Political Economy 12: Capital – Part I

1. Capital is any form of wealth which is used to produce additional wealth. Many wrongful ideas have been spread about capital.

A serious mistake is the general belief that capital means money, tools and machines and land.

Money is definitely a form of capital. But on its own it cannot do much, other than be exchanged for goods and services, or some other currency, or function as a common denominator for various others economic actions.

The capital of a business is made of the buildings (not the land), the machines, the vehicles, the furniture and all the tools and items used by the labourers. Computers, phones, copiers, paper, staplers etc., all these make up capital which facilitates the production of wealth; but also, it is a form of wealth itself for the businesses that produced all of the above.

Money, in the material form of a paper bill or coin is produced by the state mint using special paper and special machines. In its electronic form and in the form of credit, it is produced by banks, both state-owned and independent.

Money, in all of its forms, is wealth that is used for the production of additional wealth.

Land cannot be regarded as capital. Land, as was demonstrated in past articles, is a primary component in the production of wealth, goods and services. It is not produced by human labour and cannot therefore be regarded as capital.

 

 

2. All the examples of capital in §1 are products of human labour on a piece of land under certain conditions (manifested mainly by society). All are moveable from one place to another (even some buildings!) and all become worn out with use and require maintenance or replacement.

Land, ground, the solid surface, is not subject to these procedures. A piece of land, a plot, a cultivation cannot move at all. The dirt can indeed be moved and shifted around – but not the area of the location.

Land does not wear away (yet the soil might lose its fertility); it does not require repairs (except in rare cases such as draining swamps or lakes) and cannot be replaced though its earth may be replenished.

Land perseveres, fixed throughout the centuries, unless strong geological phenomena intervene, as in the case of earthquakes.

The land in many places today has the same form it has had for the last three millennia.

 

3.There seems to be a general and vague notion among supporters of communism and the far left, that capital is something evil which is used by insidious capitalists to take advantage of and to repress the workers.

This belief is nothing short of pure foolishness: it demonstrates ignorance, at best unintentional, at worst intentional, or very limited intelligence.

Let us take a shoemaker that works in a small shop on the outskirts of a neighbourhood. He will have some leather, perhaps a lathe or a drill, cutters, pliers, hammers, nails etc. at his disposal. All these are capital, necessary for the production of wealth, which in this example takes the form of shoes (or shoe-mending)!

Or let us take a tailor. He will have some textiles, a sewing machine, pairs of scissors, needles, threads, pins. All these are capital that he uses to produce wealth – clothes and services.

Or, take a carpenter. He too has capital in the form of some wood and glue, drills, surface planers, saws, a lathe, a vice, hammers, nails etc.

No self-employed professional, a baker, a pastry chef, an electrician, a plumber etc. can work without capital.

 

4.Capital, in all its forms, is a great blessing and is today necessary for all forms of production.

 

Capital may be wealth or the outcome of production for the businesses that created it, but it is also anything used for the production of other, additional products by other businesses.

Capital is not, as some fanatical meta-marxists hold, the great oppressor. It is not capital which creates inequality and exploitation; these are caused by the misuse, the private appropeiation, of economic rent as we have demonstrated in the past. This has to be understood with certainty and clarity.

 

-Nikodemos

 

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