Critique of Political Economy Chapter 2 part 3 and 4- notes

3. Money

In a text that is so obviously all about money it may seem funny to have the above section title here in the middle of the book. But up until now we have been considering money as a means of circulation. The social relations we dealt with were the social relations of simple circulation or C-M-C (commodity-money-commodity) where the goal of exchange is for the commodity to change hands. Here in part 3 Marx begins to consider forms of money where the goal of exchange is to acquire money. Here money is more than just a symbol. This requires real money, gold. Gold is the universal commodity, the bodily representative of material wealth.

Of course the quintessential form of this M-C-M is capitalist production where wage labor is exploited for the profit of capital. Marx is still not ready to get to an analysis of capitalist social relations. So instead he wets our appetite with a discussion of hoarding, means of payment and world money. These are all forms of money that require money as real money but exist logically prior to the discussion of capital. They are all still observable within C-M-C (simple circulation).

Gold becomes money not because society has consciously decided so but as a result of the natural evolution of the commodity form. As money gold is a unity of measure of value and medium of circulation. However as a unity it also has a separate existence in these functions. “As measure of value it is only ideal money and ideal gold. As a medium of circulation it is symbolic money and symbolic gold.” For instance, a price reflects an ideal amount of gold which a commodity exchanges for. This commodity can be purchased with token money, realizing the value of the commodity without gold ever changing hands. Gold is necessary for this function but only ideally.  
Since all commodities represent imaginary quantities of gold then money is the only real commodity! Commodities are particulars. They represent “independently existing exchange value”. But gold is “the material form of abstract labor”. Commodities are specific in their use-values while gold can be converted to any use-value. Money is the god of commodities.

a. Hoarding.
Coin becomes money when circulation is interrupted. When a sale is not immediately followed by a purchase then money freezes in it’s circuit. This isolation of gold/money is “a material expression of the disintegration of the process of circulation…” This reminds us of Marx’s critique of Say’s Law in other places.  Marx’s theory of money allows him to theorize the breakdown of circulation and later the breakdown of capitalist production in a way that other theories which lack a real understanding of the role of money in capitalism are unable to do. (By ‘other theories’ I mean not just JB Say but also all theories which rely on a general equilibrium framework. This encompasses all forms of neo-classical economics as well Sraffians and many post-Marx Marxists such as the New Interpretation school and the Simultaneous Single System school. None of these schools of thought can adequately account for the role of money in the organic way that Marx does.)

Marx spends some time discussing this idea of an interruption in C-M-C. Selling is determined by labor time but buying is determined by wants. In order to buy without selling one must have already sold without buying. In other words, in order to have any money to buy without selling I must have already sold something without buying. The break in C-M-C presupposes a previous or future break in C-M-C. This means that the flow of coin must constantly coagulate in reserves of money. Since we don’t always buy right away after selling, since we sometimes save for awhile before reentering the market, we need to consider the role of hoarding. These reserve hoards are constantly appearing and disappearing. Here the hoarding mechanism does not require us to convert coin to gold yet. Money merely becomes ‘suspended coin’. It exists just within this basic framework of simple-circulation as a “technical aspect of money circulation.” Still, it exists as money and not just medium of circulation. It is a baby-step towards money as Money proper.

Primitive exchange is based on surplus-product. People work for themselves first and then sell this surplus in the market. Surplus must be hoarded. Gold becomes the adequate form for the preservation of this surplus. Gold here takes the form of abstract social wealth. Because of the natural properties of gold and silver they are perfect for hoarding: they are indestructible incarnations of social wealth. This is hoarding for its own sake, for the love of social wealth. It is therefore different than the type of ‘suspended coin’ hoarding that we talked about in the previous paragraph. Here gold is money to the extent that it is NOT a medium of circulation.

Hoarding is motivated by greed. It belongs to simple circulation as opposed to forms of accumulation which belong to capitalist production. It is the barbaric form of production for production’s sake. It is a hallmark of ancient societies. In contrast capitalist production is about the reinvestment of money into the production process. Capitalist accumulation is not hoarding.

Hoarding also brings money in and out of circulation allowing the amount of currency in the market to adjust to the price level. This becomes a crucial part of Marx’s critique of the Quantity Theory of Money which argued that the amount of money in circulation determined prices and the value of money. For Marx the value of money and of commodities are already given in ‘ideal gold’ and ‘ideal value’. The quantity of money in circulation is determined by the quantity of money needed to facilitate these transactions (divided by the velocity of money). If more money is needed it flows out of hoards. If less money is needed it flows into hoards. The relationship of this theory to fiat and credit money will be taken up later.

Capitalism centralizes its hoards in banks. Banks also have coin reserves. These are not hoards. Coin reserves are part of the total amount of token money in circulation. This is an important addendum to the above paragraph. Token money cannot be hoarded. It remains in circulation even when in the bank. This means that it follows different rules than gold in terms of the considerations of the above paragraph. Marx does not pursue the issue further here so we will return to it later.

b. Means of Payment
So far we have two forms which distinguish money from mere circulating medium: 1. hoards proper and 2. suspended coin (a sort of mini-hoard). This leads us to a discussion of means of payment. As soon as money develops, via hoarding, into abstract social wealth it assumes special functions within circulation.

In the same way that paper can represent gold a buyer and seller can represent future buyers and future sellers. The payment for a commodity can be delayed in time (as when I buy something with my credit card.) Or the payment can be made first and the commodity can arrive later. This separation of purchase and sale in time means that money takes on a new function: means of payment. Means of payment is another example of how “All of the forms in which gold develops into money are but the unfolding of potentialities which the metamorphosis of commodities bears within itself.” This is important: if we are going to later develop a Marxist theory of credit we need to see how credit still bears the mark of its origin in the simple circulation of commodities. Credit is not something exogenous to commodity production.

Previously we saw how tokens came to symbolize money. Now we see how the personal symbolism of the buyer becomes money in the form of a promise to pay. What had seemed a merely imaginary difference between purchase and sale now becomes real. The seller-buyer relation becomes a creditor-debtor relation. Price is a measure of obligation.

When we buy something with credit no actual money is present. Money is only there ideally in the price of the commodity. The price is also a measure of obligation on the buyer. Only when the credit payment is due does money enter circulation. But it does not enter circulation as means of purchase. The purchase has already happened. It enters circulation “as the only adequate expression of the commodity, as the absolute form of existence of exchange value…. in short as money, and money in its distinct form of a universal means of payment.” Money appears as the god of commodities but not apart from circulation as in hoarding. It appears as god of commodities within circulation.

[Question: Does Marx reserve the term “credit” for capitalist credit systems, making credit a type of means of payment? Or are the terms credit and means of payment synonymous?]

If these payments are always paid in time then production and exchange are unaffected. But in a crisis we see the real difference between means of payment and means of purchase. Purchases are made but payments don’t follow. The chain of payments breaks down, etc.

Marx makes another interesting point here: in C-M-C we assume that the buyer has sold something previously to allow him to have money to buy the commodity. Selling commodities becomes a necessary prerequisite to buying them. In contrast to hoarding where C-M served merely the private greed of the hoarder here we have a different way in which accumulating money becomes an essential part of exchange. “The motive or essence of sale for the sake of payment becomes from a mere form of the process of circulation its self emanating substance.”

This is important because when, in Kapital, Marx analyzes capitalist social relations we learn that the compulsion to sell in order to buy is a function of the fact that the working class does not own its own means of production and thus must sell labor power. Marx is not making this argument here. He is merely showing how the compulsion to sell is inherent, formally, in simple circulation and that this formal aspect is developed further, takes on more concrete specificity, when we discuss credit. When considering the obligation to pay, the creditor-debtor relation, the need to sell in order to buy becomes the “self-emanating substance” of circulation.

The temporal differences between purchase and sale that bring out the need for credit/means of payment originate in simple circulation (though they are obviously much stronger in capitalism). The regular repetition of purchase and sale leads to goods being purchased in advance. Differences in seasons, productivity, etc result in the needs to delay payment.

It is interesting to me that Marx needs to develop this aspect of the value form within circulation itself and prior to an analysis of capitalist production. There may be several reasons. The dialectical structure of the presentation is such that the logical unfolding of categories starts with the most general (C-M-C which expands back historically to pre-capitalist society, and is logically more abstract/less-determined by more concrete determinations) and gradually expands the sequence of categories to take on more concrete determinations specific to capitalism (M-C-M, labor power, profit, class, etc.). This means that the compulsion to sell in order to buy, easy to see in capitalism where the worker must sell labor power in order to buy means of subsistence, also exists at a more general level of abstraction, within credit relations and, formally, within simple circulation. And it means that this compulsion is there in pre-capitalist societies, to the extent that credit and/or simple circulation is present.

Money as means of payment increases at the expense of means of purchase. Coin remains in retail use but means of payment takes over large commercial transactions. “As the universal means of payment money becomes the universal commodity of all contracts…” The extent to which money takes this exclusivity shows the extent to which exchange value has “taken hold of production.”

How much money enters circulation as means of payment? First we balance accounts. Then we take the remaining payments and total up their prices. We divide this by the velocity of money and this answers our question. The price level (of the commodities needing to be paid for with means of payment) and the value of money is determining the quantity of money needed for these payments. This seems to be the same method Marx uses for determining the quantity of gold in circulation in the abstract case where gold is the material used for circulation. It is different than the method used for token money used in circulation. The reason it is the same is because real money, not tokens or more credit, is needed at some point to bring the cycle of means of payment to a close. Means of payment cannot exist in perpetuity without a commodity basis. This becomes especially apparent during a crisis when the chain of payments breaks down and money as money, as gold, becomes essential.

This chain of payments (A owes B, B owes C, etc.) reveals a deeper social connection than the chain of metamorphosis of commodities. The metamorphosis of commodities is a slowly developing chain whereas the chain of payments represents hands that have “already clasped each other”, already existing social connections. This makes a break in the chain of payments felt by all.

If all payments happened at the same time no money would be required. Money would only be an ideal measure of value, as above. It would be ideal money of account. But money as money, gold, is latently present, waiting to assert itself in times of crisis. The need for payments is another factor requiring the establishment of reserve funds/hoards.

To find the total amount of money needed for circulation we take the above calculation of the amount of money needed for means of payment and add this to the total amount of money needed for all other transactions (total of all other prices divided by the velocity of money). Thus the presence of money as means of payment does not alter the law that the prices of commodities and the value of money determine the amount of money needed for circulation.

The value of money can change (due to changes in the productivity of gold or silver mines) before payments are due. Debts can be repaid in money that is of greater or lesser value and this, obviously, hurts or helps creditor and debtors depending on which way the value of money has changed. In such an instance the commodity function of money comes into conflict with its function as a measure of value.

It seems there is a tendency for contradictions in the commodity form to constantly be resolved by breaking the functions of use-value and value into separate objects: commodity and money, then money as measure of value vs money as medium of exchange. Then these aspects of money are further expanded to include hoarding and credit. But still the commodity basis of money comes into conflict with these higher forms.

C.World Money

To review, with hoarding gold becomes money proper and is distinguished from coin. This gold “enters” circulation but as a non-circulating medium! In other words, with the concept of hoarding: gold, as opposed to coin, enters the our picture of the component necessary parts of circulation. But it doesn’t actually circulate.

World Money is a new category. Here gold ‘breaks through the barriers of home circulation” to become the universal measure of value on the world market. While coin can replace gold for purposes of circulation within the home market, between countries accounts must be settles in gold. Why? Because, obviously, the rubles are useless to the French and francs are useless to the Russians. Previously we traced the path of gold measured in weight evolving into weight names that stand for different, lesser amounts of gold, etc. Here the opposite process takes place. The actual, real weight of the gold is all the matters for its value when it comes to world money.

As world money gold is not acting as a medium of circulation. It is a universal means of exchange. This takes two forms: Gold serves as means of payment in settling debts between countries and it serves as means of purchase when exchange is one-sided. In home circulation coin was means of purchase in a one-sided exchange. But in the international arena gold does this. Means of payment takes on the function of settling international balances.

Settling balances means taking into the account how many purchase and sales were made between various countries in a certain span of time and ‘settling-up’ on the difference through the payment of gold. This requires hoards of gold that can serve this purpose. This can be also a be a movement directly from gold mines to other countries. Gold can flow out of mines and enter international circulation as world money, trading at it’s socially necessary labor time with commodities of equal value, before it penetrates the national sphere. I don’t think Marx is saying here that all gold enters as world money first. I think he is just saying that it can do this in order to serve as means of payment. But he is saying that all gold can serve the function of universal money and so I guess, in this sense, newly produced gold is immediately world money. But it seems to me that it is not world money until it is used as world money. Maybe I don’t have this correct.

Regardless, Marx says that the value of the gold as world money falls and rises with its socially necessary labor time. This relation of the value of gold as world money to its production happens regardless of the manner in which gold enters the home market.

Lastly, gold helps create the world market. Countries trade looking for gold. In the same way that one must sell in order to buy in simple circulation, countries must sell in order to obtain gold to buy things they need to import. This forces nations into the world market.

4. Precious Metals
This subchapter discusses the qualities of the previous metals that make them ideal for their function as money. I don’t find it of particular interest. Perhaps there is a point being scored against Ricardo who had sought an unvarying standard of value. Marx remarks that gold is not by nature money but money is by nature gold and silver. However gold and silver are not able to “fulfill the requirements they are expected to meet in their capacity of money, viz. to remain values of unvarying magnitude.” He then discusses the history of the changes in relative value between gold and silver as the technique of their mining evolved. Marx is not interested in finding some abstract invariable measure of value. But he is not directly addressing Ricardo here as far as I can tell.

Posted in the critique of political economy- notes, Uncategorized | Tagged , , , , , , , , , , , | 2 Comments

Alan Freeman: Investing in Civilization


This is a lecture that Marxist economist Alana Freeman gave in China in 2012 on the topic of the Creative Industries. (It’s a practice talk Alan gave in his hotel the day before his actual presentation.) While the talk begins on a more narrow discussion of the creative industries it becomes a wide-ranging discussion of the role of creative labor in the changing nature of the modern capitalism, to crisis, to the role of the state in crisis, to a critique of stage-ist theories of history and mechanical marxism, and more. It’s a fascinating talk.

Alan Freeman now has his own Youtube channel where you can see more of his lectures. His papers can be read at:

Posted in Interviews, Uncategorized | Tagged , , , , , , | Leave a comment

Read a book with me

I have moved to New York City. I am looking to either join or start a reading group. I want to read the Grundrisse (and perhaps some supplementary texts) with this group. I want to start as soon as possible.


Contact me at: call me cooney at g mail (no spaces.)

Posted in Uncategorized | 19 Comments

Critique of Political Economy. Chapter 2 part 2- notes

2. Medium of Circulation

Interesting that Marx has discussed all of these properties of money as measure of value, unit of account and so on, without getting into circulation. Thus, in Marx’s system, money arises out of the nature of the commodity itself, out of the social relations of commodity production, not out of some abstracted notion of circulation. This roots Marx’s concept of money and circulation in a theory of production, firmly establishing the primacy of the social relations of production in our analysis.

Marx tells us that circulation will both present and solve the contradictions of exchange that are inherent in commodity production. Circulation is the change of form of commodities. Commodities enter exchange with an ideal price which their sellers hope to realize. If this price is realized they become use-values to the new owner and a sum of money to the seller. Thus the change of form corresponds to the two sides of the commodity: it’s use-value and exchange-value (or value, in Marx’s later formulations.)

Circulation implies a continual renewal of transactions and that commodities enter exchange with an ideal price.

a. Metamorphosis of commodities:

Marx is dealing here exclusively with C-M-C (the form of exchange where a commodity-C- is traded for money-M- and then this money is used to buy another commodity-C-.) He is setting aside M-C-M, the process whereby capitalist’s make profit. He is setting M-C-M aside because this entails more advanced relations of production, specifically capitalist relations of production (M-C-M implies M-C-M1, or production for profit which implies wage labor). Marx is here dealing merely with social relations of simple circulation. Later, in Capital, he will show that simple circulation masks capitalist social relations.

In C-M-C, the ideal price of a commodity becomes real social labor. Ideal money becomes actual money. Exchange values were ideal gold. Now they are actual gold.

Here gold’s value is a formal use-value, its ability to measure value, rather than an actual use-value (it’s ability to be jewelry or something). Thus the antithesis of exchange value (or value!) and use-value splits into the antithesis of commodities and money. The antagonisms within the commodity form is externalized to the antagonism between commodities and money. Each extreme (C and M) represents the other ideally. Commodities are ideally money and vice versa. And this solves the contradiction inherent in exchange.

…what was that contradiction again? It was that a commodity with an ideal price must exchange for money with an ideal use-value. By representing the commodity and gold as one-sided polar opposites we can finally see how this exchange becomes logically possible. We return to this point after noting…

When we discuss C-M-C we get into a viscous circle of assumptions where we assume purchases and sales at each end of the circuit. The presence of money implies the metamorphosis of other commodities elsewhere in the economy. It implies an infinity of interlinked circuits.

When we said that we can only solve the mystery of exchange if we consider commodities and money one-sidedly this means that though money is a commodity and the the commodity has an exchange-value, money must take the form of pure, one-sided exchange-value. Gold is not bartered as a simple commodity. It is money. And commodities are already estimated in ideal money prices. The exchange value of a commodity is determined by the price of the commodity and the value of gold, not vice versa. This is in contrast to the view that gold and commodities enter circulation as simple commodities to be bartered and that their values are determined in this process of bartering. For Marx, money and commodities have values before they enter circulation.

Parenthetically here Marx tells us that discussions of price-value divergence do not belong in the analysis at this point since we are only talking about simple circulation. Nonetheless it is still appropriate to discuss the separation of purchase and sale, though at this point it is merely a formal possibility. (The reason that price-value divergence do not belong in this analysis at this point is not because Marx has an equilibrium view of exchange as is sometimes argued. Rather, since he has abstracted from production relations and is merely treating relations of circulation his analysis at this level of abstraction lacks a discussion of the dynamism of capitalist productive relations and the way they manifest in price-value divergence.) Marx then discusses the isolated sides of each part of the metamorphosis.

When we look at C-M we see that there is no quantitative limit to the alienability of gold, but only a quantitative limit. In other words, anything can be sold for cash. Each isolated exchange is part of a vast intertwined web of exchanges.

Marx relates C-M-C to S-U-I or Species-Universality-Inidivuality. I can’t say the meaning of this is perfectly clear to me, but I assume me means that Money is the link that connects the individual laborer to the species. Money is the universal measure of value and hence the universal gateway which connects the two extremes.

The role of buyer and seller are not eternal to human nature but part of a specific organization of production. In C-M-C capitalist relations are expressed merely as formal relations of buying and selling. The origin of profit and the specific capitalist form of circulation (M-C-M) are obscured. The formal equality of markets and civil society is established.

In the antagonism of M-C we see the possible separation of purchase and sale. Just because one person turns C into M doesn’t mean that they will turn around and turn M back into C. The possibility for crisis is opened up. Say’s Law if refuted. Say’s Law is bullshit because it leaves out the role of money!

B. Circulation of M

As a means of circulation money always appears as a means of purchase. Commodities change form while money changes its place. The metamorphosis of commodities take the form of the circulation of money.Through its special function acquired in the sphere of circulation money acquires a new function which Marx must now examine.

The constant movement of money could appear chaotic unless we see the order imposed upon it by production (or by banks which we abstract from here.) The amount of gold required for circulation is determined by the sum of all prices and the velocity of money (and the value of gold.) The velocity of money refers the amount of transactions a unit of money can make in a day. The velocity of money can substitute for the amount of gold required for circulation only up to a limit. The volume of money required is set by the prices of commodities not vice versa, as in the quantity theory of money. The quantity of gold required depends on its own value. And Money must be capable of expanding and contracting is supply so that it can adjust its volume to the needed price level.

Since all of the determining factors here originate in production, the analysis of strict simple circulation is shallow and limited.

c. Coin and Symbol of Value

As medium of circulation gold becomes coin. It is coined according to money of account, or unit of account. In other words money takes the form of coins which are coined in specific unit names (shillings, pounds, pennies, whatever.) Coins are gold pieces stamped with weight names. This shows the obvious role of the state in money. The state gives money its local and political character. A new contradiction emerges, that between the national sphere of circulation of a coin and the universal sphere of commodity circulation (and gold circulation as world money…)The difference between coin and bullion is the difference between coin denomination and weight denomination. The technical conversion between the two forms consists of either stamping or melting.

When a coin is debased its ideal value is greater than its real value. It becomes fictitious gold. It is idealized in practice! (It is important that Marx always bases these theoretical moves in real practice, in historical development.This doesn’t mean that the logical succession of categories is the same as the history of concrete money relations. It just means that the logical ordering of these categories is not merely a matter of idealist philosophizing but rather that logical categories can and do take concrete form in specific historical examples.) This means that the mint value of money comes into conflict with the bullion value, or, in another way of putting it, the medium of circulation comes into conflict with the standard of price. Of course, both medium of circulation and standard of price are properties of money and so we are talking about a contradiction/antagonsim/conflict within the money form itself. We can expect that this contradiction will be too volatile to be contained in one form of money and that it will have to be resolved by splitting the various functions of money into different types of money in the same way that the contradiction in the commodity form between use-value and value is externalized into the separation of money and commodities.

As explained above, when the market price of gold rises above its mint price this means that the ‘reckoning name’ of coins begins to denote smaller and smaller quantities of gold. The standard of price changes. Future money must be coined to adjust to this change in the standard of price. Thus the same money name, the same standard of price, stands for a constantly diminishing quantity of gold. In other words we could have a coin that has “I am a pound of gold” written on it but it is not actually a pound of gold. The mint price/the reckoning name/unit of account has been devalued. If we are talking about gold coins then this devaluation is probably the result of clipping of coins. The ideal value of the coin (“I am a pound of gold”) has become less than the actual value of that coin (perhaps it is only .9 pounds of gold.) The gold coin is fictitious gold. It has become ‘idealized in practice’! This contradiction between mint value and bullion value is another name for the contradiction between medium of circulation and standard of price.

Thus the market value of gold rises above its mint price. The reckoning names of coins begin to represent a smaller and smaller quantity of gold. A ‘pound’ comes to mean less and less than an actual pound of gold. This means that the standard of money has changed. Future coins are minted to this new standard. Thus the same money name (one pound of franc or dollar, etc.) stands for a constantly diminishing quantity of gold! This is a contradiction between coind and standard of price. It is also a contradiction between coin and universal equivalent.

If it seems that we are drowning in a lot of different contradictions we could probably step back for a moment and realize that all of these contradictions in the money form seem to be variations on a theme. Money has a use-value and a value. It’s value is universal (the representation of abstract labor, universal wealth.) It’s use-value takes particular forms: coins, paper money, credit money, etc. Perhaps all of these contradictions are all variations of a universal-particular contradiction. (Alan Freemen makes this point in a paper called ‘GELD’).

This absurdity of measuring gold in gold coins of lesser value leads to the replacement of gold coins by symbols of value, tokens of value like copper coins or paper money. Thus coins become symbols of ideal money. While only gold can be the measure of value anything can be a means of circulation. Gold doesn’t actually have to be physically present in order to measure the value of a commodity or in order to realize this value in exchange. We already know that commodities have ideal prices. They don’t need gold to be present in order to form these prices. And we know that a symbol of value, like a copper coin, can serve the purpose of realizing the value of the commodity.

The state is important here because the state must guarantee the value of the symbolic money. Marx mentions that copper coins are legally kept within the sphere of circulation by not over minting (not producing too many of them). Over production of copper coins would lead to people hoarding them to melt down and sell for metal. In fact, because copper, silver, nickel, etc. coins still have values as metals this leads to the use of paper money. Thus the medium of circulation becomes purely symbolic. We have moved from a commodity with a use-value and value to money to coin to subsidiary metal to paper. The separation of commodities from the representation of their own value has become completely separated.

Still, despite this separation, the value of the symbol relies on the value of the gold it represents. Thus exchange value has an ideal expression in price and an imaginary, symbolic existence in money. The only real existence of value is in the commodity itself (the gold commodity and all other commodities.) The token appears to represent value directly but it does not. It only represents value indirectly through gold.

Credit money, Marx tells us here, operates under different laws which he does not take up in this volume, or elsewhere. This is because credit money assumes more advances relations of production, which we are abstracting away from at this level of analysis. Unfortunately, Marx did not get around to fleshing out a credit theory of money so it lies up to others to construct one based on his framework.

While Marx leaves a big role for the state in most of his value theory he likes to deduce the categories from each other without relying on some exogenous force like the state. While the state is often caught up in the regulation of token money Marx has shown us how token money evolves logically from the structure of simple circulation. Thus monetary politics which seek to change the role of token money in capitalism (say the movement to bring back the gold standard) will fail to change the fact that token money evolves ‘naturally’ in capitalism into purely symbolic money.

A change in the value of gold effects the value of paper money. The value of paper money depends on the quantity of paper money relative to the gold needed for circulation. In other words divide the quantity of paper by the value of all commodities to be circulated (measured in gold). This tells us the value of paper currency. This is an extremely important point and relevant to debates over the theory of paper money.

The state seems like it can escape the laws of money but it can’t. It seems like the state can just print more money to solve the problems of capitalism. But this just causes inflation. The state can only control the nomenclature of the standard of price. It can control how much money to print but the underlying values of commodities and gold determine the value of these tokens. Circulation forces these tokens to have a relation to gold.

For the measure of value the substance of money is important. Not so for medium of circulation. The measure of value depends on the quality of the money. The medium of circulation depends on the quantity of tokens. The quantity of gold present in the economy is determined by the total price level and the value of gold. The quantity of token money depends on the quantity of tokens and the value of the gold they represent. Thus all laws appear reversed in circulation. It appears that the quantity of money determines the value of money and that this determines the price level. This would be the Quantity Theory of Money. In actuality the process works the other way around.

Posted in the critique of political economy- notes, Uncategorized | Tagged , , , , , , , | 9 Comments

the UnMaking of Marx’s Capital

Back in April the Monthly Review posted a piece by Michael Heinrich about Marx’s theorization of the tendency of the rate of profit to fall. Here I have attached/linked a response co-authored by Andrew Kliman, Nick Potts, Alan Freeman, Alexy Gusev and myself.

Unmaking of Marx’s Capital, final, 7-22-13-2

Michael Heinrich’s recent Monthly Review article claims that the law of the tendential fall in the rate of profit (LTFRP) was not proved by Marx and cannot be proved. Heinrich also argues that Marx had doubts about the law and that, for this and other reasons, his theory of capitalist economic crisis was only provisional and more or less in continual flux.

This response shows that Heinrich’s elementary misunderstanding of the law – his belief that it is meant to predict what must inevitably happen rather than to explain what does happen – is the source of his charge that it is unproved. It then shows that a simple misreading of Marx’s text lies at the basis of Heinrich’s claim that the simplest version of the LTFRP, “the law as such,” is a failure. Marx’s argument that increases in the rate of surplus-value cannot “cancel” the fall in the rate of profit is then defended against Heinrich’s attempt to refute it. Finally, the paper presents evidence that Marx was indeed convinced that the LTFRP is correct and that he regarded the crisis theory of volume 3 of Capital as finished in a theoretical sense.

Posted in Uncategorized | 18 Comments

The Critique of Political Economy- Chapter 2 part 1 notes

the second installment of my notes on the book:

Chapter 2: Money or Simple Circulation.

Marx tells us that the confusion about money will disappear once we look at the evolution of money. Does he mean the historical evolution or a logical evolution? Marx says that it is crucial to understand the particular forms of Money and their interrelations. This is difficult because all bourgeois relations are money relations. In order to get to the heart of money, and its relation to the mode of production, Marx will only deal, in this book, with the forms of money that arise directly from commodity production. He will not deal with credit money. This is also his approach in Capital.

1. Measure of Value.

Gold becomes the measure of value because all commodities measure their value in gold. These exchange values with gold are prices. Price is the form of appearance of exchange value in circulation.  There is an equalization between the labor in gold and the labor in all other commodities. Of course, like any other commodity, the labor that goes into gold can vary with changes in the productivity of gold producers.

Prices are commodities transformed into gold in imagination. Prices measure the abstract labor contained in commodities, while their use-values correspond to the specific concrete labors that formed them.

The difference between exchange value and price (notice he doesn’t say “value and exchange value”… though I assume this is what he means) is super-important. This is the kernel of the storms that rock capitalist production… the source of uncertainty and crisis. Whether or not exchange value equals price is a matter of chance. The flip side of the necessity for alienating the commodity from the worker is the possibility of the non-alienation of the commodity.

Standard of price: The standard of price is the particular unit of gold that is used to measure value. Measure of value and standard of price are not the same!!! The measure of value is a measure of the abstract labor time contained in a commodity. The standard of price is a unit of weight (pound, etc.). It is similar to the difference between distance and a foot. A foot is a unit of measurement. Distance is the thing to be measured in feet.

Historically there was a process by which the same unit of measurement (the pound for instance) came to represent a smaller and smaller amount of gold. This seems insane but it happened all the time. A piece of gold was stamped as a pound. In circulation it lost some of its weight (through people shaving off parts and through wear and tear.) Now we see the importance of the state in establishing the value of the money of account. Money of account is the specific legal unit of account (pound, franc, etc.)

In order for money of account to exist, gold only needs to exist in the mind. Tokens of the money of account can circulate.

Now’s the part that fucks up your brain: The mint price of gold is the price of gold measured in the unit of account. But money has no price!

B. Theories of the unit of measure of Money

The purpose of this section is to critique previous theories of the unit of measure. Marx makes important points about the logical and practical relation between the unit of measure and the measure of value. He also discusses the problem with utopian labor-money schemes.

Marx first begins with the theory of the ideal unit of measure of money. This theory holds that since the unit names of money (pound, dollar, franc, etc.) are what is used to measure value that these units don’t represent quantities of gold, but instead directly measure ideal “atoms” of value. Thus value seems to have an abstract, independent, ideal form. (But this is impossible since we only can see value through exchange value. Value does have some independent abstract essence to measure without reference to an exchange value.)

Marx’s critique might seem like a nitpicky one but he immediately moves to a real-world example. During the reign of England’s William III silver coins were becoming debased. This meant that the market price for silver rose above its mint price. Why? The mint price is the amount of silver a coin says it represents. The market price is the actual amount of coins one receives for selling an ounce of silver bullion. Since the coins were debased it took more coins to buy an ounce of silver. In Marx’s example an ounce of silver bullion was minted into 5s 2d (5 shillings 2 pennies) but after debasement an ounce of silver bullion could be sold for 6s 3d! Eventually there was a re-coining of silver coins so that each silver coin was worth less silver than originally.

Now comes the interesting part: Lowndes, Biritish secretary to the treasury, declared that the reason for the rise in market price above mint price was not the debasement of the currency. Rather the rise in market price was a sign that silver had become more valuable (because it was measured in more units of the unit of measure!) The unit of measure represented ideal atoms of value and hence the rise in market price could only mean a rise in value! The upshot os this bullshit theory was that the British state could argue that it should pay back its debts in devalued currency!

This sort of problematic thinking directly relates to questions of inconvertible paper money. Marx says that regardless of civil law, the economic law is that paper gets its value from gold. Or, perhaps to put it better, paper’s ability to measure value is derived from gold’s place as a measure of value. The theorists of inconvertible paper money, Marx says, take refuge in this notion of an ‘ideal unit of measure’, as if worthless scraps of paper can represent ideal atoms of value directly, without measuring value through commodity exchange.

The same problem applies to Gray’s utopian labor money schemes. Gray advocated a system whereby all inequalities in exchange could be eliminated through a system whereby each commodity was automatically stamped with a price directly corresponding to the labor that went into it. Gray thought that the labor in all commodities could be directly social, without having to move through the process of exchanging against a money commodity, and all of the divergences of price and value and corresponding adjustments that take place in capitalism. Marx critiques this idea at length in other places, but here he points out that labor will not become directly social just because a bank or state declares it. The indirectly social nature of capitalist labor comes from commodity production not from a problem with the measure of value. If labor were directly social then there would be no need for gold or commodity production. But this is not the society that Gray is imagining.

Posted in the critique of political economy- notes, Uncategorized | Tagged , , , , , , , | 15 Comments

Interview on Alpha2Omega

I recently had the privileged to appear on Tom O-Brien’s excellent podcast Alpha2Omega. We discuss, among other things,  the Occupy movement, Marx’s critique of labor-money. The interview can be heard below. Alpha2Omega is a really excellent podcast. Tom has really top-notch guests on each week, he asks excellent questions, and does a great job of editing the interviews. I don’t feel like I was able to be as spontaneously articulate as I’d have liked to have been during our interview but so it goes.

The interview:

The podcast

Photo 3Here’s the paper by Seth Weiss that Tom asks me about.

It’s a great paper. I’ve referenced it several times on this blog.

Also, listeners interested in thinking more about ‘socialist labor vouchers’ should know that there is currently a heated debate happening on the topic on Libcom. I have not had time to read through it all but it looks like a spirited and sophisticated discussion. Here is a recent summary and response to that discussion.

Posted in Interviews, Uncategorized | Tagged , , , | Leave a comment