Are there any policies consistent with capitalism that could solve the UK's under-investment problem? This is the question raised by Paul's reasonable observation that "under-investment is at the heart of Britain’s economic decline." He suggests that the solutions to this should include: attacking the hegemony of the City; "a virtuous wage and demand growth circle"; and a "non-investment tax, where it costs corporations and banks more to hold surpluses over a certain percentage limit than it does to invest them productively."
I'm sceptical about all three ideas.
1.October's quarterly CBI survey_(pdf) found that only 6% of manufacturers said that investment was constrained by an inability to raise external finance. This proportion has been low for as long as I remember. Of course, this 6% might be important. But it's hardly a sign that financiers' starving industry of capital is a widespread problem.
2. "Wage-led growth" - whereby higher wages lead to higher aggregate demand and thus stronger investment - is theoretically possible. It happened post-war. But it requires that capitalists be confident that governments can maintain high aggregate demand. If this confidence falters, high wages will lead to investment cuts, as we saw in the 1970s. And, remember, the wage share rose between the mid-90s and mid-00s, without generating a great investment boom.
3. We already have a tax on non-investment. It's been imposed by the Bank of England which has cut interest rates to negative levels in real terms. (In fact, real interest rates have drifted downwards for most of the post-80s period). Whilst this probably has kept investment higher than it would otherwise have been, it has been insufficient to greatly increase it. As Keynes said: "It seems unlikely that the influence of banking policy on the rate of interest will be sufficient by itself to determine an optimum rate of investment."
I don't say all this to suggest instead that "neoliberal" policies would do better at promoting investment.
Quite the opposite. I do so to ask a question. Could it be that there are no policies consistent with capitalism as we know it that would generate sufficient investment to create lasting full employment? It could be that the eastward migration of low-wage work, plus the slowdown in technical progress that's created a lack of (monetizable) investment opportunities mean that any policies to promote investment will be at best only mildly effective.
Now, I honestly don't know the answer to this. Maybe we'll get a second wind of technical progress that does stimulate investment. Or maybe a reduction in uncertainty about the US fiscal cliff and euro debt crisis, combined with pent-up demand, will cause a strong bounce in capital spending.
Instead, my concern is that too many non-Marxist commentators are making an assumption which should be questioned - that there are some policies which could feasibly greatly promote investment.They seem to assume away Keynes' suggestion that "a somewhat comprehensive socialisation of investment will prove the only means of securing an approximation to full employment."