capital

capital According to modern economics, one of four factors of production—the others being land, labour, and enterprise. That capital is not, first and foremost, a sum of money, was the great discovery of early political economy, which stressed that expansion of the wealth of a society lay in expansion of its productive powers. Capital consists of tools, machinery, plant, and any other humanly made material or equipment which, not being used for immediate consumption, contributes to or enhances productive work. Since Adam Smith it has also been customary to distinguish between circulating capital and fixed capital. The former is used to purchase commodities, chiefly raw materials and labour effort, and sell them again as a product at a profit. The latter, for example machines and tools, yields a profit without circulating further.

According to Karl Marx, capital accumulation supplies the dynamic specific to the capitalist mode of production, or modern capitalist system. It depends on the exploitation of workers through the extraction of surplus value (see LABOUR THEORY OF VALUE). In Capital (1867), Marx offers a critique of political economy, arguing that, although this process appears to be a relation between things (commodities), it is in fact a relation between human beings. Furthermore, there is a logic to the accumulation process which will result in the concentration of capital in a few hands, simultaneously with proletarianization and immiseration of the bulk of the labour-force.

Mainstream economists and sociologists continue to regard capital formation and accumulation as necessary to any form of industrialization. Moreover, because the development of capitalism has proceeded somewhat differently from Marx's expectation, it has become necessary, even for Marxists, to distinguish between various capital functions—in particular between capital ownership and managerial control. A related notion is that of different capital fractions, for example finance capital as against industrial capital. See also CORPORATION; CULTURAL CAPITAL; LABOUR THEORY OF VALUE; MANAGERIAL REVOLUTION.