What is Capital and Fixed Capital?

In Supereconomics, capital is anything that creates value. This is different from finished product or service which represent the value itself and is called in consumer goods and services in Part 1.

Modern Economics which defines capital as property, machines, money, and equipment that produces goods and services.

However, Supereconomics is a bit different that it inclues the skill, personal attributes, relationships, name, reputation, and other non-physical objects as capital.

Two Types of Capital

1. Fixed Capital

This yields a revenue without changing masters or circulating any further. Examples are:

• land improvements
• useful machines
• beautiful voice
• good reputation

2. Circulating Capital

This is employed in raising, manufacturing, or buying goods and selling them again. A Circulating Capital yields no revenue to its employer while it remains with him.

A merchant’s goods provide no revenue until he sells them for money.

• The money yields him little until it is exchanged for goods.
• His capital is continually going from him in one shape and returning to him in another.
• Only such successive exchanges can yield him any profit.

The Force of Capital

Our definition of capital as anything that creates value. Therefore, capital has ’economic potential energy'.

This energy has to be used, otherwise it will be useless. For example, owning a huge tract of land will give a lot of economic potential energy to its owner. This will drive him to use his land in order to utilize that energy.

We call that drive as the force of capital. The bigger the capital, the more energy it has, and therefore more force.

The misuse or non-use of this force leads to imbalances that manifests as inflation, unemployment, scarcity (or overproduction), etc.

Four Employments of Capital

1. Extraction

This is the extraction of raw materials for use and consumption.

This includes agriculture wherein the inorganic nutrients from the soil are extracted into organic elements that are useful for industry and human consumption.

2. Manufacturing

This is the processing of the raw materials for immediate use and consumption.

3. Wholesale

This is bringing those finished or processed goods from where they abound to where they are lacking.

This includes Logistics and Storage.

4. Retail

This is the dividing the portions of raw materials or finished goods into small parcels for those who want them.

This includes Distribution such as last mile deliveries.

Each of these four methods is needed by the other three.

Which capitals replace which capital?

The retailer’s capital replaces, with profits, the wholesaler’s capital.

The wholesaler’s capital replaces, with profits, the capitals of the farmers and manufacturers he buys from.

Part of the capital of the master manufacturer is employed as a fixed capital in the instruments of his trade.

The farmer’s capital mobilizes the most amount of productive labour.