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A Plea for Investment, Not Spending

October 25, 2011 - 5 Comments

By Howard Baldwin, Contributing Columnist

As economic confusion roils the world, it’s disconcerting that no one seems to know which path to take to solve the problem.

Governments in economic turmoil, such as those in Greece and Italy, consider austerity. Other governments, such as the United States, consider even more spending.

I would argue for a different mindset, one that favors the concept of investing instead of spending. Certainly government must address present concerns, but it’s even more important that it lays the foundation to help its citizens prepare for and thrive in the future. (Would World War II have lasted as long, if the United States had been less isolationist during the preceding years?)

Rather than budgeting money for jobs, I’d prefer to see government budget money for infrastructure that will establish a foundation for the ongoing creation of new jobs.

Infrastructure that’s Built for Lasting Effect

There’s no question that broadband is one of those potential investments. A new survey commissioned by Ericsson, in conjunction with Arthur D. Little and Chalmers University of Technology, shows that investing in broadband has a significant multiplier effect. The survey, which looked at 33 OECD countries, “quantifies the isolated impact of broadband speed, showing that doubling the broadband speed for an economy increases GDP by 0.3%,” which translates to the equivalent of $126 billion.

But broadband is not the only kind of infrastructure we need, and looking at it in isolation ignores the two other pillars of a strong economy. Certainly we need to move data, but we also need to move people and goods, because not everything will be digital.

Nations will need to invest in forward-looking alternative energy, in order to make sure that the other two categories aren’t stymied (instead of investing in wars that merely attempt to preserve access to legacy fossil fuels).

Focusing on Outcomes, Rather than Activities

The outcome I’d like to see is something akin to a term that first popped up during the Internet boom: frictionless commerce. Although in those days it connoted the potential elimination of intermediaries, I think of it now as the unfettered movement of ideas, data, people, and goods.

Not surprisingly, China already moved this concept into action several years ago: when it announced a $568 billion spending plan in 2008, it included technology, but also railways, roads, and airports.

Governments should think about building a foundation for the future, not just a safety net for the present. The problem is that elected representatives like to be able to show results, not potential. They want to be able to capitalize on their efforts when they’re up for re-election, so as a result, long-term plans frequently get waylaid. (Perhaps that’s why China can move more quickly).

Even more important, technology has given us a far longer horizon than ever before. It has given us the ability to envision a world where information can be piped anywhere, where energy can come from above the earth rather than below, and where commerce is possible wherever people congregate — whether in Azerbaijan or Algeria or Albany.

Rather than keeping our eyes cast downward at today’s troubles, and reacting with a stream of proposals that appear to result in mostly tactical activities, we need to start looking out toward that world and acknowledge the entrepreneurs who are often a key catalyst for growth.

Would the youth of today really want their government to spend just for the short-term, if they truly understood the likely consequences, or would they expect the adult policymakers to think ahead? Yes, it’s a rhetorical question — I already know the answer.

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  1. @Justin, understood, access to broadband infrastructure is part of the solution. It's not the eventual outcome that most communities are seeking. Gaining the full socioeconomic benefit will require a concerted effort from a cross-section of the locally engaged community leadership. Thank you for sharing your point of view.

  2. I agree with your sentiments and fully believe that national leaders often look for that "four year solution" rather than focusing deep and identifying a long term solution to a short term problem. However, I also believe that a lot of that blame lies with us. We, as a society, are so focused on moving forward in the quickest way possible, that we push for the delivery of short term solutions that will yield immediate results. This results in elected leaders feeling that pressure to make the decision to spend on the now rather than invest in the future. I do believe that technology is a significant driving force that allows us to have access to the big picture network and a forward outlook of the direction of our society as a whole. However, having access and actually seeing are two different notions, and I think it is up to us as taxpayers to understand that in order for these changes to be made. Thank you very much for sharing the blog. Justin

    • Unfortunately what you stated is sad but true. We as a society push for changes now, and therefore put additional pressure on the leaders to make changes that will produce results immediately. We all know that impulse decision making without proper analysis can lead to failure in the long run. What do you think a leader in today's age should do to help society understand their pressures?

  3. @Sara Jane, thanks for sharing your perspective. The more I consider this core issue, the more I wonder if the real test of leadership in a crisis situation is demonstrating that you have a substantive vision of *how* to reach a desired outcome (thereby enabling others to move beyond their immediate fears and short-term concerns). To be convincing you have to focus on credible probabilities, not merely creative possibilities. Leadership under pressure is very challenging, for sure.

  4. I agree with all of your points 100%. Perhaps the statement/concept you landed so very true was about how current government officials are looking more towards short term results, rather than long-term investments. I think that if we could flip that script entirely, this nation would be on it's way to becoming better off that we are now.