Genesis of Capital in India

My book ‘Genesis of Capital in India’ in Kindle Edition.





My Book ‘PIKETTY MARX AND CAPITAL’ in Kindle edition:

Piketty Marx and Capital (Kindle edition).jpg 1

This book is a critique of Thomas Piketty’s much acclaimed work ‘Capital in the Twenty-First Century’. While critically examining the book, it brings out the major contradictions and inconsistencies inherent in Piketty’s treatment of the subject. Piketty’s pious wish to resurrect the spirit of classical political economy on the one hand, and his pragmatic preference for the big data methodology on the other hand, has been dealt as the first major inconsistency of his book. Piketty’s theoretical genealogy has been traced to Etiênne Bonnet de Condillac (1715-1780). In course of the critique, the book surveys the evolution of economic theories and schools as well as that of the contradictions inherent in the capitalist mode of production.

Piketty’s book has been compared with Karl Marx’s ‘Capital’ and some reviewers have christened it ‘Capital 2.0’. Piketty too has been called ‘Modern Marx’ or ‘Bigger than Marx’ by some critics. Moreover, Marx’s long shadow is quite apparent in his book from beginning to end. At every point, before propounding his conclusions, he remembers and cites Marx, but quickly backtracks. In this background, this book extensively deals with Piketty’s ‘Yes Marx No Marx’ syndrome.

Moreover, Piketty’s book refrains from considering certain major developments of the twentieth century that are playing vital role in shaping the economy and society in the twenty-first century. Piketty desist from entering new time, and hence the content of the book does not justify the title of the book. However, no book is complete and free from certain inconsistencies. Some incompleteness, certain inconsistencies are part of a book – it keeps the door of fresh explorations, interpretations and explanations open for those who want to pursue the subject further. Hence, despite certain inconsistencies, this book thanks Mr Piketty for unequivocally drawing attention to certain realities (substantiated by data spread over two centuries) that provide enough lessons for emerging economies.

The book is divided in eight sub-titles: i. Apocalypse and Exuberance; ii. Data and Dialectics; iii. Capital Social and Self-Expanding; iv. Wealth Inherited and Created; v. Century Twentieth and Twenty-First; vi. Yes Marx No Marx; vii. London Chicago Paris; and viii. Thank You Mr Piketty. At the end of the book a list of economists who have shaped our economic thinking and practice up to our own times has been provided.







Prasanna K Choudhary

Karl Marx

            Karl Marx



“The relations of capital assume their most externalized and most fetish-like form in interest-bearing capital. We have here M → M′, money creating more money, self-expanding value, without the process that effectuates these two extremes. ….

It is a relationship of magnitudes, a relationship of the principal sum as a given value to itself as a self-expanding value, as a principal sum which has produced a surplus value. And capital as such, as we have seen, assumes this form of a directly self-expanding value for all active capitalists, whether they operate on their own or borrowed capital.

M → M′. We have here the original starting point of capital, money in the formula M → C → M′ reduced to its two extremes M → M′, in which M′ = M + ∆M, money creating more money. It is the primary and general formula of capital reduced to a meaningless condensation. ..Capital appears as a mysterious self-creating source of interest – the source of its own increase. ..In interest-bearing capital, therefore, this automatic fetish, self-expanding value, money generating money, is brought out in their pure state and in this form it no longer bears the birthmarks of its origin. ..Thus we get the fetish form of capital and the conception of fetish capital. In M → M′ we have the meaningless form of capital, the perversion and objectification of production relations in their highest degree, the interest-bearing form, the simple form of capital, in which it antecedes its own process of reproduction. It is the capacity of money, or of a commodity, to expand its own value independently of reproduction – which is a mystification of capital in its most flagrant form. For vulgar political economy, which seeks to represent capital as an independent source of value, of value creation, this form is naturally a veritable find, a form in which the source of profit is no longer discernible, and in which the result of the capitalist process of production divorced from the process – acquires an independent existence. ..As the growing process is to trees, so generating money appears innate in capital in its form of money-capital. ..Money is now pregnant. ..Interest on it grows, no matter whether it is awake or asleep, is at home or abroad, by day or by night. ..In its capacity of interest-bearing capital, capital claims the ownership of all wealth which can ever be produced, and everything it has received so far is but an installment for its all-engrossing appetite. By its innate laws, all surplus-labor which the human race can ever perform belongs to it. Moloch. ..”1


The product of past labor, the past labor itself, is here pregnant in itself with a portion of present or future living surplus-value. “We know, however, that in reality the preservation, and to that extent also the reproduction of the value of products of past labor is only the result of their contact with living labor over living surplus-labor lasts only as long as the relations of capital, which rest on those particular social relations in which past labor independently and overwhelmingly dominates over living labor. …

The formula capital → interest, as third to land → rent and labor → wages, is much more consistent than capital → profit, since in profit there still remains a recollection of its origin, which is not only extinguished in interest, but is also placed in a form thoroughly antithetical to this origin. ..”2

While unraveling inequality inherent in the very nature of social capital, Piketty gets trapped in the conception of fetish capital (representing capital as an independent source of value-creation). This is the second major inconsistency of the book. Big data methodology can lead Piketty only to this fetish of capital. In that case, he can, at best, only think of containing capital. He desists from imagining other forms of organization or mode of production, and hides that option in bracket (Chapter One/Income and Output/The Capital-Labor Split in the Long Run: Not So Stable).


Piketty’s formulation of the basic contradiction of capitalism as r (rate of return on capital) > g (rate of growth) is a natural corollary to his capital fetishism. This matter of fact statement (supported by data spread over two centuries) hardly guides us to explore the inner world of capitalist production, and offers nothing new by way of propositions and explanations.

For Marx, “The real barrier of capitalist production is capital itself. It is that capital and its self-expansion appear as the starting and the closing point, the motive and purpose of production; that production is only production for capital and not vice-versa, the means of production are not mere means for a constant expansion of the living process of the society of producers. The limits within which the preservation and self-expansion of the value of capital resting on the expropriation and pauperization of the great mass of producers can alone move – these limits come continually into conflict with the methods of production employed by capital for its purposes, which drive towards unlimited extension of production, towards production as an end in itself, towards unconditional development of the social productivity of labor. The means – unconditional development of the productive forces of society – comes continually into conflict with the limited purpose, the self-expansion of the existing capital. ..Things are produced only so long as they can be produced with a profit .. having an eye solely for the development  of the productive forces, whatever the cost in human beings and capital-values.”3



“The growing discordance between the productive development of society and the relations of production hitherto characteristic of it, is expressed in acute contradictions, crises, convulsions. The violent destruction of capital as the condition for its self-preservation, and not because of external circumstances, is the most striking form in which it is ADVISED TO BE GONE AND TO GIVE ROOM TO A HIGHER STATE OF SOCIAL PRODUCTION. ..


Mr Piketty can here well remember the period 1914 – 1950.



  1. Marx, Karl; ‘Capital’, Volume III, Progress Publishers, Moscow, 1977. Moloch: the god of sun, fire and war in Carthage and Phoenicia, whose worship was accompanied by human sacrifices.
  2. Ibid.
  3. Ibid.
  4. Quoted in Marx’s ‘Capital’, Volume I, Progress Publishers, Moscow, 1977.
  5. Marx, Karl and Engels, Frederick; Collected Works, Volume 29, Progress Publishers, Moscow, 1987.


[This critique is divided in eight parts, tentatively titled as: i. Apocalypse and Exuberance; ii. Data and Dialectics; iii. Capital Social and Self-Expanding; iv. Wealth Inherited and Created; v. Century Twentieth and Twenty-First; vi. Yes Marx No Marx; vii. London Chicago Paris; and viii. Thank You Mr Piketty.]










Prasanna K Choudhary




This gratuitous service of past labor, when seized and filled with a soul by living labor increases with the advancing stages of accumulation. Past labor always disguises itself as capital. ..Capital is not a fixed magnitude, but is a part of social wealth, elastic and constantly fluctuating with the division of fresh surplus-value into revenue and additional capital. ..Even with a given magnitude of functioning capital, the labor-power, the science, and the land (by which are to be understood, economically, all conditions of labor furnished by Nature independently of man), embodied in it, form elastic powers of capital, allowing it, within certain limits, a field of action independent of its magnitude. …Classical economy always loved to conceive social capital as a fixed magnitude of a fixed degree of efficiency. …

Accumulation of wealth at one pole is, therefore, at the same time accumulation of misery, agony of toil slavery, ignorance, brutality, mental degradation, at the opposite, i.e., on the side of the class that produces its own product in the form of capital. ..

The circulation of money as capital is an end in itself, for the expansion of value takes place only within this constantly renewed movement. The circulation of capital has therefore no limits. ..As the conscious representative of this movement, the possessor of money becomes a capitalist. ..Use-values must therefore never be looked upon as the real aim of the capitalist; neither must the profit of any single transaction. The restless, never-ending process of profit-making alone is what he aims at. ..”1

Thus, according to Marx, the basic cause of capital accumulation is inherent in the very definition of capital as ‘self-expanding value’. Unpaid labor is the ultimate source.


What happens when capital itself is traded as a commodity? “Its use-value then consists precisely in the profit it produces. ..In this capacity of potential capital, as a means of producing profit, it becomes a commodity, but a commodity sui generis. Or what amounts to the same, capital as capital becomes a commodity.”

“Capital manifests itself as capital through self-expansion. The degree of its self-expansion expresses the quantitative degree in which it realizes itself as capital. The surplus-value or profit produced by it – its rate or magnitude – is measurable only by comparison with the value of the advanced capital. The greater or lesser self-expansion of interest-bearing capital is, therefore, likewise only measurable by comparing the amount of interest, its share in the total profits, with the value of the advanced capital. If, therefore, price expresses the value of the commodity, then interest expresses the self-expansion of money-capital and thus appears as the price paid for it to the lender. ….

Capital appears as a commodity, inasmuch as it is offered on the market, and the use-value of money is actually alienated as capital. Its use-value, however, lies in producing profit. ..The product of capital is profit. ….

Furthermore, capital appears as a commodity inasmuch as the division of profit into interest and profit proper is regulated by supply and demand, that is, by competition, just as the market-prices of commodities. ..In any event the average rate of profit is to be regarded as the ultimate determinant of the maximum limit of interest. ..(Here we will not go into the fluctuations in the rate of interest during the cycles in which modern industry moves – state of inactivity, mounting revival, prosperity, over-production, crisis, stagnation, state of inactivity, etc., or due to other reasons.)”2

“As a nation advances in the career of wealth, a class of men springs up and increases, more and more, who by the labors of their ancestors find themselves in the possession of funds sufficiently ample to afford a handsome maintenance from the interest alone. Very many also who during youth and middle age were actively engaged in business, retire in their latter days to live quietly on the interest of the sums they have themselves accumulated. This class, as well as the former, has a tendency to increase with the increasing riches of the country, for those who begin with a tolerable stock are likely to make an independence sooner than they who commence with little. Thus it comes to pass, that in old and rich countries, the amount of national capital belonging to those who are unwilling to take the trouble of employing it themselves, bears a larger proportion to the whole productive stock of the society, than in newly settled and poorer districts. How much more numerous in proportion to the population is the class of rentiers England! As the class of rentiers increases, so also does that of lenders of capital, for they are one and the same.”3

Cover of Marx's Capital

“Moreover, as concerns the perpetually fluctuating market rate of interest, however, it exists at any moment as a fixed magnitude, just as the market-price of commodities, because in the money-market all loanable capital continually faces functioning capital as an aggregate mass, so that the relation between the supply of loanable capital on one side, and the demand for it on the other, decides the market level of interest at any given time. This is all the more so, the more the development, and the attendant concentration, of the credit system (ever-growing control over the money-savings of all classes of society that is effected through the bankers, and the progressive concentration of these savings in amounts which can serve as money-capital) gives to loanable capital a general social character and throws it all at once on the money-market. On the other hand, the general rate of profit is never anything more than a tendency, a movement to equalize specific rates of profit. The competition between capitalists – which is itself this movement toward equilibrium – consists here of their gradually withdrawing capital from spheres in which profit is for an appreciable length of time below average, and gradually investing capital into spheres in which profit is above average. Or it may also consist in additional capital distributing itself gradually and in varying proportions among these spheres. It is continual variation in supply and withdrawal of capital in regard to these different spheres, and never a simultaneous mass effect, as in the determination of the rate of interest. ….

In emphasizing this difference between the rate of interest and the rate of profit, we still omit the following two points, which favor consolidation of the rate of interest: i. the historical pre-existence of interest-bearing capital and the existence of a traditional general rate of interest; ii. The far greater direct influence exerted by the world-market on establishing the rate of interest, irrespective of the economic conditions of a country, as compared with its influence on the rate of profit. ..

In the money-market only lenders and borrowers face one another. The commodity has the same form – money. All specific forms of capital in accordance with its investment in particular spheres of production or circulation are here obliterated. It exists in the undifferentiated homogenous form of independent value – money. The competition of individual spheres does not affect it. They are all thrown together as borrowers of money, and capital confronts them all in a form, in which it is as yet indifferent to the prospective manner of investment. It obtains most emphatically in the supply and demand of capital as essentially the common capital of a class – something industrial capital does only in the movement and competition of capital between the various individual spheres. On the other hand, money-capital in the money-market actually possesses the form, in which, indifferent to its specific employment, it is divided as a common element among the various spheres, among the capitalist class, as the requirements of production in each individual spheres may dictate. Moreover, with the development of large-scale industry money-capital, so far as it appears on the market, is not represented by some individual capitalist, not the owner of one or another fraction of capital in the market, but also assumes the nature of a concentrated, organized mass, which, quite different from actual production, is subject to the control of bankers, i.e., the representatives of social capital. So that, as concerns the form of demand, loanable capital is confronted by the class as a whole, whereas in the province of supply it is loanable capital which obtains en masse.”4

These are some of the reasons why the general rate of profit appears blurred and hazy alongside the definite interest rate, which may fluctuate in magnitude, but always confronts borrowers as given and fixed because it varies uniformly for all of them. Just as variations in the value of money do not prevent it from having the same value vis-à-vis all commodities, just as the daily fluctuations in market-prices of commodities do not prevent them from being daily reported in the papers, so the rate of interest is regularly reported as the ‘price of money’. It is so, because capital itself is being offered here in the form of money as a commodity. The fixation of its price is thus a fixation of its market-price, as with all other commodities. The rate of interest, therefore, always appears as the general rate of interest, as so much money for so much money, as a definite quantity. The rate of profit, on the other hand, may vary even within the same sphere of commodities with the same price, depending on different conditions under which different capitals produce the same commodity, because the rate of profit of an individual capital is not determined by the market-price of a commodity, but rather by the difference between market-price and cost-price. And these different rates of profit can strike a balance – first within the same sphere and then between different spheres – only through continual fluctuations.”5

For the productive capitalist who works on borrowed capital, the gross profit falls into two parts – the interest, which he is to pay the lender, and the surplus over and above the interest, which makes up his own share of the profit. If the general rate of profit is given, this latter portion is determined by the rate of interest; and if the rate of interest is given, then by the general rate of profit. ….And, indeed, regardless of whether the capital employed by the active capitalist is borrowed or not, and whether the capital belonging to the money-capitalist is employed by himself or not, the profit of every capital, and consequently also the average profit established by the equalization of capitals, splits, or is separated, into two qualitatively different, mutually independent and separately individualized parts, to witinterest and profit of enterprise – both of which are determined by separate laws. The capitalist operating on his own capital, like the one operating on borrowed capital, divides the gross profit into interest due to himself as owner, as his own lender, and into profit of enterprise due to him as to an active capitalist performing his function. ..The employer of capital, even when working with his own capital, splits into two personalities – the owner of capital and the employer of capital; with reference to the categories of profit which it yields, his capital also splits into capital-property, capital outside the production process, and yielding interest of itself, and capital in the production process which yields a profit of enterprise through its function. ….6


“Since the specific social attribute of capital under capitalist production – that of being property commanding the labor-power of another – becomes fixed, so that interest appears as a part of surplus value produced by capital in this inter-relation, the other part of surplus value – profit of enterprise – must necessarily appear as coming not from capital as such, but from the process of production, separated from its specific social attribute, whose distinct mode of existence is already expressed by the term interest on capital. But the process of production, separated from capital, is simply a labor-process. Therefore, the industrial capitalist, as distinct from the owner of capital, does not appear as operating capital, but rather as a functionary irrespective of capital, or as a simple agent of the labor-process in general, as a laborer, and indeed as a wage laborer.


Interest as such expresses precisely the existence of the conditions of labor as capital, in their social anti-thesis to labor, and in their transformation into personal power vis-à-vis and over labor. It represents the ownership of capital as a means of appropriating the products of the labor of others. But it represents this characteristic of capital as something which belongs to it outside the production process and by no means is the result of the specifically capitalist attribute of this production process itself. Interest represents this characteristic not as directly counter-posed to labor, but rather as unrelated to labor, and simply as a relationship of one capitalist to another; hence, as an attribute outside of irrelevant to the relation of capital to labor. In interest, therefore, in that specific form of profit in which the antithetical character of capital assumes an independent form, this is done in such a way that the antithesis is completely obliterated and abstracted. Interest is a relationship between two capitalist not between capitalist and laborer.

On the other hand, this form of interest lends the other portion of profit the qualitative form of profit of enterprise, and further of wages of superintendence. The specific functions, which the capitalist as such has to perform, and which fall to him as distinct from and opposed to the laborer are presented as mere functions of labor. He creates surplus-value not because he works as a capitalist, but because he also works, regardless of his capacity of capitalist. This portion of surplus-value is thus no longer surplus-value, but its opposite, an equivalent for labor performed. Due to the alienated character of capital, its antithesis to labor, being relegated to a place outside the actual process of exploitation, namely to the interest-bearing capital, this process of exploitation itself appears as a simple labor-process in which the functioning capitalist merely performs a different kind of labor than the laborer. ….

The conception of profit of enterprise as the wages of supervising labor, arising from the antithesis of profit of enterprise to interest, is further strengthened by the fact that a portion of profit may, indeed, be separated, and is separated in reality, as wages, or rather the reverse, that a portion of wages appears under capitalist production as integral part of profit. This portion, as Adam Smith correctly deduced, presents itself in pure form, independently and wholly separated from profit (as the sum of interest and profit of enterprise), on the one hand, and on the other, from that portion of profit which remains, after interest is deduced, as profit of enterprise in the salary of management of those branches of business whose size, etc., permits of a sufficient division of labor to justify a special salary for a manager. ….

Stock companies in general – developed with the credit system have an increasing tendency to separate this work of management as a function from the ownership of capital, be it self-owned or borrowed. ….

Since, on the one hand, the mere owner of capital, the money-capitalist, has to face the functioning capitalist, while money-capital itself assumes a social character with the advance of credit, being concentrated in banks and loaned out of them instead of its original owners, and since, on the other hand, the mere manager who has no title whatever to the capital, whether through borrowing it or otherwise, performs all the real functions pertaining to the functioning capitalist as such, only the functionary remains and the capitalist disappears as superfluous from the production process. ….

On the basis of capitalist production a new swindle develops in stock enterprises with respect to wages of management, in that boards of numerous managers or directors are placed above the actual director, for whom supervision and management serve only as a pretext to plunder the stockholders and amass wealth.”7

Piketty includes entrepreneurial and top managerial work in the category of labor.


  1. Marx, Karl; ‘Capital’, Volume I, Progress Publishers, Moscow, 1977.
  2. Marx, Karl; ‘Capital’, Volume III, Progress Publishers, Moscow, 1977. Quotations are from different chapters of the book.
  3. Ibid.
  4. Ibid.
  5. Ibid.
  6. Ibid.
  7. Ibid.

[This critique is divided in eight parts, tentatively titled as: i. Apocalypse and Exuberance; ii. Data and Dialectics; iii. Capital Social and Self-Expanding; iv. Wealth Inherited and Created; v. Century Twentieth and Twenty-First; vi. Yes Marx No Marx; vii. London Chicago Paris; and viii. Thank You Mr Piketty.]







Prasanna K Choudhary


Thomas Piketty


MONEY IS NOW PREGNANT. Goethe, ‘Faust’, Part I, Scene5.1

Let me begin with Thomas Piketty’s definition of capital, labor and ‘return on capital’. After all, ‘capital’ and ‘return on capital’ form the basic theme of the book.

Piketty writes, “In this book, capital is defined as the sum total of nonhuman assets that can be owned and exchanged on some market. Capital includes all forms of real property (including real estate) as well as financial and professional capital (plants, infrastructure, machinery, patents and so on) used by firms and government agencies. ….Nonhuman capital which in this book I will call simply ‘capital’, includes all forms of wealth that individuals (or groups of individuals) can own and that can be transferred or traded through the market on a permanent basis. In practice, capital can be owned by private individuals (in which case we speak of ‘private capital’) or by the government or government agencies (in which case we speak of ‘public capital’). There are also intermediate forms. ….Capital is not an immutable concept: it reflects the state of development and prevailing social relations of each society. ….

Throughout this book, when I speak of ‘capital’ without further qualification, I always exclude what economists often call (unfortunately, to my mind) ‘human capital’, which consists of an individual’s labor-power, skills training, and abilities. ….There are many reasons for excluding human capital from our definition of capital. The most obvious is that human capital cannot be owned by another person or traded on a market (not permanently at any rate). This is a key difference from other forms of capital. One can of course put one’s labor services up for hire under a labor contract of some sort. In all modern legal systems, however, such an arrangement has to be limited in both time and scope. In slave societies, of course, this is obviously not true: there, a slaveholder can fully and completely own the human capital of another person and even of that person’s offspring. In such societies, slaves can be bought and sold on the market and conveyed by inheritance, and it is common to include slaves in calculating a slaveholder’s wealth. I will show how this worked when I examine the composition of private capital in the southern United States before 1865. Leaving such special (and for now historical) cases aside, it makes little sense to attempt to add human and nonhuman capital. ….

I use the words ‘capital’ and wealth interchangeably. To summarize, I define ‘national wealth’ or ‘national capital’ as the total market value of everything, owned by the residents and government of a given country at a given point of time, provided that it can be traded on some market. It consists of the sum total of nonfinancial assets (land, dwellings, commercial inventory, other buildings, machinery, infrastructure, patents, and other directly owned professional assets) and financial assets (bank accounts, mutual funds, bonds, stocks, financial investment of all kinds, insurance policies, pension funds, etc.), less the total amount of financial liabilities (debt). ….

Capital is a stock. It corresponds to the total wealth owned at a given point of time. This stock comes from the wealth appropriated or accumulated in all prior years combined. ….” (Chapter One/Income and Output)

Piketty includes top managers and entrepreneurs in the category of labor, and thus, high salaries paid to them are accounted in the category of labor income.

On the rate of return on capital, he writes, “The rate of return on capital is a central concept in many economic theories. In particular, Marxist analysis emphasizes the falling rate of profit – a historical prediction that turned out to be quite wrong, although it does contain an interesting intuition. The concept of the rate of return on capital also plays a central role in many other theories. In any case, the rate of return on capital measures the yield on capital over the course of a year regardless of its legal form (profits, rents, interest, dividend, royalties, capital gains, etc.), expressed as percentage of the value of capital invested. It is therefore a broader notion than the rate of ‘profit’, and much broader than the ‘rate of interest’, while incorporating both.” (Chapter One/ Income and Output)

“By construction, this average rate of return aggregates the returns on very different types of assets and investments: the goal is in fact to measure the average return on capital in a given society taken as a whole, ignoring differences in individual situations. ….” (Chapter Six/The Capital-Labor Split in the Twenty-First Century)

Finally, he concludes the central contradiction of capitalism as r > g.

Piketty’s definition of capital offers nothing new and basically follows the definition prevalent in Political Economy since its classical days. This definition clings to appearances and believes them to be the ultimate. Blindly operating average, apparent data, is the ‘secret’ of the capitalist economy, invented to hide the intrinsic interconnections of the capital’.2

Capital, in the prevalent economic literature, has been generally defined as ‘accumulated wealth that is traded over again’, as ‘accumulated or capitalized interest’. “Capital, with compound interest on every portion of capital saved, is so all engrossing that all the wealth in the world from which income is derived, has long become the interest on capital”, wrote The Economist, London, way back in 1851.3

Since Piketty refers to Marx in this context, it is imperative to state that Marx’s definition of capital and its basic contradiction evolved in course of the critique of this very Political Economy. Hence, a brief summary of Marx’s position, in his own words, on all the points mentioned above by Piketty will not be out of place. This will bring out the inconsistencies in Piketty’s definition as well.

Marx defined capital as self-expanding value-form. Social capital is social wealth exchanged (or traded) in self-expanding mode. This self-expanding value-form assumes different avatars at different stages of the development of capital.

Karl Marx

Karl Marx


Describing the genesis of industrial capital, Marx writes, “The circuit M → C → M, buying in order to sell dearer, is seen most clearly in genuine merchants’ capital. But the movement takes place entirely within the sphere of circulation. Since, however, it is impossible, by circulation alone to account for the conversion of money into capital, for the formation of surplus value. It would appear that merchants’ capital is an impossibility so long as equivalents are exchanged; that, therefore, it can only have its origin in the twofold advantage gained, over both the selling and the buying producers, by the merchant who parasitically shoves himself in between them. It is in this sense that Franklin says, ‘war is robbery, commerce is generally cheating.’ ….Turn and twist as we may, the fact remains unaltered. If equivalents are exchanged, no surplus value results, and if non-equivalents are exchanged, still no surplus value. Circulation, or the exchange of commodities, begets no value.

The reason is now therefore plain why, in analyzing the standard form of capital, the form under which it determines the economic organization of modern society, we entirely left out of consideration its most popular, and, so to say, antediluvian forms, merchants’ capital and money-lenders’ capital. ….

We have shown that surplus value cannot be created by circulation, and therefore, that in its formation something must take place in the background, which is not apparent in the circulation itself. ..The commodity owner can, by his labor, create value, but not self-expanding value. He can increase the value of his commodity, by adding fresh labor, and therefore more value to the value in hand, by making, for instance, leather into boots. The same material has now more value, because it contains a greater quantity of labor. ..It is therefore impossible that outside the sphere of circulation, a producer of commodities can, without coming into contact with other commodity owners, expand value and consequently convert money or commodities into capital. It is therefore impossible for capital to be produced by circulation, and it is equally impossible for it to originate apart from circulation. It must have its origin both in circulation and yet not in circulation. We have, therefore, got a double result.

The conversion of money into capital has to be explained on the basis of the laws that regulate the exchange of commodities, in such a way that the starting point is the exchange of equivalents. Our friend , Moneybags, who as yet is only an embryo capitalist must buy his his commodities at their value, must sell them at their value, and yet at the end of the process must withdraw more value from circulation than he threw into it at starting. His development into a full grown capitalist must take place within the sphere of circulation and without it. These are the conditions of the problem. ..

The change must, therefore, take place in the commodity bought by the first act, M → C, but not in its value, for equivalents are exchanged, and the commodity is paid for at its full value. We are, therefore, forced to the conclusion that the change originates in the use-value, as such, of the commodity, i.e., in its consumption. In order to be able to extract value from the consumption of a commodity, our friend, Moneybags, must be so lucky as to find, within the sphere of circulation, in the market, a commodity, whose use-value possesses the peculiar property of being a source of value, whose actual consumption, therefore, is itself an embodiment of labor, and consequently, a creation of value. The possessor of money does find on the market such a special commodity in capacity for labor or labor power.”4


“The continuation of this relation demands that the owner of the labor-power should sell it only for a definite period, for if he were to sell it rump and stump, once for all, he would be selling himself, converting himself from a free man into a slave, from an owner of a commodity into a commodity. He must constantly look upon his labor-power as his own property, his own commodity, and this he can only do by placing it at the disposal of the buyer temporarily for a definite period of time. By this means alone can he avoid renouncing his rights of ownership over it. ….

The second essential condition to the owner of money finding labor-power in the market as a commodity is this – that the laborer instead of being in the position to sell commodities in which his labor is incorporated must be obliged to offer for sale as a commodity that very labor-power, which exists only in his living self. ..


For the conversion of his money into capital, therefore, the owner of money must meet in the market with free laborer, free in the double sense, that as a free man he can dispose of his labor-power as his own commodity, and that on the other hand he has no other commodity for sale, is short of everything necessary for the realization of his labor-power. ..

The value of labor-power is determined, as in case of every other commodity, by the labor-time necessary for the production, and consequently also the reproduction, of this special article. So far it has value, it represents no more than a definite quantity of the average labor of society incorporated in it. Labor-power exists only as a capacity, or power of the living individual. Its production consequently pre-supposes his existence. Given the individual, the production of labor-power consists in his reproduction of himself or his maintenance. For his maintenance, he requires a given quantity of the means of subsistence. Therefore the labor-time requisite for the production of labor-power reduces itself to that necessary for the production of those means of subsistence; in other words, the value of labor-power is the value of the means of subsistence necessary for the maintenance of the laborer. Labor-power, however, becomes a reality only by its exercise; it sets itself in action only by working. But thereby a definite quantity of human muscle, nerve, brain, &c., is wasted, and these require to be restored. ….The owner of labor-power is mortal. If then his appearance in the market is to be continuous, and the continuous conversion of money into capital assumes this, the seller of labor-power must perpetuate himself, ‘in the way that every living individual perpetuates himself, by procreation.’ The labor-power withdrawn from the market by wear and tear and death, must be continuously replaced by, at the very least, an equal amount of fresh labor-power. Hence the sum of the means of subsistence necessary for the production of labor-power must include the means necessary for the laborers’ substitutes, i.e., his children, in order that this race of peculiar commodity-owners may perpetuate its appearance in the market.

In order to modify the human organism, so that it may acquire skill and handiness in a given branch of industry, and become labor-power of a special kind, a special education or training is requisite, and this, on its part, costs an equivalent in commodities of a greater or less amount. This amount varies according to the more-or-less complicated character of the labor-power. The expenses of this education (excessively small in the case of ordinary labor-power), enter pro tanto into the total value spent in its production. ….

The consumption of labor-power is at one and the same time the production of commodities and of surplus-value. The consumption of labor-power is completed as in the case of every other commodity, outside the limits of the market or of the sphere of circulation. ..Therefore, the value of labor-power and the value which that labor-power creates in the labor-process are two entirely different magnitudes; and this difference of the two values was what the capitalist had in view, when he was purchasing the labor-power. What really influenced him was the specific use-value which this commodity possesses of being a source not only of value, but of more value than it has itself. ….

Every condition of the problem is satisfied, while the laws that regulate the exchange of commodities, have been in no way violated. Equivalent has been exchanged for equivalent. ..This metamorphosis, this conversion of money into capital, takes place both within the sphere of circulation and also outside it. …By turning his money into commodities that serve as the material elements of a new product, and as factors in the labor-process, by incorporating living labor with their dead substance, the capitalist at the same time converts value, i.e., past materialized, and dead labor into capital, into value big with value, a live monster that is fruitful and multiplies. ..The capitalist again and again appropriates, without equivalent, a portion of the previously materialized labor of others, and exchanges it for a greater quantity of living labor. ..

It is the natural property of living labor, to transmit old value, whilst it creates new. Hence, with the increase in efficacy, extent and value of its means of production, consequently with the accumulation that accompanies the development of its productive power, labor keeps up and eternizes an always increasing capital-value in a form ever new. This natural power of labor takes the appearance of an intrinsic property of capital, in which it is incorporated; just as the productive forces of social labor take the appearance of inherent properties of capital, and as the constant appropriation of surplus-labor by the capitalists, takes that of a constant self-expansion of capital. ….”5

Piketty does not admit any human element in the making of capital.



  1. Quoted by Marx in ‘Capital’, Volume III, Progress Publishers, Moscow, 1977.
  2. Marx, Karl and Engels, Frederick; Collected Works, Volume 43, Progress Publishers, Moscow, 1988. Marx to Kugelmann, 11 July, 1868; p. 69. “The vulgar economist thinks he had made a great discovery when, faced with the disclosure of the intrinsic interconnection, he insists that things look different in appearance. In fact, he prides himself in his clinging to appearances and believing them to be the ultimate. Why then have science at all?
  3. Economist, London, July 19, 1851. Quoted by Marx in ‘Capital’, Volume I, Part VII, Chapter XXIV.
  4. Marx, Karl; ‘Capital’, Volume I, Progress Publishers, Moscow, 1977. Quotations are from different Chapters and pages of the book.
  5. Ibid.


[This critique is divided in eight parts, tentatively titled as: i. Apocalypse and Exuberance; ii. Data and Dialectics; iii. Capital Social and Self-Expanding; iv. Wealth Inherited and Created; v. Century Twentieth and Twenty-First; vi. Yes Marx No Marx; vii. London Chicago Paris; and viii. Thank You Mr Piketty.]

July, 2014.










Prasanna K Choudhary




France inherits a very rich and glorious intellectual-theoretical tradition. Beginning with Michel de Montaigne (1533-1592) and René Descartes (1596-1650), this tradition includes leading lights of French Enlightenment like, to name a few, Charles Louis de Montesquieu (1689-1755), François Voltaire (1694-1778), Jean-Jacques Rousseau (1712-1778), Denis Diderot (1713-1784), and Jean Antoine Condorcet (1743-1794). The French Enlightenment played a vital role in the making of modern mind. Marx’s methodology too was indebted to these great minds. This tradition was carried forward by later French thinkers as well. Even in the twentieth century, F Saussure and Claude Lévi-Strauss pioneered structuralism in linguistics and anthropology respectively. Jean Paul-Satre influenced a whole generation of intellectuals as well as activists. Simone de Beauvoir’s ‘The Second Sex’ became the guiding spirit behind the feminist movement. Émile Durkheim and his theories and hypotheses became an integral part of social science studies the world over. ‘Annales School’ found a large audience among the historians, and its clones emerged in various universities around the world. These are just a few names; it is not possible here to give even a brief description of France’s immense contribution to the intellectual wealth of humankind and their vital role in the evolution of the theory of knowledge. Many of these thinkers were system-builders and versatile genius – Descartes himself was one of the founders of analytical geometry, mathematician, physicist, physiologist, philosopher and founder of rationalism.

In this background, it is quite understandable that young Piketty’s dream was ‘to teach at the École des Hautes Études en Sciences Sociales, whose faculty has included such leading lights as Lucien Febvre, Fernand Braudel, Claude Lévi-Strauss, Pierre Bourdieu, Françoise Héritier, and Maurice Godelier, to name a few…’ He further writes, “There is one great advantage to being an academic economist in France: here economists are not highly respected in the academic and intellectual world or by political and financial elites. Hence they must set aside their contempt for other disciplines and their absurd claim to greater scientific legitimacy, despite the fact that they know almost nothing about anything. ….” Explaining his theoretical and conceptual framework, Piketty strongly criticizes ‘childish passion for mathematics .. at the expense of historical research and collaboration with other social sciences.’ ‘Economists are all too often preoccupied with petty mathematical problems of interest only to themselves. This obsession with mathematics is an easy way of acquiring the appearance of scientificity without having to answer the far more complex questions posed by the world we live in.’ Finally, he makes clear the aim behind his study – he wants to ‘contribute, however modestly, to the debate about the best way to organize society and the most appropriate institutions and policies to achieve a just social order.’ Furthermore, he ‘would like to see justice achieved effectively and efficiently under the rule of law, which should apply equally to all and derive from universally understood statutes subject to democratic debate.’ (‘Introduction/The Theoretical and Conceptual Framework’) Well said, indeed.


However, despite his somewhat emotional fondness for the French intellectual tradition and French theoreticians, his criticism of ‘childish passion for mathematics’, and his eagerness to collaborate with the other social sciences, Piketty, so far as the main theme of the book is concerned, follows the ‘big data methodology’. (His book is not a big data book in the strict sense of the term – what I am referring to is his methodology.) He appears to be consciously avoiding ‘why’, and remains content to explain ‘what’. He tells us ‘what’ the data (spread over a very long period of two centuries) reveals about the movement of inequality in the age of capital (i.e., r > g), but he desists from going into the question ‘why’ r > g. He does not critically examine existing hypotheses or theories on this question, and he himself does not advance any hypothesis or theory in this regard, and hence, does not put such hypothesis or theory to test in the light of appropriate data. In short, he deliberately avoids venturing into the field of hypotheses or theories or reasoning – he is satisfied with correlations, and does not feel the need of causal analyses.


‘With a cell phone in every pocket, a computer in every backpack, and big information technology systems in back offices everywhere’, the digital age has made it quite easy to generate, store, process and retrieve large amounts of data at a scale previously unheard-of. “In the analog age collecting and analyzing such data was enormously costly and time-consuming. New questions often meant that the data had to be collected again and the analysis started afresh. The big step toward managing data more efficiently came with the advent of digitization: making analog information readable by computers, which also makes it easier and cheaper to store and process. ….Google processes more than 24 petabytes of data per day, a volume that is thousands of times the quantity of all printed material in the US Library of Congress. Facebok, a company that did not exist a decade ago, gets more than 10 million new photos uploaded every hour. Facebook members click a ‘like’ button or leave a comment nearly three billion times per day, creating a digital trail that the company can mine to learn about users’ preferences. Meanwhile, the 800 million users of Google’s YouTube service upload over an hour of video every second. The number of messages on Twitter grows at around 200 percent a year and by 2012 had exceeded 400 million tweets a day. ….In 2013 the amount of stored information in the world is estimated to be around 1,200 exabytes (an exabyte is one billion gigabytes), of which less than 2 percent is non-digital. ….The era of big data challenges the way we live and interact with the world. Most strikingly, society will need to shed some of its obsession for causality in exchange for simple correlations: not knowing why but only what. This overturns centuries of established practices and challenges our most basic understanding of how to make decisions and comprehend reality. ….By changing the amount, we change the essence. ….The change of scale has led to a change of state. ….The quantitative change has led to a qualitative one. … As we transition from a hypothesis-driven world to a data-driven world, we may be tempted to think that we also no longer need theories.”1

“In 2008 WIRED magazine’s editor-in-chief Chris Anderson trumpeted that ‘the data deluge makes the scientific method obsolete.’ In a cover story called ‘The Petabyte Age’, he proclaimed that it amounted to nothing short of ‘the end of theory’. The traditional process of scientific discovery – of a hypothesis that is tested against reality using a model of underlying causalities – is on its way out, Anderson argued, replaced by statistical analysis of pure correlations that is devoid of theory.’2 Piketty rightly acknowledges his indebtedness to ‘recent improvements in the technology of research’, but, I hope, he does not subscribe to Anderson’s views.

However, the big data experts Viktor Mayer-Schönberger and Kenneth Cukier do not view analogs and algorithms, causality and correlation, ‘why’ and ‘what’ as dichotomous categories. They admit that big data itself is founded on theory (statistical theories, mathematical, computer science theories), and big data analysis is based on theories (how we select the data). ‘They shape both our methods and our results.’ They conclude, “We still need causal studies and controlled experiments with carefully curated data in certain cases. ….But for many everyday needs, knowing what not why is good enough. And big data correlations can point the way toward promising areas in which to explore causal relationships.”3


Amartya Sen who also grapples with the problem of inequality, justice and democracy in our modern world, derives his inspiration from the French Enlightenment. His methodology traces its origin to the ‘social choice theory’ (of Condorcet in the eighteenth century) which has been developed in the present form by the pioneering contributions of Kenneth Arrow in the mid-twentieth century (Condorcet → Kenneth Arrow → Amartya Sen). He critically examines John Rawls’s theory of justice, while developing his own views and propositions. Tracing the genesis of his own theory, he writes, “ There is a substantial dichotomy between two different lines of reasoning about justice that can be seen among two groups of leading philosophers associated with the radical thought of the Enlightenment period. One approach concentrated on identifying perfectly just social arrangements, and took the characterization of ‘just institutions’ to be the principal – and often the only identified – task of the theory of justice. Woven in different ways around the idea of hypothetical ‘social contract’, major contributions were made in this line of thinking by Thomas Hobbes in the seventeenth century, and later by John Locke, Jean-Jacques Rousseau and Immanuel Kant, among others. The contrarian approach has been the dominant influence in contemporary political philosophy, particularly since a pioneering paper (‘Justice As Fairness’) in 1958 by John Rawls which preceded his definitive statement on that approach in his classic book, ‘A Theory of Justice’.

In contrast, a number of other Enlightenment philosophers (Smith, Condorcet, Wollstonecraft, Bentham, Marx, John Stuart Mill, for example) took a variety of approaches that shared a common interest in making comparisons between different ways in which people’s lives may be led, influenced by institutions but also by people’s actual behavior, social interactions and other significant determinants. This book (‘The Idea of Justice’) draws to a great extent on that alternative tradition. The analytical – and rather mathematical – discipline of ‘social choice theory’, which can be traced to the works of Condorcet in the eighteenth century, but which has been developed in the present form by the pioneering contributions of Kenneth Arrow in the mid-twentieth century, belongs to this second line of investigation. That approach, suitably adapted, can make a substantial contribution …. to addressing questions about the enhancement of justice and the removal of injustice in the world.”4 Thus, Sen talking about the dichotomy between ‘transcendental institutionalism’ (or an ‘arrangement-focused view of justice’) and ‘realization-focused comparison’ (or ‘realization-focused understanding of justice’) follows the latter line of reasoning. (However, the way Sen classifies Enlightenment philosophers into two opposing camps seems to be somewhat arbitrary.) Since Piketty mentions Sen only in the passing, I will not expand this discussion on Sen’s methodology further.


Here, it will be sufficient to mention that in the dichotomy between ‘why’ and ‘what’, causality and correlation, analog and algorithm, Piketty chooses the latter, thereby misses the opportunity to pursue the dialectical method in order to grasp why and what, causality and correlation, analog and algorithm in their interconnections, in their motion and constantly changing places, and in their interpenetration. He falls prey to the method that views opposing categories in irreconcilable, absolute terms – why versus what, causality versus correlation, analog versus algorithm (and in case of Sen ‘arrangement-focused view of justice’ versus ‘realization-focused understanding of justice’). He thus departs from the great French tradition that played a vital role in the development of the science of thought. Descartes was himself a ‘brilliant exponent of dialectics’, and Rousseau (‘Discourse on the Origin of Inequality Among Men’) and Diderot (‘Rameau’s Nephew’) produced ‘masterpieces of dialectics’.5

The genealogy of big data methodology can well be traced back to John Locke’s empiricism, and then to Auguste Comte’s positivism, to William James’s pragmatism, and to John Dewey’s instrumentalism (not to mention various shades of twentieth-century positivism). Big data methodology is, in fact, digital-age avatar of above-mentioned philosophical tradition.6

Karl Marx

It seems that ‘his vaccination for life, at the age of eighteen (when the Berlin Wall fell) against the conventional but lazy rhetoric of anti-capitalism’ went much deeper, creating mistrust of theories and hypotheses; and this mistrust and prejudice was further reinforced when, at the age of twenty-two, he ‘experienced the American dream’ at Boston.

To be fair to Piketty, it must be mentioned that the quintessential French intellectual (as distinct from the American) asserts and shines forth occasionally in different chapters of the book, particularly when he passionately deals with the Euro-zone crisis and comes out with a number of propositions and proposals.

The role of data should not be underestimated. Piketty’s study of the ‘World Top Income Database’ (WTID, based on the joint work of some thirty researchers around the world) and his findings which form the main content of the book, are definitely major contributions towards understanding income inequality in our time. However, since capital is a network of social relationships, to explore distributive injustice (why) is as much, and more so, important as the data-based movement of income inequality (what).

To sum up, so far as the methodology of Piketty is concerned, his pious wish to resurrect the spirit of classical political economy on the one hand, and his pragmatic preference for the big data methodology on the other hand, constitute the first major inconsistency of the book.


Before moving ahead, a little more on the question of methodology will not be out of context. Piketty rightly suggests that his book can be read as a history book as well. Here, a brief reference from Michel Foucault seems relevant: “For many years now historians have preferred to turn their attention to long periods, as if, beneath the shifts and changes of political events, they were trying to reveal the stable, almost indestructible system of checks and balances, the irreversible processes, the constant re-adjustments, the underlying tendencies that gather force, and are then suddenly reversed after centuries of continuity, the movements of accumulation and slow saturation, the great silent, motionless bases that traditional history has covered with a thick layer of events. The tools that enable historians to carry out this work of analysis are partly inherited and partly of their own making: models of economic growth, quantitative analysis of market movements, accounts of demographic expansion and contraction, the study of climate and its long-term changes, the fixing of sociological constants, the description of technological adjustments and of their spread and continuity. These tools have enabled workers in the historical field to distinguish various sedimentary strata; linear successions, which for so long had been the object of research, have given way to discoveries in depth. ….

At about the same time, in the disciplines that we call the history of ideas, the history of science, the history of philosophy, the history of thought, and the history of literature (we can ignore their specificity for the moment), in those disciplines which, despite their names, evade very largely the work and methods of the historians, attention has been turned, on the contrary, away from vast unities like ‘periods’ or ‘centuries’ to the phenomenon of rupture, of discontinuity. ….One is now trying to detect the incidence of interruptions. ….They suspend the continuous accumulation of knowledge, interrupt its slow development and force it to enter a new time, cut it off from its empirical origin and its original motivations, cleanse it of its imaginary complicity; they direct historical analysis away from the search for silent beginnings, and the never-ending tracing back to the original precursors, towards the search for a new type of rationality and its various effects. There are ‘displacements’ and ‘transformations’ of concepts; ..they show that the history of a concept is not wholly and entirely that of its progressive refinement, its continuously increasing rationality, its abstract gradient, but that of its various fields of constitution and validity, that of its successive rules of use, that of the many theoretical contexts in which it developed and matured. ..”7

Any study of capital in the twenty-first century required the ‘architectonic unity’ of both the methods described above by Foucault, but Piketty obviously avoids to ‘enter a new time’, to search for a ‘new type of rationality’, and to attempt ‘displacements’ and ‘transformations’ of concepts, thereby creating architectural fault-lines in the book which I will deal with in course of this critique.


  1. Mayer-Schönberger, Viktor, and Cukier, Kenneth; ‘Big data’, John Murray, London, 2013.
  2. Ibid.
  3. Ibid.
  4. Sen, Amartya; ‘The Idea of Justice’, Allen Lane, London. 2009.
  5. Engels, Frederick; ‘Anti-Duhring’, Foreign Languages Press, Peking, 1976.
  6. “In the Preface to Sir Dudley North’s ‘Discourses upon Trade’ (1691) it is stated that Descartes’ method had begun to free Political Economy from the old fables and superstitious notions of gold, trade, &c. On the whole, however, the early English economists sided with Bacon and Hobbes as their philosophers; while at a later period, the philosopher of Political Economy in England, France and Italy was Locke.” Karl Marx, ‘Capital’, Volume I, Part IV (Continued), Chapter XV, Section 2, Second Footnote, p. 368. Progress Publishers, Moscow, 1977. Translated from the third German edition by Samuel Moore and Edward Aveling.
  7. Foucault, Michel; ‘The Archaeology of Knowledge’, Routledge Classics, Oxon, 2006.

[This critique is divided in eight parts, tentatively titled as: i. Apocalypse and Exuberance; ii. Data and Dialectics; iii. Capital Social and Self-Expanding; iv. Wealth Inherited and Created; v. Century Twentieth and Twenty-First; vi. Yes Marx No Marx; vii. London Chicago Paris; and viii. Thank You Mr Piketty.]

July, 2014.