Fictitious capital

Fictitious capital (German: fiktives Kapital) is a concept used by Karl Marx in his critique of political economy. It is introduced in chapter 25 of the third volume of Capital. Fictitious capital contrasts with what Marx calls 'real capital', which is capital actually invested in physical means of production and workers, and 'money capital', which is actual funds being held. The market value of fictitious capital assets (such as stocks and securities) varies according to the expected return or yield of those assets in the future, which Marx felt was only indirectly related to the growth of real production. Effectively, fictitious capital represents 'accumulated claims, legal titles, to future production' and more specifically claims to the income generated by that production. In terms of mainstream financial economics, fictitious capital is the net present value of expected future cash flows. Marx saw the origin of fictitious capital in the development of the credit system and the joint-stock system. 'The formation of a fictitious capital is called capitalisation.' It represents a claim to property rights or income. Such claims can take many forms, for example, a claim on future government tax revenue or a claim issued against a commodity that remains, as yet, unsold. The stocks, shares and bonds issued by companies and traded on stock markets are also fictitious capital. A company may raise (non-fictitious) capital by issuing stocks, shares and bonds. This capital may then be used to generate surplus value, but once this capital is set in motion, the claims held by the owners of the share certificate, etc., are simply 'marketable claims to a share in future surplus value production'. The stock market 'is a market for fictitious capital. It is a market for the circulation of property rights as such'.