Sunday, November 28, 2010

McKeynesian economics: UK prosperity through transport spending (and our management fees, of course!)

The UK and Ireland branch of management consultant McKinsey and Company issued its "From austerity to prosperity: Seven priorities for the long term" report (with executive summary here) last week.  Its Number Three Priority of the seven is to "Unlock infrastructure investment" by rousing the profligate penny-pinching British public sector to spend more money on government-monopoly transport.  The good people at McKeynes have detected insufficient courage on the part of Her Majesty's Government to spend money which the British people are rumored to either not have or (how selfish of them) unwilling to surrender to the Exchequer.

Fortunately, McKeynes sees clearly through the fog, reports Construction Enquirer:
Kevin Sneader, UK managing partner at McKinsey, said: “Contrary to the prevailing economic gloom, we judge the prospects for long-term economic growth to be strong–provided that bold action is taken to remove key barriers.
“We believe that it is critical to move on from today’s necessary focus on the UK’s short-term fiscal position.”
The McKinsey plan represents a 45% increase on the average spent between 2000 and 2009 just as public spending is being slashed.
McKeynes promises a fuller report soon [page 38]:
McKinsey’s upcoming report "Building the transport infrastructure that the UK needs" estimates that the UK will need to spend £350 billion over the next 20 years to renew its strategic road network, railways, and airports and expand capacity where most needed... This is the minimum level of expenditure required if economic growth is not to be hindered.
Quit being so short-sighted! Let's be bold and spend our way to prosperity.  If you hire us, we'll show you the way, McKeynes further told Dow Jones:
"Our research estimates that almost GBP50 billion of the shortfall can be delivered by improving the efficiency of construction," it said. "Our experience working with infrastructure owners around the world suggests that materials expenditure can almost certainly be reduced by 12-14% while front line labor can often be reduced by around 20%."
McKinsey said the remaining GBP50 billion would have to come from road and rail users, and added that toll charges for road use would be a much less efficient way of raising the funds than through taxes on fuel or vehicles. The firm estimated that to raise the required sum, fuel duty would have to rise 11% or vehicle tax by 50%. Neither of those moves would be politically popular.
"Our research suggests that road usage is, on average, considerably cheaper in the U.K. than elsewhere in...Europe," McKinsey said. "To close the funding gap, the U.K. would need to raise an additional 0.5 pence per vehicle kilometer, making the cost of motoring similar to that in Germany."
Wot?  No money?  We're gobsmacked.  You need us to perform back-office efficiency management...and you have to raise taxes "create additional funding streams to fund road investment" in order to lower "key barriers" to economic growth.  Voila!  Prosperity just around the corner.  John Maynard would be proud.

So it is with the government practices of the major management consulting firms.  Their sales jobs obscure this fact: that large government cannot "just be managed better", but rather cannot manage at all.


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