Shovel-ready or not

Published in Insights, The New Zealand Initiative’s newsletter, 4 September 2020

Politicians like shovelling out money for shovel-ready projects.

But let’s call a spade a spade: When push comes to shovel, it does not matter if projects are ready. They should ideally make sense, too.

Green Party co-leader James Shaw dug himself a hole with his support of a “green” school in Taranaki. After the public outcry over giving $11.7 million of taxpayers’ money to a private school lacking school registration, Shaw backed down and showed remorse.

Even then, Shaw staked his good intentions. It was all about a “shovel-ready” project creating “shovel-ready” jobs for Taranaki, he said.

Fair enough. His Green Party had doomed thousands of jobs in Taranaki with its ban on oil and gas exploration. In criminal law, the school funding would be called active repentance.

Still, “shovel-ready” is not a useful criterion for success.

Having some projects ready so the Government could quickly spend money and create jobs is intuitive. It is also at the heart of a school of economic thinking: Keynesianism.

Named after British economist John Maynard Keynes, Keynesian economists believe Government should act whenever there is deficient market demand. When workers and machinery are idle, Government should step in and utilise them.

In his General Theory (1936), Keynes presented examples of projects the Government might do. How about Treasury fill old bottles with banknotes and bury them at suitable depths in disused coalmines?

The mines could then be filled up to the surface with town rubbish so private companies could dig the notes up again. And voilà! Unemployment will be gone, while income and wealth increase.

In the same way, Keynes speculated that “pyramid-building, earthquakes, even wars may serve to increase wealth.”

To be fair to Keynes, he did not seriously mean this nonsense. It was an intellectual provocation to make his point about deploying underutilised resources.

As Keynes wrote: “It would, indeed, be more sensible to build houses and the like; but if there are political and practical difficulties in the way of this, the above would be better than nothing.”

Keynes’ followers, however, were more literal-minded – and reached for the shovels.

Since this Government has proved to be useless at building “houses and the like” (think KiwiBuild and light rail), it has moved to building an esoteric private school hosting a DNA activation seminar, holy ceremonies and crystal plantings. Ohmmm.

Though shovel-ready, this exercise is just as useful as building pyramids, burying banknotes and creating earthquakes.

It is not what Keynes had in mind, but it is the best his disciples can come up with these days.

If only they realised that when you are in a hole, you should stop digging.

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