Government policy and budgets
Heritage in a Time of Financial Crisis
March, 23 2009
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.
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Why the French are Smarter than us Americans
February, 12 2009
(The blog below was written for an American audience and first appeared on February 9 on my blog at www.PlaceEconomics.com. But because it is international in nature, I've also posted it here)
Yeah, we have to have a stimulus plan. And one will pass this week. The latest iteration is the one crafted by a moderate Republican (Susan Collins of Maine) and a moderate Democrat (Ben Nelson of Nebraska). And as a militant moderate myself, I have to commend them for at least making some adjustments to the bottomless barrel of pork written by the Democrats in the House and the equally irresponsible "just say no" or "just say more tax cuts" approach by the Republicans.
In this morning's Washington Post Senator Arlen Specter, one of the three Republicans likely to vote for this latest version, said that the $780 Billion Dollar package would create or save 4 million jobs. (As an aside "create or save" used by both Specter and President Obama is bullshit...why? It means you have already defined success for yourself. If not a single new job is created you can still say, "Yeah, but I saved 4 million jobs" and it's impossible to disprove that.)
But bullshit aside, make the calculation. $780 Billion divided by 4 million jobs equals $195,000 per job.
Now France has as big a case of economic chaos as we do. Their economy shrunk last year the most since World War II and their unemployment is expected to reach nearly 11%.So, of course, President Sarkozy had to introduce his own economic stimulus plan. But here's a big piece of his approach - committing 100 million extra Euros per year ($130 million) for the restoration of historic monuments in France for the next 4 years. So about 1.5% of his stimulus package is going toward heritage conservation.
By the way Sarkozy isn't the only one. In March there is going to be a hearing in Brussels of the European Union on using heritage conservation as a counter-cyclical economic development strategy.
So what if we took this approach as part of our stimulus plan? Of course in the US we are much more likely to use tax incentives to attract private investment rather than direct public funding. And we've done this effectively with the Historic Rehabilitation Tax Credit.
So let's double the tax credit for the next 4 years (from 20% to 40%) and let's assume that costs the US taxpayers the annual equivalent of $130 million per year. What would that mean? Nearly 20,000 jobs per year for each of the next 4 years. (Also, by the way, when economists and politicians say "job" they mean one full time job for one year. So if a stimulus package creates one job in the highway building business, for example, that lasts for the next four years, that will be counted as 4 jobs).
The cost to the US taxpayer of historic preservation as stimulus? $6875 dollars per job...for the same amount of money that is required to create 1 job in the rest of the stimulus package, 28 jobs would be created. And this would represent less than 1/10 of 1% of the stimulus spending, not France's 1.5%.
Furthermore, this is Sustainable Economic Development! A tax credit to encourage Americans to buy even more cars isn't.
France might not produce the best armies, but they are better at wine, better at cheese, and sure as hell better at figuring out a stimulus plan than we are.
Yeah, we have to have a stimulus plan. And one will pass this week. The latest iteration is the one crafted by a moderate Republican (Susan Collins of Maine) and a moderate Democrat (Ben Nelson of Nebraska). And as a militant moderate myself, I have to commend them for at least making some adjustments to the bottomless barrel of pork written by the Democrats in the House and the equally irresponsible "just say no" or "just say more tax cuts" approach by the Republicans.
In this morning's Washington Post Senator Arlen Specter, one of the three Republicans likely to vote for this latest version, said that the $780 Billion Dollar package would create or save 4 million jobs. (As an aside "create or save" used by both Specter and President Obama is bullshit...why? It means you have already defined success for yourself. If not a single new job is created you can still say, "Yeah, but I saved 4 million jobs" and it's impossible to disprove that.)
But bullshit aside, make the calculation. $780 Billion divided by 4 million jobs equals $195,000 per job.
Now France has as big a case of economic chaos as we do. Their economy shrunk last year the most since World War II and their unemployment is expected to reach nearly 11%.So, of course, President Sarkozy had to introduce his own economic stimulus plan. But here's a big piece of his approach - committing 100 million extra Euros per year ($130 million) for the restoration of historic monuments in France for the next 4 years. So about 1.5% of his stimulus package is going toward heritage conservation.
By the way Sarkozy isn't the only one. In March there is going to be a hearing in Brussels of the European Union on using heritage conservation as a counter-cyclical economic development strategy.
So what if we took this approach as part of our stimulus plan? Of course in the US we are much more likely to use tax incentives to attract private investment rather than direct public funding. And we've done this effectively with the Historic Rehabilitation Tax Credit.
So let's double the tax credit for the next 4 years (from 20% to 40%) and let's assume that costs the US taxpayers the annual equivalent of $130 million per year. What would that mean? Nearly 20,000 jobs per year for each of the next 4 years. (Also, by the way, when economists and politicians say "job" they mean one full time job for one year. So if a stimulus package creates one job in the highway building business, for example, that lasts for the next four years, that will be counted as 4 jobs).
The cost to the US taxpayer of historic preservation as stimulus? $6875 dollars per job...for the same amount of money that is required to create 1 job in the rest of the stimulus package, 28 jobs would be created. And this would represent less than 1/10 of 1% of the stimulus spending, not France's 1.5%.
Furthermore, this is Sustainable Economic Development! A tax credit to encourage Americans to buy even more cars isn't.
France might not produce the best armies, but they are better at wine, better at cheese, and sure as hell better at figuring out a stimulus plan than we are.
Not only are the French smarter, so are the Norwegians
February, 12 2009
(The blog below was written for an American readership and appeared on February 11th on my blog at www.PlaceEconomics.com. Because it deals with international comparisons, however, I've repeated it here.)
Earlier this week I wrote about the incorporation of $132 million a year for the next four years for the restoration of historic buildings in France. That was a specific part of President Sarkozy's economic stimulus plan for France. Like the US, France is suffering its most severe recession since the end of World War II.
This morning I get an email from my friend Terje Nypan who is in the Culture Ministry of Norway. Much of the national budget in Norway is dependent on oil. So when the oil price drops from $140 per barrel to $40, it obviously has a big impact.So the Norwegian government has adopted what they call their "Crisis Package" in the amount of about $685 million dollars. (If that number seems low compared to the $780 Billion stimulus package here, remember that the population of Norway is around 4.6 million versus 304 million for the US. )
But unlike the United States where the only criteria to make the bill seems to be having a friend on the House Appropriations Committee, in Norway they actually had a set of principles upon which their decisions were based. And here they are:
And how did Norway commit their stimulus money to be consistent with these principles?
The Cultural Heritage portion of that was around $34,000,000 and was divided as follows:
Why did they do this? Because they learned in the last recession that: a) it worked putting people back to work and training workers for the future; and b) it met the principles they established.
Virtually all the line items in the Norwegian stimulus package are long term investments. Almost none in the US stimulus package are.
One more blog about the stimulus package then I'll let it go. What the hell, I'll never live long enough to have to repay any of it.
Earlier this week I wrote about the incorporation of $132 million a year for the next four years for the restoration of historic buildings in France. That was a specific part of President Sarkozy's economic stimulus plan for France. Like the US, France is suffering its most severe recession since the end of World War II.
This morning I get an email from my friend Terje Nypan who is in the Culture Ministry of Norway. Much of the national budget in Norway is dependent on oil. So when the oil price drops from $140 per barrel to $40, it obviously has a big impact.So the Norwegian government has adopted what they call their "Crisis Package" in the amount of about $685 million dollars. (If that number seems low compared to the $780 Billion stimulus package here, remember that the population of Norway is around 4.6 million versus 304 million for the US. )
But unlike the United States where the only criteria to make the bill seems to be having a friend on the House Appropriations Committee, in Norway they actually had a set of principles upon which their decisions were based. And here they are:
- The measures must have a speedy effect on the labor market
- The measures must have specific target objectives
- The measures must be limited in time
- The measures shall strengthen the Government in its policies for the environment and income distribution.
And how did Norway commit their stimulus money to be consistent with these principles?
- Measures for increased energy efficiency $183,529,000
- Repair and development of railway system $198,976,000
- CO2 cleaning $147,129,000
- Footpaths/sidewalks and bicycle roads $ 76,471,000
- Nature management and Cultural Heritage $ 52,000,000
- Environment research on sea wind turbines $ 11,471,000
- Charging stations for electric cars $ 7,647,000
- Bio Energy $ 7,647,000
The Cultural Heritage portion of that was around $34,000,000 and was divided as follows:
- Rehabilitation and maintenance of privately owned, protected property $11.6 Million
- Technical and industrial heritage, vessels and centers $6.9 Million
- Rock art, archeology, and universal access $3.8 Million
- Fire safety for historic wood buildings, medieval and important churches $11.8 Million
Why did they do this? Because they learned in the last recession that: a) it worked putting people back to work and training workers for the future; and b) it met the principles they established.
Virtually all the line items in the Norwegian stimulus package are long term investments. Almost none in the US stimulus package are.
One more blog about the stimulus package then I'll let it go. What the hell, I'll never live long enough to have to repay any of it.