In a post earlier this week, I showed how public investment, net of depreciation, in the US is barely above zero, meaning that fresh expenditures on long-lived assets like schools and roads are running just slightly ahead of the decay of existing infrastructure. You might think, given neoliberal orthodoxy, that the private sector is taking up the slack. It isn’t.

The graph below shows net private nonresidential fixed investment as a percent of GDP. Net means less depreciation (the declining monetary value of existing assets over time, as they wear out and grow obsolete); private means not-government; nonresidential should be self-explanatory; and fixed means sticking around, as opposed to inventories, which are considered a form of investment, since businesses accumulate them for later sale.

Several things stand out from the graph. First, the declining trend lines on both total investment and investment in equipment, and the slow rise in intellectual property investment. Investment in equipment and software — machinery, computers, telecommunications equipment, etc. — is particularly crucial to long-term productivity growth. Although the fruits of productivity growth can be distributed in any number of ways, like higher profits and/or higher wages, the growth in productivity (meaning the dollar value of an hour of labor) puts an upper limit on income growth over the long term.