It depends. Historically, governments have occasionally strengthened a nation's growth trajectory through the contribution of new infrastructure. However, context matters. For one, the less complex a government's already existing obligations to its citizens, the more benefit such investment might provide. Most important: does new infrastructure make it possible for citizens to build more substantial economic templates, than what already exist? In other words, are citizens able to utilize new infrastructure on economic terms, specifically, greater opportunities to pay existing bills? Or are there structural ("special interest") factors which prevent citizens from putting to good economic use, the infrastructure already in place?
Answers to these questions particularly matter, given the all too perennial arguments for fiscal policy rather than monetary policy, in times of economic stagnation. Today's fiscal policy infrastructure dialogue emerged somewhat slowly, and for good reason. For instance: how many were all too cognizant of new infrastructure and investment in waiting, with scarcely any measurable yield, due to lack of local economic patterns for productive activity? Even as earlier investments dwindle and are quickly forgotten, fiscal arguments to "jumpstart" growth gradually reemerge, since there is little else to fill the conspicuous economic void. Meanwhile, private interests actively and passively stall economic activity behind the scenes, as others contribute to this unfortunate reality, by actively stalling monetary policy as well.
Once again discounted in the latest monetary/fiscal round, is that monetary policy has the capacity to maintain existing societal obligations in recessions and downturns, particularly for the massive group responsibilities in complex economies. Done properly, monetary policy can at least maintain present and ongoing economic stability, whereas fiscal policy is far less immediate, and exists within a broader realm of issues that extend beyond present concerns.
An additional problem in the present, is that many government fiscal obligations have become closely bound with ongoing redistributive maintenance. While some maintenance capacity provides real value, these governments consequently have fewer means to work within a first mover context when growth is most needed - particularly the growth capable of generating broad, equilibrium wide opportunities to populations, such as occurred at mid 20th century in the U.S.
Consequently, private interests now bear the responsibility of ensuring continued momentum in growth and economic progress. Why has monetary policy proven so reluctant to assist them in this task, since the Great Recession? One problem in this regard, is that too many non tradable sector private interests contributed to economic stagnation, which in turn is wreaking havoc on the U.S. Republican party - given how it has long stood for economic progress.
Hence "feet dragging" on the part of both private interests and monetary policy, contributes to the latest wishful thinking regarding government options. Which in turn leads to "forgetting" of monetary history, as noted by Scott Sumner in a recent post. How many universities even provide this history for their students? While reading the old "new" Keynesian views he noted, I was struck by the policy maker confidence in being able to positively affect the expansion of supply side factors, as though this ability were a relative constant. Even though fiscal reasoning as such could be readily countered, in terms of public/private contribution to output potential, why would economists want to jeopardize their employment by doing so? Understandably, it's not quite rational to directly challenge the private interests, which benefit from the artificial scarcities of non tradable sector activity.
One reason governments were successful in the first mover endeavor in the twentieth century, was the fact they contributed to the capacity of still expanding tradable sector formation. New roads and bridges, meant the expansion of capacity for every commodity and physical product imaginable. But even more important, was the citizen contribution to this new capacity, as they expanded retail into areas which previously held little more than the wealth of commodity formation.
Nonetheless, arguments for fiscal instead of monetary policy, begin with the assumption that government has a continuous and ongoing advantage in generating a stronger growth trajectory. If only it were so! Alas, the 20th century government role for progress was substantial enough, that the earlier dynamic appears easier to replicate than is actually the case.
At a surface level, one might mistakenly assume that government holds the prime responsibility for much of a nation's growth trajectory. However, this appearance can be misleading. For instance: only recently, Washington "warned" citizens of impending slow growth in the foreseeable future. If it were in government power to generate and maintain a strong growth trajectory, 1) why was that dire warning issued in the first place, and 2) why have they waited until now, to stir up hope yet again regarding growth potential?
One could reasonably argue that Washington didn't do so, because their first mover options have been greatly diluted, especially in recent decades as existing entitlements have multiplied. Unfortunately, the fact that Washington is doubling down on infrastructure reasoning now, points to the lack of a supply side desire to even offer reasonable options which aren't based on wishful thinking. One could say that government infrastructure/spending arguments would make a better "feast" (more employee skill preparedness) for the private interest patrons which are already "full" and backing away from the table.
The infrastructure that matters in terms of economic stagnation, is that which makes new economic templates possible - templates which citizens can actively use in new forms of economic engagement. Before everyone gets excited about building new infrastructure and research opportunities, let's set up shop along the countless nodes and end points on the digital highways we already have, first. At the very least, don't rewrite economic and monetary history in a way that pretends people want economic growth, if this is not actually the case.
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