What is Capital?



One hears a great deal about Capitalisms and anti-capitalisms; but what do these terms actually mean? Have these terms been so used and abused that they now mean very little? Can I just think of Capital as simply the economic order of the West - in its modern form; and then globalised?

When and how did the term become so popular? Smith for example wrote on the wealth of nations.

Also, to place it a little in context - how does one distinguish Capital from markets in Medival Europe; bazaars in Bangladesh; or trading along the silk-roads? How does one for instance distinguish Antonio, the merchant in Venice (from Shakespeare's Merchant in Venice) from the capitalist today?

Mozibur Ullah

Posted 2015-04-23T08:05:00.410

Reputation: 1

2I think while this is asking about a definition, it's asking about it in a technical sense, so should be left open. – James Kingsbery – 2015-04-23T11:45:15.817



Understanding capitalism requires understanding a constellation of concepts that reinforce each other. I'll try to make some headway here.

A helpful way to think about capital is as the aggregate of all non-labour inputs to production. Some would include land as a factor of production as well, and some others would consider human capital to be a form of capital (typically when explaining why capital in aggregate does not run up against the problem of diminishing marginal returns.)

The defining characteristic of capitalism is that capital is privately owned. As you can see, it is compatible with a great diversity of political systems (ranging from the illiberal democracies of Singapore, to the authoritarianism of China, to the democracies in the West). Because capital is privately owned, it is typically invested in such a way as to maximise profit. This isn't necessarily the case, and some people might invest their private wealth in non-profit organisations. But the dominant paradigm is typically acquisition for private gain.

The term became popular in its modern usage sometime in the middle of the 19th century, possibly slightly earlier. Marx was probably not the originator, but he was definitely contemporaneous with others who did. Potentially Proudhon and socialists of other stripes. Since then the left has kept this usage alive, together with the oft-mentioned 'bourgeois mode of production' - which is essentially synonymous.

For Capitalism

The capitalist is likely to speak of capitalism being conducive to human freedom (freedom to buy and sell, enter into contracts), and to the generation of wealth and prosperity for mankind. He is likely to speak of its efficiency with respect to classical economics - the invisible hand through the price mechanism equilibrates supply and demand, so that the market clears (everyone is satisfied). And possibly, that capitalism encourages thrift and industry - which are virtues (although, this is susceptible to the immediate retort that we are conditioned to think of these as virtues, because they are useful within capitalism, not because they have any timeless worth).

Anti-capitalisms (two main types, with many sub-types)

1. A Normative Critique

The main line here is that capitalism is unjust and causes us to detract from the good life. There is substantial trove of academic debate on whether Marx himself thought capitalism was unjust. (c.f. Norman Geras, "The Controversy about Marx and Justice).

The most common type of this critique is - capitalism leads to inequality in resources. Some people may regard this as intrinsically negative, which is up for debate. But this inequality typically translates into unequal political influence - which we see in the form of corporate lobbyists and other distortions to the democratic process.

Some other normative critiques (nowhere near exhaustive):

Capitalism is exploitative - maximising profit involves underpaying workers and denying them the fair share of the revenues.

Capitalism is coercive - while people may seem to voluntarily enter into labour contracts, the reality is that they have very little other option. Back in the day when peasants had some land - they could get by on subsistence farming. The modern-day proletarian has no such option. Notice that it is not an issue of whether the proletarian (working-class man) is better off or not, it is an issue of whether he is free to choose or not.

Capitalism is alienating - it prevents us from working in the right sort of way, that which actualises our potential. We are stuck doing pointless jobs - like waiting fast food tables, when simple etiquette would do without it, or shuffling papers within an engorged bureaucracy, telemarketing, or roadsweeping, when machines can do it so much better. Because what maximises profit doesn't necessarily coincide with what develops our potential, there is a problem. Capitalism also alienates us from our fellow man - we see each other as potential consumers, or labour, which prevents us from relating in a dignity-preserving way.

2. An Efficiency Critique

Capitalism is inefficient, and squanders our natural resources. In the Marxian lingo you would hear about capitalism being 'a fetter on the productive forces' at some point in future (1859 Preface to a Critique of Political Economy). The idea is that the productive forces (labour, machinery, natural resources...) have a tendency to develop, and the relations of production we choose have a bearing on how effectively the productive forces can develop. Capitalism has unleashed great productivity, but those who subscribe to a Marxian view of history are pessimistic about whether it will always be conducive to the development of the productive forces.

From the Greens (environmentalists) you might hear about how capitalism takes a myopic view and systematically disregards environmental externalities. When selfish interests dominate government policy-making on the environment, there is wanton environmental degradation in the service of profit. This is often brought across in ethical terms - but considerations of natural resource scarcity lead me to consider it an efficiency-based critique, at least in part.

Hope this helps!

Ng Li Ki

Posted 2015-04-23T08:05:00.410

Reputation: 126


Capital is held wealth in a form which can be liquidated or invested. So capitalism is the preference for control in the public sphere to devolve into the hands of those who hold this variety of wealth.

This is distinct from the emphasis on Real Estate, as a means of distributing control. Those medieval trades took place somewhere, and the participants' ability to make decisions were always trumped by a local Lord, however poor he might be in money or materials, he was in control because of title to the land, however little value that land might have as capital. Neither could they set up their own rules, nor could they just move and do business where they wished. (Jews, "gypsies" and expatriates in general, and the Silk Road in particular, were something of an exception, continually lying in a sort of DMZ between various different Feudal systems).

To the degree we are not free of jurisdictions or of Lords and heredity, given inheritance, traditional jurisdictions, etc. in Western Law, this contravenes strict Capitalism.

The economic system of the West, therefore, to the degree economics is subject to a set of controls that has vestiges of Feudal Law (local authority and bylaw), Civil Law (public police and statutory enforcement) and Common Law (our legal procedure itself), is not pure Capitalism. It comes close, for instance at the nadir of government effectiveness that led up to the 'Robber Baron' era, but Progressive movements always arise to reverse this trend.

To apply this to another of your examples: Antonio had to go to Shylock because the Church said financial speculation was a sin and could enforce its will and have any Christian who made high-risk loans formally ostracized. They derived this power largely from Feudal Law. Today, anyone can be a venture capitalist, and he could have found a less bitter man to borrow his money from. But it would be someone whose wealth was liquid, and who therefore, in our system, has substantial power -- much more than an equal quantity of wealth might have granted Shylock.


Posted 2015-04-23T08:05:00.410



I personally would like to add some info to the already answered and accepted answer by Ng Li Ki. ( which is surely plausible. ) But only in Marxian way, since I am afraid to say today's main stream economics stays in the realm of metaphysics ( although it looks scientific )

Since the most prominent person(s) who analyzed the circulation of the Capital ( please note I am emphasizing here the term circulation ) first, was certainly Marx-Engels, ( Smith's is very vague ( but he is considered as the one who had claimed the production of the commodities needs the the workpower ), while Ricardo sophisticated Smith's idea, but his idea is dependent on Say's law ( Simply, the amount of the production of a commodity = the amount of the demand of it as his law )).

Now, while Ng Li Ki's definition of Capital is I think sure, correct, what his one is lucking is Fictitious Capital simply, such as stocks, bonds, etc.

While I think nobody would argue the purpose of private companies is acquiring more money, Marx thought the source of the "more money" resides in the process of the production of the commodities the companies produce. ( which is, the aggregate amount of the wages paid to the workers minus the aggregate total volume of the workpower put into the commodities ). Now here, Capital is considered as a sum of dead labors, which are, raw materials, machines, even the amount of the electricity used, the cost of the exportation, to which living workpower will be put into, meaning they are the chunk of materials the work power was put into in the past ( mostly by another institutes.)

But the commodities need to be sold, in another term, need to be swapped by the Money-The-Almighty ( my word ). Until here, I think Ng Li Ki answered nicely about Capital.

But as I quoted above, I think we ought to consider the fictitious capital too, Marx thought as the reference says, the fictitious capital can be kind of a waiting capital to be thrown into the future process of the production of commodities.

The fictitious capital can be commodities too ( not as a certain bodily commodity but as a commodity-the-exchangeabe-with-anything ). Today, securities of companies are bought and sold like stocks like a commodity, am I wrong here?. So I think we have to take into account of the fictitious capital as Capital as a waiting capital. Many people think Marx is a communist or just a person who pursued the equality so on and so forth but to me his main focus was/is how the Capital works ( and found out the decree of Capitalism is, acquiring more money for it's own sake for more money ).

I said long, in short Capital can have 2 meanings, I think

  1. Methods/physical objectives in the process of the production of the commodities ( machines, raw materials, waters, etc etc ) to which human workpower will be applied onto ( for the production of the item )

  2. From the fictitious capital as a waiting capital, the pure aggregation of money ( such as stocks, securities, bonds, derivatives so on, which are floating and bought and sold in the market.

Thank you.


Posted 2015-04-23T08:05:00.410


Isn't it interesting to see, in English, all the money-commodites, 1 trust --> trusting someone expecting to pay later = money. 2 Securities = meaning safe but at that same time another form of money 3 Stocks = accumulation but also same with another form of money accumulated 4 Savings = in religion, saved by God, but actually money. Here we see what we human beings are seeing as the ultimate is money = capital. So more money = more capital = much more safety. – None – 2015-04-25T03:21:09.020