Reference no: EM133185323

Discussion : Public and private investment

We are going to debate the relationship between fiscal policy, public investment, private investment, technology generation and growth. Watch this video, from Dr. Mariana Mazzucato in the World Economic Forum. Instead of focusing on the possible crowding-out effect of government borrowing (meaning the possibility that public investment will discourage private investment in an economy), professor Mazzucato argues that the state is the primary agent of innovation, using examples of successful companies of the United States to illustrate how risky, long-term investment is essential for the private sector to thrive, but discouraged by traditional markets. However, she argues, the profits of those public investments are increasingly privatized, while the costs are socialized (paid by the public through the government). How does this socialization of costs and privatization of profits impact fiscal policy (i.e. how does it encourage fiscal austerity discourses)? What are some of the suggestions offered by Dr. Mazzucato to create a symbiotic (instead of parasitic/predatory) relationship between public and private investment? Consider the substantial government expenditure of the United States during the COVID-19 pandemic, and the positive impact that it had on households and businesses. In that context, do you think that the United States Government will and should get some of the profits that result from that investment? Justify your answers.