Thursday, April 1, 2021

Bill Mitchell — Governments must restore the capacity to allow them to run large infrastructure projects effectively

One of the major complaints that Milton Friedman and his ilk made about the use of discretionary fiscal policy was that time lags made it ineffective and even dangerously inflationary. By the time the policy makers have worked out there is a problem and ground out the policy intervention, the problem has passed and the intervention then becomes unpredictable in consequence (and unnecessary anyway). The Financial Times article (March 29, 2021) – To compare the EU and US pandemic packages misses the point – written by Ireland’s finance minister reminded me of the Friedman debate in the 1960s. Apart from the fact that the article is highly misleading (aka spreading falsehoods), it actually exposes a major problem with the way the European Commission operates. If Friedman’s claim ever had any credibility, then, they would fairly accurately describe how the European Union deals with economic crises. Always too little, too late … and never particularly targetted at the problem. The debate remains relevant though as governments move away a strict reliance on monetary policy and realise that fiscal policy interventions are the only way forward. Most governments around the world are talking big on public infrastructure projects. However, the design of such interventions must be carefully considered because they can easily be dysfunctional. Further, thinking these projects are a replacement for short-term cash injections is also not advised. I consider these issues in this blog post.
The good thing about "competition" with China is that Western governments will have to to do this to actually compete. But it's complicated as Bill points out. Instead, they are more likely to try to block Chinese progress and pull it down.

Bill Mitchell – billy blog
Governments must restore the capacity to allow them to run large infrastructure projects effectively
Bill Mitchell | Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at University of Newcastle, NSW, Australia

7 comments:

lastgreek said...

Hey! Finally. Infrastructure week. For real :)

Matt Franko said...

Not really:

"This plan is not about rebuilding America’s backbone. Less than 6% of this massive proposal goes to roads and bridges," McConnell said. "It would spend more money just on electric cars than on America’s roads, bridges, ports, airports, and waterways combined."

lastgreek said...

Matt, McConnell is worried about the national debt [snicker] and the slight tax increase on the super, super...super rich [the horror!]. That is the ogre's excuse for not supporting it.

What's yours?

Matt Franko said...

There is no qualified people do do this work...

We have a bunch of fat, sugar addicted Art degree people who wouldnt know which end of a "shovel ready!" shovel to hold on to...

"Real constraints"...

Better question for you people is why the charade?

lastgreek said...

"We have a bunch of fat, sugar addicted Art degree...

I unfortunately have an expensive habit-- I'm addicted to olive oil. I myself go thru almost a liter a week. I am starting to worry because last year's olive oil crop supply is almost sold out -- don't know if it will last until this fall. Then what, switch to butter?

Matt Franko said...
This comment has been removed by the author.
Matt Franko said...

No... just import substitution...

But as you’ve said be careful.. I’ve heard the Costco Kirkland brand is actually pretty good...

This was our “go to” for a few years

https://www.kristalyaglari.com/kristal-organic-extra-virgin-olive-oil-750-ml-glass-bottle-en

Grown in Ancient Greece...

Best I ever tasted ... but the whole Turkish USD fiasco has screwed it all up and can’t get it now...