The mys­tery of Amer­ica’s miss­ing cap­i­tal in­vest­ment

In­vest­ing in fac­to­ries and equip­ment is weak “We wanted fly­ing cars, in­stead we got 140 char­ac­ters”

Bloomberg Businessweek (Europe) - - NEWS - —— Peter Holmes Coy

14

The pub­lic is in a foul mood this cam­paign sea­son, in part be­cause liv­ing stan­dards have stag­nated. The me­dian house­hold in­come in Jan­uary was slightly lower, ad­justed for in­fla­tion, than it was in Jan­uary 2000, ac­cord­ing to Sen­tier Re­search. Pay is lag­ging partly be­cause com­pa­nies have been un­der­in­vest­ing in the tools that work­ers need to be more pro­duc­tive. Those tools, which range from ma­chines to soft­ware to land and build­ings, are col­lec­tively known as cap­i­tal.

The chart un­der the mag­ni­fy­ing glass shows that com­pa­nies are ad­ding to the na­tional stock of cap­i­tal at an his­tor­i­cally slow pace. In a sep­a­rate cal­cu­la­tion, the U.S. Bureau of La­bor Sta­tis­tics says that what it calls “cap­i­tal in­ten­sity”— the ra­tio of cap­i­tal used to hours worked—was so weak that it ac­tu­ally sub­tracted from work­ers’ pro­duc­tiv­ity from 2010 through 2014.

Econ­o­mists and pol­i­cy­mak­ers agree this is hap­pen­ing. They dis­agree on why. So put one of these the­o­ries in your pipe and smoke it, Sher­lock.

*IN­VEST­MENT IN PRI­VATE, NON­RES­I­DEN­TIAL FIXED AS­SETS, NET OF DE­PRE­CI­A­TION, AS A SHARE OF EX­IST­ING STOCK; EACH POINT IS AN AV­ER­AGE OF THE TRAIL­ING FIVE YEARS; DATA: BUREAU OF LA­BOR

STA­TIS­TICS

Busi­ness Cuts Back An­nual ad­di­tion of build­ings, equip­ment,

and soft­ware in the U. U.S. S. as a per­cent­age of ex­ist­ing to­tal* Cap­i­tal spend­ing sank af­ter the last re­ces­sion and hasn’t

re­cov­ered

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