Chapter Content
Okay, so I was reading this, like, super interesting thing about capital and wealth, and it really got me thinking. You know, we throw these terms around all the time, but do we *really* know what they mean, especially in today's world?
So, it kicks off with this, like, quote supposedly from Karl Marx's mom. Apparently, she said he should have *made* capital, instead of just writing about it, which is pretty savage, right? But it highlights this thing, which is that "capital" means different things to different people. I mean, you've got factories and offices, which are like, the *stuff* a business needs to operate. But then you also hear about a business’s capital or a university's endowment, which is more about, like, wealth.
And the thing is, these meanings used to be much more connected. Back in the day, like during the Industrial Revolution, wealth, productive capital, and who controlled the business were all tied together. But, like, not so much anymore. Now, capital as a factor of production, like those factories, is different from capital as a measure of wealth, you know, how much you’re worth. And neither of those is really directly connected to who's running things.
These days, it's mostly professional managers who are in charge. And their power, their economic power, doesn't necessarily come from *owning* the means of production or from their personal wealth. It comes from their, like, *role* in the company. Think about CEOs, right? I mean, sure, some of them are super rich, but their wealth is *because* of their job, not the other way around. It's like, they control the economic activity, and then they get rich. This is obviously true for business founders, like Jeff Bezos and Elon Musk, whose wealth is mostly shareholding value. But it's also true for what they call "salarymen," basically people who climb the corporate ladder, and make a fortune through bonuses and stock options. It's wild.
Then it dives into how some economists kind of, like, mess this up, by using “capital” and “wealth” interchangeably, which it seems, is a huge oversimplification. They try to say the main difference is just between man-made stuff and natural resources. But the real issue is how things actually work in a modern business. I mean, think about the land a building sits on. The location is often way more valuable than any inherent goodness of the land itself.
It really emphasizes that these terms are *not* interchangeable and using them that way just makes things confusing. Like, we benefit from investments in roads and bridges, but who personally *owns* those? And, on the other hand, government debt and bank deposits are part of personal wealth, but they don't really produce anything. The value of Apple shares doesn’t correspond to tangible things in a factory, but to the future income they'll generate. The rich lists are all basically financial assets, not factories and yachts. Plus, the warehouses that *are* crucial to Amazon aren’t worth as much as the company itself, and are owned by totally different people.
Then it talks about how some economic models try to compare capital as wealth to capital as a factor of production. But it argues that, since they're so different, it just doesn't make any sense to compare them. It’s like comparing apples and oranges. And it argues that it's really hard to find a useful definition for these concepts to be able to compare them anyway.
It also goes into how economists try to measure capital as a factor of production. They usually add up all the spending that went into creating it, using something called the "perpetual inventory" method. Basically, they track new investments and add them to the previous year's total, and then, like, subtract some for depreciation. But that depreciation is just a rough guess.
It's kind of similar to traditional accounting, but the problem is, we're often more interested in how useful something *is* now, not what it cost way back when. It gives this example of a railway built almost 200 years ago and asks whether updating the building cost even matters now. Modern accounting is moving towards "fair value," but even that's kind of fuzzy.
It looks at the capital stock of some major economies, and it turns out that housing is the biggest part, like half the value of physical assets. Back in the day, companies actually built houses for their workers, which is wild to think about. Then, over time, people started buying their own homes, which is definitely a big change. It argues that nineteenth-century housing was owned by capitalists, but in the twenty-first century housing is owned by workers.
Infrastructure is mostly state-owned, but a lot of it has been, like, franchised or sold off. Commercial property is shops, offices, and stuff. And then you have plant and machinery, which is now often owned by specialist companies.
Then it uses the example of 9/11 and the World Trade Center. The buildings were owned by the Port Authority, and leased to a real estate company. But when they were destroyed, they weren’t just about the buildings. They were an icon.
And who even *owns* the sewers of London? I mean, technically, it's Thames Water Utilities, but they operate under a license and are mostly funded by debt. It's this weird situation where the company is close to bankruptcy, but the government would step in if they failed. It’s argued that no one really *owns* it because ultimate control lies with the British government.
It says this story really shows that ownership isn't always a helpful way to understand economic relationships today. In another example, it mentions that some people who worked at Morgan Stanley during 9/11 barely mentioned the person who heroically saved a bunch of people. They were all congratulating each other for how quickly trading resumed afterward, which is pretty crazy.
It uses the story of a British railway to illustrate this point even further. It was once a big, important project, but now it's this complex web of companies and investors from all over the world. The point is, there's no single "capitalist" figure to blame or praise anymore. You’ve got global insurance companies and pension funds that invest in railways and airplanes and all sorts of stuff. But they don't actually want to run these businesses. The phrase "the divorce of ownership and control" has come up, which describes this situation where managers don't own the company's stock. But the development of extensive markets for capital services is an even bigger change.
It concludes that just because you need something to run a business, doesn't mean the supplier controls the business. Like, we don't talk about "water-ism," even though we need water to live. It argues that some people still think about capital in outdated ways, based on old factories and plants.
It says a lot of commercial property is owned by real estate investment trusts or institutions, and some of it is being bought up by offshore entities, who want a safe place to park their money. It asks the question of what “ownership” even *means* in the context of the Treasury Building.
Ultimately, most workers don't even know who owns the warehouses or the planes or the equipment they use, because it doesn't really matter. They work for the *organization* itself. Political and economic power doesn’t rest with the owners of business assets. So, if there were a revolution, the new revolutionaries wouldn't necessarily storm the headquarters of these capital service companies. They'd find that the means of production of modern businesses are elusive. You can't just point to one factory or building and say, "That's where the power lies." It's much more complicated than that, you know?