Capital

The stock of capital in an economy is the aggregation of fixed assets, made or cultivated by man, used for the production of goods and services. These assets mediate between human labour and its environment, and are the main factor determining the level of productivity of human activity in a given environment. This is the traditional concept of capital, confined to physical items: equipment, buildings, plantations, and such. Investigations in recent years of the phenomenon of economic growth have led to a new concept of capital: ‘human capital’, which relates to the accumulation of skills, abilities and knowledge in society. Human capital also mediates between man and his environment and is thus a prime determinant of labour productivity. Theoretically, it has the same economic role as physical assets, and should be included in the discussion of capital as a factor of production in an economy. Nor is it—in principle—more difficult to measure. Nevertheless, it is in danger of being ignored so long as national accounting excludes outlays which build up human capital formation from the investment figures which are readily available for analysis and therefore widely used. Though fully conscious of the importance of human capital, especially in a developing economy, our own discussion here is oriented towards the traditional physical concept, particularly when dealing with numerical data. We shall start with a survey of the stock of capital in Ghana in our benchmark year, 1960. This will be followed by an examination of the process of capitalization of the economy over the seven years 1955-61. Finally we shall consider some aspects of the productivity of capital in Ghana.