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Commentary: March/April 2010

Public infrastructure spending – for how long?


April 13, 2010
By Andy Bateman


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A report by the Conference Board of Canada provides thought provoking
commentary on the value of Ontario’s infrastructure investment program,
ReNew Ontario, launched in 2005.

A report by the Conference Board of Canada provides thought provoking commentary on the value of Ontario’s infrastructure investment program, ReNew Ontario, launched in 2005. “Indeed, our findings reveal that, over recent history, public infrastructure has helped lift economic growth by increasing the productivity of Ontario’s economy,” says the report’s executive summary. “Moreover, previous studies reveal various channels through which this can occur. Roads and public transportation, for example, can reduce business costs and improve competitiveness.” The summary also states that “public capital has been a strong contributor to the performance of Ontario’s private sector over the past 30 years. Each dollar of real public infrastructure spending through ReNew Ontario is adding $1.11 to Ontario’s real gross domestic product.  If not for recent increases in (public) infrastructure spending, Ontario’s economy would have lost an additional 70,000 jobs in 2009. Government infrastructure spending in Ontario is estimated to have supported 182,897 jobs in 2009; this will rise to an estimated 223,268 jobs in 2010.

Pretty convincing stuff, even though the report is limited to Ontario and does not provide analysis of other Canadian provinces or the country as a whole. Nonetheless, it seems to make a good case in principle for the benefits of long-term public infrastructure investment. 

Canada’s federal government seems to be taking a different tack. The government has confirmed its commitment to year two of Canada’s Economic Action Plan but to date has also firmly rejected calls to extend the stimulus funding beyond March 31, 2011. Deficit reduction is identified as the primary goal for several years at least. 

So how long should stimulus funding continue in times of deficit? No doubt, the discussion will continue and intensify as the funding deadline, already less then 12 months away, nears.

Either way, the Conference Board report makes a valuable contribution to our understanding of the issues involved. 


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