and the development of means of payment. To this must now be added a reserve fund (a hoard) that will permit flexibility in times of flux (240). (In contemporary conditions, of course, this reserve fund is not privately held but lies within the prerogative of a public institution, which in the US is appropriately designated the Federal Reserve.)
The final subsection of this chapter deals with world money. To work effectively, any monetary system, as we have seen, requires a deep participation on the part of the state as a regulator of coins and symbols and overseer of the qualities and quantities of money (and in our times as manager of the reserve fund). Individual states typically manage their own monetary system in a particular way and can exercise a great deal of discretion in so doing. There is still a world market, however, and national monetary policies cannot exempt states from the disciplinary effects that flow from commodity exchange across the world market. So while the state may play a critical role in the stabilization of the monetary system within its geopolitical borders, it is nevertheless connected to the world market and subject to its dynamics. Marx points to the role played by precious metals; gold and silver became, as it were, the lingua franca of the world financial system. This metallic base was vital both domestically and in external (international) relations (241–3).
So the security of this metallic base and the money-forms (coins, in particular) derived from it became critical to global capitalism. It is interesting to note that at the same time as John Locke was urging religious tolerance, condemning the practice of burning heretics at the stake, his close colleague Isaac Newton was being called on to defend to quality of moneys as master of the Royal Mint. He had to face the problem of the debasement of the currency through the practice of shaving some of the silver off silver coins to make more coins (an easy way to make money, when you think about it). Convicted coin-clippers were publicly hung at Tyburn—offences against God were to be forgiven, but offences against capital and mammon deserved capital punishment!
So this brings us to the problem of how relevant Marx’s arguments are in a world where the financial system works without a money commodity, without a metallic base, as has been the case since 1971. You will notice that gold is still important and perhaps wonder, in these troubled times of roiled international currency markets, whether you want to hold gold, dollars, euros or yen. So gold has not entirely disappeared from the scene, and there are some who argue for a return to some version of a gold standard to counteract the instabilities and the chaotic speculation that often trouble international financial transactions. The gold, recall, is simply depicted by Marx as a representation of value, of socially necessary labor-time. All that has happened since 1973 is that the manner of representation has changed. But Marx himself also notes multiple shifts in representational forms with coins, paper moneys, credit and the like, so in a way there is nothing in the current situation that defies his mode of analysis. What has happened, in effect, is that the value of a particular currency vis-à-vis all other currencies is (or should be) determined in terms of the value of the total bundle of commodities produced within a national economy. Plainly, the overall productivity of a whole economy is an important variable in all this; hence the emphasis placed on productivity and efficiency in public policy.
Now, if we stick with Marx’s logic, we should immediately observe the contradictions that derive from this situation. To begin with, there is the fiction of a national economy that matches the “national uniforms” of national moneys. Such an economy is an “ideal,” a fiction made real by collecting vast amounts of statistics on production, consumption, exchange, welfare and the like. These statistics are crucial for evaluating the state of a nation and play an important role in affecting exchange rates between currencies. When the statistics on consumer confidence and jobs look good, the currency rises. These data actually construct the fiction of a national economy when really there is no such thing; in Marx’s terms, it is a fetish construct. But then perhaps speculators may enter and challenge the data (much of which is organized on pretty shaky grounds) or suggest that some indicators are more important than others, and if they can prevail then they can make megabucks betting on currency moves. For example, George Soros made a billion dollars in a few days by betting against the British pound in relation to the European Exchange Rate Mechanism, by convincing the market that he had the better view on the national economy.
What Marx has built into his mode of analysis is a persuasive way to understand the fraught and problematic link between value (the socially necessary labor-time congealed in commodities) and the ways in which the monetary system represents that value. He unpacks what is fictitious and imaginary about those representations and their resulting contradictions, while showing how, nevertheless, the capitalist mode of production cannot function without these ideal elements. We cannot abolish the fetishism, as he earlier pointed out, and we are condemned to live in a topsy-turvy world of material relations between people and social relations between things. The way forward is to advance the analysis of the inherent contradictions, to understand the way they move and the ways they open up new possibilities for development (as with the credit system) as well as the potential for crises. Marx’s method of inquiry, it seems to me, is exemplary even as we have to adapt it to understand our current perilous situation.
One final point. This chapter on money is rich, complicated and hard to absorb on first reading. For this reason, as I began by remarking, many people give up on Capital by chapter 3. I hope you have found enough that is intriguing to stay with it. But you will also be glad to know that you do not have to understand everything in the chapter in order to move on. Much of what is said here is more relevant to later volumes than to the rest of Volume I. Armed with some basic, but essential, propositions from this chapter, it is possible to grasp the rest of the material without too much difficulty. From here on in, the argument becomes much easier.
We now take on the three chapters dealing with the concepts of capital and of labor-power. These chapters, I think you’ll find, are much more straightforward and clear than those we have been through. There are times when they seem almost obvious; one wonders sometimes why we are being treated to such elaborate discussions of fairly simple ideas, particularly when in earlier chapters such difficult ideas were presented almost without explanation. To some degree this is a product of the period when Marx was writing. Anyone interested in political economy at that time would have been familiar with the labor theory of value (albeit in Ricardian form), whereas we not only are unfamiliar with it but live in times when most economists, and even some Marxists, consider it indefensible. Were Marx writing Capital today, he would have to offer a strong defense of it rather than simply state it as obvious. By contrast, the materials covered in these following chapters were more radical departures from conventional thought in Marx’s time, but appear far more familiar to us today.
We are, however, undertaking a macro-transition in the argument’s location in these three chapters, and it is useful to note this at the outset. Capital starts out with a model of exchange based on the barter of commodities, in which it was (unrealistically) imagined that equivalent socially necessary labor-times were being exchanged. Marx then moves from this C-C relation to examine how exchanges get mediated and generalized through the rise of the money form. Careful analysis of this C-M-C exchange system brings us at the end of the money chapter to identify the M-C-M form of circulation, in which money became the aim and object of exchange. In the C-M-C circuit, an exchange of equivalent values makes sense because its aim is to acquire use-values. I want the shirts and the shoes but do not need or want the apples and pears I have produced. But when it comes to M-C-M, the exchange of equivalents seems absurd. Why go through all the trouble and risk of this process to end up with the same amount of money-value at the end? M-C-M only makes sense if it results in an increment of value, M-C-M + ΔM, to be defined as surplus-value.
This raises the question: where can this surplus-value come from when the laws of exchange, M-C and then C-M, as presupposed in classical political economy, mandate an exchange of equivalents? If the laws of exchange are to be observed as the theory states, then a commodity must be found