Spend or invest - that is the question
I believe most of the western governments have got it wrong with their big economic stimulus plans. They are trying to spend their way out of the crisis like shopaholics instead of acting like good stewards of the economy and spending and investing wisely.
The tax cuts and other plans to stimulate private consumption will, in the best case scenario, just have a short term benefit and no lasting impact – except for the public debt that builds up.
On top of this the increased new debt will limit the governments’ ability to move in the future.
The governments should rather increase public investments. There are plenty of areas where governments could invest wisely today, and then save the money afterwards, as well as secure increased tax revenue for years to come.
They could, for example, put forward plans to build roads and other public building works and then cut back once the crisis is over.
They could also invest more in schooling and education – hire more teachers and helpers and make sure that the pupils learn more now. This strategy should support the weaker pupils.
This will in the future result in more qualified graduates getting more high paid jobs and lower the number of pupils leaving school with bad notes – condemning them to a lifetime of low paid jobs.
Governments should invest in more green technology such as alternative sources of energy and make public buildings more energy efficient.
These are all things that will benefit the future economy for generations to come.
Also, part of the package should be a stimulus for private people and industries to make their own investments – which will have a long term effect for the whole economy.
Again an easy example would be investments in technology that would lower our energy consumption which would benefit both the private economy for years to come as well as lower the production of greenhouse gasses, benefiting the whole world at the same time.
Therefore let us invest our way out of the financial crisis instead of trying to spend our way to salvation. It would benefit our children for years to come and not burden them with debt they were not responsible for.
February 28th, 2009 at 4:28 am
Quite right. I’d much rather see unemployed but skilled car-workers and ship-builders creating a tidal wave system in the Bristol Channel or similar, rather than cheap tat from TopShop getting cheaper by 2.5% for a few months. Even if the Net-Net was roughly the same, the former would give the country something to aspire and rally around and feel good about - a unquantifiable feel good factor contribution.
February 28th, 2009 at 5:23 am
[...] agree with this short post from Joergen Jensen that governments would be better investing rather than spending their way out of the [...]