The Politics of Investments: The Time Dilemma and Blame Avoidance Strategies

To meet the challenge of slowing economic growth, governments of Western democracies are increasingly forced to prioritize growth-friendly investment policies that facilitate productivity and labor force reproduction in the long run. Such future-orientated policies include public spending on education, research and development, public infrastructure, active labor market policies, and family programs. However, while the long term might be a salient concern of economists and policy advisors, the future is rarely popular among myopic voters. In this paper, we try to answer how decision-makers overcome this dilemma of time: When are politicians able to prioritize growth-friendly investment policies over more compensating policies with clearer short-term benefits for the voters? We argue that institutional fragmentation and the opportunities of blame attribution play key roles. High clarity of responsibility makes it harder for reelection-motivated governments to dedicate resources to policies that only yield a return in the long run. As such, blame avoidance factors constitute a hitherto neglected explanation to the observed variation in investment policy across countries and time. The argument is tested using data from 18 OECD countries over 30 years.