Monday, September 27, 2010

Context for the Flaherty stimulus report today

As we watch Finance Minister Jim Flaherty deliver his hunky dory, rosy, shiny and sixth status report on the Economic Action Plan today, here is some context as to what a few other nations have been doing, infrastructure wise.

China is doing moon shots. Yes, that’s plural. When I say “moon shots” I mean big, multibillion-dollar, 25-year-horizon, game-changing investments. China has at least four going now: one is building a network of ultramodern airports; another is building a web of high-speed trains connecting major cities; a third is in bioscience, where the Beijing Genomics Institute this year ordered 128 DNA sequencers — from America — giving China the largest number in the world in one institute to launch its own stem cell/genetic engineering industry; and, finally, Beijing just announced that it was providing $15 billion in seed money for the country’s leading auto and battery companies to create an electric car industry, starting in 20 pilot cities. In essence, China Inc. just named its dream team of 16-state-owned enterprises to move China off oil and into the next industrial growth engine: electric cars.
Not entirely fair to compare ourselves to mammoth, authoritarian China but still, that is serious infrastructure with clear goals. 

The U.S. is not quite keeping up with China, but still you get some sense of a vision with their infrastructure choices:
...the Recovery Act is the most ambitious energy legislation in history, converting the Energy Department into the world's largest venture-capital fund. It's pouring $90 billion into clean energy, including unprecedented investments in a smart grid; energy efficiency; electric cars; renewable power from the sun, wind and earth; cleaner coal; advanced biofuels; and factories to manufacture green stuff in the U.S. The act will also triple the number of smart electric meters in our homes, quadruple the number of hybrids in the federal auto fleet and finance far-out energy research through a new government incubator modeled after the Pentagon agency that fathered the Internet.
The stimulus is also stocked with nonenergy game changers, like a tenfold increase in funding to expand access to broadband and an effort to sequence more than 2,300 complete human genomes — when only 34 were sequenced with all previous aid. There's $8 billion for a high-speed passenger rail network, the boldest federal transportation initiative since the interstate highways.
And so on. Not to hold it up as perfection, the Americans have been criticized as not doing enough, but this overview of the Recovery Act does give a sense of the direction there (and see the later Biden quote on items rejected and why:"...some 260 skate parks, picnic tables and highway beautifications that flunked his what-would-your-mom-think test. "Imagine they could have proved we wasted a billion dollars," Biden says. "Gone, man. Gone!")

Now, today, here in Canada, you will hear Jim Flaherty talking up 22,000 or so projects started across the country, as if there is magic in that number as opposed to the quality of projects undertaken. And as this columnist in the Globe today suggests, there are questions about how the stimulus has been spent that underscore the comparison between us and other nations:
It’s hard to imagine there’s much Canada envy over the millions Ottawa has thrown at local pet projects over the past two years, including Kitchener-Waterloo’s Oktoberfest ($700,000), an indoor skateboard park and climbing wall in Winnipeg ($3.2-million), a motorized orchestra pit at a concert hall in Rimouski, Que. ($153,000), or repairing a busted hockey rink in Iqaluit ($2.5-million).

No one begrudges Canadians’ right to knock back some Schnapps or play a little hockey. But to throw billions into a hodge-podge of boondoggles and call it world-beating economic policy is a bit of a stretch.
Throw in the reporting yesterday from CP on the intricate communication requirements imposed by the federal government on local infrastructure partners, with emphasis on signs, plaques, ribbon-cutting events and other assorted political aspects of the process, all the while leaving local groups in the lurch on the interest costs...and it reinforces the point of a skewed sense of priorities and a celebration of arguably inferior choices. Tom Friedman made an observation on his country's inability to get its act together to make better choices and it's relevant to us as well:
Studying China’s ability to invest for the future doesn’t make me feel we have the wrong system. It makes me feel that we are abusing our right system. There is absolutely no reason our democracy should not be able to generate the kind of focus, legitimacy, unity and stick-to-it-iveness to do big things — democratically — that China does autocratically. We’ve done it before. But we’re not doing it now because too many of our poll-driven, toxically partisan, cable-TV-addicted, money-corrupted political class are more interested in what keeps them in power than what would again make America powerful, more interested in defeating each other than saving the country.
Deflate some of the rhetoric and the key point reverberates here.

Has our stimulus been a wasted opportunity? In part? This is likely to be part of the coming debate, with the Auditor General's report forthcoming as well.