I am at a conference at Manchester Business School today. Prof Sheri Markose of Essex University has argued this morning that the UK is simply not investing enough in new capital formation to maintain an effective. The argument is fairly compelling. The following data on gross capital formation comes from the World Bank.
Three relatively straightforward observations: first, the world has, broadly speaking a rate of about 24% post 1995.
Second, the UK, in contrast, has a markedly downward trend over the same period, and the rate has declined from around 20% to about 17%. We may be 7% short on the world at large for maybe 20 years: it’s a staggering deficit.
The global number includes, quite obviously, a number of developing countries. Who are building out the infrastructure for an economy for the first time.
We’ve already done that, we’ve got roads and ports and railways and airports and…..
That’s one reason that richer countries have lower gross capital formation than the world average.
The other is that of course there are diminishing marginal returns to the process. That’s another reason why richer countries have lower gross capital formation than the world average.
The UK number here is not markedly different from Germany or the US. Both of which are below that global average.
There is only solution and it is the state. We need green infrastructure quantitative easing to address this. I cannot see anything else that will.
Well, there’s always the possibility of understanding what the fuck you’re talking about.