Home > Uncategorized > The definition of capital as a social, historical relation – and TTIP

The definition of capital as a social, historical relation – and TTIP

A negro is a negro. In certain circumstances he becomes a slave. A mule is a machine for spinning cotton. Only under certain circumstances does it become capital. Outside these circumstances, it is no more capital than gold is intrinsically money, or sugar is the price of sugar…. Capital is a social relation of production. It is a historical relation of production.”

Karl Marx

Economists do not like to discuss their concepts. Fortunately, however, things are changing. The famous book by Piketty for one thing gave a big impetus to the discussion about the concept of ‘capital’. Piketty states that he uses a market oriented definition of capital and uses market prices to value capital. Which is not true, as he uses the concept and data of the national accounts, which use market prices whenever there is a market price – but other methods when a market price is not available (for instance in the case of non-tradable public capital goods, like urban roads). But he does exclude things like human capital.

But whoever is right – Pikkety’s approach to ‘capital’ is a-historical and in a literal sense one-sided. Which is surpirsing as the Piketty data very clearly show the historical character of our concept of capital – for instance by highlighting the enormous share of ‘slaves’ (to be more precise: negro-slaves) in the total stock of capital of the USA before the civil war. It took a war to change the social relations! (the Marx quote above might, today, to the occasional reader sound derogatory but at the time it must have sounded emancipatory and action oriented).

It is also one-sided as it only looks at the asset side of the balance sheet: the estimated value of capital. But balance sheets have two sides, for a reason. The other, liability side shows who owns the stuff and calls the shots.

Comes in TIPP. There is no doubt about it: TIPP will increase and enhance ownership rights of ‘capitalists’ (including pension funds, which own an increasing number of shares and increasingly take part in company equity in even more direct ways). Which changes the nature of capital. The value of at least some assets on the asset side will rise – as these capitalist will receive more ammunition and better guns. The point: people have often trouble to understand phrases like ‘capital as a social, historical relation’ – which is a pity as it is a powerful analytical concept. Using the balance sheet concept of capital and understanding that the nature of capital did and does change is enlightening – a lot of recent political endeavours are all about the nature and ownership of capital. Just ask yourself: who owns the stuff, who calls the shots.

  1. October 18, 2015 at 1:35 pm

    A good question. An example of this is who is going to own the US Post Office now that it has a pension fund sufficient for employees not even born yet? Are those responsible for writing the law requiring the Postal service to build this huge retirement capital fund planning a hostile takeover of public wealth paid for with expensive stamps?

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