In a Crisis, Build Infrastructure; Build Housing When the Economy Is Growing

I listen to many economists, experts and public figures, and when it comes to specific questions about the anti-crisis program, nearly all of them say the same thing: we need institutional reforms aimed at liberalizing the market and creating properly functioning institutions.

But I think that building or changing the system is not the job of a minister or the head of a national company.

It is unlikely that any of them could propose truly radical changes, for a variety of reasons.

Their task is to get the maximum effect from the instruments they already have, so all these recommendations are largely utopian.

Yet for some reason, few people propose changing anything under current conditions.

For example, many suggest moving away from oil dependence as a tool of the anti-crisis program.

What exactly this slogan means is a big question. To end oil dependence, we would have to change every institution. And perhaps in 20 years or so, with a favorable combination of circumstances, we might manage it.

Any institutional change takes at least five years, but we need results here and now.

And here and now, strange as it may sound, the oil industry needs to be developed, because it is the only sector that feeds the country even at current hydrocarbon prices.

State stimulus of our economy suffers badly because it does not deliver the returns it should. Every tenge the state invests affects the economy with a multiplier of less than one, when it should be more than one.

This is precisely where, here and now, the question of using public money effectively must be raised.

How, then, should the state achieve an effect?

Public money should be used to stimulate production and the creation of new added value with a long-term impact.

Building infrastructure, for example, creates conditions for new production: besides the return for the construction industry, it generates returns from the new enterprises themselves. Housing construction, by contrast, will bring no return in the future: an apartment, a house or an office building cannot generate added value later on. It is a final consumption product.

That is why it breaks my heart when a country builds millions of square meters of housing instead of building infrastructure.

I may be wrong, but my instinct tells me that in a crisis one should build infrastructure and factories, and build apartments during a period of rapid economic growth. To live in an apartment, you first have to earn it, even at the macro level.