Production without capital is hard for us even to imagine. Nature cannot furnish goods and materials to man unless he has the tools and machinery for mining farming forestry fishing etc. if man has to work with his hands on barren soil. Productivity would be very low indeed. Even in the primitive sate man used some tools and implements to assist him in the work of production. Primitive man made use of elementary tools like bow and arrow for hunting and fishing net for catching fishes. With the growth of technology and specialization capital has become more complex and is of superior and advanced type. More goods can be produced with the aid of capital in fact greater productivity of the modern economy like that of U.S.A is mainly due to the extensive use of capital machinery tools or implements in the production process. Capital adds greatly to the productivity of workers and hence of the economy as a whole. Decease of its strategic role in raising productivity capital occupies a central position in the process go economic development. In fact capital accumulation is the very core of economic development.
Capital goods are man-made instruments of production and increase the predictive capacity of the economy. Therefore accumulations of capital goods every year greatly increase the national product or income. Capital accumulations is necessary to provide people with told and implements of production. If the population goes on increasing and no net capital accumulation takes place then the growing popular to would not be able to get necessary tools instruments machines and other means of production with the result that their capacity to produce would be seriously affected.
Thus capital accumulation makes possible the use of indirect or roundabout methods of production which greatly increase the productivity of the workers. Under these indirect or roundabout methods of production workers instead of working with bare hands, woke with the aid of more positive tools instruments and machinery. Under these indirect ro roundabout methods some laborers and other productive resources are first employed in producing capital goods and then with the help of these capital goods workers produce consumer goods. The greater the extent to which the methods, of production would be indirect or roundabout, the greater their productivity and efficiency. But as we have seen above for the use of indirect or roundabout methods of production capital has to be accumulated. Therefore we see that capital accumulation makes the use of indirect or roundabout methods of production possible and there by greatly increase the national product and in helpful in bringing about rapid economic growth. Moreover productivity of the workers depends upon the amount of capital per worked the greater the quantity of capital per worker the greater the productivity and efficiency of the worker.
From the viewpoint of economic growth capital formation is important also because it make large scale production and greater degree of specialization possible. Thus with capital accumulation the scale production and is helpful in bringing about rapid economic growth. Moreover productivity of the workers depends upon the amount of capital per worker. The greater the quantity of capital per worker the greater the productivity and efficiency of the worker.
From the viewpoint of economic growth capital formation is important also because it make large scale production and greater degree of specialization possible. Thus with capital accumulation the advantages of large scale production and specializations are obtained. The advantage of large scale production and specialization is that they greatly increase output and productivity and there by brig done the cost of production per unit. Without adequate capital accumulation neither the scale of produiotn can be neither increased nor greater specialization and division of labour in the production process is possible. Hence capital accumulation by increasing the scale of production and specialization increases the production and productivity in the economy and thereby promotes economy’s growth.
Another contribution of capital accumulation is that it makes the technological progress of the economy possible. Different technologies need different types of capital gods. Therefore when new superior and better technology is discovered its use can be made for production only if that technology is embodies in new capital goods that are if capital goods according to that technology are made. Therefore without capital accumulation not much technical progress can be made. If there is no capital accumulation then the various new inventions or discovers will remain unused for portion. It is therefore clear that capital accumulation promotes technical progress and there by accelerates the economic growth of the country.