What is Capital?


Erik Parsels
from the New Unionist, February 1996, page 3

Coming to Terms

By Erik Parsels



Many people think that the word capital is just another word for "money" or "wealth." For instance, a person might say something like, "I don't have enough capital to buy a new car."

But capital is not just money. In fact, capital doesn't need to be money at all.

Capital is wealth that its holder uses to get more wealth. If a company takes a certain amount of its money, its assets, and buys a piece of machinery, has its capital gone down? No. The new machinery has replaced the money as part of its capital.

But machinery is no more capital all by itself than money is. My car is machinery, but it's not capital. The thing that makes the machinery a company buys into capital is its relation to labor, the workers who operate the machinery.

When the workers go to work, they use the machinery to make things. When those things are sold, they are sold for a certain value, all of which has been created by the workers. But the workers don't get all the value their labor adds to the things they make. If they did, there would be no money value for the owner of the capital, no profit.

It's this social relationship of owners and workers, the relationship that says the workers have to fork over part of the value they produce to the owners as the condition for being allowed to work, that makes wealth into capital.