[OPE-L:381] World Money [forwarded post from Anwar Shaikh]

glevy@acnet.pratt.edu (glevy@acnet.pratt.edu)
Tue, 31 Oct 1995 10:07:48 -0800

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---------- Forwarded message ----------
Date: Tue, 31 Oct 1995 12:21:12 -0500
From: ANWAR SHAIKH <SHAIKH@newschool.edu>
To: glevy@acnet.pratt.edu
Subject: World Money

Jerry wrote:

Duncan wrote [ope-l:372]:

> Perhaps the most puzzling thing about the money markets of
contemporary > capitalism > is to understand how different national
money markets and money rates of > interest can coexist and function
effectively as a world money market, > despite there being no world

This is a very interesting, and important, issue. I ask the following
question of Duncan, and whoever else is interested in pursuing this
issue as a "digression":

-- What would be the various steps that one should take that would lead
one to developing a satisfactory answer the the above issue?
That is, if we were to attempt to develop a Marxist explanation for
the above, very concrete, issue, *how* [specifically] would we go
about theorizing such a subject?

This might seem to be a question that is very far removed from a
discussion of method, which Chai-on initiated today. I would argue that it
is not. Perhaps, by thinking of the *way* that we would go about
answering a concrete question, we might flush out some of our own
perspectives on method and how one goes about "extending Marx."

Would anyone like to take a bite?

This is meant as a posting, but I have not figured out how to do that.
Could you bring me upto date on procedures, since I was not on the list
in the beginning? Thanks.

[Send posts to: ope-l@anthrax.ecst.csuchico.edu
Cc: multiple recipients of list <ope-l@anthrax.ecst.csuchico.edu>

MAKE SURE you include the Cc line. -- Jerry]

Duncan's question is not very clear to me. It seems to me that there are
at least three elements to it.

First of all, there have been periods in the past where more than one
world money existed. The coexistence of gold and silver as bases of
commodity money is an obvious example. While one cannot have too
many coexisting world moneys, the difficulty of having more than one is
is not insuperable. This does raise, however, the question of the
hierarchy of coexisting moneys: all are equal, but some are more equal
than others. In certain periods of transition, such as the present one, the
old hierarchy has given way but the new one has not been established.

A second question has to do with the determination of relative exchange
rates of national currencies. Here, it seems to me, the issue has to do
with the laws of foreign trade and their implications for exchange rates,
balance of payments, and international capital flows. I have tried to show
that Marx's theory of competition has a specific series of implications for
the patterns of international trade and for the determination of exchange
rates. These arguments are developed and tested in two of my New
School Working Papers ["Competition and Exchange Rates: Theory and
Empirical Evidence", No. 25, Dec 1991; and "Free Trade, Unemployment
and Economic Policy", No. 50, Nov 1994]

A third question, which has apparently already been touched upon in
the earlier discussion (I just got on the list), has to do with the
determination of the interest rate within one country and of the links
between interest rates across countries. This is the least developed one,
in my opinion, but I believe that one can make some progress by noting
two things. First, that within any country the rate charged by banks is
itself limited by the general rate of profit (the difference between the two
being viewed as the "profit rate of enterprise" in Marx's framework and
as the "risk premium" in orthodox finance theory. Second, that the spread
between the rate banks charge for funds and the rate they themselves
have to pay for funds is linked to their profits, and hence once again to
the general rate of profit (through the mobility of capital). I mean this link
to be not only a theoretical one, but also an empirical one which can be
directly investigated. I have been able to show a strong empirical link
between the rate of return in the stock market and the incremental rate of
profit in the corporate sector, in the US over the postwar period ["The
Stock Market and the Corporate Sector: A Profit-Based Approach", The
Jerome Levy Institute, Working Paper No. 146]. Similar empirical links
appear to hold across major world sectors, as demonstrated in a soon
to be defended New School dissertation by George Christodoulopoulus .

I bring these references up because I want to argue that it is possible,
not to mention imperative, to address the phenomena of modern
capitalism on the basis of the framework Marx began to lay out in Capital,
provided of course that it is systematically built up and its various holes
filled in (you all have already been through the six books discussion, so I
won't bring that up again!). Whether or not my particular attempts are
worthwhile, it seems to me that we must try. And in this regard, I must
confess that what interests me the most these days are theoretically
grounded explanations of the burning economic questions of the day.
What, for instance, do we as marxists economists have to say about the
concrete determinants of unemployment across the world today? About
the concrete determinants of inflation? About the links between the two,
if any? Such issues dominate the policies and politics of many countries
in present day world.

In his day Marx tackled similar issues (inflation, wages, rents, exchange
rates, gold movements, etc.) and used his theoretical framework to
provide alternative explanations. I clearly believe that the same can be
done for present day phenomena. But being new to this list, I have no
sense yet how many others share this belief, and/or whether the
various agendas proposed for us are motivated by it. If so, what would
be a worthy list of concrete issues, and how do various proposed
discussion agendas plan to get there? Comments?