The latest issue of the Cambridge Journal of Economics carries an interesting article on what the author, Özgür Orhangazi, calls the ‘investment-profit’ puzzle. He focuses his analysis on the US economy, and tries to account for the slowdown in investment and growth there since the early 2000s, and particularly since the crisis of 2008, despite a rise in the rate of profit.
The puzzle in question is the disconnect between rising profits and sluggish or falling rates of investment. It contributes to the literature blaming factors such as globalisation and financialisation for the disconnect. In particular, ‘investment’ in intangible assets in the high technology, healthcare, telecoms and non-durables sectors has risen relative to investment in tangible capital assets, cementing monopoly power and reducing some of the competitive stimulus for increasing investment in tangibles, thereby slowing economic growth. Continue reading