Man in a Shed: Its time to tell the difference between 'investment' and 'spending'

Tuesday, April 18, 2006

Its time to tell the difference between 'investment' and 'spending'

Most times when a member of the New Labour elite gets on TV to talk about Education/the NHS (delete as appropriate) they keep on about investment, as if there is no difference between investment and spending - and indeed waste.

Wikipedia entry on Investment says:
Investment or investing¹ is a term with several closely-related meanings in finance and economics, related to saving or deferring consumption. An asset is usually purchased, or equivalently a deposit is made in a bank, in hopes of getting a future return or interest from it. Literally, the word means the "action of putting something in to somewhere else" (perhaps originally related to a person's garment or 'vestment').

Dictionary.com says: ( format highlighting is mine )

An asset or item that is purchased with the hope that it will generate income or appreciate in the future. In an economic sense, an investment is the purchase of goods that are not consumed today but are used in the future to create wealth. In finance, an investment is a monetary asset purchased with the idea that the asset will provide income in the future or appreciate and be sold at a higher price.

Investment is clearly not the same as spending. Paying people more money increases your sending, but the result of the investment element needs to be measured in improved returns.

I don't understand why the New Labour critics let them get away with this deliberately misleading language. The time is right for this to be opened as a strong line of attach on the government.

Here are a few starting line of attack:

New Labour Investment * Incompetence = waste. ( As can be seen in the NHS right now )
Investment where no return can be proved is spending and is probably waste.
Calling all spending investment is dishonest.

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The pound in your pocket

"We used to think that you could spend your way out of a recession and increase employment by cutting taxes and boosting government spending. I tell you in all candour that that option no longer exists." James Callaghan

“The trouble with theoretical economists is that they don't understand that when you have a deficit, you can only finance it by borrowing, and you've got to persuade people that it's worth lending money to you and that they'll get their money back... there's no way of escaping it.” Dennis Healey during the 1976 Stirling Crisis.

"Lenin is said to have declared that the best way to destroy the Capitalist System was to debauch the currency. By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens ... Lenin was certainly right. There is no subtler, no surer means of over-turning the existing basis of society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose." John Maynard Keynes, 1920.

"To preserve [the people's] independence, we must not let our rulers load us with perpetual debt. We must make our selection between economy and liberty, or profusion and servitude." Thomas Jefferson, President of the United States of America,1801-1809.

Inflation is taxation without legislation .. Milton Friedman