Circulating capital is a term used by classical economists such as David Ricardo and others such as Karl Marx. It refers to a kind of physical capital, i.e., short-lived items that are used in production and used up in the process of creating other goods or services. It includes raw materials, intermediate goods, and inventories (working capital). It is contrasted to fixed capital.
But though the whole expence of maintaining the fixed capital is thus necessarily excluded from the neat revenue of the society, it is not the same case with that of maintaining the circulatingcapital.
But though the circulatingcapital of every individual makes a part of that of the society to which he belongs, it is not upon that account totally excluded from making a part likewise of their neat revenue.
The circulation of every country may be considered as divided into two different branches; the circulation of the dealers with one another, and the circulation between the dealers and the consumers.
Refining the distinction between fixed and circulatingcapital in Das Kapital, Karl Marx emphasizes that it is really purely relative, i.e.
Fixed capital also "circulates", except that the circulation time is much longer, because a fixed asset may be held for 5, 10 or 20 years before it has yielded its value and is discarded or depreciated.
In national accounts, fixed capital is conventionally defined as the stock of tangible, durable fixed assets owned or used by resident enterprises for more than one year.
Feeds |
Contact