Labor constrained vs capital constrained is a slight simplification that implies that all other things being equal, availability of capital and labor are the tw

Labor constrained vs capital constrained is a slight simplification that implies that all other things being equal, availability of capital and labor are the two things that will stop a business from growing without limit. With that in mind: A labor constrained economy implies that the capital is there to start a new business or venture, but the new business or venture cannot begin because they simply cannot hire the laborers needed to do the job (either through directly hiring, or hiring and then training). All things being equal, two businesses in direct competition, the business that manages to hire the most talent will end up growing most quickly and beat its rival. A capital constrained economy implies that labor is not a limiting factor to consider when starting your new business or venture, you will be able to find laborers as needed. Your only possible constraint is the amount of capital required to fund said business, or the amount of capital available to you to make it grow more quickly. All things being equal, two businesses in direct competition, the business that manages to get access to the most amount of funding the quickest will end up growing the most quickly, and beat its rival. By and large, most of the economy exists in the second category. That said, you're right, there are large amounts of money sitting idle both at large corporations and elsewhere. But what these individuals and organizations are doing is taking advantage of the fact that we are in a capital constrained economy. To say it another way: In an economy where the "only" thing that can prevent a new business from growing large is its availability to capital, then the most powerful actors will be the ones with the most say in how that capital is directed. We can think of it another way. If we were in a labor constrained economy, VCs as they currently exist would be far less powerful. The organizations with the most power, would be firms that had access to large numbers of skilled and waiting laborers ready to join your organization the moment they are needed.... like a union.