41 - Aid for Investment 41 opposed to 9.5 percent in 1998...

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Aid for Investment 41 opposed to 9.5 percent in 1998) if growth was only 2 percent. If on the other hand, growth were 6.5 percent (with the accompanying higher investment), unemployment in 2002 would be only 6.4 per- cent of the labor force.49 The idea of low investment mechanically increasing unemployment is silly-it ignores again the possibility of substituting labor for machinery. If machines increase slowly because of low investment, then the presumably abundant workers will be substituted for the scarce machines. The surplus labor idea suggests that additional people have no effect on production at a given rate of investment, an idea strongly rejected by the evidence. How could we have gotten more of a growth response from in- vestment? It is true that as an economy grows, it will need more machines. But the reason that the rigid investment-and-growth rela- tionship has not worked is that machinery investment is just one of many forms of increasing future production, and all the forms
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