Capital

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Capital

Postby BadgerJelly on February 7th, 2019, 1:47 am 

I was chatting someone the other day about this and that and they used the term “capital” in a manner I couldn’t quite get my head around. I kept on talking of scenarios where a group of people were producing goods and selling them and he seemed to say it was fine as long as there was no “wage” and the people owned a percentage if the profits.

This doesn’t seem practical to me because larger groups of people would make larger amount of money, thus destroying competition. Although I do see the idea of “minimum” wage as something that could be expanded into percentage for large companies.

Note: He also seemed to think communism was “inevitable”. To be fair I think he simply meant that eventually wealth will be shared at some point in the far flung future.

Anyway, we’ve been over this before in regards to what will replace capitalism, given that it is under strain - or at least what transition will take place so we can also delve into that one again if people wish to.

Generally I am just asking about the meaning and application of terms like “capital”, “wage” and “labour” in constrasts between economic models of Marxism and Capitalism. I have noticed many subtle differences and thought discussing the jargon may help me understand positions I find puzzling.

Thanks
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Re: Capital

Postby Lomax on February 7th, 2019, 5:18 am 

Your friend has a strange use of the term. The original distinction between money and capital - the distinction Marx uses, for instance - is that capital grows without the input of labour and resources. That is to say, you can speculate to accumulate. A critique of capital is not necessarily a critique of money - money far precedes capitalism and is a pretty convenient way of improving trade. It doesn't expire, and you can subdivide a dollar in a way you can't subdivide a (live) hen.
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Re: Capital

Postby BadgerJelly on February 7th, 2019, 9:25 am 

His position was that members of an organisation should act democratically. That is regardless of position or importance within the company everyone should vote according what they deemed the fairest way to split the profits.

It seems to me that at some point “votes” would be bought to bolster those in higher positions anyway. Any small companies would also suffer disproportionately due to lack of efficiency and being unable to compete in the market place - which is by no means a problem absent from wage based pay, what he called “capitalism” and essentially “slavery” ...

The idea of a universal wage does seem like a possible solution, yet I am not sure how the negative aspects of it could be combated effectively. Any thoughts on “universal wage”?
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Re: Capital

Postby Serpent on February 7th, 2019, 10:23 am 

There are co-ops all over the place. Manufacturing, tech and farming communities that own the business collectively and make decisions democratically.
The capital for such enterprises usually comes from a bank (capital being invested money) and the interest is paid by all the share-holders in the company, whatever arrangement they have for ownership.
The two concepts are independent of each other.
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Re: Capital

Postby Forest_Dump on February 7th, 2019, 12:58 pm 

Serpent is correct. A digging stick counts as capital. The oldest capital we know of is bashed rocks with a sharp edge. Political and economic systems grew out of the systems to decide who would scrape the meat of bones from scavenged dead animals and who would get to eat it.
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Re: Capital

Postby Lomax on February 7th, 2019, 8:06 pm 

I'm not convinced that we should categorise a digging tool as capital. The idea of capital is that it profits without labour - that it is a means of production unto itself. We might argue about whether venture capitalism really is a form of labour, but I don't think we can really make that argument about digging, so there's a practical distinction in that.
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Re: Capital

Postby Serpent on February 7th, 2019, 9:05 pm 

In a business, tools, buildings, vehicles and machinery would be accounted as "capital assets" - necessary and permanent fixtures of the operation (which will depreciate over time and need to be replaced), to distinguish it from "liquid assets", which is spendable money and saleable product. When a business goes bankrupt, the capital assets are liquidated to pay off its debts, but normally, it pays interest and some percent of the principal of the original loan and dividends on its profits.
Investment capital is surplus money (that the owner doesn't need to live on or run a business with) for the purpose of investing in businesses, mortgages, stocks, bonds and loans. The investor doesn't have to do anything but wait for interest or dividends to arrive. If they fail to arrive, he can foreclose or call in the loan.
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Re: Capital

Postby Lomax on February 8th, 2019, 6:35 am 

That may well be the nomenclature but it is by the by: the debate between capitalism and socialism is about that form of money which self-appreciates.
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Re: Capital

Postby Forest_Dump on February 8th, 2019, 9:38 am 

There is of course tons of room for debate and no doubt definitions often get rewritten to serve individuals arguments but capital never simply self multiplies (with the odd exception of things like wild stock such as "sea stored fish") but only multiplies profits with the application of labour. So yeah a digging stick counts as much as intellectual property rights, ownership of lond, mills and forges, looms, robots and rocket boosters. But all require labour and some measure of control over the outcome.
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Re: Capital

Postby Serpent on February 8th, 2019, 1:20 pm 

Forest_Dump » February 8th, 2019, 8:38 am wrote:There is of course tons of room for debate and no doubt definitions often get rewritten to serve individuals arguments

I wonder whether I ought to take umbrage at that...

but capital never simply self multiplies (with the odd exception of things like wild stock such as "sea stored fish") but only multiplies profits with the application of labour.

Of course. Only, it's somebody else's labour (plus time, plus luck). For the capitalist himself, it's the money that does the work. The financier buys stock (risks losing his money) in the entrepreneur's effort (on the expectation that they will turn natural resources+labour into a saleable product, and so bring in more money than he put out. )
Stocks are sold, bought, traded and the dividends collected by a whole lot of people who have never been near the goldmine or factory they own, who don't even know half the time what they're invested in; their broker just goes and does it for them. Capital may be invested in precious metals, art, land, wine, spices, tulip bulbs; skin-care clinics, fashion design, football teams, and theatrical productions - anything that's expected to appreciate in value and/or earn profits. In no instance does the investor dig up gold, ferment grapes or prance about in a wig. Capital may also be put to work more safely in government bonds, mortgages, or pay-day loans. Also RRSP's and pension funds (which mean you put it in an investment pool: the bank lends it out and collects interest on your behalf, after skimming off its own fee. Then there are lottery tickets, the poor man's venture capitalism.

So yeah a digging stick counts as much as intellectual property rights, ownership of lond, mills and forges, looms, robots and rocket boosters. But all require labour and some measure of control over the outcome.

- The digging stick is a tool and a personal possession. It becomes a capital asset only if the owner digs commercially - that is, charges other people a fee for digging their holes. He's the entrepreneur. If another man, who does no actual digging, bought the stick for him, that man is the investor and the guy with the digging stick has to give him a portion of his earnings, while the capitalist sits under a tree.
- Intellectual property rights is a legal concept; the government acknowledges your original work, so that if somebody else tries to pass it off as their own, you can sue them. (Good luck!)
- Ownership of land is not capital investment unless the owner rents out that land for other people to work, and collects rent or a share of their crop in return for the use of that land.
- Ownership of a forge or mill is simple proprietorship by a tradesman if he does all his own work and sells his product to earn a living, or by an entrepreneur who employs other people to work with or for him and pays them wages, and may or may not make a profit (earnings above the operating costs, taxes and payroll). In those cases, the forge or mill is a capital asset. If the forge or mill was bought with borrowed money (investment capital or bank mortgage) then the capitalist behind that investment collects a quarterly dividend or monthly interest (compound, usually, which interest on the interest) without beating a single gatepost or warping a single loom.
- Robots and rocket boosters are usually owned by biggish corporate or military organizations and the role of that equipment in their operation is far beyond me to characterize.
- Labour is certainly required, with or without capital, to produce anything; some degree of control is presumed by humans undertaking any endeavour, with or without capital.
The fact remains: capital is surplus money (not in circulation to pay workers or buy pants) employed in one particular way: to promote some enterprise which will return more money.

Lomax -- That may well be the nomenclature but it is by the by: the debate between capitalism and socialism is about that form of money which self-appreciates.

You can't have a debate without a common vocabulary. A lot of people think capitalism is the same as monetarism is the same as commerce.
Capital - ism is a political ideology centered on economic growth.
Socialism is a political ideology centered on the welfare of the society as a whole.
It's hard to administer any modern country without some mixture of the two.

So, what's the question of the debate?
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Re: Capital

Postby Lomax on February 8th, 2019, 6:22 pm 

If Serpent were the only man smart enough to invent a digging stick, he could lend it to me on the condition that he gets to keep half the carrots, and then he could lend it to Forest on the condition that he (Serpent) gets to keep half the gold. In such a dystopia he's made a profit merely by owning the digging stick, and the digging stick is the means of production. That is what a capitalist does - if I want to open a cocktail bar I'm going to need probably a few hundred thousand pounds that I don't have, and somebody else does, and so that person is in a position of power. This is why capitalism is the most radically productive economic system man has ever invented - and also why it creates power imbalances, class division and alienation.

Of course, I don't begrudge Serpent the rewards of his competence, but when a man owns thirty million pounds because he inherited it and put it in a savings account, that is not a proportionate reflection on his competence. It is a reflection on his power, and the power of his money.
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Re: Capital

Postby Serpent on February 8th, 2019, 8:14 pm 

Couple more btw observations: the inventor of a new tool is rarely the beneficiary of its long-term earnings. The inventor generally needs start-up capital to make prototypes and market his invention, so he sells an interest - very often a controlling interest - to an investor, who then takes most of the profit. Edison owned more than a thousand patents, but many of them were not on his own inventions. There are patent sharks now, too. If you work for a big company, all your ideas are their property - though you might receive a bonus or royalty payments.

It's a productive economic system that rates its own success on productivity. But what-all it produces is not rated for its effect on the world. The weapons industry is enormously innovative, productive and profitable - all for the purpose of turning farms into quagmires, cities into rubble and people into vulture-feed.
Manufacturing is basically natural resources+human thought and labour+some form of energy = artifacts+waste-products. The latter are hardly ever accounted-for in production reports. Indeed, cleaning up after industry is sometimes counted on the plus side of the GDP, even though it has to be paid out of tax revenues.

Entrepreneurs have also taken recently to referring to the "product" of insurance companies or the "banking industry" where, in fact, this kind of service providers produces nothing and adds no value, but merely moves money from one place to another. Servicing moneys - investment, banking, insurance, taxation, accounting, lawsuits and patents, transfer security, making, shipping and guarding the currency, saving, investigating and collecting etc. probably constitutes 20% of the function of a national economy.

PS The only invention I ever devised didn't get outside my workshop. In the early, pre-civilized era, all inventions were communal: you simply threw your idea into the tribal pool to make life easier for everyone. The modern version is all those clever people who make You Tube videos.
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Re: Capital

Postby Forest_Dump on February 8th, 2019, 8:24 pm 

Serpent. I was not directing that comment towards you. I have have read a fair amount of Marx but I would note from a relatively nonpartisan perspective - as one archaeological theorist put it, when you study material culture/artifacts, the evolution of cultures and societies, etc., reading Marx is a bit of a must. So I have read some of his analytical economic stuff up to Das Capital but not his political stuff much. In broader economics, I have read a lot from Smith to Galbraith (has there been anyone since?). But I won't get into this much beyond noting that in the classical sence, the means of production are confined to labour and capital with the proceeds confined to wages and profits. So, for example, in modern terms money can be capital but doesn't necessarily have to be since money can also be wages and profits - money, after all, has no value except exchange value, i.e., as a medium of exchange, realized or promised. But of course, since Marx has probably been written about more than the bible with usually more smoke and heat than light (just think about the variations between Lenin, Mao and Tito), I have absolutely no doubt the definitions given at the London School of Economics, Harvard and some Midwestern high school will differ somewhat.
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Re: Capital

Postby Serpent on February 8th, 2019, 9:16 pm 

I didn't take it personally - just kidding.

Anyway, yes, money isn't necessarily capital - it can be liquid assets and operating costs or a simple medium of equitable exchange. Capital doesn't necessarily come only in the form of money: it can be land or infrastructure used for a commercial purpose, buildings occupied by tenants; buildings, land or non-perishable goods taken out of circulation on the speculation that their value will increase.

Investment capital always requires appreciation; that is, more comes back than went out, so that the investor gets his returns from contributing surplus money, rather than his own body or time. And investment income depends on value added from outside: consume more energy, use up more resources for more production, more customers more product or higher resale value -- economic growth.
Capitalism and the nations that commit their political system to it, depend for their survival on growth. If economic growth slows down from 5% to 1% per year, everybody in power acts like the sky is falling. And it does, with inevitable regularity: booms and busts.

Capitalism cannot survive sustained stability and the world cannot survive economic growth, and more than it can survive indefinite population growth.
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Re: Capital

Postby BadgerJelly on February 9th, 2019, 4:08 am 

He used the term “surplus labour” a lot.
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Re: Capital

Postby Serpent on February 9th, 2019, 10:52 am 

BadgerJelly » February 9th, 2019, 3:08 am wrote:He used the term “surplus labour” a lot.

Is that referring to unemployment rate? I've also heard the term "surplus people".
I've heard the ideal figure (from an economic perspective) as 5-7%. That keep the workers just insecure enough, without depleting the customer base. If you have a very high unemployment rate, the wages go down, but not enough people have enough money to buy stuff, or enough confidence to borrow the money to buy stuff. If the unemployment rate is too low, they get picky, drive wages up and don't want to do the scut-work. Then you have to import migrant labour, or let in undocumented immigrants who work cheap - especially if you hire them under the table, with no income tax or benefits and if they're injured, they can be replaced - no legal hassles, no medical bills. Bonus: A decade later, unemployment starts rising, the working-class starts hurting, you have a handy scapegoat to blame it on: "These illegals are stealing your jobs."
Super-bonus: Play your cards right and the citizens who are upset about unemployment will give up their social services to pay for more border security.
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Re: Capital

Postby Lomax on February 9th, 2019, 10:58 am 

Serpent - the phenomenon you describe is (in Marx's terms) "reserve labour". Surplus labour is the amount of work we have to do above and beyond what it would take to produce the wealth we (the workers) get in return.
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Re: Capital

Postby Serpent on February 9th, 2019, 12:33 pm 

Lomax » February 9th, 2019, 9:58 am wrote:Serpent - the phenomenon you describe is (in Marx's terms) "reserve labour". Surplus labour is the amount of work we have to do above and beyond what it would take to produce the wealth we (the workers) get in return.

Sorry! I misunderstood.
He meant profit. (Plus, I suppose, income tax, but the worker is supposed to get that back in the form of government protections and services.) So, you work 8 hours, your boss works 4 hours, the major share-holder works 0 hours; you drive home in a Hyundai, your boss drives home in a Bugatti and the shareholder flies his jet to Paris for lunch.

If you're a hunter-gatherer, any extra work you do beyond subsistence would go toward winter supplies and added comforts for your family or community. If you work for somebody else, you have to work extra for his comforts. In modern industrial society, you have to work extra for the payment of interest on the money you borrowed to get qualifications to work, the money you borrowed for the car to get to work, the money you borrow daily on a credit card, the money your employer borrows to buy supplies, the money your landlord borrowed to build your apartment (or your mortgage) the money your governments borrowed and to protect all the money that runs the economy.

If you just cut out the guy in the private jet, everybody could work and hour less per day. Bonus: the sky would be cleaner.
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Re: Capital

Postby Lomax on February 9th, 2019, 1:03 pm 

Oscar Wilde wrote:The chief advantage that would result from the establishment of Socialism is, undoubtedly, the fact that Socialism would relieve us from that sordid necessity of living for others

Something that's underappreciated about Marx, particularly by the people who confuse Marxism with Marxist-Leninism, is his criticism of the mighty state in Das Kapital. Here in the UK the poor pay (as a percentage of their earnings) far more tax than the rich, because of things like Value-Added Tax. The state regularly colludes to prop up big businesses with taxpayers' money, and the chapter on this in Marx's magnum opus shows that it's nothing new in the capitalist era. So what you say is true and true again. Hyksos has a separate thread on confronting misconceptions about Marx's work, but it should be added that to frame the socialism/capitalism debate as Big Government vs. Big Money is to ignore the realities of the situation.
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Re: Capital

Postby Serpent on February 9th, 2019, 1:31 pm 

And we didn't even touch the monumental inefficiency of competitive redundancy of administration and duplication of goods. Or how often that competition is a sham. (The same company makes four different brands of home appliance, with interchangeable parts made in the same factory, each with its own advertising campaign and retail outlet.)
Nor government-supported, subsidized and insured big business vs small independent family business.

When I hear an official say "consumer choice" I know he's planning to "streamline" away regulations so a corporation can scam you a higher fee for the same or inferior service.
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