I pointed out several months ago that the Federal goverment’s stimulus plan could not achieve increased wealth for the average Australian, because simply taking money from some people and giving it to others does not produce anything new. It is production that increases wealth, not simply spending. Professor Neal Stoughton agreed.
In an article called The Uselessness of Useless Spending published on Quadrant online today, Steven Kates explains in more detail why this is so:
The fact of the matter is, that should it turn out that these have been quack remedies, the equivalent of bleeding the unwell and applying leaches to the sick, we are going to know.
Because there are some of us who believe that what is being done will actually make economic conditions worse, with the potential to slow recovery, reduce real incomes, lower employment, push up inflation and cause investment to fall back.
Spending money we do not have on infrastructure with no net value was once seen by economists of a bygone era as about as wrong a policy as one could possibly invent …
Build roads that goods can travel along at a lower cost, and these outlays repay themselves in higher national productivity.
But to build school libraries or to insolate houses or to build loss making broadband networks will not create any additional value with which to repay these expenditures. We will have the debt, but no extra output to repay any of the monies we are so madly spending now.
But sadly, no one who needs to hear will hear, and most working Australians will spend the rest of their lives paying back this pointless extravaganza.