Digging holes
One of John Maynard Keynes most famous quotes was: «Let them dig holes in the ground.» What the great economist meant, of course, was that by creating new jobs, public works projects stimulate economic growth, which, in turn, increases tax revenues that help to lower the public deficit. Therefore, public deficits are not always a bad thing – at least for a certain period of time. This theory has dominated Greek economic thinking for decades. However, a simple question remains: What’s the cost of digging a hole? The answer is a relative one. One of the most notorious cases in Greece’s construction history is the opening up of the Sfigio tunnel near Thebes. The contract was assigned to a construction company for 440 million drachmas. By the time the tunnel was completed, the budget had skyrocketed to 3.5 billion drachmas, overrunning the original budget nine times. The ground was said to be in danger of caving in and had to be reinforced, rocks had to be removed, additional work was needed. The study upon which the project designs were based was said to be inaccurate and extra spending was approved. The «poor» constructor who encountered all these technical snags happened to be a relative of a senior minister. But that’s life. Greece is such a small country that, one way or another, people all know each other. Keynes uttered his famous words after a world war that destroyed many infrastructure projects and left most of the world in recession. In addition, public works contractors back then were labor-intensive and employed domestic workers who received income thanks to these projects. Even non-essential projects generated income and reinforced the economy. The question for us is: What’s the cost of the projects? And there’s no simple answer to that simple question.
