More pinkbatts!

When Toyota announced it was going to exit domestic manufacturing in three years time the Victorian premier, Denis Napthine, immediately jumped onto a plane to Canberra to appeal for stimulus spending. As if we didn’t already know how badly that kind of government spending works. As if unemployed auto-industry workers would get jobs building roads.

That sort of logic applies when all you’re interested in is the macro big picture, as opposed to what is actually happening on the ground. Let’s have economic activity – any economic activity as long as politicians can stand around in fluoro vests looking important. Well, frankly, that is just not good enough. Large scale government spending to ‘stimulate’ the economy makes the assumption that all economic activity is homogenous – whereas we know that both capital and labour tends to be highly heterogenous. So an increase in public infrastructure spending is going to be a highly imperfect substitute for a decline in manufacturing activity.

The other consideration is that the auto-industry was highly subsidised – the long-term benefit of the collapse of the industry is that there will be fewer distortions in the economy. So it hardly makes sense to increase distortions elsewhere through increased government spending. If there are good arguments for infrastructure spending then lets hear them.

The notion of shovel ready projects was a terrible idea five years ago and still remains a terrible idea today.

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24 Responses to More pinkbatts!

  1. Pickles

    Three years notice. Has any worker in the history of the world ever got three years notice?

  2. rickw

    Projects purely for “stimulus” are a very bad idea indeed.

  3. Token

    Napthine has the cover he needs for the next Vic election so he can say he did “everything”.

    There is a serious problem when a non-Trade Union party believes it needs to be seen to be doing “something” instead of re-educating the public that governments can not create wealth through protection & restrictive labour practices.

  4. Rabz

    So it hardly makes sense to increase distortions elsewhere through increased government spending.

    Another salutory lesson from the six nightmarish years of Krudd/Lardarse/Krudd.

    “This reckless spending must stop.”

    :x

  5. Baldrick

    Government stimulus spending is not the panacea for every economic woe but a suppository for more taxpayer pain.

  6. Rabz

    Projects purely for “stimulus” are a very bad idea indeed.

    Especially when the proponents are the likes of these two idiots.

  7. candy

    I don’t get it.
    I thought the premiers were always calling for more help with infrastructure and our infrastructure was lagging behind for years. I’ve come across this many times said in the media.
    So if more infrastructure is needed, how can that compare to pink batts which was never a need?

  8. Dear Professor,
    Except for us, you are talking to a blank wall. The concept of “market distortion” assumes there is such a thing as the undistorted market. Marxists all the way down to the knee-jerk idiocy of Napthine, will never recognise such an argument. On account of the entire world being made up of evil selfish people who must be reined in and controlled.

  9. MACK1

    We need a properly structured and staffed Infrastructure Australia which can produce proper cost-benefit analyses and rankings of all big projects, so we can all see what is useful and what’s not, and also see the assumptions underlying the analysis. We need expert, and we need transparent.

  10. entropy

    Candy, in this case Naphthalene isn’t arguing for infrastructure spending on its merits, but to make up for the shut down of Toyota. The grounds for his argument is that government spending, any spending at all, will keep the economy afloat.

    The lesson of the pink batts, school halls is it doesn’t produce the stimulus it’s backers promote and, in this case, borrowed money, that future taxpayers will have to pat back in addition to spending on future government services.

  11. Token

    I thought the premiers were always calling for more help with infrastructure and our infrastructure was lagging behind for years. I’ve come across this many times said in the media.

    This is the People’s Republic of Victoria.

    The skanks & the leftard media are united in fighting against a major infructure project which would reduce the traffic in inner city neighbourhoods and create long term properity for their state.

  12. Yohan

    Economic activity for the sake of it, such as government stimulus, does not work because the activity does not involve satisfying the wants of man.
    Building pyramids and bridges to nowhere does not make our economy better off, it just uses scarce resources that were better of being allocated to their most desired ends by man in the free market economy.

  13. Crossie

    If building more roads in Victoria is to streamline traffic then they needn’t bother until they scrap the speed cameras. The existing roads are sufficient but if you are smacked with a fine for even a km over the limit there will continue to be traffic problems. Though having visited Melbourne last week I saw that their rush hour traffic is nowhere near as dense as Sydney’s.

  14. Max

    Just give the laid off workers a 6 mth tax holiday when the start a new job or perhaps their employers a payroll tax holiday.

  15. Pickles

    Building pyramids

    Yes maybe those workers could see then end of their jobs a few years off, but the end of the job for many was coincident with the end of their lives. Buried with the Pharaoh and all that.

  16. Nato

    Only 9 months until the election, I’m guessing that Napthine will get the cash he wants from the ‘Infrastructure Prime Minister’ but doubt that it will be enough to save the Libs unless the Royal Commission unto unions gets press coverage.

    If they do manage to land the deal, and if the building unions do get cleaned up, and if the Coalition is reelected, it might even be worth getting a white card for the projects. “I built that!”

  17. Mack1, an Infrastructure Australia would be immediately staffed and stuffed by Union Apparatchiks when the Labor Party got in. It’s what they do. Then you’d have desalination plants in every town, powered by windmills and solar power.
    We are sooo rooted.

  18. David

    Just heard on the radio that Dimwit Napthalene is going to subsidise SPC in Shepparton.

    FFS that’s my money you are splashing up against the pallets.

    As a conservative government it is a waste of space.

  19. Dr Faustus

    We need a properly structured and staffed Infrastructure Australia which can produce proper cost-benefit analyses and rankings of all big projects, so we can all see what is useful and what’s not, and also see the assumptions underlying the analysis. We need expert, and we need transparent.

    We have a private sector and the iron discipline of markets to do exactly that. It has just concluded that Australia cannot support an automotive industry – and is currently working on the more modest problem of canned fruit.

    These decisions distil Australia as it is, not Australia as centrists believe it should be.

  20. Roger

    “As if we didn’t already know how badly that kind of government spending works.” Indeed, but if even Liberal premiers don’t understand that principle, what hope the electorate? The PM and co. have to set their case out clearly and simply. Meanwhile, here in QLD, foreign currency earning coal and gas exports are held up by poor rail and port infrastructure.

  21. Driftforge

    Markets are inherently distorted and disrupted all the time. That something distorts the market is not inherently bad.

    Infrastructure is a field with innumerable options available to undertake, nominally ranked by anticipated return, denominated by cost and limited by available capital.

    A lack of infrastructure is constraining; a surfeit serves no advantage except for the provision of direction.

    Inherently infrastructure serves to reduce the costs of doing business. It provides locational advantage where it previously did not exist.

    If there are good arguments for infrastructure spending then lets hear them.

    If no money is spent on infrastructure, then society becomes constrained quite quickly. So some spending on infrastructure is not only desirable but necessary.

    If the question is more ‘why should Victorian infrastructure receive additional capital given the demise of the car industry in that state?’, and we are leaving political advantage out of the response, then the first thing that comes to mind is that where disruption occurs, infrastructure needs will change. Some of those will lead to overcapacity, some to under. Infrastructure spending may also lead to a minimisation of ‘writedowns’, where investments in property, skills and networks are retained because the need for people to move in order to find employment is reduced; I will note that the timeframes involved do reduce this.

    An alternate construction might be ‘Given a transfer of x$ from the federal government (for the obvious political reasons)to the Victorian government, is the best use of the money to pay down state debt, or are there alternate uses that would provide a better long term outcome?’

  22. .

    I don’t mind Infrastructure Australia in theory except I assume it will be compromised in giving objective analysis very, very quickly.

    I don’t want to live in a place shafted by Federal bureaucrats.

    If it can be like the RBA it would be good.

    However the function of central banking and infrastructure provision ought to be privatised.

  23. Token

    I don’t mind Infrastructure Australia in theory except I assume it will be compromised in giving objective analysis very, very quickly.

    After the NBN experience it is clear it is another institution that exists as a facade to cover highly political and uneconomic decisions.

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