Public Investment in Canada

Abstract

Prior to 1930 discussion of public investment was conducted largely on the basis of an assumption of full employment within a closed economy. Consequently it centred around the productiveness of public investment as opposed to that undertaken in the privately-operated sector of the economy, the appropriate methods of financing the projects undertaken, and the legitimate spheres of operation of public bodies. The usefulness of public investment projects was believed, in the main, to be confined to their long term contribution to the productiveness of the economy. In practice, even well into the nineteen-thirties, governments, with exceptions, undertook public projects when finances were buoyant and borrowing relatively easy, and curtailed them, in attempts to balance budgets, when depression became serious.After 1930 both in the thought and practices of some central governments and in economic writing the pendulum swung the other way. Main emphasis was laid on the current employment and income giving effects of public investment. This change in emphasis received additional impetus after the advent of The General Theory of Employment, Interest and Money when economic discussion became much more concerned with the level of employment than the distribution of the factors of production among alternative uses.The transfer of attention from the long term aspects of public projects to their effect on current employment and income maintenance was accompanied by the shortcomings of practice and thought which are inevitable in an undeveloped field. While a good deal was written and spoken about the desirability of well thought out and well planned investment, insufficient attention was given to its attainment and in practice resort was had to many undertakings whose value, from either a short or long term viewpoint, was dubious. The shortcomings were largely associated with failure to cope adequately with the institutional and administrative problem involved. Further, there was a penchant for fastening on single devices to meet the overall employment problem.