As we know, the U.S. is still stuck in a capital spending drought. According to my calculations, nonresidential business investment in the first quarter of 2011 was still 23% below its long-term trend. By contrast, nonfarm employment is about 8% below its long-term trend.
But there are some companies that are still investing in the U.S. As part of a new paper for the Progressive Policy Institute, I identified America’s “investment heroes”: The companies which are the leaders in domestic capital spending. Here’s the table from the paper:
In 2010 AT&T was the domestic capital spending leader, by a wide margin. Verizon was next, followed by Wal-Mart. These are companies that invested huge sums into the domestic economy, at a time when many other companies were still holding back. Out of the top seven “investment heroes,” 3 were telecom companies, 3 were energy companies, and 1 was a retailer. [Before you ask, I’m not ready to release the rest of the list yet. Some companies break out their U.S. vs non U.S. capital spending, but many don’t, so it takes time to estimate and verify the breakdown based on other financial data ].
Why is this important? We at PPI see long-term economic prosperity as resting on a three-legged stool: Investment in physical capital, human capital, and knowledge capital. Higher levels of investment improve the productivity of U.S. workers, which in turn should show up as higher real wages and greater international competitiveness. Or to put it another way: Without strong capital spending at home, the U.S. economy will sink into irrelevance. *
The overarching aim of economic policy should be to encourage all three types of investment, since all are essential for long-term prosperity. In particular, those companies which continue to invest in the U.S. need to be acknowledged for their contributions to the domestic economy, especially when other companies of equal size are investing much less at home. I wouldn’t go as far as to give them a medal, but let’s give them their due. Rather than resorting to financial trickery, these investment heroes are making money the old-fashioned way–by spending on productive long-lived assets which will generate economic benefits for years to come.
*Some might argue that the U.S. has been able to generate good productivity gains since 2007 without capital spending. But as regular readers of this blog know, I am skeptical of the stunning productivity gains that the official statistics seem to report for many industries in 2007-09, the middle of the financial crisis (see this post here, for example).
Mandel on Innovation and Growth 
To be a hero requires overcoming fear and taking risk. Let’s see a listing ranked by capex as percentage of market value, capital (debt and equity), or equity.
Big companies, especially ones with strong finances, make big investments without much effort or risk compared to smaller companies who may be betting their existence.
The exception would be when a big company invests in a technologically or economically unproven technology, which many small companies do all the time.
It looks like these companies must invest in the U.S. because telecom, wireless coverage, and energy production all must be in the U.S. Walmart primarily does logistics, so it must invest in the U.S. as well. These companies don’t have the option of investing overseas, like Intel or manufacturing companies. Therefore, any regulatory uncertainty will affect them less. I’m not saying their investment is bad or not noteworthy, just that it might not be as heroic as it may seem.
Oil companies and telecom monopolies, what is this, a banana republic? The bigger news is the comeback of tech, driven by the mobile boom of smartphones and tablets. No tech firm other than Microsoft, which just threw away a bunch of money on Skype, has the monopoly position of an AT&T or Comcast so they won’t spend enough individually to show up on your chart, but in aggregate are doing much more. If a country depends on protected national telecom monopolies or old-line sectors like oil and retail, that’s a sign of weakness, not strength. Unfortunately for the US, it’s very much a mixed bag right now, until the next tech boom is able to get traction and unfurl.
I continue to anxiously await this next tech boom. 🙂
So do I. 😉 As my link shows, there is a tech mini-boom driven by mobile technology right now, but unfortunately there’s a lot of fluff that’s being funded again this time around, like Facebook or twitter, let alone the stuff that makes no money. But the key tech that will really drive the next tech boom, micropayments, hasn’t been deployed by anyone yet, so as long as the techies are too dumb to build that, they’re going to be stuck with mobile for now.
The anounts given in the table as investments include imported capital goods, meaning that a portion of the impact creates jobs and economic activity abroad.