Like China, Spain took the Keynesian policy prescription to heart over the last couple of decades: increase government spending, but follow Keynes by making expenditures on items that are autonomous of income.
In China, this has taken the form of building cities whether there is anyone to live in them or not.
I tend to agree with this comment that Alex makes towards the end:
My view is that rather than causing a crisis, bad investments are mostly masked by a boom and revealed by a crisis. Still, “infrastructure spending” doesn’t always create jobs …
In this sense, I view government boondoggles as similar to corporate fraud: no one notices it during the boom periods, but it becomes very obvious when cash flows get tighter around recessions.
The message here is not that Keynes was wrong.* There’s nothing wrong with expenditures that are autonomous of income to boost the economy. But, we’re now at the stage where politicians are confusing “spending that is unrelated to income because no one would be dumb enough to spend their income on that” with “spending that is unrelated to income because it’s necessary and we should find some way to do it”. The latter was Keynes vision.
* Remember that my takeaway for all students is not that Keynes was wrong, but that he was right about a much smaller portion of the economy than anyone imagined.