Claim Capital and Productive Absorption

This paper proposes a balance-sheet theory of growth slowdown based on the distinction between productive capital and claim capital. Productive capital is defined as capital that expands an economy’s capacity to generate future output. Claim capital is defined as a legal, financial, institutional, or accounting claim on future output that does not itself expand productive capacity. The central argument is that economic growth depends not merely on the quantity of capital, but on the relation between productive capital, claim capital, and the economy’s productive absorption capacity. Productive absorption capacity is the ability of an economy to transform incoming or accumulated capital into additional productive capacity rather than into claims on future output. The paper argues that many economic phenomena usually studied separately—public debt, private debt, mortgage credit, real estate inflation, pension entitlements, central bank liabilities, foreign capital inflows, resource rents, and financialization—share a common balance-sheet structure. They increase claims on future output. They are economically beneficial only if they are accompanied by a sufficient expansion of productive absorption capacity. A key implication is that claim instruments do not cease to be claim capital merely because the resources raised through them are used productively. Public debt, private debt, and central bank liabilities are claim capital by construction. Their net economic effect depends on whether they are accompanied by productive assets or institutional changes that expand productive absorption capacity. The framework is applied to saturated economies, foreign direct investment, inflation, education, mortgage subsidies, resource-rich economies, colonial Spain, euro-area imbalances, and central bank balance sheets. The theory does not claim that all its components are new. Rather, it unifies ideas from classical rent theory, fictitious capital, financialization, secular stagnation, foreign investment spillovers, and resource-curse literature into a single balance-sheet framework organized around one question: whether a given economic structure expands productive absorption capacity, or merely creates claims on future output.