The Cost of No Principles and Learning What Works

This morning’s New York Times had a story about plans in Texas to spend $181 million in stimulus funds to build a sprawl inducing highway outside of Houston. The Times headline is “Stimulus Ideals in Conflict on the Texas Prairie.” And as evidence they quote President Obama as saying “The days where we’re just building sprawl forever, those days are over.”

But the Times is wrong. The problem is not that there are principles that are in conflict. The problem (as I’ve written before) is that there is no underlying set of principles whatsoever…or at least other than having a member of the House Ways and Means Committee thinking “oh, that sounds like an idea that would get me some votes.”

So while today the US Congress is spending their three day workweek holding hearings on establishing the National Bank for Bad Loans, other legislative bodies are trying to learn what actually works as economic stimulus.

On March 5th in Brussels there was a European Union hearing on The Role of Heritage in a Time of Financial Crisis.

The hearing was organized and chaired by a Spanish member of the European Parliament Dr. Cristina Gutierrez-Cortines and opened by Portuguese MEP Vasco Graca Moura.Witnesses included academic economists Xavier Greffe, Professor at the University of Paris I – Sorbonne and Dr. Romilda Rizzo of the Department of Economics and Quantitative Methods at the University of Catania in Italy. Professor Rizzo’s new book The Heritage Game: Economics, Policy and Practice will quickly become the basic text for explaining cultural economics to non-economists.

Extraordinarily important was the testimony of Dr. Edmundo Werna of the UN’s International Labour Organization (ILO). Among his comments were the following:

The restoration of buildings, roads and other elements of the built environment with heritage value is a labour-intensive type of activity. Therefore, it has high employment content. According to the ILO, experience has shown that for the same level of investment in local construction, the use of labour-based technologies can create between two and four times more employment.

In addition, the use of labour-intensive methods promotes small and medium enterprises, causes the drop of foreign exchange requirements by 50% to 60%, decreases overall cost by 10 to 30%, and reduces environmental impacts.

It also implies the increased use of associated local resources. These may include locally available materials, tools and equipment, skills and knowledge, as well as finance. This reinforces the percentage of investment that remains in the country and often in the locality of the works, reduces the dependence on costly imports, and stimulates the local economy.

Unlike the United States, Norway actually had a set of principles upon which their stimulus plan was based. I’ve written about the Norwegian approach earlier. At the hearing Dr. Terje Nypan of the Royal Ministry of the Environment explained both the what’s and the how’s of that country’s strategy that in the end represented nearly 8% of the whole stimulus package.

Why did the Norwegians give such a high priority to heritage? Here was Nypan’s explanation:

  • Labour intensive, more than new construction
  • High multiplier effect; 1 direct job creates many indirect; more than most economic activities
  • Most of the funding goes to salaries, little investment in machinery.
  • Most materials are of local origin and are processed locally.
  • The invested money remains in the local economy.
  • Projects are planned and can be started immediately.
  • Demonstrated broader income base for small and medium sized enterprises when economy turns
  • Serves to upgrade artisan skills and secure the future for tradition based crafts and techniques.

Finally, three superb examples were presented from Germany, Cape Verde and Spain on how investment in the historic built environment was used as an economic development tool.

I had the great honor for being the opening witness at these hearings and will post my testimony in a subsequent blog.

But the lessons from this blog are threefold:

  • During this time of economic chaos there is a need for government action throughout the world.
  • Some countries are smart enough to actually ask “how should we be spending the taxpayers’ money to provide an effective stimulus?”
  • When that question is answered, investment in heritage resources merits a high priority.