On my desk lies a graphing calculator. With this device I am able to perform complex mathematical calculations almost instantly. All of the laborious and time-consuming arithmetic is computed by the internal processor and the solution is displayed on the screen. The only labor on my part consists of inputting the original data by tapping a few buttons. Tap, enter, done.
The lesson to be learned by this simplistic, everyday situation of utilizing a calculator is profound, but it is regrettably a lesson many will never consider. This is the lesson of capital – what it is, where it comes from and what ramifications are implied by its use.
Why do I even have a calculator? Surely, given enough effort and time, I can solve the same mathematical calculations manually. But with a calculator, I can reduce the time needed to perform the calculation, freeing up more time and consequently amplifying my productivity. Clearly, the utility of the calculator lies in its ability to increase productivity. But how did I get the calculator? The calculator was procured through my conscious decision to abstain from current desires and instead save money in the hopes of increasing future productivity. Rather than spending all of my money on say, more pencils and paper to do the calculations, I instead withheld that money from being spent so that I may be able to perform a great many more calculations later.
This is the essence of capital. A capital good is a factor of production attained by saving. The purpose of the capital good is to increase the productivity of the laborer. Now here is where folk logic begins to turn dangerous. Those who denounce capital accumulation and capitalism do so based on a faulty understanding of the role of labor and its relation to capital. Socialists claim that workers are exploited by their employers, and point to the disparity between the prices paid for their labor and the total production, implying that the employer is unjustly harvesting the crop of their collective labor. This is, however, a preposterous notion. The total production of the enterprise is not merely the sum parts of the input of the workers. Rather, it is the product amplified by the use of capital. For myself to lay a claim over the processing ability of a calculator and consider it as my own labor is to terribly confuse things, especially when the wage paid covers only pressing the buttons. Workers who don’t understand the role of the employer in increasing their productivity through capital fall for the same fallacy.
This confusion over capital has lead to some wishing for the abolishment of capital entirely. Others contract government regulators to fight for “social justice” on their behalf, actively working to limit the profits of employers for their own benefit. But these shortsighted measures only serve to reduce capital and capital investment. This is a tragedy considering the intrinsic supply and demand relationship tying capital to labor. The less capital there is in a society, the more laborers there are to operate that capital. The marginal value of labor will therefore plummet along with the wages paid to the workers. The opposite is also true. When capital exceeds the amount of laborers, the higher the demand for laborers there will be, driving up their wages in the process. Therefore any wise worker would see it is in their absolute best interest for capital accumulation to continue unabated. Those advocating for the elimination of capital should then be seen for what they truly are: Naive, destructive sophists.
A comparison between a capital-rich country and one deficient of capital should make sober the mind of any critic of capital, profit and enterprise. To eliminate capital entirely is to eliminate the concept of saving. Which in itself is impossible, even in a mythical socialist society. To attempt to bring about programs toward this end is to effectively toss the productivity of the calculator amidst the scrap heap – to stop the clock on the progress of civilization.