Comment 61177

By A Smith (anonymous) | Posted March 18, 2011 at 15:25:20

Real (inflation adjusted) spending by Canadian businesses on machinery and equipment, as a percent of GDP...

1961 - 0.0250 or 2.50%
0.0253
0.0265
0.0295
0.0330
0.0372
0.0363
0.0317
0.0326
0.0325
1971 - 0.0320 or 3.20%
0.0331
0.0375
0.0406
0.0422
0.0415
0.0395
0.0392
0.0430
0.0447
1981 - 0.0484 or 4.84%
0.0422
0.0392
0.0393
0.0416
0.0447
0.0492
0.0554
0.0578
0.0550
1991 - 0.0545 or 5.45%
0.0535
0.0508
0.0532
0.0558
0.0583
0.0704
0.0735
0.0766
0.0774
2001 - 0.0738 or 7.38%
0.0696
0.0736
0.0778
0.0862
0.0926
0.0943
2008 - 0.0943 or 9.43%

Our governments/businesses tout spending on machinery and equipment as the magic bullet in creating economic growth. Yet, the numbers tell a different story. From 1961-69, real GDP increased at a rate of 5.56%, when business spending on machinery/equipment averaged around 3% of GDP. Fast forward to the 2000's, where real business spending on M/E was up to 9.43% of GDP, Canada's real GDP increased by only 1.85%.

If governments increased taxes on automation and used that money to lower payroll taxes, instead of machines replacing workers, workers would start to replace machines, or at least reach a happy medium. Who knows, it may even be possible to return to a sixties style economy, where human capital was in higher demand versus automation, that an average family could afford to live off one salary.

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