Cooking the Books: Capitalist musings on money (2026)

The Cooking the Books column from the January 2026 issue of the Socialist Standard

Some capitalists have been philosophising recently on their favourite subject — money. One-time investment banker Matt Levine titled his ‘Money Stuff’ column in Bloomberg News (24 November) “Leave the Gold in the Ground”.

Gold is no longer used as the currency — what Marx called the ‘money commodity’ — as it was for millennia. It is, however, still a store of value. ‘Even now’, Levine pointed out, ‘gold is an important reserve asset, and people hold it in their financial portfolios in the form of gold futures, gold exchange-traded funds, etc’. What is being traded are titles to the ownership of gold. Those who buy and sell these are speculating on how the price of gold will move in the future. The gold itself is stored underground in a safe vault. When these titles are exchanged what happens is just that an entry of who it belongs to is changed in a database. The gold stays where it is.

Levine discusses the case of a group of capitalists who, noticing this, have come up with the idea of selling titles to gold that is still in the ground. They are either fools or knaves as they are assuming that unmined gold in the ground is as valuable as gold bars in a vault. But, of course, it is not. Unmined gold has no value precisely because it hasn’t been mined, though the land under which it lies will have a price based on what royalties might be received were it to be mined. Gold bars in an underground vault have value only because they have been mined, refined, made into bars and transported, their value reflecting the amount of labour that has had to go into doing all this.

What is perhaps surprising is that this is the explanation put forward in a news site for capitalists, surprising because it is an application of the labour theory of value that pro-capitalist economists teach is nonsense. After noting that ‘that modern finance creates layers of abstraction on top of real-world activity, and sometimes those abstractions become unmoored from the reality’, Levine applies this not just to titles to gold but to the shares in any business. As an example he takes Amazon:

‘A share of Apple Inc. stock encapsulates all of the labor and creativity that went into inventing the iPhone and manufacturing it and selling it and building app stores and everything else; all the factories and offices and decades of decisions are all reflected in the tradeable electronic token that is a share of stock’.

Another capitalist who has been philosophising on money is the richest person in the world himself, Elon Musk. Fox News reported him as telling a business forum on 17 November:

‘“If you go out long enough, assuming there’s a continued improvement in AI and robotics, which seems likely, the money will stop being relevant at some point in the future,” Musk said. He added there will still be constraints on power, such as electricity and mass. “The fundamental physics elements will still be constraints, but I think at some point currency becomes irrelevant,” Musk said’.

Musk seems to be embracing here the FALC — Fully Automated Luxury Communism — thesis. Improvements in AI and robotics will certainly make socialism easier but it is not that which will make money irrelevant. What will is only the conversion of the means of production from the private property of the few into common property of all. And that doesn’t have to wait for ‘full automation’, nor will it come about automatically through advances in technology.

“Money Must Go”: Letter from the authors (1946)

Letter to the Editors from the September 1946 issue of the Socialist Standard

The authors of “Money Must Go” write the following letter about the review published in our July issue : —

Dear Comrades,

We were pleased to see the review of our book, “Money Must Go,” in the July issue of the Socialist Standard. May we draw attention to several statements made by the reviewer, L.J., which might give a wrong impression?

(1) The book is not intended to be “an attempt to simplify some of the fundamental ideas on Socialism,” if by this is meant the critical analysis of Capitalism, etc., which is the basis of Scientific Socialism and constitutes the bulk of its teaching. It is intended to suggest to the Socialist propagandist a different mode of approach to the problem of interesting workers in fundamental social change. It does this by (a) giving a general picture of Socialist society in order to induce interest in Socialism as a practical project; and (b) by emphasising the moneyless character of that society, which factor sharply demarcates the Socialist aim from those of all pseudo-socialist factions. On the other hand it provides a means of implanting the idea of Socialism as a working system of society in the mind of the non-socialist without using “that blessed word.” We are of the opinion that the word “Socialism” has become so debased through constant use by reformist organisations and “political tricksters” that the use of the word can well be delayed until the idea has sunk in. For the use of the term “World Commonwealth” we have a precedent in the Socialist Standard of May, 1922.

(2) We think that the charge of “over-insistence that money is ‘the root of all evil'” is unjustified. This dictum is referred to but once (p. 15), and there we merely point out that such an idea was current about a hundred years ago. We do refer to the ownership of the means of wealth production by a small minority as the cause of the poverty of the majority (p. 7) and to the class division of society as the source of social evils (p. 13). Neither do we “make a direct attack on money” nor propose its simple abolition. We advocate, and in this book supply a positive approach to the idea of a world without money and in which goods are produced solely for use and/or free distribution as an alternative to the present system of production for profit (p. 16). That with the achievement of such a system the means of production would simultaneously become commonly owned by the whole of the community is implied in unorthodox fashion on page 17. Nevertheless, the statement at the top of page 17 (incompletely quoted by L.J.) is quite true. A statement of the same nature which accords with L.J.’s version is given on page 132. We have found that this approach induces interest, whereas the use of the economic and more precise terminology does not. Interest precedes desire. Workers can themselves easily see the possibilities of life in such a world organisation. It is so simple to visualise a world in which all capable of working take their part in the world’s work and in which all the goods produced are distributed to stores and warehouses from which the people will take according to their needs without payment of any kind. True, money is a medium of exchange. Then surely if there is to be no exchange there will be no need for a medium of exchange. Is not this as simple to understand as the four characteristics of capitalism, given by L.J. ?

(3) We do not define Socialism—we explain it. We conceive it as a system of society. On page 25, and again on the back cover, we concisely sum up the essential characteristics of a Moneyless World Commonwealth. The term “common ownership” may be precise in meaning to those who know what it really means. This did not prevent the Common Wealth Party from using it—to mean something quite different.

(4) To most workers the State appears as an abstraction, an intangible power above society, but controlling it and manifesting itself through the individuals that compose it. Similarly the “heavy hand of ‘the law,'” referred to by L.J. To them, more concrete is the heavy hand of the policeman, and later, the heavier hand of the gaoler. As a “public power of coercion” we do explain the State adequately on page 121.

(5) We deny our “misreading of the class struggle.” In its first and present phase the class struggle is only over the question of the division of the workers’ product. The “wages, hours of labour, conditions of work, etc.,” referred to by L.J. are essentially aspects of this. There is hardly as yet a “political struggle over the ownership of the means of wealth production.” That is yet to come, and we show its necessity in Chapter 18.

(6) “Clarity is essential in explaining Socialism.” We do that. But almost all Socialist propaganda is devoted to explaining capitalism and neglects to explain the features of Socialism as an alternative system of society. It is that we deplore, and we have tried to show how this shortcoming can be made good. The important question directed to Socialist propagandists to-day is, “How will Socialism work?”, and this should be seized upon as a potent means of agitation. Explaining capitalism can well come later.

(7) “Confusion plays into the hands of those who defend capitalism.” Again true. And it is for this reason we avoid the use of those precise terms, “capitalism,” ”working class,” “Socialism,” “class struggle.” In spite of their precision in use by Socialists these words have been and still are used by every confusionist party claiming working-class support. Every schoolboy “knows” what Socialism means—so does the Evening Standard ! Precise terms can be used by opponents to spread confusion. We have found mental pictures more useful for our purpose.

(8) “The word Commonwealth is not synonymous with Socialism.” In “Money Must Go!” we do not once refer to “Commonwealth” alone; always to “World Commonwealth,” and at least once in each chapter we add the adjective “Moneyless.” The comment that “its use by all sorts of political tricksters should have warned the writer of its vague and confusing character” therefore does not apply to “World Commonwealth.” The comment as it stands can be applied aptly to the word “Socialism.” Even Hitler used it !

Fraternally,

PHILOREN.

Philo—

—Ren.

Reply:

“Philoren” has swopped horses. In his preface to “Money Must Go” he says that the “main purpose” and the “only justification” for the book is that he is sure that the “great mass of the people” will accept the ideal of World Commonwealth, “would they but take the trouble of understanding the barest essentials of the idea.” His suggestion that it was intended to show Socialist propagandists a different “approach” is only an afterthought. We are answering paragraphs 1, 3, 7 and 8 in one section as they deal largely with the same subject matter.

He does not deny that he avoids using definite terms; on the contrary, he states, “Precise terms can be used by opponents to spread confusion.” Is that a good reason for substituting confusing and vague terms in place of words that have a definite meaning? Why do political parties which serve capitalist interests use such words as “the people” or “the Commonwealth”? Simply because they are vague, abstract and indefinite terms. In 1940-41 a “People’s Convention” was organised, which demanded a “People’s Peace”; others described the war as a “people’s war”; an ex-Liberal formed a “Commonwealth Party,” while apologists refer to the Empire as the “British Commonwealth of Nations”; many other instances could be given of this use of abstract Language, which hides more than it reveals. That “Philoren” had to go to a Socialist Standard of 24 years ago to find the term “World Commonwealth” is a sign that it has fallen out of use with Socialists, while it is increasingly used by non-socialists. Socialism is clear enough without using the ponderous “Moneyless World Commonwealth.” If others use the name of Socialism to spread confusion, that is all the greater reason for us to insist on its real meaning and to increase our efforts to get it understood by workers. The task of doing “long and persistent” educational work cannot be evaded by dropping scientific methods and using the slovenly jargon of our enemies.

(2) If words mean anything, then we are right in saying that “Philoren” insists on money being the cause of social problems. He describes the present system as a “money-based system.” On page 96 he says, “Think of all the misery, the worry and the illness all caused by these funny pieces of metal,” while later, we are told that, “In a sense woman is doubly enslaved—to man and to money” (page 99). We showed that money is not the basis of capitalism and he has not troubled to answer that point. He claims that he refers to the class division as the source of social evils (page 13), but, as a matter of fact, it is the “ever-widening division of the people into rich and poor” that he states gives rise to social problems; a view held by the Labour Party and other reformists who seek to narrow the gulf between rich and poor. “Philoren” knows that nothing was omitted from the quotation from Page 17, which altered its meaning.

(4) Because, it is claimed, most workers regard the State as an “abstraction,” are we to call it that? A feeble reason to give for an incorrect view. The explanation on Page 121 is not adequate but most sketchy. He merely deals with the State as a deterrent to “crime” ; its function as a power holding in check the disruptive force of class struggles is not touched upon.

(5) Because the working class is not class conscious in the sense of understanding the full implications and significance of the class struggle, “Philoren” assumes that the “present phase” of the struggle is only over wages, etc. This, we repeat, is a misreading of the class struggle. The class struggle exists, otherwise how could a political party whose purpose is to end the private ownership of the means of wealth production come into existence? What is the Socialist Party but the expression of the class struggle on the political field. He states that he advocates political action in Chapter 18, but it is after suggesting political action that he refers to the class struggle as “no more” than a struggle over a “bone.” In any case, to state that political action is “yet to come” is simply ignoring the existence and activities of the S.P.G.B.

(6) Both here and in the latter part of section 2 (Workers can themselves easily . . . without payment of any kind) he shows that he is nothing more than an Utopian Socialist. He wants us to cut down our criticism of the ugly economic system under which we live and draw up beautiful schemes of the new society in the hope that they will attract workers. Many Utopian Socialists did this in the past and their beautiful schemes are infantile in relation to modern conditions. Not merely that; Socialists are not building a “brave new world” from any “blue prints”; they have, in the words of Marx, “to set free the elements of the new society with which the old bourgeois society itself is pregnant.” Capitalism fetters the free production of goods—and it is through explaining the nature of those fetters, the economic laws of capitalism, that we create amongst workers the desire to break those fetters. The problems that face workers are the problems of capitalism, and we concentrate on explaining capitalism in order to pave the way to Socialist understanding. Workers who understand capitalism, generally desire and work for Socialism; they want no fanciful dreams to stimulate them to play their part in ending the hideous reality of capitalism.

L. J.

"Money Must Go": A Review (1946)

Book Review from the July 1946 issue of the Socialist Standard

We have been asked to review a booklet, “Money Must Go” (Published by J. Phillips, 203, Lordship Lane, N.17. Price 2s. 6d.). The subject matter is dealt with in the form of conversations between “Professor” and “George.” It is a genuine attempt to simplify some of the fundamental ideas on Socialism, although the writer, instead of using the word “Socialism,” uses the vague term “World Commonwealth.” Some of the ideas are all right, but we haven’t the space to deal with them here. There are, however, weaknesses, due to the over-insistence that money is “the root of all evil.”

The writer apparently holds the view that it is easier to make Socialists by a direct attack on money than by a direct attack on Capitalism. We do not hold this view. In our experience it is most difficult for workers to see that it is possible to produce and distribute wealth without the use of money, unless they have some knowledge of the elementary facts of capitalist production. Most workers regard money simply as a means of exchange, and nothing in this book will remove that idea. Money is a means of exchange, but, as gold in its metallic form, it is also a commodity, and it will be abolished as money only when commodity production is abolished. The expression “a money-based world” is repeatedly used, and if it is intended as a simple definition of capitalism it gives a wrong impression. Money is not peculiar to capitalism, nor is it the basis of capitalism. The essential characteristics of capitalism are: (a) Private ownership of the means of production and distribution ; b) a dispossessed or propertyless working class; (c) the production of goods for sale (commodities) ; (d) large-scale industrial production. These elementary facts can be grasped by any worker and cannot be easily simplified without becoming meaningless. The term “money-based world” is meaningless.

Another difficulty is the mixture of right and wrong ideas in the book. It is slated that “the abolition of money alone would solve no problems” (page 16), but on the next page we read, ” . . . . since money would not exist …. no person could say that he owned a share …. in the people’s means of production. In fact, all the world’s means of production would, then belong to the people of the world.” In this passage it is clearly implied that it is the abolition of money that will lead to common ownership. The correct position is that when the means of wealth production and distribution are commonly owned and democratically controlled there will be no exchange of goods and the need for money disappears. On both these pages efforts are made to define Socialism, but somehow the author leaves out the term “common ownership.” Also, while he states that every form of slavery will disappear, he fails to state that the present form of slavery is wage-slavery.

There are also serious theoretical errors. The, State is called an “abstraction” (page 120). This will appear strange to those who have felt the “heavy hand” of the law. The State is the public power of coercion used by the dominant class against the subject class. Later he explains, the “civil war” raging in society as a struggle over the goods produced by the workers. He says, “This war — or perhaps more accurately — this struggle is nothing more than a conflict between two dogs for the same bone” (our emphasis). The bone is the wealth produced by the workers. This is a misreading of the class struggle. In the industrial field the class struggle is a struggle over wages, hours of labour, conditions of work, etc., but it is something more than that; it is a political struggle over the ownership of the means of wealth production.

If the purpose of the book was to present a simple statement of the Socialist case, it is by no means a success. Subjects can be so over-simplified that they lose meaning. We can be sparing with words, but we cannot be sparing with sound definitions and clearly understood terms. Clarity is essential in explaining Socialism. Confusion plays into the hands of those who defend capitalism. It is strange, therefore, that, the writer avoids using such precise terms as “capitalism,” “working class,” “Socialism,” “class struggle,” but uses vague words such as “the people ” and the “World Commonwealth.” The word Commonwealth is not synonymous with Socialism. Its use by all sorts of political tricksters should have warned the writer of its vague and confusing character.

L. J.

Blogger's Note:

An excerpt from Money Must Go was reprinted in the World Socialist No.4 Winter (1985-86).

A PDF of the book is available over at Libcom.

The Socialist Forum: The Price of Gold. (1931)

Letter to the Editors from the May 1931 issue of the Socialist Standard

A Canadian reader asks if the price of gold fluctuates.

When the value of commodities is expressed in the form of money, that is their price. Money itself, therefore, has no price, since it would be meaningless to express the value of one sovereign’s worth of gold as being equal to one sovereign. When gold is the money commodity, the price of gold is a fixed relationship between gold as bullion and the unit of currency. For example, if the pound sterling were defined by law as a quarter of an ounce of pure gold, then an ounce would always be worth £4 (putting aside questions of the cost of coining, melting, transporting, and insuring, etc.). Actually, the pound sterling is fixed by law at a quantity and quality of gold which makes an ounce (troy weight) of gold of standard fineness worth £3 17s. 10½d. ; and makes pure gold worth. £4 4s. 11½d. an ounce. Given that the coin is convertible into metal and vice versa, the fixed price except to the extent of the cost of melting, transporting, insuring, etc. Thus, on March 31st, of this year, owing to gold coming into the London market in excess of demand, the price fell from £4 4s 10¾d. to £4 4s. 9¾d., the lowestprice for five years.

If gold were not the money commodity, then its price could fluctuate in just the same way as the prices of other commodities. When gold is the money commodity, changes in the value of gold (due to changes in the amount of labour necessary to produce it) have the effect of changing the prices of all other commodities. Thus, a fall in the cost of producing gold would cause a rise in prices generally. But if gold were not the money commodity, its price would be expressed in the money commodity and could fluctuate just as if it were wheat, or boots, or silver. The money unit may be paper money not convertible into a precious metal, as in Germany and elsewhere after the War. If, in such circumstances, the Government issues paper money in large quantities in order to pay its way, inflation causes all prices to rise. Everyone tries to hold goods, and to get rid of paper money whose purchasing power falls from day to day. Then the paper money price of gold soars with the soaring prices of other commodities.

Money (2009)

Book Review from the January 2009 issue of the Socialist Standard

Marx’s Theory of the Genesis of Money. By Samezō Kuruma, translated with an introduction by Michael Schauerte, Outskirts Press, 2008

Money can function as a means of exchange, a measure of value, a general equivalent, a standard of price, a store of value. Samezō Kuruma takes a close look at some of the key theoretical issues related to Marx’s concept of money. Kuruma (1893-1982) was a Japanese Marxist economist and the text here is translated by a member of our American companion party. He also provides an introduction which seeks to outline the answers to how, why and through what is a commodity money. Karuma’s text, however, is purely analytical in its approach and is devoid of historical context, a common failing amongst many Japanese writers on Marxian economics.

Lew Higgins

The Economics of Capitalism - Part 3 (1954)

From the November 1954 issue of the Socialist Standard

(Continued from October issue)

Now for a few words on the question of money. To know the relative value of an article we must give that value an independent form; a form apart from the form of the article whose value we wish to indicate. This we do when we say that there is ten shillings worth of value in 20 loaves. The value concealed in the loaves is put into the form of ten shillings and we are then able to compare the value of the loaves with the values of other articles whose value is expressed in a similar form. It is like comparing the weights of given quantities of soap, iron, and lead, by expressing their weights in hundredweights, quarters, and pounds. The ten shillings is the price or monetary expression of the value of the loaves, or, in the language of economics, the value equivalent. As previously mentioned it represents a definite portion of gold.

Gold is the money commodity and the basis of all currencies to-day. Gold can only serve as the value equivalent because it is also a product of labour and has a value determined by the quantity of labour required to produce it. As the universal equivalent it gives a visible expression to the values of all other commodities, but to find out the relative value of gold you must reverse the relation and look upon all other commodities as the expression of the value of gold, an unending series.

Gold has only become the universal equivalent as the result of the action of custom. In early times cattle, silver, and many other things occupied the part of universal equivalent, but owing to its handiness, durability and malleability gold finally replaced all the others as the generally accepted substance of money. It is obvious that the money commodity must be subject to little variations in value through wear and tear, and comprise in a small compass as much value as possible; gold fufilled this better than anything else, and thus became the national and international medium of exchange.

Money has several functions and we have already indicated its function as a measure of value. As a medium of circulation it circulates commodities; commodities are transformed into money and the money received is transformed into other commodities, so the process goes on in an unending series in which commodities come into circulation and disappear; money remains in the sphere of circulation although it is occasionally hoarded for a time. Commodities drop out of circulation to be consumed but money is never consumed.

Another function of money is that of acting as standard of price—tons, pounds, and ounces of gold, a measure of the weight of gold, and as such it never varies. However prices may change, an ounce of gold is always an ounce of gold, in the same way as a yard measure is always a yard long.

For currency purposes money functions as money of account; coins of a certain weight, purity, and size are struck for the purpose of carrying about and making reckoning easier. Up to 1914 gold coins circulated in England as currency, and the following remarks apply to that period; the effect of the withdrawal of gold coins from circulation we will see later.

To continue then, on the pre-1914 basis. In those days the Mint price of gold, the amount per ounce which the Mint was always prepared to pay for gold, until England went off the Gold Standard (refused to pay in gold the face value of its bank notes), was £3 17s. 10½d. This was not really a price but a statement of the number of gold coins of the necessary weight and fineness which can be struck from a given weight of gold. 1869 sovereigns can be struck (or coined) from 40 pounds of gold, and, therefore, three sovereigns and a fraction (17/10½ in silver and copper) from one ounce. In practice people sold gold to the Bank for £3 17s. 9d. (the Bank price) and the Bank sold it to the Mint for £3 17s. 10½d. It is important to bear in mind that an ounce of gold is the standard, and is divided arbitrarily into £3 17s. 10½d. in a similar way to which a foot is divided into twelve inches and a circle into 360 degrees. Only the gold coin circulates at its value, its divisions are represented by silver and copper symbols. The latter have no direct relation to the value of silver and copper, and there was a strict limitation upon the amount of each that was legal tender. No matter how the value of gold might alter or prices change an ounce of gold always coined into £3 17s. 10½d., and the Mint would always pay this "price” for it. Gold sent abroad figured at this “price” less cost of transport and insurance.

In another function of money, as means of payment, it was found that gold could be conveniently replaced by paper symbols, bank notes. This symbolic money turned out to be a source of considerable trouble. Banknotes were printed in various denominations and engraved with a statement to the effect that the issuers would always pay their face value in gold on demand. A separate department of the Bank of England was set up for the sole purpose of dealing with notes, the Issue Department. This department kept in its vaults a quantity of gold, plus a small percentage of government securities, that covered every note issued; the notes were referred to as “gold backed.” Thus a £5 note was backed by gold, exchangeable into gold at any time, and therefore as good as five golden sovereigns. Anyone, could present a note at the Bank and had to be paid in gold if he demanded it. As long as gold circulates freely in currency, or, to put it another way, as long as there is a free market for gold, the gold-backed paper symbols played their allotted parts adequately.

The sum total of money current (or in currency) during a period is equal to the sum of the prices to be realised plus the sum of the payments falling due, minus the payments that balance each other and minus the number of times in which the same coins pass from hand to hand, in turn as means of circulation and means of payment. Money is current that represents commodities long since sold, and commodities circulate whose equivalent in money will not appear till some future date; debts contracted each day, and payments falling due on the same day, are not quantities that can be measured in order to foretell the exact amount of currency that will be required on a given day.

As long as gold coin circulates a surplus of currency will find its way back to the bank and can be melted down for export or for other purposes. When part of the currency consists of the gold-backed notes we have described the surplus notes can be withdrawn and their gold backing subjected to the same process as gold coin.

After 1914 inconvertible bank notes (bank notes that would not be exchanged-for gold at face value on demand) were issued, the celebrated "Bradburies,” and then notes began to get out of touch with the sum of gold they were supposed to represent; currency became overstocked with a paper that could not be drained away. When crises came gold was demanded as the only form of wealth whose value remained dependable (hard cash) and higher paper prices were paid for gold. The decline in the value of paper money, as it was losing direct touch with gold, meant that more paper money was required for currency purposes and so, once inflation had commenced, the situation got worse until the time arrived when the curious position arose of an ounce of gold, equal to about £4 in gold coins, costing £8 in paper notes. We will conclude these remarks on money with a quotation from “Capital” relating to bank notes:—

“The State puts in circulation bits of paper on which their various denominations, say, £1, £5, etc., are printed. In so far as they actually take the place of gold to the same amount, their movement is subject to the laws that regulate the currency of money itself. A law peculiar to the circulation of paper money can spring up only from the proportion in which that paper money represents gold. Such a law exists; stated simply, it is as follows: the issue of paper money must not exceed in amount the gold , (or silver as the case may be) which would actually circulate if not replaced by symbols. Now the quantity or gold which the circulation can absorb, constantly fluctuates about a given level. Still, the mass of the circulating medium in a given country never sinks below a certain minimum easily ascertained by actual experience. The fact that this minimum mass continually undergoes changes in its constituent parts, or that pieces of gold of which it consists are being constantly replaced by fresh ones, causes of course no change either in its amount or in the continuity of its circulation. It can therefore be replaced by paper symbols. If, on the other hand, all the conduits of circulation were to-day filled with paper money to the full extent of their capacity for absorbing money, they might to-morrow be overflowing in consequence of a fluctuation in the circulation of commodities. There would no longer be any standard. If the paper money exceed its proper limit, which is the amount in gold coins of the like denomination that can actually be current, it would, apart from the danger of falling into general disrepute, represent only that quantity of gold, which, in accordance with the laws of the circulation of commodities, is required, and is alone capable of being represented by paper. If the quantity of paper money issued be double what it ought to be, then, as a matter of fact £1 would be the money-name not of ¼ of an ounce, but of ⅛ of an ounce of gold. The effect would be the same as if an alteration had taken place in the function of gold as a standard of prices. Those values that were previously expressed by the price of £1 would now be expressed by the price of £2” (page 103-4, Glaisher edn., 1909).

 Gilmac.

(To be continued)

Aspect: Marx’s Critique of Political Economy (1971)

From the November 1971 issue of the Socialist Standard

After the failure of the European democratic revolutions of 1848 Marx, in exile in England, decided to improve his knowledge of economics or “political economy” as it was called at that time. The first result of this research, mainly at the British Museum was the publication in 1859 of A Contribution to the Critique of Political Economy*. Marx had intended, as he said in the Preface, to examine various aspects of the capitalist economic system and he listed capital, landed property, wage-labour, the State, foreign trade and the world market. In fact before he died in 1883 he had only got as far as capital with the publication of the first volume of his main book in 1867.

The Critique itself only covered the commodity and money, and is much the same as the first three chapters of Capital (though “exchange value” in the one becomes “value” in the other). In fact it too begins, “The wealth of bourgeois society, at first sight, presents itself as an immense accumulation of commodities . . .”, but is a good introduction to the labour-time theory of value, especially as applied to money.

Marx emphasises that money is not just a convenient device for facilitating the buying and selling of goods but is also, as he puts it, “an expression of a social relation of production”. Money, in other words, is a sign that the people who use it have a particular form of society; at the very least it tells us that the means for producing wealth are not owned in common and that production is not carried on according to some definite social plan. The regulation of production by money and the market disguises the domination of the means of production by a minority class.

Marx’s theory of money is that where wealth is exchanged one commodity (or, product of labour produced for sale) will eventually emerge as the one which can be exchanged for all other commodities. This commodity, which acts as a measure of the amount of socially necessary labour-time spent on producing all other commodities, is money. Being the measure of value is the money-commodity’s primary function, but it is a role which can only be played by something which itself has a labour-time value by virtue of being the product of socially-necessary labour. Say it takes the same amount of social labour-time to produce an overcoat as an ounce of gold, then we can say that the overcoat (or 4 chairs or 10 books, etc, etc) is worth 1 oz. of gold. This is its price, the expression of its exchange-value in units of the money-commodity. Being a standard of price and a unit of account like this is money’s second role. The units in which prices are expressed are purely conventional. In our example they are units of weight (which is what they originally were, a £ having once been a lb. of silver) but are now special money-units like cents and dollars or roubles and kopecks fixed by governments. These units can still be related, however indirectly, to weights of gold; the American dollar for instance was for a long time defined as l/35th oz. of gold. Finally, money serves as a means of settling debts, what Marx calls a means of payment.

Originally, the money-commodity itself, usually gold or silver, circulated as the currency in the form of coins. Where this is the case, said Marx, the amount of money that is needed depends on the total prices of all the goods and services to be bought and sold (and the total amount of debts to be settled) and, since coins can be used more than once, on how quickly the coins circulate. Marx rejected the Quantity Theory of Money, at least in the form put forward by Hume and Ricardo which made the price level depend on the quantity of the money-commodity rather than vice-versa.

But, Marx went on, “where paper notes are the sole medium of circulation”, i.e. where the currency is composed of paper notes circulating as tokens for the money-commodity, then the situation is reversed: the price level does depend on the quantity of (paper) money. This does not contradict the theory that the amount of real money is determined in the end by the price level. For the basis of the Quantity Theory of paper-money is that only a definite amount of real money is needed so that, if the amount of paper money issued exceeds this, then currency depreciation—and inflation—will result. This is because paper money is worthless in itself and only has value insofar as it represents gold or silver. If the amount of gold or silver to be represented is given, then obviously the more tokens are issued the less amount of gold or silver each will come to represent. Prices rise because in effect the whole standard of price has been altered.

As Marx put it:

Let us assume that £14 million is the amount of gold required for the circulation of commodities and that the State throws 210 million notes each called £1 into circulation: these 210 million would then stand for a total gold worth £14 million. The effect would be the same as if the notes issued by the State were to represent a metal whose value was one-fifteenth that of gold or that each note was intended to represent one-fifteenth of the previous weight of gold. This would have changed nothing but the nomenclature of the standard of prices, which is of course purely conventional, quite irrespective of whether it was brought about directly by a change in the monetary standard or indirectly by an increase in the number of paper notes issued in accordance with a new lower standard. As the name pound-sterling would now indicate one-fifteenth of the previous quantity of gold, all commodity-prices would be fifteen times higher and 210 million pound notes would now be indeed just as necessary as 14 million had previously been. The decrease in the quantity of gold which each individual token of value represented would be proportional to the increased aggregate value of these tokens. The rise of prices would be merely a reaction of the process of circulation, which forcibly placed the tokens of value on a par with the quantity of gold which they are supposed to replace in the sphere of circulation.

That inflation will be the inevitable result of issuing more paper currency that the amount of the money- commodity which would have to circulate if there were no (inconvertible) paper currency was once recognised even by bourgeois economists. It was forgotten under the influence of Keynesian economics and is only now, after over thirty years of non-stop currency depreciation and rising prices, being rediscovered.

The Preface to the Critique contains Marx’s well-known account of his historical method—the materialist conception of history. The structure of a particular society, including the ideas predominant amongst its members, said Marx, was conditioned by how its members were organised with regard to the production of wealth. This, in its turn, was mainly dependent on technology and the level of productivity. As technology changed and productivity increased so social forces were set in motion which eventually led to a change of society. Marx mentioned four main stages through which human society has passed — later known as Asiatic society, chattel-slavery, feudalism and capitalism—and went on to say that the coming social revolution would end in the establishment of Socialism.

Also published with the Critique as with the original 1904 translation is a document called An Introduction to a Critique of Political Economy which is an unfinished and rough draft dealing mainly with the relationship between production, distribution (defined as a person’s share in what has been produced) and consumption. Though translated on its own into English in 1904 it is really the first part of a set of manuscripts known as “Marx’s Grundrisse," which are only now being translated. The Introduction is interesting in that it shows that Marx would have rejected the orthodox Trotskyist description of Russia as a “contradictory combination of a non-capitalist mode of production and a still basically bourgeois mode of distribution” (Mandel).

Actually, “non-capitalist” is too weak a term to convey what the Trotskyists really have in mind. For they consider that as far as the production of wealth is concerned Russia is a classless society. They do not deny that there is a privileged group in Russia but claim that this group is privileged only with regard to the distribution of wealth. To make this point Trotsky called it a “caste” to distinguish it from a class.

True, classes are defined by how groups are related to the use of the means of production rather than by how they stand in relation to the distribution of the products, but the real question is: Could a class-type mode of distribution exist alongside a classless mode of production?

Marx’s answer can be clearly inferred from the following:

The structure of distribution is entirely determined by the structure of production. Distribution itself is a product of production, not only with regard to the content, but also with regard to the form, since the particular mode of men’s participation in production determines the specific form of distribution, the form in which they share in distribution.

And how in fact could a group be privileged with regard to the distribution of the products without being at the same time privileged with regard to their production? For having the power to distribute products to your advantage amounts to being able to decide what should be produced and so to deciding how the means of production should be used — which is precisely what being privileged in relation to production means. The orthodox Trotskyist analysis of Russia is an absurdity and, as the Introduction shows, quite at variance with Marx’s theory of society.

An introduction by Maurice Dobb and two reviews of the work by Engels complete this edition. Dobb, by the way, seems to imply that commodity-production and money were not central to Marx’s conception of capitalism, but this is what you would expect from someone who mistakenly believes that, although money and commodities still exist there, Russia has abolished capitalism and established Socialism. As Marx always made clear, capitalism is the highest form of commodity-production and money-economy while Socialism by establishing democratic social control over production necessarily means the abolition of production for sale and of money.

Adam Buick

* Just republished by Lawrence and Wishart — £1.50.

Letter: Economic Questions. (1930)

Letter to the Editors from the September 1930 issue of the Socialist Standard

To the Editor of the Socialist Standard.

Is it, or is it not, correct to hold that Marx used the term “Capital” in the sense of “Money,” seeing that all commodities are only “Money” circulating in a different way?

That the “Price of Production” (of commodities) is not “determined” by the “quantity of labour embodied in them,” but is ultimately “determined” by monopoly“?

An adherent of the. S.P.G.B. informed me that a lecturer on economics at headquarters seriously discussed the question as to whether a “cart-horse” is “constant” or “variable” capital. If this is a fact (?) then I feel bound to remark that the lecturer must be considered a “doctrinaire,” and in no way propagating “Socialism in Our Time.”

I trust you will favour me with a reply, because it is important to clear up such current conceptions—or “misconceptions.”

I remain, Yours faithfully,

Robert Chapman,

Walworth.

Reply:

The replies to the points raised are given below.

(1) This matter is dealt with in “Capital,” Volume I, page 123 (Sonnenschein Edition), in the following’ passage :—

“As a matter of history, capital as opposed to landed property, invariably takes the form at first of money; it appears as moneyed wealth, as the capital of the merchant and of the usurer. But we have no need to refer to the origin of capital in order to discover that the first form of appearance of capital is money. We can see it daily under our very eyes. All new capital, to commence with, comes on the stage, that is, on the market, whether of commodities, labour, or money, even in our days, in the shape of money that by a definite process has to be transformed into capital.”

(2) The “Price of Production” is the cost price plus the average profit. This is, of course, affected if the manufacturer has to buy raw materials from sellers who have a monopoly, and on the other hand the manufacturer’s selling price will be affected if he has a monopoly. In other words, the theory of value in its simple form assumes competition. Monopoly (which in practice is, however, only an interference with competition, not a complete suspension of it) modifies the simple theory. Nevertheless, the labour theory of value is still the underlying explanation, even in a world where monopoly is strong.

It must not be forgotten that there are many forces at work tending to undermine monopoly. This subject is dealt with in “Capital,” Volume III, pages 186, 209 and 1003 (Kerr Edition).

(3) Your point here appears to be that a lecturer should keep to main issues, and not devote attention to minor academic points. Once granted, however, that it is worth while studying economics, the lecturer cannot avoid dealing with such points if raised by a student. To the student a clear view of such points may often be necessary in order that he may understand the general theory.

Editorial Committee.

Answer to correspondent. 

S. Gilbert. Your long letter referring to the article “Parliament or Soviet” rests upon a supposed quotation from the “Gotha Programme.” As, however, the article contains no such quotation, we fail to see what is the point of your letter.

Letters: Education? Education? Education? (2006)

Letters to the Editors from the February 2006 issue of the Socialist Standard

Education? Education? Education?

Dear Editors,

Rarely does a newscast pass without mention of education. New initiatives are released like frantic hounds hunting down a headline. Examinations are or are not more stringent than ever they were. Primary school leavers enter secondary functionally illiterate and/or innumerate. Eight years on from being elected promising to solve all educational conundrums, the Labour government flounders on. Recently its education ministers turned on their own enforcers OFSTED for giving good reports on schools that subsequently appeared in the relegation zone of the league tables. If ever there was a paradigm of capitalism it is education.

 

When state education was established towards the end of the 19th century rote learning, lots of copying and well marshalled callisthenics was the rule. This reflected industrial processes for which those children were being prepared. Today the direct influence of capitalism is to be seen in the managerial approach; the setting and measuring of targets, a tightly controlled and prescriptive national curriculum, all inspected by the pedagogic commissars of OFSTED.

What is not considered, despite much rhetoric to the contrary, is that each child is an individual, ironic for a system that lauds individualism. In truth there is a continuum of ability in any area, not some crass equality that can be state imposed. Socialists have no difficulty with the concept of from each according to ability, an obvious recognition of difference, to each according to need, a guarantee no one can suffer or prosper due to congenital factors. Of course capitalism cannot act on this basis. The absolute need to produce for profit requires a trained workforce, why else make school attendance a legal requirement, pupils being the only members of our society forced by law into an institution without being convicted in court. Education becomes associated with a punitive regime rather than a wide variety of ways everyone, whatever their innate abilities, could enhance their lives.

At the end of the 19th century school boards were concerned about levels of truancy and poor achievement. Their answer? Industrial schools where a more vocational approach could appeal to those who were not so academic. Little changes really and cannot, until people accept that education will only be transformed along with society in general. Abolish capitalism and promote the co-operative, moneyless and worldwide common ownership that is socialism. And only then will the economic and social deprivation that is such a negative influence on so many children’s lives be done away with. Only then will education be determined by those who want to be educated, instead of it being subjected to the pet nostrums and egos of politicians.

Dave Alton, 

Newcastle-upon-Tyne.

Defeatist?

Dear Editors,

I agree with most of what Adam Buick writes in “Capitalism and the quality of life” (January Socialist Standard). Just a couple of supplementary points. He mentions Lefebvre’s A Critique of Everyday Life and Debord’s Society of the Spectacle as good on criticising commodity culture. I think socialists will find any of Andre Gorz’s books better value on that subject.

The other point is what, if anything, we can do about the spread of money-commodity relations into all aspects of life. The article says “There’s nothing that can be done to stop this within the context of capitalism …” Unduly pessimistic and defeatist, I think. We can protest at every manifestation of capitalist culture we come across.

 

I remember about 30 years ago being invited to a teachers’ union meeting in California. Just before the interval the chairperson introduced a guy who promptly started to sell insurance. I was amazed and voiced my displeasure. They all looked sheepish, but nobody said anything. I’m not saying the revolution took a step forward that day. But if a few hundred, then a few thousand, then a million of us publicly declare our opposition to capitalism…

Stan Parker (by-email)

Totalitarian

Dear Editors,

In assessing Bukharin (December Socialist Standard) we must be aware he belonged to the totalitarian Bolshevik Party. He supported the Bolsheviks’ forcible dissolution of the Constituent Assembly when electors placed them in a minority. Bukharin supported the erosion of workers’ rights and use of terror against political opponents, whether right or left, including the bloody suppression by Trotsky of the Kronstadt Rebellion which was not led by right wing people, but by Socialists. The workers in Russia enjoyed less rights and freedom than the capitalist West. Bukharin was in this so-called Marxist government. The SPGB rightly calls it state capitalist. The Socialist Party existed in Britain whereas in Russia people of similar views were in labour camps or executed.

Andrew Harvey,

 Carlisle

Russia and capitalism

Dear Editors,

In the article on the First Russian Revolution of 1905 (Socialist Standard, December) you conclude that one of the many lessons to be learnt from that event is that “any worthwhile progress in human society must come, and can only come, from the working class”, and “relying on our rulers to initiate worthwhile change is as useless as the Russian peasants’ reliance on the Tsar.”

This is an unusual argument for a Marxist to make because all Russian (and other) Marxists regarded capitalism as a progressive force notwithstanding the fact that capitalism was introduced into Russia as a direct result of state policy, on the initiative of rulers – from Alexander II’s reforms in the 1860s, to Witte’s industrialisation program in the 1890s and Stolypin’s agrarian reform of 1906.

More surprising is the fact that you fail to mention the one institution in 1905 which was wholly and spontaneously a creation of the Russian working class.  This was the soviet or workers’ council.  Despite its relatively brief life, the Petersburg Soviet in 1905 assumed the character of an organised revolutionary authority and a rival power of government.  From that experience Lenin drew the conclusion that the dynamic power of the soviets, under the direction of a group of professional revolutionaries, could be harnessed to bring about a revolution which would change society from top to bottom and ultimately lead to socialism (subject to the victory of socialist revolutions elsewhere in Europe). 

In October 1917 Lenin’s political tactics succeeded when he wrested power from the Provisional Government and, ultimately, from the soviets themselves.  The voluntaristic strain in Marxism represented by Lenin and the Bolsheviks triumphed over the deterministic (and orthodox) strain represented by Martov and the Mensheviks.

Yet you suggest that the main lesson of 1905 is that “no force can cut short the natural development of society until it is ready for change”.  Do you believe that the Bolsheviks were not such a force?  And if not, what sort of “natural development” are you talking about?

Peter Bryant, 

Sydney, Australia

Reply: 

We were alluding to the development of capitalism in Russia, which the Bolsheviks were unable to avoid. In fact, they became its agents – Editors.

Questioning everything

Dear Editors,

Your reaction to my letter in the December issue when I said that I restrict my buying to essentials, was very guarded. That was a correct view to take for as I point out in my booklet Question Everything, (available without charge from me at 51 Newton Road, Bath BA2 1RW), one should accept nothing without asking what are its implications and whose interests are involved.

You point out that if it caught on employers would be able to pay us less, but they always do so anyway in order to cut costs. What they never see is that if workers have less they can only buy less. Employers see things from their own short term point of view, condemning the unemployed as layabouts and a drain on public funds until they want government support, when one reason they give for having it is to alleviate the suffering of those same unemployed.

The simple fact remains that capitalism needs that we keep buying and when I heard that  the economy was slowing I thought that socialists would want to help it to do so further so that capitalism can give way to one that was more efficient.

No system based on the competitive greed, selfishness, aggression and conflicting interests of money can be more than marginally efficient, and in this scientific and technological age in which we can produce anything that we want and send it anywhere in the world without being impeded, distracted and negated by increasing multitudes of financial complexities, the money system has become superfluous, an impediment to everything that we try to do.

Only a moneyless society could be fully efficient .

We need to differentiate between people and societies, between capitalists and capitalism,  to stop defeating our objectives by making enemies. We all are humans conditioned by and conforming to our genetic and environmental inheritance so that no one, whether fat cat or beggar can be criticised or blamed for what they are or do. We can advance that inheritance only by developing intellect and reason.

Melvin Chapman, 

Bath

Capitalism and the quality of life (2006)

Richard Hamilton

From the January 2006 issue of the Socialist Standard

Capitalism is a society where nearly all the things that humans need or want are articles of commerce, things made to be bought and sold. This is not a complete definition since under capitalism one thing in particular becomes a commodity – the human ability to work and to create things, what Marx called “labour power” – and this is in fact the defining feature of capitalism. It’s a commodity society in which labour-power is a commodity.

This has two consequences. The first is that there is not simply production for sale but production for profit. And secondly, most things that humans need or want tend to become commodities, i.e. have to be bought. It is not difficult to see why. The wages system means that most people are dependent, for satisfying their needs, on the money they are paid for the sale of the one saleable commodity they do possess (their labour power), money which they then use to buy what they must have to live. So the “commodification” of labour power means the commodification of food, of clothes, of accommodation, and of other, less material wants too.

One of the things that the spread of capitalism meant, in concrete terms, was the spread of money-commodity relations. It’s a process that’s still going on in parts of the world and which even conventional economists speak of as integrating formerly largely self-sufficient subsistence farmers in Asia, Africa and Latin America into the “money economy”.

What we are talking about here is the commodification of people’s material needs. Some people might not find this objectionable. Some even find it a progressive, even a liberating development. In fact this is one of the standard defences of capitalism – that the money economy gives people the freedom to choose what to consume by how they spend their money and that this is the most efficient way of organising the satisfaction of people’s material needs and wants. Of course this isn’t true in that it assumes that the economy responds to consumer demand, whereas in fact it responds to changes in the rate of profit, while most people‘s “demand” is limited by the size of their wage packet or salary cheque.

That capitalism is not the most efficient way of providing for people’s material needs – and that socialism as a system of common ownership, democratic control and production just for use would do this much better – is the traditional socialist case against capitalism. And it retains all its validity. But, after the last World War, in the 50s and 60s capitalism in North America and Western Europe appeared to live up to its promise of material prosperity for most people through the emergence of the so-called “consumer society”. But then another, different criticism of capitalism appeared: that while it might have solved more or less adequately the problem of “bread”, of dire material want, for most people in these parts of the world, it had still not created a satisfactory society.

Books began to appear in America with such titles as The Lonely Crowd, The Organization Man, The Hidden Persuaders, The Waste Makers, One-Dimensional Man, all critical of various aspects of the “consumer society” as a society in which people were encouraged to regard the acquisition of more and more consumer goods as the main aim in life. In Europe, such criticism took on a more explicitly anti-capitalist form. In France the critical books bore such titles as A Critique of Everyday Life and the Society of the Spectacle. The argument was that in the “consumer society” (called instead, more accurately in fact, “commodity society”) the logic of buying something to passively consume had spread from the purchase of material goods to other aspects of everyday life – to how people spent their leisure time and to how they related to each other.

This type of criticism added another dimension to the socialist case against capitalism: that it not only failed to organise the satisfaction of material needs properly but that it also degraded – dehumanised – the “quality of life”.

It’s not clear to whom the credit for developing this “cultural criticism” of capitalism should go. The Frankfurt School of Marxism (Fromm, Marcuse and others), the Situationists, even radical journalists in America like Vance Packard, would be among the candidates. In any event they were all working on the basis of the observable fact of the degrading effect capitalism was having on the quality of everyday life by spreading commercial values more and more widely.

It’s a powerful criticism of capitalism. Perhaps even these days, in this part of the world, a more powerful criticism than the traditional socialist one that capitalism brings material poverty to most people. Certainly, on a world scale, there are hundreds of millions in dire material poverty. And there are few millions in this country – around 15 percent of the population – who are materially deprived. But we can’t say this of the majority of the population here. Most people in Britain don’t have a problem about getting three meals a day, decent clothes, heating, don’t have to go to the pawnbrokers or live in vermin-invested rooms. In fact, the commodification of the “wants of the mind” is based on the fact that most people have money to spend on satisfying wants over and above those of “the stomach”. If people didn’t have this discretionary purchasing power after having satisfied their material needs, then there would be no market for cultural and entertainment products for capitalism to stimulate, manipulate and exploit. (As to why people have this “extra” money to spend on entertainment, it will have something to do with increased intensity and stress at work requiring more relaxation – more escapism – for people to recreate their particular ability to work.)

The criticism of “consumer society” was not just that it represented the invasion and colonisation of every aspect of social life by money-commodity relations, but that it also encouraged passive consumption rather than active participation. There is a great deal of validity in this point – that the “consumer society” is one where, sometimes literally, people sit in armchairs watching the passing show provided for them. This is a criticism of people’s lack of participation is shaping their lives, a lack that was also reflected politically where “democracy” is conceived of as merely choosing every four or five years between rival would-be elites (using in fact marketing techniques to attract support). Instead of people making their own sport or their own entertainment – or politics – they consume them as a pre-packaged commodity.

There must be something wrong with a society in which, instead of people living their own lives and interacting with their neighbours in a human way, they sit in front of a screen watching actors perform artificial scenes based on exaggerations of everyday life and identifying with the fictitious characters in these programmes. And in which the most widely-read newspapers don’t discuss real events so much as the artificial ones portrayed in these programmes and the lives and loves of the leading actors who play in them – as well as those of other so-called “celebrities” from the world of sport and entertainment.

As long as capitalism lasts, the quality of life will continue to decline. There’s nothing that can be done to stop this within the context of capitalism as it is due to capitalism, representing, as it does, the dissolving effects on society of the spread of money-commodity relations into all aspects of life. So, despite the slow, but undeniable increase in material living standards in certain parts of the world the case for socialism as a non-commercial society in which human welfare and human values will be the guiding principle retains all its relevance. With the common ownership of the means of life, there could and would be production directly to satisfy human needs and wants and not for sale with a view to profit – the death of the commodity, the end of what William Morris called “commercial society” – and a classless community with a genuinely common interest in which humans can relate to each other as human beings and not as social atoms colliding with each other on the market-place as commodity buyers and sellers.

Adam Buick

Reading Capital as Crisis Theory: Part 1 (2022)

From the January 2022 issue of the Socialist Standard

Marx never completed a planned book on crisis, but the three volumes of Capital can be read as a theory of crisis that reveals the fundamental contradictions that explode (and are temporarily resolved) in a crisis.

Economic crisis is a troublesome phenomenon for the defenders of capitalism. The problem is not simply the curtailment of economic activities and the bankruptcies and unemployment that ensue. A far bigger problem is ideological because the undeniable reality of crisis exposes that capitalism is not, as economists insist, the ideal engine for satisfying human needs through the creation of wealth. Crisis exposes the limits imposed on wealth creation by production for profit; limits, incidentally, that are always present in capitalism, whether in boom times or bust.

Crisis is the real negation of the argument that capitalism is the ideal means of developing the productive forces of society, an argument that dates back to the emergence of political economy in the 18th century. Adam Smith begins his great work The Wealth of Nations by praising capitalism as the most efficient way to raise the productive power of labour. To be more precise, he uses the term the ‘division of labour,’ not capitalism, but what he has in mind is independent producers creating commodities for the market, a state of affairs that he says gradually emerged from a human propensity to ‘truck, barter and exchange one thing for another’.

David Ricardo, that other great classical economist, shared Smith’s faith in the ability of capitalism to freely develop productive power, and he was fortunate, in a sense, to die at the early age of 51, in 1823, because had he lived just two years longer, Ricardo would have confronted the crisis of 1825, considered the first economic crisis to clearly arise from the workings of capitalism itself, rather than some external cause. The periodic, general crises of the sort that followed in the 19th century would have put Ricardo’s faith in capitalism to a severe test.

The reality of crisis did indeed test the economists who came after Ricardo, forcing them to choose between continuing to extol the virtues of capitalism or seriously considering the implications of periodic crises. Since the livelihoods of most depended on not understanding those implications, this marked the emergence of what Marx called the ‘vulgar economists’, those ‘hired prize fighters’ who abandoned genuine scientific research to instead act as apologists for capitalism. Each time a crisis occurs, economists point to some external or contingent factor as the cause for the temporary disruption of the supposedly splendid ability of capitalism to self-regulate on the basis of supply and demand.

Crises normal under capitalism

Marx, in contrast, explains economic crises that regularly take place as a normal manifestation of the capitalistic accumulation process. He points to the inherent tendency of capitalism toward crisis, which underscores the limitations of this mode of production. An understanding of the significance of crisis is thus at the core of Marx’s investigation of capitalism.

Marx had in fact intended to write an entire book on crisis. We know this from the plans he sketched for a ‘critique of political economy’ in the 1850s. According to his 1857 version of the plan, the book on ‘the world market and crises’ was to be the sixth and final book of the critique, following the other books on capital, landed property, wage labour, the state, and foreign trade.

Marx never completed (or even began) that book however, so he has not left us a coherent, systematic theory of crisis. Nevertheless, we can consider the three volumes of Marx’s great work Capital as broadly constituting a theory of crisis.

The importance of crisis to the overall investigation of capitalism will come into sharper focus if we consider how Marx generally defined crisis. In his manuscript Theories of Surplus Value, Marx describes the crises of the world market as the ‘real concentration and forcible adjustment of all the contradictions of bourgeois production’, and says that those contradictions are ‘strikingly revealed’ in a crisis. In A Contribution to the Critique of Political Economy, we can find a description of how ‘the antagonism of all elements in the bourgeois process of production explode’ in the crises of the world market’. And in the third volume of Capital, Marx calls the crises of the world market ‘the momentary, violent solutions for the existing contradictions’.

Crisis for Marx, in short, is an explosion of all the contradictions of capitalism that brings about a temporary ‘resolution’ of those contradictions, so that through crisis the fundamental contradictions and limitations of capitalism are exposed. This suggests that a theory of crisis must clarify all of the contradictions of capitalism. This is also the task that Marx undertakes in Capital, where he unravels the fundamental contradictions of capitalism, starting with the contradiction of the commodity as a unity of use-value and exchange-value. Reading Capital as crisis theory, in other words, centres on coming to grips with the contradictory nature of capitalism that is manifested in a crisis.

Abstract possibility of crises

Of course, unravelling all the contradictions that explode in a crisis is easier said than done. So immediately we face the question of what step to take first in reading Capital as crisis theory. Fortunately, Marx has left us a passage in Theories of Surplus Value that outlines a basic approach to the investigation of crisis. (This passage can be found in volume 32 of the collected works of Marx and Engels, starting from around page 140.)

In the passage, Marx indicates that the first step toward understanding crisis is a recognition of what he calls the abstract form of crisis or the ‘general, abstract possibility of crisis’ that already exists under simple commodity circulation. The basis for the possibility of crisis, at the most abstract level, he explains, is the fact that there can be a divergence between sale and purchase.

This is something that Marx also points out in the first volume of Capital, where he notes that sale and purchase can diverge since ‘no one directly needs to purchase because he has just sold’. In other words, a person who obtains money by means of selling a commodity is under no obligation to immediately use that money to purchase some other commodity.

By indicating this fact, Marx was refuting what he called the ‘foolish dogma’ of the French economist Jean Baptiste Say, who had insisted that sales and purchases (and hence supply and demand) are in equilibrium ‘because every sale is a purchase, and every purchase a sale’. This was the popular argument used to deny the possibility of overproduction, which Ricardo also adhered to.

It is true, of course, that in the case of barter a direct identity exists between the exchange of one’s own product and the acquisition of the product of someone else. No one can be a seller without being a buyer or a buyer without being a seller. Marx points out how the introduction of money splits that unity of direct exchange into the two antithetical segments of sale and purchase, allowing circulation to ‘burst through all the temporal, spatial, and personal barriers imposed by the direct exchange of products.’

The introduction of money brings to the surface the latent contradiction under barter between the desire to obtain a specific use value and the desire to obtain a product of equivalent value – in other words, the contradiction between use-value and exchange-value. The mediation of money, which splits exchange into the two separate acts of sale and purchase, gives this contradiction ‘room to move,’ as Marx puts it, and in turn generates the possibility of crisis.

But Marx is careful to note that the divergence of sale and purchase cannot be viewed as the direct cause of crisis. Rather it merely denotes the ‘formal possibility of crisis,’ or what he calls ‘the most abstract form of crisis, without content, without a compelling motivating factor’.

Delay between sale and purchase

In the same methodological passage in Theories of Surplus Value, Marx presents a ‘second form’ of crisis related to the divergence of sale and purchase. This is the possibility of crisis arising from money’s function as a means of payment. This function of money, which is explained in Chapter 3 of Capital, concerns transactions in which a seller hands over a commodity to a buyer while providing a ‘promise to pay money’ at a later date, so that the seller becomes a creditor and the buyer a debtor. In other words, the function of money as a means of payment is at the basis of credit. Money as a means of payment allows for sale and purchase to diverge even further, as if the rope connecting them were replaced by a bungee cord.

The time gap between the handing over of a commodity and the payment of money for it raises the possibility for more problems to arise. Marx notes that if ‘in the interval between the handing over and the payment the value has changed’ so that the commodity is not worth as much at the time of its sale as it was worth at the moment when money was acting as a measure of value, then ‘the obligation cannot be met from the proceeds of the sale of the commodity, and therefore the whole series of transactions which retrogressively depend on this one transaction, cannot be settled.’ In other words, the failure to make good on one promise to pay can set off a chain reaction, leading to other failures to settle debts.

This second form of crisis, based on money as a means of payment, is more concrete than the first, but still quite abstract, Marx emphasises. Neither the first nor the second form of crisis can be considered a direct cause of crisis. Rather, they are what Marx calls the ‘most generalised expression’ of crisis or its abstract possibility. He explains that the abstract form of crisis ‘only implies that the framework for a crisis exists,’ but does not contain the factors that transform the possibility of crisis into an actual crisis; a whole series of other conditions is required in order for the possibility of crisis to develop into actuality and those conditions do not yet even exist, he says, from the standpoint of the simple circulation of commodities.

Interruptions to circulation of capital

We have seen, then, that even at the level of commodity circulation there is the potential of a disruption or crisis. Conversely, in a moneyless society, where production is directly for use (with no market mediation), this possibility of crisis would not exist.

In order to better understand the relation between capitalism and crisis we have to move beyond this abstract understanding of the potential for crisis. So here we face the question of how to take a step toward understanding crisis more concretely.

We can get some hints from the same passage in Theories of Surplus Value. Marx points out there that abstract forms of crisis receive what he calls a content or a basis on which to manifest themselves in the circulation/reproduction process of capital. This means that we need to move on to Volume 2 of Capital, where Marx examines that process.

Marx had to set aside the circulation process of capital in Volume 1 so that he would be able to purely examine the immediate production process. That is to say, in order to clarify what goes on in the production process he had to assume that capitalists have unhindered access to the needed means of production and labour power and can also sell their commodities at their value to realise the surplus value contained in them. This means that he had to assume that the circulation or reproduction process proceeds smoothly. In Volume 2, however, Marx shifts his attention to the circulation process that he had set aside so as to examine the circuit of capital from three different starting points: money capital, productive capital, and commodity capital.

Marx explains in the passage in Theories of Surplus Value that the two abstract forms of crisis identified in the process of simple commodity circulation reappear or are ‘repeated’ under the circulation process of capital, but now the content of those forms is more developed or complex. This is because capital circulation is clearly more complex than simple commodity circulation. Whereas simple commodity circulation, or commodity-money-commodity (C-M-C), is nothing more than the exchange of commodities mediated by money, the circulation of capital involves capital, in its continual movement, taking on and casting off the forms of money, elements of production, and commodity.

The significance of this added complexity as far as crisis theory is concerned is that there are more possibilities for sale and purchase to diverge under the circulation of capital as compared to simple commodity circulation.

In Volume 2 of Capital we can find many examples of how the abstract forms of crisis could acquire what Marx calls a ‘content or basis on which to manifest themselves.’ For instance, in the course of the circulation (and reproduction) of capital, the value of the elements of production (or labour power and the means of production) can fluctuate, making it difficult to carry out production at the previous scale. Another way in which the possibility of crisis acquires a more specific content is that capitalists must build up funds for the sake of accumulation and the replacement of constant capital. So they have to hoard money, which means they make sales without subsequent purchases – an example of sale diverging from purchase. Yet another example concerns large-scale projects, such as the building of a highway or railroad, which for many years require purchases without sales (or demand without supply).

We can see, then, that the analysis of the circulation of capital in Volume 2 points to some of the potential problems that can arise, revealing how the abstract forms of crisis acquire a more specific content. So we have taken some steps towards a more concrete understanding of crisis under capitalism, but it is important to note that we are still only dealing with the possibility of crisis. What has not been made clear yet is what factors transform that possibility into actuality. That is a step that brings us to Volume 3 of Capital (as will be discussed in Part 2 of this article).

The ideas on Marx’s theory of crisis presented here are based mainly on the interpretation by the Japanese Marxist Samezo Kuruma. My translation of Kuruma’s writings on crisis theory will be published in 2022 in Brill’s “Historical Materialism” series.

Michael Schauerte

Cooking the Books: Who invented money? (2021)

The Cooking the Books column from the May 2021 issue of the Socialist Standard

Whenever goods are systematically exchanged and so become ‘commodities’, one commodity evolves as what Marx called the ‘universal equivalent’ that can be exchanged for any other commodity. So nobody invented money; it came into being spontaneously. At first this money-commodity was gold or silver measured by weight. The next stage in the evolution of money was coinage, where a state stamped an amount of metal to authenticate its weight. In the European tradition this is attributed to King Croesus of Lydia, an area now in western Turkey, in the sixth century BC.

Historical research now suggests that coins may have been invented in China and at a much earlier date, as pointed out by the Mises Institute in an email note of 15 March:

 ‘China was one of the first countries to develop a metallic money that was valued and exchanged by weight. Evidence suggests that this monetary regime originated during the Shang Dynasty (1766–1122 BC) or the Zhou Dynasty (1122–221 BC). China was also one of the first countries to use precious metals as money and may have invented coined money.’

Also:

  ‘While ideas about the development of money were expressed as early as the seventh century BC, the most prevalent view of money’s origin is attributable to a politician of the sixth century BC. Shan Qi (b. 585 BC) contended that money was invented by one of the ancient philosopher-kings to measure the value of goods. However, several Chinese writers later disputed this story and argued that money originated as a market phenomenon. Sima Qian (104~91 BC) [sic: actually 145~86 BC], Luo Mi (1165~1173 AD) and Ye Shi (1150~223 AD)[sic: actually 1223] basically argued that money grew out of the trading of commodities and could not have emerged in the absence of commodity exchange. Money was only later adopted by kings as an aid in ruling their countries’ (bit.ly/3dc24Sm).

This same debate took place in Europe, with some arguing that coins were introduced by states to enable taxes to be paid in that form and others that they evolved out of commodity exchange. The debate is still ongoing with the proponents of so-called ‘Modern Monetary Theory’ and David Graeber in his book Debt arguing for the former, a position known in the literature as ‘Chartalism’. The other view is defended by Marxists and the Austrian school of economics as represented by the Mises Institute – strange bedfellows as Ludwig von Mises was an arch-enemy of socialism as well as of state capitalism (which he tended to confuse with socialism).

The case for the state being the inventor not just of coins but of money as a ‘universal equivalent’ is given some plausibility by the fact that today the currency – money as a means of exchange – is entirely the creation of the state, ‘fiat’ money as it is known. Gold and silver coins have long ceased to be used as a means of exchange; this is now made up of paper notes and metal discs issued by the state and which have no value in themselves. They are just tokens or counters that can be used to buy things.

However, the commodity-exchange origin of money is still there. Commodity production and exchange is basic to capitalism and the ratios in which they exchange for each other are still related to their labour content. The state issuing more money tokens than needed to carry out these exchanges does not increase the amount of values in existence or to be exchanged. What it changes is the unit in which the price of goods is expressed, reducing it and so raising the number of them to express prices, i.e., increasing prices all round. Which is why the ‘chartalists’ of MMT would come unstuck if ever their policy was to be implemented.