That Yellow Metal again (1967)

From the February 1967 issue of the Socialist Standard

The yellow metal which, over the ages has been passionately hunted, coveted and murdered for is much in the news. Gold, Shakespeare's "Yellow slave" which "will make black white, foul, fair; wrong right, base, noble; old, young; coward, valiant"; "Will knit and break religions . . .  place thieves and give them title, knee and approbation, with Senators on the bench . . ."

Millions of words about it, mostly of denunciation but still it holds its place. Everyone wants it, including those who say its desirability is based on myth, and including Russia in spite of Lenin's jibe (borrowed, with modification, from Sir Thomas More) that it would come to be used for building public lavatories.

Of course there are exceptions to the mainstream of thought. In South Africa where gold production is the chief industry gold is worshipped as if it were the mainspring of civilisation and life itself.

Mr. Anthony Bambridge, business editor of the Observer (8.1.67) has had a go at putting it in its place under the title "The Mad Magic of Gold". He writes: "Gold is yellow and heavy. It is useful for filling teeth and not much else . . . 'It is a fetish', declared the Americans in 1933, the year before they once more pegged the dollar to gold. 'Dug up in South Africa, only to be buried in Fort Knox', said Keynes".

The implication of what he wrote is that the world would be better off without gold, though his immediate purpose was to attack Jacques Rueff, the "high priest of gold", adviser to General de Gaulle, who advocates that all countries should get back to the gold standard as it was operated in Britain and some other countries in the nineteenth century, the results of which, says Mr. Bambridge, "are likely to be too hideous to contemplate".

The controversy has blown up because a number of the monetary experts say the world is in danger of running into a trade decline and depression because of "lack of liquidity". Rueff and others of the experts deny this.

One aspect of the controversy has a very simple explanation. The American authorities have, for over thirty years, bought and sold gold at $35 an ounce. But because of recent trends of American trade and overseas spending gold has been flowing out of formerly huge American gold reserves and the idea has gathered strength that it may be possible to persuade or force the American Government to alter the gold price to, say $70 an ounce or even $100 an ounce. If the price were doubled to $70, every central bank and every hoarder in the rest of the world holding gold would find the dollar value of it doubled. So the authorities in France, Italy and some other countries have been acquiring all the gold they can in the hope that this will happen — they buy at $35 an ounce and hope to end up with holdings worth $70 an ounce. South Africa and Russia would also be among the jackpot winners. The private hoarders have been so busy that almost all of the gold mined in the past two years outside the Russian sphere has disappeared into private hoards.

Naturally the governments which have not much gold or which for other reasons, line up with the American unwillingness to raise the dollar price of gold, accuse the gold-rich governments of not playing the game — as if capitalists ever did anything else than pursue their own interests. The Financial Times, for example, (29.12.66) indignantly attacked the Italian Government for having piled up more gold than it could reasonably need for normal trading purposes; and Mr. Bambridge was equally scathing about de Gaulle's Government. The Financial Times argued that a country's legitimate liquidity needs are a reserve of gold and foreign currency no more than sufficient to meet any temporary excess of imports which cannot be balanced by exports and therefore has to be paid in cash; but Italy we are told was "acquiring far more than her proper share".

The same writer, however, proceeded to claim that the American and British governments are a special case: they are entitled to hold more than the amount prescribed for Italy (and France) because they are international bankers. To which, of course, the French and Italian governments can retort that as far as they are concerned the American and British international banker activities cannot end too soon.

Coming back to the view Mr. Bambridge quotes (and apparently shares) that gold is a fetish with little use, this is an old notion and one Marx had something to say about. He showed (in Capital, Vol. I chapter II) that the money commodity, whether gold or silver, is able to function as such because it is, in the first place, a commodity having value like other commodities. Without this it would not have come to be the commodity in which all other commodities express their value.

Marx mentioned John Locke, who thought that "the universal consent of mankind gave to silver . . . an imaginary value", and he quoted the pointed reply given by Jean Law, who asked. "How could different nations give an imaginary value to any single thing . . . or how could this imaginary value have maintained itself?"

But though the value of the money commodity silver, or, as in the modern world for the most part, gold, is as real as the value of other commodities, and capitalism needs the money commodity, that is not to say that there is any way in which its functioning can be made smooth and stable as so many economists have supposed it could. Capitalism works by alternative expansion and contraction, booming trade, crisis and stagnation. And in these phases the capitalist attitude to money goes through corresponding violent fluctuations. When trade booms the capitalist is anxious to turn his money into commodities to reap the harvest of expected profit. But when trade turns sour, it is money alone he wants to hold. As Marx put it:

"On the eve of the crisis, the bourgeois, with the self sufficiency that springs from intoxicating prosperity, declares money to be a vain imagination, commodities alone are money. But now the cry is everywhere : money alone is a commodity! As the heart pants after the fresh water, so pants his soul after money, the only wealth."(Capital, Vol. I, Kerr edition, p. 155).

So sometimes there appears to be too much money and at other times too little and there is no way of avoiding this.

Of course there is one method by which the world can rid itself of dependence on gold but not one of the monetary experts mentions it — by establishing Socialism. Production and distribution will then be directly and solely to meet human need, without trade, internal or international, without profit, payment or money.

Edgar Hardcastle