more conventional forms of finance. (If the government wants to encourage it, just directly subsidise that finance with conventional borrowing. Don’t be put off doing so by deficit fetishism.) Suppose we also like the concept of helicopter money – not for now, but for the next time interest rates hit their lower bound and the central bank wants more stimulus. In those circumstances, it might well make sense for helicopter money to be used not only to send cheques to individuals, but also to bring forward investment financed by the NIB, or public sector investment financed directly by the state. If those investment projects could get off the ground quickly, and crucially would not have happened for some time otherwise, then what I have elsewhere described as ‘democratic helicopter money’ would make sense.
Shovel ready projects, eh? Now where have we heard that phrase before?
Shovels are highly productive means for digging holes then filling them in again.
And what happens when the government ‘invests’ in public infrastructure projects on our behalf?
Everybody goes mental, because we end up with money pits like HS2.
And they don’t get off the ground quickly, because this is Britain and we can’t build anything without excruciating planning bunfights and environmental cockwaffling and a rigorous public procurement process that puts everything out to tender, then chooses the shittest supplier.
This kind of thinking was from recollection highly popular in developmental economics circles back in the 1960s (using Aid rather than Green QE) – it was widely thought discredited following the excesses of a raft of Sub Saharan African dictators who frittered away their ‘printed money’ on vanity projects and ever increasingly grand follies or internal civil wars.
Given Ritchie’s utter, invincible ignorance on any topic, I would not expect him to have read Lord Bauer, but my question would be has anyone thinking there is even a kernel of a good idea in this ‘NIB’ read him, and if not, why not?
I’ve heard a proposal going around to build a reserve of shovel-ready infrastructure projects so when it’s appropriate to create a stimulus, we have something useful to spend the money on.
That would mean passing the planning permission / hybrid bill and then sitting on it until the money turned up.
This is a blitheringly stupid idea as soon as you apply any thought. Consider the land. For any serious infrastructure project, some of the land will need to be acquired through compulsory purchase. This is a significant chunk of the cost, so it couldn’t be spent in advance (because the whole point is to do a load of engineering studies, pass planning permissions and environmental assessments but not spend lots of money). So you’d know exactly which plots of land you were going to buy, but you wouldn’t have bought them.
I do wonder if these people have ever heard of “blight”.
Alternatively, you buy the land. Which means you now have a whole swathe of state-owned land that isn’t being used. Perhaps you rent out the houses so you can evict people when you need to spend money because the economy is collapsing. Because that’s going to be popular!
Or, alternatively, you hold a whole load of land out of economic use. Which is really bad economically. And also is going to result in lots of wildlife moving in, which will completly screw up your environmental assessment, forcing you to do another one when you do want to build, which will slow the work down until you’re out of the recession anyway.
No, if you want to chuck a load of money at the construction industry in a recession, the best thing would be an infrastructure repair backlog. You mostly have a pretty good collection of repair assessments, and repairing things slightly prematurely or slightly more comprehensively than is actually needed is not going to waste much money – after all, the work needed doing anyway!
Given that the UK is a services-based economy, I think it is a terrific idea to get recently laid-off software engineers and customer-service representatives back to work by digging holes in the ground and building roads.
” I think it is a terrific idea to get recently laid-off software engineers and customer-service representatives back to work by digging holes in the ground and building roads.”
No so fast comrade! All construction workers have to have their training certififcation cards nowadays, you can’t get on a building site and lift a shovel without the right pieces of paper. That’ll take at least 6 months and about £1500 per person. I doubt the training providers could cope – might be a bit of a waiting list……………..
Basically since we no longer do construction work with shovels, having a reserve of “shovel-ready” work is unfeasible. Only unskilled work can go into the reserve. I for one look forward to QE being used to pay coffee shop baristas.
Rob/Jim
I was banned for the umpteenth time by asking whether Murphy/Reed felt Gender studies graduates were likely to look to work in construction or transport – plus ca change….
Van Patten having worked in both id say more likely transport though you would some in construction.
Though as the transport was state funded there may be some bias.
Having once worked on a large govt infrastructure/reclaimation project we did indeed receive forms to be filled out regarding work force diversity.
Another problem with these projects is that as they are for large amounts they need to follow the OJEU process and may even need State aid clearance.
A full process including consultations, ITT, a war and mobilisation can easily take longer than a year.
The only thing that’s shovel-ready is all the shit that comes out of Murphy’s blog.