by Mariana Mazzucato
Today’s Budget uses taxation policy to try to encourage corporate investment. The idea is that reducing corporation tax will increase investment and employment, benefiting us all. The problem is that such tax cuts in the 1980s, both in the UK and the USA, did not increase investment but merely changed the composition of where the total tax bill came from and had a regressive effect on income distribution.
So what is wrong with focusing on taxes to increase investment? While the concept of, ‘animal spirits’ came back after the financial crisis to explain the ‘herd-behaviour’ that characterised financial markets, its main lesson did not. Keynes’ primary insight was that business investment, the most volatile element of spending in GDP, is not a function of taxes or interest rates but of ‘animal spirits’ - the gut instinct of business regarding the future growth prospects of a particular sector (eg. the future of biotech), a particular stock or of an entire economy (eg. emerging markets).
Tuesday, 1 March 2011
Management guru Peter Drucker once wrote, if you think training is expensive, try ignorance.
The UK is in danger of finding out the truth of this statement - with RCUK now focusing so heavily on interdisciplinary investments, and giving out multi-million pound grants in these areas, there is a need to give greater support to the people who will be expected to carry out this research. Interdisciplinary research requires a very different range of skills from the normal discipline-based academic model but most researchers receive no training in these skills.
The success of the recent masterclass ‘Leadership Training for Interdisciplinary Environmental Initiatives’ highlighted this gap in the training market.