One of the distressing issues for the US economy has been the slow pace of investment, which is probably part of what made the US economic recovery sluggish in the last few years, and threatens to be part of a \”secular stagnation\” outcome of lower productivity growth in the years to come. In a globalizing economy, it\’s possible that one reason for low investment in the US (and other high-income economies) is just that the investment opportunities look better in emerging market economies. At least, this is an obvious interpretation of a figure from Thomas Klitgaard and Harry Wheeler in \”The Need for Very Low Interest Rates in an Era of Subdued Investment Spending\” (March 22, 2017), which appeared on Liberty Street Economics, a blog run by the Federal Reserve Bank of New York.
The figure points out that investment as a share of GDP was about the same in emerging markets and advanced economies in 2000, but since then, the investment/GDP ratio has risen in emerging markets and fallen in high-income countries. I\’m sure this isn\’t all of the reason for stagnating US investment, but it\’s likely to be a piece of the puzzle.