This is Richard Wolff from Democracy at Work responding to another Ask Prof Wolff question from
our Patreon community. This one comes from 'Tom Zarnack' and Tom wants me to talk about something
that struck him. He's been reading the book by Thomas Piketty 'Capitalism' or 'Capital'...
(excuse me) ...'in the 21st Century.' And he noticed there that Piketty defines capital as a
collection of non-human assets. You know, tools, equipment, machinery - that's what he has in mind.
And 'Tom Zarnack' asks me (and I'm really glad he did): does this not clash with Marx's idea
of capital? Which is not that it is a thing but is, rather, a process, a relationship in change.
And I think not only is Tom right, but it is worth a response for me because of the importance of
the issue. The notion of capital as a thing; that is conventional mainstream economics.
That's how it's taught; that's how it was taught to Tom Piketty; that's how it was taught to me
in the American universities I attended; that's how most of my colleagues deal
with capital: a collection of means of production, if you like - tools,
equipment, raw materials, machinery, financial capital, money, all of that.
And I am eager to make the case with you that that is not Marx's idea at all. What is
Marx's definition? Well, the simplest way to say it: capital is self-expanding
value. What does that mean? It means capital is a relationship, a set of processes that something
can go through to become more than that which it was at the beginning. It is a relationship
that makes that happen. There has to be some relationship that transforms what you have
into something more than what you have. So that your 'whatever you call value' grows over time.
Let me give you an example, as Marx himself does. For thousands of years there has been a process
of self-expanding value which we have called borrowing and lending. Here's how it works: you
start with, say, a hundred dollars, you lend it to someone on condition that they pay you back at
the end of the year with an interest on top of it. So let's say you lent John a hundred dollars. John
gives you back, at the end of the year, one hundred and five dollars - five percent interest.
And your hundred has become a hundred and five. That value has expanded. And the relationship
is called borrowing, or lending, or credit, or whatever you want. That's very, very old.
Here's another one: self-expanding value; when you buy something
in order to sell it at a higher price. I buy a bag of potato chips in a big box with lots of others.
I have a little store and you come in and buy a particular bag when you're having your lunch.
And I charge you more for that bag than I paid buying it from the wholesaler.
I spent a buck on that bag of chips. I sell it to you for a dollar and a quarter. And the quarter
is the self-expansion of my value. Merchants are a kind of - here we go - capitalist. Because why
are they a capitalist? Because of their role in a relationship of self-expanding value.
Those have existed for thousands of years: money lending and merchants.
That's not what capitalism is for Marx.
It's self-expanding value. But the capitalism Marx wants to talk about is something much newer;
didn't exist on a mass scale hundreds or thousands of years ago. For Marx what is interesting about
the modern world is that self-expanding value has decided that production of goods and services
itself can be made a way to expand value. Notice that to lend money and get back
more no production is involved, just an agreement. I will get the 100 and I'll give
you back 105. Ditto the merchant isn't producing anything. He's buying and selling the same thing.
But capitalism for Marx is when this kind of a notion of self-expanding value takes over,
captures, infuses the production of goods and services. So that we now have a system
driven by the capitalist. Who buys tools, equipment and raw material,
hires workers, sets them to work with each other (the workers with the tools, equipment
and raw materials) to produce an output that is worth more than the money the capitalists
put into production. Then production itself becomes a means of expanding value.
And that's only three or four hundred years old as a mass phenomenon. Slave masters did not invest
their money to grow. Feudal lords didn't either. They didn't have to. That wasn't the way their
system was organized. Capitalism is when this urge to expand takes over, literally, the production of
goods and services. You hire a worker, you pay the worker 20 bucks an hour. Why? Because you know you
will get from that worker more than 20 dollars worth of output;
increasing the value. And you can sell that and you make the money off the capital.
This urge, which we know as the profit motive... this urge
drives capitalism in a way that feudalism and slavery were never driven. Which is
why capitalism, on the one hand, develops technology the way other systems couldn't;
quicker, faster, further. But it is also, at the same time, why it destroys the natural environment
and doesn't pay attention to the consequences. There's another contradiction of capitalism.
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