The Value of Everything: Making and Taking in the Global Economy

by Mariana Mazzucato

All of which means that policies constructed on the assumption that business always wants to invest, and simply needs a tax incentive to do so, are simplistic, not to say naïve. The incentives (indirect spending through a tax cut), unless complemented by strategic direct investment by government, will rarely make things happen that would not have happened anyway (in economics speak, there is no ‘additionality’). As a result, a company or individual will often experience an increase in profits (through a tax cut) without increasing investment and without generating any new value. And the primary objective of the policymaker should be to increase business investment, not profits. Indeed, as seen earlier the relationship between profits and wages is at record levels. There is no profits problem, but an investment problem.70