Investing versus spending
Investment is key to economic growth. We could enjoy now the pleasures that funds can bring. Sometimes we put some of that money into projects we hope will bring us future gain. We forego present pleasure for future reward. To do this, we need to be compensated for postponing the rewards that could come now, and for taking the risk that our investment might not pay off.
In the famous experiment, the children were offered the choice between a marshmallow now, or two if they waited until the teacher came back. They were tracked over their lives. The two marshmallow kids were life’s winners, with higher salaries, educational qualifications, home ownership, and fewer mental and physical illnesses. Life’s winners.
Investment pays off. It drives growth. It funds new ventures that bring new consumer satisfaction, new business, new jobs and new opportunities. It makes us richer.
Investment is such a good thing that people, especially politicians, want to be seen to be doing it. It is like ‘freedom,‘ such a good word that no-one wants to be seen to oppose it. That is why restrictions on freedom are usually called ‘real freedom.’
Investment should strictly mean money put into making greater financial return in future. If money is allocated to making you feel good, or making the world into a better place, it may be worthwhile, maybe not, but it is not investment in the strict sense.
Gordon Brown was a master of the art of using the term ‘investment’ to mean spending. Under his terminology you might ‘invest’ in a Mars bar. US companies have invested in fracking in order to make a profit by selling the oil and gas that they will produce. Gordon Brown ‘invested’ in the NHS and in education, among others, not with a view to financial return, but because he believed, rightly or wrongly, that they were good things worth spending on. They might be, but this was spending, not investment.
The moral of the story is that when governments talk of increasing taxes to fund ‘investment,’ try substituting ‘spending’ for ‘investment’ and see if it is looks just as worthwhile.