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Anorak | Building Bloody Great Trains To Everywhere Doesn’t Make Us Rich You Know

Building Bloody Great Trains To Everywhere Doesn’t Make Us Rich You Know

by | 29th, July 2011

THERE’S any number of people out there telling us that we must all spend the tax money on their favourite boondoggle. Might be yet more bleedin windmills, neighbourhood nuclear plants, the trains sets they dreamed of as spotty youths or that national broadband they want to spend billions on.

And in these spending demands there’s one word that flourished as the Ace of Trumps: “Infrastructure!”.

If you say it’s “investment in infrastructure” then everyone gets dewy eyed and coughs up the cheques. For investment in infrastructure is seen as being what will drive future wealth creation, so let’s do lotsn’lots of it without worrying too much about what we’re actually building.

Except it doesn’t actually work like that:

Financially, the project has already effectively broken the Ministry of Railways. At the last count, the ministry was nearly 2 trillion yuan (£200bn) in debt and clocking up losses at the rate of about £400m a quarter. On any Western definition, the ministry is completely bust. To meet the plan, another 2.8 trillion yuan has to be found in the next three and half years. Where’s the money going to come from?

In recent debt issues, the railway has had to pay way above the going rate of interest, despite the fact that its bonds are implicitly and in some cases explicitly underwritten by the state. Of equal concern is that the newly opened links have failed to achieve anywhere near expected traffic levels. In the West, they would be dubbed a massive white elephant.

Concern over the new network’s safety has created an even bigger hill to climb in terms of driving the necessary demand. Many of the trains are as empty as the ghost towns that sprout randomly upon China’s vast open plains. For many Chinese, both are too expensive to contemplate.

The Chinese approach to development is to build the infrastructure in the expectation that the demand and economic activity will naturally follow in its wake.

Good infrastructure is great, yes, random train lines to everywhere are just pissing money away on a magnificent scale. For its the use of infrastructure that creates wealth, not the building or the having of it. If you’re going to build stuff that no one uses might as well just burn the money instead: least you can get warm that way.

And this is true of us here in Blighty too, it’s not just Chinee Commies who can waste the folding stuff on a grand scale. Don’t be suckered by those promises of a “21 st century infrastructure”. What we want to know, before we build it, is who and how many are going to use it and to do what? And perhaps most importantly, could they find another, cheaper, way to do it?

Image: The Crystal Palace, built for the Great Exhibition of 1851, lays in ruins after a fire destroyed the glass and iron structure in London, England, Dec. 7, 1936. The damage caused by the fire of Dec. 1 is estimated at ten million dollars. (AP Photo



Posted: 29th, July 2011 | In: Money Comments (4) | Follow the Comments on our RSS feed: RSS 2.0 | TrackBack | Permalink