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- Sep 25, 2007
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Hi all,
An article from the November 11th edition of the Globe and Mail (Report on Business). Excerpts:
Now that bank bailouts, interest-slashing and pump-priming are in full swing around the world, governments are looking for other levers to lift their economies out of the quicksand. And the one they are all pulling out of their toolkit is infrastructure spending.
Policy makers consider spending on new highways, bridges, water treatment plants and high-speed rail as more palatable to the public than traditional fiscal medicine such as aggressive tax cuts, transfer payments and massive handouts to stricken industries.
Economists widely agree that infrastructure investments tend to produce many more jobs than tax cuts, because none of the spending leaks into savings accounts.
One key question though is why governments around the world have suddenly latched on to infrastructure spending as the way out of the worst global financial and economic slump in decades - and whether they`ve moved too late.
"My first reaction is that the timing`s probably all wrong," said Charles Lannon, director of research with Toron Capital Markets in Toronto. "To get a big project off the ground takes a good two, three years. So it could be coming out just as the business cycle turns and the economy is reaccelerating."
But most countries have underinvested in infrastructure for years, "so it might be a better late than never situation," Mr. Lannon said.
One answer to the timing question may be that it signals governments expect this slowdown to be deeper and more protracted than any in recent memory, other analysts suggested. So the fact such projects can take years to plan, finance and build is not a barrier.
In Canada, all levels of government agree that speeding up spending on already planned projects should be a central plank of a recovery plan.
Municipalities alone estimated the cost of their infrastructure needs at about $127-billion (Canadian) two years ago.
http://www.theglobeandmail.com/servlet/sto...Story/Business/
Keith
An article from the November 11th edition of the Globe and Mail (Report on Business). Excerpts:
Now that bank bailouts, interest-slashing and pump-priming are in full swing around the world, governments are looking for other levers to lift their economies out of the quicksand. And the one they are all pulling out of their toolkit is infrastructure spending.
Policy makers consider spending on new highways, bridges, water treatment plants and high-speed rail as more palatable to the public than traditional fiscal medicine such as aggressive tax cuts, transfer payments and massive handouts to stricken industries.
Economists widely agree that infrastructure investments tend to produce many more jobs than tax cuts, because none of the spending leaks into savings accounts.
One key question though is why governments around the world have suddenly latched on to infrastructure spending as the way out of the worst global financial and economic slump in decades - and whether they`ve moved too late.
"My first reaction is that the timing`s probably all wrong," said Charles Lannon, director of research with Toron Capital Markets in Toronto. "To get a big project off the ground takes a good two, three years. So it could be coming out just as the business cycle turns and the economy is reaccelerating."
But most countries have underinvested in infrastructure for years, "so it might be a better late than never situation," Mr. Lannon said.
One answer to the timing question may be that it signals governments expect this slowdown to be deeper and more protracted than any in recent memory, other analysts suggested. So the fact such projects can take years to plan, finance and build is not a barrier.
In Canada, all levels of government agree that speeding up spending on already planned projects should be a central plank of a recovery plan.
Municipalities alone estimated the cost of their infrastructure needs at about $127-billion (Canadian) two years ago.
http://www.theglobeandmail.com/servlet/sto...Story/Business/
Keith