And – most important – although household growth is modest at best whilst trade growth is negligible and businesses biggest customer is slashing spending – especially on investment which it always buys from the private sector – business is going to be investing enormously.
It’s just not going to happen. What it it going to be spending on? And why should it spend? What’s the rationale for doing so without any government stimulus for doing so?
The problem with this view is that it is assuming technological stasis. That business investment is only driven by the level of aggregate demand in an economy.
Something which we know is simply not true: this odd mixture of markets and capitalism is, as we’ve found to our long term good fortune, actually the great innovation machine, the greatest we’ve as yet been able to devise.
Part of my work over the past week has been to go and knock on some City doors. “Oi, mate, wanna buy an idea?” sort of stuff.
Project one is to prove the technology to clear up a billion tonnes odd of pollution while extracting the stuff to make fuel cells work. Project two is simpler and cheaper: a new method of separating the lanthanides. Something which would make, assuming success of course, each 1MW of windmill installed about $3,000 cheaper.
No, these aren’t in fact huge worldchanging projects. Rather to my surprise though it looks like we can get both ideas funded (and a big shout out to those several readers of this blog who passed along contacts to get me in front of those City guys).
Which brings me to the real point. Knowledge of these sorts of things is local: they aren’t the sort of things which would occur to a retired accountant from Wandsworth. Which is why said retired accountant is sitting in Norfolk puzzling over what business might invest in. We’re going to go off and spend money on making his beloved Green New Deal a reality: which is why we use markets to allocate capital rather than retired accountants from Wandsworth actually.