Economics Analysis

To get the economy going, we’ll need more than hard hats

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Cartoon by Paul Dorin / @DorinToons

If we are to achieve economic recovery, we will need to address social infrastructure weaknesses in aged care, health and university education, writes Professor John Quiggin.

WITH THE economy in recession as a result of the COVID-19 pandemic and depressed conditions likely to continue for a year or more to come, attention has turned to strategies to promote recovery.

Unsurprisingly, most participants in the policy process have turned to the kinds of strategies they have always favoured.

High on the list for many is increased investment in physical infrastructure projects and particularly transport infrastructure. Such projects, always announced with an impressive-sounding number of associated jobs, lend themselves to images of legions of workers toiling with picks and shovels (the term "shovel-ready" is commonly used for projects ready to be implemented rapidly). And the announcement of such projects gives rise to media-friendly images, mercilessly satirised by the ABC program Utopia, of politicians in hard hats and hi-vis vests, busily engaged in building the nation.

Yet this image has long been out of date. Moreover, the pandemic and its long-term consequences entail the need for a fundamental rethinking of the role of transport in the economy and of the kinds of investments that we will need in the future.

Large-scale infrastructure projects generate relatively little employment compared to their huge costs. Much of the cost goes on heavy equipment, most of which is imported. Meanwhile, physical transport has become relatively less important as the 20th Century economy, based almost entirely on physical goods, is replaced by a service and information economy, where the core infrastructure is that associated with the internet.

The pandemic has rapidly accelerated this transition. While some of the decline in transport we have seen will be reversed when the virus is controlled – or when, as elsewhere, we decide to put up with the steady toll it exacts – much of it will not be.

Business travel is unlikely ever to return to its previous levels. As experience with online meetings has been forced upon us, their advantages have become obvious and have grown over time. 

In the pre-pandemic era, organising a meeting with virtual participants was more difficult and complex than the alternative of providing everyone with transport to a physical venue. Now, it’s just a matter of sending out invitations from Zoom or Microsoft Teams. It’s easy to schedule multiple meetings, with different participants in quick succession or even, at a pinch, in parallel. In the light of these advantages – and the likelihood that some level of social distancing will be needed for years to come – it’s highly likely that online meetings will remain the norm even after constraints on travel are removed. 

The biggest impacts will be on air travel. In the pre-pandemic era, it was common for business meetings to be organised in a conference room located in or near to an airport, with the participants driving to the airport in their home city, flying to the meeting, then returning home. It seems unlikely that this nonsensical practice will ever return. But business travel of all kinds will raise the question (asked in British posters during WWII), Is your journey really necessary?

The effect on commuting to work will not be as great. Some employers are already trying to reverse the shift towards working from home. But the obvious efficiency gains and the cost of providing enough office space to maintain a safe workplace mean that these efforts are unlikely to be more than partially successful. So, the total demand for work travel is likely to decline.

Some other kinds of private travel are likely to fall. The pandemic forced many households to rely on home delivery of groceries. A single delivery truck needs much less road space than a couple of dozen households, each driving to the grocery store and back.

The big problem raised by the pandemic has been the decline in public transport usage. Travellers understandably prefer using their own cars to sharing a bus or carriage with a crowd of strangers. Fixing this problem is an urgent task if congestion is to be controlled. The first step must be making masks compulsory. As most people now understand, the main point of masks is not to protect the wearer against infection but to protect others — in this case, fellow travellers. A mask mandate might discourage some who are opposed to such precautions from using public transport, but these are the people most likely to engage in high-risk behaviour of all kinds.

If transport infrastructure investments are not the right way to stimulate the economy, what kinds of investment do we need? The most important single physical investment we can make is to fix the National Broadband Network, replacing Malcolm Turnbull’s hodgepodge with high-speed fibre to the premises everywhere. This investment would create more jobs for a given budget than a big road project. Even better in this respect would be an expansion of social housing.

But the biggest investments we need to make are in people, not concrete. The pandemic has exposed huge weaknesses in our social infrastructure, from aged care and public health to university education. These are the areas that desperately need more investment if we are to make the economic transformation we need.

John Quiggin is Professor of Economics at the University of Queensland and the author of 'Zombie Economics and Economics in Two Lessons'. You can follow John on Twitter @JohnQuiggin.

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