Capital Is Making a Comeback

The U.S. economy is about to become more capital-intensive. Over the past three decades, modern innovation ranging from software to Crispr gene editing has increased productivity, allowing tangible investment to stagnate. But new economic demands—brought on by climate goals, supply-chain pressures, shifting demographics and defense needs—will require investment in tangible capital to increase.

From 1985 to 2021, tangible investment—including property, factories and equipment—decreased from 12.5% to 8.5% of private gross domestic product. That decrease was more than compensated for by growth in intangible investment—including intellectual property, software and process knowledge—which rose from about 11.5% to 16.75% to meet the demands of an increasingly digital economy. Overall, the rate of total private capital investment from 1985 to 2021 grew only 1%.