Keywords: public investment, full employment, environmental sustainability, government budget surplus, government budget deficit, private sector borrowing, government borrowing, sustainable development, incomes policy, deficit government financing, capital projects, health investment, education investment, infrastructure investment, aggregate demand expansion
Creating the conditions for public investment to deliver full employment and environmental sustainability
This paper argues that a suitably vigorous approach to public investment is a crucial ingredient to achieve full employment. If directed appropriately, then such a public investment programme can also promote environmental sustainability. A well-designed and properly implemented incomes policy is a precondition of any aggregate demand expansion so that it will not cause undue inflationary pressure. The next issue is the character of the demand expansion with such an incomes policy in place. The linkage we are looking for is not, for instance, an expansion of bank lending which finds its way to heightened activity in the property market. Public investment in health, education, and infrastructure programmes is the priority. Expenditure on these items of public capital should not be constrained by a budget balance (surplus) requirement which has its only justification in relation to current expenditures. Deficit government financing, drawing on a surplus from the private sector, provides the means of achieving public investment in capital projects which yield a social rate of return.