A critique of Capital (2): The metaphysics of economics


by Sanjay Perera

[Peamble: This piece is the second of three parts, the first being — “A critique of Capital (1): The problem with economics“. The final part will be — “A critique of Capital (3): Toward a moral economy.]

C. Transcendent equilibrium

From the perspective of the Kantian critique the problem with the synthetic idea of general equilibrium is that it fast becomes a transcendent one. Re-looking at a quote earlier (from the section “The illusion called general economic equilibrium”), we have central assumptions to Walras’s theory of equilibrium which assert that there are (a) voluntary exchanges among individuals; (b) they are well-informed persons (they have perfect knowledge guiding them in their choices); (c) individuals are purely self-interested and think only about themselves; individuals are rational in that they try to maximize their own goals; and (d) the result would be production organized and income distributed in an efficient and mutually beneficial manner.

Once these ideas are accepted under such artificial conditions that imply the world of human beings is but a laboratory in which things can be held constant perpetually, we naturally have ideas posited that are then devoid of the influence of the environment and human agency. So in effect, we have arguably transcendent qualities enshrined: As these ideas are meant to be fixed and immutable and taken as that which is the case at all times. The Walrasian equilibrium is no longer just a hypothetical meant to test against the world and then be thrown out if found wanting; it is meant to be taken as a truth about the world and set against any ideas that challenge it — and it should be defended at all costs and at the insistence that it is incorrect to point out that it does not reflect reality. This then becomes a matter of dogmatism.

So this is how the move towards transcendence for the idea of equilibrium takes place and it is also how it is thereby given a form of metaphysical certitude: Thus, we can say that equilibrium is afforded what we term as a primitive ontology. This is an idea that may be looked at in greater detail subsequently; but presently, suffice it to say that economics scores very poorly in this area in that while primitive ontology has some use in quantum mechanics, it hardly has any value in economics. And, in fact, the point is that the primitive ontology generated via economic concepts sneaks in the transcendence for ideas like equilibrium that create the subreption of providing the quality of that which is real/actual under all conditions – and so misleads us into thinking that it is indispensable and a metaphysical reality (or a thing-in-itself). Instead of merely treating it as a hypothetical not deserving of more than brief speculation in theorizing, equilibrium is taken as a transcendent/ontological reality that becomes the cornerstone in economic thinking.


Needless to say, transcendent concepts are also circular in a most unpleasant question begging way in that they are assumed as an underlying metaphysical necessity to create the neoclassical theorems. Human agency is diminished and the so-called ‘science’ of economics is no more than a dangerous farce as policy-makers and profit-mongers take it as their gospel. This applies also to synthetic ideas like the ‘factors of production’ and ‘productivity’. While useful notions they have been assumed in the way they are bandied as having an ‘objective’ value such as the laws of thermodynamics. While scientists are willing to accept that their ideas are subject to change despite the invariant quality they may have under certain conditions, economists unwarrantedly assume a capitalist paradigm by asserting that their analysis must revolve around factors of production: Which are then not subject to change and go beyond being invariant as they are assumed to be realities such that the world must categorically be analyzed for socio-political and policy purposes using such concepts.

The strength of the Marxian critique is that all human phenomena must centre around human beings and so their role as workers and participants in the process of production is central. To turn human beings into a commodified unit or factor in production (labour) is a gross assumption. To treat these assumptions then as fact, and then a reality is to make not only transcendent claims but to initiate a most pernicious and morally despicable process of exploitation. Similarly, the idea of productivity when merely measured as output-growth, or quantitative-money value seals the way people are treated as not only commodities but dehumanized entities.

People are seen as mere digits within the transcendental logic perpetuated by the ‘factors of production’ notion, that is, if labour is a factor of production, then the only way of measuring any value is not only quantitative/output (the more, the merrier), but that output is further quantified by money made (the most, the merriest). Quality is treated as quite subjective and it is of little consequence if the quantitative (productive) aspect is glorified and the owners of enterprises make dollops of cash. All moral and humane considerations are bled away by this vampiric paradigm of working people to the bone to maximize profit. It does not stop there. It is further assumed that ‘productivity’ is a reality in itself (and a useful-meaningful measurement), an essential aspect of being, rather than an artificial thing imposed on people: Or, a rack on which human beings can be stretched to the point of breakdown.


D. Transcendent capital

We also need to consider perhaps the most elusive and deceptive element of the so-called factors of production. Capital is but a synthetic and transcendental concept. It is used as not only a generic reference to money or money accumulated, but as a form of investment. Capital is treated as an investment to which there are returns: So that money invested in an enterprise or kept in equities is expected to give returns. The returns on capital are profit, dividends and interest earned. There are many ways to skin the cat of capital depending on how this term is used in meaning and practice. To confuse matters, equipment is also referred to as capital. And whatever losses associated with capital over time is also called ‘depreciation’. Capital becomes much more than a concept: In its fixed and ‘liquid’ form it turns into an asset; with this status as an asset, it too is commodifiied.

Therefore, investment-money-Capital has become a transcendent entity in itself. The most obvious way of examining this is in terms of the nature of money. The scam of fractional reserve banking is a classic example (please see “Money creation: Usury and the scam of banking” which gives some background to the claims made here about fiat currency and fractional reserve banking). The beast called fractional reserve banking viciously gouges itself away from the gold standard, or use of precious metals to give value to a currency: This attenuates any semblance of stability and discipline the latter may be deemed to provide. Instead, we have in effect a systemic generation of loose credit, ‘growth’, ‘production’ and ‘investment’ – which are generated principally through the explosion of money known as loans; that is, money that does not exist but is projected out to bring in returns of more money that does not exist (but is a projection of what can be brought in). The system of banking further causes leveraging of loans in the form of credit-money; yet this is nothing but figures in computer data banks. They only have virtual reality: Virtual digits that can be easily changed and manipulated at will. And there is credence to this given the institutionalized non-transparency of banks, not to mention the banking fraud cases in recent years which have given rise to so much of the world’s woes.

Similarly the process of capitalization as a projected means of finance (which is a form of fictional capital too), is indeed a useful implement for wielding influence. This idea of capitalization is examined by Bichler and Nitzan in their book Capital as power. The entire edifice termed Capital can be seen as a lightning rod meant to accumulate, consolidate and unleash a harmful force over our lives and that of all life forms.


Moreover, the money generated via the fractional reserve banking system is also largely fictional, so when this non-existent money is given the status of reality through loans — it is endowed with a primitive ontology. How? It is given the status of actuality when the amount appears as a credit (in effect a loan) in your bank account; or when it appears in your investment ledgers. It would seem that this can be proven tangibly by printing out the money and storing it somewhere, but as that is unlikely for most of us, we take the loan/credit/digital figures as not just representative of something real, but as something actual/tangible. This is given added weight when we can purchase things with this money that was created out of thin air. Thus, the non-existent (money) has been anointed as a thing-in-itself (the shift to transcendence). It is at this level of transcendent figures on ledgers/databases (not as wads of printed bills moving around in brief cases) that Capital starts to take on a life of its own.

But this Capital in the banks is all built on credit that has but been generated and built on debt. In fact, almost all the money we use is a debt-based fiat currency which is in itself worthless but is assigned value (at increasingly devaluating rates thanks to inflation); and it is to this essentialized fictional object (Capital) that nation-states and people are enslaved to. After all, money is largely created by loans from banks/central banks to the government via bonds and treasury bills. In our time, it is rarely worth the paper it is printed on. We all owe the banks the money in the end since the prerogative of creating money has been surrendered to them; and given the economic and financial troubles of the world, it is increasingly apparent that banks are among the greatest criminal organizations in world history. But the point is that money is given a metaphysical basis/reality and an ontological status as a thing-in-itself when it is regarded as Capital: Even when it is non-existent in the form of credit/debt and unrealized capitalizations.

This is an important point that must be understood to see how Capital is used in disruptive and damaging ways across the world.


And, indeed, this may explain part of the mystery of the seven seals on how money is transformed into Capital. In many ways, we are on this track today thanks to Marx asking the right questions on how money is translated into Capital. He was formidably prescient: For it was especially in the 20th century that fictitious capital became a primary means of forging Capital coupled with the advent of worldwide fractional reserve banking (complemented by abstruse and questionable financial instruments and practices of our era). To use a certain amount of something to inflate into more than it is and in effect to pretend that it is something tangible, to accumulate that non-existent entity and commodify it as Capital and then use it to dominate and gain ascendancy over people: Surely this may well be the greatest and most effective scam in history. And the bankers can be seen as the progenitors of this.

So this sleight-of-hand creation of money through usury (interest rates) and fractional reserve banking is in effect a subreption of a concept and giving a metaphysical basis to an entity like money: For it allows money to expand into its fictional status of credit and then be transformed into the transcendent status of Capital. Again it bears repeating — this is then used as a means of influence, sabotage and violence across all socio-politico-economic aspects of societies.

We can safely state that most financial institutions and instruments can also be viewed as providing ways to manipulate and enhance where possible this transcendent notion called Capital. Similarly, profit created is placed in banks and hoarded and thereby further transformed — through the process of fractional reserve banking — into Capital. This in turn is leveraged upon to acquire more loans, access to influence and gain superiority and status over others. It is in every way a means of exercising power and control through hierarchy and privilege.

Bichler and Nitzan put forward the idea of differential accumulation as an analogue to the Marxian notion of Capital accumulation. And their concept of Capital being a mode of power reflects the transcendent status of Capital which allows it to be bandied about in broad and precise ways of sabotage and punishment. The duo provide an effective post-capitalist explanation, from an economic perspective, on how (transcendent) Capital is manipulated as a tool of power.


E. The issue of interest

One of the ways that the trickery of transcendent Capital takes effect is to use the passing of time as a means of essentializing capital into an instrument of power. It goes back to the age old idea of usury. For a detailed look at what charging interest involves and why it is regarded as immoral by most of the world’s great spiritual traditions, again please see this piece for more: “Money creation: Usury and the scam of banking”.

It will be apparent that interest works in tandem with fractional reserve banking to not only create money out of nothing but make the capital that is produced by the banker’s strokes from a pen (or rather, on a keyboard) — and playing with figures on ledgers — into something real in the sense of a thing-in-itself. Interest is also a sleight-of-hand that is added to an ever rising icing on the transcendent cake of Capital to manufacture the scam: That which accrues to a transcendent (metaphysical) entity like Capital must be real and tangible and a thing-in-itself. Capital is the proverbial cake that bankers can eat and have at the same time. Of course, interest is but a synthetic concept that is essentialized into an entity that is then thrust onto borrowers’ heads as an actuality that must be acquired and paid back. However, these are all projected figures generated to try and capture money in the world that only exists digitally in computer data banks — but which is in effect non-existent.

Hence, the perpetual need to be working/slaving away to keep oneself economically afloat (to pay bills, clear debts, save for retirement etc).

In other words, interest rates are yet another scam that create the illusion that over a certain period of time you can get something out of nothing: Capital that is just a concept and/or digits in a database can manipulate people into becoming mired in life-long debt to banks and financial institutions merely by the trickery of projecting figures at a percentage rate which then seem to become actual entities. The insidious nature of non-existent projections are realized when we are caught in the throes of finding ways to repay these fictional entities. By working our life away to find, compete and struggle for this fictional capital to pay-off debts, we have effectively given them a reality or life of their own. But the fact is — this is a situation we have allowed ourselves to be caught in by giving transcendent status to the capital arising from loans, that is, we are slaves to capital that does not exist, but is merely a credit/debit projection of a bank which we then take as actual. This non-existent capital then produces the double phantom effect of being able to conjure up interest rates that must be satisfied monetarily: We then toil to repay this through the workforce as modern indentured wage slaves.


So a defining characteristic of the term Capital is that which is in effect non-existent as such. Capital is a fiction. It is a concept that through the subreption generated via a scam is given transcendent status and treated as an actualized entity or thing-in-itself. Again it is useful to take a look at Marx’s valuable insight of fictitious capital. Here we have money creating money out of itself for itself in a never ending process of accretion and consolidation. Fictitious capital then is basically Capital garnered through the function of banks, interest/usury, and investments in its many forms; it is the way the entire stock and money markets, and all financial institutions and instruments create and re-create Capital through inflationary bubble-like means for further capital enhancement. Subprime loans and virtually all other forms of leveraging for gambling on the international markets of finance are but varieties of capitalist frenzy we witness in our era.

Imagine what we are not privy to because the mass media calculatedly avoids scrutinizing it, just as we do not have access to the goings-on of billionaire clubs that allow for all other kinds of risk-taking and casino-like activities. It is this lack of transparency throughout the world on the workings of Capital that engenders so much of the corruption and violence across the planet. We must also thank the collusion between banks, corporations and governments, that allows for the excesses of fictitious capital to hold the world in destructive bondage to those who play with it.

And when fictitious capital is transformed into transcendent Capital, we have comprehensive and exact tools that are used viciously as implements of power, manipulation and sabotage by its wielders.

[Note: The final follow-up piece is “A critique of Capital (3): Toward a moral economy“. All three parts of this essay are available as one piece: “A critique of Capital: The struggle toward a moral economy“.]


1. George, Donald A.R. “Consolations for the economist: the future of economic orthodoxy.” Issues in heterodox economics (Ed. D.A.R. George). Blackwell Publishing: Oxford, 2008.

2. Bichler, Shimshon and Nitzan, Jonathan. “Capital as power.

3. Lipsey, Richard G. An introduction to positive economics (Fifth ed.). Weidenfeld and Nicolson: London,1980.

4. Rawls, John. A theory of justice (revised ed.). Harvard University Press: Cambridge, Massachusetts, 2003.

5. Screpanti, Ernesto and Zamagni, Stefano. An outline of the history of economic thought (2nd ed.). Trans. David Field and Lynn Kirby. OUP: Oxford, 2005.


The writer is the editor of Philosophers for Change

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