IF THERE is a consensus at the moment, 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 problem is multi-faceted. While people tend to be enthusiastic about infrastructure in general, they are more critical of specific projects. If they are in the country, then they ruin the currency; if they are in the town, then they ruin neighbourhoods or impinge on private property rights. When it comes to public infrastructure projects, the benefits are long-term but the costs are short-term. The politicians that authorises the project is rarely the same one that opens it. So an elected leader gets all the flak from those who oppose this white elephant/blot on the landscape but none of the praise for the reduced traffic jams or cheaper power that ensue. Occasionally a leader might be tempted into authorising a big scheme (like Britain’s high-speed rail) but as the <a…Continue reading