Vince Cable's speech at the Liberal Democrats' annual conference went down a storm with the party faithful, but like a dose of the clap with the City. At the heart of his speech was the idea that capitalism kills competition and must therefore be tightly regulated. However, this rather presumes that we all know what capital is.

Here I haven't found the literature very helpful.  "What is capital?" is clearly such a bone-headed question that even the simplest economics textbooks don't feel the need to answer it. So... what is capital?

My conclusion, having thought about it for some time, is that it can be nothing other than banked labour.  Imagine a group of cavemen, who must hunt to survive.  Anyone who doesn't hunt is worthless to the tribe and will be cast out.  They quite literally eat what they kill.  Then one day, one of the caveman thinks 'Sod this, I can find a better way to hunt' and invents a machine gun.  Now, he can do all his hunting in 2 minutes and sit around on his arse for the rest of the day.  He is able to deliver an entire day's work in a fraction of a minute.  That's worth something.  And it is worth something to other people too, allowing him to trade his invention to other people in his old age when he no longer wants to hunt at all.

That 'worth something' is the ability to forego work.  It's the amount by which the inventor has done tomorrow's work today and can therefore not work in the future.  Conversely, borrowing of capital represents a promise to work in the future.

Left wingers tend to hate capitalists as being 'against the workers'.  I disagree.  Capitalists are good workers; those who have produced more than they can consume and are living off this deferred gratification.  Conversely, people without capital have consumed more than they produce.  This is a problem where all people are supposed to contribute to society.  It's to society's credit that we look after these people instead of slinging them out of the cave.

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Filed under: Economics with tags capital, liberal democrats, vince cable