The paper highlighted this week so neatly fed the tired trope that China’s infrastructure build has been mostly a bad idea it got widespread press coverage last month.
Writing in The Oxford Review of Economic Policy Atif Ansar, Bent Flyvbjerg, Alexander Budzier and Daniel Lum, all from Oxford University concluded; ‘..unless China shifts to a lower level of higher-quality infrastructure investments, the country is headed for an infrastructure-led national financial and economic crisis, which is likely also to be a crisis for the international economy. China’s infrastructure investment model is not one to follow for other countries but one to avoid.’ Uh-huh.
I found a lot not to like in terms of their methodology (sample size and method of selection of projects for review mostly), some of their conclusions (obvious in some cases, irrelevant in others) and their overall failure to recognize the bleeding obvious i.e. China infrastructure build will slow organically, probably significantly, from this point.
On the last point consider this; the Shanghai metro is now the largest in the world. It’s construction began in 1995 and from there the network has grown from carrying zero passengers per day to ten million. Let me write that again; from zero daily passenger journeys to ten million! It cannot and will not grow at the same rate in the next 20-years as the last. Nor will the road, rail, port, telecommunications, power or other infrastructure in China grow at the same rate in the future as the past.
The researchers aim to prove that infrastructure development doesn’t produce growth which is, IMHO, a very developed world way of looking at the issue. No, just building stuff won’t grow an economy if it’s largely already developed, that was Japan’s problem in the ’90s. What if your starting point is zero though?
Are they seriously suggesting Shanghai didn’t need a metro system? Ten million take the daily trip underground now because it’s such fun and it’d be a shame to see all those trains running empty? Come on.
The headline contention of the work, that infrastructure development weakens an economy, is such demonstrable nonsense in China’s case I’m surprised even the shabbiest of journos repeated the assertion unchallenged?
Further, I wonder how much time these gentlemen spent in China researching their paper? My guess would be very little or, most likely, none at all. Had they gone and seen projects they’re so dismissive of I’m sure they’d have come away with a more holistic and positive view of the highways, subways, airports and high speed rail network they’d have been able to utilize to facilitate their work?
Or would they prefer to have crisscrossed the country by ox cart?
Read the work in full at Infrastructure Benefits and Problems
Happy Sunday.