Are large infrastructre projects the key to bankruptcy?

woodburner · Post by **woodburner** » 23 Jul 2016, 07:22

There is a major dam building programme in Brazil which will inevitably displace indigenous people, drown large areas of forest, and wipe out many specialised local species. For all the hype, dams seen as renewable power generators may have their problems, and increase emissions.

As we know from older dams (Africa for example) there is kudos funding to build them, but maintenance is not so prestigious, and takes a huge amount of energy.

An article in The Newyorker deals generally with large projects, citing one in particular.

The Trouble with Megaprojects

Flyvbjerg finds much of this familiar. He writes that megaproject planners are often outright dishonest, systematically overestimating benefits and underestimating costs. He cites an unusually candid comment that Willie Brown, a former speaker of the California State Assembly and mayor of San Francisco, made in a 2013 newspaper column. Referring to huge cost overruns during the construction of San Francisco’s four-and-a-half-billion-dollar Transbay Transit Center, Brown wrote, “We always knew the initial estimate was way under the real cost…. If people knew the real cost from the start, nothing would ever be approved. The idea is to get going. Start digging a hole and make it so big, there’s no alternative to coming up with the money to fill it in.”

johnhemming2 · Post by **johnhemming2** » 23 Jul 2016, 08:51

systematically overestimating benefits and underestimating costs.

This is a sort of human nature. People are driven by their conclusions to produce best possible argument. It is a problem in many areas of public policy. It is called "optimism bias" by people who argue for PFI who ignore the "optimism bias" in their own proposals.

Little John · Post by **Little John** » 23 Jul 2016, 09:07

johnhemming2 wrote:
systematically overestimating benefits and underestimating costs.
This is a sort of human nature. People are driven by their conclusions to produce best possible argument. It is a problem in many areas of public policy. It is called "optimism bias" by people who argue for PFI who ignore the "optimism bias" in their own proposals.

The problems with PFI did not happen because of "optimism bias". PFI happened because some people, in positions of power, knew they were going to make lots of money out of it and any problems that may ensue for the taxpayer down the line were neither here nor there for such people. The "optimism bias" operated at the lower level of those who were politically and operationally tasked to implement it.

woodburner · Post by **woodburner** » 23 Jul 2016, 18:31

PFI also happened because Gordon Brown was trying a slight-of-hand to remove spending from the government coffers so he could pretend he was being prudent. It may well have been because someone in the rich and powerful lobby syggested this is how he could do it. Of courese, every PFI scm has cost buckets more than a proper government project. The tories have continued PFI as it suits all their mates.

RenewableCandy · Post by **RenewableCandy** » 30 Aug 2016, 20:09

I was cheered a lot recently by news of someone (a hospital, I think) who managed to extricate themselves from a PFI deal, saved billions and paid off all their debts. Wish I could remember who, though...

emordnilap · Post by **emordnilap** » 31 Aug 2016, 10:09

RenewableCandy wrote:I was cheered a lot recently by news of someone (a hospital, I think) who managed to extricate themselves from a PFI deal, saved billions and paid off all their debts.

Fair play to them, whoever it was. It's a lesson few learn. Debt is normal.

Post by **kenneal - lagger** » 31 Aug 2016, 14:37

The ridiculous nature of the funding of government projects is that the government borrows money from *ankers to pay for them instead of printing the money themselves and cutting out the middle man, the *anker who makes money for doing precisely nothing.

emordnilap · Post by **emordnilap** » 31 Aug 2016, 15:06

Yes, ken. The fact that all modern governments are 100% against printing money, building the infrastructure, then taxing the money out of existence says it all. And we vote them in!

emordnilap · Post by **emordnilap** » 04 Aug 2017, 10:22

Aditya Chakrabortty today has a fine article in The Guardian highlighting just a few of the money pits into which the UK throws its taxes.

Great piece of journalism, short and to the point but stuffed with good journalism.

For instance:

Ponder the new nuclear station about to be built by the Chinese and French at Hinkley Point, at an estimated cost to British households of Â£30bn.

Neither David Cameron nor Theresa May would countenance the British government creating a new power station, but they will pay way over the odds for foreign governments to do so.

or

Across the UK there are more than 700 PFI projects with a capital value of around Â£55bn. It is estimated that they will cost the public more than Â£300bn.