The FT reports that motorways in Portugal are deserted due to the recession, the introduction of tolls and the overinvestment in roads funded by the EU, which has left Portugal with four times more motorway per inhabitant than the UK.So much for the idea that infrastructure investment by government spurs economic growth. I saw the same phenomenon last summer in Spain; i.e., brand new but empty motorways. Infrastructure investment MUST follow economic growth, because no one can predict where growth will arise or in what form. In the nineteenth century Bethlehem Steel built its own railroads to transport its products to market. Oil pipelines and other infrastructure must be built where the oil is discovered. I think it is safe to say that most of the new motorways in Europe would never have been built, if private capital funded them. This is not an indictment of the shortsightedness of private capital, but an indictment of the irresponsibility of government. Does anyone really doubt that government contracts and union labor jobs were not influential in all this useless infrastructure investment? How long will it be before these now beautiful roads fall into disrepair due to lack of adequate toll receipts?
FT Open Europe research: Structural funds
Tuesday, August 27, 2013
Another economic fallacy revealed
From today's Open Europe news summary: