Mother Earth: Ally or Adversary?

Economic growth requires capital. This article reviews the relationship between economic growth around the world and six different kinds of capital: (a) real capital, (b) human capital, (c) financial capital, (d) foreign capital, (e) social capital, and (f) natural capital. Economic theory and empirical evidence suggest that domestic and foreign investment, education, financial maturity, and reasonable equality in the distribution of income are all good for growth. However, recent theory and evidence also seem to suggest that natural capital – i.e., abundant natural resources – may crowd out or impair other types of capital and thus impede economic growth over long periods.