MIA: Encyclopedia of Marxism: Glossary of Terms


Fictitious Capital

Fictitious Capital is value, in the form of credit, shares, debt, speculation and various forms of paper money, above and beyond what can be realised in the form of commodities.

If a capitalist forces a hundred workers to work ten hours a week unpaid for a year, and succeeds in selling the product of their labour at its value, then he has secured for himself a definite quantity of the product of their labour, in the form of capital. In the normal course of affairs, he would exchange his money-capital for commodities and restart the cycle of reproduction with the aim of accumulating more capital.

On the other hand though, let us suppose that he now wants to retire, and instead of putting his money-capital back into commodities, he invests it in the bank. He now holds in his hands a claim to capital, perhaps in the form of a bank-account, or a bond, shares or whatever, rather than capital as such.

Now if his money lies idle in the bank vault, just the same as if it lay in his own vault, his claim to money is secure. However neither his claim nor the money itself are capital as such and can earn no interest, because the money is not in circulation.

In order to expand itself, in order to be capital, money must circulate, it must again employ labour-power and again realise itself in expanded value. So, in order to pay interest to our retired industrialist, the bank must loan his capital to another industrialist. So long as one and the same sum of money is loaned only once, then all that we have is claims upon really-existing capital. The industrialist who has borrowed the money must service the loan, i.e., pay interest, out of the profits he makes.

However, as the class of speculators, bankers, brokers, financiers, and so on, grows, as is inevitably the case wherever the mass of capital in a country reaches a sufficient scale, what happens is, for example, the bank finds that it is able to loan out far more than it has deposited in its vaults; speculators can sell products that they do not possess, “the right kind of person” is good for credit even when they have nothing, .etc., etc. Thus one and the same unit of productive capital may have to support not just the one retired industrialist who deposited his savings with the bank, but multiple claims on one and the same capital.

If the bank accepts one million from our retiree, but loans out ten millions, each of those ten millions has equal claim to that same value. This is how ficitious capital comes about.

To put it another way, the hundred workers who were able to create the original value by a year’s worth of their surplus labour time, can now find ten units of capital all, by one means or another, claiming a share of the same surplus.

The ability of the bank to make unsecured loans is dependent on “confidence”, and at times of expansion and boom, the mass of fictitious capital grows rapidly. Then, when the period of contraction arrives, and the workers can no longer feed the voracious appetites of all these capitals, the bank finds itself under pressure and calls in its loans, defaults occur, bankruptcies, closures, share prices fall, and things fall back to reality – fictitious value is wiped out.

In times of recession, even good, useful commodities cannot be sold because money and credit has become scarce, and the commodities prove to be valueless.

Fictitious capital is that proportion of capital which cannot be simultaneously converted into existing use-values. It is an invention which is absolutely necessary for the growth of real capital, it constitutes the symbol of confidence in the future. It is a necessary but costly fiction, and sooner or later it crashes to earth.

Marx did not fully elaborate his views on credit and fictitious capital before his death. What he had written on the subject is presented by Engels in Volume III of Capital, particularly Part V. For example:

“... a large portion of this money-capital is always necessarily purely fictitious, that is, a title to value – just as paper money. In so far as money functions in the circuit of capital, it constitutes indeed, for a moment, money-capital; ... it exists only in the form of claims to capital. With the assumption made, the accumulation of these claims arises from actual accumulation, that is, from the transformation of the value of commodity-capital, etc., into money; but nevertheless the accumulation of these claims or titles as such differs from the actual accumulation from which it arises ....

Prima facie loan capital always exists in the form of money, later as a claim to money, since the money in which it originally exists is now in the hands of the borrower in actual money-form. For the lender it has been transformed into a claim to money, into a title of ownership. The same mass of actual money can, therefore, represent very different masses of money-capital. ... With the growth of material wealth the class of money-capitalists grows; on the one hand, the number and the wealth of retiring capitalists, rentiers, increases; and on the other hand, the development of the credit system is promoted, thereby increasing the number of bankers, money-lenders, financiers, etc. With the development of the available money-capital, the quantity of interest-bearing paper, government securities, stocks, etc., also grows as we have previously shown. However, at the same time the demand for available money-capital also grows, the jobbers, who speculate with this paper, playing a prominent role on the money-market. If all the purchases and sales of this paper were only an expression of actual investments of capital, it would be correct to say that they could have no influence on the demand for loan capital, since when A sells his paper, he draws exactly as much money as B puts into the paper. But even if the paper itself exists though not the capital (at least not as money-capital) originally represented by it, it always creates pro tanto a new demand for such money-capital..” [Capital Volume III, Chapter 32]

Throughout its history, capitalism has experienced its business cycles. Roughly every ten years, the mass of fictitious capital grows while trade is good, and then, as the capacity of the workers to sustain the mass of hangers on reaches its limits, the downturn gathers momentum and fictitious capital is wiped out, and the cycle begins again.

The scale of these crises grew continuously until the Wall Street Crash of 1929, and the Great Depression of the 1930s. The Depression and the War which followed wiped out all the accumulated mass of capital so that a new cycle of reconstruction could begin again in 1945. The New Deal in the US, Keynesian economic policies and particularly the international monetary arrangements set up at the Bretton Woods Conference of July 1944, created conditions for an exceptionally long period of growth after the War.

The particular mechanism for the creation of an unprecedented mass of fictitious value in this period was the role assigned to the US dollar as the medium of international exchange in lieu of gold. Under the Mashall Plan, Europe was rebuilt and the US capitalist class further enriched by the labour of all those workers who did the rebuilding. But capital could not organise that reconstruction other than by creating a new mass of fictitious capital, in the form of inconvertible dollars.

By the mid-1960s this mass of fictitious capital began to collapse, and world entered a prolonged period of crisis. The mass of fictitious capital circulating in the money markets, futures exchanges and so on today is, however, far greater than ever before. 98% of the value of monetary transactions in the world are speculative, only 2% involve actual use-values.

Capital continues to exist by means of the delicate balancing act performed by all the governments and banks of the major capitalist countries, staving off the collapse of this gigantic and parasitic fantasy.



Pirerre Bourdieu adapted the notion of “field” from physics to surpass sociological theories that endeavoured to theorise the activity in institutions and social settings simply in terms of interactions between individual actors. The idea of the field is that there is some entity which everyone in the field is striving to attain, such as status, money, power, reputation, or whatever, within a particular material culture, and that the actions and relations between individuals can be understood in terms of this striving. Thus different individuals who may not know each other and never interact with one another, but by contributing to the development of the material culture and acquiring positions in or portions of the relevant “cultural capital,” nevertheless compete or collaborate with one and another. The concept is now widely used in sociology.

See Classes and Classifications, by Pierre Bourdieu.

The market is an example of a field where economic agents compete for profits and market share, as would be the education system where student endeavour to acquire educational certificates and academics compete for status and ‘citations’.

See also Arena, Community, Forum, Party and Network.


Finite & Infinite

Finite and Infinite are terms used in mathematics and philosophy concerned with the boundedness or exhaustibility of a thing. Finite means having limits, or in mathematics ‘countable’. Infinite means being without limits or ‘uncountable’. However, as soon as we put a limit around something and declare it to be finite, we simultaneously define its other which is infinite, and a thing can only be deemed uncountable on the basis of a conception of it as composed of finite parts.