There are various types of capital.  For this article, we will talk about consumer and capital goods.  The goal of all production is to make things that satisfy our demands.  That is, transforming capital goods into something else that can be consumed immediately, or they can be called consumer goods.  This may sound simple, but the process is rather time consuming and complex.  For example, a steak in Texas may have a short production process—farm, butcher, to consumer.  However, a cup of coffee in New York City is likely quite a bit longer—coffee field in Brazil, roasters, grinders, shipping liners, to consumer.  I understand this is not the exact process.  There are many more factors that are in play here, this is just an example.

In each scenario, the meat and coffee producer, took a roundabout process to transform the capital goods into consumer goods.  This is a very long process, and it was done for you, the paying customer.  Be grateful, they are doing this for you.   All factors are put in the correct place, so to speak, to complete the circle.  The finished good can be used to satisfy our demand for steak and coffee.  Steak ready to eat and coffee ready to drink don’t exist in nature.  Therefore, we must use this roundabout process to satisfy demands.  This is a combination of human labor and nature.

These capital goods are used in the best possible way to satisfy demand.  If there was a better way, they would be used for that.  Consumer goods continue to increase with a limited supply provided by nature: new processes are constantly being invented or discovered, new capital goods are being invented or discovered, alternatives are used, division of labor, combination of labor, human ingenuity, etc.  If the owners of the capital goods fail to meet the demands of consumers, for any reason, the owners will be replaced by new owners.  This is a never-ending process.

Capital goods do wear out, just not overnight.  You can see the empty cup of coffee, but seeing the shipping liner approaching its end is much more difficult.  Nobody else can see this but the owner, maybe a few others, but it is not obvious.  If this is left for others to decide, we can call this capital consumption for that company.  If this happens on a larger scale, it’s capital consumption for the market, or market destruction.  “As long as the walls of the factory building stand, and the trains continue to run, it is supposed that all is well with the world.”

Capital consumption is the destruction of society.  If the owners are replaced as decision makers, aside from the fact that it’s aggression, we are in danger of destroying the society.  This is a great situation for the statist leader, who can blame the market.  Of course, the uninformed masses will believe this lie and will readily give him more power.  The larger the capital stock, the longer this can go on.  As mentioned above, capital goods don’t wear out overnight, plus the capital stock must dwindle down before the destruction is obvious.

The way to increase production is to increase the stock of capital, or put another way, saving.  Imagine Crusoe consumes each fish he catches.  He would never move beyond stage one.  He must consume less fish than he catches so he can move to stage two.  Crusoe would not survive very long if he does not save.  Saving is instrumental to the growth of an economy.  Crusoe economics is a useful thought experiment to see the absurdity in the logic used in economics.

References

Eugen von Böhm-Bawerk; The Positive Theory of Capital

Richard von Strigl; Capital & Production

Ludwig von Mises; Socialism: An Economic and Sociological Analysis