[OPE-L:1172] Notes on the value of money

Alan Freeman (100042.617@compuserve.com)
Wed, 21 Feb 1996 02:04:56 -0800

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A footnote to the last post on the 'real fundamental marxian theorem'
has grown into a separate post because of the discussion generated
by my Philosophy of Poverty quote and Allin's reaction.

I only want to say enough at this point to remove a fresh confusion
which has arisen because it might cloud the interpretation of my last
set of posts.

I really don't think, as Allin seems to be implying, that Marx held the value
of money, *when functioning as the measure of value*, that is, when a certain
sum of money 'represents' a certain sum of value, to be the intrinsic
value of the money commodity, even metallic money, and I am astonished
that he thinks the textual evidence supports this idea.

Thus Towards a Critique of Political Economy p177:

'Money is simply specie, and the amount of gold present in a country must
enter the sphere of circulation; as a token representing itself it can rise
above or fall below its value'


'The most common and conspicuous phenomenon acompanying commercial crises
is a sudden fall in the general level of commodity prices occurring after
a prolonged general rise of prices. A general fall of commodity-prices may
be expressed as a rise in the value of money relative to all other commodities,
and, on the other hand, a general rise of prices may be defined as a fall in
the relative value of money'

See also p91n, Grundrisse 134-135 and many other such statements

I suspect that in thinking Marx 'changed his mind' after Philosophy of Poverty
Allin has missed a vital distinction in Marx which writers such as Rodriguez have
been at pains to draw attention to. Marx distinguishes the *intrinsic* value of
metallic money from the value it *represents in exchange* or, as he puts it on
p132 of Grundrisse and other places, its *real* and its *nominal* value.

Statements such as 'gold can rise above its value', which Marx never stops making,
don't make any sense without this distinction. And, I think, even less sense
will come of trying to understand the evolution of Marx's thought without
recognising the distinction and speaking as if the expression 'value of money'
was one homogeneous term. The conclusion that will arise is that, wherever he
speaks of nominal value he holds one theory and wherever he speaks of real
value, he holds another.

In all cases where Marx refers to gold as the *representative* of value,
that is in its function as money of account, as the medium in which
prices are evaluated, it is the second, 'nominal' value to which he
refers. It is in its function as means of payment that its real value
becomes important, which I am not denying; in a crisis, where all mere
tokens of value cease to function as such, everyone rushes to 'real value'
and they demand, as means of payment, something which does not depend on the
state or on the financial system. Then it does indeed become important what
its real value is. 'World money' plays a similar role; where there is no
regulatory authority, it is important that the means of payment should
have purchasing power in its own right, which is only possible if it has
value in its own right. But this is a different statement from saying
that Gold invariably represents its real value in exchange.

In 'normal circulation' gold (if indeed gold is used) is merely a 'token
of itself' and so the two measures can become separated; the point Marx makes
against Ricardo and also the time-chitters is that this separation is not a
consequence of fluctuations in the supply and demand for gold, as Ricardo
would have it, but in the fluctuations in the supply and demand of everything

Thus Grundrisse p200

'The general rise of prices in times of speculation cannot be ascribed to
a general rise in its exchange value or cost of production; for if the exchange
value or the cost of production of gold were to rise in step with that of all
other commodities, then their exchange values expressed in money, i.e. their
prices, would remain the same. Nor can it be ascribed to a decline in the
production price of gold...since money here is not only a general commodity
but also a particular, and since, as a particular, it comes under the laws
of supply and demand, it follows that the general demand for particular
commodities as against money must bring it down'.

It is surely obvious that, if ordinary commodities can exchange at ratios
not equal to their values, then so can gold. So a gold coin worth $1 can
of course exchange for commodities worth $2, or $0.50, or whatever. The
dispute over quantity theory was not on this point, which both Marx
and Ricardo knew to be a simple empirical fact, as indeed it is today.

The argument with the quantity theory concerns the *causes* of the departure
of nominal from real value, not an attempt to collapse the nominal value
into the real value, which as Marx says in his polemics with Ricardo would be a
reversion to the idea that commodities only barter against each other - against
which is directed the whole polemic in the Chapter on Money in the Grundrisse.
For, if money that cost an hour to produce always represented an hour in
exchange, then the time-chitters would be absolutely right, and a gold coin
could equally just be replaced by a token stamped '1 hour'. Marx's whole point
is that because of the very nature of money, the minute you do this, tokens
stamped '1 hour' will start exchanging for commodities that were produced in
more, or less than an hour and that therefore the 'hour' will depreciate or
appreciate against itself, so that tokens labelled 1 hour will exchange for
'less than themselves'.

But the reason for this depreciation or appreciation would not be the
number of the tokens. It would be the fluctuations in all *other* prices.
If *all* goods are expensive, as in a boom, then a '1 hour token' simply
represents less than an hour. If all goods are cheap, as in a slump, then
a '1 hour token' represents more than an hour. But this is because the
goods themselves are in short supply or oversupply, not because of the
number of tokens in existence.

This argument is no different for gold, whose value is intrinsic,
rather than designated by the State; this is what the argument with
Darimon is all about. If you want to abolish the rise and fall of gold
relative to itself, says Marx, you have to abolish not gold but
money, that is, capitalism.

I think Marx made his argument more *rigorous* as time went on, by
developing the money initially in the 'pure' form. But precisely as the
basis for showing that all the problems attributed to distortions of the
money supply (crisis, price fluctuations, runs on the bank, etc) did not
arise from some peculiar manipulation of the banking system but from
the nature of money itself: just as he demonstrates to the Proudhonists
that surplus value cannot arise from unfair exchange by removing
unfair exchange from the debate. In short, Marx no more held that money
exchanged for its value, than that values equalled prices.