[OPE-L:5885] Why Marx does not Need a Commodity Theory of Money - One

Michael Williams (Michael@MWILLIAM.U-NET.COM)
Mon, 22 Dec 1997 16:50:28 +0000

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Having recently presented them to the Joint De Montfort
University/Open University Economics Research Seminar, I thought these
notes and indicative supporting quotes on `Why Marx does not Need a
Commodity Theory of Money' might be of interest to some on OPE-L. [The
full set of notes and selected quotes, as well as the latest version
of the full paper are on my web Page
<http://www.mk.dmu.ac.uk/~mwilliam>. The full paper contains full
references, and acknowledges the major contribution of our OPE-L
discussions on Money.]

I hope that my attempts to clarify the conceptual issues will
complement the extremely interesting OPE-L thread of recent weeks, and
stimulate further debate. I apologise for the length of this post, but
I hope that it is sufficient to indicate in outline the
`reconstruction' of the orthodox Marxist account of money that has
been called for by Claus if we are to go beyond that orthodoxy.

This Part One of a Two Part message.
A subsequent post will attempt to make links between my concerns and
some of the specific points raised in the OPE-L thread.

I. Some Preliminaries:
A. For Marx, the theory of Money is intrinsic to the theory of Value.
Money is the necessary social form of existence of Value, the
substance of which is socially necessary Abstract Labour.

"[M]oney as a measure of value is the necessary form of appearance of
the measure of value which is immanent in commodities, namely
labour-time." [Marx, 1976 {written 1867}: 188]

"[Ricardo] completely fails to grasp the connection between the
determination of the exchange value of the commodity by labour-time
and the fact that the development of commodities necessarily leads to
the formation of money" [Marx, 1969 {written 1861-3}: 164].

B .Propositions
1. Commodity money is necessary neither to the logic of Marx's system,
nor to the logic of advanced capitalism. 2. It is a category mistake
to subsume Money under Commodity. 3. There is textual support for a
non commodity, 'Value-form', account of Money in Marx's work.

II. Logical Derivation of the Social Functions of Money

"The properties of money ... *simply follow from its character as
exchange value separated from commodities themselves and objectified*
[+]." [Marx, 1973 {written 1857-8}]: 146}

If it can be shown that the social category of Money is completely
determined by its `functions and purposes', then the need for any
systemically necessary commodity basis for Money is thereby

A. General Equivalent
Sophisticated commodity production and exchange requires, or at least
would be very inefficient without, a general equivalent. This is
highly congruent with the orthodox transactions costs (`double
coincidence of wants') insight [cf Marx, 1887: 113-5]. Money emerges
logically as the general equivalent from Marx's investigation of
Commodity circulation. It is first and foremost the sole
near-autonomous form of existence of Value:

"It is a basic principle of capitalist production that money, as an
independent form of value, *stands in opposition to commodities* [+],
or that exchange-value must assume an independent form in money"
[Marx, 1894: 516].

"money is nothing but the value-form of commodities" [Marx, 1887:

Money is crucially
"the value-form *independent* of their [exchanging commodities] own
use-value, or of the individual needs of the exchangers"[Marx, 1887:

"money is the independent, tangible form of existence of value, ...,
in which every trace of the use-value of the commodities has been
extinguished" [Marx, 1893: 59].

Money is "the absolute form of existence of exchange-value" [Marx,
1887: 136]

"gold and silver [are] distinguished from other forms of wealth ... by
the fact that they represent independent incarnations, expressions of
the *social* character of wealth", and "[c]redit likewise [is] a
social form of wealth" [Marx, 1894: 573].

Of course there can exist no form without content, but the import of
this characterisation of Money is to emphasise the contingency of the
content of the money-object to its social role as the manifestation of

Money as General Equivalent has a two-fold grounding :
1. First Money "functions ... as money of account, as measure of
value" [Marx, 1887: 137]. 2. Money requires social recognition as the
sole general equivalent. Such social recognition is to be grounded in
social mechanisms, such as: a. the universally recognised, direct or
indirect, intrinsic worth of the money-object; &/or b. the
effectiveness of an integrated bank system and a central Bank; &/or c.
the efficacy of the market system; &/or d. the sovereign powers of the
state; or in some combination of these.

Money is necessarily no more and no less than the general equivalent
concretisation of Value, which must therefore be determined as the
socially accepted systemic measure of Value, the conditions of
existence of which are that it be a store of value and a medium of

B. Measure of Value
For many it is as measure of value that Money must find expression in
a commodity. However, this notion is revealed as an antediluvian
Mercantilist prejudice once it is noted that Abstract Labour is the
substance of Value because it constitutes society's epochally specific
productive powers - capitalist society's capacity to produce Value.

The standard argument is that any measure must possess something in
common with that which is measured, and that here that is (abstract)
labour. There are two general responses to this essentially
metaphysical argument:- 1. Value is a social, not a physical,
phenomenon. It expresses the systemic social evaluation of a
commodity, and so of the labour incorporated in its production as
Abstract Labour. Value is not just a property of the labour that is
its essential substratum. Rather capitalism is characterised by the
kind of inverted reality in which what is `essential' about it is,
paradoxically, its form - in particular the Value-form of association
[Arthur, 1993; Reuten and Williams, 1989: Chapter 1]. 2. Abstract
Labour and Value do not pre-exist Commodity circulation, but rather
come into existence only in and through the systemic circulation of
the products of labour as Commodities.

The social meaning of labour as the `substance' of value, Marx argues,
is that all increase in Value is brought about by the expenditure of
labour in production. To reach the Value-form position, it is only
necessary to note that production in isolation does itself not
determine the quantitative relation between hours of Abstract Labour
and the money expression of Value that is its sole actual
manifestation. This quantity is `stamped on' the commodity by Value-
form association, socially mediating the private labour processes,
grounded (perhaps contingently) in market mechanisms.

Labour as Value is thus not a substance that must be "in common"
between a commodity and the quantity of the money-object that
implements its purchase by Money. Rather Value is the dimension
equalised in any two commodities systemically and systematically
exchanged via Money. The formation of Value and of Abstract Labour are
the same process. It is the systemic commensuration of all commodities
via Money that establishes the quantitative dimension of the Abstract
Labour as equal as between commodities so circulated (see below).

Thus that Money functions as the measure of value follows necessarily
from it being the general equivalent concretisation of Value that
itself commensurates heterogenous entities, regardless of its
historically contingent concretisation in any specific money-object.
Money is a measure of Value because it reproduces itself as
successfully performing all its (other) social functions.

Money as medium of circulation, means of payment and store of Value
are then conditions of existence of Money as the general equivalent
expression and measure of Value.

C. Medium of Circulation
As medium of circulation, Money is necessary for the social validation
of (the products of) decentralised concrete labours. M in C-M-C' is a
place holder (though no `mere' about it). It is the labours expended
in the production of C and C', that are commensurated (as Abstract
Labour) by ongoing systemic and systematic capitalist commodity
production and exchange. [Marx, 1887: 108] As Marx emphasises:

"[i]n the crudest barter, when two commodities are exchanged for one
another, each is first equated with a symbol which expresses their
exchange value" [Marx, 1973 {written 1857-8}: 142].

Or as Schumpeter [1954: 321-22] puts it: "Money is not the value *for*
which goods are exchanged, but the value *by* which they are

Any commodity-money account of Money as medium of circulation seems
enmeshed in commodity fetishism:

"the illusions of the monetary system" to which "gold and silver, when
serving as money, did not represent a social relation ..., but were
natural objects with strange social properties" [Marx, 1887: 86].

Any "token must have an objective social validity of its own" but
"this the paper symbol acquires *by its forced currency*" [Marx, 1887:
129-30]. Money as Value is then tendentially `pure' quantity: "[o]ne
sum of money is distinguishable from another only by its amount."
[Marx, 1887: 148-9]

D. Means of Payment and Credit Money
The emergence of credit is essential to the evolution to and of
advanced capitalism:

"capitalistically developed nations ... to a large extent replace
money, on the one hand, by credit operations, and on the other by
credit-money" [Marx, 1894: 516].

Money then must also function as means of payment, mediating debtors'
and creditors' relationships.

"just as true paper money takes its rise in the function of money as
circulating medium, so money based upon credit takes root
spontaneously in the function of money as the means of payment" [1887:

This then reveals something conceptually about Money, that has
hitherto to not been explicated:

"The banking system shows, ... , by substituting various forms of
circulating credit in place of money, that *money is in reality
nothing but a particular expression of the social character of labour
and its products* [+]" [Marx, 1894: 607].

In as much as credit operates as Money, it transcends the private
contract between bank and borrower and takes on the other
characteristics of Money - manifestation of the general equivalent,
store of value and medium of circulation.

When credit extension is not subsequently validated by the successful
production of commodities, the conditions of existence of Money may be
undermined. It is vital to note here that such incipient monetary
crisis has nothing to do with the fact that credit money is not
embodied in a commodity (see below).

E. Store of Value
This is the function of Money that is most often cited as demanding
`gold'. However, there is no systemic necessity about this. Rather,
Money functions as a store of value because

"[a]long with extension of circulation, increases the power of money,
that absolute social form of wealth ever ready for use" [Marx, 1887:

"money ... is the universal representative of material wealth,
*because it is directly convertible into any other commodity*" [Marx,
1887: 138]

What is more, to the extent that gold is used as a store of value it
is decreasingly acting as Money. Gold may be the store of value `of
last resort', but the role of `gold' reserves in the reproduction of
systemic confidence is entirely contingent. Confidence is grounded
more generally at the macro level in the efficient and secure
operation of the banking system. At the micro level, confidence in a
particular commercial bank or central Bank may well be enhanced by
their ability to call up collateral - and that might, but only
contingently, include ownership of bullion.

Monetary crises then start with the flight into Money and away from
commodities. Bullion is a barrier to accumulation, that exerts itself
in time of crisis. But Capital is entrepreneurial in overcoming
barriers to accumulation.

"[W]ith the development of the credit system, capitalist production
continually strives to overcome the metal barrier, which is
simultaneously a material and imaginative barrier of wealth and its
movement, but again and again it breaks its back on this barrier"
[Marx, 1894: 574].

Despite the last phrase, it is clear that the capitalist economy's
underlying health depends on its ability to reproduce valorisation and
accumulation, not on the periodic shortage of gold as a money-object.
Today `Capitalist production' in any economy exhibiting serious
incongruence between its productive capacity and its financial
expression is more likely to have its `back broken' by IMF-imposed
conditions than to break it on some `gold-barrier'.

When confidence in all currency collapses, Value may take refuge in
particular commodities whose most crucial characteristic is intrinsic
scarcity. This process becomes the flight from Money (in all its
functionality), as part of a flight from capital. The flight from
Money into gold is not an aspect of the operation of the category
Money, but rather a regression to the infantile stages of the
capitalist system's development.

"[i]n a crisis, the *antithesis* [+] between commodities and their
value-form, money, becomes heightened into an absolute contradiction."
... "[I]n such events, the form under which money appears [the various
money-objects, `gold or ..Credit money such as bank-notes'] *is of no
importance* [+]" [Marx, 1887: 138].

In managing Money the state is in fact, and has always been, managing
the social relations that Money mediates. The first line of defence
for alleviating monetary crisis is the banking system, not the
reversion to gold.

"[I]t is clear that as long as the credit of a bank is not shaken, it
will alleviate ... panic ... by increasing credit-money" [Marx, 1894:

The capability of an individual bank to do this is much enhanced by
the inter-bank system and the existence of the central Bank,
reproduced by the state's responsibility, via the Bank, for defending
the external and internal value of the national currency. Any role for
bullion in sustaining confidence in a particular national currency is
then contingent, derivative (from the `markets'' perceptions of the
nation's economic performance), and (arguably) declining.

"The entire history of modern industry shows that metal would indeed
be required only for the balancing of international commerce," ...
"That the domestic market does not need any metal even now is shown by
the suspension of the cash payments of the so-called national banks,
which resort to this expedient in all extreme cases as the sole
relief." [Marx, 1894: 517]

F. World Money
With some support in Marx's own work [see also Marx, 1887: 141-4; ,
1894: 320], it is often argued that world Money is, in the absence of
a global currency, paradigmatically bullion. The exact role of bullion
in the world monetary system remains a matter of current controversy.
Central Banks continue to hold a significant proportion of their
reserves in specie. Nevertheless, several factors may cast doubt on
any necessary systematic role for bullion as world Money. It's there,
but does it do anything?

1. Imbalance of payments seems to lead to international `reserve'
currency rather than specie flows. The world Money role of settling
international debt is now done overwhelmingly by payments in any
acceptably `strong' national currency. 2. Specie prices in different
currencies seem to be a managed rather than a market phenomena. 3. Any
flight into gold in times of economic crisis is, as argued above,
surely a flight from Money. If confidence in a particular currency is
undermined, different commodities act as more and less adequate stores
of value. This is not part of the reproduction of Money, but of its
cyclical degeneration.

Historically, the currency most widely used for world trade, and
indeed for commerce in other lands, has been, not gold, but that of
the economically (and politically and militarily) most powerful state
in the then known world: Athens, Rome, the ducats of Venice, the
florins of Florence, the pound Sterling, the US dollar, ... . Exchange
rates have been fixed by negotiation between leading traders,
facilitated by speculation.

In the case neither of bullion nor of Bank notes is it the relative
conditions of production of gold and other commodities that provides
the datum or standard of value. Rather it is the relative conditions
of Value creation in different national economies that reproduces
national currencies (expressed in notes and coins or financial
instruments denominated in it) as standard of value, as Money.

G. Money Capital
Capital in embryo wears the character mask of `hoarder', characterised

"hard-work, saving and avarice" for whom money, "the value-form of
commodities" becomes "the end and the aim of the sale" [Marx, 1887:
136; cf 1893: 325-6]

Money, post Mercantilism, is hoarded, because it is the means of
payment that alone can be used, when the time is right, to purchase
labour power for the production of commodities, in pursuit of
valorisation and capital accumulation [Marx, 1893: 35, 353]. Hoards of
inactive money then become insignificant, as the banking system and
Money capital develop to mobilise Money idle even only for a short
time [1893: 185, 318-9, 325-6, 454-5; Marx, 1894: 321, 402ff].

Capital emerges as a self-expanding hoard of Money, M-M'. The orthodox
economic jibe that this is the `Scrooge' theory of Value would
certainly hit home were the Ms taken to be referring to gold.
However, under capitalism, hoarding is not an end in itself, but
merely a temporary pause in the process of valorisation and
accumulation [Marx, 1893: 84-6].

"while the miser is merely a capitalist gone mad, the capitalist is a
rational miser" [Marx, 1887: 151].

"In this capacity of potential capital, as a means of producing
profit, it [money] becomes a commodity, *but a commodity sui generis*"
[Marx, 1894: 339]. That is, one that transcends the genus `Commodity'.

Again note that the creation of new Value by the expenditure of labour
takes place not, as is often inaccurately asserted, in `production',
but in the process of circulation that is the unity of production and

"It is therefore impossible for capital [self-valorising value] to be
produced by circulation, and *it is equally impossible for it to
originate apart from circulation* [+]. It must have its origin both in
circulation and yet not in circulation." [Marx, 1887: 163]

"The ... condition, that the capital to be advanced must be advanced
in the form of money, *is not eliminated by the form of this money
itself* [+], whether it is metal-money, credit money, token-money,
etc. The ... condition [that means of production are tied up during
the production period] *is in no way affected by what money-medium*
[+] or in what form of production labour, means of subsistence, and
means of production are withdrawn without the return of some
equivalent to the circulation. [Marx, 1893: 362]

Thus it is the successful deployment of Money as capital, for the
purchase of labour power and means of production, and so the
production and sale of commodities that validates and re-validates
different money-objects as manifestations of Money, the sole
autonomous existence of Value.

The hermeneutic circle is, in outline, complete. The functions of
Money form a systemic whole. Money is necessarily no more and no less
than the general equivalent concretisation of value, which must
therefore be determined as the socially accepted systemic measure of
value, the conditions of existence of which are that it be a store of
value and a medium of circulation.

These functions must be further grounded in their social validity,
reproduced by markets, the banking system, central Banking and the
state. The complications of world Money do not negate the fundamental
determinants of Money. The world monetary system is a bit shonky not
because it is off the gold-standard, but because there exists no
effective world-monetary authority, backed by a world state (although,
*from the perspective of capital*, I don't think the IMF is doing too
badly). The monetary mediation of economic activity leads inevitably
to credit and the emergence of credit money, paving the way for the
evolution of Money capital, bearing the central motif of the era -
self-valorising Value.

Money plays its role in all this precisely by sloughing off all
pretence to use value, and thus making clear that it has no necessary
commodity basis. The role of any particular money- object, however
historically important, is systemically contingent.

III. Two puzzles:-
A. Money as social unit of account vs Money as Measure of Value
The problems of articulating Money as social unit of account and
Abstract Labour as the substance of value clearly haunted Marx:

"(To be examined more closely later: whether this characteristic mark
of gold and silver money [that it expresses directly a given quantity
of its own substance] is in the last analysis an intrinsic property of
all money.)" [Marx, 1973 {written 1857-8}: 134]

There may be two possible answers:
- `uni-lateral' articulation via the abstract labour required for the
reproduction of the money- object. - `multi-lateral' articulation via
the systemic relation of Money to every commodity, grounded in
ubiquitous markets.

The first answer underlies any serious commodity theory of Money; the
second is my (`Value- form') position. It is my submission that in
becoming the general commodity par excellence Money transcends the
Commodity-form and loses any necessary connection with the commodity
from which it has developed. The point is that the category `Money' is
not adequately reducible to any particular money-commodity - not even
gold. Money and Value are but two aspects of the same category. Though
Money emerges (crucially) from generalised commodity production and
exchange, this does not, in itself, entail that the money-object
should itself be a commodity. It entails only that it should be an
effective, universally accepted, general equivalent.

"with the increasingly social character of production ..., so grows
the power of *money*, i.e. the exchange relation establishes itself as
a power external to and independent of the producers."[Marx, 1973
{written 1857-8}]

"The division of labour converts the product of labour into a
commodity, and thereby makes necessary *its further conversion into
money*." [Marx, 1887: 110]

The logical diremption of Money from any commodity money-object does
not, of course, entail a divorce of Money from Commodity, from the
system of generalised capitalist commodity production and exchange.
This is because Money is the necessary form of appearance of Abstract

"[t]o the degree that production is shaped in such a way that every
producer becomes dependent on the exchange value of his commodity,
i.e., as the product increasingly becomes an exchange value in
reality, and exchange value becomes the immediate object of production
- to the same degree must *money relations* develop, together with the
contradictions immanent in the *money relation*, in the relation of
the product to itself as money." [Marx, 1973 {written 1857-8}]: 146}

The interconnection of Money with Commodity is thus a systemic,
multilateral, one to all commodities, rather than depending on the
unilateral link through a commodity money-object. What is being
ditched here then is only the notion of some more or less automatic,
subjectless regulation of the system by an underlying economy of
embodied labour, in which the conditions of production of a
money-commodity form the closing link. The essence of Money is as
socio-economic form, not natural substance. (Whereas the essence of
Commodity is that it is the unity of a specific (alienated) social
form of its natural usefulness - use-value - and this socio-economic
moment - Value).

B. The Money-object - a source of confusion
Marx expresses the need to investigate:

"the presentiment that the money-form of an object is not an
inseparable part of that object, but is simply the form under which
certain social relations manifest themselves" [Marx, 1887: 94].

For Marx himself, gold is not Money, it is rather

"the material of which money consists" [Marx, 1887: 111].

"Gold and silver, in and of themselves, are not money. Nature does not
produce money, any more than it produces a rate of exchange or a
banker." [Marx, 1973 {written 1857-8}: 239]

"[T]hey play an important role *as money material* [+] and hence as
*potential* [+] money" [Marx, 1893: 473].

And the money-object is (contingently) gold only in as much as it
transcends the commodity form: "Gold, ..., became ideal money, or
measure of values, in consequence of all commodities measuring their
values by it [+], ..., making it the shape of their value" [Marx,
1887: 111].

"[G]old, when a mere commodity, is not money, and ... when other
commodities express their prices in gold, this gold is but the
money-form of those commodities themselves" [Marx, 1887: 106].

[to be continued]
"Books are Weapons"

Dr Michael Williams
Department of Economics Home:
School of Social Sciences 26 Glenwood Avenue
De Montfort University Southampton
Hammerwood Gate SO16 3QA
Kents Hill
Milton Keynes
tel:+1908 834876 tel/fax: +1703 768641
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