But such productivity can grow even faster with corresponding or even faster growth in human capital investment. Thus, per capita income growth is accelerated significantly by improvement in human development all round. Hence, we have a positive sum game: economic growth enables human development, and human development itself contributes to the acceleration of economic growth.
That is the rationale behind capital cushions. They provide a certain breathing space before institutions are forced to unload risky assets and curb their lending. If the buffers are too small, however, the pressure to deleverage during a shock can become overwhelming and cyclical movements may be amplified. This is where public capital assistance comes into play.