Will governments crowd out private investment?

Posted by: Paul Donovan

12 Jun 2020

Weekly Update

  • Government debt levels are obviously going to be higher after the current crisis. If governments need more cash, will that mean less for companies that need to invest? It might, but at the same time some companies may need to invest less in the future.
  • The virus seems to be accelerating the structural changes that were already at work in the global economy. The fourth industrial revolution is, in part, about making the economy more efficient. We are doing more with less. These changes are now happening faster.
  • As people start to work from home companies can invest less in real estate, technology and office furniture. Employees supply all of these things when they work at home. Rather than two pieces of real estate (work and home), two desks and two computers, the same output can happen with one of everything.  Less investment produces the same output.
  • On average a desk in a traditional office is used around 24 hours per week. Nearly all the investment required to get an office desk in place is a waste of money.  If companies can achieve the same output with less investment, the government's borrowing needs will be less of a threat.

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