A Research Into Marx's Theory Of Vitrual Capital

With the acceleration of the process of world's financial integration, the worldeconomy is increasingly being dominated by the virtual capital. Fictitious capital isno longer subject to geographical constraints, and accompanied by economicvirtualization, which has shown signs of an irreversible trend. The integration ofworld economy has contributed to the emergence of a financial planet. In the contextof financial globalization, the form of the virtual capital is evolving. Since the 1980s,financial innovations have emerged one after another in the developed countries inEurope and the United States. The types of financial derivatives are also rising at thespeed of geometric progression, expanding the scale of the virtual capital continually.The type and scale of the virtual capital have greatly exceeded that in the times ofMarx. In order to better understand virtual capital and to better serve the realeconomy, the thesis, based on Marx's theory of virtual capital and by reference toseveral viewpoints of virtual capital in the West, makes a deep research into thecharacteristics, and nature of virtual capital, and its relationships with and dualeffects on the real economy.The study of the nature of the virtual capital, which is mainly based on Marx'sresearch outcomes of virtual capital, makes a deep analysis of the source, the essence,the formation mechanism and the first and second form. Virtualization of thecurrency can be regarded as the premise of appearance of the virtual capital. With theexpanding scale of production of goods, the demand for monetary capital willincrease accordingly, accompanied by the appearance of loan capitalists who arespecially engaged in the service of money loading. With the rising of modernbanking, banks gather unused funds together and then load them, resulting in theinterest-bearing capital, after the socialization of which, capitalization of outcome isrealized. By analyzing the operating process of interest-bearing capital, Marx illustrates the source of virtual capital, i.e. virtual capital is achieved through thecapitalization of income. Virtual capital is a special form of transformation ofinterest-bearing capital and its appearance is an inevitable result of development ofinterest-bearing capital. Marx believes that the virtual capital has two forms--the firstform is the "paper copy" of real capital represented by negotiable securities such asstocks and bonds, and the second form is based on credit, including commercial billsof exchange, bank drafts and bank notes.Marx refers to two characteristics of the virtual capital, i.e. the speculation andprice regression in Das Kapital. In the study of the characteristics of the virtualcapital, this paper summarizes four characteristics: virtuality, riskiness, priceregression and predictability, analyzes the same four characteristics of virtual capitalwhich the third and the fourth categories of fictitious capital have manifested inoperation in the process of morphological evolution of virtual capital, andsummarizes that the derivatives of virtual capital have similar attributes with theirnative assets. The virtuality of virtual capital is classified by degree of how it is closeto real assets, i.e. the less intimate the relationship between virtual capital and realassets is , the more virtualized it is. When there is no relation between virtual capitaland real assets, the former will be completely virtualized and become the mostvirtualized capital. Riskiness is the basic characteristics and properties of the virtualcapital because of its greater uncertainty when it is transacted in the financialmarkets. This uncertainty will spread with the increase in the number of virtualcapital, risk also will expand accordingly. The risks of virtual capital include twocategories: one is systemic risk, due to the change of macroeconomic environment,such as economic, political, social factors has impact on the price of virtual capital;the other is non-systemic risk, which only influents on certain industry or securities.Characteristic of the virtual capital is also reflected by the nature of price's return tonature. Marx claims that rise and drop in the price of fictitious capital price change isa movement of reversion to the origin, manifested by a drop in price when the priceof virtual capital soars to the extent that is seriously deviated from the natural price,or price returns to nature after a serious drop. Virtual capital and physical capital together constitute the basis of social pricing. The price of financial products isgenerally determined by people's expectation, such as stocks and bonds, which haveno cost of production, but they are able to obtain pricing in the financial marketsmainly due to people's expected price, that is, expectations of future income stream,and thus it can be viewed that the price of fictitious capital is determined by people'sexpectations, or referred to as "the price determined by concept".Virtual capital has both positive and negative effects on real economy. Thepositive ones include the followings: supplying saving-investment conversionmechanism, optimizing resources allocation, promoting optimization of industrialstructure and promoting financial integration. The negative effects include: thedeviation of virtual economy from the real economy resulting from over-expansion,the birth of the "bubble" economy, induction of financial crisis and distortion ofresources allocation. According to Marx, the virtual capital is firstly interest-bearingmoney-capital, and it has no value itself. However, it can generate profits throughcirculation movement. Virtual capital in the financial sector operates independentlyfrom the real economy, and breeds virtual economy in the process of constantself-survival, self-circulation and self-replicating. The real economy is the basis offunctioning of fictitious capital, and the good functioning of the real economy bringsabout demand for virtual capital. When the virtual capital is suitable for the scale ofthe real economy, the two complement each other and promote each other; when thedevelopment of fictitious capital is over-excessive to occupy resources needed by thedevelopment of physical economy, the economic bubble will evolve into a bubbleeconomy. When the development of virtual capital is separate from the real economy,it will inevitably return to the real economy eventually. Without the supporting of thereal economy, it is certain that the virtual capital can not develop sustainably.The application of the theory of virtual capital in the socialist market economyis mainly reflected by the construction of financial market. As the main place of thefunctioning of fictitious capital, the formation and development of financial marketis an inevitable product of the market economy. As a necessary part of the socialistmarket economy, socialist financial market achieves optimal allocation of capital resources in the socialized production through marketing operation on money andcapital. With the degree of currency virtualization and virtual economy graduallydeepening, the impact virtual capital has on the development of real economy willalso expand. It is both the starting point and the ultimate purpose of studying thetheory of virtual capital to utilize characteristics of virtual capital and its positiveeffects to serve the real economy. It can promote economic growth by developingfictitious capital in a rational manner, achieving a positive interaction between thevirtual capital and the physical capital to promote harmonious development betweenthem, and utilizing the positive effects the virtual capital has on the real economy tobetter serve the real economy. The development of the real economy will furtherincrease the demand for virtual capital, and a positive interaction will emerge. Firstly,the regulatory mechanisms over the development of fictitious capital must beimproved. Authorities of financial management should improve the long-termmonitoring mechanism over the virtual capital and continue to improve the financialregulatory systems. Secondly, the relationship between financial openness andfinancial security must be correctly handled; the degree of openness must beaccurately controlled in the opening of the fields of direct and indirect financing; andthe monitoring over the international capital must be strengthened and a globalnetwork of financial security must be built. Finally, the financial markets must befurther established and improved by utilizing characteristics of virtual capital topractice socialist market economy.