Tuesday, February 22, 2011

Dearth of Private Investment Keeps Economic Progress Anemic

As Robert Higgs notes, the so-called recovery has been absolutely nothing to write home about. In two blog posts (here and here), he explains why this is the case. The key is that private net investment has not recovered to anywhere near its pre-Great Recession level. Net private investment is the investment that is over and above the amount necessary merely to maintain capital previously accumulated. Consequently, if we want growing prosperity, we need growing net private investment.

Higgs also explains why private, not government investment is the key. He also rightly notes that the cyclical action in the Great Recession, as in all business cycles, is in investment, not consumer spending. Consequently, he rightly concludes that we should put to bed the myth that there is a "pressing need for the government to stimulate consumer spending.

No comments:

Post a Comment