Tuesday, October 4, 2011

Private Capital Formation and The Great Recession

Within a private enterprise system, private capital formation is a major driver of long term well paying private sector jobs. During the Great Depression private capital formation was anemic. Currently, during the Great Recession, private capital formation is anemic.

Private capital formation during the 1930’s was lifeless due to rising taxes, the specter of even more taxes [which did in fact occur], government deficit spending causing a crowding out effect of private investment,  the vilification of the investor class, and over regulation.

History repeats itself? Same song just a different beat?

'With the jobless rate stubbornly stuck above 9 percent for the last 28 months, the United States is experiencing a “jobless recovery” that is much worse than those following the 1990-91 and 2001 recessions. What’s the main reason that job creation has stalled and prevented a full economic recovery? The ongoing economic weakness and lack of job creation can be traced directly to a lack of private business investment, and the critical “investment-employment-economic growth” connection has been getting some attention lately.

For example, Robert Higgs wrote recently that “The economy remains moribund not because consumption spending has failed to recover and not because government spending has failed to increase, but because the true driver of economic growth—private investment—remains deeply depressed.” In a recent New York Times editorial, Greg Mankiw emphasized that “The subpar recovery has coincided with a historically weak investment recovery.” ' - Dr. Mark Perry, The ‘Jobless Recovery’ Is Really an ‘Investment-less Recovery’, Journal of the American Enterprise Institute, 10/03/2011

Link to the entire article appears below:


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