Answer Question Nos. 64–66 on the basis of the following information :
“While capital is the most important condition or prerequisite of high efficiency production, one cannot explain differences in the wealth of nations in terms of differences in ‘capital endowment’ of different countries, in the same manner as one can explain differences in population density by reference to differing endowments of natural resources, such as climate, rainfall, geology, etc. For in contrast to natural resources which exist independently of human activities, ‘capital endowment’ is necessarily the result of such activities. It is impossible therefore to separate cause and effect; it is just as sensible—indeed more enlightening—to say that capital accumulation has resulted from industrial development than that it was the cause of such development. For taking manufacturing activities as a whole, the growth of output and the accumulation of capital are merely different aspects of a single process.”
(Nicholas Kaldor, Capitalism and Industrial Development, 1972)
‘Capital endowment’ cannot explain the differences in the wealth of nations, because
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