Capital goods

With the name of capital It is known to all the goods that in the productive process are destined to the combination with other factors of production in such a way to obtain final goods for consumption.

The capital good constitutes a form of capital, which is the resource from which some people are capable of transform a series of goods that have no value for consumption (or have it in a measure), in final goods that do have it (or they have it to a much greater extent than the individual combination of factors).

The development of capital goods is one of the most important phenomena of the capitalist mode of production, and the fundamental subdivision that Karl Marx, its main critic, elaborated on capitalism separates people between those who own capital goods and those who are not: in the production process, the latter only have their workforce. The capital goods that allow the subsequent production of consumer goods are produced by the heavy industry.

The capital good is defined by taking a product (in some cases a raw material from nature, in other cases an intermediate good that is also elaborated) and transforming it into another with different characteristics, which is usually called consumer good but eventually it could be another capital good, since obviously some production process determines them. Consumer goods are the last link in the productive chain (produced by the light industry).

In use, capital goods do not always remain the same but, on the contrary, undergo a process of wear and tear called amortization, for which they lose a certain value: the production process must not only be sufficient to compensate for the difference between the value of the final goods and raw materials, but also the compensation for the loss of capital value during the process must be added.

The function of capital good is, through the production process, transform money into more money, which is the equivalent that happens with money investments: this is why the money that receives a profit as an interest rate is also called capital.

The way in which capital good is generated is usually easily synthesized through an example, that of the lonely man on the island who spends his days jumping and lowering 10 fruits from the trees a day, until a week is dedicated to build a ladder and then you can go down 50 per day.

In the aggregate, the synthesis is that of the total of what is produced by a society, a part of consumption must be given up if capital goods are to be obtained, which in the future will mean greater product and then greater potential for consumption (and for the construction of capital goods). This development of capital goods (as well as other forms of capital) is called investment. China is one of the countries in the world with the highest percentage of the product destined for investment, with a fraction close to 50%.