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WHAT TO DO WITH CAPITAL – INVESTMENT OR CONSUMPTION (PART III)

October 9, 2014

WHAT TO DO WITH CAPITAL – INVESTMENT OR CONSUMPTION (PART III)

Our failure to educate our workforce adds to outsourcing. Routine labor in assembly of goods demanding no special skills and not yet robotized can be performed anywhere, so capital will be attracted to cheap labor venues in Southeast Asia (and as proposed elsewhere under the not-yet approved TPP). As noted by Reich in his book The Work of Nations, there is a growing connection between the amount and kind of investments that the public sector undertakes and the capacity of the nation to attract worldwide capital. It is not money that attracts money; money is highly mobile – it can move around the world in seconds. So what does attract capital?

Under the new logic of economic nationalism, what attracts capital are the skills of a nation’s work force and the quality of its infrastructure which make it unique, and uniquely attractive, in the world economy. Investments in these relatively immobile factors of worldwide production are what chiefly distinguish one nation from another – not money. As titled in a recent post of mine, it’s what we do, not what we own. Human skills can be profitably honed and skilled; money is just money, always seeking a higher return, oblivious to its human environment.

Thus (per Reich) a work force that is knowledgeable and skilled at doing complex things, and which can easily transport the fruits of its labors into the global economy, will entice money to it. Well-trained workers and modern infrastructure attract global webs of enterprise, which invest and give workers relatively good jobs; these jobs, in turn, generate additional on-the-job training and experience, thus creating a powerful lure to other global webs. As skills increase and experience accumulates, a nation’s citizens add greater and greater value to the world economy commanding ever-higher compensation and improvement in their standard of living. (See Sweden and Germany with their emphasis on vocational education and how they compete well in the global economy.)

The foregoing analysis is background for my repeated complaints that we are underfunding our investment in education, both academic and vocational, and letting our infrastructure approach Greek and Roman ruins status. It is clear that education of our workforce and redoing our infrastructure are essential to attraction of capital – and a lot more.

Thus, for instance, when we fail to provide adequate infrastructure and education of our workforce in favor of corporate profits and investments, such indirection of public resources not only operates to send capital elsewhere; it also sends jobs elsewhere. Under such conditions, global investment can be lured to this country only if we provide low wages and low taxes, which in turn and with consequent inadequate revenues to operate make it harder than ever for the nation to finance adequate education and infrastructure in the future as our public investment larder is exhausted and we have to borrow even more money due to our failure to invest in our future.

Such a result is in tune with the logic of so-called austerity economics which, unless reversed, will accelerate our downward spiral to Third World status as we morph into the new China of pre-global fame. Keynesianism, of course, with an emphasis on infrastructure repair and a robust funding of vocational education (among other important public initiatives) is the policy panacea for these and other problems, but austerity-loving Wall Street and its congressional lackeys are not into letting money (whether via taxes or borrowings) escape their greedy grasp into the public sphere.

Our economy is thus not really “ours.” We just pay the bills and are liable for trillions; that’s our connection to the economy. Running the economy is none of our business. It is the business of bankers, Wall Street paper shufflers, hedge fund managers and corporate and investment circles. We, the taxpayers and bailouters, are to keep our mouths shut but our wallets open in our feeble response to this continuing abuse. I, for one, object. Austerity arithmetic is wrong in both theory and practice to such an extent that its effects have become immoral as well as debilitating. Since austerity is not policy but arithmetic, we currently have no policy, so let’s embrace Keynesianism as policy ASAP!

Economists I trust hold that there is nothing wrong with being indebted to foreigners – so long as the borrowings are invested in factories, schools, roads and other means of enhancing future production. Taking on debt for these purposes is preferable to maintaining a balanced budget by cutting back on such investments. Debt, thus viewed from a national perspective, is only a problem when the money borrowed is squandered on consumption (Wall Street, tax cuts etc.) and not on education, infrastructure, and other such long neglected public investments, investments that provide jobs, attract capital and increase revenues to government.

The choice of how to corral and invest public monies is clear to me. I far prefer public investment for the long term production of national wealth and an enhanced standard of living for all Americans .over short term profiteering among the few but campaign-contributing greedy among us, and I will be voting shortly for those who appear most likely to agree with my position. Join me.   GERALD   E

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