Friday, May 28, 2010

What is capital?

Karl Marx, Capital:

The circulation of commodities is the starting-point of capital.

Capital is not so much a thing, money, as it is a process in which money is converted into more money through an exchange of commodities. So "capitalism" is a system of capital accumulation that is based on widespread commodity production and exchange.

A commodity, for our purposes here, is any commercial product.

One can imagine a circumstance in which a person buys a commodity in order to sell it at a greater value to somebody else; this was the beginning of capitalism as it was practiced by the merchant class.

But capitalism would eventually evolve into a system that favored not merchants, who had to purchase commodities from somebody else, but the direct producers themselves.  And this happened when capital was applied to the production process itself.

Industrial capital is really what Marx concerned himself with, because it had the effect of transforming the way things are made altogether.  Prior economists speculated about the source of industrial profit, but Marx determined that the advantage to industrialists came from the fact that they circulated their money through a very special kind of commodity: what Marx calls "human labor power." 

Industrialists bought this commodity in the "labor market" only to get their money back, plus more, by applying it for so many hours to factory-style production.  Factory owners had to pay people enough so they could live from day to day, and they were constrained by other biological requirements, like the need for sleep; but to the degree that these "expenses" could be kept to a minimum, greater profit was the industrialist's reward.  And this was not a mere matter of preference, as would apply in the case of "greed," but rather a matter of necessity as one industrialist competed against all others for survival.  (Always remember that!)

It's worth noting that this is still the way profits are made in every traditional "industry," whether or not the workplace is a traditional factory -- in most cases, our workplaces are just "factories" of a different sort!

Industrial capital accumulation, which forms the basis for measuring "the real economy" in terms of "economic growth," can be distinguished from financial capital, which Marx explains is just "money into money" -- using money to create more money, by loaning it or making bets on it, and so on. 

This is another important form of capital -- in fact, really the ascendant one now that greater profits can be achieved through finance than traditional industry.  It explains a lot about why the United States doesn't "make anything" anymore; but this is really beyond the scope of our purpose here, which is to understand capital as a process in which human qualities are exchanged as commodities for the purpose of profit.


Richard said...

Good stuff.

I am nearing the completion of Giovanni Arrighi's The Long Twentieth Century: Money, Power and the Origins of our Times, which has considerably complicated and deepened my understanding of these processes. For Arrighi, US corporate capitalism is the fourth and latest regime of systemic capital accumulation. Each successive regime emerges out of the contradictions and collapse of the previous, and is precipitated by a financial expansion (which itself occurs because of an overaccumulation of capital--capital which cannot be profitably invested in trade or industry). It's only with the third (British) cycle that we have a capitalist mode of production.

More to say, but gotta get to a meeting... but the book is fascinating. (Meanwhile, I am on the cusp, still, of CH15 of Capital itself...)

Richard said...

Incidentally, the first two cycles of systemic capital accumulation center on Genoa (first) and the Dutch (second). The Genoan cycle, and thus capitalism as a world system, begins with a financialization period.

I think I need to write an actual post on this....

JRB said...


That's very interesting. I look forward to hearing more.

We're in the same place in Capital, so don't feel bad!