Courtesy of Michael Panzner of Financial Armageddon
One argument I made in "Not Just Me" and "Simply Deluding Themselves" is that the record corporate profits bulls are fixated on and salivating over stem from companies freezing or slashing spending (e.g., R&D) that is essential for creating sustainable growth (and a demand for permanent full-time workers).
In other words, corporate America has been focusing on the short-term at the expense of the long-term.
As it happens, a post, "Our Aging Capital Stock," at the blog of the former chief economist of BusinessWeek, Mandel on Innovation and Growth, suggests such short-sighted behavior isn’t actually a new phenomenon — although it certainly seems to have gained steam in recent years — but is, rather, standard operating procedure.
If things feel more decrepit and worn-out these days, it’s because they are. The average age of the U.S. capital stock is at a 40-year high in all three major categories: nonresidential, residential, and government. Take a look at this chart:
One unpleasant surprise after another, from the top down.
- The age of the residential stock is at its highest level in 40 years, despite the mammoth building boom of the 2000s.
- The age of the government capital has steadily risen over the past 40 years, suggesting great underinvestment in public infrastructure.
- The age of the private nonresidential capital stock has risen more or less steadily since the early 1980s, with a slight dip in the New Economy boom of the 1990s.
Of course, some some companies and sectors are doing a better job of investing in their future than others. Click here to see Michael Mandel’s chart of the aging of capital by industry.
