One of the great disappointments of the weak economic recovery has been the sluggish revival of business investment — spending on new buildings, factories, equipment and intellectual property (mainly research and development, and software). For the United States, this spending in 2014 was about 9 percent above its 2007 record high. Sounds good? It isn't. The average annual gain is a bit more than 1 percent over the past seven years. It is only a small stretch to say that capital has gone on strike.
Why? Can anything be done about it?
We now have a new study from the International Monetary Fund that suggests some not very encouraging answers. For starters, it confirms that the investment bust is a global phenomenon. It's not just the U.S. but also Europe, Japan and most advanced countries. As important, the main cause of the investment slump is clear-cut: Businesses aren't expanding because they can already meet most demand with existing capacity.
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