It didn’t work in Japan, so why will it work here?

This from the New York Times:

“Two decades of generous public works spending have showered this city of 61,000 mostly graying residents with a highway, a two-lane bypass, a university, a prison, a children’s art museum, the Sun Village Hamada sports center, a bright red welcome center, a ski resort and an aquarium featuring three ring-blowing Beluga whales.

Nor is this remote port in western Japan unusual. Japan’s rural areas have been paved over and filled in with roads, dams and other big infrastructure projects, the legacy of trillions of dollars spent to lift the economy from a severe downturn caused by the bursting of a real estate bubble in the late 1980s. During those nearly two decades, Japan accumulated the largest public debt in the developed world — totaling 180 percent of its $5.5 trillion economy — while failing to generate a convincing recovery.

Now, as the Obama administration embarks on a similar path, proposing to spend more than $820 billion to stimulate the sagging American economy, many economists are taking a fresh look at Japan’s troubled experience. While Japan is not exactly comparable to the United States — especially as a late developer with a history of heavy state investment in infrastructure — economists say it can still offer important lessons about the pitfalls, and chances for success, of a stimulus package in an advanced economy.”

Japan has stagnated and public works is not the answer. We are in danger of turning into a permanently stagnated economy. This is very scary. As I have mentioned in other posts public money will crowd out private money. It would be better if the infrastructure project was done by a private company. Most people can agree on that, but the government believe it has to build it because the private people do not have the money to do so right now and they need to increase jobs. The problem then becomes a dependency issue. How do you fire everyone from the government job so that they can now become private workers?

The rest is here.

~PCCapitalist

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Published in: on February 10, 2009 at 1:15 pm  Leave a Comment  
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