One point on this:
The article mentions the concept of government spending 'crowding out' private sector spending/investment and then claims that 'targeted public investment can attract more private sector investment.'
I doubt that is the case. I think the public spending shifts private investment into certain 'favored' sectors of the economy, but doesn't increase overall investment. But, is that a bad thing?
Here in Canada, the Globe and Mail will constantly bring up failed examples of government subsidies like the infamous cucumber greenhouses (which I believe actually occurred in the 1970s!), but targeted government subsidies as part of coordinating private sector investment have been promoted going back to the late 1980s when business consultant Michael Porter advised governments to promote 'clusters' (or clustering.)
https://hbr.org/1998/11/clusters-and-the-new-economics-of-competitionFrom the article:
Clusters are geographic concentrations of interconnected companies and institutions in a particular field. Clusters encompass an array of linked industries and other entities important to competition. They include, for example, suppliers of specialized inputs such as components, machinery, and services, and providers of specialized infrastructure. Clusters also often extend downstream to channels and customers and laterally to manufacturers of complementary products and to companies in industries related by skills, technologies, or common inputs. Finally, many clusters include governmental and other institutions—such as universities, standards-setting agencies, think tanks, vocational training providers, and trade associations—that provide specialized training, education, information, research, and technical support.
In economics, this concept is known as 'network effects' which predate this consultant's idea of clusters. You can think of the idea of research zones (or research triangles) and how successful they are, or, similar things like Silicon Valley.
Business cluster due to the 'synergies' (aka network effects) of being located together, of having access to support businesses and universities and their research facilities and coordinating supply chains and this is more efficient than businesses locating randomly. The simple fact is, this often takes government coordination and targeted financing to happen.
This has actually been a debate going back to the 1980s in Europe when several European governments adopted 'clustering' as economic policy while Margaret Thatcher promoted 'laissez faire' private sector investment with no government involvement. While Europe isn't necessarily doing wonderfully economically and there are other factors like Brexit, the British economy is something of a basket case.
How many empirical economists can explain this to you? Damn quants.
