[OPE-L:5764] explaining inconvertible money

Thu, 27 Nov 1997 17:25:56 -0500 (EST)

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I agree with Duncan's recent post about commodity money. We ought to be able
to produce a convincing explanation of money that illuminates the *fact* that
money is no longer based on gold, and is unlikely ever again to be based on
any commodity, at least as far into the future as we can see. Unless we can
do this, we are destined to say nothing on really important things that
affect people's lives - currency fluctuations, inflation, balance of payments
crises, and so on. This would be a disservice to those we purport to defend.
To put it bluntly: if Marxism cannot explain reality, then perhaps it's
irrelevant after all, and we should be doing something else.

I shouldn't be so dramatic. It's fairly easy to account for the existence of
inconvertible money based on Marx's reasoning. Oversimplifying things a bit,
I'd do it this as follows:

1- In chapter 1 of Capital 1, Marx derives the function of measure of value.
His argument implies that the one-to-one relationship between the value of
*each* commodity and the value of the unit of gold determines *each* price.

2- In chapter 9 of Capital 3, we learn that prices do not correspond to
values; there is no one-to-one correspondence between the SNLT to produce any
commodity and its price.

3- This *implies* that - even in Marx's own time - gold *never* actually
functioned as the measure of value along the lines of Capital 1 chapter 1.
For under capitalism, because of the uniformisation of profit rates, there is
*never* a one-to-one relationship between price and value. To suppose
differently is to remain in a world of simple commodity production, or at
least with a very abstract understanding of capitalism (before profits enter
the scene explicitly).

4- Conclusion: under capitalism, gold is *never* the measure of value, and it
need *not* be money. The measure of value under capitalism is not any
commodity; it is *the rate of valorization of capital*. It's on the basis of
this rate that the transformation gives us (however we may imagine that it
actually happens) a vector of prices of production.

This simple reasoning allows us to bypass gold entirely. The transformation
implies a change in the function of measure of value; this is the key to the
abolition of the fetishism of gold. Why doesn't Marx do it? For two reasons.
First, because he never returned to the analysis of the functions of money
after the transformation. Second, because in his time it made perfect sense
to refer to gold as money.

I'd welcome comments on this.