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In popular usage, capital (from Latin caput, ‘head’, the unit of possession used in a Roman census) means money or wealth; to economists capital is the third factor of production (the others are labour and land), which are combined to produce goods and services. The proportions of capital and labour used to make a car, for example, depend on two things: (1) their relative prices, that is, labour costs and the rate of interest, which is one measure of the cost of capital; (2) the state of technology—processes that use a lot of capital relative to labour are called ‘capital intensive’, while big labour users are called ‘labour intensive’.
Although capital goods are normally taken as being machinery, buildings, planes, etc.—anything used to make something else—capital itself is further divided into two categories: fixed capital, that is, machinery, buildings and plant; and working or circulating capital, that is, stocks of raw materials and semi-finished goods, components and, crucially, money, that are used up quickly in the production process.
Certainly capital existed in the precapitalist world, in the sense of private wealth. But, although the funds existed, there was no impetus to put them to new and aggressive use. Writing in the 18th century, Adam Smith saw accumulation of capital as a vast benefit to society. For capital, if put to use in machinery, provided the division of labour which multiplies a people\'s productive energy.
In the 19th century, Marx used the term capital to refer to the privately owned wealth of the capitalist, which is used to create a surplus value. For Marx, all history could be divided into a number of time-periods which could be distinguished from each other in terms of their economic structure and associated social relationships. Marx argued that under a capitalist system of production the minority capitalist class owns the means of production and the majority working class does not. The value of wages paid to workers is less than the value of the goods they produce which are sold on the market for profit. This profit is creamed off by the capitalists and may be accumulated and reinvested in the productive process.
The term capital is used more loosely by some sociologists to refer to any ‘asset’ which is either immediately or potentially useable as a source of income, for example, ‘cultural capital’. Used in this sense capital exists in all societies, whereas in the more restricted sense used by Marx it is a feature unique to capitalist society. DA TF
See also alienation; bourgeoisie; capitalism; class; conflict theory; labour process; Marxism; power; Protestant ethic; society.Further reading A. Cutler, , B. Hindess, , P. Irst and , A. Hussain, Marx\'s ‘Capital’ and Capitalism Today. |
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