Investing in Happy Endings

LONDON – Public and private investment in the real economy has been under attack since the 2008 financial crisis. In difficult economic times, it may seem logical to cut investments that yield results only in the long term, and thereby conserve money and resources to address short-term problems. In fact, cutting investment in our future – be it in people, the planet, political institutions, or business – is deeply irrational.

It is only through investment in visionary ideas, blue-skies thinking, research and development, and innovation that we can ensure that the future will be better – freer, more peaceful, and more prosperous – than the past.

Early-childhood education, preventive medicine, libraries, physical infrastructure, and basic scientific research, for example, all cost money – and studies show that they are worthwhile. But when policymakers need to cut spending, investment in these public goods is often the first thing to go, because voters do not feel the effects in the short term. Most of the pain is deferred, which is precisely why such cuts are politically attractive.

But this is low-hanging fruit that societies cannot afford to pick. We must start investing in people at the earliest possible moment – right from birth. Universal access to high-quality nutrition and preventive health care, as well as early-childhood learning programs, are necessary to provide strong foundations upon which countries around the world can ensure their future social advancement and economic growth.

Likewise, for children and adults alike, there is real value in, say, public libraries – secular and free gathering spaces that offer universal access to learning and, increasingly, provide a gateway to digital services. The same is true of cultural programs and institutions that stimulate growth in the arts and sciences; they, too, are necessary to ensure that citizens can contribute productively to their societies and economies.

The temptation to cut long-term investment in economic hard times stalks the private sphere as well. And companies around the world, big and small, have been succumbing to it since the beginning of the global economic downturn. As companies are forced to look to their bottom line and become leaner, they cut investment in research and development, employee development and training, infrastructure, and more. Making matters worse, these budget lines are the last to be restored when economic prospects brighten.

For example, in the face of investor pressure, pharmaceutical companies have cut their research activities dramatically, relying instead on acquisition strategies. The aim is to “de-risk” by buying up firms that have already carried out all of the costly blue skies research and have developed proven drugs.

Obviously, such strategies will not work in the long term if no one is willing to invest in the earliest stages of research in critical areas like biotechnology, digital technology, renewable energy sources, and the like. With early-stage investors scarce, governments turning away from blue-sky science, and funders of university-based research increasingly demanding that grantees’ show the “impact” of their work, who will fund risk-taking? If no one does, the well will run dry, and there will be nothing to acquire.

Likewise, instead of investing in new infrastructure, companies patch up the old. But patching broken things can work for only so long. By not committing resources to invest in new, cost-efficient, environmentally-friendly operations, or in developing the skills and knowledge of employees, or in innovation, companies will find that their short-term savings come at the expense of their long-term success.

The choices that companies are making not only affect their own operations, but also have profound consequences for their customers, suppliers, and the societies in which they are embedded. Failure to invest in the future will affect that future for everyone.
Not everything that is worthwhile has an immediate positive effect on financial bottom lines, or can be put neatly in a box. If public and private investment decisions are driven only by the easily measured and easily defined, we will miss out on the breakthrough moments that characterize so much of human achievement and advancement.

In both the public and private sectors, we need to commit ourselves to long-term investment, whether in children and education, science and technology, and health and medicine, or in building strong institutions that can serve as the sustainable foundations of peaceful, democratic, and prosperous societies. An investment in our future is never wasted. Investing in beginnings is the only way we will live to see happy endings.

This column is also available in Arabic, Chinese, Czech, Dutch, French, German, Italian, Russian, and Spanish

Date

18 November 2014

Organisation

Project Syndicate

Investing in Happy Endings

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