Debate Magazine

Infrastrucure - Chickens and Eggs.

Posted on the 11 August 2017 by Markwadsworth @Mark_Wadsworth

Lola, in a comment on Bayard's post:
"The Skye Bridge both confirm and confounds my contention that infrastructure spending comes after economic growth."
It does both, it's chicken and egg. From the point of view of an individual or a business, everything that everybody else does or provides is "infrastructure".
Sticking with the car example: there are car manufacturers, petrol stations, car mechanics, motorists and roads. The motorist needs all four things, he couldn't care less whether the government/taxpayer or private businesses provides the cars, petrol, repairs and roads. The car manufacturer doesn't care whether it's government/private sector demanding cars, or providing roads, petrol, repairs. Ditto the petrol stations and so on.
Which also illustrates that supply creates demand - not necessarily for the thing itself, but demand for complementary stuff, and the more complementary stuff there is, the more demand there will be for the thing which sparked it off in the first place.
The Skye bridge is, from the point of view of the traveller, vastly preferable to taking the ferry. On a static basis, it is difficult to justify spending £25 million of taxpayers' finest (yes I know it was a PPI job but the taxpayer ended up paying for it) on a lovely bridge for 10,000 inhabitant = £25,000 each. Either take the ferry or move to the mainland.
But that's not the end of the matter.
The bridge (especially now it is toll free) has led to a surge in tourism. If the local NIMBYs don't succeed in choking this off, then with the benefit of hindsight, the bridge does justify itself. £25 million x ten percent amortisation/running costs a year ÷ 150,000 tourists a year = £17 per extra tourist, which looks like a great deal from Skye's point of view, the average tourist will spend a lot more than that.
And those tourists create extra demand for all sorts of things, which in turn creates demand for other things and so on, hopefully in a virtuous circle.
If only there were some elegant way of clawing back the £25 million via the tax system...


Back to Featured Articles on Logo Paperblog

Magazine