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The unintended consequences of improving transport connections…

On paper at any rate, jolting a moribund, post-recession economy into motion is quite simple: invest in railways, roads, airports and other transport projects, expensive though they be in the short-term.

But do the outcomes always meet the grand expectations? A piece in The Economist* last month had some thought-provoking points to make about the local economic benefits, or otherwise, of state investment in infrastructure.

In particular, if a new road or railway seems to boost productivity in a given region, is it really thanks to the infrastructure? Or was the infrastructure a result of demand generated by economic growth that was already taking place?

A new railway linking one of China’s poorest provinces to Tibet would suggest that the answer to the first question is ‘Yes’. There was no hint of any prior growth to prompt the investment, yet GDP per person in the areas affected by the railway shot up much higher than GDP in other areas.

But the figures relating to the same vast nation’s investment in its trunk roads over the last two decades takes our enquiry down a rather different, twistier route. The small regions that found themselves connected to the highway system experienced less GDP growth than unconnected places. It appears that goods piled in from more prosperous areas and pushed out local products.

Before reading any further, I wanted to stop the anonymous author in their tracks and explain that I have a question to which they could usefully apply their expertise in a future edition: could the same happen here in the UK when HS2, the high speed railway, is built?

Adding to London’s bulging coffers at the expense of the economic wellbeing of cities in the Midlands and North would be the very opposite of the Government’s stated intentions, assuming Ministers do indeed want to spread prosperity more evenly around the nation.

*The Economist, 19th July 2014 – ‘Bridges to somewhere’

high speed train

TGV train, France

 

 

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