The collapse of a bridge in Baltimore after a ship collided with it is a tragedy for those who lost their lives as a result. It will be massively disruptive for millions in the area. No doubt, insurance litigation will last for many years. But two things immediately stand out to me.
One was just how flimsy the structure appeared to be compared to the ship and that the odds against its surviving impact seemed so incredibly low as a result.
The claim is that the bridge was up to standard when it was built, although the design looks very old, but the reality is that ship technology has moved on massively since then. 290-metre mega container ships were not docking in Baltimore in the seventies.
So lesson one is obvious, and is that infrastructure cannot be allowed to stand still when all around it changes. If it dies the severe disruption that is going to be experienced in the Baltimore area, and beyond, now is going to happen.
And before anyone gets complacent, the biggest message from this is on climate change. The world is moving on. Our infrastructure is not. Unless we catch up with the rate of change going in right now - and it would seem that it is rapid - then we are going to get very heavily caught out. Flooding is one very obvious risk, but it is not the only one.
The second lesson should get as glaringly obvious, but to most current era politicians will not be. It is that state investment is vital to well-being. This is not just in infrastructure of course, but that matters a lot.
Right now we have both the Tories and Labour obsessing about how they can increase savings ratios in this country, which they think to be vital to increases in investment. So, we end up with the farce of the ‘British ISA'. The aim of this is not to increase investment. It is to increase the price of shares in British companies, which is something entirely different. And underpinning this is something even more worrying, which is the very obvious lack of understanding amongst politicians that share capital no longer funds any investment of any consequence: that is funded by credit. in other words, they are promoting the misdirection of funds in precisely the opposite direction from that which is needed. We need public infrastructure investment. We will get private speculative activity.
This is not to say that savings are not important. I recognise that they are. However, unless the association between savings and investment is re-created, their only real function is twofold. One is to withdraw money from active use within the economy, which slows growth. The other is to increase economic volatility in financial markets, which has consequences for instability. In other words, as used currently, savings undermine the government's economic goal of growth and increase financial risk. As outcomes go, these are a long way from being smart.
They are, of course, solutions to this problem. I have already proposed, time and again, how tax relief on both ISAs and pensions should be reformed to massively increase the funds available to the UK government for vital infrastructure investment. in my estimate more than £100 billion a year could be made available to fund state investment if this were to be done, which is at present way in excess of the capacity of the economy to spend on such activity. This means that changes to these reliefs could be undertaken gradually, giving the savings market time to adjust, with beneficial outcomes still being achieved.
My point is fairly straightforward. All the money that is required to undertake all the capital investment that our economy can sustain for the maintenance of critical infrastructure that increases the stability of our society is currently available if only we change the rules on saving, and simultaneously end the paranoid obsession that grips economists and politicians alike whenever the size of the government balance sheet is enlarged by funds being deposited with it to finance the growth in its assets, that then benefit society at large.
Our society is being held back by a misunderstanding of the relationship between savings and investment and between deposit-taking and government asset creation. The false economic stories that we tell ourselves or are being told are undermining our ability to protect ourselves from harm, deliver what is good, and protect our well-being both now and in the future.
We really do need to put an end to the economic narratives that are proving to be so destructive and to replace them with narratives intended to reinforce the meeting of need.
The collapse of a bridge in Baltimore was a disaster for all involved. If we learn the lessons that come from it, then something good might at least come from it. I can live in hope.
Thanks for reading this post.
You can share this post on social media of your choice by clicking these icons:
You can subscribe to this blog's daily email here.
And if you would like to support this blog you can, here:
Great plan. Around £100bn extra revenue for the government by changing the savings system. Hooray. The government can then go out and spend that extra without impacting on inflation or the deficit. They could spend it on infrastructure investment – looking at HS2, Elizabeth line and atomic power- what makes you think they will ‘invest’ it in infrastructure and invest it well. Where’s the mechanism to ensure that. I can’t see it.
With respect, explain Boeing before you ask me to answer those questions.
After World War II when Britain was effectively broke, the country invested in infrastructure, replacing slums, building 4.5 million homes (which you could buy on a single salary with a 25-year fixed-rate mortgage at just 3.5%), founded the welfare state and the National Health Service.
Britain prospered. Not only did the country spend, but it invested in producing something tangible for itself and its future. Today, shareholders expect their dividends, with nothing produced or invested, and infrastructure deliberately neglected. It should be a simple lesson to learn, but greed has no moral compass.
Now featured on the blog
Thank you
True, although it’s important to note that we cannot return to the starting conditions of those days: lots of returning industrial workers and reconstruction of industry (cf present day mass consumerism with offshored manufacturing); a green revolution in domestic and imported food production (giving us cheap food from agribusiness and fossil fuels/fertiliser dependency); and supremely, energy from onshore (nationalised) coal (cf the urgent need to transition to renewables and reduced consumption, eg. through insulation).
Nevertheless the macroeconomic argument about government spending and investment is valid.
There are obviously still great political battles to be fought in order to dump the neo-liberal wealth extraction system that has done so much to bring this country to its knees but I do think that we also need to think about how we use the money that we might secure. For a start we should look back at the lessons to be learnt from the period of the post war consensus.
During that time we built Nuclear power stations, developed the National Grid and dealt intelligently with the problems and potential of North sea gas without the constant financing problems of today and with the minimum of disruption to National life.
The same could be said for the National Motorway system developed at the same time.
The lesson that we need to learn is that purely “Market solutions” do not work. They are a breeding ground for incompetence, corruption and corporate anti-social behaviour.
Personally, I think that this country desperately needs a modern rail system but the abysmally rotten performance of the HS2 project serves only to exemplify how not to do it.
Mike Parr’s comment about “safety nets” on your “Scotonomics” post set me the thinking that the Neoliberal experiment of the last 45 years where we were constantly told we need as a nation to be more “market fundamentalist” completely misses out the reality that the private sector market heavily relies on “safety nets”!
You only have to look at the massive government creation of money to bail out the financial sector and those affected by it after the 2007/2008 Great Financial Crash and ditto the Covid Pandemic to see why you need a government’s ability to create money from thin air!
But it’s not only that is it? The very fact that market fundamentalism can’t deliver an adequate wage for many and this has to be supplemented by government top-ups reveals that government “safety nets” are very much an integral part of “market fundamentalist” ideology despite the wilful amnesia summoned up to deny this is so.
Indeed as Mike pointed out in sum areas of the nation’s economy like sustainable power generation private sector entrepreneurialism needs a government prod by way of a base income guarantee.
The other big “safety nets” are of course healthcare and education where inadequate incomes from “the market” have resulted in government having to prop up the market in order to benefit it!
So much cognitive dissonance going on in the heads of those who’ve swallowed Neoliberal ideology without much thought!
I doubt that cognitive dissonance has anything to do with those that drove and still drive the neoliberal lies. Personal greed would be the one and only thought in their heads. Just follow the money to see how true that is.
“replace them with narratives intended to reinforce the meeting of need.”
So you are finally coming round to understanding the free market? If a transaction freely entered into by both parties isn’t meeting the needs of both, then it simply won’t happen.
I have always understood the freemarket, as you describe it. I quite strongly suspect that I have set up more companies than you ever have, and employed more people, and managed more turnover. I was really quite good at it. I have no problem with profit. But, I do have a massive problem with those who claim to have a free-market ideology, who do as a consequence, exclude from participation in society all those who cannot do so because they earn insufficient for that purpose. You are simply assuming them away, just as your economics does by assuming that everyone has equal access to capital, which is one of the many farces that it presents to undergraduate students, which far too many of them never forget.
” the free market? If a transaction freely entered into by both parties isn’t meeting the needs of both”
That’s how the “free market” is portrayed, and it sounds good.
But the free market also means other things: The ability to entering into financial arrangement that is free of morals and ethics. The evidence is the removal of regulations:
The ability to freely dump raw sewage into our rivers
The option to freely ignore health and safety of workers
The option to freely ignore tax payment though off-shore accounts
The freedom to exploit workers.
And the claim also ignores the impact of information asymmetry in the market, which is enormous
Elsewhere you’ve argued that government can create money it needs, being mindful of the potential effects on inflation etc. Can you explain for me how that fits with the £100 billion you’ve identified. Given that the government could just create that amount anyway, is the advantage of taking it from savings/investments that it doesn’t have an inflationary impact?
If it comes from savings the person saving has reduced their consumption – so creating the capacity for the capital spend to take place. That reduces the risk of inflation.
A few things struck me as I read the reports and watched the horrendous footage. The ship involved has one engine connected to one propeller so appears to have a fundamental safety flaw.
The workers who died were reported to be repairing potholes and were Hispanics from Central America.
The ship involved is an illustration of Western industrial policy or lack of it. Massive volumes of imported goods made in low wage economies being shipped around the world in polluting ships. Well paid jobs with benefits have been eliminated. The west exports scrap metal and plastic to support manufacturing in China. Take a trip to Felixstowe to see it happening in realtime in the UK. Some western countries have made interventions to support manufacturing and there has been some limited examples where manufacturing has been repatriated. Much more could and should be done.
“One was just how flimsy the structure appeared to be compared to the ship and that the odds against its surviving impact seemed so incredibly low as a result.”
Ok here is some perspective;
That ship is massive. Let’s see…
Length approx 300m
Width approx 50m
Draught approx 12m
So displacement is 180,000 M3
So the ship weights 180,000 metric tonnes.
(I know ships aren’t cuboid, but we’re just after first order approximation here)
Assuming it’s fully loaded, and according to vessel finder it’s summer dead weight tonnage is 116851t. Let’s call it 115,000.
So we’re looking at approximately 295,000 tonnes!
A bridge is designed to carry light traffic, with an individual vehicle weighing up to 40 or 50 tonnes or so. And it has to withstand crosswinds. That’s it, usually if you’re being generous it may have to withstand vehicle impacts but on the grand scheme of things these aren’t that big.
Over a quarter of a million tonnes coming in is just going to smash straight through it.
Designing a bridge that can withstand that amount of force is possible, but would be an incredible engineering challenge and crazy expensive.
This applies to all bridges new and old and built in all corners of the world. I suggest Richard that there is no logic in what you say other than to make political capital and for that it is ignorant in the extreme.
Thank you for your kind words.
Actually, it is you who is showing your ignorance.
The world has appreciated this problem. That is why bridges have buffer zone islands built around their supports now, to absorb an impact before the infrastructure itself is hit.
Your problem is you just want to be rude rather than see solutions. It’s really terribly apparent, and equally unbecoming to see apparent intelligence go to such waste.
For anyone interested, this article in the Tampa Bay Times is instructive:
https://www.msn.com/en-us/news/other/lessons-from-skyway-disaster-failed-to-help-protect-baltimore-bridge/ar-BB1kGoru
The Sunshine Skyway Bridge at Tampa Bay collapsed in 1980 after being hit by a ship, several vehicles (including a Greyhound bus) fell into the bay and 35 people died.
Could similar protective islands have been built around the Baltimore bridge piers, its been nearly 44 years since the Sunshine Skyway Bridge collapsed, but no additional protection seems to have been added. Maybe it would have cost too much! I’m not sure if that equation still works out when the cost of disruption at Baltimore is added up. It might even have been cheaper to carry modifications to all US bridges crossing shipping lanes just in case!
The insurance claim is already reckoned to run to several billion, and no doubt the economic cost will be much higher.
I think those islands are going to look very cheap in comparison.