Capital
From Encyclopediak
Capital, in economics the accumulated wealth used as a means for the production of additional wealth. The capitalist abstains from immediate consumption and deprives himself of present enjoyment in order that he may have future profit. Capital is to be distinguished from money, for money is only one form, the common form, of capital. In different stages of civilization wealth has been represented by various forms of capital; such as tools, cattle and produce. Money has come to be the recognized form in our day.
Capital is divided into two classes, fixed and circulating. The difference is one of degree, depending on the form of investment. Fixed capital consists of objects which can be used several times in the act of production without undergoing marked change. Machinery, tools and buildings are fixed capital. Circulating capital is that capital which is used in the course of trade and consumed in a single act of production. To this class belong all raw materials, and money used in the payment of wages and the purchase of goods for the purpose of immediate sale.
Among the concrete forms of productive capital, such as improvements upon land, means of transportation, raw materials, tools and machines, land is excluded, because, primarily, it is a gift of nature, and is not the product of industry directed toward the production of capital. Neither are food and clothing, except when in the hands of the manu¬acturer, to be considered as capital.
Capital when used for industrial purposes brings in returns in the way of profits of trade and investment, rent or interest. A saving of money incomes makes it possible to obtain interest on accumulated capital, and in this way the money becomes productive capital, though that term is generally applied to the material, concrete tools of production. The rate of production must exceed the rate of consumption if there is to be any progress in industry. This margin, together with the natural accumulation of resources, constitutes capital. See INTEREST ; POLITICAL ECONOMY.
