Economic Policy Review ISSN 1313 - 0544

Fighting Unemployment with the Bridges to Sicily

Author: Petar Ganev / 28.05.2009
Rate This Article:

The construction of a bridge connecting Sicily with the main land of Italy is expected "to save" the Italian economy from recession. Exactly the bridge to Sicily is the byword for large infrastructural projects (total cost €17 billion) planned by the Italian government, which aim at creation of tens of thousands of jobs. In this part the "Berlusconi's" plan to a large extend looks alike our "Stanishev's" plan.  The message is clear - "we are in a crisis ... let us start spending".

Actually, the bridge to Sicily is not a new idea at all. In every crisis program during the last 30 years, the Italian government returns to that project as a possibility for creating jobs (and respectively possibility for enormous spending), but by the time the project begins, the crisis is over and the bridge remains only a wish. The project is often qualified as a classical "white elephant", a byword used for expensive and often unnecessary projects.  

During a crisis the bum of such projects is easy to explain. Although the politicians do not spend their own money, but those of the taxpayers, the experience shows that they need some adequate argumentation in order to start a large scale projects. When the benefits from a given project are apparently way below the expected costs than this project needs additional arguments in its favor. The crisis and providing employment are the hidden trumps of the governments in such delicate situations.

The crisis has many manifestations, but exactly the growth of unemployment is that which makes the governments to show "wonders of bravery", particularly a few months before the elections. The long term objectives are put aside and the only thing which has any meaning is the people (read the voters) not to loose their jobs just before they go to the ballot boxes. The fear of unemployment among the people is also completely understandable. The data about worsening conditions on the labor market (redundancies, frozen wages and revoked bonuses) could be herd daily in the media and on a personal level, which is frequently worst. All of that changes the attitude of the public toward such type of projects, which eventually would save someone's work place. The projects themselves are now justified in a completely different manner. The expenses are no longer made to bring some benefits in the future, but to provide employment.

Thus the discussion in now totally different and it seams that the government has its arguments. At the end of the day if you are constructing a bridge or a high way it is logical that someone would do the actual construction - in other words to create some temporary employment. But still, is this the real argument in favor of implementing the project!?

Imaging that is some remote place in Bulgaria, someone wants to build a relatively large fast food restaurant, but due to the total lack of potential customers this idea had not been implemented for a number of years. To put it simply, the idea is good on its own but totally unprofitable. Is it possible to use the argument with the employment in this situation? Is it possible during a crisis, the entrepreneur to get help from the local municipality for example, because the restaurant would employ 20 people, which will put them beck on the labor market?  A "suitable" solution in this case would be to create a public-private partnership, by providing a credit line from some state bank for development and the state to undertake paying half of the salaries of the staff. Thus we would have a beautiful restaurant, which is providing employment to 20 people and may be someday there would appear a customer after all.

The truth is that if the project in unprofitable and is not worth during the time of growth and high employment, then arrival of the crisis could not possibly change that. Starting a project with the simple idea of providing employment is a total madness. If it was not so, we should have started the construction of at least ten high ways, with that we would totally overcome the unemployment. The problem is that for all of this we need money and the money comes out of the taxpayer's pocket. It is sufficient to mention that part of the money, with which are financed these projects and is "created" employment actually come from levying taxes on ... labor!

All government expenditures have an alternative. An alternative, which is not approved at a meeting of the Council of Ministers, but is born in the heads of the different individuals, which also have their plans and projects.  They may not be as large, but it does not mean that they do not make sense. Exactly at the day that Stanishev announced his great government plan, the plan of each one of us was reduced to some extend.

One should not overlook the fact that such large infrastructural projects create enormous risk of abuse and corruption and such ineffective spending or simply wasting of funds is unlikely to be the best remedy during the time of crisis.

The government's "white elephants" are like from a text book. In the beginning of the 90's, together with high-ways and bridges, as classic "white elephants" were considered projects for large technology parks and large investments in the rail road transportation (Scott 1992). Exactly as those are the projects of the Bulgarian government. Our bridges to Sicily are well known - the high-ways "Trakya", "Struma", "Lyulin" and "Maritza", the new railroad infrastructure, new capacity at TPP "Maritsa-East" (I and II), new nuclear power generation capacity at Belene, building new modern business parks, building golf coerces (!?!), etc., etc. It is really surprising that we have not thought about Danube Bridge 2 as a leading project of the government program.  In such case we would have competed with the bridge to Sicily.