[OPE-L:2277] Re: Commodity Money

Michael Williams (100417.2625@compuserve.com)
Sat, 18 May 1996 13:47:40 -0700

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I will take up Chai-on's eminently sensible suggestion to characterise my
non-commodity account of bourgeois money. This is done prior to sight of the
responses of any of the other comrades mentioned in Chai-on's post - so it makes
no claims on their behalfs. It is also done without reference to anyone else,
including Geert, and is entirely 'off the top of my head' - a reasonable test of
whether I am persuaded by my own arguments.

I must be succinct - both because that is what, quite reasonably, Chai-on asks
for, and because of on-going pressures on my time and intellectual energy - but
I cannot avoid some methodological preliminaries. I hope that the modellers and
empiricists amongst us will try to consider my long-winded conceptual
clarifications at least as carefully as I seek to understand and interpret your
modelling and econometrics. My quarrel with the latter (whether bourgeois or
Marxist) is the inadequate attention paid to interpretation.

1. 'Necessity' in my discourse, in this context as elsewhere, refers to systemic
necessity for the reproduction of bourgeois society, and within it the
capitalist economy, as it was, is and is becoming. Hence the question for me is:
Is commodity money necessary to the reproduction of the capitalist system?

2. Categories of the systematic presentation, intended to grasp the reality of
the capitalist economy, are characterised ('defined' is not the right word) in
terms of their systemic interconnections wthin the whole - this includes organic
inter-connections, historical interconnections and potential interconnections
(Ollman 1993, Dialectical Investigations, espc, ch. 2 is brlliant on this kind
of account of dialectical argument - had I read it before Geert and I published
our 1989, the methodological remarks we struggled with in Part I would have been
much clearer).
So a related question is what are the necessary interconections of money in,
advanced capitalism? In particular, what is its location with respect to the

3. Development of the systematic presentation from the most abstract, and
concomitantly fundamental-to- grasping-the-object-totality, starting point (for
R&W, the value-form, for Marx the appearance of capitalist wealth in the form of
the commodity), consists of a dialectical development of categories, the
fundamental basis of which is the emergence and transcendence of contradiction,
but also the incorporation of empirical information at the appropriate level of
So we may look (of course through our conceptual spectacles at their current
stage of development) at what money seems to be doing empirically in terms of
reproducing capitalism as it is now, and at what phenomenal forms it is taking.

4. We (R&W) have argued for a characterisation of the commodity which includes
the following:
i) It is produced by the expenditure of (abstract, socially necessary)
labour under capitalist relations of production. Such labour is incommensurable
except in as much as it is in fact commensurated by entry of the commodities it
produces into generalised capitalist commodity exchange, mediated by money.)
ii) It is produced with a view to exchanging it - to selling it at a
price that systematically covers its costs of production plus some adequate rate
of profit. Thus in production, capitalists anticipate the terms of successful
entry of the product into commodity circulation, in a speculative process we
have called precommensuration.
iii) it is the category in which human productive activity in the
creation of socially useful objects is grasped in the bourgeois epoch,
manifesting itself as the use-value of a commodity, necessarily in a
contradictory unity with value in the commodity.
iv) it thus has a specific use-value to an individual purchaser, which is
realised only outside the sphere of circulation (in production or in the
'household'); and a (social) value in which is the stamp of approval from the
social system, both for the commodity, and therefore for the labour that
produced it.

So now the key question becomes: is that form of money which seems to be
necessary to the reproduction of advanced capitalism a species of commodity in
these senses?

To which, my answer is NO! Why? Because:-

5. The most fundamental abstract determinant of capitalist money is as the sole
autonomous quantitative manifestation of value. From this can be derived
(dialectically) its well know functions as universal equivalent, means of
payment, unit of account and store of value (not necessarily in that order).

6. There are various money objects which fulfil these roles in advanced
capitalism, amongst which the most ubiquitous are notes and coins in various
national currencies, and entries (electronic or not) in bank accounts.

7. But there is no magic about these inanaimate objects ability to perform these
manifold functions - that ability is socialy reproduced - first by commercial
prudence, regulated by Central banks, then by emergent convention, codified and
reproduced by the state and various quasi world monetary authority institutions.
(The exact detail of the institutional links manifesting this regulation is
contingent, at a lower level of abstraction and is variable across space and

8. Commodity money - most recently and ubiquitously, bullion, plays only a
residual role - as partial reserves of central banks, for isolated
inter-national transactions, and as a bolt-whole store of value. This latter is
not part of the necessary reproduction mechanism of advanced capitalism, but it
appears when some part of the global capitalist systems threatens to NOT
reproduce itself. The 'mystique' of gold may well play a role in upholding
confidence in any money instrument seen to be ultimately backed by it. But this
is, I would claim, a decreasingly important component of confidence-formation.

9. Historically, commodity money has played a more fundamental role in the
evolution to, and reproduction of, capitalism. But from the earliest days, this
has been mediated to lesser and greater degrees by the role of the sovereign in
upholding confidence in its value, and enforcing it as legal tender (control of
assaying, coining, etc., etc. Paul made some knowledgable comments a few
postings ago). It is appropriate in seeking what is necessary to the
reproduction of capitalism to examine the form assumed in the most advanced
stages of development of that mode of production. In this light, the rejection
of the necessity of commodity money is the argument that modern capitalist money
has all but sloughed-off its commodity basis.

Returning to the dialectical category of money:

10. Unlike a with a commodity, money
i) has no necessary connection with an object produced under capitalist
relations of production by the expenditure of socially necessary labour
ii) there is no systematic connection between the costs of reproduction
of the various monetary objects and its social usefulness
iii) money HAS no value; rather it is the sole actual autonomous
quantitative manifestation of value. It is the purest actually existent
manifestation of the value-form. Abstractly pure quantity. The alienation of
capitalist social relations is to be understood in terms of their determination
by this pure form. Capitalism is not (as is sometimes argued) production for
productions sake, but valorisation for valorisation's sake
iv) In particular, money's social usefulness (efficacy in performing its
social functions) depends on its 'value' only in the sense of the inverse of the
general price level
v) It has no use-value (to be consumed ultimately outside the sphere of
circulation, either in production or in the private sphere - the 'home'), rather
it has a social usefulness. It is condemned to circulate endlessly.
vi) It therefore cannot be reproduced in response to market signals by
the expenditure of labour. Hayek around 1960 (reluctantly, I bet) came to some
such conclusion when he discussed the impossibility of 'privatising' money - his
argument is couched in terms of the irreducible inter-dependence of the supply
and demand of money. [I can look up some references, if anyone is interested.]
So why lumber money with a term which just does not fit? Money (like
labour-power), if it is a commodity is a very peculiar commodity (Engels argues
something like this, somewhere - in 'The Holy family ,,,', I think.) My argument
is that the 'peculiarities' outweigh any similarities

And some circumstantial remarks:

11. Marx, not surpisingly given his historical location, may have been in thrall
to a commodity theory of money. However:
i) There are several footnotes in Capital referring to the 'bullionist'
debates which indicate an uneasiness with any too extreme commdodity money
position, at the level of the empirical as the concrete.
ii) Most of Marx's important arguments in Capital couched in terms of
commodity money, can be reconstructed in terms of a value-form understanding,
without loss of cogency. (Many years ago I went through Capital to show this.
Unfortunately, I never wrote the results up, and the paper has gotten lost. I
intend to redo it for a paper intended for the ESHET conference next year - any
of you computer buffs have any suggestions as to how the task may be faciltated
by the deployment of a search engine (I think that is what it is called) on the
on-line versions of Capital?)
iii) recgnition of a possible historical myopia by Marx in this regard
does not demean his genius, or the relevance of his conceptualisation of
capitalism as a whole.

12. The practical import of a lot of the above can be captured by arguments
couched in terms of the necessarily credit-basis for money. In R&W 1989, we do
indeed allow money to emerge as credit money as a necessary condition of
reproduction of capitalist accumulation. Perhaps Duncan is better placed than I
to elaborate on the 'essence' of money as credit?

13. An earlier account of some of the details of the above, with which I
generally still agree are to be found in various parts of R&W 1989. (I don't
have a copy to hand, but the relevant bits are clear both from the contents
list, and the index.) I haven't consulted Geert about the present elaboration of
our joint work.

And so to Chi-on's 'downside' implications of abandoning commodity money:

(1) [a)]You must explain how the value of money is determined. [b)] And,
if it can be determined *with no reference to labor content*, [c)]then
the values of other ordinary commodities have no reason to be
determined by the labor contents. Why the two cases can be
justified in the determination of money-value and commodity-value?

Michael W.'s response:
a) Nationally, as the inverse of the general price level. Globally, since there
is no world state or world central bank, the 'value' of money is subject to all
the contingencies of exchange rates, determined by economic and geo-political
struggle between sovereign nation states. But then so is the price at which gold
inter-links into the global monetary system.
b) It seems irrefutable that labour-content has nothing whatsoever to do with
the either the value of any particular monetary object, or with the social
value (usefulness) of money.
c) For our approach, there is no quantitative determination of a commodity's
value prior to its entry into commodity circulation, for which it was produced.
Our argument for the necessity of labour, traded as labour-power, to value,
valorisation and capitalist accumulation is quite independent of any postulation
of some a priori value-substance such as abstract labour. Whilst our conceptions
of money and of commodity value are, of course, inter-linked in our systematic
presentation of the capitlaist economy and bourgeois society, it is not obvious
how YOU make the link from the rejection of commdoity money, to the rejection of
any embodied labour theory of value?

(2) [a)]Money is put on a more abstract level than commodity values in
your money conception [b)]since your conception is in the context of
"monetary theory of labor value". [c)] Money is something other than the
commodity. [d)] The value of money is therefore to be explained *with no
reference to commodity values*. [e)] The exchange between money
and other ordinary commodity is of course not on an equivalent

a) Yes

b) Not quite sure what you mean. But probably 'yes', if you mean that Elson's
'Value theory of Labour' was influential. Under capitalism, value considerations
systemicaly determine the allocation of resources, of which the sole primary
factor of the value of a commodity is (though this has to be argued) labour.

c) Yes indeedy!

d) No, No! The value of money is just the inverse of the general level of
commodity values

e) Oh yes it is! The value of a commodity which is systematically sold for $1 is
$1. If I sell one $1 dollar commodity, I can expect to be able to buy one unit
of any other $1 dollar commodity. The equivalence is SYSTEMIC, and makes no use
of the 'underlying' metaphor, which refers to a substantial sub-structural value
economy of abstract labour times. There is nothing 'conserved' in exchange: the
value of the commodity (and indeed the value of the money expression of labour)
is constituted and reconsituted by systemic ongoing market exchanges.

(3) In view of the above two points, the labor theory of value in a
commodity money system should be radically different from that in a
non-commodity money system. This is why there have been so
wide varieties between us.

Yes - but the development of capitalism has revealed that commodity money never
was necessary to the capitalist system. During the early stages of capitalism,
it contingently happened to be very prominent, even, perhaps, historically
(though not, it is now clear, dialectically) necessary.

Chi-on then says:
In my commodity money conception, however, the first two
questions do not apply and Marx's value theory is seen correct and
right in every aspect.

To which Michael W. replies:
There are at least two distinct types of value theory in Marx's work, each with
many different interpretations.
We think value-form theory is congruent with one of these, in the context of
Marx's overall conceptualisation of capital via the critique of classical
political economy.
If I ever sought for the Word on what is 'correct and right in every respect', I
suspect I would consult a priest rather than a social scientist.

In earlier posts, Chai-on has referred to the importance of bullion in
underpinning confidence in monetary transactions across international
boundaries. It may, contingently play that role, precisely because there is no
capitalist world state adequate to the concept. Inter-national relations are
suffused with contingency at every level, not just in terms of monetary
relations. Part of the reason it is able to do so may be a historical hangover
of the mystique of gold.

Well, that is enough for now: Any Qustions!?

In international solidarity

Michael W.