By Richard Pond – Europe needs to spend €1.5 trillion on social infrastructure between now and 2030 to redress the massive under-spend over recent years and to address the increasing demands on social services. This is one of the main arguments of the report, Boosting Investment in Social Infrastructure in Europe.
While the report is very good in identifying the scale of the problem, it fails to address some of the key reasons why spending on social infrastructure has been too low for too long and so puts too much emphasis on an increased role for private finance.
There is an alternative view that puts public investment at the center of the solution and this requires an analysis of why the cuts in public investment have been so deep for so long.
It identified three key problems:
- The relatively low political cost of downsizing/delaying government investment programs compared to current expenditure programs and subsidies;
- An undervaluation of the role of government investment for growth, including its crowding-in effect in times of low growth; and
- A set of European and national fiscal sustainability regulations that do not incentivize the prioritization and ring-fencing of capital spending, especially at the sub-national level.