One of the most significant differences between a pre-industrial economy and an industrialized economy is that the latter has a larger stock of capital; in other words, each member of the industrial labour force has a great deal more physical capital to assist him in the process of production. This is one of the reasons for the higher level of productivity that characterizes an economy which has gone through an industrial revolution. To the extent that the additional capital is purchased by private entrepreneurs as they innovate and expand, then the accumulation of the larger national stock is achieved by raising the proportion of profits which the average entrepreneur ploughs back into his business.

There are some kinds of capital, however, which cannot be accumulated in this automatic way because they require capital outlays out of all proportion to current or immediately expected levels of profit. This is recognized to be a major stumbling-block to the economic growth of some of today's underdeveloped countries. A great deal has been written in recent years about the ‘social overhead capital’ which must be provided before an underdeveloped economy can expand its output of goods and services at a rate which will produce an appreciable growth in incomes per head. If we begin to define this ‘social overhead capital’ in concrete terms, most of it seems to consist of capital embodied in basic transport facilities—harbours, roads, bridges, canals and, nowadays, railways.