Capital shallowing: the effect of disinvestment on government functioning

Is a term that I am sad to say that I haven't come across.  (Although I have seen the term "capital deepening" applied to the increased income of neighborhoods as demographics change and the neighborhood becomes more attractive at the scale of the metropolitan residential landscape.)

It has so much explanatory power.

It's used in a Financial Times article about the National Health Service in Britain, how with decreased funding and investment, the amount of capital to support each worker, and each facility, declines in systematic ways that often reduce the ability to provide proper care ("NHS capital investment cuts leave England’s hospitals crumbling").

The article argues that while the facilities are declining and the waitlists lengthening, care is still okay.

In the basement pharmacy at St Mary’s Hospital in London, part of the world-renowned Imperial College Healthcare NHS Trust, senior pharmacist Michele Garwood has placed plastic trays beneath the ceiling in an attempt to protect her stock of medicines from regular flooding. 

Elsewhere, on Albert ward, one of five lavatories has been out of use for three months after a hole opened up in the floor, exposing it to the car park below, and rotted floor joists in patient bays, temporarily taped over, represent a constant trip hazard. 

We “still provide the best care we can” but some patients are so horrified by their surroundings that they discharge themselves, said matron Marta Calvo Hernandez. St Mary’s is one example of how a longstanding lack of capital spending is being felt across the NHS. The service is struggling with an accumulated maintenance backlog estimated to be worth more than £10bn, the highest since records began. 

Stephen Rocks, an economist with the Health Foundation, a research organisation, said there had been “a very sustained under-investment in capital” over the austerity years of the 2010s, which had “left the NHS with insufficient capital investment to deliver the care patients need”.  

Rocks suggested this was part of the reason that a growth in staffing levels in the health service did not seem to have translated into a corresponding increase in activity. “We’ve seen a ‘capital shallowing’, with less capital per worker, and that does have a very direct read across to productivity,” he said. 

As a term, apparently it was coined in development economics, making the point that as countries grow in population, there is less money invested in per capita ("Population Pressures, Saving, and Investment in the Third World: Some Puzzles," Economic Development and Cultural Change, 1988).

I wish I had known this concept earlier, because it explains points I've made in various areas.

First, the impact of neoliberal induced disinvestment in government--the US could "slide" for a long time with denigration and disinvestment in government because in the decades before it overinvested. 

But the failures with FEMA and disaster response after Hurricane Katrina and under Trump with Puerto Rico and Houston are a good example.  But I don't know if the failure of the Army Corps of Engineers and levees was about capital shallowing or just politics, failure to adequately address risk, budget shortfalls, etc.

And the failure of the Trump Administration to properly respond to covid.  And the serious problems of the US public health infrastructure to respond to covid after decades of declining budgets ("COVID-19 and Underinvestment in the Public Health Infrastructure of the United States," Milbank Quarterly, 2020).

Of course, the Conservative Party austerity agenda in the UK for the last ten years has had the same kind of debilitating effect ("Austerity urbanism in England: the 'regressive redistribution' of local government services and the impact on the poor and marginalised," Environment and Planning A, 2017).  With covid, policing, transit, health care as mentioned above, care for the aging, defunding of local government, parks, libraries, etc.

Second, with the tax cutting fervor in growing places like Utah--"let's share the benefits of growth"--when growth imposes more costs, not fewer, and by cutting taxes you have less revenue to invest, or a capital shallowing ("A Robust Economy, State of Utah press release).

A third example would be the impact on local governments of declining budgets.  This has been particularly pronounced in Toronto, where the previous mayor refused to raise taxes beyond the inflation rate, even though costs increased greater, with serious negative impact on the quality of municipal services ("Brutal performance art criticism of Toronto's Mayor, John Tory, and his "austerity" agenda").

It can be difficult to separate the effects of neoliberalism, say with the water quality failures in the UK ("Water companies are playing dirty over sewage. That’s why 20 million of us are taking them to court" Guardian) from capital shallowing--the budget of the UK Department of Environment is only £11.47 million FOR THE ENTIRE COUNTRY--and capital shallowing.  

I think they are mutually reinforcing, especially when it comes to "advanced economies" as opposed to developing economies for which the concept was coined.