Well, this depends Dr. Chang, this depends


Ha-Joon Chang wants to tell us that the government should permanently be running a budget deficit:

Like individuals, of course, a government can increase its means in the long run by borrowing to invest in things that will make the economy more productive, and thus increase the tax revenue. If a government invests in improving the transport system, it will make the country’s logistics industry more efficient. Or if it invests in healthcare and education, that will make the workers more productive.

We're not entirely certain whether this is either only potentially so or impossible.

For example, we could pay doctors more, an increase in spending upon health care, but not notably an increase in the productivity of either the populace or the general economy. And we could spend more on producing more PhDs in Womens' Studies but this is not synonymous with a more efficient economy. We could spend more on infrastructure: like the Swansea Barrage. But that project has a negative net present value meaning that that spending actually decreases the future wealth of the nation.

So we veer between two different thoughts here. The first being that it is potentially possible that if government spends a deficit on investment in productive projects then yes, perhaps a deficit for investment would be reasonable. Then we look at what British governments do spend "investments" on and decide that as the system cannot identify, nor invest in, productive schemes then the proposition fails.

We do worry though that we are being insufficiently cynical about the ability of government here.