Capital is Sufficient (Part 2)

In last week’s post, I provided some data on how much physical capital has grown in the last one hundred years. When measured by certain proxies, such as the production of steel, it looks like about a 30x growth in the last 100 years and nearly 100x if you go back just two decades further to 1900. We also saw that significant growth has occurred since World War II, which as a first approximation is at least a 10x growth.

Now someone might suggest that this growth could all be due to the population explosion, but that’s not the case. Over the same timeframe the global population has grown a lot less: from 1900 to today a bit less than 5x and from the end of World War II to today only by a bit more than 3x. Put differently, the increase in physical capital has far outstripped population growth.

Now one might still question whether this capital is sufficient to meet everyone’s needs as I have asserted. I believe that the strongest evidence for my claim comes from considering what happened during World War II. Here is a chart that shows how government share of GDP in the US spiked during the war years.

Let’s dive a bit deeper and look at the manufacturing efforts. The US ramped production of tanks, airplanes, battleships and guns at an extraordinary clip in the war years. Here is a table that tabulates this for different weapons systems.

The (Read more...)