[OPE-L:1848] Re: Re: Re: the money supply

Subject: [OPE-L:1848] Re: Re: Re: the money supply
From: Claus Germer (cmgermer@SOCIAIS.UFPR.BR)
Date: Mon Dec 06 1999 - 15:14:42 EST

Thank you Paul for your remarks in ope-l 1845.

> > Paul wrote:
> > >
> > > Money is whatever the state is willing to accept in the form of tax
> > payment.

> > Claus:
> > I don't understand this. Considering that in Marx's theory of money one
> > its basic functions is to measure values, and considering that value is
> > produced in the form of commodities and represents amounts of social
> labor,
> > how does your above statement fit these assumptions?

Claus: I'm sorry but I would remind you that the problem of how the labor
content of the commodities can possibly be measured by a form of money that
is not a commodity remains to be answered, as long as one conceives of
prices as expressing the contents of social labor in the commodities. I
would still like to know how you handle this problem.

> I do not think we have to start out from Marx's analysis of money.

I agree, but his is not only one of the theories available, but is the only
one which attempts to connect the explanation of money with the explanation
of value based on social labor. And it seems to me that an alternative
theory of money in the general framework of Marx's theory has to provide an
alternative explanation of that connection.

> Around
> 1975
> or so I was doing some reading for a project to write a book on marxist
> political economy. As part of the reading for this I went into the
> literature
> on the historical origins of money, literature that was semi-economic
> numismatic. One thing that came as a revelation to me from this was the
> fact that from the earliest history of coinage, the account put forward
> in marx whereby gold coins are simply certified weights of gold or silver
> did not hold up.
> The earliest coins, the Lydian 'lions' are already debased, being made of
> electrum rather than gold. Isotopic analysis of the silver content
> that the debasement was deliberate. The weights of the coins were pretty
> accurately controlled, but the gold content varied.
> Repeatedly one finds that the issue of money has been a source of profit
> to the state through debasement. This is not a periperal matter but a
> central
> feature of real money.

I frankly don't see how those historical examples contradict Marx's concept
of money as a commodity. The usefulness of the debasement by governments
can only be explained by the fact that the money commodity functions as
money thanks to its intrinsic value, which enables it to measure the values
of the other commodities, which allows everyone to profit from pretending
to have more of the money material than it actually does. This is why the
state, which mints the coins, can profit - and always has - from minting
debased coins, as long as people don't notice the fact, i.e., the state
falsely certifies that a coin has the amount of the commodity money stated
by the law. Does this fact contradict Marx's theory?

> The idealism of Marx's analysis of money is to try and examine it in an
> imaginary
> world without the state where all that exists are simple commodity
> exchanges.

It seems to me that what you call idealism is in reality a feature of
Marx's method - abstraction. In the present case, Marx abstracts the
commodity and its exchange in order to analyse it in isolation. Is there a
different way of proceeding in the social sciences? Abstracting explicitly
a part of the reality is not the same as building an imaginary world. You
may argue that Marx made a mistaken abstraction, but in this case it would
be better to call it a mistake instead of idealism.

> The state is historically prior to money and central to its history.

You are probably right, but again this doesn't prove anything against
Marx's theory of money, since he didn't argue that the existence of money
was a precondition for the existence of the state. The fact that the state
legislates and mints coins, which Marx acknowledged, proves that the state
must have appeared before that.

> What he presents there, gold money as a certified quantity of gold, is
not a
> starting
> point, but the product of a long historical development and a specific
> bourgeois
> state, what Meiksins Wood calls the pristine culture of capitalism.

You are right again and Marx explicitly stated that only in capitalism
money is fully developped. I don't see a contradiction in this either.

> As such,
> gold standard
> Britain was a historical anomaly and not a sound basis for theorising
> in general.

This is logically objectable, since Britain was at Marx's time the more
developped capitalist economy. One may argue that it is very plausible to
expect that such an important aspect of capitalist economies, as money is,
would be most developped in that country. On the other hand, Britain was at
the same time the country with the highest developped banking system, with
credit money (mostly banknotes) and gold working together. Would this be a
coincidence? It is also noteworthy that the credit relations at the
international level also developped fast only after gold became world
money, in the last quarter of the 19th century.

Claus Germer
Departamento de Economia
Universidade Federal do Paraná
Rua Dr. Faivre, 405 - 3º andar
80060-140 Curitiba - Paraná

Tel: (041) 360-5214 - Ufpr
       (041) 254-3415 Res.

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