Anglosphere Costs and Inequality
After my last post detailing how high American subway construction costs cannot be attributed to high incomes, people in comments were talking about inequality instead. Matt was talking about lack of union power, calling high US and UK costs “social democracy by stealth,” and Michael James was talking about political elite elements of inequality including domination by Ivy League and Oxbridge graduates with their old boy networks. Just as the story that high US costs are about wealth does not stand up to closer scrutiny, the converse story, relating high US and UK costs to a negative exceptionalism about their inequality and class systems, is also false.
Inequality and costs
The Luxembourg Income Study has comparative data for inequality in most of the world, looking at inequality after taxes and transfers. The OECD has its own dataset, which mostly agrees with the LIS, except notably in the UK: on LIS data, the UK nowadays has similar inequality to Germany and France, after a long period of decline from post-Thatcher levels under Tony Blair and Gordon Brown, whereas on OECD data, the UK has higher inequality than nearly anywhere else in Europe, and is slightly more unequal than halfway between Germany and the US.
But regardless, among the countries and macro-regions that build a lot of subways, the highest inequality is in India and Latin America. India’s Gini index on LIS numbers is 0.5; Indian costs are in theory below-average, but only by virtue of high use of els, and correcting for that, its costs are high by global standards and low by Anglosphere ones. Chile, remarkable for its low costs (as explained by Eno), has a Gini index of 0.46. Much more expensive Brazil is rather similar. Next to Latin America there is China, which the LIS gives a Gini of 0.41, and which has rather average costs. Any attempt to do correlations between a country’s subway construction costs and its Gini will run into those outliers; I expect the correlation is still going to be positive because of high American inequality (0.39) and high American costs, but dropping the US it might not even be positive, let alone statistically significant.
Canada and Australia
The US unambiguously has high inequality and high costs. The UK has ambiguous inequality, and other features of high inequality, such as low income mobility (see for example an OECD review). However, Canada and Australia both have lower inequality and high income mobility; a more recent paper, by Corak, Lindquist, and Mazumder, finds that Canada has more mobility than Sweden and not just more than the US.
The sort of elite that the UK and US have does not exist in Canada. The United States is a country of “where did you go to college?”; the UK is the same, except it’s called university and not college. Most of Continental Europe is not like this at all – what one studied matters much more (engineering is good, humanities are not) than where one studied. Canada is rather like Continental Europe in this – there just isn’t an equivalent of the Ivies or Oxbridge there, just a number of huge, very good research universities like Toronto, McGill, and UBC, none of which is anything like an elite American university. The current prime minister is literally the son of a previous prime minister, but his predecessor, Stephen Harper, worked his way up from the mail room of an oil company; the previous PM, Paul Martin, is the son of politicians; the PM before, Jean Chrétien, was born indigent, more reminiscent of classical Victorian literature more than modern first-world poverty. This is not the consistent middle-class or princeling upbringing of leaders in the US or UK.
And yet, Canada has horrifically high construction costs. This, again, is in a country without any of the elite hangups of the US or UK. It doesn’t have Nordic or even Franco-German inequality, but it’s very close to France and Germany and not at all close to the United States. It doesn’t have nearly so much core-periphery dynamics (every single province has received net equalization payments at least once in the history of the program). Its provinces have local core-periphery dynamics, but nothing by the standards of any region or small country that builds subways at reasonable costs. It doesn’t need to do stealth social democracy.
Italy and East Asia
While Canada (and Australia) has American costs without American inequality, in Italy we see low costs while inequality is, by European standards, high. On LIS numbers, Italy is the worst in Western Europe on this. It also has low income mobility, and very sharp core-periphery dynamics, with incomes in Lombardy clocking in at about twice the level of Campania and Sicily. If anywhere needs to do stealth social democracy, it’s Italy – the core-periphery dynamic does lead to social disaffection on both sides of the North-South divide.
And yet none of that happens. Construction costs in Central and Northern Italy are rather low. They’re higher in Naples, for geological reasons more than any stealth social democracy.
What’s more, Italian costs fell between the 1980s and 2000s, an era of much cleanup of the endemic corruption of the First Italian Republic. This did not involve any resolution of longstanding social tensions – the North-South divide remained as large as ever, economic inequality rose (slightly), the one-party rule of Democrazia Cristiana was replaced with left-right polarization and the growth of the both extremist and regionalist-to-secessionist Lega Nord as one component of the right coalition. Economic growth ground to a halt – Italy took until about last year to recover to 2007’s GDP per capita, which itself was not too far above 1990s levels.
And again, Italian costs fell.
Democratic East Asia has different tensions – very deep political polarization in Taiwan and South Korea, political corruption, distaste for a universal welfare state of exactly the kind that encourages stealth place-based replacements, brutal test meritocracies in which the leadership comes from the same narrow social milieus as the US and UK. Taiwanese costs are high, though not Anglosphere-high; Japanese ones are lower; Korean ones are quite low. None of this seems to matter.
The timing of Anglosphere cost growth
To be clear, there are elements of the Reaganite and Thatcherite package that I do think are responsible for high costs – namely, the delegitimization of the civil service. But they’re not usually core to what people perceive as Thatcherism, and much of the dismantling of state capacity happened under people trying to come up with a synthesis of postwar big government and the Reaganite and Thatcherite antithesis thereto, leading to public-private partnerships and outsourcing of government functions.
None of that has anything to do with inequality or stealth social democracy or elite theory, though. The same cost explosion happened in Canada, where on LIS numbers, inequality has been largely the same since the 1970s; Brian Mulroney, unlike Thatcher or Reagan, did not preside over a rise in inequality. It did not happen in Germany, where inequality did rise under Gerhard Schröder and early Angela Merkel; Schröder’s ideology was similar in broad outline to that of Bill Clinton and Tony Blair, except that under Schröder economic growth was weak and inequality rose, the opposite of Clinton and Blair, and yet Anglo-style privatization of state planning to consultancies did not happen.
Rather, the culprit for high costs must be a more specific set of project delivery mechanisms that have been popularized in 1990s Britain – the same globalized system I mentioned in the previous post, workshopped by British consultants in Hong Kong and Singapore, and now in the Gulf states. British neoliberalism had Singapore and Hong Kong to absorb consultants, whereas German neoliberalism had Russia, which led to different dynamics, such as gas dependence and geopolitical weakness, rather than Russia inviting Germans to teach it how to redo the way RZhD contracts infrastructure and operations.
And in the US, costs rose from an already high base. This is not the same situation as in the UK, where in the 1960s and 70s costs were the same as in Continental Europe. Rather, American costs were already high, New York costs having exploded in the 1920s. Things have gotten worse in the last 40 years, but the mechanisms aren’t always the same, and the atrophying of the civil service is not a matter of stealth social democracy, not when postwar New York was incapable of building.
Pedestrian Observations 
Canada has unexceptional income inequality and comparatively admirable income mobility, at least where where the Anglosphere is concerned, but it is infested with oligopolies and there are about 15 families which own an inordinate amount of the country’s wealth./ But I believe that you are fundamentally correct that the roots of a dearth of public transit construction across the Anglosphere (and the countries in its influence orbit) are to be found primarily in the neoliberal turn whereby governments voluntarily absented themselves from entire segments of economic activity — most scandalously public housing (which I blame in significant part for both the affordability crisis in housing and the homelessness crisis; they ARE linked) and public transit design and construction. As a result, huge premiums are paid over civil service rates EVERYWHERE along the design, construction, maintenance and management stages for, among other public goods, subways. These are economic rents, full stop.
*All* rich countries have oligopolies; domination of the labor market by big business is a feature of rich countries, while poorer ones, and even poor-rich ones like Italy, have more family-scale businesses, which are inefficient.
And re the government absenting itself from housing: Japan has very little public housing, while Singapore is replete with public housing. It’s not about this.
Japan has more public housing than you might think (about 5% of housing stock). The simple reality is that excepting the Communist block before the 1990’s, there are very few societies that have ever had significant social housing. Southern Europe and Switzerland never did. Germany had its own weird rental property system. Canada/Aus/NZ/US never had subsantial programs.
Everytime somebody whines about “social/public/state housing” I want to beat them with the Hong Kong census which has a higher “public housing rate” than any social democracy. Then ask their parent’s about their property portfolio.
I’d argue that actually the record of the social housing heavy states on housing quality/affordability consistently underperform the affordability-through-production states. The only countries to have consistent affordability among those two are France and Austria, which have relatively high rates of private production, self-built housing and hypothecated taxes for financing social housing. Even then prime-city NIMBYism is undermining the system. Whereas Denmark, Netherlands, UK, Ireland, Sweden consistently rank terribly because social housing incumbents join with home-owners to punish newcomers who just happen to be young people and immigrants and people who dare move-away from home. (Yes UK is the worst on that by miles, although Ireland cheats).
And lets not go into how HK/Singapore replicate the Communist block pattern of using housing to extract resources from their populations for industrial policy/refusing to build a tax system enforced by underbuilding.
The social housing incumbents in Sweden aren’t NIMBY… among the parties on the left, it’s the NIMBY greens who are more bourgeois and weaker among the public housing residents than the YIMBYer social democrats, consistently throughout Europe.
And 5% in Japan is low – it’s similar to the proportion of US households in public or otherwise federally-subsidized housing.
Yeah that model applies better to Netherlands and the UK than to Sweden. I merged the co-operative rent-controlled sector with straight public. I’d definitely agree that New Left/Greens are waaay more NIMBY that legacy-soc-dem left, although Hard Left is also ultra-NIMBY* de-facto.
*”no more private housing until the Revo- I mean we get a magic extra 2-3% of GDP to have a social housing party like its 1958″ is NIMBYism with more steps.
Polling in these issues is a mess because voters are often a mess. But I’ve seen real numbers showing supply skepticism among social rent or rent controlled apartments in New York or Ireland. UK is actually different, the Labour machine is historically Nimby but councils and housing associations are such atrocious landlords* even before you get to the fiscal crisis imposed by Tory governments.
*This long predates Thatcher by the way, which is why tenants gleefully bought up their units to the horror of Labour. Or the rise of regeneration ballot initiatives The sector is filled with the worst kind of charitable sector abusive incompetent (Anya Martin a housing campaigner told me she moved from social sector to financial regulation because it was less evil and incompetent a sector!).
Yeah, somewhat less polemically the problem with social housing based systems is that it requires the state to be builder of last resort while being dependent on the kindness of the homeowner majority/plurality to provide the cash to build/maintain stock….and more controversially the land. Lots left-wingers are pro-social housing because they think it will put “those people” far away from them. Which is why Paris and Stockholm are more segregated than Tokyo or Taipei despite lower headline inequality. Mobilising developer greed > homeowner-taxpayer kindness.
“Polling in these issues is a mess because voters are often a mess. But I’ve seen real numbers showing supply skepticism among social rent or rent controlled apartments…“
I kind of want to say that some of them are unironically correct. As in, “of the people answering exactly the same written question and ticking the same box, some are wrong and some right”. You need sharper tools (e.g. focus groups, or a “poll” on the level of an exam) to tease apart the possible interpretations of the questions. Quick rundown:
– Are you asking about the social rent? That’s controlled by political forces, the market only has an indirect influence (as an input to the politics), that rounds to “no”.
– The question is about the rent specifically, not about waitlist length, bribery, landlord pickiness, etc., right?
– Are you asking whether a construction spree of such magnitude that the market sweeps away this political hackery (market price slips below current/extrapolated (which?!) social-rent) is even slightly plausible?*
– Even an optimistic and enthusiastic YIMBY would think it would take two decades, and assume that your poll has a shorter time-scope than that, and therefore answer “no”.
– On these timescales, the endogeneity of demand starts being significant. Unfortunately, short explanations of “(indirectly) self-complementary good, therefore infinite-or-negative demand price elasticity” without the jargon tend to read a lot like supply skepticism. (Econ 201 professors’ favorite “trick questions” are the level of unambiguously-nailing-down-what-the-question-asks effort here.)
*: Regrettably, an awful lot of people are entirely unable to discuss X->Y if probably the case is that ~X. I’ve had on multiple occasions deeply alienating discussions, wherein otherwise intelligent people doggedly refused to express any opinion on X->Y, instead “answering” either by reasserting ~X for the umpteenth time, or by attacking the questions as pointless (waste of time) or nonsensical (unanswerable).
“the social housing heavy states on housing quality/affordability consistently underperform the affordability-through-production states.”
This x 1000.
Maybe you’ve already discussed this in another post and I don’t remember, but the problem with infrastructure cost affects also the private sector, not only the public? I think the rebuilds of the football stadiums in Madrid and Barcelona have high costs comparable to the building of new stadiums in UK. Is the private sector worse at procurement compared to the public sector of some countries? Maybe there is something related to the trust in the client (“this football club may fail to pay for its stadium”, “this government may decide to pull the plug on the project if there isn’t a social consensus that it’s strategic”) driving up the price?
It doesn’t seem that Japanese and US private rail is much more expensive than public rail, though I say that entirely on a vibes basis. Not sure where else there’s been much private rail construction recently, so a broad analysis may need to include toll roads and stadia.
The freight railroads spend billions of dollars a year on construction.
Well, if the private sector isn’t clearly cheaper than the public sector, then they both share the same high cost problem, that was precisely my point.
I don’t know they details of Japan, but in Spain I have the feeling that toll roads are closer to a public project where the construction company acts as a financial company at the same time.
I think the risk of HS2 phase one or Crossrail being cancelled was always pretty small. So I am not sure that drove up costs.
Wait, why did construction costs rise in New York on the 1920s?
Also, you mentioned Russia as a sidenote. It does have some infrastructure construction going on, but you don’t mention it often. Is it a lack of data, or irrelevancy?
Insufficient data, yeah – the data I do have points to fairly high construction costs in Russia and Ukraine (their metro building traditions are identical, and at this point I don’t think there’s any pressure on Ukrzaliznytsia to Francize or Germanize), but there’s such lacunae in our data for Russia…
In New York, the cost explosion in the IND can be attributed to a lot of different kinds of overbuilding. The line in The Power Broker is “the city didn’t get what it paid for, but it certainly paid for what it got.” The IND was built with wide curves and cut-and-cover, necessitating demolishing buildings at corners; it had underground flying junctions; Sixth Avenue Line was built underneath an el and on both sides of the PATH tunnel; the stations have full-length mezzanines rather than the smaller mezzanines of the IRT and BMT. For the cost, it wasn’t even good – it was built with tens of missed connections with the IRT and BMT, and it still didn’t provide adequate Queens-Manhattan capacity.
The overbuilding of the IND is legendary (there is still a six track station shell at South 4th St in Brooklyn waiting for all of those new lines from Manhattan to Brooklyn and Queens….) but this raises an interesting question: are US subway costs so high simply because of overbuilding/scoping (like the huge excavations for back of house space at Second Av Subway stations) or is the US actually less efficient (the German-TBM-has-six-operators-but-the-American-has-eighteen story)?
In other words, if a US subway costs double per mile to one in Europe, is that because they poured 1000 cubic meters of concrete while the Europeans poured 500, or did they both pour 500 yards but the US spent $10,000 per yard while the Europeans spent $5,000?
If it is a mix of both, which has a larger cost impact?
I ask because you have identified exploding costs as a feature of the past few decades and the “globalized system” of consulting and contract management, but if costs were high in the 20’s and beyond because of overbuilding that would mean that Anglosphere contracting procedures are not the problem but instead a failure to keep scope in check (DC Metro and Harry Weese’s huge arched stations? BART digging deep under Market St instead of sharing platforms with Muni?).
Not everything you read in obscure corners of subchat.com are true.
Alon misunderstands my comments. I’m not making an argument about societal inequality. I’m making an argument about the relationship of low social service spending and high public infrastructure spending in the same society, mainly the US and UK. I’m arguing that public infrastructure spending is a unique point of leverage for certain working and middle class Americans and Brits and they use that leverage to extract as much as they can from public infrastructure rather than investing their time and efforts in supporting more broadly and explicitly redistributionist candidates and parties. Why such candidates and parties don’t currently exist in the winner-take-all constituency systems in the US and UK is a relevant and related question here. If infrastructure were not publicly funded in the US and UK, they would no doubt have the lowest infrastructure costs despite the great societal and political pressures for implicit redistribution. The redistributionist pressures would find another way to extract something from a system that otherwise keeps such pressures divided and weak.
If the US and UK had explicitly redistributionist parties and policies, it would relieve that pressure leaving infrastructure planning and funding less politicized and more professionalized as in continental Europe.
So, winner takes all/paucity of choices and low social spending leads to a kind of machine politics? Maybe sometimes, but here are some counterfactuals: (1) France has winner take all, but not FPTP; consequently, the winner has to build a broader coalition to win run offs. (2) Japan has something like one party rule, so if being unable to meaningfully vote for a redistributionist party would cause such rent seeking why doesn’t it have much higher costs? (3) It hasn’t been the case for a while that the US/UK working class votes Dem/Labour as a matter of course.
What the fuck is “the working class” does that mean home-owning pensioners in Wisconsin or Lincolnshire? “The working class” is crappy majoritarian Marxist theology designed to attack the legitimacy of other identities, its cope concept with an occasional dash of coercion. Its why Republicans have come to love it.
Japan doesn’t have one party rule, it has coalition politics and has since 1993. And the Japanese left died in the 1990’s and nobody seems to want it back because all they offer is “the 1960’s is only Japan worth having” which is basically left-coded version of the LDP offer which “1890/1930/1950’s is the only Japan worth having…but we’ll make do with the one we have”. And the Japanese Communist Party is a group of NIMBY rentiers who hate Koreans, burakumin and taxes, while believing the best policy for peace in Asia is sending “how sad” letters to Taipei.
AFAIK other than the 93-05 period (LDP still dominant, just in a coalition as you say) and 09-12, LDP has had an outright majority in the lower house for a very long time. Hence “like” one party rule. Close enough that nationally, they essentially limit how much more social spending is feasible, from a low-ish baseline. Also don’t know why you brought the communists into it, they are irrelevant nationally?
As for the usefulness of the working class construct, I think it is useful as one of many crosstabs. But as I said, it’s not a monolith and many working class people vote based not on redistribution or even against social redistribution as evidenced by (R) and Con working class voters.
LDP relied on coalitions with the Socialists, Ozawa’s party and since 2000 the Komeito to have Lower and Upper house majorities. The Komeito’s power is mostly that it can lend its voter machine in single member districts (average LDP member in urban areas relies on them for 15-30% of their vote). LDP hasn’t had a majority in both houses since 1989, and no genuine one in the lower house since 1993.
JCP wins more than 5% of the vote in most elections, they have deep presence in local government they are the only meaningful “left” political party. If you want the Japanese left you start there. The CDPJ is a big-tent coalition.
Its the Japanese public that limits social spending in Japan. Not the LDP. They voted for economic conservativism because they want the 1960’s social order forever. Read the JCP or JSP’s manifesto. Sod all on taxes. And tellingly none of the major urban prefectures which are fiscally self-sufficient have decided to go on a tax-and-spend spree for the urban poor, they did in the 1960’s. But they don’t now.
Two things — (1) I don’t mean to imply that the LDP is some kind of repressive regime, it is indeed clear that they are reasonably popular with the public. (2) AFAIK CDP is for more social services, but not by a huge margin. But they and the communists aren’t popular enough to constitute a realistic way to get more social services, is my reading — unlike Labour, the French left coalition, or US Democrats for instance. I would say that Labour and the US Dems also don’t really represent much more in the way of social services.
And good info about Komeito. Though it is also a center right party, so the difference within the LDP Komeito coalition seems not super relevant to the initial discussion about whether they represent a way to obtain more social services.
The “working class” has income but the net market value of their assets is low or negative.
I’m not sure why some on this blog have issues understanding this sort of concept. Working class refers as much to a lack of wealth which can generate its own income as a dependency upon labor to generate income. The universality of that categorization–because no one can know that their assets will generate them income in perpetuity, through generations of their descendants–is why it can be powerful, and why leftist studies of present-day capitalism tend to focus on that definition of it. We’re all, at best, temporarily enriched paupers; even the very wealthiest capitalist isn’t truly free–insofar as that word has any actionable substance, at least–under capitalism.
A better term today that avoids the class issue, is “working poor”. Those who cannot afford a normal life* while working a full-time job. Thus forced into multiple jobs often of precarious nature. In rich societies this is particularly odious. Not to mention bad for their economies.
*affordable, stable housing, healthcare (including dental), educational opportunities.
@Michael I agree that “working poor” can be a useful lens, but I don’t see its applicability here. As I understand it, most of the people Matt is discussing are the kind of construction and planning workers who are not the working poor but who are working class or even petite bourgeoisie.
UK and US are very different. US has never really had a civil service outside maybe the DOD. UK has a civil service but its technically incompetent, and has been well before the Thatcher revolution, indeed she was a product of that system’s massive disappointments 1945-1979, UK underperformance on public infrastructure dates to that era, though Thatcher makes it worse. In 1939 UK had the highest productivity, the best quality housing (highest share of running water), one of the best road-rail mixes in Europe, by 1979 it was already Portugal with a megacity with meh productivity, low quality housing (poor thermal performance, small size), bad railways, and the cost disease is already starting to hit the Jubilee line construction. Not to mention BR had the worst operation costs in Europe. Mild Mediocrity is Postwar Britain, its core commitment because its core value is that its core territory is worthless unless conversion therapied into Great Britain.
Both the UK and the US have explicitly redistributive parties. New Labour was in practice a social-democratic party operating under explicit orders from the electorate not to raise taxes, and with the partial exception of Clinton, each Democratic party Trifecta has expanded the US welfare state, and inequality seems to have finally stablished since Obama took power.
This idea of Anglosphere as uniquely and perversely anti-redistribution relies very heavily on letting left-wing parties off the hook for their many sins, i.e. commiment to majoritarian electoral systems, unwillingness to admit to administrative complexity, neglect of local administration etc etc. The UK has an added problem of the left-parties being committed to creating a racial aristocracy across via Sewell Convention/Barnett formula “equality for everyone except the English” doesn’t make things easy. Democrats don’t have anything quite that stupid, although treating African Americans, LGBT people in the American racial-religious context is much much harder sell for social democracy than 1960’s Sweden.
Also the East Asian developed states have relatively weak welfare states, even compared to the US is some respects (e.g. share of gdp), hasn’t ruined them.
The British Left, whether soft, hard, Celtic, Green or Blairite are equally guilty as the Tories, they treat government as an exercise simply of moral superiority and will while refusing to discuss competence, administrative detail, hard-choices, or even just self-restraint (1945 Labour government made a killing in land speculation booms created by their policies). And lots of scape-goating. How very Thatcherite.
I think Starmer will actually be better at some of that boring shit to be honest. He actually ran a large organisation and clearly relatively successfully.
At some level that’s true. But Starmer (and Sue Gray) clearly believe the system is good but for teh evil Tories. Gray apparently hates “siloing” the ministries which is a source of 1/5 the problems of the British state. I am very very skeptical that coercion from No. 10 will build enough housing. More housing certainly, but infrastructure unfortunately no. Partly because the NIMBY backlash will be fierce, but mostly because the 1947 system is so utterly rotten it will be like running in mud. Furthermore you have to equip local government to actually administer shit and upticking council taxes isn’t nearly enough.
If you want to build houses in Britain you have destroy the Postwar British social order. It will reveal that Outer Britain is a property scam with a side business in pity money. It means giving fantasies of moral leadership stemming from parliamentary labour party. It means giving most of Labour most cherished dreams and assertions. And I think Starmer is much more a naive believer in the Labour dream than people give him credit.
I think a big issue in the UK with rail infrastructure at this point is that the transit activists are extremely bad at caring about costs.
I mean they have supported Northern Powerhouse rail long past that making sense even though it doesn’t meet a cost-benefit ratio – and seem incapable of suggesting an alternative that is better value for money.
And with HS2 they haven’t realised that the bottom half of phase 2a (i.e. the end of phase one to where the line to Stoke splits off) is very high priority but the upper half is much lower priority.
Beyond that improving Crewe – Weaver Junction (where the Liverpool line splits off) either with a new dedicated passenger line or with four tracking the existing one – is probably the top priority on the West Coast Mainline – with four tracking Weaver Junction to Preston and having passing tracks at stations North of Preston and speeding up the exits from sidings for freight trains all having higher priority than another else.
In comparison to be fair the New York transit activists do seem to be already starting to come round to the idea that the congestion charge should fund commuter rail, and they have had a lot less time to get to that position. I have been bloodied on Twitter for suggesting that HS2 was overpriced *years* after that should have been obvious. Also to be fair the New York thing is much more political than transit focused as a decision.
Certainly it would be possible to have people on the team who believe the New York congestion charge should fund the second avenue subway as that is still a good project. In comparison it would be harder to have people who don’t care about the cost benefit ratio of Northern Powerhouse Rail as they will actively be fighting against doing a project that is actually deliverable and gettable past the Chancellor.
Apologies for terrible spelling/grammar – ‘another else’ means HS2 from Norton Bridge to Crewe.
I am not really sure that is true in the UK. Perhaps in the US.
The UK issues are mostly around over engineering, very high usage and population density.
As before, your argument has lots of flaws:
If there is meta-anglo-saxon institutional legacy its that local government is highly incoherent and relatively weak in terms of funding/capacity due to heavy reliance on just property taxes. An arrangement that was world-class in the 17th-18th century but creates horrendous incentives (Fischel hypothesis).
There is bit also on unions but its subtle. Anglo-saxon unions are craft based which means they are very attached to certain ways of doing things while having little power/responsibility for the industry/sector/company-operator as whole. Compared to Japano-Korean enterprise unions or Western European sector wide unions. It partly accounts for insularity against global best practice (which means firing duds and deadwood) and resistence to change other than “moar money”.
“Anglo-saxon unions are craft based which means they are very attached to certain ways of doing things while having little power/responsibility for the industry/sector/company-operator as whole. Compared to Japano-Korean enterprise unions or Western European sector wide unions.”
This is a little recognized but I think very important point. There is far too much conflict is US labor relations due to UAW threatening to strike Ford using the threat of lost market share to GM as leverage, or a company taking a hard line with the Teamsters so that they don’t set a precedence for concessions during negotiations with the AFL-CIO next year.
Note that the construction industry is the best in this regard in the US. Although not quite enterprise or sector wide, each craft local (electricians, plumbers, etc.) tends to set a single rate for the region (sometimes with variations like a higher rate for downtown work) in negotiation with contractors. The National Electrical Contractors Association and the International Brotherhood of Electrical Workers produce a bumper sticker with two wires intertwined. The fluid nature of the construction business (where a general contractor can work with different sub-contractors on different projects, and where hiring “out of the union hall” is still common as projects fluctuate, compared to a factory that has roughly fixed employment) may have something to do with this.
Its the worst form of unionism, its bad when you have large scale industrial enterprises undergoing constant change in technique with some branding-pricing-market power. Its even worse is soft-budget situation like the public sector or protected from foriegn trade sector. US also has a lot of weird state-level licensing laws even where there aren’t unions. Not to mention the unusual power of professional association (50 bar associations, and the AMA’s role in supressing medical school students).
UK doesn’t really have that problem thanks to Thatcher, but it had already destroyed much of manufacturing sector by the time she got there and broken the public sector’s standing with the public.
Social service spending varies enormously between different US states, by several hundred percent per capita.
“Social service spending varies enormously between different US states”
And yet infrastructure costs are high throughout the country (Alon, is this true? I know that some small US states probably don’t have enough projects to evaluate, but I’ve never heard you reference large differences in intra-US costs, versus comparisons to the rest of the world).
Furthermore, the states with the highest social service spending (CA, NY) are also the states with the highest public infrastructure costs.
Yet two more points that completely contradict your argument that social service spending is inverse to public infrastructure costs.
How de we know that infrastructure costs are “high throughout the country?”
I didn’t say it was the working or middle classes extracting money from public infrastructure spending. They don’t have the power to do so in the US or UK. I said it was small select groups of working and middle class people in unions, public agencies, and elected offices who are doing the extracting. Most working and middle class Americans don’t belong to unions so they are left out of the processes of extracting money from public infrastructure. Why can’t anyone even represent my argument correctly?
“public agencies, and elected offices who are doing the extracting.”
If public agencies and elected officials are doing the extracting, then what does that have to do with social service spending?
….Are you really not understanding the argument? This seems like a Richard Mlynarik point.
Assuming I’m not putting the wrong words in others’ mouths, public service in the Anglo countries isn’t designed to provide a public service/produce a public good. It’s another means of getting some of the largess that is pretty readily thrown into the private sector. At least outside of those of the comfortably right-wing, it’s unusual to have pols explicitly state that demolition of the public sector is an actively-pursued goal, and so joining the public sector becomes a relevant option for anyone looking to make a living, along with perhaps better aligning with the political thinking of some.
Alon has also made this point, that essentially the only reason people join the Anglo public sectors is because they can’t get private sector jobs due to incompetence, lack of connections, etc. Funding the public sector therefore becomes a form of social spending: not done specifically to provide public goods/services, but for the sole purpose of keeping an educated and potentially politically-adversarial group of people in line.
@aquaticko, even given its flaws the public sector has much more interesting and rewarding problems to solve. I think that is a big motivator too.
It has to do with the LACK of social services spending. Less social services spending leaves more financial space for infrastructure spending. It also gives incentives for those who participate in infrastructure spending to get their cut. It’s the one point of access they have to public spending so they take it. If US infrastructure were built and operated by private for-profit organizations with private capital and user fees/tolls, the US would be low cost infrastructure.
Wait – France has very high infrastructure spending on top of its social spending, it just spends its infrastructure money better than the UK and US.
Exactly, France has high social spending and the US and UK have lower social spending. A broad spectrum of French people have access to social spending and there is therefore much less incentive to pursue a complex and challenging strategy of extracting a share of infrastructure spending as a political/career strategy by some. That is WHY it “spends its infrastructure money better than the UK and US.”
You are verballing me a bit, though I do not resile from the thesis of “political elite elements of inequality including domination by Ivy League and Oxbridge graduates with their old boy networks”. I can’t see anything here that contradicts that reality. As I said multiple times, there is no simple metric that encompasses the problem. Outcomes are horribly complicated interactions from multiple factors. If anything it is Alon who, being a mathematician, is prone to searching for a holy grail equation.
Inequality is certainly at the heart of the UK’s problems but as I also said, it is not just the official measures of equality but the operational ones not reflected in any inequality metric, prime amongst them being the 6 to 7% private schools (aka “public” in UK) vastly overrepresented in the ruling elite. Note also, that, like with many metrics, one cannot easily do cross-country comparisons based on this bald metric: private schools in France are little different to public schools; and Australia has a much greater private school sector due to long-persisting absence of the state which has left a legacy of a large number of poor church-based schools (heavily state-subsidised!) while the number of elite private schools is probably about the same as the UK, and produces a similar elite–the overall achievement of all private schools in university exam results and admission is lower than public schools.
If one took the LIS result at face value one would be shocked at this and maybe disbelieving; or even the OECD measure (and I don’t think I have the energy to ferret out how the LIS distort the data). This is the critical observation:
Neoliberal economics does this everywhere but none so thoroughly as the UK, except perhaps its offspring Singapore & HK (esp. since 1997). An interesting metric would be to determine how much of that excess spend on HS2 (the excess being of the order of £100bn) flows to the same elite, ie. alumni of the 7% private school which of course 100% overlaps with the land-owning gentry, including the Russian and ME oil oligarchs (eg. Baron Evgeny Lebedev elevated to the House of Lords by Boris; can’t make this stuff up):
Why is an out-of-touch political elite a problem in the UK but not in Japan, where almost all recent PMs come from political families (as mentioned in their Wiki articles)?
https://en.wikipedia.org/wiki/List_of_prime_ministers_of_Japan#Prime_ministers
@John:
Never said it wasn’t, and plenty have said that it is a problem for Japan.
They can do stuff but the social compact is not everyone’s ideal, including approximately half of Japanese. But they are the first, along with S. Korea, to grapple with the population shrinkage crunch and I hope they provide examples for how the rest of us can manage it.
OTOH I’ve always said that Japan is so singular that one has to be very cautious about what lessons others can learn.
In the context of transit costs, Japan’s are reasonable by international standards despite a more entrenched and out-of-touch political elite than the high-cost UK.
I think the original article shows that there’s no falsifiable correlation between inequality and transit costs. In any case, there are other examples besides the ones in the article. Historically neoliberal Chile has comparable, if not the lowest, construction costs compared to other Latin American countries. Bahrain and Saudi Arabia have reasonable costs too. The Czech Republic is one of the most equal countries in Europe by Gini coefficient, yet has higher costs than all the countries it borders.
It is not hard for unequal countries to have low construction costs, and for equal countries to have high construction costs. You can look at Table 4 and find many more countrexamples. The easiest way to solve transit costs in the UK does not involve reforming the entire economic and political system.
https://transitcosts.com/new-data/
It’s also difficult to fully judge how recent an issue the excessive cost in the UK is.
Yes the Victoria line was cheap, but the post construction extensions at Victoria and Kings Cross were very expensive.
The Jubilee line was also expensive, but there was some alleged corruption and health and safety delayed it for a year. Plus it was built to a much higher standard than previous lines.
The real excess is in the more recent projects, in general it’s much harder to justify building more space than the Jubilee line extension that has aged well and hasn’t needed and doesn’t justify further improvements.
@John
I am not, and never tried to say there is some simplistic equation between inequality and high construction costs! In the UK one could make the case that their entrenched inequality is a cause (amongst many) or an effect.
That is why nothing seems to change in the UK–it is forty years since I lived there and it has got steadily worse. One can imagine all kinds of wondrous changes to begin the transformation. For example, Starmer could rebuild in-house government-institutional competencies, for everything really not just transport (NHS will take priority) but he is inheriting a house on fire and will have too many other urgent issues to put effort into something that will take multiple political cycles. Without such changes I don’t believe any improvements can be made, or at least change that will hold. As I said (maybe in previous Alon article) Starmer is different to all the usual private school and elite university (mostly PPE) political lifers that have run the joint since forever, so he could do some of these things that are at the very crux of good government. Maybe those young and progressive northern mayors (Andies Street and Burnham) have started the ball rolling in trying to exert some kind of ground level control over HS2 (northern bits, phase 2A, 2B).
Note, it is the heart of institutional government that matters more than the transient politicians, ie. in terms of getting good long-term management. We have the opposite, in a world where Governor Cuomo sacks the one person in ages (Byford) who appeared to have a realistic plan to begin repairing NYC transit. But generations have been brought up with the Reagan idiocy that government is the problem, and the Thatcher poison that those transient government ministers must solely determine projects and senior public servants should indeed be lowly obedient servants to them. The last six years saw “two leadership coups, three prime ministers, four chancellors, five education secretaries, six fiscal events and more than 30 exits from the cabinet”.
Of course Pedestrian Observers, being transit or urbanist geeks, aren’t particularly interested in, and don’t have any special expertise or influence over those deeply institutional mechanisms. Those things aren’t amenable to the easy solutions of crayoning a route or choosing a construction/contracting method.
@Michael, Starmers big strength is that he has run a large organisation before. Unless there is a reshuffle, which I think is unlikely, Louise Haigh will be handling transport and will continue to do so. And she has been in post since November 2021 already.
Also I don’t think it is unfixable, certainly under Thatcher we were getting good value for money transport projects.
@Matthew Hutton:
Only because she wasn’t paying attention. She had zero interest in public transit. Those projects were probably well advanced in planning for them to be allowed to go ahead. Unfortunately not the case for the Tilt Train.
@Michael, the DLR was 100% a Thatcher project.
@Matthew Hutton
You shoulda quit while you were ahead:-) You mean the Dinky toy railway? I am not referring to today’s much modified system which carries ≈90m pax pa. In the late 70s it was recommended to extend the Jubilee line from the City to Canary Wharf:
If I remember, they tried to get the private sector, via the LDDC, to fund it but of course business was not really into giving such a freebie to the city or the government. Consequently the first incarnation reused old elevated freight ROW (fair enough) with one-carriage trains that couldn’t transport enough people, and “poor connections, as it did not connect directly with the nearby Tower Hill tube station or Fenchurch Street railway station.” Eventually:
They should have built the Tube extension to make it a real part of the city’s integrated transit system. In the end they paid dearly for that early stinginess. Typical.
Incidentally, Canary Wharf, the LDDC and eventually HS1 via East Stratford owed (eventual) success to Michael Heseltine and against the often outright hostilities of Thatcher. Of course he notoriously stormed out of Thatcher’s cabinet in 1986 over her intransigence (one of her few ministers to refuse to be handbagged by her), eventually returning when Major replaced her, and Major getting him to pick up where he left off–no one else in the relevant departments, Malcolm Rifkind or Michael Portillo showed any interest in any of that nation-building stuff, mostly trying to privatise it all.
FYI, here is Nicholas Faith on Heseltine, in his The Right Line: (I’m cherrypicking some juicy bits that are germain to your post and to the general subject of Alon’s piece.)
That is, the more expensive plan was better value long-term. It would have been even better value if built 12 years earlier. There was opposition all the way, particularly from the old Thatcherites like Norman Lamont a real suck-up no-talent and pet of Thatcher. As you know they insisted on a PFI (PPP) for HS1 but that imploded with the whole scheme bought back in by the government at billions cost, however the usual suspects still eventually made a killing on all their property along the route.
Matthew, this explains why any progress took exceptional, relentless work by a progressive conservative, and needed to find ways around Thatcher, some things (HS1) waiting until she was gone though her dumb, ideologues still had to be fought all the way. (Plus ca change …) So please think twice about ascribing anything at all positive to Thatcher!
Yes, and this inequality is also transmitted to Singapore and Hong Kong – but not to Canada or Australia. Canada is not a country of rigid hierarchies of where you went to school, in either the British sense (VAT-exempt private schools, A-Level coaching to Oxbridge) or the American one (hyperlocal district funding, legacy university admissions).
You’re still falling into a kind of numerology trance over this one statistic. With its causes, and indeed outcomes, varying so much from country to country it is naive to try to link it to something like construction costs. I use it too but know that it doesn’t properly reflect deeper inequalities in the UK; it has an omnishambles in so many things–housing, healthcare, education, water & sewage, transit and politics itself (a House of Lords in the 21st century FFS)–and this affects the less-wealthy far more than the wealthy or even large swathes of metropolitan inhabitants.
We could quibble over “transmitted”. And HK is different from Singapore. Up to 1997 (perhaps with some effects since the 1987 signing of the handover) HK was doing a creditable job in alleviating the status of its poorest who were a much bigger fraction of its population than in the west; they were at risk of being overwhelmed by the refugees both from the mainland and the likes of Vietnam, so really this issue was out of their control except in how they responded. Previously I have noted that this was largely due to the best governor-administrator they ever had, Murray MacLehose (1971-1982). Amongst a huge set of achievements, PO readers should know that he created the HK MTR (was it done at reasonable cost in those early years? I would guess yes.). And yes, the other notable feature is that he was Scottish not English (as were most of the early movers & shakers in HK). Being Scottish I am sure he was fairly parsimonious, but at the same time knew that he had to spend very large sums of money (that the Brits had always refused to do) that would have economic payoffs not far down the road. He was spectacularly correct. Thatcher seems to have learnt the inverse lesson. It is curious to think that MacLehose and Thatcher overlapped for 3 years! Then he was replaced by a failed conservative (touted for future leadership) Chris Patten who also continued MacLehose’s tradition on infrastructure, eg. the new airport and all the roads, bridges and rail connections to it that made it the biggest civil works in the world at the time (was it done at reasonable cost; at US$20bn it seems to me yes.)
Anyway, after 1997 when the Brits lost all influence and interest, it reverted to elite exploitative mode. Building public housing went on the backburner and they are living with the crisis today. I think the main thing indisputably in common across the Anglosphere, including HK & Singapore, is the absurd obsession of pseudo-wealth creation via property price inflation.
Sorry Chris Patten is clearly very, very, able.
He did well in Hong Kong up to the handover after running the Conservatives successful 1992 election campaign. After that he reformed policing in Northern Ireland which was/is a massive success and he has done decently as chancellor of Oxford University.
@Matthew Hutton
My English must be terrible. (I guess it was the “failed conservative polly” comment which just refers to him losing his own seat.) I agree and everyone, except the CPC, were pleasantly surprised by Fat Pang. Actually I think he even earned their respect by the end, and he did force thru the construction of the airport despite their endless objections and threats (the CPC weren’t convinced it wasn’t a plot to leave the HK treasury empty by the handover). Perhaps he was one of those lost PMs who, but for his sliding doors moment, could have put UK conservatism back on track from its extremism. (Better than the other victim of losing his seat, Michael Portillo!) I’ve read his book on his time in HK.
Oops, I was wrong in suggesting he took over from MacElhose who retired in 82. It wasn’t until 92 that Patten arrived in HK as the last governor. It was Major who appointed him to rescue him from that ejection from parliament by the voters in the election that Major miraculously won.
I have no idea why this got caught by the spamfilter, it doesn’t even have links :(.
What are the society-wide costs associated with the usury imposed by financialization? Are there any usury costs imposed on specific projects or sectors?
None. It’s not about financialization; Switzerland is plenty financialized (“gnomes of Zurich”) and also builds infrastructure efficiently.