7 Capital
Capital is misunderstood to mean money or wealth - because in the present money economy, capital is stored in the form of money, and is set aside out of wealth. But the word has a more specific meaning than that: it consists of the assets that are dedicated to be used in producing goods that will deliver value.
He goes on a long tangent to clarify: in an isolated environment in which trade does not take place, a man may use tools and materials. If he decides he wishes to eat a fish, he must make a boat and a net. The boat and net are capital - the time he invested in fashioning them was not for the sake of having them, but in having something else they will be used to obtain for him.
In the money economy, capital may be stored in the form of money - but what makes it "capital" is that it is intended to purchase things for the sake of purchasing other things. The man who wishes to have a fish may set aside the money to purchase a boat and a net (rather than making them himself), and the fact that he intends to use the money in this way makes it "capital." Tools, materials, provisions, and the like also constitute capital. A field that is purchased to be planted is capital. Money set aside to purchase these things, or to pay laborers to help in production, is also capital.
He describes creating capital as "working for the sole purpose of making future work easier [while] doing nothing for present needs."
There's a rebuttal against those with an allergy to capital, which seems excessive. In essence, the only way man can live without capital is to revert to a savage state where we take from nature at the moment of need with no planning or preparation for future - but even savage people have capital, as the tribesman takes time to make a knife and a spear to facilitate hunting for food.
Another rail against those who criticize the owners of capital for hoarding a resource that belongs to all of society: this argument fails to account for the way in which capital is acquired. That is, those who have capital have created it, through their own forethought, and to facilitate their own future action. The fisherman who thinks to weave a net has not denied the net to his brothers, nor does he owe them the use of it - the reward he gains for taking the time to amass capital (ease of work and greater product) is not denied to anyone, but is the just reward for his own foresight.
Man in isolation can leverage capital only by producing it for himself. There is no-one to provide him with a net, so he must make it himself. Man in society may borrow capital from others - he can buy a net on credit and pay the maker after it has been productively employed. This facilitates economic activity, as it enables those with resources but no plans to profit by investing in the activities of others, and those with plans but no resources to obtain what they need to take action.
There is a great deal of needless moralizing about the interest charged on such loans. Without interest, there is no reason for someone with property to make it available to someone who could make use of it - the holders of property might as well keep it in a vault. It is only because they are being compensated for its temporary displacement and the risk it may not be returned that they have any interest in loaning it at all. He goes on for a while about this, but the argument has been made better elsewhere, and is largely moot in the present day.
He makes a somewhat convoluted argument about depreciation of capital being akin to interest - which is to say that the loss we take when items become dilapidated over time, even without use, is an "interest" paid. But I do not think this is useful and may be misleading to characterize this as interest.
However, it does lead to the point that capital assets are diminished in value by use or over time, and must be compensated for in the revenue earned from the sale of the product they produce. The steel of a farmer's plow is thinned with each plowing and it must be replaced eventually, and his revenue must cover the cost of capital consumed in production. (EN: However, this is a supply-side concern when a seller sets a price for his service, and does not influence the buyer's offer.)
There's another long consideration of improvements upon land by a person who rents it. The cost of clearing a field cannot be repaid by a single harvest, so it is only in the interest of a tenant farmer to clear a field if he has a lease of the land for a long enough time to disburse the cost of clearing the field over several harvests. His interests are thus protected by a long-term lease of the land, and he would be foolish (and suffer from his own folly) if he invests in capital improvements without the protection of a lease that ensures he will have sufficient time to recover his investment.
The same is true of other forms of employment, though there is often no legal document to provide the terms. A lawyer cannot expect his first client to reimburse the expenses of his education - he invests in education because he expects to have a high enough income over a period of time to repay his investment. But this is his own estimation and his own risk.
And the same thing applies to any farmer, manufacturer, ship-owner, artisan, or anyone who enters into a long-term business: they invest in capital in hopes of making a future profit. But under normal circumstances there is no guarantee they will do so. To plow a field, to build a factory, to buy a ship, to outfit a workshop, or to undertake any other endeavor based on an expectation of future income is always to take on risk.
Capital investment is necessary for efficiency. The cloth-maker who purchases a power-driven loom will use it to make more cloth than he could create with a manual loom over a given period of time, and the profit he will male on its sale covers the amount he invested for the sake of this efficiency. Without capital, he would be less productive. The grand advances of industrial production would not be possible but for capital investment.
Another point is that capital (and borrowing) puts people to work who otherwise might have been idle. To build a table, a carpenter needs wood and the tools to work upon it - if he can borrow the money to purchase these things, he may set to work right away. If he cannot borrow, he cannot work, but must find some other profession and accumulate his own savings to purchase what he needs to begin his profession - generally working in some profession to which he is less well-suited, and which does not compensate him as well. Without borrowing, labor is permanently idle or under-used.
Capital supports social equality rather than undermining it. For the reason just stated, many who have the skills but not the resources to work in a given profession are enabled to do so by means of borrowing. Without borrowing, only those who already have wealth would be able to undertake professions that require training, facilities, or equipment. The capitalist facilitates the production of those in whom he invests, and loaning increases the general welfare by enabling more individuals to be productive.
There is further detail, with examples, of the manner in which borrowing creates wealth for society, as opposed to allowing capital resources to set idle and workers to be under-used ... but it is excessive and unnecessary. Capitalists and workers are encouraged by the half-witted to regard each other with envy and distrust, but their relationship is mutually beneficial. We can look to the period of the dark ages for an example of a society in which capital was hoarded rather than loaned to those who could make use of it.