If you leave out energy and materials, capex spending since the crisis has been flat. That is a problem now that commodity prices have plunged

ONE reason why interest rates were cut to zero in the aftermath of the financial crisis was to encourage business to invest, and thus boost the real economy. Companies have a "hurdle rate" for new investment; a project must offer a higher return than the hurdle rate. Other things being equal (a critical assumption), a lower financing cost should result in a lower hurdle rate and thus that more projects get approved. But as the graph from Citigroup shows, if one excludes energy and materials, global capex has been flat since the crisis. And the boom in energy and materals investment owes much to the lingering effect of the commodities boom, which ended in 2011, and the development of shale oil and gas. Now that the oil price has plunged, many energy investment projects have been cancelled.

So why hasn't other capex gone up? An obvious problem is the slow nature of the global recovery. If companies do not expect rapid growth, then they will lower the return forecast for any project they consider. Even though, the financing cost has gone down, the number of potentially profitable projects may not have increased.

Another issue may be that the new industries do not require as much capex as before. It takes a lot of capital to build a steel mill; not so much to design a video game or iPhone app. Perhaps, then, we shouldn't worry that capex is flat. The worry, though, is that the new industries might not create as many jobs either. A new report (also from Citi, but in collaboration with the Oxford Martin school) says that the

downward trend in new job creation in technology industries is particularly evident since the computer revolution of the 1980s. A study by Jeffrey Lin suggests that, while about 8.2% of the US workforce shifted into new jobs associated with the arrival of new technologies in the 1980s, the equivalent figure for the 1990s was 4.4%. Using updates of official industry classifications, Thor Berger and Carl Benedikt Frey further document that less than 0.5% of the US workforce shifted into technology industries that emerged in the 2000s, including digital industries such as online auctions, video/audio streaming and web design

This analysis bolsters the "secular stagnation" argument. Emerging markets and commodities gave world growth a lift for a while. Now that they have slowed, where is the growth going to come from?