Thursday, August 26, 2010

Why we need more public investment in public services and public infrastructure

Interesting to read a recent US study that found that the most effective options for creating jobs and building a prosperous regional and state economy is for governments to spend and invest more in public services and public infrastructure.

Disputing the idea promulgated by pro-business and pro-market politicians and advocates that funding public services and economic development are competing interests the study found that:
" The tax cuts and business subsidies approach to economic development will do little to create jobs in the short run and is not the most effective to generating growth over the long term".
The study found that investing public funds in public services, such as education and health and in public assets and public infrastructure is the best approach for state and local development, and raises gross state product, expands productive capacity, increases employment and raises personal income.

The study found that providing incentives to corporations and business such as tax breaks, public subsidies, employment subsidies and other forms of business incentives are not effective and are often counterproductive because they deplete resources that could be spent on education and investments in public services and public infrastructure. 

Strategies that shift resources and assets from the public sector to the private sector- privatization, marketization and corporatization- reduce costs and increase corporate and business profits but are not effective in terms of state and local development and building a prosperous state and regional economy.

The study concludes:
Instead of trying to lure firms with deals and lower corporate taxes, an approach to economic development that builds the skills of the current and future workforce, improves the physical infrastructure of regions, and makes communities more attractive places for families and firms represents a more effective use of a state’s scarce resources.

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