Governments all over the world are mulling various options to overcome recession. Building infrastructure is candy of eye of all the governments as the solution. . J.M. Keynes, in his book ‘General Theory of Employment, Interest and Money’ argued about the relationship between production, wages and employment. According to Keynes, purchasing power in the hands of people was the most crucial factor for the economy to revive. He suggested that government should pump in money because no private investor would be interested to take risk in turbulent times.
Although the benefits to economy from building the infrastructure cannot be neglected but I have reservations about whether it is a solution to recession. In earlier time (when Keynes has given his theory), building infrastructure was labour intensive. But today it is highly mechanised, using little labour. Dams, power plant, airport, roads etc are capital intensive these days, not labour intensive. With today’s technology, building infrastructure is not a big job creator unless we insist on inefficient, obsolete techniques, a mistake that government of India had committed when it stipulated that 60% of cost of building road under NREGA (National Rural Employment Guarantee Scheme) should go to wages. As a result, we got low quality roads which disappear almost after every monsoon. This approach of forcing the mechanism of building infrastructure can never create good infrastructure.
Also, normally infrastructure projects have a long incubation period. So they have their own time in disbursing money and hence cannot provide Keynesian boost.
No comments:
Post a Comment