Will The Lights Go Out?
Creaking Infrastructure
I was intrigued by the following article (see here) in today's "Sydney Morning Herald" - "Daily Blackouts Ahead - Liberals Claim".
"Sydney may soon be experiencing almost daily blackouts because funds have been diverted to pay dividends rather than maintaining the electricity network, the NSW Opposition claimed yesterday.
About 30,000 homes and businesses in the inner north-west were without electricity on Wednesday night, after a substation exploded in Gladesville."
Leaving aside the usual inter-party point scoring, it brings into focus an issue that we may well be seeing more of in the years to come. I certainly recall blackouts earlier this year in the CBD when a couple of blocks were without power for several days and we've seen major blackouts in both the USA and Europe over the past year.
What's going on? It seems that the basic infrastructure has suffered underinvestment going back decades. This doesn't just affect Australia but it seems to be an issue throughout the Western World. It's often referred to as "Private Affluence and Public Squalor".
The usual response to this issue, particularly from the left, is that we need to spend more on public infrastructure. Perhaps we do. However, before throwing more money at the problem, I think it's worth asking why we the infrastructure hasn't been properly maintained. After all, taxes are at record levels and have increased relentlessly over the last 50 years.
Readers will not be surprised when I suggest that the reason is that public spending is inherently inefficient (so we haven't been getting value for money) and that spending on infrastructure has taken a back seat to short term vote buying. Put bluntly, there's no payoff for a politician by acting prudently and making a long term investment when they face reelection now. Long term issues are put off and only tackled when they become an immediate crisis.
In Sydney, we're seeing similar problems with the rail network and with the water supply (this latter problem being compounded by the environmental lobby).
It's interesting as well, that the USA faces similar problems, even though the power companies are in the private sector. The problem here is that regulation is so stringent that the poor returns on capital have resulted in similar underinvestment. Regulation in many instances becomes a "de-facto" form of public ownership.
"Socionomics" would also add that these signs of emerging stress are to be expected at the tail-end of a fifth wave and the start of a bear market. Fifth waves are relatively weak in terms of the real underlying economic fundamentals and the prevailing optimism leads to the deferral of action on problems such as this. Problems are ignored until reality intervenes,
I was intrigued by the following article (see here) in today's "Sydney Morning Herald" - "Daily Blackouts Ahead - Liberals Claim".
"Sydney may soon be experiencing almost daily blackouts because funds have been diverted to pay dividends rather than maintaining the electricity network, the NSW Opposition claimed yesterday.
About 30,000 homes and businesses in the inner north-west were without electricity on Wednesday night, after a substation exploded in Gladesville."
Leaving aside the usual inter-party point scoring, it brings into focus an issue that we may well be seeing more of in the years to come. I certainly recall blackouts earlier this year in the CBD when a couple of blocks were without power for several days and we've seen major blackouts in both the USA and Europe over the past year.
What's going on? It seems that the basic infrastructure has suffered underinvestment going back decades. This doesn't just affect Australia but it seems to be an issue throughout the Western World. It's often referred to as "Private Affluence and Public Squalor".
The usual response to this issue, particularly from the left, is that we need to spend more on public infrastructure. Perhaps we do. However, before throwing more money at the problem, I think it's worth asking why we the infrastructure hasn't been properly maintained. After all, taxes are at record levels and have increased relentlessly over the last 50 years.
Readers will not be surprised when I suggest that the reason is that public spending is inherently inefficient (so we haven't been getting value for money) and that spending on infrastructure has taken a back seat to short term vote buying. Put bluntly, there's no payoff for a politician by acting prudently and making a long term investment when they face reelection now. Long term issues are put off and only tackled when they become an immediate crisis.
In Sydney, we're seeing similar problems with the rail network and with the water supply (this latter problem being compounded by the environmental lobby).
It's interesting as well, that the USA faces similar problems, even though the power companies are in the private sector. The problem here is that regulation is so stringent that the poor returns on capital have resulted in similar underinvestment. Regulation in many instances becomes a "de-facto" form of public ownership.
"Socionomics" would also add that these signs of emerging stress are to be expected at the tail-end of a fifth wave and the start of a bear market. Fifth waves are relatively weak in terms of the real underlying economic fundamentals and the prevailing optimism leads to the deferral of action on problems such as this. Problems are ignored until reality intervenes,
posted by Kevin Francis at
6:15 pm
