Revisiting the NDP

The government has released its revised National Development Plan for the period to 2016.   The documentation includes a short leaflet, Investing for Growth and Jobs: Infrastructure Investment Priorities 2010 – 2016.   With a bit of chutzpah, the document claims the 40 percent cut in capital spending as “stimulus” for the economy.   The emphasis is on new priorities and not on the overall cuts.   Fortunately, the Department of Finance has also released Infrastructure Investment Priorities 2010 – 2016: A Financial Framework, which makes a more sober case for the shift in strategy (see, in particular, Chapters 2 & 3).   The arguments of Colm McCarthy for just-in-time infrastructure provision (based on the time value of money) and more broadly for cost-benefit analysis – as championed on this site and elsewhere by Edgar Morgenroth – would appear to have been influential in the overall approach.   Of course, the precarious state of the public finances looms large behind the change in strategy. 

One of the most common complaints about post-2000 fiscal policy is that it was pro-cyclical.    This will continue with a vengeance in the down phase of the cycle.   While infrastructure spending should not be used to fine-tune demand management, counter-cyclical considerations should be relevant in the context of large output gaps.  There is some discussion of the direct employment consequences of different types of capital spending in the DoF document.   But on the whole the demand-side implications of the timing of capital spending is absent from the analytical framework.   With apologies for stating the obvious, counter-cyclical fiscal policy is about more than just about taking the heat out of an over-stimulated economy. 

The document emphasises the large fall in tender prices, down an estimated 30 percent.   However, the demand curve for public capital is presumably downward sloping.   All else equal, we should want more roads, hospitals, schools, etc., if the relative cost of that capital is lower.   To be concrete, suppose the elasticity of the demand for public capital is -1.   Moreover, assume that the relevant price is the price of public capital deflated by the GDP deflator.   Then decreases in the relative price of public capital should lead to constant real expenditure on public capital.  There should be increases in public capital output when that capital becomes cheaper relative to other prices in the economy.  Of course, all else is not equal.  But a more complete analysis would have dealt more robustly with the reasons for sustaining capital spending as well as the reasons for cutting. 

The economic case for cutting capital spending in a recession is shakier than the government would have us believe. 

78 thoughts on “Revisiting the NDP”

  1. John, the price reduction is material of course, and should be factored into the cost-benefit appraisals. But the scale of the economic contraction is pointing in the opposite direction, as is the higher cost of public borrowing.

    A further factor, with which macro folks cannot be expected to be familiar but which influences my line and I think Edgar Morgenroth’s, is that some fairly iffy projects crept in to the National Development Plan, prepared in 2005 when Ireland was the world’s greatest economy etc etc, with the world’s softest budget constraint.

    What follows is, verbatim, a piece I wrote for last week’s Farmers Journal – apologies for the length.

    ————————————————————————————–

    The Construction Industry Federation and the employers’ body IBEC have been calling for government to stimulate economic activity through spending more on infrastructure investment. They see two benefits, the immediate boost to jobs, and the longer-term addition to the productive capital stock. But the Economic and Social Research Institute, in its most recent economic commentary, takes a different tack, and expresses scepticism about any notion that the capital programme should be an engine of job creation.

    Ireland has had a very sizeable public capital programme in recent years, adding to the pressure on resources in the construction industry during the bubble. Building costs went through the roof and government ignored advice from the ESRI to pursue a more leisurely infrastructure investment programme. Value-for-money was bound to be poor as the state sought to purchase growing volumes of construction output from an industry already operating flat-out.

    The National Development Plan for the period 2007 to 2013 was published in August 2005. It envisaged the largest commitment to public capital formation in the state’s history, designed to underpin the assumed growth rate in GNP of about 4.25% on average from 2007 onwards. If growth at that rate had in fact been achieved, the economy would have been about one-third larger in 2013 than it was in the base year of 2006. Unfortunately economic activity in 2010 has already fallen back to the level of 2004, and the latest forecasts expect only a slow recovery. The economy in 2013 will in all likelihood be no larger than it was in the Plan’s base year of 2006, even with a better recovery than most analysts are expecting. Not surprisingly, the Department of Finance has sought some of the required spending cutbacks from the capital programme.

    Far from growing between 8 and 9% in 2008 and 2009 combined, as assumed in the Plan, real GNP actually fell by 14%. In round numbers, the economy in 2013 will be roughly three-quarters the size assumed in the National Development Plan. If this was a plan for a farm, and it emerged that the scale of operations had to be adjusted to three-quarters of the previous assumption, that extra shed would get cancelled for starters. But not if you are the CIF or IBEC.

    The first and simplest reason for cutting back on capital spending is the scale of the economic contraction which Ireland has already experienced. Every indicator of pressure on infrastructure resources has weakened dramatically. Passenger numbers at airports have collapsed, leaving lavish new terminals at Cork and Dublin under-utilised. Sea-port traffic is down, so are passenger numbers on public transport, traffic on the national road system has fallen for the first time since traffic counts began in the 1960s. Emigration has resumed and the population may actually be falling. Meanwhile the government’s budget deficit is unsustainable and borrowing costs are punitive. To advocate an accelerated capital programme in these circumstances is bizarre. Why add ghost infrastructure to the ghastly empty estates which disfigure the countryside? A major ingredient in the economic collapse was excessive borrowing through the banking system to finance a construction bubble. Are the CIF and IBEC seriously suggesting that more borrowing to finance construction is part of the solution?

    The ESRI rightly points out that the job content of many construction projects is low, and their economic value can be just as low. The modern construction industry is not a pick-and-shovel operation. Moreover, it is not the case that public capital spending goes entirely on vital economic infrastructure. For example, there are two projects under consideration involving theatres in Dublin. One is a proposal to re-locate the Abbey Theatre in the GPO in O’Connel St. This would be a retro-fit into a listed building, and with an arbitrary deadline of 2016. The potential for cost-overruns is obvious. The other is an extension to the National Concert Hall. These projects would cost several hundred million each. Since there is no evidence of a shortage of theatres in Dublin (Harry Crosbie’s magnificent Grand Canal Theatre, capacity over 2,000, has just opened, at no cost to the taxpayer) there is no economic justification for either of these projects.

    The new railway line connecting Limerick to Galway cost €106m. It offers five services per day, with average journey time of about two hours, and was opened with great speechifying a couple of months back. But the existing Citylink bus service between Limerick and Galway offers six frequencies per day, and a journey time of 90 minutes! So the National Development Plan has delivered, for €106 million, a slower and less frequent public transport option than was already available from Citylink, at no cost to the taxpayer.This is not investment in infrastructure, this is waste pure and simple. The Department of Finance opposed the Western Rail project, on the grounds that it had negative economic value, but were ignored. Finance do get the odd thing right, believe it or not.

    Both the CIF and IBEC were vocal cheerleaders for accelerated public capital spending during the bubble. They now advocate the same medicine in an utterly different economic and financial situation. Can either of these bodies conceive, even in principle, of circumstances in which public capital spending might be too high?

  2. Colm,

    Thanks for the reply. I know we have done this dance before.

    I have no trouble believing that there were some bad projects in the old NDP, and support them being dropped. I do not pretend to have any expertise on the individual projects, but the Western Rail Corridor does look questionable on its face. My point is really about projects that will need to be done but are being postponed — necessary maintenance on secondary roads is an example. The implicit plan is to do these when the economy has recovered. This is pro-cyclical fiscal policy plain and simple. I doubt if you disagree with that, but I’m sure you will counter that it is forced on us by the mistakes of pro-cyclical policy from the past. However, this is where I think there are more degrees of freedom than you allow. Changing the timing of capital spending should have a limited effect on the inter-temporal budget constraint. But the existence of even small fiscal multipliers has a dramatic impact on the properly conducted aggregate cost-benefit analysis of capital spending. A multiplier of 0.5 — which I believe is credible for an SOE with a fully accommodative monetary policy and credit-constrained businesses/households — means that you effectively get half the cost of investment back in higher income elsewhere in the economy. I would have thought that kind of deal would stir a hard-headed economist.

  3. I really don’t see the logic behind Colm McCarthy’s comments. The contraction in the economy has not been uniform across the board. It has been concentrated largely in the construction sector. Even at the trough of the recession (its over, by the way), most of the productive sectors of the economy suffered only a small fall in output (far smaller than in other EU countries), and even this modest fall has been reversed since the start of 2010. Uniquely in the EU, manufacturing output, merchandise exports and services exports have in recent months surpassed their pre-recession peak. There is every likelihood that they will grow rapidly in the next few years. The fall in GDP is very largely accounted for by the fall in construction output. So, what is being suggested is that, because construction output has fallen by 50pc, in the process reducing the size of the overall economy by about 10pc, we therefore should spend less on construction, even though the productive sectors of the economy, which require a good infrastructure to be competitive, have not recorded any fall in output at all between their pre-recession peak and now, and are currently growing very rapidly (manufacturing output up 9.5pc y-o-y in May, merchandise exports up 8pc y-o-y in May). This is tautological economics. Construction output has fallen by 50pc, therefore we should reduce the amount spent on construction still further to ‘compensate’.

    We should also be wary of all forecasts for population growth and migration made by economists. In 1990 a report by DKM predicted that the population would fall from the 3.5m it was then to 3.3m by 2011, due to forecast net emigration. The report can be found on the Irish Times archive. The DKM forecast will be well over 1m out. The result was that governments of different political parties in the 1990s, acting on the assumption that the population would fall, did not properly develop the infrastructure to handle the massive growth in population that did actually occur. By the late 1990s, the entire economy was riddled with bottlenecks; roads, railways, airports, ports, schools, hospitals, sports stadia. None of them were able to cope with the massively increased population, largely because the economists and planners of the late 1980s and early 1990s failed totally to foresee the population boom. So, we should be wary of economists forecasts, made at the time of recession, that the symptoms of the recession (lower demand for infrastructure, lower population, fall in passenger numbers etc) will continue well after the recession is long over. The 1990 report, which got the future population growth and future demand for infrastructure so wrong, was published by DKM, which stands for Davy Kelleher McCarthy. So, we should be doubly wary when one of that trio comes forward with the same predictions as in 1990.

    I have no objection to Colm McCarthy’s comments about the Limerick-Galway railway line. He may well be correct. However, his comments about the proposal to re-locate the Abbey Theatre in the GPO in O’Connel St. are a different matter. Colm McCarthy describes 2016 as an an ‘arbitrary date’. No, it isn’t. Its the centenary of 1916. Even allowing for the fact that most Dublin 4 economists are embarassed by the whole 1916 business, and would ideally like commemoration of it to be limited to sending a letter of apology to Her Majesty’s Government, the majority of people in the country (by which I mean the 32 counties) would like to see the event being commemorated in a big way. Moving the Abbey Theatre to the GPO would be an ideal way of doing so, given the links both have with 1916.

  4. @ John McHale,

    I always appreciate your attempts to inform the masses of how this cost-benefit analysis is meant to actually work. Believe me, some of the message is starting to get through.

    BTW, I meant to post this link for your attention. It’s a very short little paper, but packs a good punch. Its to do with future iterations of EPBD legislation, and how to implement it at national levels. To do with the minimum cost of KWh saved, and how to remove distortions in conventional methods used to do cost-benefit studies. Thanks again, BOH.

    http://www.buildup.eu/publications/6425

  5. I sometimes wonder who really runs the capital spending in this great little nation.
    If somebody could calculate how much of the goverments capital went directly to the shareholders of CRH it would be much appreciated.

    We have been cursed in this country with bean counter economists within government circles since the days of Adam and the fact that they concentrate on fiscal spending while somehow ignoring the monetary malice that goes on behind closed doors in our most respectable banks arouses serious suspicions within me.
    There has been no real study of the economic externalities of a massive road building project in a economy the size of Manchester , soon to be the size of Plymouth.

    1. The cost of railway maintenance is borne by CIE yet it is still expected to run a profit – meanwhile once roadworks that would make Adolf proud are built the state or private companies taxing road users have to pay huge amounts for maintenance.

    2. It is inevitable that once roads are built linear development becomes inevitable pushing up imports dramatically and more and more users depend on cars and the ever increasing fuel costs to drive them.

    3. The loss of valuable agricultural land that will not be replaced.

    4. The destruction of the landscape which dramatically effects tourist revenue unless Bord Failte can come up with a marketing campaign to publicise Bungalow tours in the Great Irish wilderness of Cavan ,Leitrim and other areas of note.
    This however may take off as tourists may be fascinated by a second generation of famine homes with curious double glazing.
    The type of high spending tourist that goes to the likes of Switzerland will I am afraid never return and we will therefore have to depend on Trabolgan type outfits for a meagre revenue.

    I could go on but I will summarize that all utilities require costs for maintenance and wether they are borne by the taxpayer is secondary as the costs will ultimately be extracted from some poor Irish serf wether he pays taxes or not.
    Also all these services are politicalized and this includes road building as these are lobbies that must be satisfied – this creates a inertia within transport policey as there is no other solution blah blah blah.
    But there is if you use your imagination.
    For instance in western Scotland the ferries are subsidised like any other utility and provide much more cost effective transport even though the roads are excellent – this creates a polticalised economy around this service but everything is political wether it is a government or banking/corporate policey.
    Effective car ferry services could be made available connecting Dingle / Caherciveen and Castletownbere provided that the road maintenance was cut substantially in the southwest as this is unsustainable in its current form promoting linear development all over the southwest.
    But first of course a certain man in Kilgarvan would have to take a cut in his revenue stream.

  6. @JohntheO
    “Even at the trough of the recession (its over, by the way),”
    Only in 2008’s money… in today’s money, GDP contracted by 4.4% in Q1… I wish we had some of that 2008 money left. It was so much more valuable…

    Still waiting for the GDP figure you based your growth figures on from last year… 😉

  7. @Keith Cunneen

    There has been no real study of the economic externalities of a massive road building project in a economy the size of Manchester.

    You are merely spouting the wacko environmentalist view. You’d be better of posting on FIE than on IE. Apart from the economic benefits, the massive road building program of the past decade has resulted in a dramatic drop in road deaths. In 1997, 472 died on Irish roads and the road deaths rate was one of the highest in the developed world. Given the population growth since 1997, that would correspond to 650 road deaths in 2010. In fact, thanks largely, although not exclusively, to the development of the motorway network since 1997, the actual number of road deaths in 2010 is heading for just over 200, a fall of 70pc, and Ireland’s road deaths rate is now one of the lowest in the world. Bertie Ahern’s decision to proceed with a full national motorway network, rather than simply building a few bypasses, which the wacko environmentalists and many economists were arguing for, has resulted in hundreds of lives being saved annually. The tragedy is that the wacko enviromentalists delayed the project by 5 years. It should have been completed by 2005. But, for the first few years the anti-motorway protestors help up everything with their spurious objections (viking stones, breeding-grounds for snails, rare types of grasses etc etc). Had it not been for them, the road deaths toll would have been down to 200 about 5 years ago. Their protests and delaying tactics cost hundreds of lives.

  8. @JTO
    “the majority of people in the country (by which I mean the 32 counties) would like to see the event being commemorated in a big way.”
    a) some proof (which you are usualy good at giving) would be nice
    b) If your so keen move here, pay tax and contribute. As opposed to coming down the road (didnt we pay for one?) to visit.
    Seriously JTO – you sound like the Republican Continuity 32 County I cant believe its not Reunified Economic Movement.

  9. Economists seem to believe that a stimulus means spending Government “money”. This is not necessarily the case. The Government has given Guarantees of Eur 440 Billion to the Banking system. Why not reduce this Guarantee by 10% say Eur 40 Billion and provide a similar amount of Guarantees limited in time to commercial PPPs and revenue generating commercial infrastructure projects that are badly needed . We have radial motorways exiting Dublin in all directions but it is not joined up. Try driving from Rosslare to Galway to find out what I mean.The problem is that there is about as much brain power within this Government’s Cabinet than that of Bart Simpson. This recession or is it a depression urgently needs thinking outside the box if we are to have any hope of pulling out of it.

  10. @Ray
    An economist will tell you that a guarantee is spending – as it has a non-trivial chance of having to pay out, that needs to be recognised and saved for. Of course, we should just make the solicitor defence if such a guarantee was invoked – “ah jaze lads, shure we never thought we’d have to pay up on those personal guarantees. Our friend the slippery ex-politician told us that we wouldn’t”.

    Anyway, I think many here are a bit leery of seemingly cheap guarantees… Apart from Brian Woods II…

  11. @JohntheOptimist

    First of all I hold no candle for the Green party in its current manifestation as it seems to believe that efficiency will out do productive growth always.
    This would have dramatic consequences for a industrial society as their unscientific and irrational use of wind over nuclear proves.
    However I do agree with their transport policey as the use of cars is perhaps the most inefficient mechanism of transport around in dense population areas and such low hanging fruit is easily harvested if we so wish.
    Western society’s seem to find it easy to spend large chunks of their wealth in servicing their auto dreams via road construction and maintenance, car , fuel and home purchases and also the armies to extract the oil spice.

    This is obviously unsustainable and what is unsustainable cannot be sustained.
    Your arguments about fewer road deaths is I believe spurious as the opportunity cost lost from such profligate spending is huge.

    The sad fact is that once the industries present here due to the gaming strategies of the IDA disappear and the dollar system collapses we will not be able to afford to maintain this dispersed high energy dependent population.
    If we are to maintain a industrial society of any kind we will have to abandon our suburban and sub rural dreams.
    If of course things get worse then that it may be best to stay out of the cities and go back to our root tubers in the fields

  12. @Keith
    re: subsidies for ferries in Scotland

    One of the most interesting cases I’ve heard about is Curitiba in Brazil. The gov’t used subsidies to ensure far-flung and less-well-off communities were well-served by various crucial infrastructure. E.g. private companies were subsidized to provide public transport according to the number of miles they served. This resulted in rapid provision of adequate transport services even to less accessible areas. Passengers’ fees are subsidized to keep them affordable for everyone.

    This kind of approach could have brought us better distribution of broadband and other services, instead of the inevitable cherry-picking.

    Some critical services are worth subsidizing and might pay for themselves through the many ways society would benefit. (Reduced business costs, reduced congestion, more even regional development, more informed society, etc.)

  13. @Hogan
    “Of course, we should just make the solicitor defence if such a guarantee was invoked”
    no. mental reservation – we never REALLY meant it – would be much better

  14. @OAC
    I would not be liked in rural Ireland as my policies would only try to save what could be saved and there would be a effective land clearance of large areas of rural Ireland via reductions in econimic subsidies that would be similar to Scottish population dispersal but hopefully without the violence

  15. CMcC says:

    A further factor, with which macro folks cannot be expected to be familiar but which influences my line and I think Edgar Morgenroth’s, is that some fairly iffy projects crept in to the National Development Plan, prepared in 2005 when Ireland was the world’s greatest economy etc etc, with the world’s softest budget constraint.

    Unfortunately yes. That is why we need to return to basics. The link I provided above to the Ecofys short paper for instance, is no less than what any local authority should demand from their designer or engineer going forward. A sort of ‘smart’ composite between the financial and the design. That is, if we are to become serious about any of this ‘smart’ or ‘green’ sort of stuff. It has to work financially, as well as every other way. It is encumbent now upon our design and building professionals to re-train themselves along those lines – to learn to work intelligently with budgets again – and that is not going to be easy. My generation went through our internships and managed to retain a breathtaking level of arrogance with regard to cost efficiency. I think we stopped short of the ultimately extreme of asking for triangular lift carriages and so forth – but given another couple of years – and we would have seen public money spent on those also. I linked in another thread, to a department of energy, USA, FEMP website. They are using a kind of ‘energy saving performance contract’ over there – and that is the kind of high standard we should aim to achieve in public works projects. That is, if we really are to claim a ‘smart’ title. I hope that institution bodies and such will work tirelessly to provide re-training opportunities for the many designers, managers and engineers out there in the private sector. Many of whom work on private and public projects during the bubble years, and would not know a budget, if it hit them smack on the forehead (my good self included). BOH.

  16. @JohntheOptimist

    “Even allowing for the fact that most Dublin 4 economists are embarassed by the whole 1916 business, and would ideally like commemoration of it to be limited to sending a letter of apology to Her Majesty’s Government, the majority of people in the country (by which I mean the 32 counties) would like to see the event being commemorated in a big way.”

    More than they’d like to see the effects of this savage recession alleviated? I’m fairly sure most people would choose welfare over going to the theatre.

  17. What many people do not realize is that you cannot really decrease energy consumption in a debt money system and hope to increase wealth as the debt money system is reliant on increased consumption or it dies.

    For instance credit money can only be expanded in the hope and expectation of increased energy consumption via capital extraction.

    If that capital becomes negative year after year the expanding credit money will very rapidily deplete all capital.

  18. CMcC says:

    Sea-port traffic is down, so are passenger numbers on public transport, traffic on the national road system has fallen for the first time since traffic counts began in the 1960s.

    The nuclear industry in the United States experienced a similar problem many years ago. They had planned for dozens of new reactors, but the trend from the start of the 20th century until the 1970s was for more and more electrical devices, and more consumption of power. But after the oil shocks of the 1970s, the consumption levels started to go down, and threw the entire nuclear industry in the US into disarry and bankruptcy. You had very unhelpful characters in the middle of it all, such as physicist Amory Lovins talking – about ‘negawatts’. The cheapest unit of power generation Lovins would argue, was the unit saved. This kind of psychology is very tied up into the Ecofys paper I linked above in relation to retrofits. Peter Schewe wrote a very interesting history of the power industry, and its various tribulations, called The Grid.

    From what I can gather reading CMcC’s contribution above, is the NDP in Ireland, was very much based on the assumptions the nuclear industry made in the US. That consumption would continue to grow – yet in every form of transport we see, right across the board – the opposite has indeed occured. And we are left with big questions to ask. BOH.

  19. On the contrary I think the death or at least the static nature of the nuclear industry since the seventies was almost entirely due to the change in the nature of money.
    Remember the last symbolic representation of capital was dropped in 1971.
    Once this was done we enter a pure debt based monetary system where only the production of credit increased econimic growth.
    This was done via the reduction in investment in physical capital and the expression of this saving via profit which also fed into more consumption…
    The growth was maintained via the reduction in physical oil / coal and other resources but this was not expressed in any financial system.
    Given that the accounts no longer expressed these assets as declining there was no effort to produce a more concentrated energy source to replace coal for example.
    The only developments were effeciencey savings that effectively made the capital extraction cheaper and more productive.
    If we went a true non debt money system capital extraction would have to be balanced by capital creation through the creation of new technology to replace the energy lost and balance the books.
    Remember we did not lack the energy/money to build nuclear – rail in the seventies but chose to extract more capital as the monetary system made this more profitable.

  20. Is there anywhere I can get a county by county breakdown of where and what on the money is going to spent??

    I think this is very relevant in relation to the national spatial strategy and was wondering do ye think that we should have balanced regional development, Dublin centric development, or Dublin development and concentrate on a counter balance as well such as Cork??

  21. Dan O’Brien is very skeptical of the whole thing in the IT today
    http://www.irishtimes.com/newspaper/opinion/2010/0727/1224275548198.html

    “Given how much economic activity has fallen back, and how slowly it is expected to return to previous peak levels, it is moot whether so much new investment is needed.

    Japan’s experience of the past two decades shows it is possible to over-invest, resulting in innovation spending that produces little innovation and the building of bridges to nowhere. There is a risk of creating ghost infrastructure to match ghost housing estates.

    And if there are questions over the efficacy of allocating such large amounts to the capital budget, the affordability of doing so is even more questionable. With the costs of borrowing to fund this programme high and likely to rise, it remains my view that the capital budget, for 2011 at least, is too large.”

    “The Department of Environment, Heritage and Local Government is the second-largest capital spender, grabbing nearly one-quarter of the budget for 2010-2016. Almost €500 million a year will be spent on water services, investment urgently needed to prevent water shortages. Considerably more has been allocated for housing purposes. All of this may not be needed to achieve objectives. The Department of Finance has not included in its calculations the probability of the State finding itself in possession of a large number of properties as Nama forecloses on developers in the times ahead. There is little doubt that many homes and hotels will not be suitable for conversion to social housing, but many will.

    The report (arbitrarily) compares cumulative spending allocations over the 2010-2016 period to the year 2008. By this somewhat dubious comparison, the proportion of the total capital budget going to education rises slightly, from just under one-tenth to just over one-tenth.

    By the same time-period comparison, spending on enterprise rises more sharply than any other budget line, from 5 per cent of the total to 10 per cent. This is not uncontroversial. Most of the €3.8 billion budgeted to go to Batt O’Keeffe’s department will be spent on science, technology and innovation programmes. Lots of money has already been spent on such programmes, with no great visible pay-off so far.

    This raises the issue of the continued limited use of cost-benefit analysis (CBA) to evaluate spending programmes. In a perplexing passage, the Department of Finance appears to advise itself (twice) that there “should” be greater use of CBAs.

    Their absence makes it easier for vested interests, who stand to gain directly from capital spending, to influence decision-making. It is worrying that more rigorous and transparent evaluation procedures are not in place for a spending programme of €39.4 billion.”

  22. @Colm McCarthy

    Sea-port traffic is down.

    Actually, it is rising again, and fast. It fell in 2008 and 2009, but since the start of 2010 it has been rising rapidly. Dublin Port publish monthly reports. The volume of freight through Dublin Port was up 13.5pc y-o-y in April.

    http://www.google.co.uk/search?hl=en&rlz=1R2ACPW_enGB379&q=dublin+port+traffic+up+in+april&btnG=Search&aq=f&aqi=&aql=&oq=&gs_rfai=

    @Brian Lucey

    Seriously JTO – you sound like the Republican Continuity 32 County…

    This is an absurd comment. Since when does that lunatic organisation support the GFA, FDI in Ireland, and praise Bertie Ahern, Martin McGuinness, Ian Paisley and Arlene Foster (which I did in a post last week). The Republican Continuity 32 County is an organisation which wants to see the economy crash so as to better the prospects for its political agenda. Who does that remind you of?

    @Brian Lucey

    a) some proof (which you are usualy good at giving) would be nice
    b) If your so keen move here, pay tax and contribute. As opposed to coming down the road (didnt we pay for one?) to visit.

    Re the size of the commemorations in 2016, let’s take a poll at Croke Park on Saturday. I think you’ll find that Tyrone and Down are physically a lot closer to the GPO than is Kerry and spiritually a lot closer to the GPO than is Dublin. I suppose you think that the matches on Saturday are Dublin and Kerry’s entry into Europe? No, that’s Shamrock Rovers you’re thinking of.

    More seriously, might you (or anyone) care to answer the points in my first two paras, which are more substantive than my relatively trivial third para – namely:

    (a) Since the fall in GDP has been caused almost entirely by a massive fall in construction output, it makes no economic sense to say that we need to cut construction output further because of the fall in GDP.

    (b) The past record of economists in forecasting long-term economic growth, population growth and migration is abysmal (eg DKM report in 1990). Therefore, we should be wary of basing our assumptions of infrastructural needs on their forecasts. The little titbit of information I gave above re Dublin Port traffic is a sign that they are getting it wrong this time too.

  23. I think Prof. Honohan’s post: http://www.irisheconomy.ie/index.php/2009/07/16/another-lap-for-hare/
    from a year ago provides a sobering context for this thread.

    Following the fiscal retrenchment of the late ’80s and early ’90s (which, in hindsight, looks mild compared to what is required now) it took the Irish economy 8 years (’93 – ’01) to achieve a sustainable measure of internal and external balance.

    This occured during the Great Moderation when many factors – both domestic and external – were running in our favour. With de-leveraging continuing apace in most developed economies there is collective wishful thinking that all can export their way to prosperity – in an extremely uncertain and turbulent environment for international trade.

    Whiole not ignoring measures to encourage exports, I would argue for measures to strip out excessive costs and inefficiencies in the state, semi-state and sheltered sectors to boost the domestic economy and to facilitate the emergence of businesses that can compete both at home and abroad. In this context the public capital expenditure programme would play a well-defined supporting role and the relevant costs and benefits might be more accurately assessed..

    While these excessive costs and inefficiencies remain unaddressed, large portions of public capital expenditure – even in this reduced and reformed programme – will be wasted. And, of course, irrespective of the critiques that are advanced, the legislation required to enact, at least the early stages of, this programme will be whipped through the Oireachtas without any effective scrutiny or amendment. The only effective restraint on Government is the possibility of a revolt by a few backbench government TDs – or government supporting ‘independents’. And these revolts, should they arise, are generally motivated by a perception that the pork barrel isn’t big enough in their patches. All of which, of course, is in the ‘public interest’.

  24. Dan O’Brien says:

    There is little doubt that many homes and hotels will not be suitable for conversion to social housing, but many will.

    I will throw my lot in here with the architectural profession for once. We had only just began to get a grip on how to do purpose-built social housing here in Ireland. It would be a crying shame now to back-cycle into policies aimed at providing ‘shelter’ rather than the building of real, sustainable communities. The key question to ask always with social housing is, if you would not live in it yourself, then don’t ask someone else either. On the other hand, there are projects underway at the moment, where they convert unsuccessful retail developments into schools. All the better if a multi-storey hotel can be converted as such. Whereby office space for start up companies could be accomodated in the same block as a school. If you think about it, it may work. As many indebted hotels have access to transport routes, parents who have children may also have ideas to become entrepreneurs of sorts at local levels. There are interesting ideas that can be explored. But many of the most unsuccessful social housing developments in our cities in the later half of the 20th century – were actually blocks, inititally built in the 1970s to house affluent people who were supposed to want skyrise apartments. That turned out to be a misinterpretation of the market, and resulted in exclusive housing blocks being coverted for use as affordable housing blocks with disasterous long term consequences, and very negative societal paybacks. Locan Sirr and Conor Skehan contributed a very good article in the Irish Times newspaper recently. See link. BOH.

    http://www.irishtimes.com/newspaper/opinion/2010/0712/1224274512053.html

  25. @ BOH

    I outright hated that IT article. It’s simple elitism, dressed up in faux-scholarship.

    As with most academic articles, it started by stating obvious facts and then shamelessly ignoring them to draw outlandish conclusions from poorly concealed prejudice. The stereotype of rural voters they choose -that of an a nincompoop local politician making an ass of himself on national television- is scarcely instructive as to the dynamics of our national political debate. I am particularly surprised the authors think that rural voters want fewer Gardaí, more drugs, less public transport and generally worse public services. Oh those misguided rural fools; they need self-important, professors like these to protect them from themselves.

    Such arrogance has no place in a Republic.

    Up Mayo.

  26. @BOH

    “The key question to ask always with social housing is, if you would not live in it yourself, then don’t ask someone else either.”

    I don’t agree that this is the key question. To me, the key question is,

    Does the social housing output accurately achieve the balance of rewarding those private sector home seekers whose contribution funds the Exchequer against the need to maintain a decent, Christian welfare provision for those who are unable or unwilling to contribute?

  27. @BOH

    Otherwise I sympathise with what you’re saying about purpose built social housing -but housing is expensive to use, and it’s important we sweat our existing assets.

    Indeed, if Ireland has one failing above all others, it is that we don’t sweat our assets enough, and are constantly talking of the next investment instead of utilising what we have.

  28. All these plans are for nought if we have unpayable debt – people are not going to accept sacrifices if you refuse to give them real money.
    Even hyper efficient Germany hyper inflated its way out of its obligations when it decided that enough was enough.
    And Ireland is no Germany.
    You cannot generate wealth in a feudal society – stagnation is the best you can hope for.
    The discourse here reminds me of the Participants in the Glass Bead Game where the more intelligent elements of society were allowed to intellectualize the finer things of life in comfort but did not achieve anything because they did not question the basis of society – this was to the elites benefit because if they were to do so they would become a threat to their power.

  29. @ All,

    thanks for responses above. I knew some of my remarks were guaranteed to come across as over-simplistic.

    The huge difficulty with the hotel block, is what do you do when a minority decide they can take over the block? As it is, we witness situations, where entire towns and major parts of our cities are consumed in a situation controlled and operated by a small minority. So a hotel block is hardly going to present much of a challenge. In fact worse, when the problem is contained in a hotel block – then any authorities who are supposed to care – might say, well at least it is contained in that area. And to heck with it. You go all over our towns and cities and there are always un-official bargains struck between occupiers of identifiable housing blocks, and neighbourhoods areas. I.e. You stay out of my patch, and I will stay out of yours. Pat Kenny interviewed some social housing dwellers (what a terrible label) on his radio program in 2009 I think. One lady was offered a residential unit in one of the neighbouring blocks in her development – but refused it. She was happy to stay living in the development, on condition she could remain in the block she had always been in. But would rather move out altogether, than move to a different block. In other words, the community within the development had struck some sort of bargain between themselves, that each would remain in their own discreet blocks – and that is how they worked out territories – and managed to live together in the one place. This is what I mean about gaining experience in working with this particular design problem. We have just began to figure it out a little in Ireland, and we should try to proceed along that vein. In the long run, the saving in other areas will far outweight the costs in getting housing organised properly to begin with. BOH.

  30. @ Keith,

    Ah but remember in the Glass Bead Game the protagonist drowned when he tried to become a benevolent pragmatist at the end.

    Sort of reminds me of the baggage handler complaining bitterly about how the air traffic controller guys are so out of touch with what really goes on. “What we need to running this airport is a tarmac-up approach to things!”

  31. @BOH

    If the state is to lease hotels for social housing, B&B hostels, whatever it will probably be done though the OPW. It will sign off on a lease with a landlord, most likely one with a penitent tie to NAMA. A condition in any such lease is that the property is handed back to the landlord without deterioration – in other words such that any alternations do not decrease its value.

    The whole initiative smacks of a political stroke – a scam. The taxpayer supports, the banks, NAMA and now will give NAMA dependents cash to enjoy a good lifestyle while their loans are ‘worked through’. Meanwhile those outside the NAMA nursery must accept the realities of the market. The assets held by NAMA in many cases will be foreclosed upon. This process should have been accelerated but isn’t. Hmmm… Ah! But wait. Here I see an cavalry of leases riding over the hill.

  32. @Ribbit
    yeah good point , better knuckle under and accept a good dose of austerity for the greater good.

  33. The Alchemist,

    I’ve been looking at this because I heard the word “lease” mentioned at least twice in coverage.

    http://www.finance.gov.ie/documents/publications/reports/2010/capitalreview.pdf

    Page 36:

    5.3 Assessment of Sectoral Capacity and Anticipated Medium-term Demand

    5.3.2 Housing</strong

    “The number of unoccupied dwelling units in the country weakens the case for continuing with a construction-centred investment programme. Acquisitions of existing stock will continue to play an important role in the early years of the programme but the only viable medium term option is to undertake a re-balancing of investment towards a more lease based model.”

    “the only viable medium term option is to undertake a re-balancing of investment towards a more lease based model”

    The Government intend using current expenditure to provide an income stream to developers administered by NAMA (or its SIV’s).

    Apart from the fact that this is a disgrace it most certainly is not an “investment”.

    It is a commitment to a stream of expense for the next (say?) 21 years.

    It is fundamentally undemocratic as any future Government would have to break the leases in order to recover the income stream.

    NAMA becomes the biggest slum landlord in Europe to protect the banks and developers.

    30,000 houses (or housing units) could be bought for €1.5bn at an average price of €50,000. A good price for distressed liabilities.

    Guess who will be the preferred developers and who will be bankrupted?

    Page 36:

    “Construction/acquisition of social housing units to be used only to replace units lost through tenant purchase; to meet needs where leased properties are unavailable and to meet special housing needs;”

    “This will result in a rebalancing between current and capital expenditure: with an increase in leasing, current expenditure will rise.”

    Page 64:

    8 Health and Children

    8.3.2 Future Policy Direction and Key Projects

    “In terms of primary care, the HSE has identified an extensive list of proposed developments to advance provision of primary care centres. Submissions were invited for proposals to develop over 250 sites and the Board of the HSE has approved in principle advancement of 182 locations. These projects are being progressed as leases.”

    Page 87:

    11. Office of Public Works

    “Lower tender prices, pursuit of leasing solutions where suitable and increased efficiency in the use of the existing asset base will allow for delivery of a very high level of outputs from a more limited level of expenditure. However new leases will have a current expenditure implication.”

    So the question is. How much have the current Government restricted the freedom of future Governments to manage the economy.

    Are we looking at €2bn per annum from future tax revenues?

    It seems that the current Government is determined to sell out this country lock, stock and barrel.

    Or more correctly social housing, health care and public works.

    Why don’t they just sell the Republic and lease it back.

    That should provide enough for a great party in 2016.

  34. @ Alchemist,

    Very relevant point. I hadn’t looked at it like that – but if I were to put on my legal hat (considering that NAMA never took possession of title), I sure there is a lot of validity in the concern that you express. BOH.

  35. So much vacant housing stock is being transferred to NAMA that some of it has to be useful for social housing. The analyses of the spatial dispersion of vacant dwellings done by NUI Maynooth and UCD highlight very significant concentrations in urban areas, including Dublin, where social housing demand is high. Here a lot of this stock is apartments but the majority of people on the waiting lists are single people so this stock would be suitable for their needs. There is also a lot of vacant stock in the parts of the north west, finance by the Rural Renewal version of Section 23. There is very little demand for social housing here and I have no doubt that some of these estates will have to be demolished.

    However using poorly located or poorly designed dwellings as social housing will only need to much long costs in terms of the need for regeneration, as cases such as Ballymun, Darndale, Southhill, etc. etc. etc clearly demonstrate.

    I have done a lot of work with the social housing sector over the years and my contacts there tell me that they have grave concerns about the slow speed with which transfers to NAMA are proceeding. Although entirely understandable from a legal point of view, the fabric of unoccupied dwellings deteriorate quickly, particularly heating systems for instance and so it is likely that many of the NAMA dwellings will require renovation prior to letting.

    My contacts also tell me that they calculate that the cost of acquiring vacant stock at current market value (i.e. not at a NAMAed rate) is practically identical to the cost of a 20 year lease. Although the costs of buying are of course concentrated whereas the costs of leasing are spread out. Housing associations are local authorities and largely opposed to the leasing project and are examining the potential to fund purchase of vacant dwellings themselves by borrowing against the value of their existing housing stock. This funding mechanism in the norm in the rest of western Europe, but hasn’t been used here in recent decades as the government has grant aided the full costs of social house building/ purchase.

    Interestingly, despite strenuous efforts on their part the Department of the Environment has so far failed to negotiate a single agreement for leasing social housing. It seems that neither the banks nor the builders want to play ball. From the builders perspective, their housing development model is predicated on high borrowing to fund high upfront costs and quick sales to pay down these loans. I can’t understand why the banks aren’t interested. To my mind, it seems like a clear-cut bail out for them.

  36. @ BOH.
    I grasp what you’re saying and I agree slightly. However, I have a long held scepticism about the positive effects that architecture can play on social problems. I think it has (with fairly thin evidence) come to be seen as a cure-all for all manner of social ills. It can make people more healthy, more secure, more social and even less violent.

    I’ve no doubt that it can effect all of these things; and for the better. But I’m also in no doubt that it is not the prime force either. I don’t imagine that using regular housing as social housing will inevitably result in a boys in the hood situation. Rather, if some care is taken to manage social housing allocations (for instance, avoiding having several large families next door to one another), then that I beieve will have a bigger effect than the built environment. Conversely of course, if you don’t manage social housing allocations, then it doesn’t matter how carefully you plan the layout -you’re in trouble.

    My greatest criticism of the whole idea, is that the hotels in question are mostly in the countryside, on scenic terrain, and social housing tenants usually want to live within walking distance of the shops. But I guess we’ll have to see specific examples of what’s being proposed.

    I wonder if they’ll be able to retain hotel sports facilities for the use of the residents/public. That would be a terrific boon. Some sort of club run by the residents. Perhaps I’m getting carried away.

    Indeed, it seems a long way off before a single such conversion takes place.

  37. There are dreadful similarities between the economic policies of today and those of the 1840’s.
    Then too it was seen as more important to build roads to nowhere than to address the fundamental problems of the economy. Then too there was a focus on maintaining exports (Travellians corn). Then too there was a belief in some presumed economic Darwinism that would improve society by curing an overreliance on cheap food (now cheap credit).
    Economics can never be divorced from the reality of human lives – else it just becomes a study of human greed.
    The current capital expenditure plan is a piece of bs designed to bailout the construction industry. Not one project will lead to a sustainable job or an increase in economic opportunity. It is total and utter gombeen tripe!!!

  38. Michelle says:

    However using poorly located or poorly designed dwellings as social housing will only need to much long costs in terms of the need for regeneration, as cases such as Ballymun, Darndale, Southhill, etc. etc. etc clearly demonstrate.

    The cost of the Limerick re-generation project, to my ears at least is out of this world. I still can’t imagine it takes the hundreds of millions that they describe, to re-juvenate a relatively compact urban area. As for the point about leases and paying (equivalnt of today’s purchase price) in stages over a 20 year period – it is an interesting point, and I am glad you brought it to our attention. Certainly, it would be a useful exercise to see some good pay-back analysis done in this regard. Costs of borrowing for new construction spread out over the same period – how that compares, to leases of existing stock. Deterioration of heating systems in existing stock, and the urgent need to occupy those dwellings before they need serious work. All those are excellent points and important factors in consideration. I’m very glad you did bring them up. Judging by the number of unoccupied apartments in the docklands purchased by international soccer players as a nestegg, I should think, the apartments stand a better chance if left un-used over an extended period. But the standalone, on-it’s-own-grounds, housing stock doesn’t put up much of a battle unless it is occupied. BOH.

  39. Michelle says:

    Interestingly, despite strenuous efforts on their part the Department of the Environment has so far failed to negotiate a single agreement for leasing social housing. It seems that neither the banks nor the builders want to play ball.

    The perception being, in the trade (at it is one that may prove to be a mis-conception), is that once you allow in the rabble, the value of the entire neighbourhood goes down. During the boom years, this theory which was widely accepted as written in stone, spawned an entire cottage industry who worked diligently and were paid handsomely, to keep the rabble out. With the result that we have rich ghettos, and sterile communities. I.e. The ones where apartments are bought as nest eggs by international soccer players – and never a stick of furniture is put into them – or a light bulb even switched on. I would call them ‘ghost apartments’. Except they are treated like assets, a save way to store away a bit of money for a rainy day. Personally, I would rather take a risk in leasing the odd unit to the council. But I am not one bit surprised the prevailing logic still is, not to allow in the rabble, or the value across the board will tank even faster. BOH.

  40. Ger says:

    I grasp what you’re saying and I agree slightly. However, I have a long held scepticism about the positive effects that architecture can play on social problems.

    Very well said Ger, and thankyou for making that point. I don’t know how my text above came across – and if I did imply the above – that architecture can solve social problems, then I do apologise. This claim that architecture is a cure-all for social dis-functionality, is one I often hear trotted out all too often. People really do deserve to be pulled up on that.

    Ger says: My greatest criticism of the whole idea, is that the hotels in question are mostly in the countryside, on scenic terrain, and social housing tenants usually want to live within walking distance of the shops. But I guess we’ll have to see specific examples of what’s being proposed.

    People who lived in the [new] Clondalkin in the early years, describe a situation very similar to the one you have referred to there. BOH.

  41. “”Limited atonement”: Also called “particular redemption” or “definite atonement,” the doctrine of limited atonement asserts that Jesus’s substitutionary atonement was definite and certain in its design and accomplishment. This implies that only the sins of the elect were atoned for by Jesus’s death. Calvinists do not believe, however, that the atonement is limited in its value or power (in other words, God could have elected everyone and used it to atone for them all), but rather that the atonement is limited in the sense that it is designed for some and not all. Hence, Calvinists hold that the atonement is sufficient for all and efficient for the elect.[8] The doctrine is driven by the Calvinistic concept of the sovereignty of God in salvation and their understanding of the nature of the atonement.”

    “This implies that only the sins of the elect were atoned for by Jesus’s death.”

    Or.

    “This implies that only the sins of the Fianna Fail were atoned for by the death of the Republic.”

    Sounds about right.

    “Calvinists do not believe, however, that the atonement is limited in its value or power (in other words, God could have elected everyone and used it to atone for them all), but rather that the atonement is limited in the sense that it is designed for some and not all.”

    Or.

    “Fianna Fail do not believe, however, that the atonement is limited in its value or power (in other words, Fianna Fail could have elected everyone and used it to atone for them all), but rather that the atonement is limited in the sense that it is designed for some and not all.”

    Sounds about right.

  42. “The doctrine is driven by the Calvinistic concept of the sovereignty of God in salvation and their understanding of the nature of the atonement.”

    Or.

    “The doctrine is driven by Fianna Fail’s concept of the sovereignty of Fianna Fail in Their salvation and Their understanding of the nature of debt repayment”

    Sounds about right.

  43. Here’s a little ditty from someone called Pearse.

    “I am Ireland:
    I am older than the Old Woman of Beare.
    Great my glory
    I that bore Cuchulainn the valiant.
    Great my shame:
    My own children that sold their mother.
    I am Ireland:
    I am lonelier than the Old Woman of Beare”

    Rolling and grave come to mind.

  44. “The doctrine of irresistible grace (also called “efficacious grace”) asserts that the saving grace of God is effectually applied to those whom he has determined to save (that is, the elect)”

    Or.

    “The doctrine of irresistible Fianna Fail (also called “make sure you’re on our Fianna Fail side”) asserts that the saving grace of Fianna Fail is effectually applied to those whom They have determined to save (that is, themselves)”

    Sounds about right.

    No doubt John the Optimist thinks everything is just “tickety-boo”.

  45. “Perseverance of the saints”

    “The doctrine asserts that since God is sovereign and his will cannot be frustrated by humans or anything else, those whom God has called into communion with himself will continue in faith until the end.”

    Or.

    “Perseverance of Fianna Fail”

    “The doctrine asserts that since Fianna Fail is sovereign and its will cannot be frustrated by humans or anything else, those whom Fianna Fail have called into association with themselves will continue in wealth until the end.”

    Don’t you just love the “Soldiers of Destiny”?

    Theirs is wealth. Yours is penury.

    Everything’s just tickety-boo.

    Oh, bye the bye.

    There is no “macro” “economics”.

    There is debt.

    Nothing else.

  46. So nobody on here is interested in the balanced development aspect of the new NDP????

    All roads, planes, trains and NDP budgets lead to Dublin I suppose and ye are happy with that!!!

  47. @Greg

    No doubt John the Optimist thinks everything is just “tickety-boo”.

    I haven’t slightest idea what your posts were about. I doubt if anyone has.

    As you appear to have been up all night sending them, may I enquire if you had consumed too much alcohol at the time? Or is the obvious mental impairment they exhibit a more permanent condition?

  48. Colm McC says,

    ‘If this was a plan [NDP] for a farm, and it emerged that the scale of operations had to be adjusted to three-quarters of the previous assumption, that extra shed would get cancelled for starters.’

    The crop has failed in one out of four fields. Colm’s answer is never sow there any more. Slaughter some of the livestock. And increase the tick at the grocer’s.

  49. @Michael Burke

    Your false analogy completely misrepresents Colm McC’s argument. His argument was that economic activity is severly down – and will be for many years – over projections made in 2005/6 for the period in question. Such is the extent of the drop in activity, he argued, that the projected requirements for capital investment ought to be revised downwards.

    Yet I tend to disagree with McCarthy. The drop in capital use – at ports, airports, and other transport networks, may have overshot on the way down, and might rebound quicker than expected. Exports and car registrations for example are considerably higher than last year we thought they would be now. But even if the rebound is slow, the other flaw in McCarthy’s argumentis that it assumes we had roughtly aqequate infrastructure to begin with.

    True there has been an enormous improvement in our road network, but it remains the case that our public transport network, right across the country, is utterly lamentable in comparison with say France and Germany. And I don’t just mean the main routes between cities : obviously the main routes in those countries justify massive investment. But I mean on a more local scale. In many parts of rural france you can still pick up local train services and efficient bus services. Here, on the other hand, unless you are travelling from one of about four cities to Dublin, there is barely anything. Try getting from say west donegal to Westport. Our rural transport networks are abyssmal.

    But the focus ought not be on transport alone. What other kinds of infrastructure do other countries have to a very high standard that we haven’t. What about social infrastructure such as creches, libraries, swimming pools, schools, etc.

    Even looking at a purely economic angle, many of these items do in fact provide good returns. For example a study in California showed a return of $2.60 for every dollar invested in providing universal pre-school education. Few would argue that most of these items of social infrastructure do provide good returns – and over a long term.

    Despite the downturn then, I would argue there are many areas of infrastructure where we lag our european counterparts.

    The trouble isn’t, as McCarthy would have it, that the downturn means we no longer need large investment in infrastructure. The real problem is finding the money at the right price : the very question which has featured so much on these pages.

  50. @ Tomaltach,

    Good post. The interesting things to my mind are where there are cross-overs between several infrastructural investments. You get a kind of multiplication of returns, I would argue. For instance, transport infrastructure which enhances accessibility to health care. Road infrastructure which relieves pressure from Victorian built city centres (which were designed around horse and buggy locomotion). The really big one at the present I guess, is our energy generation infrastructure is reaching the end of its useable life, and needs replacement anyhow. Flood defense for instance, are also relics of our history. How much is lack of investment there going to cost. The argument in Cork city for instance, it is nonsense to see the ESB managing a hydro generation facility for 2.0% of the city’s power needs. The hydro dam infrastructure aught to be viewed as part of the city’s flood defense strategy, and its value as an asset would be increased dramatically. There we are not talking about asset disposal so much as asset re-evaluation for the next century. In terms of rivers, I would argue the big spade and shovel approach to river management needs to be offset against other considerations, such as rivers as corridors to ensure biological diversity and maintain overall stability of our ecosystems. There are green natural infrastructures which are valuable as well as engineered manmade ones. Except we need to manage our natural infrastructure over a long time frame. The average lifespan for a new road bridge is 150 years, and it needs to be disposed of.

    Many people who argue against expenditure on renewable energy generation, point to the fact that it is very expensive. Indeed, there are some good arguments to that effect and we do need to be careful. But what is often left out of analysis, mistakenly, is that our old coal/oil/gas burning infrastructure has reached the end of its lifecycle anyhow – so it isn’t merely a choice of working away with what we have got – we need to replace it with something. The trouble today is that the power stations tend to be move to the fuel – rather than the fuel being moved to the power station – and that in turn influences decision making, with regard to the superhighways needed to transport the power from point of generation to points of consumption. Which are very far away from one another. The nuclear advocates can argue that if we go down their route, our existing investment in transport infrastructure for electrical power remains viable and we don’t need to built any new superhighways. The other side of the argument seems to be, if we go down the renewable energy generation road, there is a much better chance we can own the technology, develop it and gain expertise in that area.

    Anyhow, this is a very big area for discussion and I have enjoyed sharing some views with you people. In 2009, when I found myself between occupations, I attended several seminars, approached many experts and investigated many investment programs and framework documents. But nobody is doing that at present. As a nation we tend to assume that things just come together by themselves – when in fact they don’t – things have to be brought together through effort. The northern peace process being a prime example of where we failed miserably for decades, at considerable long term cost. I began to wonder, why no one in our vast public service have not been encouraged to look at coordination strategies. To try and join up some of the conversations, and get a real picture of different groups who are working on similar problems from different points of view. I think our government is too strong. Our power structure is too centralised. We wait for an Taoiseach to deal with the minutiae of our problems. That is our achilles heel in Ireland. We tend to value our privacy a bit too much, and are content to work away for 30 or 40 years on our own little departments – with some union boss figure at the top, as our patriarch. The system must incentivise that behaviour, and must punish the opposite. More is the pity, it will cost us more and more, further down the road. BOH.

  51. Predicting speculative bubbles and self unfullfilling prophecies, link:

    http://www.econ.ku.dk/okocg/Students%20Seminars%C3%98kon-%C3%98velser/%C3%98velse%202007/artikler/Flood-Hodrick-Bubbles-JEP-1990.pdf

    Irish economists are now in a unique position to put the spotlight on rational and irrational expectations in a severe downturn. FF headed for damnation or redemption in the third year of downturn. Irish polticians paralysed by delirium tremens as cynical Irish public snub positive spin that worked so well up to 2007. Speculative self destruction resulting from rational expecations.
    There is a place in Irish literary and economic history waiting to be filled.

  52. @MickeyHickey
    “There is a place in Irish literary and economic history waiting to be filled.”
    There’ll be nobody here to read it!

  53. O some people will remain but

    They will be too busy digging spuds to take the time to read that little footnote in history

  54. @Ger

    The article might be elitist but sometimes the elites are right.

    I speak as someone with family connections to both the Up Mayo and the Cost Benefit Analysis modes of politics.

    Fintan O’Toole summed it all up yesterday.
    They don’t do Cost Benefit Analysis because it would stop them making political decisions.
    Minister Cullen delivers on a motorway to Waterford.
    Minister Dempsey assures us the railway to Navan is still on track.

    It was bad enough when we thought we could afford it.

    And look at the alternative – a vacuous Labour Party and a 50.01% of FG that believes in “Up Mayo” politics that will no doubt “deliver” on the Western Rail Corridor and a west coast motorway.

    Sarah Palin and her Bridge to Nowhere seems like an intellectual colossus
    compared to most of these eejits.

  55. @al

    The problem is that now the government has announced its intention to lease property, a vast number of properties will rise in value automatically.

    It is simply naked manipulation of LTEV efforts, such as they are, beign pursued by NAMA.

    The reason why leasing is so important, and I think this really needs to be drilled into by the media, is that a lease is an income stream. In order to borrow from the banks, in the commercial world, an income stream has acquired much greater (more normal) significance than it did during the ‘Tiger’ (bubble) years. By creating income streams for developers, not only is the government (taxpayer) bailing them out on the double (NAMA + Long term lease with residual value) but it will also enable some of the same developers to go back into the market and in cases buy back some of their original assets at much reduced prices because NAMA will eventually have to put its assets on the block in staged firesales.

    The initiative is no more and no less than another political scam to divert more taxpayer’s money (and how much will be borrowed to meet leasing costs?) into the hands of developers and artificially crank up the wealth of the construction industry.

  56. @ Maurice
    There’s nothing wrong with doing Cost benefit analyses. I’m all in favour. And I’m all in favour of cutting out the wasteful projects too.

    But that’s not what that article was about. It was about the allegedly pernicious effects of rural voters on sensible political decisions. Urbanites are right because their current demographic trend is on the up. Rural people only want to drive drunk and have train stations in their garage.

    It was self-indulgent balderdash, built on nothing more than a contempt for people with a different lifestyle and values.

  57. A massive devaluation of our currency wether it is the euro or a new Irish pound will make car based suburban dreams a thing of the past.
    This planning to service linear development is a artifact from the post World War II monetary regime which is dying as we speak.

    We must at least plan for nodal development to sustain some semblance of a industrial society while we still can.

  58. @ All,

    Some very strong input above – and I can judge quite easily from the above, there are going to be some fairly blunt debate on the issue of infrastructural development in Ireland, over the coming decade. Thanks for sharing views to all. BOH.

  59. @Maurice O’Leary

    Fintan O’Toole summed it all up yesterday.
    They don’t do Cost Benefit Analysis because it would stop them making political decisions.
    Minister Cullen delivers on a motorway to Waterford.
    Minister Dempsey assures us the railway to Navan is still on track.

    This is just the usual Fintan O’Foole nonsense. A man who spent the past 20 years of economic growth whinging about everything, who spent the past 2 years of economic recession whinging about everything, and who’ll spend the next 20 years of economic growth whinging about everything.

    The fact is that it is not always possible to do a narrow economists’ type of cost/benefit analysis because, while the costs can usually be quantified pretty precisely in monetary terms, the benefits can not.

    Example: the national motorway network

    Along with other road development, this has led to a huge reduction in the road deaths rate in Ireland. In 1997, before the development of this motorway network, the annual road deaths rate in Ireland was 13.5 per 1,000 population, one of the highest in the developed world. In 2010, it looks like it is heading for 4.5 per thousand population, one of the lowest in the developed world. The number of road deaths annually in Ireland is now about 400 to 500 less than it was in the 1990s (after adjustment for population increase). How can this sort of benefit be quantified monetarily, although no doubt some economists will pretend that it can?

    Ultimately, the decision whether or not to proceed with such projects is a political one, with the decisions being made by politicians responding to the wishes of the people – in other words, democracy. The decision should not be left to economists, applying some magic formula taken from some text book on cost/benefit analysis. Thank God we had a politician of vision in Bertie Ahern who was determined to give Ireland a world-class motorway network, despite the virulent and frenzied opposition of wacko environmentalists, idiot left-wing commentators like O’Foole himself, and various academic economists. The massive reduction in road deaths is the result.

  60. John I can see why you are a optimist – it is because you are a Keynesian.

    You seen to have no idea what money really is – it is a token for energy yet to be used.
    We are now losing more money then what we are making in this world economy because the investments globally are now net energy negative not really because of the high price of oil but because global capital extraction has reached a peak and is now declining therefore the debt nature of money has to change into capital. Real capital construction and not mass road infrastructure which is a form of state or corporate welfare needs to be phased out rapidily as the remaining credit money will destroy the remaining capital in a hyperinflationary event.
    This process is perhaps unstoppable now but your policies will just make the problem even worse.

  61. John I can see why you are a optimist – it is because you are a Keynesian.

    You seen to have no idea what money really is – it is a token for energy yet to be used.
    We are now losing more money then what we are making in this world economy because the investments globally are now net energy negative not really because of the high price of oil but because global capital extraction has reached a peak and is now declining therefore the debt nature of money has to change into capital. Real capital construction and not mass road infrastructure which is a form of state or corporate welfare needs to be phased out rapidily as the remaining credit money will destroy the remaining capital in a hyperinflationary event.
    This process is perhaps unstoppable now but your policies will just make the problem even worse.

  62. @ The Alchemist

    ‘The problem is that now the government has announced its intention to lease property, a vast number of properties will rise in value automatically’

    That’s the theory. But you have to factor in the sovereign fiscal position.
    Them promissory notes are a divil.

  63. I know it is a relatively trivial point and I certainly don’t wish to overmilk it, but attendances at Galway races so far this week are well up on last year. During the recession, total attendances fell by 20pc, which is something similar to or even greater than the falls in passenger numbers at airports, on the railways and on the buses that Colm McCarthy highlighted. But, this simply shows the danger of making long-term predictions for infrastructure demand, based on recession-time experience. Things always turn around, and usually with a vengeance. And, that appears to be what has happened in Galway so far this week. Compared with a year ago, attendances were up +3.5pc on Monday night, and up by a whopping +13.5pc on Tuesday night. Something similar will happen in due course, and probably sooner rather than later, to passenger numbers at airports, on the railways and on the buses.

  64. re: Cost benefit analyses

    Because the life span of most major infrastructural projects is several decades, if not centuries, the idea that a cost benefit analysis will give you any useful insights if totally absurd.
    My suggestion is to use a bit of “cop-on” instead.

    here is a start:
    Motorways to relieve traffic congestion in major cities and dissipate traffic to commuter towns : good idea
    Motorways criss-crossing a small island with 5 million people: Bad idea

  65. To repeat in the event of a major currency collapse the transport infrastruare built since the 70s is simply to costly to maintain

    To my mind this is almost inevitable given the size of the monetary base and currencies tendency to zero credit money expansion in the long run which is just consumption brought forward in the hope that resources will be present in the future.
    Why do we assume such wild fancy in our econimic calculations?

  66. @Kevin O’Brien

    Motorways criss-crossing a small island with 5 million people: Bad idea

    What ‘small island with 5 million people’ have you got in mind’?

    Can’t be the island of Ireland, as population of the island of Ireland is currently over 6.25 million and projected to rise to 8-10 million in the next few decades.

  67. @JTO
    “….over the next few decades…”. Not much of a rise in the next 20-30 years (at least)-is it. Maybe not so optimistic after all

  68. JTO – you are right, I am showing my age.

    A small island of 6.25 million.

    “Projections over the next few decades” : Statistical heresy!!!!

  69. The number of people in any given economy has no effect on the overall consumption level although the ratio of people to credit money does affect the nature of the consumption.

    Remaining residents should celebrate people going home or abroad as the economy at any given time has a certain carrying capacity depending on how much credit money the banks decide to produce
    During the boom the GNP was high but Irish nationals did not see all of this given the immigration rate – now that the banks have decided to contract the money supply the present economy cannot sustain this larger number and therefore the remaining population will have a larger proportion of a admittingly smaller cake.
    We are a slave to global capital movements and therefore domestic planning and governance are but a side show in comparsion to such raw power wielded by our money masters.

  70. The number of people in any given economy has no effect on the overall consumption level although the ratio of people to credit money does affect the nature of the consumption.

    Remaining residents should celebrate people going home or abroad as the economy at any given time has a certain carrying capacity depending on how much credit money the banks decide to produce
    During the boom the GNP was high but Irish nationals did not see all of this given the immigration rate – now that the banks have decided to contract the money supply the present economy cannot sustain this larger number and therefore the remaining population will have a larger proportion of a admittingly smaller cake.
    We are a slave to global capital movements and therefore domestic planning and governance are but a side show in comparsion to such raw power wielded by our money masters.

  71. @Keith
    One day you will realize that the indivisible element in all of this is the quality of human experience.
    Economics is merely a descriptive add-on to it.

  72. Ha you must still be getting paid from the fiat trough – come down in the gutter with me and I will give you a lesson in econimics and its relationship with the human experience.
    This pump and dump mechanism by the money powers is a weapon of war on vast swathes of human existence.
    Instead of giving the serfs real money they play with them like rag dolls.
    Why should people accept this serfdom ?
    I would almost accept feudalism if my overlords risked their own hides in a battle or joist but they do not deserve to wield a kitchen knife never mind a broadsword.
    Rome is falling and we are reaching the late stages now but even that took some time.
    I can’t wait to see some satisfaction.

  73. @Keith
    Rome falling wasn’t so great in retrospect. Dark ages and all that.
    Current system is imperfect but probably the least malignant of all that have existed up to now.

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