[OPE-L:4396] Re: Marxs "gold"

Duncan K. Fole (dkf2@columbia.edu)
Sun, 16 Mar 1997 20:36:29 -0800 (PST)

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Catching up on some long-past OPE-L stuff, in particular Alejandro's OPE-L:4084:

>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.

Duncan in reply:
Isn't this the point of the discussion of the socially accepted general
equivalent theory of money in ch 1-3 of Volume I of Capital? That is, to
show how one commodity can take on the burden of expressing the values of
all the rest?

>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

Duncan in reply:

I think one has to be somewhat suspicious of the idea that "land" was the
real basis of the Rentenmark, or its stability. (Note the contrast with the
French Revolutionary "assignats", which were supposedly based on land and
led to a rapid inflation.) A full discussion of this problem would require
a discussion of the German hyperinflation itself.

>> 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 think you are wrong. If the U.S. had continued to mint silver dollars at
the 16 to 1 ratio to gold, the cheapening of silver would have driven gold
out of circulation in the U.S.

>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?

It seems to me this happens all the time, either in a gold standard system
or in a state credit monetary system. The capitalists and workers have to
cope with the variability of the monetary standard in terms of both labor
and the use value of commodities.

>> 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?

In a paper on Marx's Theory of Money, Social Concept 1 (1981?). I'm trying
to get this up on my www page, since the journal was not very widely

>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.

I don't think the discount between "coin" and "gold" can get very big in a
gold-standard system, so I don't think it's very important, though Marx
does, for the sake of completeness, discuss it in ch 3 of Volume I of

Please be aware that I make a distinction between the "definition" of the
MEL (and the value of labor-power) and the "determination" of the MEL. The
definition of the MEL as the ratio of value added to current labor says
_nothing_ about the determination of the MEL, which may be very different
in a gold-standard and in a state-credit monetary system.



Duncan K. Foley
Department of Economics
Barnard College
New York, NY 10027
fax: (212)-854-8947
e-mail: dkf2@columbia.edu