…is the title of a Washington Centre For Equitable Growth article. I think that there is some logic to investing in social infrastructure in a slowing growth frame.
In a slowing growth frame less of a corporation’s revenue flows are likely to be reinvested and productive capital is likely to be increasingly depreciated over time, depending on the rate of decline of the frame. At the moment this cash flow, distributed as either dividends or buybacks, is likely to go disproportionately to those with higher wealth and hence more likely to be reinvested in existing assets, driving up their prices.
In a competitive economic model cash flows would be used to finance the transition to lower growth, with flows consumed and/or used to reduce debt. As people age the costs associated with complex medical and personal care needs rise, but these are liabilities that are presently not that well funded. It makes sense to optimise the allocation of flows to a) fund the economic costs of older adult communities and b) make sure that those at the younger end of the scale continue to receive the necessary education and employment skills training. This would ensure that the expenditure flows in the economic habitat would be healthier in terms of optimising expenditure and investment. Imbalances due to inefficient distribution of flows are likely to lead to higher asset price and financial system risks.
In a growth frame where higher levels of productive capital investment is needed it makes sense to have lower corporate tax rates, but in a slower growth frame where higher percentages are distributed it would make sense to tax these distributions at higher levels for more efficient distribution. In a competitive efficient market place without asymmetric properties we would be less likely to have the present skewed distribution of income and wealth and associated funding pressures on key aspects of social infrastructure.