188.8.131.52 Investment in Business Development and Growth
Some of the proceeds from wealth-creation, or borrowed money, can be used to invest in developing the business: for example in facilities, machinery, tools or research (3.2.8) for any of the following purposes:
- Increasing a company’s capacity.
- Increasing its productivity, for example by automation.
- Development of new products and markets.
Steve Denning’s article, Will Trump Discover Why So Many Americans Were Left Behind?, attributed this slowdown to the policy of “maximizing shareholder value as reflected in the current stock price.” Management and shareholders have placed a short-term focus on increasing the share price, because their incentives are linked to that. He quoted a report by three professors at Harvard Business School:
“firms invested less in shared resources such as pools of skilled labor, supplier networks, an educated populace, and the physical and technical infrastructure on which U.S. competitiveness ultimately depends.”
The remedy he suggests is a renewed focus on “entrepreneurship and innovation”, so that companies can continue to improve their productivity and ensure their long-term survival.
There is also a case for national investment in infrastructure, technology and people – as argued in an article in 2017 by Joseph E. Stiglitz: When it comes to the economy, Britain has a choice: May’s 80s rerun or Corbyn’s bold rethink. Britain’s Conservative and Unionist Party Manifesto 2019 moved towards that view two years later in the 2019 General Election, promising:
“Millions more invested every week in science, schools, apprenticeships and infrastructure while controlling debt.”
This is a current page, from the Patterns of Power Edition 3a book, © PatternsofPower.org, 2020. An archived copy of it is held at https://www.patternsofpower.org/edition03/3565a.htm