Is Capital a Blessing or Curse?

“Capital is opposed to labor, and the rich get richer while the poor get poorer” is a phrase heard all too often.

It’s often repeated by those who misunderstand the true economic relationship between capital formation and the productivity and real income of workers.

• I have previously written about how our understanding of the causes of economic progress can assist human flourishing and our fulfilling the cultural mandate.
• I later explained the nature and beneficial consequences of division of labor and how voluntary exchange is necessary for the division of labor to thrive.

Something often forgotten, however, is that a highly developed division of labor would be impossible without capital formation—another engine of economic development.

What is Capital, and Why Does It Matter?

Capital goods are produced means of production: tools, machines, buildings, and intermediary goods.

What we call capital is merely the sum of the monetary value of all a firm’s assets that are dedicated to that firm’s productive operations minus the sum of the monetary value of all of a firm’s liabilities. These assets may consist of land, physical plant, tools, machinery, goods-in-process, receivables, cash, etc.

Therefore, capital formation should be no more suspect than any other economic activity. Fulfilling the cultural mandate in our fallen world without either starving to death or killing one another requires productive labor. Sustaining a growing population requires increases in productivity.

This is why capital is a blessing.

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