The Conversation We Never Want to Have
6 years, 1 month, 19 days, 20 hours
2 June 2023
Most societies prefer to spend the vast majority of today’s available money on themselves.
It is the conversation that societies generally don’t have – Part 2. That is the balance between consumption today and the opportunity for tomorrow.
My presentation at New Zealand’s Building Nations conference in Christchurch last week included a slide showing infrastructure investment as a percentage of GDP for 20 major economies, in 2019. More than half of the set of 20 invested less than 3% of GDP. China and Indonesia topped the chart with 6% and 5% respectively. Pretty low, isn’t it?
It's low because most societies prefer to spend the vast majority of today’s available money on themselves. Spend on infrastructure and in some cases you won’t see the benefit personally at all. That will mostly accrue to the next one or two generations. It is our taxes that are funding public spending, so we also feel entitled to the benefit. And the pressure on governments to spend on services is growing because the demands and expectations of today’s citizens keeps rising. There are more of us, we live longer and we want more and better of everything that the state can provide.
The easy way of skirting the hard choice is to borrow. Borrow to invest and we might in part match when the benefit is enjoyed with when the cost is incurred, which seems fair. But historically the justification for borrowing has rested on a more alluring concept, that the investment will drive growth, and that growth will repay the borrowing and leave money over to drive higher standards of future living. Which all seems reasonable, as an extrapolation of how businesses operate, if the money is invested well. It is the Magic Money Tree, a term notorious here in the UK since last autumn when the then Prime Minister tried to push the concept to politically disastrous limits.
But like a pyramid selling scheme, the Magic Money Tree relies on growth, and as I argued in my last countdown blog we are approaching a point where in aggregate the world’s wealth cannot keep growing. But we still need to invest in maintaining our schools and roads and hospitals and wind farms and parks and libraries.
At which point societies need to properly engage in the conversation they never want to have. How much of what we could have today are we prepared to forgo for the benefit of those whose lives are in the future?