[OPE-L:4084] Re: Marxs "gold"

aramos@aramos.b (aramos@aramos.bo)
Wed, 29 Jan 1997 08:02:49 -0800 (PST)

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Some brief replies to Duncan's 4057:

> Alejandro writes (Ive lost the OPE-L number):
> ..However, my hypothesis is that, in
> Marxs monetary theory, "gold" is mainly a "functional
> determination", that of "reserve money": to conserve and
> represent labor-time externally in a stable way.
> This would mean that, despite --in Marxs examples-- gold
> is a commodity, we shold not consider it as any other
> commodity. To put this in another terms: In a scheme of
> reproduction, gold could be considered as commodity, but
> NOT AS RESERVE MONEY. In its determination as money, "gold"
> is, in a certain sense, "out" of the scheme of
> reproduction.
> Duncan:
> I dont understand this. Under a gold standard gold is one of many stores
> of value. It has risks, like any other store of value, and it has returns,
> one of which is its high liquidity (since it can be spent immediately,
> without being sold first.)

Alejandro again:

What I trying to unsuccesfully say is that although in
Marx's text "gold" is a commodity like "sugar" or "iron",
in its functional determination as "money reserve" (or, if
you prefer "store of value") we should not consider it as
any other commodity. I remember the "debate" between Rosa
Luxemburg and Henrik Grossman. According to Rosa (following
Tugan), "gold" must be a separated department in the scheme
of reproduction. Grossman critizes this.

Moreover, CONCEPTUALLY the function of "reserve money"
should be set as a non-commodity. Germany 1923: To go out
of hyperinflation, it is issued the Rentenmark whose
"support" is "land". "Land" becomes a sort of "reserve
money" which would be absurd to put into a reproduction
scheme. That is, conceptually "reserve money" should be a

> Alejandro:
> Let us suppose that the labor-time to produce gold falls.
> This means that "gold money" cannot perform efficiently its
> function to conserve and represent in a stable way labor-
> time. What will be the reaction of capitalists, given the
> cheapening of gold? To increasingly use another "asset"
> able to represent and conserve better than gold labor-time,
> e.g. "silver". In this case "gold" will rapidly lose its
> monetary functions, i.e. it will cease to be "reserve money"
> and become a simple commodity.
> Duncan:
> I think this is wrong historically, and probably theoretically. Once gold
> emerges as a social general equivalent, while individuals have the choice
> to hold it as an asset or not (they could hold silver, or land, or common
> stocks), they dont have an individual choice as to what will function
> socially as money.

Alejandro again:

I am not suggesting an historical situation. I am trying to
develop a theoretical point. (However, "silver" was "money"
together with "gold" -- under bimetalism -- but the
cheapining of silver meant it was ceased to be "money". Am
I wrong?)
I am not saying that capitalists "individually choose"
money. This is a social determination. My question is: What
would happen is for any reason the socially determined
"reserve money" in period t+1 represents an amount of labor
time significantly lower than that represented in t?

> Alejandro:
> I think the functional determination performed by gold in
> Marxs examples, can be carried out by any socially accepted
> asset, e.g. a US Treasury Bond, which is a non-commodity.
> When we put the problem in these terms, it is clear that
> "reserve money" is out of the scheme of reproduction. The
> problem to determine what is the labor-time represented by
> this "asset" (or set of "assets") is completely different
> from the determination of the labor-time embodied in gold
> considered as a commodity similar to "sugar" or "iron".
> Duncan:
> Ive argued for separating the "function" of money as representing social
> labor time from the existence of a social general equivalent commodity, and
> therefore that it makes sense to talk of the "monetary expression of labor"
> in a state credit monetary system, for example.

Alejandro again:

Where have you argued for this?
I am not clear if you also have argued in the line that we
can isolate in Marx's text TWO main functions of money:
"symbol money" (Marx's "coin", "currency") and "reserve
money" (Marx's "gold"). In this case we would have TWO MELs
interrelated between them, but DIFFERENT. The relation
between them defines the nature of the monetary system. For
example, in the gold standard, the relation between them is
"fixed by the State". ("Light" gold standard--> Argentina
1997: There is a State law which fixes the relation between
the "peso" and the "US dollar" as 1:1. The whole "monetary
policy" (Suzanne de Brunhoff is not here!!) is directed to
maintain this relationship).

I want to stress the following: The simple monetary system
depicted by Marx includes AT LEAST TWO KINDS OF MONEY
("COIN" AND "GOLD", NOT ONLY ONE ("GOLD"). So that the
discussion about if in Marx we have a "commodity money" is
out of the focus. There is no a "commodity money" system in
Marx. Moreover, in capitalism never existed a "commodity
money" system. This only existed, for example, in Greek,
Roman or Etruscan cities, an even in this case I think
there was a separation between "gold" and "coins". Perhaps
Riccardo Bellofiore could tell us something about this...

More on the "two MELs":

I tend to conceive the "money reserve" MEL as "exogenously"
determined. This is in line, for example with Shaikh's
detemination of the "value of money" in his famous article
of 1977: He simply "assumes" a given relation between gold
and labor-time. I think Alan Freeman "value of money" is in
this line.
In this case, although the MEL is conceived, for example,
as determined for the productive conditions of gold
industry, it is determined "out" of the scheme of

Contrarily, the "symbol money" MEL is "endogenously"
detemined by the price equations. This is, for example,
Duncan's definition of MEL as value added/current labor.

> Alejandro:
> ..I would suggest two previous problems in
> order to "measure the monetary expression of value":
> a) Firstly, as I argued in OPE-L 3941, in Marxs text,
> "money" is a complex concept, i.e. we have --in the simply
> monetary system depicted by him-- "reserve money" ("gold")
> and "symbol money" ("coin", "pounds"). This defines TWO
> (not ONE) "monetary expressions of value". The relation
> between these two ratios is very important in order to
> understand the dynamic of the monetary system in any "real
> economy".
> Duncan:
> I dont think its very important. As long as convertibility is maintained,
> the deviation in value of "symbol money" from "reserve money" is quite
> small (on the order of 1%). I think Marx discussed this more for
> completeness and because 19th century monetary theory obsessed about it
> than because it has much importance for the functioning of capitalist
> production. Marx is very clear about this in his discussion of the
> "standard of price" in the first three chapters of Volume I of Capital,
> where he explains that the "pound" is just a legislated name for a certain
> quantity of gold.

Alejandro again:

This is not very important is you only think in terms of
the PARTICULAR monetary system presented in Capital I.
But, what I want to stress is that IN THIS TEXT we have a
more general formulation of the theory of money. If you
have a monetary system in which there is no "gold standard"
the deviation between "symbol money" and "reserve money"
could be no longer "small". But this situation can be
analysed within the premises of Marx's text.

Another point: The abolition of gold standard does not
invalidates Marx's money theory because, now, we still have
the two main functions: "reserve money" and "symbol money".
They are performed in a different manner than in UK 1867,
but they still remain. Moreover, capitalist system always
require a "reserve money". As "function" this cannot be
abolished. Only its relation with "symbol money" can be

> Alejandro:
> b) Secondly, it is necessary to know what is actually
> "reserve money", what is the "asset" able to conserve and
> represent labor-time in a stable way. This "asset" can
> change through time, but the analysis of this change is
> completely different from that involving commodities. So,
> it does not make a lot of sense to consider the
> "differential rates of increase in cost reductions between
> gold and other commodities."
> Duncan:
> I dont see how your last sentence follows from the first two. If one is
> considering a functioning gold standard system, then speculation on the
> future technological changes in gold production is going to have an
> influence on the value of gold relative to commodities, that is, on the
> money price level.

Alejandro again:

Well, you are right is you limit your analysis to the gold
standard system. But what I meant is that Marx's theory of
money can be interpreted in a broader, general sense than
that of his specific illustration using the gold standard

In more general terms, the analysis of "reserve money" is
an specific field that cannot be "naively" confused with
the analysis of gold production. For instance, what do you
think about Mandel's article in Mandel & Freeman "Ricardo,
Marx, Sraffa", 1984, Verso?

Alejandro Ramos M.