Capital (economics)

“ Likewise, social changes, new needs, the growth of population, increase the net income of wealth, or the rents of a business. The basis of capital value is income, and whatever be its cause, political or economic, material income can and will be capitalized and added to the market value of the privilege, wealth, or industry on which the income is conditioned. ”

“ No Wealth is completely produced until it has been delivered to ultimate consumers. But Distribution has to do with Wealth apportionment.
In apportionment, or Distribution, there are two major categories, Wages and Rent, corresponding respectively to the two Production categories, Labor and Land. A minor Distributive category, corresponding to the minor category in Production called Capital, is distinguished as Interest. This term identifies the earnings of Capital. Inasmuch, however, as Capital is part of Labor-produced Wealth, Interest must be a subdivision of Labor-earned Wages. ”

“ Under normal conditions of capitalist production, the remuneration of the workers by consumer goods direct is precluded, one of the corner-stones of capitalist economy being the money-form of the variable capital, the independent transaction between the worker as buyer of commodities and producer of consumer goods. ”

“ Thus we see, that with every rise of wages, in proportion as the capital employed in any occupation consists of circulating capital, its produce will be of greater relative value than the goods produced in another occupation, where a less proportion of circulating, and a greater proportion of fixed capital are employed. ”

“ It is not the money paid by the purchaser, which remunerates the labour; it is the capital of the producer: the demand only determines in what manner that capital shall be employed, and what kind of labour it shall remunerate; but if it determines that the commodity shall be produced on a large scale, it enables the same capital to produce more of the commodity, and may by an indirect effect in causing an increase of capital, produce an eventual increase of the remuneration of the labourer. ”

“ Interest is the price paid simply for the use of capital. But what is capital, and in what does its use consist? What claim has it to be regarded as an independent factor of production? Our very familiarity with the term, our habit of employing it with the rich looseness of every-day life is an obstacle to the clearness of thought, which is again essential. We recognize, most of us, clearly enough that capital, although we reckon it in terms of money, consists, like income, of real things; factories, machinery, materials and the like. ”

“ Now as before the variable capital, as a fixed amount of money, will put in motion an appropriate quantity of living labour, that is to say it serves to employ the appropriate quantity of constant capital in production and to produce the corresponding amount of surplus value. ”

“ No, labor consumes all of the total product that its wages will buy back.
"Two billions are left to capital. After it has paid its expenses, does it consume the remainder? Does capital consume all of its two billions?" ”

“ If every commodity on an average remained unsold for a length of time equal to that required for its production, it is obvious that, at any one time, no more than half the productive capital of the country would be really performing the functions of capital. ”

“ The use of capital consists in its advance. It goes before all operations of labour and trade. It is the power that sets labour and trade in motion; just as the power of wind, or water, or steam, gives movement to wheels and pistons.
Let us briefly see how capital operates upon the three great branches of human industry, namely, upon agriculture, manufactures, and commerce.
A farmer having acquired capital, either by the former savings of himself or his fathers, or by borrowing from the savings of others, takes a certain number of acres of land. ”

“ The payment of wages, therefore, always implies the previous rendering of labor. Now, what does the rendering of labor in production imply? Evidently the production of wealth, which, if it is to be exchanged or used in production, is capital. Therefore, the payment of capital in wages pre-supposes a production of capital by the labor for which the wages are paid. And as the employer generally makes a profit, the payment of wages is, so far as he is concerned, but the return to the laborer of a portion of the capital he has received from the labor. ”

“ When, for instance, it is said that wages are drawn from capital, the word capital is understood in the same sense as when we speak of the scarcity or abundance, the increase or decrease, the destruction or increment, of capital—a commonly understood and definite sense which separates capital from the other factors of production, land and labor, and also separates it from like things used merely for gratification. ”

“ It is not less difficult to pronounce how far the effect of any given quantity of money, as capital, or in other words, as a medium for circulating the industry and property of a nation, may be increased by the very circumstance of the additional motion which is given to it by new objects of employment. ”

“ Whether the ten thousand pounds thus employed are capital or not, will depend on what is done with the amount by the ultimate receiver. If the children invest their fortunes in a productive employment, or the mortgagee on being paid off lends the amount to another landholder to improve his land, or to a manufacturer to extend his business, it is still capital, because productively employed. ”

“ It has proved that the first condition of the rapid accumulation of capital is the diversion of money from unproductive to productive channels, and that the amount of accumulated capital is one of the two regulating influences of the wages of the labourer. ”

“ It is the circulating capital which furnishes the materials and wages of labor, and puts industry into motion. Every saving, therefore, in the expense of maintaining the fixed capital, which does not diminish the productive powers of labor, must increase the fund which puts industry into motion, and consequently the annual produce of land and labor, the real revenue of every society. ”

“ It is as much capital as if it belonged to B. A is really a farmer or manufacturer, not personally, but in respect of his property. Capital worth ten thousand pounds is employed in production—in maintaining laborers and providing tools and materials—which capital belongs to A, while B takes the trouble of employing it, and receives for his remuneration the difference between the profit which it yields and the interest he pays to A. This is the simplest case. ”

“ Capital is Wealth Appropriated to Reproductive Employment. It has been seen in the preceding chapters that besides the primary and universal requisites of production, labor and natural agents, there is another requisite without which no productive operations beyond the rude and scanty beginnings of primitive industry are possible—namely, a stock, previously accumulated, of the products of former labor. This accumulated stock of the produce of labor is termed Capital. ”

“ Land and capital stock are the two original sources of all revenue both private and public. Capital stock pays the wages of productive labour, whether employed in agriculture, manufactures, or commerce. ”

“ Or, lastly, instead of [capital] being afforded by persons not in business, the affording it may itself become a business. A portion of the capital employed in trade may be supplied by a class of professional money-lenders. ”

“ That capital may limit the form of industry is clear. Without the factory, there could be no factory operatives; without the sewing machine, no machine sewing; without the plough, no ploughman; and without a great capital engaged in exchange, industry could not take the many special forms that are concerned with exchanges. ”

“ And so, if I use my own capital in directly aiding production, as by machinery, or in indirectly aiding production, in exchange, I receive a special and distinguishable advantage from the reproductive character of capital, which is as real, though perhaps not as clear, as though I had lent my capital to another and he had paid me interest. ”

“ In consequence, the commodities annually produced by society as a whole can be resolved completely, as to value, into the two components: wages and surplus value. Here the category of capital has disappeared all of a sudden; society produces nothing but income, nothing but consumer goods, which it also consumes completely. ”

“ We have seen that capital does not advance wages or subsist labourers, but that its functions are to assist labour in production with tools, seed, etc., and with the wealth required to carry on exchanges. ”

“ I have been endeavouring to get you to admit that the profits on stock employed in manufactures and commerce are seldom permanently lowered or raised by any other cause than by the cheapness or dearness of necessaries, or of those objects on which the wages of labour are expended. Accumulation of capital has a tendency to lower profits. ”

“ Assuming capitalist methods of production, the value of his product yields him a surplus over and above his expenses, that surplus value which does not replace his capital but constitutes [Pg 54] his net income, which he can consume completely without encroaching upon his capital and which is thus his fund of consumption. ”

“ Variable capital, v, is the annual wages bill. Surplus, s, is annual rent, interest, and net profit, so that v + s represents net national income. (In this introduction surplus is used interchangeably with rent, interest and net profit.) Constant capital, c, represents at the same time the contribution which materials and capital equipment make to annual output, and the cost of maintaining the stock of physical capital in existence at the beginning of the year. ”

“ The question must still be, whether the surplus, after defraying expenses of a given capital, employed in the purchase and improvement of a piece of land, is greater or less than that of a like capital employed in the prosecution of a manufactory; or whether the whole value produced from a given capital and a given quantity of labor employed in one way be greater or less than the whole value produced from an equal capital and an equal quantity of labor employed in the other way ”

“ In order to show the reader that capital is an actual producer, in as true a sense as labour is, or the ability by which labour is directed, let us begin by considering fixed capital as distinct from wage capital, and by considering it in its simplest forms. By fixed capital is meant any tools, machines, or materials by which man’s efficiency as a producer of wealth is increased ”

“ It is true that the rate of profits depends upon the scanty or abundant supply of capital compared with the means of employing it profitably,—and these means will as you say upon the common principles of supply and demand be increased either by a diminution of capital or by an extension of the market for it. ”

“ Or capital may increase without its value increasing, and even while its value is actually diminishing; not only may an addition be made to the food and clothing of a country, but the addition may be made by the aid of machinery, without any increase, and even with an absolute diminution in the proportional quantity of labour required to produce them. The quantity of capital may increase, while neither the whole together, nor any part of it singly, will have a greater value than before. ”

“ More Capital Devoted to Production than Actually Employed in it. As whatever of the produce of the country is devoted to production is capital, so, conversely, the whole of the capital of the country is devoted to production. This second proposition, however, must be taken with some limitations and explanations. (1) A fund may be seeking for productive employment, and find none adapted to the inclinations of its possessor: it then is capital still, but unemployed capital. ”

“ Interest is determined by the equation between the demands of borrowers and the supply of capital offered by lenders. Or, if we take what is given as the law of profits, it is determined by wages, falling as wages rise and rising as wages fall—or, to use the phrase of Mill, by the cost of labor to the capitalist. ”

“ Let us hear well in mind that the capital consumed in production is consumed, not by the capitalist himself, but in the purchase of various things necessary for production, and in wages. All this capital which is employed and consumed in production, is the net spendable income of the producing nation. ”

“ He merely receives a certain value in money, for an equivalent value in goods. Neither does this give employment to his capital; for there never exists more capital than can find employment, and if one person does not buy his goods another will; or if nobody does, there is over-production in that business, he can remove his capital, and find employment for it in another trade. ”

“ Subject to an important qualification, they apply to capital, the price paid for the use of capital being what we call the rate of interest. They apply hardly less to "services," to the remuneration of labor of every kind and grade. People sometimes protest warmly against the idea of treating labor "like a commodity." ”

“ You will not, I think, deny that in a country where labour is high a manufacturer would employ more capital to produce the same commodities than what he would do in a country where wages were low, and there also would profits be low; that is to say, profits are high where capital bears a large proportion to labour, and low where labour bears a large proportion to capital. ”