Hey, degrowthers! I know you’re out there. I’d like to get your take on a post by Tim Taylor on investment. Taylor points out that both gross and net investment as a share of GDP have been falling in the US, net faster than gross. (Deduct investment that replaces depreciation from the gross figure and you have nothing but net.) Here is his key diagram, culled from FRED.
There is a lot of cyclical variability, but peak to peak or trough to trough we’re definitely headed down.
So my question for the degrowth community is whether declining investment is an occasion for celebration? Does this mean that economic policy is actually getting something right?
Here’s one answer I won’t accept: we don’t care about growth in general, just growth of bad stuff, like fossil fuels, accumulation of waste, destruction of coastlines, etc. That isn’t a degrowth position. Everyone wants more of the good and less of the bad, however they define it. I’m in favor of only toothsome pizza crusts and I’m dead set against the soggy kind, but that’s not the same as being on a diet.
This is a practical, policy-relevant question. There are many smart economists trying to understand the investment slump so they can devise policies to turn it around. You’ll notice this concern is prominent in the writing on increasing industrial concentration, the shareholder value obsession, globalization and outsourcing, and other topics. The goal of these researchers is to reform corporate and market structure in order to restore a higher rate of investment, among other things. That of course would tend to accelerate economic growth. So what’s the degrowth position on all this? Should economists be looking for additional measures to discourage investment?
Again, please don’t tell me that it’s just investment in “bads” that needs to be discouraged. That’s a given across the entire spectrum of economic rationality (which is admittedly somewhat narrower than the political spectrum). In the aggregate, is it good that investment is trending down?
My own view, as readers of this blog will know (see here and here), is that degrowth is a suicide cult masquerading as a political position. I’m pretty sure that radically transforming our economy to make it sustainable will involve a tremendous amount of investment and new production, and it seems clear to me that boosting living standards through more and better consumption is both politically and ethically essential. But I could be wrong. I would sincerely appreciate intelligent arguments from the degrowth side.