[OPE-L:5337] Re: Metal money

Duncan K. Foley (dkf2@columbia.edu)
Sun, 13 Jul 1997 22:59:02 -0700 (PDT)

[ show plain text ]

In reply to Alejandro's OPE-L:5227:

I agree with much of what Alejandro has to say. But I have some questions
about a few points in his formulations:


>3. Marx says (I think Ch. 2, I dont have the book right now) that
>when gold becomes MONEY, it has only a FORMAL use-value. This
>"formal" comes from the fact that it is the FORM OF VALUE. So,
>insofar as gold becomes money, it ESSENTIALLY has a SOCIAL,
>determination, it performs a SOCIAL FUNCTION, given by the peculiar
>characteristics of commodity producing society. Gold-money has no use-
>value in the sense of any other commodity has: we cannot satisfy any
>human need by means of gold-money.

I don't think this is quite right for the gold-standard. Gold continues to
have use-value, even as it performs the social function of measure of
value. It is used to fill teeth, to plate electrical contacts, to gild
public buildings, and in a number of industrial functions. Gold in its own
turn suffers a kind of doubling in the gold standard system as commodity
and as negation of commodities in general.


>4. Re Jerry's comment on my previous post I want to say:
>a) I dont think that Marx "gives up" gold as money in that text. The
>problem is what is the *conceptual meaning* of this "gold".
>b) My original problem was that some issues in Marxian monetary
>theory which could appear as "modern problems" are already drafted in
>Vol. III.
>c) Regarding the particular text originally quoted, it seems clear to
>me that Marx is commenting not the possibility, but the reality, of a
>*domestic* monetary system without "metal". This piece could help to
>rethink the generalization made on the basis of Ch. 3.

I agree that Marx in Volume III deals with many "modern problems",
especially those concerned with the growth of credit forms, the banking
system, and fictitious capital. However, we have to be careful about the
"without metal" idea. There are two senses in which the economy might do
"without metal". The first is that gold continues to function as the
measure of value, but plays a vanishingly small role in the actual
circulation of commodities, due to the development of the credit system. I
think this is what Marx had in mind. (Smith also discusses this possibility
in his treatment of the Scottish banking system which had much lower gold
reserves than the English banks. Smith thought this was a good thing --
"the Scotch hate gold" -- because value ties up in gold reserves brings no
surplus value.) The other notion of "without metal" would be "without gold
functioning as a measure of value", which is more the situation we have to
grapple with now. (For example, the $ price of gold has fallen by almost
25 0n the past few months. Does this foretell a tremendous deflation?) I
don't see any sign in Volume III that Marx considered this case


>Regarding the specific point of the "ghost of gold", I think that the
>simplest monetary system that one can conceive on the basis of Marx's
>theory involves at least 2 kinds of money: what I call the "reserve
>money" (which is the "gold" of Ch. 3, which main conceptual property
>is to represent labor-time in a "stable way") and the "symbol money"
>presented in Ch. 3 too, under the form of "coin", paper money etc.
>Money is the unity of both types of money, not one or another
>isolated forms.

I agree with Alejandro that Marx distinguishes something like these two
types of money. But under a gold standard system the margin within which
the value of "coin" can vary in relation to "reserve money" is relatively
narrow due to the possibility of import and export of gold bullion and the
possibility of melting coin and minting bullion into coin. In English
taverns in the 19th century children were employed in upper rooms to cull
the coins coming across the counter at the bar below, returning the light
ones to make change to the customers and reserving the heavy ones for the
bullion market.

>Marx assumes the quantitative relation between both types of money to
>be constant, but this assumption is not a necessity of the theory.
>So, when I read the passage in Kuhne's book I didnt think that this
>was a "proof" that Marx was "giving up" gold. "Reserve money" is a
>necessary form of money whether or not is performed by "gold".
>Capitalism cannot "give up" some kind of "reserve money"; money
>cannot be reduced to a "symbol".

I agree with this point. The question is, what serves as "reserve money"
today. I think it is the debt of the State.


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