TL;DR
Around three-quarters of annual US corporate investment merely offsets depreciation of existing assets, leaving only a quarter that actually expands productive capacity.
US companies pour money into investment every year, yet for the past decade or so roughly three-quarters of that spending has just been paying off old debts — replacing worn-out equipment and obsolete know-how. Only a quarter is net investment that actually adds to the country's productive base.
The figures come from the St. Louis Fed's FRED database. Think of a household doing renovations: 70% of the budget goes to patching up aging pipes and wiring, and only a small slice actually makes the house bigger. And that repair bill is growing — back in the 1970s, covering depreciation took about half of all investment; today it takes three-quarters.
Why is the repair bill rising?
Because modern investment leans toward computer software and other information technology, which becomes obsolete every few years, unlike a machine tool that can serve for two decades. Firms have to keep paying just to stay in place.
What does that mean for workers?
In the past, a key driver of rising labour productivity was more and better equipment per worker. Now, to give the average worker meaningfully more capital, the required raw increase in gross investment is far larger than it was decades ago. The trouble is, the US was never a high-investment economy to begin with.
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