Identifying Circulating Capital

In years gone by, every political season was adorned by a scandal involving the spouse of a candidate charging a bunch of clothing and personal effects to an inappropriate account. The reasoning was the spouse had to maintain a certain status exemplified in their presentation. One could say the the candidates spouse, and family for that matter, required circulating capital in support of the candidate in image and appearance.

Circulating capital is a businessy term which is defined by Webster Marriam as:

capital consumed in the process of production (as fuel, power, and raw materials) —contrasted with fixed capital

In loose language it pays for the maintenance and utilities to keep the lights on, the machines oiled, the pathways shoveled, and so on. Since the business world has replaced this concept with the term working capital, perhaps circulating capital could capture the more socially relevant maintenance items.

One might say that the resistance of workers to go back to a brick-and-mortar workplace is due to the increase in circulating capital required to do so. The reversion to pre-Covid times may involve purchasing some new dockers, reacquainting oneself with the bus routes, and debating the tradeoffs between a bag lunch or Subway. There’s no question that the circulating capital will suck some profits out of the paycheck.

Another reason to bring back the term is that it is all but ignored in many important marketplaces. The circulating capital required to maintain a houseful of kids in their education and recreational programming is significant- ask any parent. The circulating capital required to provide housing to folks on the margin is substantial ask any half-way house provider. The circulating capital required to keep a small theater group performing is substantial, ask their donors.

It would be helpful to know some of these numbers.