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Are austerity policies wrecking or saving highly indebted nations? The debate rages on. But even partly discredited austerity hawks Kenneth Rogoff and Carmen Reinhart agree with their rivals on one point: government stimulus spending on infrastructure can help boost economic and productivity growth.
There is a lot to recommend a ramping up of infrastructure spending to get sluggish economies back on their feet: it would put people to work and help to fix a chronic "infrastructure deficit," whereby tens, if not hundreds of billions of dollars' worth (in Canada alone) of roads, waterworks, bridges, electricity systems and so on desperately require repairs. Governments here have already committed billions of dollars to infrastructure since the Great Recession, but there remains a need for new "greenfield" projects, such as roads or subway-line extensions. Plus, there are well-financed private investors who are keen to invest through public-private partnerships (PPP).
The problem with infrastructure is that you can't just decide to build today and start tomorrow – or next year. "People like us would be more than willing to build social infrastructure at a normal rate of return," says Leo de Bever, chief executive officer of public fund manager Alberta Investment Management Corp. "But there's nothing to build. It takes forever for everybody to say their bit, and nothing gets done."
Big projects, particularly new infrastructure, can take years of planning and run into all sorts of opposition – in the political arena, the court system and the court of public opinion – not to mention regulatory delays and jurisdictional spats. It's not just pipelines and gas plants: the construction of a 16-km toll highway east of San Diego was delayed by 12 years, primarily due to the endangered Quino Checkerspot butterfly, whose habitat the highway crossed.
Never mind that only two Quino Checkerspots were spotted in the area during that period: it took three court challenges, numerous environmental studies, regulatory approvals and, eventually, a $20-million habitat preservation plan by the highway concession owners just to clear all the hurdles and start building, in 2003 (The road finally opened in 2007, just in time for the housing bust, which curtailed growth and traffic; the concession's owners filed for bankruptcy protection in 2010.)
Even a more obvious project, a proposed new bridge in Fort McMurray that would provide a vital rail link from the oil sands to the CN network has been stalled for years, partly because it's difficult to build on muskeg but also because of indecision at the political and bureaucratic level over whether to allow the charging of tolls under a PPP arrangement.
"It's clear we need that [bridge] and we'd like to make that happen," says Mr. de Bever, who's keen to participate under the right conditions. "In my mind you could probably get this done in two to three years if you set your mind to it. But for a variety of reasons it hasn't happened."
Investing in productive infrastructure would be a great way to stimulate economies, here and abroad. But it would take considerable political bravery. Elected officials would have to be prepared to spend considerable political capital to get projects off the ground in a timely fashion so they can make an impact when they are needed the most.
Sean Silcoff is a contributor to ROB Insight, the business commentary service available to Globe Unlimited subscribers. Click here for more of his Insights, and follow Sean on Twitter at @seansilcoff.