Robert Samuelson remarks on an IMF study of worldwide business investment:
We now have a new study from the International Monetary Fund (IMF) that suggests some not very encouraging answers. For starters, it confirms that the investment bust is a global phenomenon. It’s not just the United States but also Europe, Japan and most advanced countries. As important, the main cause of the investment slump is clear-cut: Businesses aren’t expanding because they can already meet most demand with existing capacity.
Compared with what had been expected, the shortfall is huge. The IMF looked at predictions in 2007 of future investment and then examined what had actually occurred. For advanced countries, the difference averaged about 20 percent from 2007 to 2013. Investment was about one-fifth less than had been anticipated.
They’re looking at too short a horizon. Investment hasn’t just been low for the last seven years. With the exception of housing construction and related things, business investment has been low for fifteen years.
I think a change has taken place in the understanding of risk. Investors are willing to buy quarters for a nickel a piece in quite literally any quantity. Much riskier than that and they pick up their marbles and go home.
What the IMF and Mr. Samuelson are missing is that personal consumption expenditures as a percentage of GDP haven’t been north of 67% forever. Just for the last fifteen years.
Federal government spending is also high relative to historic norms. The only component of GDP that isn’t bearing the weight it used to is business investment. The “shortfall in demand” argument doesn’t wash unless you narrow your examination to the last eight years. It doesn’t explain why business investment has been low for so long.
This is a no brainer…
It’s neither easy for a person to wade through the bureaucratic gauntlet to start a business nor very profitable, except for the wealthy and connected elite. People who do have the entrepreneurial spirit (now) tend to do business under the radar, oftentimes on a cash basis, where the government cannot latch their tentacles onto what small profit they do make. It’s also less fun or rewarding than it used to be, as more and more people think of themselves as working for the government rather than for themselves or their families.
Furthermore, when you take into consideration the negative social progressive mantra, aimed at successful enterprises, such upward mobility literally becomes a liability, targeting anyone’s wealth as being the source of all economic woes as these nameless people obviously don’t pay their “fair share.” Statistics have proven otherwise, as almost half the population pay no income tax at all. However, why let facts get in the way of emotional projection, stirred up for political advantage. Consequently, it’s lighter weight and PC these days to blend in with the dissatisfied crowd, burnishing liberal credentials in their signage of “tax the rich,” (not me). Why bother going out on the limb and being or doing anything else?
IMO, lose the weight of oppressive government rules, regulations and policies, and it will be like adding Miracle Grow to the economy.
The way that would usually be portrayed is that you want to eliminate all laws on businesses including safety regulations, child labor, etc.
I think there’s a more basic way to do it. Extend the Uniform Commercial Code to cover a much wider area than it does now and eliminate the varying state and local regulations.