Japan Airlines has just gone into bankruptcy. Joe Sternberg at the WSJ wonders if this is a legacy of Japanese stimulus spending. He’s got a good point – the idea of stimulus is to spend a dollar on any project without worrying if that is a good or bad project.
During the lost decade of the 1990s, airport construction popped up in many stimulus plans. National and local politicians, not to mention the politically powerful construction lobby, wanted to put an airport in every prefecture. And ordinary airports wouldn’t do. Because Japan’s relatively small flat surface area is in such high demand, one airport after another was built on reclaimed land in the middle of the ocean at enormous expense. Despite periodic public fulminations about out-of-control costs, in practice “expensive” seemed to be viewed as a net positive.
Boosters touted airports as creators of short-term construction jobs and longer-term boons to their areas. This airport binge has continued right up to today. Japan’s 98th airport opened last year: Shizuoka-Mt. Fuji, roughly 50 miles from the famous mountain. California, with a larger land area, has around one-third as many airports in regular commercial service, with another 35 or so “reliever airports” to handle business jets and general aviation.
Japan’s strategy hasn’t worked for the airlines or the airports. Those half-empty JAL flights helped push the carrier to bankruptcy. They also translate to less revenue for airports.
To my mind there are two take-home messages.
For everyone else, there’s a lesson here about the costs of Keynesian stimulus. While political debates on infrastructure spending so often focus on how much government will have to pay for a project today, businesses can end up stuck paying the price for inefficient infrastructure tomorrow—and the day after. It was just JAL’s bad luck to have to work with or around Japan’s airport Keynesianism.
The second message being the more interesting.
Meanwhile, one irony is that while Tokyo was busy dotting the countryside with “airports to nowhere,” it lagged on beefing up air-transport infrastructure at places that actually need it. A third runway at Narita, the country’s main international gateway, remains mired in political wrangling.
Stimulus packages don’t just crowd-out the private sector, they can also crowd-out otherwise legitimate infrastructure spending that needs to be undertaken. We saw this in Australia last year where the government were so busy building (new) school halls that they neglected or delayed building proper schools and classroom upgrades.
