Monday, July 8, 2013

False rumor, prejudice, blind spots 4: Trap of public construction projects 1


While Japan governments explain that public construction projects are necessary for economic recovery, they have spent a tax of 10-20 trillion yen every year.
Other advanced countries have been reducing greatly it for 30 years or more.
I watch the truth of the public construction projects.

Merits and demerits of the public construction
For example, construction and engineering companies are ordered public constructions for 10 trillion yen.
And then, the order companies get capital investment and purchase materials, and the employees spend family expenses, a total of the consumption may be 8 trillion yen.
And 2 trillion yen of the remainder is saved.
This consumption is repeated successively over several years, 50 trillion yen that theoretically becomes 5 times of it will increase GDP.
Since it had been carried out every year, the unemployment rate must have fallen, and the economic growth rate must have become 10%.
However, the growth rate has been falling every year, and became 0% at last, and accumulated debt went over quadrillion yen, and furthermore continues to increase toward an abnormal end.



a dam construction 

< a dam construction  >

Why didn't Japan’s economy recover?
A multiplying factor of the economic effect has been falling every year, and became 1.3 or less, and the actual economic effect was low.
Because companies and people have felt uneasiness against their future, the companies reduced capital investment, and the people cut down consumption from the falling income in order to sock away money furthermore.
It is the reason.
In addition, because the difference of wealth and poverty became large, the property is gathering to the wealthy class that has few consumption rates

The economic effect decreases further because a fiscal resource of public construction projects is a loan.
The effect is theoretically only same 10 trillion yen that the government spent if it invests by the tax increase.

l       経済効果の乗率は年々低下し1.3以下になり、実際の経済効果は低かった。
l       公共投資の財源は借入金なので、効果はさらに低下。


 What of public construction is the problem?
If public construction is stopped, the economy will get worse and remaining things will become only an immense cumulative deficit.
A mild diabetic lowers the blood sugar level by insulin and repeats gluttony, and became seriously injured.
Its process is same as so of public construction.
Japanese economy is in such a severe situation that a self-sustaining recovery is impossible except that Bank of Japan scatters much money with zero interest rates.
Japanese economy compensated by big spender's public construction and was maintaining in zero economic growth somehow.
The worst situation will approach in the near future if we don’t escape from this vicious circle as soon as possible.

Next time, I show essential role of public construction, and an alternative solution.




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