High Speed 2 benefits special interests at the expense of the wider economy

In the face of mounting doubts as to the merits of High Speed 2 (HS2), Transport Secretary Patrick McLoughlin continues to maintain that the advantages of the mammoth project are ‘absolutely clear’. Noting a pattern of spiralling costs, Public Accounts Committee Chairwoman Margaret Hodge expressed concerns about the relative benefits of HS2. Given such an unfavourable cost-benefit balance, it may come as a surprise that HS2 lives on just the same. But a bit of historical probing and a consideration of the interests at play may help to explain the resilience of what is such a patently bad idea for the British people.

Indeed, the image of a new railway is redolent of the United States’ experience with the various projects attending the completion of a transcontinental railroad in the nineteenth century. For libertarians, the undertaking is notorious as an example of subsidies and land grabs, of poor quality work and gaming the system. Even while obviously defrauding the public, the subsidised railroad firms were defended by the US military against ordinary Americans. Hardly an aberration, the story illustrates the relationship between the economically and politically powerful.

Fast forwarding to the present, not much has changed in the US or the UK. In his book Downsizing the Federal Government, Chris Edwards notes the dozens of federal loan and loan guarantee programmes – amounting to hundreds of billions of dollars – that the US government uses to favour special interests in a manner less noticeable than ordinary spending. Edwards spotlights the Army Corps of Engineers, which constructs and operates much of American infrastructure, as a conduit for ‘uneconomic megaprojects favored by powerful members of Congress.’ Costing Americans about $5 billion yearly, the Army Corps has become synonymous with mismanagement and corruption, cooking the books to sell its projects, then featherbedding in league with entrenched firms. The Army Corps is just one among countless examples of institutional parasites – ensconced in the seats of power – that regularly cozen the public out of billions.

Infrastructure has always been a convenient and seemingly unobjectionable way for the political class to arrogate enormous power to the state. Conspicuous production in the form of new bridges, tunnels and rail lines is a way to simulate national greatness, to substitute extravagant spending for the real economic health of free markets. Public works projects are a favorite artifice of totalitarian regimes, outwardly providing employment and the necessary foundation for economic life. The reality, though, is simply to divert wealth and resources from activities which the market – the free interchange of millions of consumers – would otherwise choose. With High Speed 2, politics shows itself again as the way to be excused from market forces.

In his recent paper on HS2, Richard Wellings shows that it would be difficult indeed to be too cynical about the motivating forces that underlie the project. Despite the evidence available to MPs, which reliably warns of the harm to taxpayers, a dedicated lobby has been able to prevail over those tiresome facts. Still, the inevitable outcome is glaring enough to lead one London commuter to dub HS2 ‘the biggest white elephant ever’.

The professed benefits of state infrastructure projects are a thin pretext for the usual big money favoritism and collusion that drive public policy on the national level. The story of big infrastructure ventures is that of corporate welfare, insolvency and waste palmed off as a catalyst for interconnectedness and economic growth. Business and government benefit, transferring billions in stolen lucre to connected contractors, while the taxpayer is left with the bill for a finished product that history demonstrates often does more harm than good.

It isn’t that we ought to oppose endeavours to improve or expand infrastructure – roads, rails, dams and the like – in itself; rather, we ought to leave these important undertakings to the economic actors for whom there is the strongest incentive for efficiency, to market actors competing with others like themselves. HS2 is the result not of careful economic forethought, but of political machinations; it represents the best interests of a small group of politicians and business, but not those of Britain at large. Here’s to hoping the misgivings of Chairwoman Hodge prevail.

1 thought on “High Speed 2 benefits special interests at the expense of the wider economy”

  1. Posted 19/09/2013 at 12:51 | Permalink

    If we now take the government (and others) line that HS2 is needed not for its benefits of reduced journey times but to increase capacity, (which in itself is questionable) then why is there not more clamour to ask the obvious question?

    If HS2 is being built to increase capacity why are we building the line with high speed capability ?
    The government have said if we are going to build a new line then of course it should be high speed.

    But should it ?
    It is so much more costly to build straight high speed track than more conventional track that can avoid urban developments and more difficult terrain.

    A brand new (conventional) line linking the major UK cities may be the answer to a capacity crunch, although the case that additional capacity is desperately needed has not been made as yet. And even if additional capacity is seen to be needed then a thorough assessment of the best way of delivering this capacity is needed.

    The betting is that if all the options of delivering this increased capacity were assessed HS2 would be at the very bottom of the pile

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