[Eran]

Capitalism is a socio-economic system within which the means of production are privitized for the creation of profit and which is generated by capital accumulation.

The institutions of capitalism are merely those of private property and voluntary interaction. As such, capitalism (as a system) merely allows private ownership of the means of production - it doesn't require it.

As a voluntary system it allows people to trade at arms-length from each other. People are still free to exchange gifts, but, in order for them to fully enjoy the efficiency of large-scale economic cooperation, and given human nature, arms-length trading is very common (though not universal).

As a voluntary system with protected property rights, it allows private ownership of the means of production, but certainly doesn't require it. Co-ops and sole proprietorships are possible and, indeed, exist, though not as commonly as ordinary corporations.

Going back to capital, it is nothing but savings invested in productive enterprises. The savings could have been spent on consumption goods. That would have been perfectly legitimate. But by investing their savings in productive enterprises, savers are helping all other members of society, by making longer (but more efficient) production processes possible.

In a free market (i.e. a voluntary society), the various factors of production (land, labour and capital) are bid by entrepreneurs competing to produce products with the hope and expectation that consumers will favour them. The relative price of land, labour and capital depends on the degree to which they contribute to the production process, as well as their relative scarcity.

Capital is one of the three legs. It isn't inherently privileged in the capitalist system, but neither is it inherently suppressed.



When left-leaning people talk about capitalists, they seem to confuse three separate functions which may or may not coincide in the same person:

1. A saver who wishes to invest his savings in a productive process
2. An entrepreneur who identifies and attempts to exploit inefficiencies in the market
3. A manager who directs the day-to-day labour of employees

The classic capitalist combines all three. But in modern society, such concurrence isn't dominant. In fact, it primarily exists in relatively small businesses. More commonly, the three functions combine as follows:

1. Savings are routed towards productive enterprises through financial intermediaries such as banks, hedge funds, private equity funds, venture capital funds, pension funds and mutual funds. Neither the original saver nor (in most cases) even the consolidator plays a significant role in directing the enterprise. In many cases, capital is injected as a debt (rather than equity), and the capital owner plays no role unless and until bankruptcy ensues. The ultimate savers/capitalists are often workers themselves.

2. Entrepreneurship is present at all levels of production, but is most obvious when a business is first brought into existence. The entrepreneur is also the founder of the business. He may or may not provide some of the start-up capital, and while typically playing an important initial role in management, often takes a back-seat later as the company matures. The founder typically retains some equity in the firm, and as such is a part capitalist, but most capital comes from the outside. In many cases, the entrepreneur is a former worker himself.

3. Managerial responsibilities are typically filled by hired hands. Managers at all levels may exhibit some entrepreneurial behaviour, though they are often restricted to mere bureaucratic "follow the rules" function. Senior managers may retain or be awarded some equity, and thus become part capitalists. Lower-level managers are often recently-promoted workers.

I am not sure how the Marxist narrative fits this

As if capital never seeks consumers!?

"Capital" doesn't seek consumers. Capital is merely savings invested in a productive enterprise. Productive enterprises, however funded, often indeed seek consumers. In fact, that process (whereby productive enterprises seek consumers) is illustrative of the power of the latter. They have to be sought/tempted/persuaded by businesses. They have the power.

[ralfy]

"Capital" doesn't seek consumers. Capital is merely savings invested in a productive enterprise. Productive enterprises, however funded, often indeed seek consumers. In fact, that process (whereby productive enterprises seek consumers) is illustrative of the power of the latter. They have to be sought/tempted/persuaded by businesses. They have the power.

I think what is meant is that capital "seeks" consumers because that's the only way to pay for the "productive enterprise" and get a profit, part of which is the return on what is "invested".

[Eran]

The more I think about what you guys are saying, the more confused I am.

WE are talking about a system (capitalism) which encourages profitable enterprises by allowing their owners to retain the profits, even while unprofitable enterprises are discouraged because the losses come out of their owners' pockets. That's a very good thing. A business is profitable if (and only if) the cost of producing whatever it is producing is less than the value of those products to paying consumers. In other words, a business is profitable if it creates wealth. It is unprofitable if it destroys wealth. We should all cheer for profitable businesses and boo the unprofitable ones.

The profits do not necessarily go to the people providing the capital. When a company funds expansion by borrowing money, capital is coming from the bank (indirectly from the bank's depositors), but control remains with the entrepreneurs who initiated the enterprise.

In co-ops, profits go primarily to labour. There may well be some enterprises in which profits primarily go to land-owners.

Nothing special about capital.


In fact, "profits" is a term that hides several different components:
1. Interest paid on invested equity
2. Rent on land
3. Wages for unpaid managerial services
4. Entrepreneurial profit

The first is the only component that goes to capital qua capital. For debt-funded businesses, this amount appears as interest cost. For equity-funded businesses, it appears as profit. The difference is purely technical.

The second component is very similar to the first, but applies when land (unimproved natural resources) is part of the property of the enterprise.

The third component (mainly relevant in small or very small enterprises) really compensates the owners for the work they are doing. Not "really" profit.

The fourth component is the only true economic profit. Note that it doesn't go to capitalists qua capitalists, but rather to entrepreneurs, whether those bring capital with them or not.


Now where is your beef with profit? Which of the four type of profit are you concerned about? Is it really the first (rewarding of capital)? Or are you really opposed to the last (entrepreneurial profit), which has little to do with capital?

[anticlimacus]

The institutions of capitalism are merely those of private property and voluntary interaction. As such, capitalism (as a system) merely allows private ownership of the means of production - it doesn't require it.

This is how I have defined it as a "system":

Capitalism is a socio-economic system within which the means of production are privitized for the creation of profit and which is generated by capital accumulation. However, it is not merely economic because it is both created by socio-political forces and the economic forces of capital accumulation create socio-political conflicts, all of which require various forms of ideological struggle.

Are you rejecting this definition in total? In part? Not at all? My sense is that you are rejecting it, but primarily on the notion that capitalism merely "allows"
for the privitization of capital. But that merely begs the question: Under what institutional force does this allowance for capital privitiziation (and motivation to privitize!) occur so that it becomes the mainstay of the socio-economic system? What is that? I thought that's what capitalism, as a system, was.

Going back to capital, it is nothing but savings invested in productive enterprises.

I don't entirely disagree. All I have done, and what Marx did too, was to look at this systemically. So we must add to "Capital is savings invested in the productive enterprise" this: "for the accumulation of capital". So the beginning of the circuit is capital and so is the end--hence capital accumulation becomes the center of the system.

In a free market (i.e. a voluntary society), the various factors of production (land, labour and capital) are bid by entrepreneurs competing to produce products with the hope and expectation that consumers will favour them. The relative price of land, labour and capital depends on the degree to which they contribute to the production process, as well as their relative scarcity.

Capital is one of the three legs. It isn't inherently privileged in the capitalist system, but neither is it inherently suppressed.

A free market is a "voluntary" society because labor is freed to sell itself and because commodities can be exchanged with the universaly equivalent of money. This is predicated on the privitization of capital. Moreover, this description of "free labor" and "free exchange" is entirely formal and it ignores the institutional conditions under such a "voluntary society" is possible and actualized within its respective phase. Capital is not just a part if it all. Capital is what makes this systemic because the expansion of capital is the aim of production and exchange, and it is what makes distribution and consumption peculiar. Thus the expansion of capital colors all the different moments of the system. It is not an equal part to the rest of the moments.

When left-leaning people talk about capitalists, they seem to confuse three separate functions which may or may not coincide in the same person:

1. A saver who wishes to invest his savings in a productive process
2. An entrepreneur who identifies and attempts to exploit inefficiencies in the market
3. A manager who directs the day-to-day labour of employees

Leftists are actually very specific about how each of these operate within particular phases of capitalism. But I think I see where your confusion may be:

The ultimate savers/capitalists are often workers themselves.

This is misleading. That workers are a part of the capitalist system--yes, they are you will get no argument from me. But that workers can be identified as equivalent to major financial investors and financial isntitutions and CEOs etc. simply because they might invest is just, well, strange. Investing in a company is something that makes it easier for...CAPITAL EXPANSION--which is the telos of the system. Such expansion is organized and directed, not by workers at all, but by financiers and CEOs, who in the end will cut losses on the backs of workers (including their investments) for the sake of their own profit. Workers may put in money to the system, and find it all gone in a few years. But, they are told, that is just the way the "market" works. Again, it appears as all alien (even to capitalists at times), as entirely separated from their own labor and what they do. Something else has taken everything from them and moved it some place else. Something else has "allowed" them to save for retirement. Something else controls their entire destiny. Keep in mind, I do not mean to suggests that capitalists take no risks. They do--they can lose as well, and often do. But as I have mentioned before they are not the center of the system, and neither are workers. They are personifcations of capital and one day's capitalists may be exhanged by another tomorrow.

I am not sure how the Marxist narrative fits this

I hope it is a bit clearer how capital can be so central to the system and how the production process is so entegral to the direction of capital expansion. Savings are invested for the creation of capital. Entrepreneurship, which is not nearly as egalitarian as you make it sound, is for the sake of making private profit by acquiring the means of production and thus expanding capital. Managerial responsibilitis are established by capitalists to get other workers to keep other workers in line (pardon the example, but the NAZIs did this with the Jews too). The fact that workers want to become capitalists or managers does not make it any less capitalism as I have described it. It is not the people that are important. It is how people are oriented within the system and how they are oriented in that particular way that is important. At the core, Capital is constantly and increasingly confronting labor and becoming a force all on its own--reified, if you will, without understanding the social processes that shape the system. Capitalists and workers are both, often, unaware of what is going on and just "going to work". Ideology plays a major part in this, but so too does the expansion of capital, which, as I have said, seems to become a force that works on its own, e.g. "How is the 'market' today?" "what will the 'market' do?" "nobody can control the 'market's' boom and busts"? etc.

[Eran]

Are you rejecting this definition in total? In part? Not at all?

I accept your definition in part. Capitalism is a system in which the means of production are privately-owned. Whether profits are used for capital accumulation or not isn't inherent to capitalism per-se. It depends on the culture, technology and economic circumstances.

I certainly do not agree with the statement that "the economic forces of capital accumulation create socio-economic conflicts".

My sense is that you are rejecting it, but primarily on the notion that capitalism merely "allows" for the privatization of capital. But that merely begs the question: Under what institutional force does this allowance for capital privatization (and motivation to privatize!) occur so that it becomes the mainstay of the socio-economic system? What is that? I thought that's what capitalism, as a system, was.

Capital isn't "privatised" (in the sense of being made private from a starting point of not being private). Rather, capital is merely private assets, acquired from private savings, and being used for productive purposes. In other words, capital, typically, has always been private (and has not been "privatised"). The motivation for applying resources as capital (i.e. in productive ways) is very straightforward - capital allows greater production efficiency. In other words, it lowers the cost of production. That lowering of cost flows, in the first instance, to the owners of the enterprise (whether or not they also own the capital!), but, in very short order, and through competition, is transferred to the consumers and labour partners of the enterprise.

Capital isn't the "mainstay of the socio-economic system". The mainstay is private ownership of productive enterprises. They owners of such enterprises may or may not own the capital funds used to purchase capital equipment. The significance of those capital funds vary greatly, and in many productive enterprises in a capitalist society, they may be minor indeed. What fraction of a software company's revenues go to pay for its capital equipment? Very little indeed! The same may hold for many service providers as well.

So the beginning of the circuit is capital and so is the end--hence capital accumulation becomes the centre of the system.

That may or may not be the case, depending on particular circumstances. Marx has written in the 19th century, a period of rapid deployment of capital equipment in a variety of manufacturing enterprises. The degree to which profits are still directed into capital accumulation varies by industry. In many cases, only a small fraction of the profits are thus directed. Ironically, the financial industry, in one sense the most closely associated with the capitalist system, itself relies on relatively little capital. A large fraction of the revenues is used to compensate labour (all those banker bonuses!) rather than capital.

Capital is what makes this systemic because the expansion of capital is the aim of production and exchange, and it is what makes distribution and consumption peculiar. Thus the expansion of capital colors all the different moments of the system. It is not an equal part to the rest of the moments.

I don't agree. Whether profits are re-invested as capital or not is an entirely circumstantial question. Apple Computers is sitting on well over 100 billion dollars in cash. Yet it doesn't seem to want to invest that cash as capital. Doesn't that contradict your theoretical understanding of how capitalist society is supposed to work?

Such expansion is organized and directed, not by workers at all, but by financiers and CEOs, who in the end will cut losses on the backs of workers (including their investments) for the sake of their own profit.

Note, btw, that neither financiers nor CEOs are "capitalists" in the classic sense. Neither owns the corporation (or the means of production it uses). I also don't understand what you mean by "cut losses on the backs of workers". Workers who own shares in a public corporation enjoy precisely the same returns on their investment as any other share-holder. There is no mechanism whereby they get discriminated-against.

But as I have mentioned before they are not the center of the system, and neither are workers. They are personifcations of capital and one day's capitalists may be exchanged by another tomorrow.

We come back to the issue of capital. IF a particular enterprise or industry is in a state such that further investments in capital equipment are likely to be beneficial, capital will be directed to it. However, the return on capital isn't profit - it is interest. Nobody gets wealthy by collecting market interest-rate on their savings.

The "big bucks" aren't associated with capital at all. They are associated with (successful) entrepreneurship.

Entrepreneurship, which is not nearly as egalitarian as you make it sound, is for the sake of making private profit by acquiring the means of production and thus expanding capital.

Entrepreneurship is incredibly egalitarian. You don't need capital, education or anything else to be an entrepreneur. In fact, people earning $3/day in Indian slums are often very entrepreneurial, while mid-level executives making hundreds of thousands per year may not be.

Whether the profits of successful entrepreneurship are redirected for further investment in productive enterprises or not is entirely up to the individual who owns those profits. There is nothing in the "system" that directs those profits into capital expansion. Plus, did I mention that the profits associated with capital are merely interest?

Managerial responsibilities are established by capitalists to get other workers to keep other workers in line (pardon the example, but the NAZIs did this with the Jews too).

Sometimes. At other times, the manager may be the capitalist himself. Or, it is possible that the managers are hired by the corporation (i.e. by thousands of share-holders) to run the company.

As for the Nazis, like their Soviet enemies (and unlike managers in a free market), the Nazis created a system of forced labour, i.e. state slavery. It is that aspect of their system which is morally deplorable. Not the fact that some Jews supervised other Jews.

At the core, Capital is constantly and increasingly confronting labor and becoming a force all on its own--reified, if you will, without understanding the social processes that shape the system.

In what possible sense is capital confronting labour? If anything, the two are natural allies. Labour needs capital, and capital needs labour. Separately they are worthless. Together, they are productive. Whether it is capital which hires labour, or labour which borrows capital, or both being hired by an entrepreneur is besides the point. There are many examples for all forms of cooperation between them.




Having reached this point, I am going to ask you to explain what you mean by "capital". I would distinguish between two related concepts. "Capital equipment" are the famous means of production - man-made resources utilised in the production process. "Capital" is the value of those resources, or the funds used to acquire them.

It seems to me that you actually mean a third thing - the equity in productive enterprises, whether such enterprise actually owns any capital equipment or not, whether such capital equipment was acquired using share-holder funds or borrowed.

[anticlimacus]

Capitalism is a system in which the means of production are privately-owned. Whether profits are used for capital accumulation or not isn't inherent to capitalism per-se. It depends on the culture, technology and economic circumstances.

Except for the fact that in every capitalist society capital accumulation has been a central aspect to capitalism. Consider the first part of my definition again:

Capitalism is a socio-economic system within which the means of production are privitized for the creation of profit and which is generated by capital accumulation.

The privitization of capital is for the purposes of creating profit, it's not simply for the saking of owning property (like, hording which Marx makes a careful distinction). The profit motif works in direct link with capital accumulation, and capital accumulation is also what motivates the privitization of capital.

I certainly do not agree with the statement that "the economic forces of capital accumulation create socio-economic conflicts".

There are many different conflicts that arise, the major ones being the conflict between labor and the personifications of capital (i.e. capitalists) and the conflicts between capital expansion (and contraction) and communities.

That may or may not be the case, depending on particular circumstances. Marx has written in the 19th century, a period of rapid deployment of capital equipment in a variety of manufacturing enterprises. The degree to which profits are still directed into capital accumulation varies by industry. In many cases, only a small fraction of the profits are thus directed. Ironically, the financial industry, in one sense the most closely associated with the capitalist system, itself relies on relatively little capital. A large fraction of the revenues is used to compensate labour (all those banker bonuses!) rather than capital.

The degree to which capital is invested has always varied--hence the boom and bust cycles of capitalism. There is nothing new there. And I would hesitate to call the big banker bonuses "labor compensation". These are, more often than not, the very same people who make all the major decisions on capital investments.

Capital isn't "privatised" (in the sense of being made private from a starting point of not being private). Rather, capital is merely private assets, acquired from private savings, and being used for productive purposes. In other words, capital, typically, has always been private (and has not been "privatised"). The motivation for applying resources as capital (i.e. in productive ways) is very straightforward - capital allows greater production efficiency. In other words, it lowers the cost of production. That lowering of cost flows, in the first instance, to the owners of the enterprise (whether or not they also own the capital!), but, in very short order, and through competition, is transferred to the consumers and labour partners of the enterprise.

Capital isn't the "mainstay of the socio-economic system". The mainstay is private ownership of productive enterprises. They owners of such enterprises may or may not own the capital funds used to purchase capital equipment. The significance of those capital funds vary greatly, and in many productive enterprises in a capitalist society, they may be minor indeed. What fraction of a software company's revenues go to pay for its capital equipment? Very little indeed! The same may hold for many service providers as well.

Capital, as the means of production, is privitized, and capital as accumulated goods to be invested are primarily determined by private entities under capitalism. Under capitalism this becomes equated (objectified by) with money and wealth, which allows us to overlook the real social process that makes capital possible.

Entrepreneurship is incredibly egalitarian. You don't need capital, education or anything else to be an entrepreneur. In fact, people earning $3/day in Indian slums are often very entrepreneurial, while mid-level executives making hundreds of thousands per year may not be.

Whether the profits of successful entrepreneurship are redirected for further investment in productive enterprises or not is entirely up to the individual who owns those profits. There is nothing in the "system" that directs those profits into capital expansion. Plus, did I mention that the profits associated with capital are merely interest?

But you are equating, oddly enough, a person working for $3 a day in the slums trying to survive with somebody who is a the peak of the capitalist system. You do need capital in order to be a successful entrepreneur and our poor Indian is never going to be successful (not poor) unless he/she controls a large sum of capital and can wield it for the purposes of gaining a profit. This profit comes from exchange, whose value becomes, on the one hand profit and on the other more capital.

In what possible sense is capital confronting labour? If anything, the two are natural allies. Labour needs capital, and capital needs labour. Separately they are worthless. Together, they are productive. Whether it is capital which hires labour, or labour which borrows capital, or both being hired by an entrepreneur is besides the point. There are many examples for all forms of cooperation between them.

Here I quote Marx, because he best described this antagonism

[Capital] As capitalist, he is only capital personified. His soul is the soul of capital. But capital has one single life impulse, the tendency to create value and surplus-value, to make its constant factor, the means of production, absorb the greatest possible amount of surplus labor. Capital is dead labor, that, vampire-like, only lives by sucking living labor, and lives the more, the more labor it sucks...There is here, therefore, an antinomy, right against right [between labor and capitalist], both equally bearing the seal of the law of exchanges...Hence is it that in the history of capitalist production, the determination of what is a working-day, presents itself as the result of a struggle, a struggle between collective capital, i.e., the class of capitalists, and collective labor, i.e., the working class...Capitalist production, therefore, of itself reproduces the separation between labor-power and the means of labor. It thereby reproduces and perpetuates the condition for exploiting labor. It incessantly forces him to sell his labor power in order to live, and enables the capitalist to purchase labor power in order that he may enrich himself. It is no longer a mere accident, that capitalist and laborer confront each other in the market as buyer and seller. It is the process itself that incessantly hurls back the laborer on the market as a vendor of his labor power, and that incessantly converts his own product into a means by which another man can purchase him. In reality, the laborer belongs to capital before he has sold himself to capital. His economic bondage is both brought about and concealed by the periodic sale of himself, by his change of masters, and by the oscillations in the market price of labor power...

[Grundrisse] But the relation of every capitalist to his own workers is the relation as such of capital and labour, the essential relation. But this is just how the illusion arises...that apart from his workers the whole remaining working class confronts him as consumer and participant in exchange, as money-spender, and not as worker...Since one production sets the other into motion and hence creates consumers for itself in the alien capital's workers it seems to each individual capital that the demand of the working class positied by production itself is an 'adeqate demand'...What precisely distincuishes capital from the master servant relation is that the worker confronts him as consumer and possessor of exchange values

Thus through money relations the actual process of capital production become disguised and objectified. Nevertheless labor does not control its own production or the product or price of its production. Capital confronts it, as money to be exchanged on the one end for profit on the other for consumption as labor is thrown back into the market to survive and buy back the products labor produces. This confrontation continues in the labor process, where capital is already present making wage labor possible and a means to an end--which is capital accumulation.

Having reached this point, I am going to ask you to explain what you mean by "capital". I would distinguish between two related concepts. "Capital equipment" are the famous means of production - man-made resources utilised in the production process. "Capital" is the value of those resources, or the funds used to acquire them.

It seems to me that you actually mean a third thing - the equity in productive enterprises, whether such enterprise actually owns any capital equipment or not, whether such capital equipment was acquired using share-holder funds or borrowed.

Capital is a process. Capital is the means of production used towards producing commodities that are then exchanged for money whose profit is taken partly by capitalists, but is also put back into production for its own expansion.

[Eran]

Except for the fact that in every capitalist society capital accumulation has been a central aspect to capitalism.

Not necessarily. In stagnant economies (e.g. Japan of the past couple of decades), capital accumulation may be minimal, non-existent, or even negative.

Capital accumulation is to be expected when (and because) it makes economic sense. It is possible under capitalism, but isn't a central aspect of the system.

There are many different conflicts that arise, the major ones being the conflict between labour and the personifications of capital (i.e. capitalists) and the conflicts between capital expansion (and contraction) and communities.

Conflicts exist within all forms of economic organisations. Conflicts between labour and employers are no longer a major aspect of most capitalist societies.

And I would hesitate to call the big banker bonuses "labour compensation". These are, more often than not, the very same people who make all the major decisions on capital investments.

Which just shows that now, after about 150 years, it is perhaps time to update your terminology. A senior trader working on a bank's trading desk, and receiving a multi-million-dollar bonus is, at the end of the day, merely an employee of the firm. He doesn't sit on the board, he isn't a general officer of the firm. He may (or may not) manage other employees. He may (or may not) receive a fraction of his compensation in equity. He has no role to play in "major decisions on capital investments"

His bonus is nothing less and nothing more than compensation for the work he has done for his employer, i.e. labour compensation.

Capital, as the means of production, is privatized

Again, "privatized" suggests being converted from non-private to private (as in the privatization of national industries). Capital isn't "privatized" in that sense. Capital starts its life as private saved assets, which, are invested in productive assets. Throughout the process, the capital remains in private hands. At no point is it "privatized".

But you are equating, oddly enough, a person working for $3 a day in the slums trying to survive with somebody who is a the peak of the capitalist system.

Yes. They play the same role in the system. Just as the latest teenager working for McDonald's, and McDonald's CEO are both, technically, employees. And just as Warren Buffet and a worker with a $50,000 pension fund invested in public equities are both "capitalists".

Marxists, by insisting on using out-dated functional titles, are the ones perpetuating this absurdity.

You do need capital in order to be a successful entrepreneur

You might need access to capital to be a successful entrepreneur. You certainly don't need to own capital to be one. And the modern finance system provides access to capital to anybody, irrespective of wealth.

The problem of the $3/day Indian isn't lack of access to capital, but lack of skills and experience to profitably make use of such capital.

Here I quote Marx, because he best described this antagonism

I'm sorry, but Marx's words don't make any sense. Capital is weirdly personified. "capital has one single life impulse".

As for capital being "dead labour", that's nonsense. If anything, capital is private savings. All capital starts its life as somebody's deferred consumption, being put to productive use.

We could live in a society in which people tend not to save, but rather spend their income as soon as possible. Such society would have no capital, and, consequently, be stuck at a very low economic level. Savings (invested and thus converted to capital) is an incredible social good. While providing modest returns to the saver (not to be confused with the potentially much greater rewards to the entrepreneur, capital is essential at lifting economic production into more and more efficient levels.



Again, Marxists seem to confuse capital (saved and invested assets), management (the people who actually determine the length of the working day) and entrepreneurship (the one function that can reap substantial financial rewards), grouping them all as "capital".

Nevertheless labor does not control its own production or the product or price of its production.

Low-level employees, indeed, don't tend to control their own production. These are people who have chosen the security and certainty of wage employment over the inherent uncertainty and risk of self-production.

More senior employees (still "labour") do tend to control their own production.

Capital is a process. Capital is the means of production used towards producing commodities that are then exchanged for money whose profit is taken partly by capitalists, but is also put back into production for its own expansion.

Sorry. Is capital a process? Or is it the means of production? A machine isn't a process, and a process isn't a machine.

You seem to be describing capitalist production (which, of course, is a process, which uses capital as well as labour and land), not capital.

[ralfy]

Not necessarily. In stagnant economies (e.g. Japan of the past couple of decades), capital accumulation may be minimal, non-existent, or even negative.

Don't confuse a boom and bust cycle with long-term trends. For capitalist systems, the trend line for national income is upwards.

Capital accumulation is to be expected when (and because) it makes economic sense. It is possible under capitalism, but isn't a central aspect of the system.

Don't confuse what "is to be expected" with what is desired. For capitalist systems, capital accumulation is not only "possible" but actually the "central aspect of the system."

Conflicts exist within all forms of economic organisations. Conflicts between labour and employers are no longer a major aspect of most capitalist societies.

Utter nonsense. You should read up on what is happening concerning the current global financial crisis.

Which just shows that now, after about 150 years, it is perhaps time to update your terminology. A senior trader working on a bank's trading desk, and receiving a multi-million-dollar bonus is, at the end of the day, merely an employee of the firm. He doesn't sit on the board, he isn't a general officer of the firm. He may (or may not) manage other employees. He may (or may not) receive a fraction of his compensation in equity. He has no role to play in "major decisions on capital investments"

If he's a "senior trader working on a bank's trading desk," then he definitely has a "role to play in 'major decisions on capital investments.'" In fact, that's how several banks got into trouble the last few years due to "rogue" traders.

His bonus is nothing less and nothing more than compensation for the work he has done for his employer, i.e. labour compensation.

Utter nonsense. Bonuses can be "less" and can be "more" depending on various circumstances.

Yes. They play the same role in the system. Just as the latest teenager working for McDonald's, and McDonald's CEO are both, technically, employees. And just as Warren Buffet and a worker with a $50,000 pension fund invested in public equities are both "capitalists".

Complete and utter nonsense. It's painfully obvious that their roles are different.

You might need access to capital to be a successful entrepreneur. You certainly don't need to own capital to be one. And the modern finance system provides access to capital to anybody, irrespective of wealth.

If "successful" can be defined in many ways, then anything can be said about this point, which makes it irrelevant.

The problem of the $3/day Indian isn't lack of access to capital, but lack of skills and experience to profitably make use of such capital.

That depends on what you mean by "problem." If the problem involves making any earning, then skills will be needed. But at some point, capital will be very important.

I'm sorry, but Marx's words don't make any sense. Capital is weirdly personified. "capital has one single life impulse".

It's definitely "weird" if most prefer to hide money saved under the mattress.

As for capital being "dead labour", that's nonsense. If anything, capital is private savings. All capital starts its life as somebody's deferred consumption, being put to productive use.

Only if "private savings" are placed under the mattress.

We could live in a society in which people tend not to save, but rather spend their income as soon as possible. Such society would have no capital, and, consequently, be stuck at a very low economic level. Savings (invested and thus converted to capital) is an incredible social good. While providing modest returns to the saver (not to be confused with the potentially much greater rewards to the entrepreneur, capital is essential at lifting economic production into more and more efficient levels.

Complete nonsense. If people "tend not to save, but rather spend their income as soon as possible," then there can't be no "savings" or "savers."

Again, Marxists seem to confuse capital (saved and invested assets), management (the people who actually determine the length of the working day) and entrepreneurship (the one function that can reap substantial financial rewards), grouping them all as "capital".

Actually, non-Marxists do the same, referring to "intellectual" capital, etc. More details below.

Sorry. Is capital a process? Or is it the means of production? A machine isn't a process, and a process isn't a machine.

You seem to be describing capitalist production (which, of course, is a process, which uses capital as well as labour and land), not capital.

http://en.wikipedia.org/wiki/Capital_(economics)

[anticlimacus]

I'm sorry, but Marx's words don't make any sense. Capital is weirdly personified. "capital has one single life impulse".

As for capital being "dead labour", that's nonsense. If anything, capital is private savings. All capital starts its life as somebody's deferred consumption, being put to productive use.

Labor is what makes capital possible. Capital is not just private savings. Capital is accumulated money and wealth that can be put back into the process of accumulation. The raison d'etre of capital, in the capitalist system, is to expand itself. One can approach from different perspectives, say that of the capitalist who seeks to become a wealthier capitalist, or the middle class who perhaps seeks to become a capitalist or save for retirement, or the working poor who just seek to save what they can for any emergency needs, etc. But it is all under the system of capital accumulation that is directed from those at the top.

Sorry. Is capital a process? Or is it the means of production? A machine isn't a process, and a process isn't a machine.

You seem to be describing capitalist production (which, of course, is a process, which uses capital as well as labour and land), not capital.

It is a social process in which the circuit of Money put into the production of Commodities that are exchanged for Money (M-C-M) has a social reality typified by the conflicts arriving out of the separation of capital and labor (such as capitalist VS labor). Capital is money and wealth. But money and wealth has different phases--it is exchange value in a product of sale, but then it is also the means of production which is valued by money. Money is the universal equivalent. So you have capital that goes into the production process as money (even in the means of production) and you have capital that comes out of the process as profit, some of which goes to the capitalist and some of which goes back into capital expansion (which includes paying labor).

[Eran]

The raison d'etre of capital, in the capitalist system, is to expand itself.

I keep hearing that, but it isn't true. The "raison d'etre" of capital is to make the production process more efficient, thereby increasing the profits of the productive enterprise.

The owners of the productive enterprise may choose to reinvest the profits in the business (potentially increasing the capital), or consume the profits (e.g. by distributing them as dividends).

But it is all under the system of capital accumulation that is directed from those at the top.

Where do you see top-down direction in a capitalist economy? Apple Inc., for example, is famously sitting on top of a huge pile of cash. They could invest that cash in their own business, or distribute it as dividends. Is there any pressure on them to do the former rather than the latter?

So you have capital that goes into the production process as money (even in the means of production) and you have capital that comes out of the process as profit, some of which goes to the capitalist and some of which goes back into capital expansion (which includes paying labor).

So is "capital" equivalent to money? If it isn't, why would you call profit "capital" before it was reinvested? Is Apple's cash pile "capital"? Will it still be capital if they distribute it as a dividend?

[anticlimacus]

I keep hearing that, but it isn't true. The "raison d'etre" of capital is to make the production process more efficient, thereby increasing the profits of the productive enterprise.

The owners of the productive enterprise may choose to reinvest the profits in the business (potentially increasing the capital), or consume the profits (e.g. by distributing them as dividends).

How is it not true? No capitalist consumes all the profits and there is always a reinvestment into the business--precisely for the creation of more profits. This tends to create overaccumulation, which can create a rupture in the system where capital needs to purge itself.

So is "capital" equivalent to money? If it isn't, why would you call profit "capital" before it was reinvested? Is Apple's cash pile "capital"? Will it still be capital if they distribute it as a dividend?

Capital is money that is used to buy a commodity in order to make a profit. It thus creates the circuit of money-commodity-money, and thus capital accumulation.

[Eran]

No capitalist consumes all the profits and there is always a reinvestment into the business

Not so. A capitalist may wish to retire, for example. Or sell his stake in the business. Or take profit in the form of dividends. The decision whether to reinvest or not is a deliberate and circumstance-dependant one.

This tends to create overaccumulation, which can create a rupture in the system where capital needs to purge itself.

Again with the "over". When you say "overaccumulation", you mean accumulation to an extent greater than what exactly?

Capital is money that is used to buy a commodity in order to make a profit. It thus creates the circuit of money-commodity-money, and thus capital accumulation.

So are undistributed profits "capital"?

[anticlimacus]

Not so. A capitalist may wish to retire, for example. Or sell his stake in the business. Or take profit in the form of dividends. The decision whether to reinvest or not is a deliberate and circumstance-dependant one.

Sure, fair enough. But what I meant was that even if he/she retires the business goes on--the capitalist does not consume all the profit, part of it goes back into the business. Even if he/she sells the business, he/she sells it to another capitalist (or even a state) who seeks to make a profit off of it. The point is that a good chunk of the profit goes back into capital for the production of profit, not to the capitalist.

Again with the "over". When you say "overaccumulation", you mean accumulation to an extent greater than what exactly?

Overaccumulation, a product of the endless quest for profit, is when capital no longer bares profitable returns in a market. It has expanded beyond capacity, and must then retract.

So are undistributed profits "capital"?

What do you mean here? Capital is the use of money for the production of commodities that are used for exchange for more money (profit) which thus creates more capital (capital accumulation). That should be fairly clear.

[ralfy]

Not so. A capitalist may wish to retire, for example. Or sell his stake in the business. Or take profit in the form of dividends. The decision whether to reinvest or not is a deliberate and circumstance-dependant one.

If he puts his money in a bank, it will be lent to others. If he uses it to buy something, then that's revenue for a business. In either case, the money is re-invested.

The only way to argue that the money is not re-invested is if it's placed under a mattress.

[Eran]

The point is that a good chunk of the profit goes back into capital for the production of profit, not to the capitalist.

Maybe it does, or maybe it doesn't.

If it makes economic sense to inject more capital into a business, it is likely that such injection will take place. It could happen using re-invested profits, a new player's savings (e.g. as when an existing business owner retires, and sells the business to a new owner), or a non-owner (e.g. through a bank loan).

There is nothing sinister or inevitable about the process or its implications.

Overaccumulation, a product of the endless quest for profit, is when capital no longer bares profitable returns in a market. It has expanded beyond capacity, and must then retract.

As profit isn't automatically re-invested in the business, every decision to invest in the business (using either past profits, or funds from other sources) is a deliberate one, based on the evaluation of future value of the investment, relative to alternative uses of the funds (which may include both immediate consumption and alternative investments).

There is no reason to expect systematic overaccumulation, though errors in judgement (entrepreneurial errors) are always possible.

What do you mean here? Capital is the use of money for the production of commodities that are used for exchange for more money (profit) which thus creates more capital (capital accumulation). That should be fairly clear.

Indeed. So when Apple sits on a mountain of accumulated cash profits, those profits aren't yet capital - they aren't being used in Apple's own productive process (they may be invested in other companies, though it is more likely to be lent to world governments).

The only way to argue that the money is not re-invested is if it's placed under a mattress.

It is confusing to talk about money rather than actual resources. Money merely circulates within the economy. Flows out of circulation (being placed "under the mattress") or into circulation (taken from under the mattress, or new fiat money being printed) are minor.

If we track actual resources, however, we find that profits are often consumed rather than re-invested.

When a capitalist withdraws profits as dividends and uses those dividends to buy his third yacht (that's what you guys think is typically happening, right?), that money isn't re-invested - it is converted to immediate consumption.

[Nunt]

What is so terrible about reinvesting your money anyway?

Rather than doing the selfish thing and consuming his money so that only he is able to enjoy it, an investor puts his money back into a firm. By doing this, he is unable to enjoy his money as he can no longer consume it. Rather he gives it to the firm to expand its activities, open new factories, hire new workers, etc.

To me this seems a very altruistic thing to do. Instead of consuming the money, he creates jobs for workers.

This is even more true if a capitalist reinvests his funds in perpetuity. Then he never consumes them, but allows others to benefit from them. A perpetual investor is someone who gives money to the community and never asks anything for himself. What a saint he is.

This is why rich people are in effect very altruistic. They do not consume their income, most of their income is saved and invested. This creates jobs and provides an income for many people. Sure, they do receive an income from those investments, but similarly they reinvest most of that income. Thus, giving it away again.

The part of income that people use on themselves is consumption.
The part of income that people give to others is savings + charity.

[anticlimacus]

There is nothing sinister or inevitable about the process or its implications

To say it is sinister or evil or something of the like would be to misunderstand the process. It's amoral. It's about capital accumulation, precisely because it is about profit.

As profit isn't automatically re-invested in the business, every decision to invest in the business (using either past profits, or funds from other sources) is a deliberate one, based on the evaluation of future value of the investment, relative to alternative uses of the funds (which may include both immediate consumption and alternative investments).

There is no reason to expect systematic overaccumulation, though errors in judgement (entrepreneurial errors) are always possible.

Overaccumulation is a macro phenomenon, and there is reason to expect it--it tends to happen in capitalism all of the time.

Indeed. So when Apple sits on a mountain of accumulated cash profits, those profits aren't yet capital - they aren't being used in Apple's own productive process (they may be invested in other companies, though it is more likely to be lent to world governments).

No. It means that Apple--just like the banks--are sitting on a whole bunch of capital (money that is to be used in exchange for turning a profit). Sometimes capital even retracts, as in the case of overaccumulation. It's still capital. This again is a result of the contradictions embedded within capitalism: the constant accumulation of capital leads to overaccumulation, which leads to the retraction of capital and economic crisis.

Rather than doing the selfish thing and consuming his money so that only he is able to enjoy it, an investor puts his money back into a firm.

This is a rather odd statement. The fact that he puts his money back into the firm is based precisely on selfishness--the desire for personal profit. This should be nothing new. It is the thesis of laissez-faire capitalism: if everybody seeks their own interests they end up (by an invisible hand) serving the benefit of all. This contradicts the rest of your post. It's not by altruism and charity that he invests. It's for the sake of making a future personal profit.

[SolarCross]

It's is somewhat an artificiality to generalise on the motives of investors. To say that they seek on financial gain but in doing so help others is no more plausible than saying that they seek to help others and in doing so are rewarded for that. Individual motives will be individual and unknown to us. The same applies to your beloved proletariat. They invest their time in some work and in doing so they help others and are rewarded in turn. Is the motive helping others or helping himself? It will vary from person to person but in the end it doesn't matter much as the result is the helper is rewarded for helping, and both parties win.

[Eran]

Overaccumulation is a macro phenomenon, and there is reason to expect it--it tends to happen in capitalism all of the time.

What is the reason, and where do you see it happening?

It means that Apple--just like the banks--are sitting on a whole bunch of capital (money that is to be used in exchange for turning a profit).

But if it is sitting on that money, it isn't capital. At most, it is potential capital. It is also potential dividends, i.e. distributed (rather than reinvested) profits.

This again is a result of the contradictions embedded within capitalism: the constant accumulation of capital leads to overaccumulation, which leads to the retraction of capital and economic crisis.

What you are describing using the words "contradictions" and "over..." is nothing but a self-regulating system. My home heating system contains contradictions (between the heat generated by radiators, and heat dissipating into the outside environment). It routinely overaccumulates heat. That overaccumulation causes the thermostat to turn heating off, until the overaccumulation of heat dissipates.

[quote="Nunt"To me this seems a very altruistic thing to do. Instead of consuming the money, he creates jobs for workers.[/quote]
I have to agree with anticlimacus on this point. Rather than "altruistic" I would characterise the investment process as "socially beneficial". Altruism implies an intent to help others, rather than merely the effect of so doing. The genius of capitalism is that selfish actions, when property rights are protected, become socially beneficial.

[Nunt]

This is a rather odd statement. The fact that he puts his money back into the firm is based precisely on selfishness--the desire for personal profit. This should be nothing new. It is the thesis of laissez-faire capitalism: if everybody seeks their own interests they end up (by an invisible hand) serving the benefit of all. This contradicts the rest of your post. It's not by altruism and charity that he invests. It's for the sake of making a future personal profit.

You may assume that I incorrectly used the term altruism looking only at the result of the action rather than the motive of the action. If you feel better if I used the term 'socially beneficial' as Eran suggested, then I will gladly do so.

Anyway, I don't really believe this really alters my post.