[OPE] Jan Toporowski on Marxian theory of money

John,

Sorry I neglected to respond to this. Your paper is welltaken - Marxists often pioneered what later became mainstream thought in some or other guise. There are thinkers such as Hilferding, Schumpeter, Kondratieff and Mandel who enriched our understanding by developing new categorisations, new concepts which go beyond previous understandings, and this of course is very valuable - their pioneering unorthodoxy in developing new approaches (even although they might claim to be perfectly orthodox).

Yet I have to say I am also quite "on guard" about what they argue, since on closer inspection some of those ideas that seem prima facie to be original, innovative and illuminating, actually do not get to the essence of the problems, which becomes evident when we study the facts of history more, and consider logical implications. I do not see Hilferding either as a "renegade", or as an icon of what Tory-Marxist Isaac Deutscher styled "classical Marxism" (which never truly existed, in my opinion) - such interpretations are I think quasi-religious or politically motivated/biased, not scientific.

I don't think Toporowski would uncritically accept Hilferding's theorems lock stock and barrel, in the passage I quoted he is just using Hilferding as an analogy to make the point that the forms that monetised trade and capital finance takes are not given once and for all, but are themselves subject to development and change, and that it takes new, innovative and independent thinking to bring the Marxian theory up to speed with current monetary realities. Scholars like Dick Bryan also fully accept this, they're quite happy with the thought that financial trading nowadays exhibits novel forms virtually unknown in Marx's own day, and that money could take new forms.

In the interpretation which I have formed (which I haven't had the opportunity to write up yet), it is not true that Marx substantively espoused a "commodity theory of money". Rather, he aims to explain in a simplified way how money arises out of trade, how it historically originates and what its basic functions are. For the purposes of his analysis, a gold standard is explicitly assumed, and he often assumes a commodity theory of money in this, though in Capital Vol. 3 he indicates that this is actually a simplification, and that there is more to it.

Point is really that - I think - for the purpose of analysing the basic value relations that shape the capitalist mode of production in its "ideal average", reflecting relative proportions of social labour-time, Marx thinks that a simplified monetary theory is quite sufficient, since - I think this is his argument - whatever the ways in which money happens to be represented, it doesn't and will not alter the basic structure of the capitalist mode of production that is the subject of his inquiry, its durable defining characteristics, its basic production relations. The various monetary forms just mediate (and as the case might be, distort) relations between product values, labour-value relations which exist quite independently of prices, and to which prices must ultimately conform. He could be wrong about that, scientifically speaking, okay, but I think that is his idea. That is also I think why he pays relatively little attention to price fluctuations.

As Ernest Mandel and Doug Henwood among others pointed out, Hilferding's monetary theory - whatever its merits - is actually faulty, and doesn't truly reflect Marx's view (although Mandel lateron does ascribe a "commodity theory of money" to Marx, wrongly in my opinion as I said). My own idea (which I haven't defended in print) is that whereas Hilferding sees monopolist finance capital as an outgrowth of liberal capitalism, in truth it never was. The practices of capital finance, monopolism and finance capitalism existed from the very beginnings of the capitalism - you can prove that quite easily if you look at the historical facts - all that changed was the importance, the socio-economic weight, and the commercial role of capital finance. The basic problem here is that economists are quite often unaware about what really happened in history, being trained in the idea that markets have a universal logic which applies irrespective of social conditions, and which can be superimposed on history whatever the circumstances.

When Marx was writing in the mid-19th century, an integrated national capital market did not really exist in most countries, fully standardised, integrated accounting conventions (or even one currency unit) often did not exist either, but - this is partly his point - this did not even matter practically for the operation of capitalism, so long as traders kept to their contractual obligations and agreed auditing procedures (enforced to some or other extent by the state and the courts). It is just a deficiency or lacuna in Marx's theory, that he did not discuss the historical evolution and forms of capital finance beyond cursory references to "usury capital", taxes, credit provision, insurance and suchlike. And what Jan Toporowski is saying, I think, is that once we no longer take what Marx says as holy writ, but as a source of inspiration for a more adequate theory (adequate to historical realities, and to current realities), we can construct a theory of capital finance and a monetary theory which makes much better sense - a theory rooted in historical and empirical experience. Like I say, I haven't been able to work on this topic yet in any detail, but surely what scholars like Makoto Itoh, Costas Lapsavitsas and Jan Toporowski achieved is already a vast improvement on previous ideas? In my own theory, the modifications (or degenerations) of modern capital finance are partly a response to the historic falling tendency of the industrial rate of profit.

People might say all this is a terribly obscure theoretical preoccupation, but then consider that at the present time even high authorities in economics are at a loss to explain the fallout of the financial crises - they lack a theory which can adequately predict the future, and those people who really know about it, often keep their knowledge secret, since the knowledge is worth a lot of money; public servants are constrained in what they can say, because of the effect it could potentially have on the markets.

"Recent volatility in Iceland's asset markets has raised concerns about the fragility of Iceland's economy," commented Frederic S. Mishkin and his co-author Tryggvi T. Herbertsson in their 2006 report, "Financial Stability in Iceland." But, they argued, these concerns, particularly those that raised comparisons with certain financial issues in emerging market countries, were "misguided". "The sources of financial instability that triggered financial crises are just not present in Iceland," the economists stated. http://www.chamber.is/news.asp?id=555&news_ID=484&type=one Well, currently Iceland aims to bolster its crumbling economy with a €4bn loan from Russia... So what seems like an obscure preoccupation is in reality highly topical, I mean world authorities on finance seem to get it wrong too. The question which modern economists ought to answer is why the whole project to claim the future's wealth today, to "live now, and pay later", ultimately must fail, why exactly you cannot perpetually keep deferring (rolling over) the consequences of current market behaviour in space and time, even with the greatest financial ingenuity. If it was just a question of subprime defaults, why isn't the credit crisis solved once those are bailed out?
I think Marx has insights to offer there. “Segui il tuo corso, e lascia dir le genti.”

Jurriaan

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Received on Tue Oct 7 14:46:04 2008