[OPE] Chartalist theory of money

I think the chartalist theory has definite merits - nowadays the actual
amount of currency in circulation is tiny compared to the size of total
financial obligations - but Marx at least (and many other theorists) never
defined money simply as a means of exchange.

Thus, money functions e.g. as:

- universal equivalent (it makes it possible to acquire any commodity in the
market)
- means and medium of exchange (goods can be traded regardless of whether
the owners want to consume them)
- measure of value and gauge of prices (consequently as accounting unit)
- means of payment and and means of purchase (including borrowing and
lending operations)
- store of value, means of accumulation and hoard formation

Certainly, debt obligations (the practice of borrowing) and its inverse, the
formation of reserves, do not require or presuppose any currency in order to
exist. That is true. You can simply borrow a certain quantity of a good, and
promise to replace it with or without an interest or rent payment in kind.
But, in fact, the expansion of a borrowing system is historically strongly
associated with the increasing use of currency, because only a stable
currency serving as accounting unit enables the organisation of a more
complex system of administration and reckoning. See e.g.
http://nefertiti.iwebland.com/trade/internal_trade.htm

The problem with the concept of money as just a technology to administer
debt and credit, a "means" or "medium" in borrowing and lending, is that
money acquires a life of its own, develops laws of its own, and exerts an
independent social force which is not neutral or epiphenomenal, but has real
effect (e.g. currency exchange rates). It is not simply that money
"mediates" debt obligations, but that these debt obligations themselves can
be traded, where variations in their value are expressed in money.

If the universal equivalent was established by the state's ability to impose
a tax burden, then the problem for this theory is, that originally taxes
were not paid in money at all but in kind (primarily, storable foodstuffs
but also crafted wares), and that taxes/tributes in kind persisted for
thousands of years alongside money taxes.

Contrary to some Marxist interpretations, Marx's brief precis of the
internal logic of commodity trade was not intended as a fullfledged theory
of history, but rather as a demonstration of the development of the forms of
value, it's a "form analysis" in the sense that Marx analyses "social and
economic forms" taken by human relations which persist, replace each other,
and build on each other. State policy is an historically contingent matter,
since the state need not act in any particular way in regard to trade and
money. Part of the state's enforcement concerns the assurance that the
currency being used does indeed have the value it claims to have.

Jurriaan

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Received on Sun Jun 14 07:59:02 2009