Oddly, the Right Wingnuts, who are happy to practice weaponized Keynesianism, refuse to accept that real growth requires real return on invested funds. Today's patient is China, mentioned before. Here we can read the gory details of public and private decisions in thrall to making buildings. Perhaps China needs a "One Building Policy" to go along with its "One Child Policy". For much the same reason.
The problem with basing an economy on construction can be seen in Florida. I no longer remember the cite, but there was a quote (paraphrasing from memory) along the lines of, "high school dropouts need to find something more productive than pounding nails". China has used building, both public buildings and infrastructure (all that high speed rail, for instance) as well as private housing speculation, as the means of re-distributing wealth. Few, especially the Right Wingnuts, ever admit that Keynesian mechanisms are explicitly distributional, but that's what they are. In the case of weapons systems, of course, the Right Wingnuts are more than eager to squander the nation's wealth on killing. Those Red Staters, mentioned previously, would still be drinking and shitting in the creeks and eating their possums by kerosene lamps were it not for the TVA (courtesy of FDR). Try calculating the return on the investment in those dams, reservoirs, and power houses. Today's Democrats might consider the effort suicidal.
The productive value of public infrastructure is notoriously difficult to quantify. I always chuckle when some new highway or rail line is promoted because it will save X minutes of commuting per day for Y thousands of citizens. And, since a citizen's time is worth at least $Z, then the "return" on the highway or rail line is (X/60 * Y * Z) dollars. Of course not, especially for highways. In that case, they do come and fill up the lanes. As an adjunct to general economic growth in the areas served by the highway, then more transport is worthwhile. But then we get into the whole "public goods" squabble, which sends the Right Wingnuts into apoplexy, since they only admit to weaponry as a public good. Well, and cops to keep the darker folk in their places. And if their pet corporation wants an exit ramp next to this new highway.
What the current Chinese experience tells us is simple: an economy which is inherently inequitable in its distribution (and the Chinese model of exporting poverty is among the worst) of income has to find a method of re-distribution which both works and does so below the radar of its Right Wingnuts. Infrastructure building, especially when carried out by companies with deep ties to government, is always an early choice. The problem for China is that building buildings is inherently temporary. In time, the whole landscape will be covered in concrete (or hurricane fodder in Florida). Then what do you do?
Economic data released on Sunday by the National Bureau of Statistics showed the extent of the problems. Investment in new buildings and other fixed assets is in the doldrums. Manufacturers are retreating from ambitious production goals as they struggle with bloated inventories of unsold goods. Even the service sector, still underdeveloped and widely seen by economists as full of potential, is showing signs of distress.I wonder whether the Chinese, whom the reporter is paraphrasing, or the reporter himself get the irony: service work is just as non-productive and re-distributional as infrastructure building. The only difference is that service sector employment can be perpetual. "One from the In Box, two to the Out Box. Lunch. Go home." Yes, done with foresight and intelligence, infrastructure building can support macroeconomic growth; the Red Staters know this implicitly even if they won't admit it. The Chinese zeal has, especially recently, been plagued with corruption and shoddy performance.
The moral of the story, being both from Aesop and Confucius the story has to have one, and it is this: "It's the Distribution, Stupid". The Chinese, having chosen to export poverty with its manufacturing, has turned to building as its re-distribution regime. FDR did so, too, but in a completely different macroeconomic environment. FDR faced idle, existing, manufacturing capacity. His goal was to increase capacity utilization, thus putting Americans back to work doing what they'd been doing. The current US problem is that too many of those tossed out of the economy in the Great Recession were doing non-productive work; systems analysts and teachers and such. It turns out, an economy can get along quite nicely without them. Not to mention all those Wall Street worker bees, collateral damage done by those higher up the food chain. We could have, and some pray that a return of a "robust housing market" is needed to fix the economy, put all those nail pounders and Wall Street fast talkers back to work doing what they'd been doing. But, that would only make matters worse.
Physicians learned long ago that leeching a wound doesn't heal the wounded, even if you've cornered the market on medical leeches.
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