The folly of governments with money

Monorail may link new avalon station to airport
$300m more from taxpayers to save car jobs

Here are two great articles about how governments spend money. 

The first is a proposed Monorail linking a couple of sheds built next to a runway (Avalon or Geelong airport) with a railway station that doesn't yet exist.  If the Simpsons has taught us nothing else (and it has taught us plenty), monorail is a synonym for both 'white elephant' and 'waste of money'.  The article reads like a dreamer's bedside table notepad.  You'll be able to check your bags before you get on the monorail.  Monorail will be cheaper than regular rail.  This sounds as impractical as it is stupid.  No thought given to security, traffic going the other way or scale. 

Why did Victoria's transport minister pass comment?  This proposal is barely beyond the 'I just thought of it' phase and this article is clearly intended by the airport operators to help facilitate government funding of a rail link.  Ministers should not pass comment on what is not much more than idle speculation.  Politicians wonder why the general public struggles to take them seriously!

The second article is one of my favourite topics as it poses a unique quandary for policy makers in Australia.  There are very few countries (about a dozen I think I read somewhere recently) that retain the ability to design and build cars from scratch.  Australia is one of them.  But we spend a fair bit of taxpayer's money to keep it that way.  From a pure market point of view, that money is a waste as we could just import or assemble vehicles and hang on to at least $1billion a year.  But pure markets are for dreamers and academics.  In the real world there is the political considerations of losing heavy industrial capacity.

There are the obvious job losses at car manufacturers and then the closure of parts suppliers.  But what I believe is the most important and best argument for large government subsidisation of the auto industry is defence.  We are not just a country, we are also a continent.  So if this continent loses the ability to manufacture vehicles, it becomes a strategic weakness in terms of defence posturing and wartime capability.  As a wide open land next door to the most populous region on earth this can not be ignored.  The engineering and manufacturing skills needed for the design and manufacture of vehicles is very important to the defence of a continent.  We can't rely on the yanks for everything.

Ideally and ordinarily I'd pump for the free market economics solution and save the money, but he who fails to prepare for war is destined to find himself in one.  Perhaps the re-introduction of import tariffs might be a better way to support heavy manufacturing as it shifts the cost burden onto the consumers and producers of foreign cars rather than across all taxpayers who tend to resent the concept of government handouts to specific industries.  With a very strong Australian dollar this protectionist measure actually has some merit for help the auto industry stand on its on feet whilst imported cars are so cheap.  But governments have been giving the car makers handouts since the tariff wall started to come down in the 1980s, so both parties are kind of wedded to the concept and the car makers know they are going to be supported, so they keep putting their hands out for more.  If the idea didn't fill me with dread, I would suggest nationalisation here - but that would probably cost way more than subsidisation ever will.

So two articles about government expenditure and no mention of cost-benefit analysis or mention of any great argument for not spending the money on a pile of paperclips.  Not that cost-benefit analysis is necessarily helpful.  Take the Monash freeway here in Melbourne.  For some reason it was originally built as a two-lane road with traffic lights, yet within twenty years and a few billion extra dollars it is a four lane monster with grade separations.  Obviously the cost-benefit analysis in 1990 didn't look too far ahead or else it would have been economical to build the road at full size back then.  So what I guess I'm getting at it that if it buys votes (auto subsidy) and offers a good photo opportunity (monorail) it is more likely to get assessed and funded than if it may actually accrue long-term benefits to the community (large freeway).