Tuesday, April 14, 2009

Turnbull attacks Ruddnet

Using the unquestioned dogma of neo-classical economics, that if the private sector can't finance it or make a profit out of it, it should not be built, Opposition Leader Turnbull criticises the Ruddnet:

MALCOLM Turnbull has likened Kevin Rudd's $43 billion high-speed broadband plan to the failed business case for Sydney's Cross City Tunnel, which cost nearly $1 billion to build but went broke, with shareholders losing their investment.

The Opposition Leader writes in The Australian today that just as the tunnel venture went broke because of "wildly optimistic" traffic assumptions, the Prime Minister's failure to research the business case for the broadband venture could produce a catastrophe for taxpayers.

Time for a paradigm shift: the function of government is to build infrastructure, and it should not be operated for a profit. Its purpose is to provide a benefit.

Rudd proposes to fund the Ruddnet by issuing bonds but in my view a better funding method would be rating land values. Infrastructure creates land value and thus the economic surplus or economic rent is the ideal and natural source of funding for infrastructure investment. Pricing of the service once built should follow what's been called 'marginal cost pricing', ie price it cheaply or even make it free to encourage maximum usage and takeup. All of this of course is nearly the exact opposite of the neo-liberal, neo-classical cult of "privatize and deregulate and let the market supply the cargo" (in spite of the fact as Turnbull admits in regards both to the Ruddnet and the cross city tunnel) that the cargo will not arrive.

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