DOCUMENT 19 Essays on Marx's Theory of Money (1926-8)

Isaak Il’ich Rubin

Source: First published in Ya.A. Kuz’minov et al. (eds.), Istoki: Sotsiokul’turnaya sreda ekonomicheskoi deyatel’nosti i ekonomicheskovo poznaniya (Moscow: Izdatel’skii dom Vysshei shkoly ekonomiki, 2011), pp.

Introduction by the Editors

In the previous document of this volume, Isaak Rubin offered guidance to the first chapter of Marx’s Capital, which he described as ‘enormously difficult to understand’. The present document, written during the same period, pursues a similar theme but goes much further to examine the whole of Part One of the first volume of Capital, including ‘The Commodity'; ‘The Process of Exchange'; and ‘Money, or the Circulation of Commodities'. The logic of Rubin's approach is made clear at the outset: he will presuppose, together with Marx, that the whole is logically prior to the parts. To begin with the ‘value' of a ‘commodity' is to presuppose the whole of a commodity-producing society - a particular stage of history, a particular form of property, a particular distribution of social classes, etc. - whose cell-form is determined by analysis, and whose contradic­tions must then be reconstructed categorically. In his notes on ‘The Method of Political Economy', Marx wrote:

Just as in general when examining any historical or social science, so also in the case of economic categories it is always necessary to remember that the subject, in this case contemporary bourgeois society, is presupposed both in reality and in the mind, and that therefore categories express forms of existence and conditions of existence - and sometimes merely separate aspects - of this particular society, the subject; thus the category, even from the scientific standpoint, by no means begins at the moment when it is discussed as such.^[1181]

Adopting Hegel's method, Marx saw that discussion of an initial category begins with the presupposition of its developed form.

Beginnings are always difficult in all sciences. The understanding of the first chapter, especially the section that contains the analysis of com­modities, will therefore present the greatest difficulty. I have popularized the passages concerning the substance of value and the magnitude of value as much as possible. The value-form, whose fully developed shape is the money-form, is very simple and slight in content. Nevertheless, the human mind has sought in vain for more than 2,000 years to get to the bottom of it, while on the other hand there has been at least an approxim­ation to a successful analysis of forms which are much richer in content and more complex. Why? Because the complete body is easier to study than its cells. Moreover, in the analysis of economic forms neither micro­scopes nor chemical reagents are of assistance. The power of abstraction must replace both.

These two excerpts from Marx also tell us much about Rubin’s approach in the following essays. The theory of money begins with the theory of value, and Rubin introduces his commentary on the latter by specifying what Marx was abstracting from but also presupposing, namely, the fully developed circulation of commodities. On his opening page Rubin tells us that ‘The theory of money only results from the theory of value but, conversely, the theory of value cannot be constructed without the theory of money Why is this important? Rubin answers that if Marx had not presupposed money as the medium of developed commodity circulation, he would have had to begin with the exchange of two items in natura - that is, with two non-commodities - in which case it might very well make sense to say, together with the marginal utility school, that ‘such exchange may be regulated by the individual requirements of the participants and by their subjective appraisal of the relative usefulness of products’.

The commodity, being an attribute of a particular ‘social world’, is also neces­sarily one of the latter’s forms: it is a ‘social form’ of production relations between people, the theme that runs through all of Rubin’s work. Marx’s mar- ginalist critics, Rubin writes, displayed ‘complete helplessness’ by trying to combine ‘subjective psychologism’ with ‘objective naturalism’, whereas Marx saw that commodity production can only be understood by adopting the dia­lectical method, which, since it examines the structure of commodity-pro­ducing society, is simultaneously a ‘sociological method’. Political economy analytically determines its fundamental category and then synthetically recon­structs its subject matter in theory, moving, in this case, from social labour to the developed theory of money. When he first introduces the question of money directly, Rubin gives provides a map of his essays that will be helpful to keep in mind:

Examination of the mechanism of social dependence between the equa­tion of labour and the equation of commodities... constitutes the theme of the Marxist theory of value, or the first stage of our investigation. After showing how the equation of labour takes the form of the generalised equation of commodities, Marx turns to analysis of the latter process, showing that the generalised equation of commodities is only possible in the form of them all being equatedwith one and the same designated com­modity, which acquires the character of money. This is the theory of the origin and social Junction of money, or the second stage of the study.

Marxbegins by setting aside the subjective intentions of exchange participants. All commodities are qualitatively equal in terms of the unity of their social function as products of labour, but for exchange to occur they must overcome their quantitative inequality as use-values: they must be equalised in terms of the abstract, socially necessary labour that they represent, or their common property as exchange-value. But since exchange is always, as Rubin emphas­ises, a production relation between people, how do the participants themselves relate to one another in the exchange process? If they are not making judge­ments on the basis of marginal utility, how is the exchange act structured?

When Rubin poses this question, it seems difficult to imagine that he does not have in the back of his mind another famous text by Hegel, The Philosophy of Right. Much as Marx’s Capital begins with the abstraction of the commodity, Hegel’s political philosophy began with the concept of the individual person’s ‘abstract right’. But where Marx spoke of a society of commodity producers connected through the movement of things, Hegel emphasised ties of con­sciousness. The absolutely free will has the abstract universality of a person, a form that acquires content in property, the ‘first embodiment of freedom’.^[1184] But since existence as a determinate being is also existence for another, the relation of will to will emerges in the sphere of contract, whereby each holds and may exchange property through participation in a higher form of consciousness, a ‘common will’.^[1185] The universal that mediates contractual relations, according to Hegel, is value:

Since in real contract each party retains the same property with which he enters the contract and which at the same time he surrenders...

If the contract is violated, however, a ‘wrong’ is done that must be made right. Each must do what morality says ‘ought’ to be done, but since subjective moral judgements may differ, ‘abstract right’ turns out to presuppose ‘ethical life’, which ultimately involves the laws of the state as universal thoughts that simultaneously form and are formed by the consciousness of citizens.

Rubin’s treatment of commodity owners runs parallel to Hegel’s account of the parties to a contract. In the act of exchange, each makes a claim upon the other, but who is to adjudicate incompatible claims? Formally, the parties are equal participants, yet it appears to the individual commodity owner that his own will is passive and subordinate to that of the purchaser, who, as, the theory of marginal utility suggests, will actively make his own judgement of the commodity’s value. The participants are equal but unequal. In this case, however, the question is irrelevant. It is not Hegel’s laws of ethical life but rather Marx’s objective law of value that dictates the rate at which one commodity exchanges for another.

In Marx's terms, the law of value means that the exchange process lays down its own law. Rubin comments that ‘Within the [allegedly] “metaphysical” shell of the doctrine concerning the dual nature of the commodity, we find a soci­ological analysis of the production relations between commodity producers'. The general form of exchangeability entails money, as the universal measure of abstract labour and exchange-value. And money, in turn, now appears as the true reified ‘carrier' of the economic relation: ‘The commodity that fulfils the function of active initiator of the production relations of exchange between com­modity producers, i.e., that possesses the capacity for direct universal exchange­abilityfor any other commodity, is money’.

Hegel's juridical law is rightful and therefore also rightfully coercive. Rubin points out that the law of value, and commodity circulation mediated by money, are also ‘means of coercion':

Money is a ‘social force', it ‘measures the social wealth of its owner' his social power.^[1187] The ‘free' exchange agreement, formally presupposing the absolute equality of both participants, in fact resides in the initiative of one of them, the owner of money. This is what overcomes the limitation and restriction of the exchange process founded upon the correspond­ence of will between two counterparties. The foundation of commodity society is ‘the juridical relation, whose form is the contract'. However, ‘The content of this juridical relation (or relation of two wills) is itself determ­ined by the economic relation'.^[1188] The economic relation of exchange, being completed by the development of money, introduces lawfulness and con­stancy into a system of juridical relations based upon the correspondence of the individual wills of separate persons.

Money directly enters the analysis at precisely the point corresponding to Hegel's turn from ‘abstract right' to ethical life (or the institutionalisation of a common will). With Marx, money settles who is passive and who is active. Commodity production involves a ‘free agreement and ‘coincidence of will' that can be initiated by either party to an exchange - provided one is the possessor of money, or of a commodity that is freely exchangeable for money in accordance with the law of value. Rubin writes:

The seeming freedom of ‘motivation’ on the part of separate commod­ity producers necessarily presupposes an objective ‘limitation’ (restric­tion, constraint) of action on the part of all commodity producers taken together: the former, without the latter, would make the social process of production impossible by transforming society into a chaos of uncoordin­ated and intersecting activities by individual people.

In the Philosophy of Right, Hegel understood the contribution of political eco­nomy in discovering the immanent lawfulness of the market amongst a seem­ing chaos of accidents.^{[1189] [1190] The salient weakness of Hegel’s political philosophy, however, was that in his account of ‘civil society’ he moved from the shared consciousness of the family to class divisions - which then had to be recon­ciled in the laws of the state, which are thoughts and thus can be universally shared - with little more to offer in the way of economic insight. To fill this gap, and thus to shift the entire dialectical analysis from subjectivity to objectivity, was Marx’s undertaking in the Critique of Political Economy and later in Cap­ital. With a comprehensive analysis of the history and categories of money and exchange, Rubin guides his reader through the first three chapters of Capital, ending at the point where Marx turns from the accumulation of money - as a hoard - to the transition to the next higher category, capital. ‘The ultimate product of commodity circulation’, Marx wrote at the beginning of the fourth chapter, ‘is the first form of the appearance of capital’.11}

Isaak I. Rubin on Marx’s Theory of Money

1 Marx’s Theory of Value and the Theory of Money

Marx’s theory of money is closely, even inseparably, connected with his theory of value. The connection is even closer than between other parts of Marx’s eco­nomic theory. Of course, Marx's theory of capital is also built upon his theory of value, without which it could not be understood. Still, it investigates a different and more complex type of production relations between people as capitalists and wage-workers, whereas the theory of value examines a simpler type of pro­duction relations between people as independent commodity producers. The theory of money does not study a type of production relations different from those that Marx considers in his theory of value; rather it looks at the same type in more developed form. Money not only grows out of the commodity but always presupposes the commodity. The relation between the owner of a commodity and the owner of money is also a relation between independent commodity producers. The owner of money was yesterday the producer and owner of the commodity, which he sold for money. Insofar as exchange of the commodity for money is essentially the exchange of commodity for commod­ity (c-M-c), i.e. the equation of all commodities, this aspect of the exchange process is studied by the theory of value. Insofar as the exchange of commod­ity for commodity invariably occurs in the form of commodity for money, and money for commodity (c-M and M-c), this aspect of the exchange process is studied by the theory of money. Both theories examine different sides of one and the same process.

This is what explains the dual character of the link between these two theories. The theory of capital presupposes the theory of value, but Marx constructs the latter without the aid of presuppositions that underpin the former. The theory of money not only results from the theory of value but, conversely, the theory of value cannot be constructed without the theory of money and is only completed in the latter. At the basis of the Marxist theory of value lie the presuppositions of a money economy; more precisely, for the starting point of his analysis Marx takes the fact of the generalised equation of all commodities for one another, which characterises the money economy and is impossible without the mediation of money.

The ensuing chapters of this work are devoted to examining and substanti­ating Marx's theory of money, which he builds upon, and which results from, the theory of value. In the first chapter we shall examine the reverse side of this dependence between the two theories, which has not received due attention. We shall consider the question of the extent to which the Marxist theory of value is founded upon the presuppositions of a money economy.

The usual discussions of Marx's reasoning in his theory of value proceed as follows. First of all, Marx takes the fact of the exchange of two commodities, that is, the fact of the equation of the exchange-value of two goods that differ from one another in terms of their use-value. From the fact of their equivalence or commensurability, he draws the conclusion that there must be a specific measure whereby they are compared, and he finds that measure in labour. It appears, at first sight, that this reasoning correctly represents Marx’s thinking in the first pages of Capital. However, a more attentive examination of Marx shows us how completely mistaken is the view that reduces his theory of value to 1) an analysis of the fact of exchange between two commodities, and 2) the attempt to find a measure for their comparison.

For the starting point of his analysis, Marx does not take the equation of the commodityform alone, but rather the equation of each commodity with all others that arefound on the market, i.e. the generalised equation of any commodity with any other. The commodity is not produced at the order of particular individu­als but for the market, for an undefined and extensive circle of purchasers. It is not produced for exchange with any other specific commodities but for sale in exchange for money, with which it is possible to purchase any other com­modities. In the market, the commodity receives a certain valuation, a market price or objective exchange-value (here we leave aside any deviations of price from value), which is independent of and not bound by the will of separate indi­viduals but is rather an objectively necessary result of the activities of the entire market, of the totality of buyers and sellers. Each commodity is equated with all others (which is only possible through the medium of money). Each commod­ity has the character of exchange-value, i.e. its owner has the ability to equate it with any other commodity and exchange it for any other (by means of money). Only in these conditions is it possible to speak of the existence of a commod­ity and exchange-value, or of the suitability of the commodity for exchange in general, i.e. regardless of the type of commodity for which it exchanges or which individuals are involved in the exchange. There is no exchange-value in conditions where exchange of the product is possible only for specific products or between specific individuals; [in those conditions] exchange-value does not yet exist, and the theory of value does not apply to this sort of exchange.

The fact that Marx takes analysis of the commodity’s suitability for gener­alised equation as his starting point is established beyond any doubt by his reasoning in the Critique of Political Economy and in Capital. The fundamental fact, with which the Critique begins, is that commodities ‘are able in defin­ite proportions to take one another’s place in the exchange process, i.e., they are equivalents’.¹² The entire reasoning of the Critique is based on the fact that the exchange-value of one product is expressed in terms of all other products. Speaking of the equation of linen with coffee, Marx adds that the exchange­value of the former ‘is not exhaustively expressed’ by this proportion but only by an ‘infinite number of equations’ with all other commodities.^{[1191] [1192] [1193] [1194] Linen yarn and linen are equivalent to each other only insofar as they are ‘equivalents of any use-value which contains the same amount of labour timed4}

12

Marx 1970, p. 34.

Marx gives essentially the same reasoning in the first pages of Capital. Read­ers generally focus their attention on the famous example of comparing two commodities, wheat and iron, while the full course of Marx’s reasoning is hid­den from view. Before turning to the example of wheat and iron, Marx notes the fact that wheat can be exchanged with all other commodities: ‘A given commodity, a quarter of wheat for example, is exchanged for other commod­ities in the most diverse proportions, for instance, for 20 pounds of boot polish, for two yards of silk, for ½ ounce of gold, etc.; however, the exchange-value of the quarter of wheat remains constant whether it is expressed in terms of boot polish, silk or gold’?⁵ The equation of two commodities, wheat and iron, is only one of many that equate wheat with all other commodities.

Marx’s thinking emerges all the more clearly in the same passage, corrected for the French edition, which Marx edited himself: ‘A given commodity, a quarter of wheat for example, is exchanged for x boot polish, y silk or z gold, etc. In short, it is exchanged for other commodities in the most diverse proportions. Therefore the wheat has many exchange-values instead of one. But x boot polish, y silk or z gold, etc., each represent the exchange-value of one quarter of wheat. Therefore x boot polish, y silk or z gold, etc., must, as exchange-values, be mutually replaceable or of identical magnitude. It follows from this that, firstly, the valid exchange-values of a particular commodity express something equal...d⁶ Once a given commodity equates with all other commodities, all of the latter equated with one another. This text, which reproduces the thinking in the Critique, emphasises the fact of the generalised equation of all commodities with one another, or what amounts to the same thing, of the given commodity with all the others, and this is the starting point for the analysis in the theory of value.

Marx’s thinking continues as follows: If a given commodity equates with two other commodities, then the latter must equate with one another, expressing one and the same value in two different forms. The reverse conclusion then follows: If any two commodities (wheat and iron, for example) are equal to one another, then they must both be equal to some third one. This position, developed by Marx in the example of wheat and iron and illustrated in the famous comparison with a triangle^[1195] - which has given rise to many misinterpretations - is the conclusion that follows from the initial fact of the equation of each commodity with all the others. This is the second link in the chain of reasoning, which is usually interpreted mistakenly to be the first. The equation of two commodities gives Marx the right to infer their equality in value terms only because he deals not with some isolated equation but with one link in an endless series of equations, in which any two commodities equate with all the others. This way of thinking on Marx’s part is perfectly evident not only in the Critique, where it is the basis for the whole exposition, but also in Capital and - perhaps even more clearly - in the brochure Value, Price and Profit}^[1196]

Marx also emphasises in Theories of Surplus-Value that exchange-value pre­supposes the generalised equation of all commodities with each other, not just of two of them: ‘If only two products existed, the products would never become commodities, and consequently the exchange-value of commodities would never evolve either’?^[1197] As value, the product must be ‘directly convert­ible from one use-value into all others’.^[1198]

From what has been said, we can draw the following conclusion. In his theory of value, Marx’s starting point is not the analysis of some random equation of two commodities in natura, but rather the generalised equation of each product with all others, which occurs in the form of an objective market valuation of each commodity by way of money. Leaving the role of money temporarily aside, Marx investigates the general character and principal results of this social process that leads to the generalised equation of all the products of labour. Marx does not investigate exchange in general, but rather developed (essentially monetary) exchange as the fundamental social form of the social ‘exchange of things’, i.e. of social production. The Marxist theory of value is not a ‘dialectical deduction from the essence of exchange’, as [Eugen] Bohm- Bawerk claims, but an analysis of a determinate social form of production, namely, of a commodity economy.

It will now be easier for us to explain one point that has given rise to particular attacks from Bohm-Bawerk. On what basis does Marx assert, from the very outset, that the exchange-value of commodities is an ‘abstraction from their use-vales’,^{[1199] [1200] which he will set aside in the analysis of value? If it were a case of the random exchange of two products in natura, then Bohm- Bawerk would be correct in saying that such exchange may be regulated by the individual requirements of the participants and by their subjective appraisal of the relative usefulness of the products. Insofar as the objective exchange-value of a given product is involved, being equated with all other products without regard to their distinctions or the personality of their producers, what we have is an objective, law-governed social process of the equation of all use-values, i.e. ‘abstraction from their use-values’. This does not mean that the usefulness of commodities plays no role, for example, in the motivation of the purchasers. (But the exchange-value of the product - i.e. its ability to be exchanged for any other use-value, belonging to any commodity owner, and to move in any direction in the market - cannot be explained by these motives). Marx is not interested in the individual motives of the purchasers but in the social process of exchange, which objectively consists of the equation of one [commodity] with the other within determinate law-governed proportions that are being established for all use-values without exception.}

We have established, therefore, the error of the view that sees Marx taking for his starting point exchange as such, or the very fact of the comparabil­ity of two products. No less mistaken is the supposition that Marx concludes, from the fact of the comparability of the two products, that there must be some measure for the comparison, which he finds in labour. Following [David] Ricardo’s example, Marx decisively rejected even posing the question of a measure of value, which for Adam Smith was inseparably intertwined with the question of the cause of regular changes in the value of products, thus confus­ing the question [of the measure of value] and preventing its correct resolution. Ricardo sharply criticised Smith’s teaching on the measure of value and trans­ferred the entire theory of value to the plane of a scientific-causal examination of exchange phenomena and of changes in the value of products. The view of certain writers - to the effect that Marx weakened this strictly causal pos­ing of the theory of value, passed on to him by Ricardo, by introducing into it elements of evaluation - has no foundation.22 Marx is sharply critical of rais­ing the question of an ‘invariable measure of value’,^{[1201] [1202] [1203] [1204] [1205] [1206] and he even reproaches Ricardo for certain expressions that could be interpreted in that sense?4 It is true that we encounter in Marx the doctrine of labour as the ‘immanent meas­ure of value'?5 But Marx frequently emphasises that he understands ‘immanent measure’ in a completely different sense from the customary or ‘external meas­ure’, which is not labour but money?6 Labour is the ‘immanent measure’ of value only because it is the ‘causa efficiens’ (the operative cause), or its sub­stance?7 Quantitative changes in the productivity of labour are the cause of changes in the value of commodities. This position, translated into the lan­guage of Hegelian philosophy, says that labour is the ‘immanent measure’ of value?3}

22

Those writers who interpret Marx’s theory of value in the sense of search­ing for a measure of value have not clearly considered whether the question involves a measure that helps the parties in an exchange to equate the products they are exchanging, or whether it involves instead a measure that makes it possible for a theoretical investigator to assert equality between the exchan­ging products. Breaking down the question in this way clarifies it and leaves no doubt that Marx resisted posing the question in both of these senses. Marx had no intention of asserting that two products exchange for one another because the persons making the exchange regard their products as containing equal quantities of labour, as such: 1) Marx is interested in the objective result of the exchange process, not in the subjective motives of parties to the exchange; and 2) insofar as subjective motives are concerned, it is impossible to assume that the buyers know the comparative labour expenditures required for the produc­tion of various products and that they consciously take these expenditures as the basis for determining the exchange-value of the latter.

To pose the question in the second sense that we mentioned would mean that since two commodities are equated with one another we must, as theor­etical investigators, disclose the moment of their equality and indicate what property is common to both of them and makes them equal to one another. The theorist is obliged to reveal the moment of equality between two phenom­ena only if he is himself comparing these phenomena and asserting that they are identical in nature. But the fact that wheat equates with iron on the mar­ket does not mean that the theorist must demonstrate where their equality lies, or what makes them equal. The theorist encounters a definite fact and is obliged to explain it. This means that, upon observing the fact of equalisation between wheat and iron, he asks himself: is this phenomenon distinguished by having the character of being constant and law-governed, and if so, what is its cause, i.e. what are the phenomena that condition the existence and changes of the given phenomenon? The aim is not to show what makes wheat and iron equal, but rather to disclose the law-governed and objective social fact of mar­ket equalisation between wheat and iron - that is the task of the theoretical economist. Marx poses the question in exactly this manner, and it is an inad­equate understanding of this way of posing the question that has prevented critics, and sometimes even commentators on Marx, from correctly grasping his theory of value.

To understand properly the basis of Marx's theory of value, one must firmly grasp, as indicated above, that the starting point for Marx's analysis is the fact of developed exchange and the generalised equation of all commodities with each other. Once every commodity, upon receiving a certain valuation in the market, is thereby equated with all other commodities and can be exchanged for any of them in some definite proportion - completely apart from the fact of whether the owner of the second commodity has any need for the first one - this exchangeability, or exchange-value of the commodity, is its social property. In the process of developed market exchange, every commodity is fully equal, as exchange-value, to any other commodity and can replace it in some definite proportion. This means that in the real process of market exchange all commodities are really equal to one another, equal not in terms of their material properties but in terms of their social function. Since the social function of commodities in the market consists of being counterposed to other commodities; and since, in this process of the mutual counterposing of commodities, every commodity can replace any other commodity in some definite proportion, it follows that the generalised equation of commodities in the market means the unity of their socialfunction, or of their social nature.

Marx’s argumentation is usually presented this way: since commodities can equate with one another, we must find in them something that is common and unifying. It is more correct to express Marx’s thinking approximately as follows: the fact that commodities really equate with one another on the market is the unity of their social function. Now the task is to explain the social character of this fact of the generalised equation of commodities and, specifically, to indic­ate its necessary connection with the given social structure of the economy, its role or social function in the economy and the lawfulness involved in the equation of commodities, i.e. the causes that explain an increase or decrease of their exchange-value. In other words, the task that emerges is that of invest­igating the qualitative and quantitative aspects of exchange-value. And since the latter represents the social function acquired by products of labour within a specific social context, our task then becomes one of analysing this social environment of the commodity economy. This analysis discloses: 1) the need for a generalised equation of commodities as the sole form of social connec­tion between formally dissociated yet materially connected commodity pro­ducers; 2) the role of commodity equalisation as regulator of the ebbs and flows of labour in different branches of production, i.e. the social function of exchange-value as regulator of the distribution of social labour; and finally, 3) the laws of changes in the exchange-value of commodities, depending upon changes in the productivity of social labour. We see how a determinate social structure of the economy, or a determinate type of production-labour relations between people, creates a definite social function or social form of the products of labour, namely, their exchange-value. And this is what constitutes Marx’s theory of value.

Accordingly, we regard as incorrect the view that Marx - taking the equa­tion of two commodities as the starting point for his analysis, i.e. the fact of exchange as such, apart from its social form - is searching for a measure for comparing these commodities. From the very outset Marx has in view a developed commodity economy with the generalised equation of commodit­ies, characterised by the ability of each commodity to exchange in some defin­ite proportion for any other commodity. It is only this starting point that made it possible for Marx to eliminate in advance the individual-psychological way of posing the question (i.e. use-value) and from the very beginning to define the subject matter of his investigation, exchange-value, as an object belonging to the social world, as a social function or form of the product of labour. This is what determined the entire method of the investigation. In order to explain the social form of products of labour, it was necessary to turn to analysis of the social form of the organisation of labour, which is ‘expressed’ or ‘materialised’ in the former.

This way of thinking on Marx's part emerges very clearly in his brochure Value, Price and Profit. After characterising the fact of the generalised equation of commodities, Marx turns from the commodity to labour in the following way:

What is the common social substance of all commodities? It is labour... And I say not only labour, but social labour. [T]o produce a commodity, a man must not only produce an article satisfying some social want, but his labour itself must form part and parcel of the total sum of labour expended by society. It must be subordinate to the division of labour within society. It is nothing without the other divisions of labour, and on its part is required to be integrated with them.^[1207]

Marx forcefully emphasises that he is speaking of labour not in its natural but in its social form, and of the process of the social division of labour, of which exchange-value is the expression. The latter is right away defined by Marx as a ‘social function' or form of the products of labour, which must correspond to a definite ‘social substance', i.e. to a certain distribution of social labour.

This is essentially the same course that Marx's thinking follows in Capital. After noting the qualitative equality of all commodities as values, Marx sees in them a ‘materialised', ‘crystallised' (i.e. fixed in the form of the social proper­ties of products of labour^[1208]) expression of ‘their common social substance',^{[1209] [1210]} and expressions of ‘an identical social substance, human labour'³2 The equa­tion of commodities on the market expresses the equation of social labour in the process of its distribution between different branches of production. This process equates all the different kinds of separate labour expenditures - which originally appeared in the form of private, concrete, qualitatively diverse and individual labour expenditures - and it is only as a result of the exchange pro­cess that they are transformed into social, abstract, simple and socially neces­sary labour. To the qualitative equality of commodities in the market corres­ponds the qualitative equality of labour in the social process of its distribu­tion. Therefore, after beginning with the equality of commodities as things in exchange, on the third page of Capital Marx already passes directly to its corol­lary in the process of social production - to the equality of labour, analysing this labour as uniform and homogeneous, corresponding to the uniformity and homogeneity of all commodities as exchange-values. The abstract character of labour emerges here as the correlative of the generalised equation of commod­ities, which finds its full expression through the medium of money. From the developed form of exchange, Marx turns directly (in the first two sections of the first chapter of Capital) to developed abstract labour, temporarily setting aside the entire protracted and complex social process that converts private and unequal labour into social and equalised labour. Marx turns to review this social process only in the third section (The Value-Form, or Exchange-Value) in order finally, in the fourth section (The Fetishism of the Commodity and its Secret), to come to the more profound basis of this process, the social struc­ture of commodity economy. Marx begins with the finished result of the social process in order then to show us the development of the latter and to reveal its basis. The first chapter of the Critique follows approximately the same construc­tion. After giving a detailed analysis of exchange-value and abstract labour, Marx says:

So far two aspects of the commodity - use-value and exchange-value - have been examined, but each time one-sidedly. The commodity, how­ever, is the direct unity of use-value and exchange-value, and at the same time it is a commodity only in relation to other commodities. The exchange process of commodities is the real relation that exists between them.^{[1211] [1212]}

Following the ‘one-sided’ analysis of exchange-value and abstract labour, as the completed final results of the social process, Marx turns to examine the actual process that converts use-value into exchange-value, private labour into social labour. In the postface3⁴ to the second edition of Capital, Marx himself mentioned this particular aspect of his study:

Of course, the method of presentation must differ in form from that of inquiry. The latter has to appropriate the material in detail, to analyse its different forms of development and to track down their inner connection. Only after this work has been done can the real movement be appropri­ately presented. If this is done successfully, if the life of the subject-matter is now reflected back in the ideas, then it may appear as if we have before us an a priori construction.^[1213]

This method of Marx's investigation, beginning with analysis of finished results and ending with the social process of development, actually did prevent his critics from seeing his method of investigation and became the source of numerous charges that the Marxist theory of value is an a priori construction. It also prompted many of Marx's supporters to find the basis for his theory of value in the first pages of Capital, which deal with the content of value or abstract labour. This view, as we have seen, is mistaken. The opening pages of Capital only give an analysis of the complete and finished result, which is the object of the investigation: value and its correlative in abstract labour. We only find the investigation of the actual process of development of the phenomena of value in the sections devoted to the ‘value-form' and ‘commodity fetishism'. This process of the development of value is simultaneously the process of the development of money.

Now we can see clearly the close connection between the theory of value and the theory of money in Marx's economic system. This connection con­sists not only of the generally recognised fact that the theory of money is built upon the theory of value, but also of the fact that the latter only finds its com­pletion in the theory of money. The presentation of the theory of value in the first chapter of Capital, as in the Critique of Political Economy, consists of two parts: an analysis of the concepts of exchange-value and abstract labour (the substance of value), and an explanation of the process of development of exchange-value (the form of value). The first part, as we have seen, presup­poses generalised equation of all commodities with one another and thus of all types of labour - a process that corresponds to monetary exchange. The second part, describing the development of exchange-value as the capacity of the commodity to enter into generalised exchange, simultaneously shows the development of the money-form. It is true that the ‘money-form' is only the final and most developed of the ‘forms of value' (simple, expanded, general and monetary) that Marx considers. It may seem, therefore, that there are forms of value whose existence precedes the money-form, and that consequently exchange-value may exist at a stage of social development that precedes the appearance of money. We consider such a presupposition, which relies upon the terminology that Marx has used with regard to all the preceding phases of exchange as expressions of the ‘value-form', to be mistaken. The forms of value that precede its general form are not only the embryo of the money-form but also merely the embryonic form of value. The development of exchange­value appears only with the ‘general form’, which essentially coincides with the appearance of money.

The close connection between the theories of value and money is clearly revealed in the very organisation of Marx’s work. The first chapter of the Cri­tique of Political Economy, entitled ‘The Commodity’, also essentially contains the foundations of the theory of money. Immediately following analysis of the concepts of value and abstract labour, Marx turns to an exposition of the actual exchange process - which converts use-value into exchange-value, and con­crete labour into abstract labour - and simultaneously shows us also the devel­opment of money as the necessary correlative of exchange-value and abstract labour (beginning on page 19 of the manuscript).^[1214] The second chapter, on ‘money’, traces the separate functions of money but still does not provide a general theory of money. Capital is pretty much the same. In the first chapter on ‘The Commodity’, the part dealing with forms of value essentially contains the theory of money that Marx develops systematically and in more detail in the second chapter on ‘The Process of Exchange’. Here, too, the general theory of money is provided in close connection with the theory of value, while the third chapter, entitled ‘Money’, is concerned only with the separate functions of money.

The theory of value and the theory of money together characterise one and the same fundamental type of production relations between commodity producers, who complement one another through their labour activity in the production process but remain formally independent and only come into con­tact with one another in the process of exchange. Insofar as we are concerned with the social unity of the process of production and the distribution of social labour, which occurs through the mediation of exchange, we have the theory of value. Insofar as our attention is directed to the exchange process, with its private acts of purchase and sale as the necessary form of realising the unity of the social production process, we have the theory of money. Only the two theories, taken together, give us a general picture of commodity economy with all of its structural duality: the unity of the social process of production and its fragmentation between individual private undertakings.

2 The Need for Money

It is often thought that in the theory of value Marx describes exchange that occurs without the mediation of money, while in the theory of money he shows the emergence, development and role of money. We have already seen that such a view must be recognised as mistaken. From the very start of his investigation, Marx presupposes the generalised exchange of all commodities, which is only possible through the mediation of money. However, in analysing this complex phenomenon of money economy, Marx adheres, as always, to the method of consecutively separating and explaining different aspects. It would be incorrect to regard each of them as a separate object of investigation: each characterises one abstract aspect of the phenomenon as a whole, studied at a particular level of examination, and only altogether do they provide a complete picture of the phenomenon being studied.

In the concrete reality of money economy, we observe the facts of purchases and sales, of the exchange of commodities for money and the reverse. Regard­ing these concrete facts, Marx says in effect: let us begin by abstracting from the impossibility of each commodity exchanging for others except through the mediation of money. Let us regard the entire exchange process as a process of the generalised, mutual equation of all the products of labour in the market - a process through which the equation and distribution of all types of labour in social production is completed. In other words, let us see how, in commod­ity economy, the entire process of distribution and equation of social labour occurs in the form of the equation of the products of labour as values. Exam­ination of the mechanism of social dependence between the equation of labour and the equation of commodities also constitutes the theme of the Marxist theory of value, or the first stage of our investigation. After showing how the equa­tion of labour takes the form of the generalised equation of commodities, Marx turns to analysis of the latter process, showing that the generalised equation of commodities is only possible in the form of them all being equated with one and the same designated commodity, which acquires the character of money. This is the theory of the origin and social junction of money, or the second stage of the study. Only after that is it possible to turn to consideration of the individual properties of money asfinished results of the process of circulation, which at first appear to be independent of the latter and to inhere in money itself. This is the theory of the separate functions of money, or the third stage of the investiga­tion. In other words, these three stages of the investigation can be characterised as the doctrine 1) of value, or of the commodity; 2) of the transformation of the commodity into money; and 3) of money itself. The second stage is integ­rally connected with the first, and this is explained by the fact, as we noted above, that the theory of money is set out by Marx in two places: first, in close

connection with the theory of value (in the first chapter of the Critique, and in the section on the value-form in Capital and also in the second chapter), and secondly, independently (in chapter two of the Critique and chapter three of Capital). The second, transitional stage involves special difficulties for the study, since ‘The movement through which this process has been mediated vanishes in its own result, leaving no trace behind’.^[1215] The third stage of the study deals with the functions of money, which stand out and are immediately apparent to everyone. The first stage, or the theory of value, is more abstract and difficult but, given a certain familiarity with abstract thought, it is still easy to grasp the entire process of exchange as the equation of things, which is closely associated with the equation of labour. However, the greatest difficulties in the way of understanding come at the second stage, which traces the social process whose result is the coalescence of the function of money with a determinate natural product that appears to have a natural rather than a social character^[1216] Marx himself more than once notes the different levels of abstraction through which his investigation moves:

The fact that commodity owners treat one another’s labour as universal social labour appears in the form of their treating their own commodities as exchange-values; and the interrelation of commodities as exchange­values in the exchange process appears as their universal relation to a particular commodity as the adequate expression of their exchange-value; this in turn appears as the specific relation of this particular commodity to all other commodities and hence as the distinctive, as it were naturally evolved, social character of a thing^[1217]

Here we see clearly laid out, in synthetic order, the whole path of the study’s ascent from social labour through value to money. Sometimes Marx draws attention to the same path in the reverse, analytical order: ‘But how can one express x cotton in y money? This question resolves itself into this - how is it at all possible to express one commodity in another, or to present commodities as equivalents? Only the elaboration of value, independent of the representa­tion of one commodity in another, provides the answer’.^[1218] From the concrete phenomenon of money it is necessary to descend to the equation of commod­ities or the value-form, and from the latter still further to the doctrine of the content of value or social labour. The first level of the investigation leads from social labour (or the content of value) to the form of value; the second, from the form of value to money; and the third treats money as the finished res­ult. As we see, the separate levels of the study gradually pass from one to the other, for the final link of one is the first link of the next. The link that connects the theory of value with the theory of money is the doctrine of the value­form.

Now we can specify more clearly which task Marx pursues in the second stage of his study, in the general theory of money. He does not simply provide a scheme of the gradual historical development of money parallel with the development of exchange itself. His fundamental task has a theoretical, not an historical, character. It is not enough to trace the origin and development of money. It is still necessary to disclose the lawfulness that makes money the necessary consequence and accompaniment of a developed commodity economy. The internal connection between them must be demonstrated. The analysis of commodity economy must show us that the generalised exchange of commodities is impossible without the mediation of money. That is the theme that Marx works out in the general theory of money.

To pose the question of the necessity of money, which can explain for us the powerful, universal and unstoppable expansion of money in accordance with the development of commodity exchange - this is the characteristic specificity of Marxist theory that differentiates it from many others. Followers of the clas­sical school, for the most part, explained the origin of money in terms of its conveniences for exchange and the greater ease of monetary as opposed to natural exchange. But can conveniences alone explain the spontaneous and universal spread of money? Enormous difficulties are involved in the explan­ation of money for any theories that are built not on analysis of the objective structure of commodity economy but rather on a description of the subjective motives of economic actors, abstracted from the concrete social and historical context. In the theory of money, the Austrian school demonstrates its com­plete helplessness. As one author has commented, the leading representatives of the subjective theory of price, [E.] Fillippovich and C[arl] Menger, derive the value of money from the objective, natural properties of gold.^[1219] Subjective pyschologism is supplemented with objective naturalism. Other authors are clearly aware of the incompatibility of a subjective theory of price with the fact of objective valuation of commodities in terms of money: ‘The subjective worth of goods, as a subjective-psychological fact, cannot be reconciled with [their] objective-quantitative expression’ in terms of money; the emergence of such monetary expression constitutes ‘a problem that is not accessible to human understanding^!).^{[1220] [1221] This acknowledgement is equivalent to the com­plete bankruptcy of the psychological method in the explanation of money as one of the fundamental phenomena of a modern economy. This phenomenon can only be understood on the basis of the sociological method, beginning with analysis of the social structure of commodity economy.}

3 Money as the Result of Contradiction between the Use-Value and

Exchange-Value of the Commodity

As we know, Marx derived the need for money from the contradiction between the use-value and exchange-value of the commodity. This part of Marx’s teach­ing has often provoked the charge of ‘metaphysics’ and of being a dialectical game of abstract concepts. It is regarded as abstract and scholastic speculation, having nothing in common with real life.

Actually, this part of the theory, in which Marx ‘flirts with Hegelianism’ most directly, can create such an impression at first sight. The exposition is always conducted on the basis of his analysis of abstract concepts, their opposi­tion, the enunciation of contradictions and their dialectical reconciliation. This character of the presentation is most striking in the Critique of Political Eco­nomy. However, our appraisal of the general doctrine of money, as it is set out in the Critique and in Capital, changes if we recall that beneath each external category in the Marxist economic system is concealed a specific type of pro­duction relations between people. Within the abstract metaphysical shell we find a profound sociological nucleus. The general Marxist teaching on money turns out to be a continuation of the analysis of production relations of the commodity economy, which Marx initiates in his theory of value.

[a] Division oflabour.4³ The basic contradiction of commodity economy con­sists, on the one hand, of the fact that it comprises a multitude of formally independent private undertakings that are separate from one another, while on the other hand the latter are materially bound together and mutually com­plementary. Due to the division of labour and exchange, the labour of the individual producer acquires a twofold social character. On the one hand, it must, as a definite useful kind of labour, satisfy a definite social need, and thus maintain its position as an element of the total labour, which originally sprang up spontaneously. On the other hand, it can satisfy the manifold needs of the individual producer himself only in so far as every particular kind of useful private labour can be exchanged with, i.e. counts as the equal of, every other kind of useful private labour.^[1222]

In a commodity economy, the system of social division of labour can itself be considered from two sides: the technical and the social. On the one hand, it represents the sum total of mutually complementary and diversified types of concrete labour, expressing the ‘qualitative difference between the useful forms of labour' that are conducted independently^^[1223] while on the other hand it represents the sum total of different types of labour that have been equated and have found their equilibrium one with the other, or - as the result of this process of the equalisation of labour - the sum total of homogeneous social labour, which is distributed between the different branches of production^[1224] Thus, as we mentioned above, the private labour of each separate commodity producer must acquire a social character in a double sense: the material- technical and the formal-social. On the one hand, it must satisfy a definite social need, while on the other it must be interchangeable with any other sort of commodity.

The only condition in which the labour of a separate person could directly acquire a social character is if it were organised on a social scale and by a social organ that would take into account beforehand the specific technical content of each person's labour and include it in a social plan of the economy, i.e. by the establishment of production relations between a given individual and the other members of society that would certify its social character. This labour of society's individual members would be given a guarantee of its material useful­ness and a simultaneous sanction of its social equivalence with any other type of labour. But, in that case, we would have before us not a commodity economy but a socialist one, and directly social rather than private labour. Commod­ity economy is characterised by anarchy of production and by the absence of any direct, social organisation of labour. The private labour of a separate com­modity producer, within the production process, does not yet possess a social character in this double sense: it has neither a guarantee of being materially useful (since the given product may turn out to be unnecessary in general, or be produced in too great a quantity), nor a sanction of social equivalence (since, as a result of over-production or use by the given producer of backward means of production, the product of his labour may be equated on the market with the product of a smaller quantity of other labour). Even at the conclusion of the production process there is no single social organ that checks and sanctions postfactum the labour expended by the individual commodity producer. Such a check and sanction, or ‘follow-up control’ so to speak, is not realised by any con­sciously active social organ but occurs unconsciously through the activity of the market mechanism, i.e. through the collision of the activities of separate com­modity producers, each of whom consciously pursues only the goal of exchan­ging the product of his labour most profitably, and whose interaction has the unconscious, objective social result, as it were, of checking and sanctioning the labour expenditures incurred by the separate commodity producers. We say ‘as it were’ because, with reference to the heterogeneous and unconscious result of the interaction of a multitude of people, we can only speak of a ‘check’ and ‘sanction’ in a conditional and figurative sense. It would be more accurate to say that the following process occurs here. Either the given product of labour finds a consumer and simultaneously provides its producer with the possibil­ity of acquiring for himself, in exchange, the product of the same quantity of labour by other producers - and in that case the objective result of exchange is a tendency to maintain and continue the given labour in the further process of reproduction. In other words, the given labour expenditure turns out to be included within the system of social division of labour both in the material- technical and in the social sense, i.e. as a useful expenditure of concrete labour and as a share of the aggregate social labour that is equivalent to (equated with) others. Or else, in the case of over-production or the use of backward instru­ments of labour, the exchange occurs unprofitably for the given producer, and its objective result is a tendency to squeeze out the given labour expenditures and replace them with others capable of being fully included within the mech­anism of social production. The objective result of market exchange is, there­fore, a social selection of various types and modes of labour, their inclusion within the social mechanism of production or their exclusion from it, which is something of a check and sanction of the labour of separate commodity pro­ducers that is only in this manner transformed from private into social labour.

[b] Duality of exchange and of things?⁴¹ However, such selection of differ­ent types of labour occurs in commodity economy not directly but indirectly, through the selection of products of labour that are either rejected or accep­ted by the market. Inclusion of a given labour expenditure within the social mechanism of production occurs as a result of, and by means of, inclusion of its product within the general mass of commodities being sold on the market. A given product of labour receives a ‘valuation’ on the market, exchange-value, equating it in one proportion or another with every other commodity on the market. Through this equation of the products of different types of labour, and through the equation of the latter, there also occurs a tendency to establish a moving equilibrium between the various branches of production. The social process of equating various types of labour, which are distributed between the separate branches of production, takes the form of a special social property of the products of labour, or their ‘exchange-value’. The social properties of labour assume the form of properties of a thing; they become ‘reified’ or ‘fetish- ised’. The exchange of products reflects the socially useful character of private labours in the form that the product of labour must be useful, not to the produ­cer himself but to others, and ‘the social character of the equality of the various kinds of labour is reflected in the form of the common character, as values, possessed by these materially different things, the products of labour’.^{[1225] [1226] [1227] The product of labour becomes a commodity or a value. Besides its direct, material- technical existence, as a concrete item of consumption or means of production, it acquires a special social ‘function’ or ‘form’; it becomes the ‘carrier’ of the pro­duction relations between people.}

The result is that the process of the exchange of products acquires a dual character: on the one hand, it involves the movement of material things from producers to consumers (through a number of intermediaries), and on the other hand, the movement of those same things as carriers of the production relations between people, i.e. the process of establishing production relations between the commodity producers who are participating in exchange. ‘The exchange of commodities is a process in which the social exchange of things, i.e., exchange of the particular products of private individuals, simultaneously means establishment of definite social production relations into which people enter during this exchange of things’?⁹ The first side of exchange we will call the material-technical, and the second, the formal-social. It is social because the commodity producers, who are independent of each other, enter into a social connection through exchanging the products of their labour; it is formal because the specific type or character of this connection between commodity producers imparts a special social form to the products of their labour.^{[1228] [1229] [1230] As we know, the basic peculiarity of commodity economy is the fact that individual private commodity producers enter into mutual production relations exclus­ively as the owners of specific material things, with the result, conversely, that it is possession of the thing that gives its owner the possibility of entering into production relations with other people. The social relations become ‘reified’, and the things acquire social features. The result is creation of a close link between the material and social sides of the production process. The products of labour move about from one commodity owner to another on the basis of a particular agreement that they enter into, or a production relation of exchange; and the latter, in turn, is established between these persons only with reference to, and for the purpose of, the movement of material things from one to the other. This coalescence - of the material movement of the products of labour with the process of establishing production relations between people - finds expression in the dual character of the individual commodity, which repres­ents a fusion of the production relations of exchange5i-value with the material thing (use-value). As use-value, every commodity is one element of the social exchange of things, of the movement of material things. As exchange-value, it enables its producer to enter into a production relation with other producers. From this dual nature of the commodity, Marx also derived the need for money. We already know, however, that this dual character of the commodity repres­ents nothing more than the expression of the dual character of exchange itself, in which the production relations between people are established through the movement of things. The type of production relations between people is what characterises commodity economy and creates the need for money.52 The pro­duction relations between commodity producers - on the one hand connect­ing all members of society, i.e. being distinguished by a generalised character while, on the other hand, being conditioned and limited by their possession of certain concrete useful things - can only be established through the mediation of money. This condition is what we must now elaborate.}

[c] The Movement of Use-Value.^[1231] The dual character of exchange, as the simul­taneous process of material movement of things from one member of society to another and of establishing production relations between them, imparts a dual character to the position of the commodity producer in exchange, i.e. to his relation with the other commodity producers participating in exchange. On the one hand, he owns property in things, which must follow a certain path in the social exchange of things. On the other hand, he is a property-owner of things, and in exactly that sense he is a full participant in the given system of social production relations. Let us consider his position in terms of these two perspectives.

Insofar as the product is a material thing with useful properties, a use-value, it is not needed by the commodity producer himself. ‘For the owner, his com­modity possesses no direct use-value. Otherwise, he would not bring it to mar­ket. It has use-value for others’.^{[1232] [1233] The commodity must move, therefore, from the producer’s establishment to those of users, i.e. to undertakings where there is need for the given commodity as a concrete useful thing, as an item of con­sumption or as means of production. The commodity moves to the establish­ments of those commodity producers who represent an effective demand for it, in other words, who wish to purchase the given commodity and also are in a position to provide a corresponding equivalent (of the same value), i.e. who are able to compensate its value with an equal value of the commodities they produce. Although the demand comes from individual commodity pro­ducers, who are led at first glance by their own subjective needs and wishes, it is still not arbitrary. Its general magnitude and direction are disclosed in the midst of constant deviations and disruptions of a definite law-governed pat­tern, which results from the lawfulness of the social production process. Each establishment represents a demand for the items of consumption and means of production that it requires for the production process, i.e. for further con­tinuation of its production activity. The character of the means of production, demanded by individual undertakings, is directly determined by the character of the production process. And this is what determines - although by a more direct route, through the process of distribution - both the quantity and char­acter of the items of consumption for which individual commodity producers represent a demand.55}

Thus, the lawfulness of the movement of products of labour from one under­taking to another is determined, in the final analysis, by the lawfulness of the social production process in a broad sense, which here includes the process of distribution. However, since production is organised in a commodity society by individual private commodity producers - each of whom independently decides, although he takes into account the market conjuncture, whether he can, at any given moment, expand his production and personal consumption or whether he must curtail them - it follows that the law-governed pattern of the social exchange of things cannot be manifested except through the demand and supply of separate commodity producers. ‘To become a use-value, the com­modity must encounter the particular need which it can satisfy. Thus the use­values of commodities become use-values by a mutual exchange of places: they pass from the hands of those for whom they were means of exchange into the hands of those for whom they serve as consumer goods’.^{[1234] [1235] [1236] [1237] The direction of this movement of the commodity, as use-value, is determined not by the producer but by the consumer. ‘The alienation of a commodity as a use-value is only pos­sible to the person for whom it is a use-value, i.e., an object satisfying particular needs'.57}

Thus, insofar as the given commodity producer is the owner of a material thing, the latter, in the social exchange of things, must follow a completely determined path that is independent of the will of its producer. On a social scale this path is determined, in general and on the whole, by a law-governed pattern of the social exchange of things, which appears to the given commodity producer to depend upon the will of the consumer, upon his demand. The passage of the commodity from the producer’s establishment to that of the consumer is, for the former, a process independent of his will and externally predetermined. In this process, he is compelled to play a passive role. And since passage of the commodity from one establishment to the other is not possible except by establishing between them the production relation of exchange, our commodity producer figures on the passive side of the given production relation as being virtually without a will of his own, as the silent custodian of a material thing.5⁸

[d] Exchange-value.59 However, there is more than this to the commodity pro­ducer’s role in the market. As we know, he is not simply the custodian of a material thing; precisely because he possesses the latter he is also a fully qual­ified subject of social production relations. In exchange for his commodity, he must receive other commodities of equal value. He is not merely a producer, awaiting a demand from the side of the consumer, but is simultaneously a con­sumer, presenting a demand for the commodities he requires. The scope and magnitude of the latter are determined by the needs of his establishment and by the character of his personal consumption, which depends in turn upon the volume of his revenues - that is, in the final analysis, once again upon the position he occupies in the system of social production and distribution. But our commodity producer, as autonomous manager of his own private estab­lishment, makes his own specific decisions concerning what commodities he requires in exchange for his own.^[1238] Casting his own commodity into the mar­ket, he can demand, to the sum of its value, whatever other commodities are in the market, i.e. that are being produced in the given society. It is precisely this generalised character of exchange that characterises commodity economy with its generalised equation of all types of labour and the constant flows of labour from one branch of production to another. The commodity producer can exchange his commodity for any other commodity; this means that he can enter into a production relation with any other commodity producer. Only in these circumstances can it be said that the product of his labour has become a commodity and has exchange-value. Hitherto, for as long as the product of a given type of labour only exchanges between certain specific people or for other specified products, the commodity and exchange-value are only present in incipient forms.

Thus ‘exchange-value’, as an objective social property of the product of labour, or as its social function, consists of the possibility of exchanging the given product in a determinate proportion with any other product, or in its equation with all the other products of labour. ‘The product as value must be the embodiment of social labour and, as such, be directly convertible from one use-value into all others’^{[1239] [1240] Marx considers the characteristic feature of exchange-value to be precisely its capacity for ‘direct convertibility’: the given commodity equates with all others and can be exchanged for any of them;62 it has, if one may put it this way, the ability to move in any direction in the mar­ket. ‘A commodity functions as an exchange-value if it can freely take the place of a definite quantity of any other commodity, irrespective of whether or not it constitutes a use-value for the owner of the other commodity’.[1241] Of course, it is not really the commodity itself but rather the commodity producer who possesses this ability to move in any direction in the market: the existence of the commodity, which possesses exchange-value, permits him to enter into a production relation of exchange with any other commodity producer, regard­less of whether he requires his6[1242] commodity or not. Formally, of course, this act of exchange cannot be completed without the agreement or against the will of the second commodity producer, but such agreement almost always exists in fact and is assured in a developed commodity economy: the producers, as we have seen, are willing to deliver the product of their labour to anyone who gives them equal value in exchange. The ‘exchange-value’ of the product of labour consists of the fact that possession of the latter gives the commodity producer the ability to enter into a production relation of exchange with any other com­modity producer. The product of labour acquires a special social function as the mediator or ‘carrier of production relations’ between people; it becomes the ‘active carrier of exchange-value’[1243] [1244] [1245] The commodity producer becomes an active initiator of production relations with other members of society.}

[e] The dual position of the commodity owner.66 As we see, the unique produc­tion relations that prevail in commodity economy, connecting people through the mediation of things, create a dual position for the commodity producer in the market process of exchange: insofar as the product of labour is a use-value, whose movement is externally predetermined for a given commodity produ­cer, the latter plays the role of a passive participant in the production relation; insofar as the product of his labour represents an exchange-value, the com­modity producer plays the role of active initiator of the production relation. This dual, passive-active character of the production relations between commod­ity producers is formulated by Marx in his well-known6⁷ teaching regarding the dual nature of the commodity as use-value and exchange-value:

One and the same relation must therefore be simultaneously a relation of essentially equal commodities which differ only in magnitude, i.e., a relation which expresses their equality as materialisations of universal labour-time, and at the same time it must be their relation as qualitat­ively different things, as distinct use-values for distinct needs, in short a relation which differentiates them as actual use-values. But equality and inequality thus posited are mutually exclusive.^[1246]

This ‘equality’ of commodities, as exchange-values, enables the producer to equate the product of his labour with any other product, i.e. to emerge as active participant in the production relation of exchange. An ‘inequality’ of commod­ities, as use-values, signifies the need to connect the given product of labour with some other person’s effective demand, or the need for the given commod­ity producer to wait while other commodity producers equate the products of their own labour with the given product, i.e. the need to be a passive participant in the production relation of exchange. Within the ‘metaphysical’ shell of the doctrine concerning the dual nature of the commodity, we find a sociological analysis of the production relations between commodity producers.

We have noted that each commodity producer must appear, in his relation to the others, in the dual role of active initiator and passive godfather of the production relation of exchange. The exchange participant’s simultaneous fulfilment of both of these roles, passive and active, is possible only in the case of natural exchange, which is determined simultaneously by the demand from a given exchange participant for the product of another’s labour and by the demand from the latter for the product of the first participant’s labour. But such simultaneous union in a single person of the passive and active role in fact eliminates his active capacity, i.e. deprives him of the possibility of exchanging the product of his labour for any other according to his own discretion. Here there is no generalised exchange and equation of the products of labour, and thus there is still no developed exchange-value. Exchange still has an occasional and limited character and is determined by the individual needs of particular people. Generalised exchange presupposes the possibility of exchanging each product of labour for any other product; accordingly, the active role of the given commodity producer, as initiator of the production relation of exchange, must not be paralysed by his simultaneous role as the passive godfather. And this means that every commodity producer must appear consecutively in both of these roles, being alternately first in one and then in the other.

Thus, at any particular moment in every process of exchange, the given com­modity producer plays either the active or the passive role. It is readily under­stood that the second participant in the exchange must always play the role opposite to that of the first. If given commodity producer A actively establishes, at his own discretion, a production relation with any one of the other commod­ity producers, this means that the latter, at this particular moment, is deprived of the ability to choose, at his own discretion, the counterparty to the exchange transaction. The polar division between active and passive roles on the part of the two participants in the exchange finds expression in the polar division between the products of their labour in the simultaneous roles of exchange­value and use-value.^[1247] If the product of labour A, at any given moment, may be exchanged for any one of the other commodities, then the latter [are] obvi­ously deprived at that moment of a similar opportunity. If commodity A is able to move freely in any direction in the market, and thus play the role of exchange-value, which is capable of generalised equalisation, then other com­modities are simultaneously restricted in their movement, playing the passive role of use-value. In Capital Marx emphasises that it is impossible for both par­ticipants in an act of exchange to emerge simultaneously in the active role:

The owner of a commodity is prepared to part with it only in return for other commodities whose use-value satisfies his own need. So far, exchange is merely an individual process for him. On the other hand, he desires to realise his commodity, as a value, in any other suitable commodity of the same value. It does not matter to him whether his own commodity has any use-value for the owner of the other commodity or not. From this point of view, exchange is for him a general social process. But the same process cannot be simultaneously for all owners of commodities both exclusively individual and exclusively social and general.

Let us look at the matter a little more closely. To the owner of a commod­ity, every other commodity counts as the particular equivalent of his own commodity. Hence his own commodity is the universal equivalent for all the others. But since this applies to every owner, there is in fact no commod­ity acting as universal equivalent, and the commodities possess no general relative form of value under which they can be equated as values and have the magnitude of their values compared.^[1248]

The simultaneous appearance of all commodity owners in the active role, as initiator of the production relations of exchange, leads to mutual paralysis of their activity. The simultaneous appearance of both of the products of labour, which are being exchanged, in the role of exchange-value, which can be exchanged for any other product of labour (i.e. in the role of universal equivalent for all other commodities), results in none of them being able to play this role. If one of the exchanging commodities has the capacity to be directly exchanged for any other commodity, then the second commodity, which is involved in the given act of exchange, does not have this capacity: it cannot be exchanged directly for any other product but only through the mediation of its exchange with the first commodity:

It is by no means self-evident that the form of direct and universal exchangeability is an antagonistic form, as inseparable from its oppos­ite, the form of non-direct exchangeability, as the positivity of one pole of a magnet is from the negativity of the other pole. This has allowed the illusion to arise that all commodities can simultaneously be imprinted with the stamp of direct exchangeability, in the same way that it might be imagined that all Catholics can be popes.^{[1249] [1250]}

This brings us to the following conclusions. On the one hand, every commodity producer in the process of exchange must alternately play the active role of initiator of production relations and the passive role of godfather of productive relations established by others. On the other hand, it is not possible for both participants in the exchange to appear simultaneously in the active role: the active role of one simultaneously means the passive role of the other?² The production link between the two commodity producers in the act of exchange not only creates a certain coordination between them but also contains a certain element of subordination, i.e. a dissimilar allocation of the active and passive role. As we know, however, in commodity society there is no organ that consciously establishes in advance a specific relation between the independent producers. The commodity owners oppose each other in exchange as fully equal economic subjects, whose social position in the act of exchange depends exclusively upon the character of the things in their possession: the production relations between them have the character of ‘things'. Consequently, the active role of a given commodity producer in the act of exchange is also directly determined not by his social function in the production process but by the fact of his possessing a certain thing, i.e. by the social function of the thing.^{[1251] [1252] [1253] [1254] [1255] [1256] Once it happens that in every exchange act one of the commodity owners must play the active role of initiator and creator of the given production relation, and once he can play such role exclusively as the owner of determinate things or commodities, then the conclusion that inevitably follows is this: the possession of some determinate commodity gives their owner the possibility of entering into the production relation of exchange with any other commodity owner, in other words, makes it possible to exchange the given commodity for any other that he chooses. The commodity that fulfils the social function of active initiator of the production relations of exchange between commodity producers, i.e. that possesses the capacity for direct universal exchangeability for any other commodity, is money.}

In Capital Marx defines money as the ‘universal equivalent’, or the com­modity in ‘the form of universal equivalent.'?⁴ In general terms, Marx always considers the characteristic feature of an equivalent to be its capacity for ‘dir­ect exchangeability’?⁵ A universal equivalent is a commodity that appears in the ‘form of direct and universal exchangeability’?⁶ i.e. having the capacity to be directly exchanged for any other commodity. In this ability to play the role of active initiator of the production relation of exchange, of being the ‘active carrier of exchange-value’ and ‘the carrier of the economic relation’,77 we also find the fundamental character of money - its social function or social form. Although he expresses it differently, Marx gives essentially the same defini­tion of money in the Critique of Political Economy: ‘The particular commodity which thus represents the exchange-value of all commodities, that is to say, the exchange-value of commodities regarded as a particular, exclusive commodity, constitutes money. It is a crystallisation of the exchange-value of commodit­ies and is formed in the exchange process by the commodities themselves’?⁸ (As we previously discussed in detail, Marx always emphasises, particularly in the Critique, that the characteristic feature of the commodity as exchange­value is the ability to be exchanged for any other commodity, or to replace it in some definite proportion). Money, as the ‘crystallisation of exchange-value', also means fixation of this capacity for generalised equalisation, or for direct universal exchangeability, in a definite concrete commodity (gold). The defini­tion of money that Marx gives in the Critique corresponds fully with his defin­ition in Capital.

[f] Money as means of coercion.^{[1257] [1258] Summarising what we have set out, we can say that the development and universal spread of money is the necessary result of the structure of commodity society itself, which combines the social unity of the material process of production with the formal independence of private undertakings. Movement of the products of labour, in the process of produc­tion and consumption, is left to the discretion of separate private commodity producers, but each of the latter is also bound by the will of his counterparty. The act of direct exchange of the products of labour of two commodity produ­cers can only be established on the principles of ‘free' agreement, or a coin­cidence of will, on the part of the two counterparties. The act of exchange, conditioned by the need of each participant to acquire the product of the labour of the other participant, inevitably has an individual and random char­acter. A social process of exchange, distinguished by law-governed constancy, is only possible if the movement of products can occur at the initiative ofanyso of the commodity producers. And this occurs when a commodity historically emerges in the exchange process whose possession gives its owner the abil­ity to appear as initiator and active establisher of the production relation of exchange, i.e. money.[1259] In the system of private establishments, which are form­ally equal and permit mutual coordination of activities only on the principles of agreement, money introduces the first differentiation in the active and pass­ive roles fulfilled alternately by each commodity producer; it introduces the germ of a form of subjugation (coercion) and subordination. Money is a ‘social force', it ‘measures the social wealth of its owner', his social power[1260] The ‘free' exchange agreement, formally presupposing the absolute equality of both par­ticipants, in fact resides in the initiative of one of them, the owner of money. This is what overcomes the limitation and restriction of the exchange pro­cess founded upon the correspondence of will between two counterparties. The foundation of commodity society is ‘the juridical relation, whose form is the contract'. However, ‘The content of this juridical relation (or relation of two wills) is itself determined by the economic relation’.[1261] [1262] [1263] The economic rela­tion of exchange, being completed by the development of money, introduces lawfulness and constancy into a system of juridical relations based upon the correspondence of the individual wills of separate persons.}

[g] The teaching of RykachevM In the book by A[ndrei M.] Rykachev, Money and the Power of Money, we find a perfectly clear understanding that modern exchange, as ‘a normal process, in which each participant of the process makes calculations in advance and does so with no regard to the calculations and wishes of all the others',8? cannot be based upon the sort of free agreement that presupposes ‘the necessity of waiting upon or obtaining a correspondence of two or more wills’^[1264] ‘Agreement is a very elementary form of the exchange of services, so elementary that on its own it is not able to satisfy the demands of any developed human society and is necessarily supplemented by other forms - by direct compulsion or by monetary assessment’^{[1265] [1266] [1267] ‘Money is essen­tially the means of securing freedom of choice of economic goods’,88 freeing the participants in exchange from dependence upon the will of other com­modity owners. But A. Rykachev forgets what is most essential and important: that the possibility for free choice of economic goods by one participant in the exchange act means the simultaneous lack of such freedom, i.e. coercion, for the other participant in the same act. The active role of one participant89 in exchange presupposes a passive role on the other side. If modern exchange is ‘a normal process, in which each participant of the process makes calcula­tions in advance and does so with no regard to the calculations and wishes of all the others’, this is only possible under one condition: if ‘the calculations and wishes of all the other’ commodity producers are regularly determined by the objective social processes of production and exchange. The seeming free­dom of ‘motivation’ on the part of separate commodity producers necessarily presupposes an objective ‘limitation’ (restriction, constraint) of action on the part of all commodity producers taken together: the former, without the lat­ter, would make the social process of production impossible by transforming society into a chaos of uncoordinated and intersecting activities by individual people. The basic social function of money in commodity economy consists not so much of its role as instrument for free motivation as of its role as instru­ment of ‘limitation’, or suppression of the motives of commodity producers. The tokens, which in socialist society will give individual members the right to acquire from social stocks any products in some determinate quantity, will do no worse than today’s money in fulfilling the role of ‘securing freedom of choice of economic goods’. But they will not directly determine the motives and actions of the producers, and for that reason they will not be ‘money’ in today’s sense of the word. Losing sight of the role of money as instrument of coercion, A. Rykachev concludes that ‘purchase and sale cease to be a bilateral transaction and become a series of unilateral acts by buyers and sellers, inde­pendently pursuing their own interests’.[1268] [1269] Commodity society, as portrayed by A. Rykachev, is transformed into a fantastic kingdom of universal and unres­tricted freedom: each unilaterally does whatever he pleases, yet exchange still retains the character of a ‘normal process’. The real fact is that, even with mon­etary exchange, the system of production relations between people is based not upon unilateral acts but upon bilateral deals - with the distinction, however, that the active and passive roles are differentiated in the persons of the differ­ent parties to the transaction.}

Of course, there is no reason to be surprised by the fact that A. Rykachev - although he believes that his definition of money, as a means to free choice of economic goods, essentially corresponds with the Marxist definition of money as universal equivalent9¹ - in reality has completely misunderstood the most essential aspect of Marx’s teaching on the limiting and socially constraining role of money. For him, Marx’s doctrine remains a ‘philosophical speculation’, the functioning ‘result of a logical development of internal contradictions allegedly contained within the concept of the commodity’^[1270]

The definition of money that we have given differs from the definition given by [Rudolf] Hilferding: ‘The object which is thus authorised by the com­mon action of commodities to express the value of all other commodities is - money’^[1271] In our definition, money is a thing that, through the collect­ive activities of commodities, has acquired the authority actively to establish the production relation of exchange, i.e. it has acquired the capacity of direct exchangeability. The result of this fundamental character of money is that it fulfils the function of measure of value, which Hilferding takes as the basis of his definition. We have not accepted Hilferding’s definition for the following two reasons. First, our goal has been to clarify the meaning of the definition that Marx himself gives. For Marx, the universal equivalent is a commodity that possesses the capacity for direct and universal exchangeability, whereas Hilferding defines the equivalent as ‘the commodity in which all other com­modities express their value’.^[1272] And here, as we see, Hilferding begins with the function of measure of value. For Marx, the measure of value is only ‘one of the functions of money, or money in a particular, determinate form’^[1273] Second, we consider it proper to give a definition of money that characterises the produc­tion relations between people, the expression of which is this given external category, i.e. the money-form of the commodity. Our definition emphasises that what is involved is the active establishment of exchange, i.e. the production relation of exchange between two commodity producers, with a polar differen­tiation between them of the active and passive roles. This is a determinate type of relations between people - a type that assigns a special material property to the ‘money’ commodity that is found in the hands of the active participant in exchange. Of course, Hilferding’s formula also speaks implicitly of the same type of production relations between people, but it does not characterise them directly.

4 The Emergence of Money

We have seen that a developed commodity economy, with a generalised exchange of commodities, necessarily presupposes the detachment, from the sphere of all commodities, of a single commodity that possesses the property of direct exchangeability, i.e. that fulfils the function of money. But at this point we have still not answered the question of how this detachment of money occurred in fact, or what is the historical process of the emergence and devel­opment of money.

Of course Marx, whose basic task was the explanation of phenomena in cap­italist society, could not become involved in specialised historical research con­cerning the origin of money - research that involves the pre-historical and very earliest historical epochs. Yet, on the other hand, while regarding all aspects of the contemporary economic system as historically transitional, and con­sidering them in terms of their historical development, Marx could not but pay attention to the question of the historical origin of money. His observa­tions on this account, despite their brevity, are very interesting and valuable. Besides these comments of a purely historical character, we encounter in Marx, and especially in his teaching on money, a unique interlacing of the histor­ical and theoretical points of view. ‘Flirting’ with Hegelianism, as he put it, Marx frequently represents earlier phases of historical development as separ­ate ‘moments’ or aspects of the subsequently more developed form of the same phenomenon. Or conversely, stages in the logical analysis of a complex phe­nomenon are presented in the form of consecutive stages or phases of historical development. Such a splicing together of theoretical and historical research is especially evident in Marx’s doctrine on the ‘forms of value’, and this makes it extremely difficult to understand.

In the first half of the nineteenth century a rationalistic answer was most frequently given to the question of the origins of money as well as to all the other forms of social life. Scholars noted the utility or expediency of a given social institution, money for example, and then considered their task to be completed. It was assumed that the usefulness of any given institution served as a directly persuasive motive for people consciously to introduce it. Analysing the difficulties of natural exchange and its facilitation through use of money, scholars suggested that people agreed, by way of some special understanding or social contract, to consider some commodity or other as money in order to facilitate exchange. Other scholars saw the source of money’s lineage in the invention of individual peoples (the theory of the archaeologist [August] Bockh)^[1274] or in the conscious activity of a state authority.

At a time when [today’s] most recent archaeological, ethnographic and historical findings - showing the social-spontaneity of the development of money - were still unknown, Marx’s service lay in the fact that he staunchly defended such a view, starting from his general historical and economic con­ception. Money was the result of a gradual expansion and growing complex­ity of exchange, [emerging] through countless repetition of a mass of uncon­scious^[1275] actions on the part of exchange participants and without any decisive, conscious influence on the part of a state authority. In other words, the origin of money had a social-economic and not a governmental - a spontaneous and not a conscious - character. ‘Money is not the result of deliberation or of agree­ment, but has come into being spontaneously in the course of exchange’^{[1276] [1277] ‘The natural instinct of the owners of commodities’99 persuaded them to do the deed before thinking about it. These activities on the part of exchange parti­cipants were determined by the character and requirements of the exchange process.}

Exchange originally emerged not between members of a community, who lived in conditions of a natural and occasionally a communist economy, but between different communities or their members.^{[1278] [1279] [1280] [1281] [1282] From there exchange gradually penetrates into the community itself, promoting its dissolution.^ The products of labour, becoming commodities in inter-communal exchange, also acquire exchange-value within the community.ω2 Exchange initially involves a small number of products and has an exceptional and fortuitous character. It occurs in the form of natural exchange, in which both of the exchanging products are use-values for the parties to the exchange. On the other hand, the product is still not produced especially for exchange, and only the surplus that is left over, after satisfying their own needs, enters into exchange. Thus, in both the objective production process and in the con­sciousness of the participants, exchange-value has still not separated from use- values.103 Each of the two exchanging products determines the movement of the other product and, in its movement, is determined by the latter, i.e. fulfils simultaneously the passive role of use-value and the active role of exchange­value, or equivalent^4 The random character of exchange also entails random and fluctuating quantitative proportions between the things being exchanged. In general this stage of natural exchange ‘signifies the beginning of the trans­formation of use-values into commodities rather than the transformation of commodities into money’.[1283] [1284] [1285] [1286] The product of labour acquires the nuclear form of exchange-value, corresponding generally (but not completely) with what Marx, in his scheme of development of the value-form, called ‘the simple, isol­ated or accidental form of value'.ω6}

Having appeared on the basis of a primitive-rudimentary division of labour between separate communities, elicited partly by the difference of environ­mental and natural conditions, exchange in turn provides a powerful stimulus to the division of labour. Growth of the division of labour leads to the expan­sion and deepening of exchange, both in the sense of the quantitative increase of portions of the given product entering into exchange and in terms of draw­ing into exchange new kinds of products that hitherto were consumed within the original community. In this process of gradual attraction of new types of products into exchange, those products of labour that are already widely used as items of exchange usually separate out and acquire particular importance. Each person who brings his product to market endeavours to exchange it for one of these most widely used items of exchange, either because he requires these products more frequently in view of their wider use or because they give him the ability to use them in the next exchange for the concrete product that he does require. One or several products are most frequently exchanged for all the others and are most frequently equated with them. Usually such a role is played not by one but by several commodities, between which a certain proportion of exchange is established in turn. A system of evaluation of one commodity in terms of several others is established. With the Bondu tribe of western Sudan, one slave = one rifle and two bottles of powder, or = 5 bottles of powder = one hundred pieces of cloth.

For the Darfurs of Central Africa, one slave equalled 30 pieces of cotton cloth of a particular length, or six bulls, or ten Spanish dollars of a particular coinage.10⁷ M[ikhail I.] Tugan-Baranovsky correctly observes that such a system of evaluation, which is widespread in the early stages of exchange, corresponds to Marx’s ‘expanded form of value'.^ω8

The development of exchange does not stop here. The process of differen­tiation continues in the direction of distinguishing from the entire group of commodities the one that figures most often in exchange. ‘Commercial inter­course, in which the owners of commodities exchange and compare their own articles with various other articles, never takes place unless different kinds of commodities belonging to different owners are exchanged for, and equated as values with, one single further kind of commodity’.^{[1287] [1288] [1289] [1290] [1291] In place of the evaluation of one commodity in terms of several others comes the evaluation of several commodities in terms of one and the same commodity as their equivalent. At the outset, ‘The universal equivalent form comes and goes with the momentary social contacts which call it into existence. It is transiently attached to this or that commodity in alternation. But with the development of exchange it fixes itself firmly and exclusively onto particular kinds of commodity, i.e., it crystal­lises out into the money-form’.™ A long process of historical development was required before this monetary function was affixed to precious metals. With different tribes and peoples, the role of money was fulfilled by various com­modities, and with each people the money material changed in the course of time. If one were to list all of the commodities that have served in their day and in different localities as money, the result would be an extremely long and diverse list of the most dissimilar items. The selection of one or another item was determined by a whole series of objective conditions: the type of economy practised by a given tribe, the extent of its wealth, its relations with other tribes, etc. In the Critique Marx says that the role of money is usually ful­filled by ‘the most common use-value’, which constitutes ‘the most substantial physical element’ in the wealth of the given tribe.m In Capital Marx makes this observation in more detail. The role of money was fulfilled either by the most important items that are acquired abroad, through external exchange, and which thus represented a kind of natural form for the manifestation of the exchange-value of indigenous products; or else by the item of consump­tion that represented the main element of indigenous alienable wealth, for example, cattle, slaves, etc.n2 Generally speaking, these observations by Marx are fully confirmed by the most recent ethnography and archaeology. [Karl] Helfferich summarises these findings with the following words: ‘Among hunt­ing peoples weapons serve above all as the medium of exchange; among pas­toral people, cattle; among tribes trading with foreign merchants, the commod­ities that are acquired from the latter or given to them in exchange’.™ Together with these groups of items, which serve most frequently as primitive money, Helfferich also includes a group of items of adornment, among which are the precious metals. However, one must not overlook the fact that items of adorn­ment are often included in the first of the groups mentioned by Marx (i.e. items of import), and furthermore that the metals in general, and partly also the precious metals, were among the most important means of production for primitive peoples.}

Metals originally fulfilled the role of money alongside other commodities. Occasionally, one and the same tribe evaluated commodities simultaneously in terms of metal, cattle and so forth. But gradually the metals displaced other commodities that had fulfilled the function of money. The cause for this must be found in the well-known natural properties of metals - their uniformity and divisibility - thanks to which they are best suited to express quantitative differences. To this must be added their high degree of durability and, for precious metals, their high specific value, as a result of which they gradually displaced the more common metals and relegated them to the sphere of small change.^{[1292] [1293] [1294] ‘Gold and silver are not by nature money, but money consists by its nature of gold and silver,.n5 The conversion of precious metals into money presupposes a certain social structure, founded upon commodity economy and developed exchange. But existence of the latter inevitably causes the appearance of money and the fixation upon one commodity or another of the social function of money, the best carriers of which, in the final analysis, are the precious metals. Imagine that the world had no items distinguished by their uniformity and divisibility to such an ideal extent as the precious metals. In that case, the development of exchange would affix the function of money to some other product of labour, although, no doubt, exchange would then encounter a number of technical inconveniences that are overcome with the use of precious metals in the role of money.n6 The appearance of money is exclusively a consequence of the social structure of the economy, and the fixation of this function precisely upon the precious metals is explained above all by the natural properties of the latter.}

Metals were originally used in the form of pieces, bars, rings etc. To make payment, the metal was weighed, which in many languages resulted in the verbs ‘to pay' and ‘to weigh' emerging from a common root. With the passage of time and for ease of payment, metals begin to be produced in the form of pieces, bars and so forth, having a certain purity and a specific weight. In Babylon, where precious metals first took the role of money, a special system of weights was worked out: a specific weight, called a ‘talent’, was divided into 60 ‘mina’, each of which was subdivided into 60 ‘shekels’. This system, based upon the ‘talent’, became very widespread and, in modified form, passed into Egypt, the Near East and Greece. The Levant, as the centre of vital trade relations at the crossroads between Greece, Egypt and Assyria-Babylonia, naturally also became the centre for further development of precious metals in the role of money. Wealthy Phoenician merchants put a stamp upon metal bars, testifying to their purity and weight. From there it was just one step to coins, which represent nothing but a piece of metal with a certain purity and weight and stamped by the local state authority. The first coins also appeared in the Levant in the eighth and seventh centuries B.c. according to some scholars, in Lydia according to others, and in the Greek colonies of Asia Minor. They rapidly spread to other countries.

The appearance of coins was of colossal importance in the history of the circulation of money. Subsequently metal, in its function as money or carrier of exchange-value in an external and visible manner, became distinguished from the same metal as a use-value.Within the limits of a given state, only that state’s coins are legal and obligatory as the means of exchange and payment. When he accepts coins, an exchange participant has no interest in the actual weight and purity of the metal they contain. On the other hand, metal bars do not function as money within the country. Nevertheless, the significance of coins as legal means of payment and exchange can be seen even today in their close link, even if it is not always direct, with the value of precious metal. Numerous attempts by state authorities to use their monetary regalia (the monopolistic right to coin money), or the right to issue paper money, in order finally to sever the country’s monetary system from its metallic base, have usually ended in failure and provoked a very strong reaction on the part of commodity circulation. A graphic confirmation of the latter is the current return by Russia, Germany and other states to a monetary system that, although not directly involving gold circulation, is all the same ‘based upon’^[1295] gold. Insofar as the subject-matter of our study is not the degree and forms of influence by a state power over the monetary circulation, but instead the laws of the latter, as determined by the development of commodity exchange, we do not see any great difference between a pre-minted and a minted circulation, or to use [Georg F.] Knapp's expression, between ‘pensatory' and ‘chartal' means of payment.^{[1296] [1297] [1298]}

Nevertheless, such a difference can be asserted from an evolutionary-histori­cal point of view. Coinage was one of the stages of an evolution that began long before the appearance of coins, and one must not consider the first money, as Knapp does, to be only the first coins. In minting the first coins, the state author­ity confirmed and legalised the status of a money circulation that had existed before it intervened - on the basis of countless unconscious activities by com­modity owners and due to the requirements of commodity exchange. The state authority used the same metal for coinage as previously functioned as money. It could not alter the value of this metal, i.e. the proportions of its exchange with other commodities. Even the weight of coin, for the most part, was not estab­lished by the arbitrary act of state power but rather conformed to the weight of metal bars that circulated before the appearance of coins. The most recent find­ings have shed clear light upon the close connections between various stages of monetary circulation. For example, the famous scholar [William] Ridgeway believes that the golden talent was originally a nugget of gold exactly equal to the price of a bull. When metal squeezed cattle out of the role of money, the monetary unit of metallic circulation was determined on the basis of a hered­itary connection with the former monetary unit, which was the bull. In this way, Ridgeway intends to explain the striking similarity between the weight of ancient gold coins and the golden items that served as money amongst the most varied peoples. Ridgeway hypothesises that throughout Europe and the Levant the price of cattle was approximately identical, explaining the almost identical weight of gold items and coins (a weight of about 130-135 grains) that represen­ted the original price of a bull.^u9 This is why the image of a bull, and of cattle in general, is found so frequently on ancient coins, and why the very designation of money in many languages originates from the appellation of cattle.

The original designation of money also pointed to a connection with a certain weight of metal. The coin's designation corresponded to the weight of a piece of metal - a talent, pound, etc. ‘The names given to the standards of money or of price were originally taken from the pre-existing names of the standards of weight'd²⁰ It is only in the process of a long historical development that the monetary standard became detached from the standard of weight and was independently established by the state authority. The latter may arbitrarily establish the weight and appellation of each coin, but it is constrained both in the choice of metal and with regard to its value, which directly or indirectly is reflected in the purchasing power of the coin.

5 Money and Abstract-Social Labour

In the previous chapters we have considered the process of the emergence of money and the need for the latter in commodity society, where people are connected by production relations through generalised equation of the products of their labour as values. Now let us consider how the equation of commodities, occurring through the medium of money, leads to the equation of labour and makes money the expression of social and abstract labour.

[a] The First Characteristic.^{[1299] [1300] [1301] The process of money’s development leads to fixation of the functions of money upon some concrete commodity, ultimately upon gold. Gold is the commodity that can be exchanged directly for any other commodity, and thus every commodity owner must exchange the product of his labour - he must sell it - first of all for gold as the universal equivalent. Gold, as exchange-value, is able to replace any commodity in some given proportion; it is distinct from all other commodities, which lack this capacity for direct exchangeability. ‘A single commodity, the linen, therefore has the form of direct exchangeability with all other commodities, in other words it has a directly social form because, and insofar as, no other commodity is in this situation'.127 There occurs an external and visible separation of use-value from exchange­value; the former is represented by all the concrete commodities; the latter by gold as money. The exchange of commodities for money converts use­value into exchange-value because gold, a concrete product of labour, or a specific use-value, fulfils the role of money. It would seem that the exchange of commodity A for so many ounces of gold still does not provide us with an exact determination of the value of A, for we do not know the value of the given sum of gold. But this value can also be determined in commodity economy, not directly in labour units but indirectly in terms of the quantity of another commodity given in exchange for the gold?23 But after the equation of gold with some other commodity B, the question arises as to the value of the latter, and so forth. In reality, however, the commodity producers, equating their commodities with gold and thus determining their value, have no further question regarding the value of gold. They obviously have a vital interest in the question of the purchasing power of the gold they are acquiring, but this is a question as to how many concrete use-values can be acquired for the abstract money unit (i.e. the unit of exchange-value), not one that concerns the exchange-value of given use-values or of concrete commodities.[1302] [1303] [1304] [1305] [1306] [1307] The latter question is resolved by the equation of commodities with gold, which therefore, in its concrete form as a known item, assumes a definite value. ‘In the equation of value the equivalent always has the form of a simple quantity of some article, of a use-value.' This ‘use-value becomes the form of appearance of its opposite, valued5 This is how Marx states the first peculiarity of the equivalent form.126}

But how can the natural form of gold express the exchange-value of com­modity A? This is only possible because gold possesses the property of direct and universal exchangeability, because not only commodity A equates with it but also all other commodities. Thus commodity A, being equated with gold, equates with all other commodities. This is how it expresses its exchange-value, i.e. its capacity for generalised exchange with any other commodity. The univer­sal form of value ‘expresses the values of the world of commodities through one single kind of commodity set apart from the rest, through linen for example, and thus represents the values of all commodities by means of their equal­ity with linen'.12⁷ In other words, the generalised equation of all commodities with each other occurs in commodity economy through the equation of each of them with a single, select and concrete commodity (gold).12⁸ Equation of a given commodity with gold, which is equated in turn with all other commodities, simultaneously means equation of the given commodity with all others. Through equation with one concrete commodity, equation with all commodities occurs. This is the real phenomenon, occurring daily in the market, that Marx had in mind with his abstract formula of use-value as the form of manifestation of exchange12⁹-value, or to say the same thing differently, of the concrete com­modity as mediator of the generalised equation of all commodities. In this phenomenon we see not the result of some mysterious capacity of use-value to serve as the form of manifestation of its opposite, but the result of countless activities by commodity producers, equating their commodities with one and the same select commodity. ‘A commodity only acquires a general expression of its value if, at the same time, all other commodities express their values in the same equivalent; and every newly emergent commodity must follow suit’.^{[1308] [1309] [1310] [1311] [1312]}

[b] The Second Characteristic.™ Thus, in commodity economy the generalised equation of commodities with one another occurs in the form of their equa­tion with one and the same select commodity, gold. As we know, however, it is through the market process of the equation of commodities that the social process of distributing and equating labour between different branches of pro­duction occurs. This does not involve some mental act of abstracting from the concrete specificities of separate types of labour and equating them with identical, abstract human labour in general - a mental act that might occur in the mind of the exchange participant or of a theoretical investigator. Marx is not interested in ‘the subjective equality of the labours of individuals’ but rather in ‘the objective equalisation that the social process forcibly establishes between unequal kinds of labour'/'¹² which is expressed in the equilibrium between different kinds of labour or between separate branches of produc­tion. In commodity economy, which is consciously regulated by no one, such equilibrium between separate spheres of production (being constantly disrup­ted and appearing only in the form of a tendency), is established only through the market equation of their products as values and in a certain proportion. ‘It is only the expression of equivalence between different sorts of commodities which brings to view the specific character of value-creating labour, by actu­ally reducing the different kinds of labour embedded in the different kinds of commodity to their common quality of being human labour in general'.i33 Let us now consider how this equation of different kinds of labour occurs.

‘By equating, for example, the coat as a thing of value to the linen, we equate the labour embedded in the coat with the labour embedded in the linen'.i3⁴ If the coat were equated with all other commodities, this would mean the equation of sartorial labour with all other kinds of concrete labour. In other words, given a specific ratio of exchange between the coat and every other commodity, an equilibrium would be established between sartorial labour and the other corresponding spheres of production. The concrete labour of the tailor would be equated with any other concrete type of labour or with abstract labour in general. As we have seen, though, commodities are generally equated with one another not directly but only through the equation of each with a particular commodity, with gold. Consequently, the generalised equation of all concrete kinds of labour also occurs only through the equation of each of them with the concrete kind of labour that is being expended on the production of gold. Concrete labour A, being equated with the concrete labour producing gold, turns out thereby to be equated with every concrete kind of labour and, as a result, is a part of the aggregate of abstract social labour that is distributed between various branches of production. ‘The body of the commodity, which serves as the equivalent, always figures as the embodiment of abstract human labour, and is always the product of some specific useful and concrete labour. This concrete labour therefore becomes the expression of abstract human labour’.^{[1313] [1314] ‘The equivalent form therefore possesses a second peculiarity: in it, concrete labour becomes the form of manifestation of its opposite, abstract human labour’.^6 We likewise have to regard this peculiarity not as some mysterious property of the labour expended on production of the equivalent (gold), but exclusively as the result of the social process of all other concrete kinds of labour being equated with it. The second peculiarity of the equivalent form means that the equation of every concrete kind of labour with all other kinds occurs only through its equation with the concrete labour expended on production of the equivalent.}

In the theory of value, we said that in the distribution of labour between branches of production - A (for example, tailoring) and B (for example, weav­ing) - a condition of equilibrium is theoretically established when the exchange of a coat for cloth occurs on the market in a certain proportion that is determined by the labour expenditures on these two products; any deviation of prices from this exchange proportion initiates the ebb and flow of labour, i.e. a redistribution of labour between these two spheres of production. In other words, we presupposed that in the equation of products of the two branches in question, and in the equation of labour expended in them, there occurs a process of direct interaction between them. Now we can describe that same process in more detail and in a manner that is closer to reality. Both products are equated on the market with gold and not directly with one another. The equilibrium between these two spheres of production emerges in the condition of definite market prices for their products, i.e. in their proportionate exchange for gold. A deviation of these prices from the specific level that corresponds to the conditions of labour productivity in the two spheres, and thus to the labour value of their products, causes a redistribution of labour between these spheres. And since sphere A, through the price of its products (i.e. the rate at which they exchange for gold), is equated not just with sphere B but also with all the other spheres of the economy, it follows in this case that the redistribu­tion of labour between spheres A and B will be determined not by their relative profitability alone, in relation to each other, but by their profitability in relation to all the other spheres. Assume that, with the given market prices, production in sphere A is more profitable than in sphere B, but production in both of these spheres is less profitable than in all other spheres of the economy, c, D, E, etc. In that case, there will not be a redistribution of labour from sphere B to sphere A, as maybe expected from the direct interaction of these two spheres; instead, there will be an outflow of labour from both of them into other branches of pro­duction. Through market prices, each type of labour is equated with all others, i.e. concrete labour is converted into abstract labour.

[c] Third™ Thus, in the process of exchange the equivalent is equated with all other commodities, and the concrete labour that is expended in its produc­tion, being equated with all other concrete kinds of labour, thereby acquires the character of abstract labour. But once the labour expended in production of the equivalent is equated with any other type of labour, this means that it appears in directly social form. Although the gold industry is organised in the form of private capitalist enterprises, and thus labour in gold mining, as with all other commodity-producing labour, is the labour of private individuals, it is nevertheless ‘labour in its directly social^{[1315] [1316] form’.[1317] [1318] The owner of gold appears as representative of the ‘social power of money’, of the socially acknowledged and socially significant kind of labour; he can enter into any act of exchange as the active participant, and in that way he reveals his equality with any other commodity producer. To the contrary, the owner of a concrete commodity - a coat, for instance - in order to become socially equal and to have the same sig­nificance as any other commodity owner, must first exchange his commodity for money, i.e. equate his privatei40 labour with the private labour of the gold producer,[1319] [1320] [1321] [1322] [1323] [1324] [1325] which appears in the form of directly social labour. In the same way, the labour of the tailor acquires the character of directly social labour. ‘Thus the equivalent form has a third peculiarity: private labour takes the form of its opposite, namely labour in its directly social form,J42}

[d] ‘Forms’ of Exchange?™³ Now we can summarise Marx's teaching on the ‘peculiarities of the equivalent form'. Although Marx illustrates his thoughts in the various forms of the equivalent, beginning with an ‘accidental' initial selection144 and ending with the developed ‘universal equivalent', nevertheless the totality of his thinking refers precisely to the universal equivalent, or to money.14⁵ The universal equivalent, or money, separates out of the commodity environment in the course of a gradual, slow evolution. The appearance of money imparted to the entire process of exchange a completely new character. Exchange is not only the movement of material things from one commodity producer to another, ‘the social exchange of things', but also involves a change of the social ‘form' of things and of the commodity producers. Circulation is a ‘social process which products must pass through and in which they assume specific social characters'.^⁶ It is precisely this social form of exchange, and not its material content, that Marx investigates in his theory of money. ‘We therefore have to consider the whole process in its formal aspect, that is to say, the change in form or the metamorphosis of commodities through which the social metabolism is mediated'.^⁷ Just as Marx, in the theory of value, places in the forefront the study of the social ‘form of value', so also in the theory of money he is concerned with the ‘change of forms'. And just as he holds economists at fault, in the theory of value, for seeing only the material content of the process and overlooking its social form, so he also makes analogous reproaches in the theory of money:

This change of form has been very imperfectly grasped as yet, owing to the circumstance that, quite apart from the lack of clarity in the concept of value itself, every change of form in a commodity results from the exchange of two commodities, namely an ordinary commodity and the money commodity. If we keep in mind only the material aspect, that is, the exchange of the commodity for gold, we overlook the very thing we ought to observe, namely what has happened to the form of the commodity.^{[1326] [1327] [1328]}

[e] Threefold equalisation!^ What does this ‘change of form’, which takes place in the process of exchange, consist of? In the exchange process, what occurs is a change of the social form or social character of the commodity producers, of things, and of labour. We have previously considered in detail the necessity of a change in the social role of commodity producers in the exchange process. The latter enter exchange as representatives of a private establishment or of private labour, as passive godfathers of the production relations, and they exit from the exchange process as representatives of the social power of money or of social labour, as active initiators of production relations. Since, in commodity economy, the change in the social role of commodity producers depends upon their possession of certain things and imparts to the latter a definite social form, a change also occurs in the social form of the thing, or of the product of labour, in parallel with the change of the commodity producers’ social role: from a con­crete use-value, capable of moving only in the direction of the consumer, it is transformed into exchange-value or the universal equivalent, possessing uni­versal direct exchangeability, i.e. it is capable of moving in any direction in the market. The change in the social character of the commodity producer, which is closely connected with change in the social form of the product of labour,1⁵⁰ leads also to a change of the social character of the labour of the commod­ity producer: through exchange of the product of his labour for the universal equivalent, his labour is included in the system of social division of labour; and through being equated with all other kinds of labour, it is converted from con­crete into abstract [labour]. In the theory of value, we came to the conclusion that value is ‘the production relation between autonomous commodity produ­cers, expressed in the material form of equalisation of commodities and closely connected in its movement with the equilibrium and distribution of labour in the material process of production’.^[1329] In other words, there exists in commod­ity economy an equality of commodity producers, which is expressed in the equality of commodities and which, through this mediation, leads to the equal­isation of labour. But how is such equalisation of commodity producers, com­modities and labour possible in commodity economy, where such equalisation is not consciously produced, and where separate private commodity produ­cers (the inequality of commodity producers), applying their labour at their own discretion in different branches of production (the inequality of concrete types of labour), produce items that are necessary to satisfy the most varied needs (the inequality of use-values)? The theory of money gives us the answer to this question. In the direct process of production, it is true that the separate private commodity producers, with the help of concrete labour expenditures, create the most varied use-values. But in the process of exchange a transform­ation occurs of the social character of the commodity owners, of the commod­ities and of labour. The detachment of one commodity, gold for example, in the form of universal equivalent, means that this commodity is equated with all others, its owner is socially equal to all other commodity owners, and the labour expended in gold mining is equated with all other types of commodit­ies. Thus any commodity, through its exchange for gold, becomes equated with all other commodities (the conversion of use-value into exchange-value), and at the same time a change occurs both in the social character of its owner (the conversion of private into social labour) and of the labour expended upon it (the conversion of concrete into abstract labour). The result of the exchange process is the equality of commodity producers, the equation of commodities, and the equation of labour. This threefold equation, occurring in the real pro­cess of market exchange, is what Marx described in his teaching on the three peculiarities of the equivalent form.

The close connection between the three sides of the exchange process - the equality of commodity producers, the equation of commodities and the equa­tion of labour - explains, in the final analysis, the fundamental specificity of commodity economy, which involves the ‘reification’ of people’s production relations or ‘commodity fetishism’. The commodity producers enter into a pro­duction relation between themselves only through exchanging the products of labour, and for each modification of the type of relations between people there is a corresponding modification of the social function or social form of things through which these relations are established. Hence the close ties between the processes of equalisation of people, things and labour. In the chapter on money, Marx notes the dependence of these processes on the reification of people’s production relations:

There is an antithesis, immanent in the commodity, between use-value and value, between private labour which must simultaneously manifest itself as directly social labour, and a particular concrete kind of labour which simultaneously counts as abstract universal labour, between the conversion of things into persons and the conversion of persons into things; the antithetical phases of the metamorphosis of the commodity are the developed forms of motion of this immanent contradiction.^{[1330] [1331] [1332] [1333]}

The threefold characterisation of the process of equalisation, being the result of exchange, is sometimes replaced by Marx with a twofold characterisation of this process, leading to the equalisation of commodities and of labour. In the Critique of Political Economy Marx sees in the appearance of money a resolution of two of the fundamental difficulties of exchange: the first lies in the antithesis of use-value and exchange-value, and the second in the antithesis ‘of the particular kinds of labour of private individuals’ and ‘universal social labour'.i5³ The process of exchange, through the mediation of money, equalises things and equalises labour.^⁴ A more detailed development of this twofold formula is found in Theories of Surplus-Value:

The fact that the exchange-value of the commodity assumes an independ­ent existence in money is itself the result of the process of exchange, the development of the contradiction of use-value and exchange-value embodied in the commodity, and of another no less important contra­diction embodied in it, namely, that the definite, particular labour of the private individual must manifest itself as its opposite, as equal, necessary, general labour and, in this form, social labour.1⁵⁵

This formulation is especially valuable because here Marx describes the pro­cess of the equalisation of labour as removing all the differences between the labours of separate commodity producers. One commodity producer stands opposed to the other as a private person; he works in a particular sphere of pro­duction; the labour with which he busies himself has a certain degree of skill (which in some cases may be nil or even less than nil, i.e. may rank, in terms of skill, even below simple average labour); and finally, his labour expenditures are individual, differing qualitatively and quantitatively from the labour expendit­ures of other producers making the same product. This means that the labour of the commodity producer is private, concrete and skilled (i.e. having one or another degree of skill and individuality). In the process of exchange, through the equalisation of all products, a real connection is established between the separate spheres of production - the possibility of the ebb and flow of labour between them, a tendency towards a certain equilibrium between them. As a result of exchange, not only are all the private establishments equated (the con­version of private into social labour) as well as all the spheres of production or types of labour (the conversion of concrete into abstract labour), but addition­ally there is equalisation between types of labour that are distinguished by vari­ous degrees of skill (the conversion of skilled labour into simple) and of labour expenditures occurring in different enterprises of one and the same production sphere, involving different levels of productivity (the conversion of individual labour into socially necessary [labour]). Through the single act of exchange there is a simultaneous conversion of labour that is private, concrete, skilled and individual into labour that is social, abstract, simple and socially neces­sary. This is what Marx had in view in the formulation that we have given.^{[1334] [1335]} Hilferding gives the same kind of formula: ‘The concerted action of commod­ities in exchange transforms private, individual and concrete labour time into the general, socially necessary and abstract labour time which is the essence of value^,.i5⁷ Hilferding omits here only the reduction of skilled labour to simple labour, which occurs simultaneously in the same process.

6 Measure of Value

Measure of value and medium of circulation. Economic science continues up to the present day the debate over whether the fundamental and original function of money is its role as measure of value or as medium of exchange. Some scholars point out that gold only becomes the measure of value for all other commodities if all those commodities exchange for it. Accordingly, the function as medium of circulation is primary (C[arl] Menger, K[arl] Helfferich). Other scholars object that gold is the universal medium of exchange only in those circumstances where, on the one hand, all commodities are evaluated in abstract units of account and, on the other hand, where a certain quantity of gold is equated with the same accounting unit (the rouble, for instance).^{[1336] [1337] [1338] This means that the function as measure of value must be recognised as primary ([Gustav] Cassel, [Alfred] Amonn). Thus [each] function is, as it were, the logical presupposition of the other, and consequently the question that we have raised cannot be resolved by way of logical analysis.}

Likewise, the question cannot be resolved through historical research. On the one hand, there is no doubt that long before all commodities began to be evaluated in gold, the latter already served as the mediator of exchange transactions, or as the medium of exchange. Yet, on the other hand, we know that in the most ancient times there were instances of the use of gold in the role of measure of value, although gold did not actually figure at the time in the act of exchange:

In the third millennium B.c., for example, ancient Egyptians already used copper and gold (but not silver) as a money commodity and general measure of value, although the commodities appraised with the help of money exchanged directly for the most part. If a bull were involved in one such transaction, its price might be fixed at 119 copper utnu (14.4 kilograms of copper). It might be exchanged for a reed mat, appraised at 35 utnu, 5 measures of honey at 4 utnu, 8 measures of oil at 10 utnu, and seven other articles for the remainder. In this case, copper functions as the measure of value [although not as the medium of exchange - 1.R.].1⁵⁹

The impossibility of resolving the question of the logical or historical priority of one or the other of these two functions of money has compelled many scholars to recognise both functions as fundamental, primary and of equal significance. Thus A[dolf] Wagner defines money as follows: ‘Money, in the economic sense, is an object joining within itself two economic functions in the exchange transaction: as medium of circulation and as measure of value’?⁶⁰ In Marxist literature, the most widespread view assigns decisive import­ance to money’s function as measure of value. ‘This function of money is also necessary and important for the development of commodity production, as important as circulation itself. Even in its capacity of medium of circulation, the money commodity is less important than in its role as measure of value’.^{[1339] [1340] [1341] [1342] [1343] [1344]} Still more decisive in this sense is Hilferding, who takes money’s role as meas­ure of value to be the fundamental feature in its definition: ‘The object which is thus authorised by the common action of commodities to express the value of all other commodities is - money'.^w2 Yet looking more closely at this defini­tion convinces us that Hilferding did not succeed entirely in eliminating from his definition the reference^³ to money’s role as medium of circulation. What does it mean to refer to the ‘common action of commodities’? It means that a determinate thing has acquired the capacity to express the value of all com­modities due to the fact that all commodities exchange for it, thus also giving it the character of medium of circulation.

In Marx we likewise do not find any direct answer to the question that interests us. A superficial reading of Marx might suggest that in various places he expresses contradictory opinions. In one place he says: ‘It [gold - i.r.] thus acts as a universal measure of value, and only through performing this function does gold, the specific equivalent commodity, become money'.^K>4 It would appear that the function as measure of value is fundamental. But, ‘On the other hand, gold serves as an ideal measure of value only because it has already established itself as the money commodity in the process of exchange’.^⁵ Evidently, Marx did not derive the function of medium of circulation from the function of measure of value.

In order to understand Marx’s thinking properly, we must turn our attention to the specific feature of his doctrine concerning the functions of money. The separate ‘functions’ or ‘determinate forms’ of money are what Marx calls the properties of money, which, being acquired by a particular commodity as the result of long historical development, fuse with the natural form of this commodity and become, as it were, ‘a social property inherent in its nature’.i>6 Gold already appears in the circuit of exchange with the specific inherent functions of measure of value and medium of exchange, which thereby appear to be emerging not from the nature of the exchange circuit, i.e. from the social production relations of commodity owners, but from the nature of gold itself.^{[1345] [1346] [1347] [1348] [1349] [1350] [1351] Marx assumes the task of showing that these ‘thing-like’ properties of gold are only ‘reified’ or ‘crystallised’, i.e. they are fastened to gold as the results of production relations between people, more specifically, due to the continu­ously repeated social actions of commodity owners in the process of mutual and generalised exchange of the products of different kinds of labour through the mediation of gold. Marx wants to disclose this ‘mediating movement’ (the social activities of commodity owners - i.r.), which is visible^8 in the reified functions of money yet ‘vanishes in its own result, leaving no trace behind’.^9}

What we have been saying explains the specificity of Marx’s method that dis­tinguishes his teaching concerning the functions of money: instead of deriving one reified function of money from the other, his goal is to derive both of these functions from the continuously repeated social activities and relations of the commodity owners. Marx describes this process as follows. ‘Commercial inter­course, in which the owners of commodities exchange and compare their own articles with various other articles, never takes place unless different kinds of commodities belonging to different owners are exchanged for, and equated as values with, one single further kind of commodity’.™ That commodity plays the role of money, but only within the limits of the exchange relation in which it figures as the equivalent. It rapidly loses this transient equivalent form upon completion of this exchange relation between people, i.e. of ‘the momentary social contacts which call it into existence’.™ In its rudimentary form of money, the commodity in question already simultaneously fulfils, in an elementary way, the function both of measure of value and of medium of circulation. As Marx shows, the other commodities ‘are exchanged for’™ this third commodity and ‘equated™ as values’ with it. In reality, however, this commodity fulfils the role of equivalent only momentarily, within the limits of the given exchange relation. Countless repetition of such acts of exchange, in which commodit­ies exchange for one and the same third commodity and are equated with it as values, separate this commodity from the others and attach to it the per­manent character of equivalent, or of money. Thereafter this commodity, gold for example, ‘appears to have the equivalent form independently of this rela- tiori,^{[1352] [1353] i.e. independently of one act of exchange or another. In each exchange act gold appears with its character as money already ‘crystallised’ and fastened to it. It is only from this moment that the reified category of money appears, with its permanenti75 inherent functions: as measure of value and medium of exchange.}

Thus the development of both functions of money occurs in parallel during one and the same social process. For a long time gold, not yet being the permanent bearer of these functions, fulfilled them in a series of separate exchange acts. With the gradual entry of gold into circulation, the products of labour increasingly begin to be evaluated in terms of gold, and conversely, the gradual spread of valuations in terms of gold reinforces the position of the latter as medium of circulation. Both sides of this process of the genesis and development of money are closely tied together and mutually support one another. The final result of this protracted process is the ‘fixation’ or ‘crystallisation’ in gold of both of the fundamental functions of money, since gold up to this time frequently - although sporadically and with lapses - already fulfilled both the role of the commodity for which other [commodities] ‘exchanged’ (i.e. medium of circulation) and also the role of the commodity with which they were equated (i.e. measure of value). It is precisely in this preparatory social process that one must look for the roots of both functions of money rather than deriving one function from the other. This is precisely why Marx, when analysing both of these functions, endeavours first of all to show how both of them, appearing at first sight to be inherent in gold itself, actually serve to reflect the overall social process of the exchange of commodities.

One-sided theories, which endeavour to derive one function of gold from the other, can only be explained in terms of ignoring the preparatory process of the development of money. But is it really possible to suggest that gold had already become the universal medium of circulation and only subsequently acquired the property of measure of value? The point is that before assuming its perman­ently fixed property as universal medium of circulation, gold already figured in countless exchange transactions while simultaneously serving as the material in which the exchanging commodities were evaluated. And conversely, can one suppose that it was only after gold became the generally recognised measure of value that it actually entered into circulation? Indeed, this would amount to thinking that someone produced in advance a general evaluation of all the products of labour in terms of gold, including even the property of the com­modity owners, and only then actually put gold into circulation.

The circumstance that both of these functions become affixed to gold as the result of a long process of development does not exclude the possibility that, in the course of further development, circumstances appear that cause a separation of the function of medium of circulation, which begins to be fulfilled by other kinds of metallic money (silver, copper) or by paper money alongside of or in place of gold.

What is a Measure of Value?

What, precisely, is the function of money as measure of value - economists give the most diverse, and sometimes totally unclear, answers to this question. In most cases, these answers suffer from an individualistic-rationalistic approach to the question. The economist asks why the individual, when participating in commodity exchange, requires a measure of value for commodities. Finding one or another answer, i.e. having indicated the benefit or convenience that the individual might derive in exchange by using a universal measure of value, the economist considers that the social nature of the latter has already been clarified, although by this point he has sometimes not even begun to consider real economic phenomena, confining his attention entirely to an analysis of rationalistic arguments showing the benefit of using a measure of value.

[a] The subjective theory.^{[1354] [1355] Among supporters of the theory of subjective value one often finds, either directly or implicitly, the notion that a measure of value is required for measuring (or comparing) the marginal utility of different products. In their opinion, the exchange act is the result of a psychic177 act of measurement (or comparison) of the marginal utility of the products being exchanged. In order for the exchange participant more easily to determine the subjective marginal utility of different products, he needs to have a definite unit of measurement. The marginal utility of a unit of gold is used, as an item of luxury that serves to satisfy certain needs and thus possesses a known utility.}

This notion differs so radically from reality that even a majority of the supporters of the theory of subjective value do not consider it possible to apply it so directly to the phenomena of exchanging the commodity for money. Leaving aside the general question of whether the objective act of the equation of commodities can be explained by the subjective appraisals of parties to the exchange, there is no doubt that in the exchange of the commodity for money a subjective appraisal of the marginal utility of the money material (gold) generally does not occur in reality. ‘If he (a party to the exchange - i.r.) wishes to use means of payment in a circular manner (i.e. for exchange - i.r.), then he is interested only in their significance, which is a juridical property; the type and quantity of the thing is a matter of indifference to him’.^{[1356] [1357] [1358] Knapp is mistaken, of course, when he substitutes the juridical significance of money for its ‘economic’ significance, i.e. for its objective purchasing power. But he and his supporters are absolutely correct in denying the fact of any subjective appraisal of the money material’s utility on the part of the participants in the exchange. But it is pointless when economists who share Knapp’s view in this regard accuse all of their opponents - indiscriminately lumping them together under the tag of ‘metallists’ - of locating the fundamental value of money in the value of the money material as ‘a means of satisfying some need and as an item for subjective appraisals’.™ In Marxist theory, the money material plays a role (insofar as it is a matter of developed commodity society, not of the primitive forms of money) not as an item for subjective appraisals but rather as the product of a determinate quantity of labour.}

[b] Subjective labour value.™⁰ However, this generally accepted position in Marxist theory is not understood by everyone in the same way. Often Marx’s theory of value is understood to mean that commodity owners, in the act of exchange, equate two different products with one another on the basis of recognising them as products of different quantities of abstract labour. Such a subjective-individualistic understanding of the theory of labour [underlined in pencil] value leads to the following sort of theory of money. Money serves commodity owners as an instrument for stating and measuring the amounts of abstract labour contained in commodities. In a weakened form we encounter this sort of view in I[osif] A. Trakhtenberg:

Each act of exchange requires a qualitative comparison of the products and a quantitative comparison. To compare them quantitatively means to determine the amount of socially necessary labour embodied in each commodity, taken in abstraction from all their concrete properties. In order to determine this quantity, it is necessary to have something that can serve as a pure embodiment of abstract labour, by means of which commodities can be equated with each other and the abstract human labour embodied in each commodity may be quantitatively compared.^{[1359] [1360]}

Evidently I.A. Trakhtenberg is interested in the objective and not the subjective side of this process, but his manner of presentation leads to understanding it in a subjective-individualistic sense. In reality, commodities are not equated with each other because the commodity owners subjectively equate their labour; rather, the objective process of equating different kinds of labour occurs as a result of, and by means of, the equation of commodities as values in the mar­ket. The commodity owners are not subjectively concerned with ascertaining the amount of abstract labour in commodities. Commodities do not equate with gold because the latter is a ‘pure embodiment of abstract labour’; to the contrary, gold is the embodiment of abstract labour because all commodities equate with it.

[c] Equilibrium through price.⁸² As in the theory of value, so also in the the­ory of money we must exclude from the concept of ‘measure of value’ any subjective-individualistic elements and envision the entire process objectively. In commodity economy, the distribution of social labour between different branches of production occurs spontaneously by means of the expansion of production in the more profitable ones and contraction in the less profitable ones. Equilibrium between separate branches of production can be established in the conditions of a simple commodity economy only when their products exchange in proportion to the labour that is socially necessary for their pro­duction. To the condition of equilibrium between two given branches of pro­duction corresponds a determinate, normal ratio of exchange between their products, which corresponds to the labour values of the latter. Any deviation of the actual proportions of the market exchange of these products, either upwards or downwards from this normal proportion, evokes a redistribution of labour between the two branches, an outflow of labour from the one into the other.

Such is the general scheme of equilibrium in commodity economy insofar as we have in view the process of direct equation in the market of the products of two different production branches, between which is directly established, in this way, a certain condition of equilibrium. But to the extent that, in the process of exchange, one specific commodity (gold) is singled out, for which all other commodities most frequently exchange and with which they are equated, the scheme of equilibrium that we developed above takes on a different and more complex form. The direct exchange of two commodities gives way to indirect monetary exchange through the mediation of a third commodity, gold. Now the products of the two different branches of production are equated with one another indirectly, through the equation of each with one and the same third commodity, gold. And since, in commodity economy, the process of market equation of the products of labour as values is closely connected with the process of distribution of labour between the corresponding branches of production, it follows that evolution of the first process from direct to monetary exchange is also inevitably accompanied by fundamental changes in the process of the distribution of social labour.

We are leaving aside here changes of a material character that result from the development of money economy, i.e. the transition of separate establishments, under the influence of steadily growing monetary exchange, into another type of occupation or a different kind of labour (for instance, the movement from one agricultural crop to another, the squeezing out of household industrial production with the expansion of commercial agriculture, the curtailment of agriculture in favour of industry, etc.). Here we are interested only in change of a formal character, i.e. change of the social form of the process itself which establishes equilibrium in the distribution of social labour between the different branches of production. From this point forward, with the development of mon­etary exchange, the flow of labour from one branch into another is regulated by the movement of monetary prices for their products, i.e. by the sum of money that can be acquired from their sale in the market. The distribution of social labour between branches A and B now depends directly not upon a change of the proportions in which their products exchange for one another, but rather upon a change of the proportions in which each of them exchanges for gold, i.e. upon their price. Equilibrium in the distribution of labour between branch A on the one hand, and all the other branches of production on the other, is established by a determinate price for products of A that corresponds to their labour value. If their market price falls below this normal price, production in branch A contracts, i.e. a redistribution of productive forces occurs from branch A into more profitable branches. The opposite occurs if the market price rises above this normal price. In other words, even before their products are sold in the market, the producers already have a mental appraisal of them in terms of gold, i.e. they count upon receiving a definite selling price with which they will continue production of the given products in the same volume as before. Any deviation of market prices, either upwards or downwards from this anticipated price, will cause a contraction or expansion of production in the given branch. Thus, the anticipated normal price, or the normal valuation of the product, is the regulator of the distribution of labour between a given branch of produc­tion and the others. It corresponds to a condition of equilibrium between them, and since the latter occurs with the exchange of the products of different kinds of labour according to their values, it follows that the preliminary appraisal of the products is an expression of their value and that money, in this act of appraisal, fulfils the function of measure of value.

[d] Isolated evaluation.^{[1361] [1362] [1363] Let us now consider this act of evaluating a com­modity prior to its sale in more detail, in the form it takes in reality. The cloth producer appraises a yard of cloth in advance as being worth 3 roubles, i.e. he equates it with a certain sum of gold. This act can be regarded either from the side of the object of exchange (a thing), or from the side of its subject (a per­son). In the first case, we have before us a definite rate of exchange between things, their equality with one another, which initially appears to follow from their properties. It seems to us that the yard of cloth possesses the unique abil­ity to exchange for 3 roubles: ‘It is the private task, so to speak, of the individual commodity to give itself a form of value, and it accomplishes this task without the aid of the others’.^4 We have a unique act of equality between two things. From the side of the subject of the exchange, the same act appears to us as a certain subjective appraisal of the cloth, arising from one or another motive and equating one product with the other according to the significance attached to them by the subject. We have a single act with a subjective-psychological^5 character. In both instances, the appraisal appears as a separate, isolated act, involving only the particular individual and two particular commodities. This seemingly isolated character of the evaluation of commodities is explained by the fact that the latter initially appears in a ‘simple form of value’, as an act of equality between only two commodities. But if one of these commodities (gold) is already the universal equivalent, with which all other commodities are equated and also exchange, then what we actually have is not a singular but a universal form of value, not an individual act of appraisal but an act having a social character.}

The social character of the act of evaluation^{[1364] [1365] [1366] appears first of all in the fact that it presupposes certain definite social conditions as being given. The latter refer to the social form of the process of production and exchange and also to its technical aspect. The given act of appraising a yard of cloth as being worth 3 roubles presupposes: 1) that all commodity producers evaluate their products in terms of gold, i.e. assign the form of price to their exchange-values; and 2) that labour productivity in the cloth industry is at such a level that sale of the cloth at the price of 3 roubles per yard corresponds to a condition of equilibrium between the cloth industry and the other branches of production. The first condition, expressing a determinate social form of the process of reproduction (including both production and exchange), makes the act of evaluation possible in qualitative terms. The second condition, expressing a determinate condition of the technique of production, makes the same act of evaluation possible in quantitative terms.}

[e] The qualitative aspect.^ In the act of appraisal ‘one has to distinguish a qualitative and a quantitative aspect.188 Let us first consider the former. From the qualitative side, the act of appraisal means the equation of one concrete commodity (cloth) with another concrete commodity (gold), which in turn is already equated with all other commodities and has thus acquired the character of an abstract commodity, i.e. a commodity that can take the shape of any use-value. In being equated with gold, the cloth is equated with all other commodities and acquires the ability to exchange for any other commodity. The concrete labour of the cloth producer is thereby also equated with all other kinds of labour. Use-value becomes exchange-value, while private and concrete labour becomes social and abstract labour. The act of evaluation means a qualitative change (for the time being expected and ideal) of the social nature of both the product of labour and of the labour itself.

However, such a change in the social nature of the cloth, through its equa­tion with gold, already presupposes a difference between their social natures, i.e. it already presupposes the collective activities of all commodity producers, consisting of the fact that they exchange all of their products for gold and thus impart to the latter the character of universal equivalent or money. By means of its equation with gold, the cloth can be evaluated, i.e. can acquire a price, which expresses its exchange-value, only provided that all other commodit­ies are evaluated in terms of gold. ‘Gold becomes the measure of value only because the exchange-value of all commodities is estimated in terms of gold’.^{[1367] [1368] [1369] [1370] [1371]} ‘If the values of all commodities were measured in silver or wheat or copper, and accordingly expressed in terms of silver, wheat or copper prices, then sil­ver, wheat or copper would become the measure of value and consequently universal equivalents’.^⁰ Apart from such ‘universal action of all other com- modities’,191 i.e. apart from the collective actions of all commodity producers, the particular act of evaluating the cloth would be impossible since by this act the cloth, through the mediation of gold, is equated with all other commodities, i.e. gold in this case fulfils the role of money.

The general form of value can only arise as the joint contribution of the whole world of commodities. A commodity only acquires a general expression of its value if, at the same time, all other commodities express their values in the same equivalent; and every newly emergent commod­ity must follow suit.i9²

These words from Marx emphasise all the more strongly the dependence of the act of evaluation by the given producer on the activities of all the other commodity producers. The given producer can evaluate his product in terms of gold as money (and not gold as a concrete product) only provided that all other commodity producers do the same thing simultaneously. And conversely, in the latter circumstance our commodity producer is also compelled to evaluate his product in gold and, in response to the fluctuations of market prices for this product in terms of gold, to expand or curtail his production.

[f] The quantitative aspect^ We now turn from the qualitative aspect of the act of evaluation to its quantitative aspect. It is not only cloth in general that equates with gold as the universal equivalent but a specific quantity of cloth, 1 yard, which equates with a specific quantity of gold, 3 roubles. Gold is already not just the universal equivalent but also the measure of value.^{[1372] [1373] [1374]} The evaluation of a yard of cloth as 3 roubles does not mean that its producer will never, in any circumstances, agree to sell the particular yard of cloth more cheaply; in a bad market conjuncture he will be forced to do so. On the other hand, this does not mean that the cloth producer would not like to receive more for it; in a favourable conjuncture he will attempt to raise his price. Finally, the evaluation of the cloth also does not mean that in this way the producer summarises his subjective appraisals of the usefulness of a yard of cloth on the one hand and of a certain quantity of gold on the other. The evaluation of a yard of cloth as 3 roubles represents a preliminary mental statement of the proportion of exchange with which the producer wishes to and is able to continue the reproduction of cloth on the former scale.^w5 This preliminary evaluation or normal estimate of the commodity is a mental anticipation of the conditions of the market conjuncture that correspond to a state of equilibrium in the economy. It serves as regulator for the individual commodity producer, to which he adjusts his economic activity. A deviation of market prices above or below this normal calculation leads him to expand or curtail production.

[g] The continuity of price formation.19⁶ The ability of the commodity produ­cer, through his calculation, to anticipate the condition of equilibrium in the social economy is explained by the fact that this calculation is itself the result and reflection of a long and spontaneous process of interaction and mutual adjustment of all the branches of the economy, between which a relative con­dition of equilibrium is ultimately established through numerous frictions and disruptions. This equilibrium corresponds to a specific condition of the pro­ductive forces in the various branches of production and is sustained (with constant deviations) by the mechanism of fluctuations in market prices around an average level that corresponds to the labour value of individual products in the conditions of a simple commodity economy. The result of this process of mutual adjustment between all the branches of production is a certain average evaluation of their products, which in the calculation of the producer becomes a mental anticipation (expectation) of the future condition of equilibrium between these branches of production.

With the given state of labour productivity in the cloth industry, specifically, with a price of 3 roubles per yard, which corresponds to the labour value of the cloth, equilibrium is established (in the form of a tendency) between this branch of production and all the others. The average price of 3 roubles - a result and sedimentation of a long process of competition - is already fixed as the normal evaluation for a yard of cloth. This precisely fixed price of 3 roubles also serves as starting point for the producer in the process of calculating his commodity. In the event of a change in the conditions of production - for example, an increase in the price of material, a cheapening of production due to technical improvements etc. - this figure will be subject, of course, to correction and change. But the producer, in any case, has a starting point for his calculation, in which the social process of competition has already been summarised and the condition of the productive forces in the given branch has been objectively taken into account. The producer has no need, with each new production process, to begin all of his calculations anew or to involve himself with a subjective accounting of labour productivity and of the labour value of the product (failure to understand this point is where the error lies in the theory of subjective labour value). He begins with prices that are already determined, namely, with the given prices for material, machines and so forth (i.e. the costs of production) on the one hand, and with an assumed and anticipated price for his product on the other. Marx never thought to deny that each given state of prices arises on the basis of the previous state of prices, nor did he ever assert that with each new production process the evaluation is derived^{[1375] [1376] [­underlined in pencil] anew on the basis of the labour values of the products.^8 However, one must not of course - as happens with the cost-of-production theory - take this observation of a fact, that is, of the incessancy of price changes and of the connection between separate phases of price formation, as a causal explanation. It is still necessary to disclose the causes that regulate both the relative magnitudes of average prices for different commodities and also, particularly, their movement, i.e. the process of their changes. The task of the theory of value is to find these causes.}

Thus, the quantitative aspect of the act of evaluation also turns out to be dependent upon social conditions. This dependence is manifested in the fact that: 1) evaluation is not an expression of subjective appraisals by the producer but rather of the objective condition of the productive forces; 2) this condition of the productive forces is summarised in the form of evaluation or the calcula­tion of commodities not by the efforts of a single commodity producer, but by the collective activities of all commodity producers, the result of which serves as the starting point for the act of evaluation by the given producer. In other words, a change in the productive forces is not registered directly in the con­sciousness of the commodity producer in the form of a corresponding change in subjective value [underlined in pencil], but rather evokes a series of collect­ive actions on the part of commodity producers (the curtailment and expan­sion of production, the move from one branch of industry to another, etc.), whose result is objectified or ‘crystallised’ in the social properties of things, for example, as certain average prices, which in turn are already noted and taken into account in the consciousness of the individual commodity producer and serve as the point of departure for his calculations. Thus, the depend­ence of the act of evaluation of the commodity upon the preceding state of prices expresses nothing other than the dependence of the individual produ­cer’s activities upon social conditions.

[h] The continuity of reproduction.^[1377] The uninterrupted process of price form­ation, which we have been describing, reflects the uninterrupted process of reproduction. It does not begin with a clean slate but already presupposes the results of past production that are fixed in the form of determinate prices. Although social relations only connect the commodity producers indirectly through the act of market exchange and are interrupted thereafter, their res­ult is to affix to the products of labour a determinate social character, for example, determinate average prices. Once the commodity producer has pur­chased material, machines and other things on the market and put them into operation in the process of production, they have ceased to be commodities and become elements of production, but this does not mean that the social form that these commodities acquired in the exchange process (their determ­inate exchange-value or price) vanishes without a trace when the latter is com­pleted. On the contrary, it becomes fixed and crystallised in these things as a social property that appears to inhere in them and is preserved by them upon completion of the production relation of purchase and sale in which they have been involved in the market. The cotton, having left the market for the spinner’s workshop, does not cease to be regarded by him as a thing with a determinate price. In his technical operations with the cotton, he must not for a moment forget the price of this kind of material. Thus the prices that are established in the process of exchange continue their activity in the ensuing process of production. On the other hand, since the given process of production must be followed once more by the process of exchange, the prospects for the product’s future realisation are already considered, calculated and taken into account in the process of production itself. The product, while it is still in the production process and has yet to become a commodity, already has an anticipated price that is expressed, as we discussed in detail above, in its evaluation or normal accounting.

Thus, if we said in the theory of value that in the direct production pro­cess the given commodity producer acts independently of other commodity producers - the anarchy of commodity production - with whom he is connec­ted only in the process of exchange, this statement would be correct insofar as we spoke of the processes of production and exchange while considering each separately, from an abstract point of view. In actual reality, however, the given process of production is only one of the repeating phases of an uninterrupted social process of reproduction, a phase that precedes and is followed by the act of exchange. For this reason, the dense network of social connections, which tightly ties the producer to the process of exchange in the market, is not inter­rupted during the intervening period of production but rather continues its activity as the result of the preceding process of exchange and as anticipation of the one to come. This network of social connections, through its offshoots of the past and filaments of the future, embraces the production process, thereby establishing the continuity of social connections between people, and of the social form of things, throughout the entire process of reproduction. The com­modity producer, whose activity in his workshop is formally autonomous and independent of other commodity producers, in reality does not escape for a moment from this dense network of social ties that unite him with them and determine his economic activity. In exactly the same way, the means of produc­tion located in his workshop, as well as the finished product gradually maturing from them, cannot for a moment be considered as purely technical elements of production, deprived of social form. Removed to the quiet of the workshop, and absorbed by the technical process of production, they are momentarily not active carriers of the production relations between people, but this does not cause them to lose their character as carriers of past and future production relations. They preserve the imprint of their social origin and destiny. Herein lies the fundamental sociological meaning of Marx’s teaching concerning the measure of value, which represents nothing other than a doctrine of the evalu­ation of the product of labour in the process of production, which precedes the act of exchange.

[ι] Evaluation prior to exchange.^[1378] Marx strongly emphasises that the act of evaluating the commodity in terms of money occurs even prior to the latter's entry into the exchange process - not in the sense that in the act of exchange itself, before paying his money, the buyer must establish a price for the com­modity through mutual agreement with the seller,^{[1379] [1380] [1381] [1382] but in the sense described above of the normal calculation or evaluation of the product that occurs during the actual process of production. The fixation of exchange proportions, with a formal mutual agreement between seller and buyer (in fact it may be determ­ined unilaterally by the seller or by the buyer), occurs not only in regular but also in the casual exchange of two commodities, and not only in monetary but also in natural exchange. It is another matter with the evaluation of the product that precedes the exchange act itself, occurring in the production process and anticipating the conditions in which normal reproduction can continue, and which can preserve the equilibrium between the given branch of production and the others. It is precisely this act of preliminary evaluation of the product that is an indispensable attribute of commodity production. The latter is char­acterised not by the fact that products of labour are sold, but by the fact that they are already produced for the purpose of sale. With occasional exchange, the product of labour acquires a passing form as an object of exchange (a com­modity) only at the very moment of the exchange, without being a commodity or exchange-value either before or after the exchange act. ‘The articles A and β in this case are not as yet commodities, but become so only through the act of exchange'.202 This means that we still do not have commodity production as a determinate and stable system of production relations between people, with the corresponding reified category of value as a stable social form of the thing. Commodity production develops only to the extent that the products of labour begin to be produced ‘intentionallyfor the purpose of exchange'20'’' Once products are produced especially ‘for the purpose of being exchanged', ‘their character as values has already to be taken into consideration during produc­tion’^ And this becomes evident precisely in the fact that in the production process itself the product is assigned a definite evaluation based upon the pre­vious exchange process, with its inherent phenomena of price formation, and in anticipation of price formation in the future process of exchange.}

Once the product already acquires a preliminary evaluation in the pro­duction process itself, the consequence is that it enters the exchange process possessing an exchange-value already determined and corresponding to its price. Marx is forceful in emphasising this condition. ‘Commodities enter into the process of exchange with a determinate price’^[1383] and as ‘use-values with determinate prices’.^[1384] Marx refers to the absurd hypothesis that ‘commodit­ies enter into the process of circulation without a price'.20⁷ These persistent comments by Marx have usually been understood in the sense that during the working up of the product, in the course of production, a certain quantity of socially necessary labour is already expended so that the value of the product is consequently determined not by the conditions of market exchange but by the technical conditions that characterise the production process and by the act of exchange that precedes it. However, such an understanding has the effect of narrowing Marx’s meaning. Marx claimed that in the production process itself we already have in finished form not only certain technical conditions but also a determinate social form of production (production for the purpose of sale, or a commodity economy). For that reason, the product of labour is already, in the production process itself, not only the result of a determinate labour expendit­ure but also a thing with a determinate social form, namely, a commodity that has acquired a certain evaluation in terms of money. Marx’s teaching on the function of a measure of value, which is fulfilled by money even prior to the pro­cess of circulation, will only become fully understandable to us in connection with his teaching that the character of things ‘as values has already to be taken into consideration during production’, and that the product of labour therefore acquires a certain evaluation already in the production process itself and enters into the process of circulation with a determinate price. But in order to under­stand this possibility of an evaluation of the product of labour even prior to the act of exchange, we must remember that before the given process of produc­tion there was already a process of exchange, the results of which, in the form of the determinate social properties of things and the system of prices for dif­ferent commodities, serve in turn as the presuppositions of the given process of production.

[j] The ideal character of evaluation™⁸ Once the act of evaluation of the com­modity takes place even before the latter enters into exchange, it follows that this act has an ideal character, and ‘in its function as measure of value, money therefore serves only in an imaginary or ideal capacity’.^{[1385] [1386] [1387] [1388] The preliminary evaluation of the product establishes, so to speak, an ‘equilibrium price’ of the commodity, i.e. the level of price that corresponds to the condition of equi­librium between the given branch of production and the others. And since in commodity society, with its anarchy of production, such an equilibrium con­dition is possible only as an ideal average, from which the actual distribution of social labour constantly deviates in one direction or another, this prelim­inary evaluation of the commodity is only an anticipation of its ideal average price, from which prices also constantly deviate upwards or downwards. ‘The establishment of their price is merely their ideal conversion into the universal equivalent, an equation with gold which still has to be put into practice'?1*1 The possibility of realising this preliminary and ideal evaluation of the commodity on the market ‘depends on whether or not the [commodity] turns out to be a use-value, whether or not the quantity of labour time contained in it proves to be the quantity of labour time necessarily required by society for [its] produc- tion'.2n}

Here we encounter a very essential difference between price, i.e. the ex­change value of the commodity, expressed in money, and the exchange-value that we investigated in the theory of value. In the theory of value, we pre­supposed equilibrium between the separate branches of production so that the products of different types of labour equate with each other as values, and the same holds for different types of labour. But, in commodity economy, such an equation of labour is not a conscious presupposition of the social pro­cess of production, only the result of a spontaneous process of competition, with inequalities and disproportions that inevitably arise in the distribution of labour. This peculiarity of commodity economy is also reflected in evalu­ation of the commodity in terms of money, demonstrating that the equation of a given commodity with all other commodities, and thus of a given type of labour with all others, is not an accomplished fact but is only subject to future realisation.212 Equation of a given commodity with all others is only possible through its equation with gold. But gold, precisely because all other commod­ities are equated through its mediation (i.e. all commodity producers exchange their products for gold), possesses the special social form of money, which does not characterise all other commodities. This specific feature of the detached commodity, or money, consists of the fact that it can always be exchanged for any concrete commodity, whereas the latter cannot always be exchanged for gold. The evaluation of the yard of cloth as 3 roubles means that it is possible at any moment to acquire a yard of cloth for 3 roubles; it does not mean that, conversely, the yard of cloth can at any moment exchange for 3 roubles.^{[1389] [1390] [1391] This means that evaluation of the commodity in terms of gold involves both the moment of their equality (equation of the commodity with gold) and also the moment of inequality (the difference between the social form of money and the social form of the commodity). In other words, equation of the given com­modity with all others has not yet occurred and depends upon whether it is actually equated in the market with gold, with which it is unequal in terms of social form. Evaluation of the commodity, therefore,}

entails the necessity for alienation of commodities in exchange for glitter­ing gold and thus the possibility of their non-alienation. In short, there is here contained in latent form the whole contradiction which arises because the product is a commodity, or because the particular labour of an isolated individual can become socially effective only if it is expressed as its direct opposite, i.e., abstract universal labour.21⁴

The act of evaluating the commodity reveals its ideal character not only be­cause, as an ideal act, it precedes the process of exchange, but also because its realisation by way of the latter is always completed more or less approximately, with deviations of the market price upwards or downwards compared with the evaluation. ‘The possibility, therefore, of a quantitative incongruity between price and the magnitude of value, i.e., the possibility that the price may diverge from the magnitude of value, is inherent in the price-form itself.21⁵

7 Medium of Circulation

From the ideal act of evaluating the commodity, which precedes the process of circulation, Marx then turns to the latter. Only in the actual process of cir­culation is it discovered how far the commodity can be realised in accordance with its preliminary evaluation, in other words, the degree to which the market price approaches the commodity’s value. The greater is the factual deviation of labour distribution between individual branches of production from a propor­tional distribution of social labour, the greater will be the deviation of market price from value. A ten-hour expenditure of labour by a given producer may, on the market, be reduced to five hours of socially necessary labour, i.e. the product of his ten hours of private and concrete labour may be sold on the market at a price corresponding only to five hours of social and abstract labour. This can occur because, at the current moment, there is a lack of social demand (expressed as effective demand) for the given product; because the volume of production of the given product quantitatively exceeded the current demand for it; or because the given producer works in backward technical conditions and his individual labour expenditure exceeds the average, socially necessary labour.^{[1392] [1393] [1394]}

Investigating the function of money as medium of circulation, Marx uses the same method as when studying the function of money as measure of value. At first sight, it seemed to us that money, in itself, has the property of measuring the value of the commodity. Marx showed that it acquires such a property as the result of a long process of the generalised equation of all commodities with one another through the mediation of money, i.e. as the result of the ‘generalised activity of all commodities’, which in fact represents the generalised activity of all commodity producers. Marx takes the same approach in analysing the medium of circulation. At first sight it seems that money, on its own, possesses the property of medium of circulation: it buys every sort of commodity, as if setting them in motion with its own force. Marx derives this ‘reified’ property of money, however, from the movement of the commodities themselves, which reflects, in turn, certain activities and interconnections between the commod­ity producers themselves. Accordingly, Marx first of all analyses the movement, or the ‘metamorphosis of commodities’, and only subsequently turns to the ‘cir­culation of money’.

Turning to analysis of the process of commodity circulation, Marx distin­guishes within it two aspects: Stoffwechsel and Formwechsel - the ‘metabolism’ of things and the ‘change of forms’. ‘Insofar as the process of exchange transfers commodities from hands in which they are non use-values into hands in which they are use-values’, this process is a social exchange of things, i.e. a movement of material things.21⁷ The ‘material moment’ of this process consists of the fact that: 1) there first of all occurs a real ‘exchange of the commodity for gold’, of ‘an ordinary commodity and the money commodity’,21⁸ both of which move, in the form of determinate material things, in opposing directions: the com­modity from the hands of the seller into those of the buyer, and the gold from the hands of the buyer into those of the seller; and 2) after this happens, the same opposing movement of commodity and gold is repeated once more: the former seller now parts with his gold and receives in exchange the products that he requires. As a result of this entire process, ‘the product of one kind of useful labour replaces that of another’.^{[1395] [1396] [1397] [1398] ‘As far as concerns its material content, the movement is c-c, the exchange of one commodity for another, the exchange of quantities of social labour, in whose result the process itself becomes extin­guished^0 (i.e. the social aspect of the process).}

As we can see from the foregoing, the material-technical side of the circu­lation process, consisting of the movement of things (commodities and gold) from hand to hand, conceals from us its social form, which is the real sub­ject matter of Marx’s investigation. Things interest Marx only as the ‘carriers’ of production relations between people, i.e. not in terms of their material- technical properties but in terms of their social form or social properties, which they acquire only in the presence of determinate production relations between people. The things, which appear in the circulation process and at first sight are distinguished only by their material properties (gold and the other com­modities), are in fact distinguished from one another by their social forms. Gold enters the exchange process as a product of labour that is already equated with all other commodities, able to exchange directly for any other commodity, and for that reason fulfilling the special social function of universal equivalent or the expression of abstract-social labour. The commodity opposes gold as a product of labour yet to be equated with other commodities, in other words, as the product of private and concrete labour. Once the commodity and gold are distinguished by their different social forms, the exchange of the commod­ity for gold means not just the replacement of one material thing by another but also a change in the very social form of the thing (Formwechsel). Marx is interested in precisely this ‘change in form or the metamorphosis of commod­ities’^ which serves the social exchange of things. His goal is to investigate ‘the whole process in its formal aspect’,222 that is, the social form rather than the material properties of the products of labour.

But Marx cannot stop there. The point is that the entire social form of things is a reflection of a determinate social form of labour organisation, i.e. of determinate production relations between people. The circulation process is not only the material movement of things (the exchange of things) and the change of their socialforms (the metamorphosis of commodities), but also the movement of production relations between individual commodity producers who are the participants in exchange. The contrast between the social form of the commodity and money reflects the contrast between the different social activities fulfilled by the seller and the buyer.

These two antithetical transmutations of the commodity are accom­plished through two antithetical social processes in which the commod­ity-owner takes part, and are reflected in the antithetical economic char­acteristics of the two processes. By taking part in the act of sale, the commodity-owner becomes a seller; in the act of purchase, he becomes a buyer.^{[1399] [1400]}

As we know from the theory of commodity fetishism, the differentiation of production relations between commodity owners, consisting of the fact that in the act of exchange they fulfil opposing roles (as buyer and seller), finds ‘reified’ expression in the differentiation of the social form of the things being exchanged (the commodity and money). Differentiation of the products of labour into the commodity and money results from a change of production relations between commodity owners and the squeezing out of natural ex­change. But once the altered exchange relation has congealed or become ‘reified’ in the form of the money function of a detached commodity (gold), possession of the latter by a given commodity owner also determines his role in the act of exchange as buyer; and conversely, the commodity owner’s pos­session of other commodities (i.e. ordinary commodities), apart from the one that has become detached, predetermines his role in the given exchange act as seller. Thus, if the social forms of the commodity and money result from a determinate structure of the economy and of the production relations between people, so, on the other hand, the position of the individual in a given concrete act of exchange is determined by the social form of the things belonging to him. In the exchange process ‘they confront one another in the antithetical roles of buyer and seller, one personifying a sugar-loaf, the other gold. Just as the sugar­loaf becomes gold, so the seller becomes a buyef.22⁴ The change in the ‘social character’ of the commodity owners occurs in parallel with the change in the social form of things. To understand the latter process, it is necessary to clarify the particular characteristics of the former.

It is not surprising, therefore, that in this case, as in other parts of his system, Marx concentrates his attention on an investigation of the type of production relations between people that assigns a special form to money circulation. We find such an analysis of the production relations between people in Marx’s well-known teaching on the circuit c-M-c.

A researcher who begins his analysis with the external phenomena of money circulation will see in the latter nothing more than ‘a mass of random purchases and sales taking place simultaneously’.^{[1401] [1402] [1403] Each of these acts is absolutely no different from the others, [all of them] representing exchange of a commodity for money. The very same act that, from the seller’s side represents sale or c-M, from the buyer’s side is the purchase M-c. In each of these acts, money plays the role of means of purchase and successively realises the prices of various commodities that on their own appear to be immobile?76 Once commodity c₁ has been purchased with a particular rouble, the former seller, with the same rouble, purchases another commodity c2, while the former owner of the [second commodity] uses the same rouble to purchase c3 and so on. All of these acts of exchange are uncoordinated and not in any way connected. A new commodity figures in each of them and has nothing in common with the previous one. Each commodity is sold only once, i.e. it exchanges only one time for money and then immediately enters into the buyer’s sphere of consumption. The entire process of exchange has the appearance of a chaotic mass of purchases and sales, randomly coinciding or occurring successively with nothing to link them together.}

In order to find a lawful pattern in this seeming chaos, we must refocus our attention away from money and commodities as such and onto the commodity producers. ‘The two moments of this metamorphosis are at once distinct trans­actions [by the commodity owner] - selling, or the exchange of commodity for money, and buying, or the exchange of the money for a commodity - and the unity of the two acts: selling in order to buy’.22⁷ As soon as we take the commod­ity producer as the starting point for our investigation, the acts of exchange quickly arrange themselves in a definite, lawful and necessary sequence. The actions of each commodity producer must follow in definite order: first the sale c-M and then the purchase M-c, with the sale being completed precisely for the purpose of becoming able to make a purchase, in other words, a reg­ular sequence of one act after another resulting from the internal connection between them. And this internal connection, in turn, is determined by the fun­damental character of commodity economy.

Once the commodity producers are connected with each other by the social division of labour and are producing commodities for the market, the process of production must be followed by the process of circulation. Only the latter enables the commodity producer to acquire ‘his other means of subsistence and of production’^{[1404] [1405] [1406] in place of the commodities he has worked up and does not need himself. Until he acquires the latter, he cannot renew the production process without having the means of production that it requires and that he has expended in the previous period of production, or the means of subsistence for feeding himself and his family during the next period of production. But, in order that he might appropriate the necessary means of production and subsistence for himself, according to his own choices, he must first convert the commodities he has prepared into money, i.e. sell them on the market.}

The social division of labour makes the nature of his labour as one-sided as his needs are many-sided. This is precisely the reason why the product of his labour serves him solely as an exchange-value. But it cannot acquire universal social validity as an equivalent form except by being converted into money. That money, however, is in someone else’s pocket.22⁹

‘A man who has produced, does not have the choice of selling or not selling. He must sell’?³⁰ This means that the necessary completion of the production process is the act of selling the commodity and, in order to be able to begin a new process of production, the commodity producer, having sold his commod­ity, must necessarily appear in the role of buyer of the corresponding means of production and subsistence. The circulation process, in the form of a law­ful repetition of the two acts (c-M and M-c), is the necessary mediating link between two processes of production, completing the first and preparing for the second. The circulation process appears as part of the general process of reproduction, and the lawful course of the latter presupposes the lawful flow of the former. Independently of the will of particular individuals, the very mech­anism of commodity economy necessarily imparts the following form to the entire process of reproduction: 1) the production process; 2) the circulation process (sale, or c-M, and purchase, M-c); 3) the production process - and so forth. The periodic pulse of the reproduction process includes the pulse of the circulation process in a proper sequence of its two acts, c-M and M-c, which oppose and ‘complement each other’.^[1407]

At first glance, the internal connection of the two acts of circulation (c-M and M-c), which enter into one and the same process of reproduction and com­plement each other, is concealed because they each appear in a distinct and separate form. Indeed, what constitutes the specificity of monetary exchange is that the direct identity between alienation of the product of his labour and the acquisition of someone else’s labour is divided into ‘the two antithetical segments of sale and purchase'.^{[1408] [1409] This division of the two acts is manifest in the fact that: 1) in the act of purchase our commodity producer, having previ­ously sold his commodity to person A, now enters into a production relation with another person B; 2) the act of purchase can proceed in some other place and not where the act of sale occurred; and 3) the act of purchase can be post­poned for a certain time and need not follow immediately after the act of sale. There is a personal, spatial and temporal separation between the two acts of the circulation process.}

Each individual sale or purchase stands as an independent isolated trans­action, whose complementary transaction... may be separated from it temporally and spatially... Any M-c may follow any particular c-M, i.e., the second section of the life cycle of any commodity may follow the first section of the life cycle of any other commodity.233

This separation of the two acts in the process of circulation gives the latter the appearance of ‘an exceedingly haphazard coincidence and succession of mot­ley phases of various complete metamorphoses'.23^[1410] ‘The actual process of circu­lation appears, therefore, not as a complete metamorphosis of the commodity, i.e., not as its movement through opposite phases, but as a mere accumulation of numerous purchases and sales which chance to occur simultaneously or suc­cessively'.^[1411]

This chaotic picture of the circulation process does not, however, give us a proper representation of the latter, for the process appears to lose ‘its dis­tinct form’,^{[1412] [1413] [1414] [1415] i.e. its law-governed social character. In order to disclose the latter, Marx, in his usual manner, tried to find behind this movement of things the determinate production relations between people. Having begun with the investigation of an economy of commodity producers, with its inherent proper and rhythmic sequence of the production process and of both acts of the cir­culation process (c-M-c), Marx found in the market the pivot around which the disorderly dance of commodities revolves. This pivot must be sought not in the things themselves but in the production relations between people, more precisely, in the activities of the commodity producers and their mutual rela­tions with the world of other commodity producers. Beneath the personal, spatial and temporal separation between the two acts of circulation, Marx found within them both a single stable centre: the figure of the commodity producer, who participates in both acts of exchange (c-M and M-c)237 and includes them both in the single process of reproduction that is fulfilled at his establishment. Without denying the enormous importance of the separa­tion of exchange into the two opposing acts of purchase and sale, and sharply criticising those economists who underestimated this moment∕38 Marx at the same time also revealed a certain ‘internal unity’ of the two ‘independent’ acts of the circulation process.239 This unity consists of the fact that both acts, c-M and M-c, are complementary yet distinct links in the single circulation pro­cess of c-M-c. From this point of view, any transaction of purchase and sale is revealed not as an isolated act, but instead it has its place in the general system of commodity circulation. Insofar as this transaction is considered from the side of the buyer, as M-c, it completes a previous act of sale into which the cur­rent buyer entered as seller, and it prepares for him the possibility of renewing the production process. Regarding it from the side of the seller, as c-M, it com­pletes the just concluded process of production and, in turn, must invariably find its complement in the ensuing act M-c, even if the latter is postponed for a time and completed elsewhere. Separated spatially and temporally, the two opposing acts of c-M and M-c are tied together as necessary links of the single process of reproduction. They are connected not only with one another but also with other acts of circulation.[1416] [1417] [1418] Since each of these acts arises from the interaction (exchange) between two establishments, it enters simultaneously into the reproduction process both of the given establishment and of its coun­terpart:}

At the same time as this commodity begins the first phase of its circuit and undergoes the first metamorphosis, another commodity commences the second phase of the circuit, passes through its second metamorph­osis and drops out of circulation; the first commodity, on the other hand, enters the second phase of the circuit, passes through its second meta­morphosis and drops out of circulation, while a third commodity enters the sphere of circulation, passes through the first phase of its cycle and accomplishes the first metamorphosis. Thus the total circuit c-M-C rep­resenting the complete metamorphosis of a commodity is simultaneously the end of a complete metamorphosis of the second commodity and the beginning of a complete metamorphosis of a third commodity?⁴¹

The metamorphoses of the individual commodities are entwined with each other. ‘The circuit made by one commodity in the course of its metamorphoses is inextricably entwined with the circuits of other commodities. This whole process constitutes the circulation of commodities’.'^2a2

We must remember well that not every exchange of products for money is included in the concept of commodity circulation. Exchange becomes com­modity circulation only provided that 1) it is repeated periodically and 2) in the specific social form of c-M-c, which presupposes that the production of a given establishment is alienated with the aim of using the money acquired to purchase the means of production and subsistence required for further pro­duction. Where this is not the case, there may be monetary trade, but there is no circulation of commodities in the form that characterises commodity eco­nomy. Consider an example from the economy of the late Middle Ages. The peasant sold a portion of his grain in the city for money and paid the latter as quitrent to the feudal landlord. The latter used it to buy luxury items from the merchant, which the latter imported from the East. Here we have a series of transactions of purchase and sale, or monetary trade, but there is no cir­culation of commodities in the form C-M-C. The peasant sells his grain, but the money that he receives is handed over to the feudal lord. For the peasant household, the act C-M is not followed by the act M-C. Conversely, the feudal lord completes the act M-C, but the latter is not the completion of the act C­M since the feudal lord acquired the money not from sale of his products but rather as quitrent from the peasant, i.e. he received it in his capacity as feudal­ist and not as a commodity producer. The feudal form of production relations between people creates a special form of exchange^{[1419] [1420] [1421] that is distinguished from the form C-M-C, which characterises commodity economy with its inherent production relations between people as commodity owners. It is only in this social form of C-M-C that exchange becomes the circulation of commodities, and it is only ‘as mediator in the process of commodity circulation that money fulfils the function of medium of circulation'.244 People usually understand the function of medium of circulation simply as the role of money as instrument of exchange. That, as we now see, is incorrect. It is only in a determinate social form of economy (namely, the commodity economy), with its associated form of exchange (namely, C-M-c), that money fulfils the function of medium of cir­culation. ‘Money emerges thus as a mere medium of exchange of commodities, not however as a medium of exchange in general, but a medium of exchange adapted to the process of circulation, i.e., a medium of circulation’.2λ3 In a differ­ent social context, distinguished by a different character of the production rela­tions between people, money can serve as the instrument of exchange without functioning, however, as medium of circulation in the sense indicated.}

Thus, from a determinate type of production relations between people as commodity owners, Marx derives a determinate form of commodity circula­tion (C-M-C) - which in turn stipulates the specific function of money as medium of circulation - and a determinate form of the movement of money. The uninterrupted and periodically repeated process of reproduction, organ­ised on the principles of commodity economy, presupposes that the commod­ity producer periodically produces the commodity, periodically puts it into circulation, i.e. sells it for money, and, with the money acquired, periodically

purchases the products that he requires in order to resume production. The commodity producer’s expenditure of the money in this form already presup­poses that the production process will be repeated and that the newly worked up commodities will again be sold, and thus that the money resulting from the act c-M will return to the commodity producer in order to depart from him again in the act M-c. In other words, a periodic pulse beat of money occurs, periodically flowing into a given establishment and then flowing out of it.

But since there are new use-values produced continuously in the form of commodities, which must therefore be thrown continuously afresh into the sphere of circulation, the circuit c-M-c is renewed and repeated by the same commodity owners. The money they have spent as buyers returns to them when they once more become sellers of commodities. The perpetual renewal of commodity circulation is reflected in the fact that over the entire surface of bourgeois society money not only circulates from one person to another but that at the same time it describes a number of distinct small circuits, starting from an infinite variety of points and returning to the same points, in order to repeat the movement afresh.^[1422]

Insofar as simple reproduction is involved, i.e. reproduction on the previous scale rather than expanded reproduction, one and the same sum of money periodically flows into a given establishment and periodically exits from it (assuming that the value of commodities and of money does not change).

Since every sale is simultaneously a purchase and vice versa, this means that every inflow of money into a given establishment (in the act c-M) signals a simultaneous outflow of the same sum of money from other establishments (in the act M-c). Conversely, every outflow of money from one establishment means its inflow into other establishments. In other words, money continually flows from one establishment to others, pausing in each for an interval of time (now shorter, now longer) between the moment of the act of sale c-M and the moment of the ensuing act of purchase M-c. Money, accordingly, is continually moving in the circulation process, and this is precisely its function as medium of circulation. If we take a so-called ‘national economy', consisting of a determ­inate number of interconnected private undertakings, then in the condition of simple reproduction and the absence of foreign trade, a determinate sum of money circulates in the given economy, constantly flowing from one establish­ment to the others and remaining (with the exception of worn-out coins) in the given sphere of circulation. It is only in the form of commodity circulation (c-M-c) that the sum of circulating money represents, for the given sphere of circulation, a determinate and constant magnitude (other conditions remain­ing the same), analysis of which involves the question of the quantity of money.

The character of commodity circulation in the form C-M-C is determined by the fundamental specificities of money's circulation: its constant movement in circulation, its periodic inflow into each establishment and, finally, the function that money fulfils in each separate act of purchase and sale. Here we come to a unique aspect of Marx's teaching on money that has not been given sufficient attention. The process of replacing a given commodity (linen) with gold (money), and the latter with another commodity (Bibles), is described by Marx as a process involving a change of form of thefirst commodity (the linen). This is the central idea of Marx's theory of the ‘metamorphosis of the commodity', and for a better explanation of this we shall cite a few excerpts from Marx.

What is it that we observe directly in the act of purchase and sale? ‘The striking phenomenon here is that a commodity and gold, 20 yards of linen and £2, have changed hands and places, in other words that they have been exchanged'.^{[1423] [1424] But behind this external appearance of one thing being replaced by another, Marx discerns a process involving a change of form on the part of the first thing.}

At the outset the commodity appears as a particular use-value, then sheds this form of existence and assumes that of exchange-value or universal equivalent - which is entirely distinct from its natural form - finally it sheds this as well and emerges as a real use-value which can serve particular needs. In this last form it drops out of the sphere of circulation and enters that of consumption^⁸

In the circuit C-M-C (linen-gold-Bible), the gold and the Bible are no more than forms that the linen assumes. With the sale of the linen, what occurs is a leap of value ‘from the body of the commodity into the body of the gold’.^{[1425] [1426] [1427] [1428] [1429] The bodies of commodities, their use-values, change over to the money side, ‘while their soul, the exchange-value, is turned into gold’?50 The linen ‘changes its commodity-form into its money-form’, which becomes ‘the first term of its final metamorphosis M-c, its transformation back into the shape of the Bible’?51 In the second act M-c (purchase of the Bible), it is still the movement of the linen itself that continues, only now transformed into the money-form; the commodity ‘passes through the second phase of its circulation, no longer in its natural shape, but in its [golden] state'.252 The entire process c-M-c represents the conversion of form, or the metamorphosis of the first commodity, the linen.}

At first sight, this teaching on the metamorphosis of the commodity cannot help but seem strange and even to contradict reality. It seems to us that in the act c-M gold has replaced the linen, and there is no change of form on the part of the linen. We are confident that simultaneously with the act c-M, i.e. with sale of the linen, the latter leaves the sphere of circulation and enters the sphere of consumption. Marx claims that although ‘the commodity, in its shape as an object of utility, falls out of circulation into consumption’,25³ the linen, as a commodity or exchange-value, still continues its movement within circulation in the form of gold. It is only when the gold, acquired for the linen, is given in return for the Bible, that the linen actually moves from the sphere of circulation into the sphere of consumption.

These claims by Marx concerning the ‘reincarnation’ of the linen in gold and the Bible, while initially appearing somewhat incomprehensible, take on a completely real meaning from the point of view of his theory of commodity fet­ishism. The entire process described by Marx, the process of the metamorphosis of the commodity, must be regarded as a movement of the production relations between people, which does not correspondwith the movement of things although it is closely connected with it. From the ‘material’ point of view (i.e. from the point of view of the movement of things), there is obviously no incarnation of linen in the gold or the Bible; the linen is simply replaced by gold, and the latter by the Bible. But we come to a different conclusion from the point of view of the production relations of which these things are the carriers. Our commod­ity owner made the linen as a commodity with a determinate exchange-value that already, in the production process itself, acquires a certain evaluation in terms of gold.^{[1430] [1431] [1432] [1433] By the very fact of producing the linen, the commodity owner already enters into a certain production link with other commodity owners: he is a claimant upon other use-values that are equal in value to his linen. The exchange-value of the linen is an expression of this ability, on the part of its producer, to enter into such a production relation of exchange. But thus far we are speaking only of a possibility, or of a potential production relation of exchange. From the moment of the linen's sale, i.e. its exchange for gold, the potential production relation between the given commodity owner and the others is actively manifested; his product is swallowed up by the market and he, as the owner of gold, becomes an active participant in the production relation of exchange. In purchasing the Bible, he realises this production relation. One and the same production link between the given commodity owner and the others, founded upon the fact that he produces a product (linen) as a commod- ity,255 extends through the ensuing phases: from being a potential it becomes active in order then to be realised. The unity of this production link, in all its phases, is shown by the fact that each previous phase necessarily presupposes the one that follows, and the latter is impossible without the former. The con­tinuity of the different phases of the production relation of commodity owners is reflected in the continuity of things as the carriers of these consecutive phases. 25β Since people in commodity society are connected through things, each phase of the production relation between people corresponds to a special social form of things: the ‘commodity form' (linen), the ‘stripping off of the commodity form' (gold) and the ‘return to the commodity form' (the Bible).257 On the other hand, insofar as the different phases of the production relation between people con­stitute a certain unity, the materially different carriers of these phases (linen, gold, Bible) are merely forms of one and the same value.}

Now we can understand why the linen, following its sale, continues its existence as value in the form of money and still remains within the sphere of circulation. Of course, the material body of the linen, following its sale, leaves the sphere of circulation for the sphere of consumption. But is there an end to the production relation, of which the linen was the carrier, namely, the production tie between the producer of the linen and the other commodity owners, a connection founded on the fact that the first among them produced the linen as a commodity for the market? With the sale of the linen, this production relation not only has not come to an end; rather, it is only now that it actively appears, so to speak, and has acquired a socially significant form. This means that the exchange-value of the linen, as the expression of this production relation, still continues to exist, being ‘attached’ to or ‘reified’ in the gold. It is only through purchase of the Bible that the producer of the linen realises and simultaneously terminates his production relation with all commodity owners, which is tied to the fact of the linen’s production. Thus, it is only with purchase of the Bible that the linen, as exchange-value, departs from the sphere of circulation for the sphere of consumption.

If the linen, through sale, assumes the form of gold, it follows that the gold is a converted form of the linen. In circulation the gold is always the converted or money-form of the commodities. Marx strongly emphasises this idea. Of course, at its point of production the gold enters into circulation as a simple commodity, opposed to others and exchanging for them in the act of direct barter.^{[1434] [1435] [1436] The gold and the linen enter into such an act in identical social form, and the value of each of them is expressed in the other. But if we abstract from these points of entry of new gold into circulation and take the latter as a continuing and endlessly repeating process, then the gold enters not with the quality of a simple commodity but with the quality of money, i.e. a commodity already equated with all other commodities. Here the value of the linen is expressed one-sidedly, namely, only in the gold, whereas the value of the gold is expressed not in some quantity of linen, for which it is purchased, but instead can only be expressed in the totality of all commodities, i.e. in the general level of prices. In each particular act of exchange, the gold enters as the converted form of any commodity whatsoever. Every commodity owner (apart from the gold producer) can enter the act M-c in the role of purchaser only provided that he has already previously sold his commodity and, consequently, the gold in his hands already represents the incarnation of his commodity’s ‘alienated form'.259 Our commodity owner can sell his linen to another commodity owner only on condition that the latter has already sold his commodity, for example, wheat. This means that, in the given act c-M (sale of the linen), the gold already enters with the quality of the converted or money-form of the wheat. Upon completion of this act of selling the linen, the same gold becomes the converted form of the linen until it is exchanged for the Bible, etc. The movement of gold is the ‘movement of the metamorphosed commodity’?60}

At first sight, Marx's assertion regarding the character of gold as the trans­formed commodity appears to us to be just as strange and incomprehensible as the claim we have just scrutinised: that after its sale the commodity con­tinues to exist in the form of gold. The former claim is the conclusion drawn from the latter, and it likewise reveals its meaning to us only when translated from the language of reified relations into the language of production relations between people. From the reified point of view, a gold rouble is a gold rouble, completely apart from whether it is acquired through the sale of wheat or iron; it is impossible to know ‘whether it represents transformed iron or transformed wheat'.^{[1437] [1438] But the character of the production relations of exchange, into which the owner of the gold rouble now enters in the market, depends in no small measure precisely upon whether he acquired this rouble from the sale of wheat or of iron. The action by the owner of gold, who is entering into the actM-c in the role of buyer, depends upon the preceding act c-M, in which the same individual was seller, meaning that in the act M-c the gold appears as the convertedform of a particular commodity. This position helps us to understand the mechanism of market exchange.}

Let us suppose that we are taking a snapshot of the state of the market at any given moment. On one side we find the sellers, the commodity owners, and262 on the other side the buyers, the owners of money. The latter appear as the active participants in exchange; according to their own choice and, as it appears at first sight, their own will, they select the commodities they want. Demand, represented by the sum of money in the hands of all buyers (for instance, a million gold roubles), seems to us to be the primary and determining force of market exchange. Being the determining sum, the demand, for its own part, appears to be completely undetermined in both qualitative and quantitative terms: in qualitative terms, because it represents a certain sum of homogeneous and abstract monetary units (roubles) - each of which can be directed to the purchase of any commodities - which therefore contain within themselves no evidence of a definite concrete demand; in quantitative terms, because the sum of a million roubles enters into market circulation as a final sum, given in advance, whose origin is unknown to us.

This portrayal of the mechanism of market exchange is extremely one-sided and erroneous, singling out one link (demand) and declining to analyse those factors by which it, in turn, is determined. Such an analysis will show us first that the sum of money, which represents demand from the side of buyers at this particular moment, is acquired by the latter through the preceding sale of the commodities they produced. This sum of money, therefore, is the converted or money-form of the production by commodity owners who are presently appearing in the role of buyers.^[1439] The current acts of purchase M-c are the complements of previous acts of sale c-M, and the current demand is determined, both quantitatively and qualitatively, by the preceding process of production. Above all, it is obvious that the volume of demand from the side of the buyers depends on the quantity of commodities or exchange-values that they first produced and realised in the market in the preceding acts of sale c-M. Furthermore, the character and volume of the production of each commodity owner also influ­ences the qualitative side of the demand that they represent in the market. This is self-evident insofar as we are speaking of demand for means of production, material, machines, supplementary materials and so forth. Depending upon whether the given commodity owner acquired his money from the sale of iron or wheat, he will necessarily spend a part of the money received on the pur­chase of one or another means of production required in order to resume the labour process. He will spend the remainder of the proceeds on means of con­sumption. The quality and quantity of the means of consumption he acquires depend primarily upon the magnitude of the remaining sum, and that mag­nitude, in turn, is determined by the scale and method of his production.

Thus, the volume and character of demand depend upon the volume and character of production; the acts of purchase M-c are really complementary to the preceding acts of sale c-M; and the gold that figures in the acts M-c is the converted or money-form of the production realised in the acts c-M. It is not discernible whether a gold rouble is transformed iron or transformed wheat, but its further fate largely depends upon which it is. The same gold rouble represents transformed wheat for the peasant and, after it passes to the weaver, transformed linen, next a transformed Bible, etc. Imprinted upon the glistening, solid and constant gold rouble are the social production relations of which, in this case, it is the ‘carrier’. And here, as in other parts of his theory, Marx’s analysis discloses from behind congealed things the flexible, dynamic and fluid production relations between people. The reified economic categories acquire a magnified flexibility, reflecting all the diversity in the changing rainbow of social relations between people.

As in his teaching on the measure of value, Marx’s doctrine on the func­tion of money in the role of medium of circulation reveals a deep sociological character in the fact that it takes as given a determinate type of production rela­tions between people as commodity owners. The commonly accepted notion that, prior to the exchange act, gold fulfils the function of measure of value wherever it is conceivable to equate the product with a certain quantity of gold, and the function of medium of circulation wherever they are actually exchanged, does not apply to Marx's theory. That view suggests that gold ful­fils both of these functions in every random exchange, provided only that it is the commonly used means for comparing and exchanging different products (for example, in the monetary exchange between tribes with a predominantly natural economy, or in occasional exchange on the periphery of a society with a commodity economy, etc.). From Marx's point of view, it is only possible here to speak of money's process of emergence and development, not of the func­tions that are inherent in it with a regular process of commodity production. Here there is no function as measure of value, for there is no value itself as the regulator of production. Here there is no medium of circulation, for there is no commodity circulation as a necessary constituent element in the process of reproduction. It is only where the product is produced in advance as a com­modity, and where it acquires even in the production process a preliminary evaluation in terms of gold - which expresses the level of prices with which equilibrium is maintained between the given production branch and all the others - that gold fulfils the function of measure of value. Only where the pro­duction process is invariably followed by the exchange process in both of its phases (c-M and M-c), as the necessary condition for resuming production, does gold fulfil the function of medium of circulation. It is easy to see that both of these functions presuppose a developed commodity economy, in which pro­duction is intended in advance for exchange (hence the preliminary evaluation of the commodity and the function of gold as measure of value), and on the other hand, exchange is only an intermediate stage of the entire reproduction process (hence the metamorphosis of the commodity and the function of gold as medium of circulation).

8 Money as a Hoard

If the circulation of commodities in the form C-M-C occurs more or less unin­terruptedly, and each act of sale C-M is quickly followed by its complementary act of purchase M-c, money will quickly pass from hand to hand and fulfil the function of medium of circulation. ‘But as soon as the series of metamorphoses (of the commodity - i.r.) is interrupted, as soon as sales are not supplemented by subsequent purchases',^[1440] the money remains for a long period in the hands of the seller, fulfilling the function of a hoard.

In historical terms, the collection of treasure began very early. Even before precious metals became money, they were readily accumulated as a concrete item of consumption (i.e. as a luxury item) that was most suitable, because of its durability, for the preservation of wealth. As exchange and money develop, accumulation of precious metals already concentrates in the hands of the owners not merely stable and highly prized items of consumption but also the ‘absolutely social form of wealth which is always ready to be used’.^{[1441] [1442] [1443] [1444] Only from this moment is it possible to speak of a hoard not in the sense of a sum of concrete and useful items but rather in the sense of a ‘social force’ that is concentrated in the hands of ‘private persons?*’*’ So long as the slave or feudal economy prevails, money, of course, is not the only ‘social force’ because the members of society are not ‘private persons’ who relate to each other as independent and equal commodity owners. The members of society are still connected by relations of feudal domination, serfdom, etc. But, if the owner of money is compelled to reckon with a prince or feudal landlord, he possesses all the more advantage because of that same backwardness of social relations, by comparison with the owner of use-values when both parties occupy an equal social position. It is precisely the prevalence of natural economy and the inadequate development of exchange that makes it impossible, or in the best of cases problematic, to transform any use-value into money?*7 This means that the seller endeavours all the more to retain the money received as a hoard, as a social force that - while it does not yet replace all other social ties - already successfully supplements, modifies and to some extent dissolves them. Describing the widespread custom in the East (especially in India) of collecting a hoard, Adolf Wagner says: ‘For many “little” people a hoard plays the role of a savings bank in the event of need or of high prices, with which to guarantee survival... For the wealthy, for the aristocracy and the princes, a hoard serves as a means of social and political domination, specifically for gift-giving?*8 paying for services, retaining servants, waging war, paying taxes, etc.’.[1445] [1446] [1447] In ancient and feudal society, the ‘professional hoarder’ frequently became a moneylender and, through his activity, contributed all the more to dissolution of the economic forms inherent in such societies?70}

In developed commodity society, the formation of a hoard is one of the normal, continuous and necessary functions of commodity circulation. If, on the one hand, the latter presupposes the uninterrupted circuit c-M-c, on the other hand it ruptures this circuit into two acts, c-M and M-c, creating the possibility and occasionally even the necessity of a prolonged postponement of the second act. Every commodity owner must alternately assume the roles of seller and buyer, but at the same time he must retain for a time a portion of the money received from selling rather than put it into circulation. As we have seen above, the commodity producer spends the money received from sales on the purchase of means of consumption and means of production. For both of these purposes he must now and again withhold money in the form of a reserve fund or a hoard.

The commodity producer completes the sale of his products periodically, at the end of each production process. The periods when sales occur, there­fore, are conditioned by the periods of production. The peasant, for example, sells most of his products every autumn. The production periods are shorter in industry, but for every commodity producer these periods are fixed. Expendit­ures by the latter on means of consumption depend on the character of the vari­ous needs and their periodic recurrence?⁷¹ For certain requirements (susten­ance, for example), periodic expenditures frequently occur before the produc­tion process ends, whereas for other needs (for example, clothing and hous­ing) they occur less frequently. This means that after the production process and the sale of finished lots of commodities are completed, the commodity producer must retain out of the money received: 1) a sum needed for regular expenditures upon means of consumption (food) over the duration of the next period of production, and 2) a corresponding sum for gradual accumulation of the fund for one-time expenditures that occur over several periods of produc­tion. If the production process lasts three months, and the producer replaces his wearing apparel once a year at a cost of 200 roubles, then from the sum received from selling the products of each production period a sum of 50 roubles must be set aside for this purpose.

The same forms of reserves must be set aside from the sums intended for pur­chasing means of production in the broad sense of the word. If wages are paid weekly to workers, and fixed capital (machines) is replaced every five years, then after each production period, lasting three months, the capitalist must allocate to the reserve fund: 1) a sum equal to 12 times the total of wages paid out weekly, and 2) a sum equal to 1/20 of the value of the machines that are wearing out. In a capitalist economy, where the fixed capital takes on enorm­ous dimensions, such sums being set aside for its ‘amortisation’ or retirement are extremely significant. In simple commodity economy, the difference in the periods of expenditure of various sums on means of production also occurs, but it is not so great. Thus, in simple commodity economy it is also neces­sary to accumulate certain reserve funds - although not so extensive - for the purpose of both consumption and production. Still more profound is the dif­ference between simple commodity economy and capitalist economy in terms of how the reserve funds are accumulated. With a developed credit system, and especially with a banking system, it is possible to speak of the ‘accumulation’ of a hoard only in a figurative, not in a literal, sense of the word.^{[1448] [1449] [1450] The commodity producer does not ‘accumulate’ reserve funds on his own but instead deposits them in the bank, which uses their temporary inactivity to lend them to other commodity producers who need cash at any given moment. But in the theory of money, Marx abstracts from the presence of a credit system and assumes real accumulation, i.e. retention by each commodity producer of a certain sum of money that serves as a reserve fund.}

Thus, even if we assume that the commodity producer intends to spend the entire sum of money received from sale of the commodities on means of consumption and means of production, a portion of this money will still be retained temporarily in his own hands as the reserve fund. A certain portion of this money will be spent gradually in the near future and thus constitutes his ‘cash balance’. This is his ‘reserve fund of coin’,27³ or temporarily ‘suspended coin’, which may not be spent at the moment but still does not essentially leave the sphere of circulation. This ‘cash reserve fund’ can be regarded as ‘a constituent element of the total amount of money always in circulation’^⁴ as distinct from coin, therefore, it is not a hoard in the sense of ‘money’ that is withdrawn from the sphere of circulation.^{[1451] [1452] [1453] This role of ‘money’, withdrawn from circulation, is fulfilled by sums of money that are to be spent on means of consumption and means of production only after a more or less lengthy interval of time (for example, after the wearing out of fixed capital), and thus they temporarily leave the ‘stream of circulation’, settling or ‘congealing’ in the form of a hoard. This is a ‘reserve fund of purchasing power’, formation of which is a necessary consequence of money’s function as means of payment, i.e. as medium of circulation. With the expansion of credit transactions and of the payment function of money, the commodity producer must also gradually accumulate sums needed to pay his debts at the appointed time. A ‘reserve fund of means of payment’ emerges, based upon money’s function as means of payment. Both reserve funds (for purchasing and for payment) constitute a hoard or ‘monetary reserve fund’, as distinct from the previously mentioned ‘reserve fund of coin’?76}

Until now we have assumed that the money temporarily withdrawn from circulation as a reserve fund must at some definite time be returned to circu­lation. In other words, we have assumed that ultimately all money received by commodity producers from the sale of products is spent on the purchase of other products. It is possible, however, that the commodity producer will keep a part of this money with the intention of not returning it to circulation. In that case we are dealing not with a temporary interruption (very brief in the case of a reserve fund of coin and somewhat longer in the case of a reserve fund of money) between the acts c-M and M-C; instead, the whole circulation ends with the act C-M, which is not followed by the second act of purchase, M-C. The money received from sale C-M is transformed into a hoard, which we can distinguish from a reserve fund of money by designating it as an ‘accumulating hoard’. And this is the accumulation of a hoard in the precise277 sense of the word.

Now let us consider which technical and social conditions of production per­mit such accumulation of hoards as a more or less continuous phenomenon. In order for the commodity producer to retain part of the money received from sale of products as an accumulating hoard, it is necessary that the receipts leave him with a certain surplus beyond the sums required for the purchase of means of consumption and means of production. The commodity produ­cer cannot curtail purchase of means of production, since the inevitable con­sequence will be reduction of the scale of future production and consequently a decline of future receipts, or revenues. True, the commodity producer may curtail his personal requirements and reduce expenditure on the purchase of means of consumption. Such curtailment of personal consumption is, in fact, widely practised in a peasant and handicraft economy, although it is confined, of course, within narrow limits. Most often ‘economy’ in personal consump­tion, which characterises the first stage of accumulating a hoard in the pre­capitalist epoch, consists not so much of curtailing personal consumption as of avoiding its expansion, which may be possible with the given level of develop­ment of the productive forces. The commodity producer’s labour productivity has already reached such a level of development that the selling price of his products leaves a surplus to cover expenditures on the purchase of customary consumer items and of the necessary means of production. The technical con­ditions of production admit, therefore, of the possibility of expanding personal consumption, but the social form of the production process, namely, develop­ment of monetary exchange and of the ‘social power’ of money, persuade the commodity producer to retain this money in the form of a hoard. Accordingly, the supportive conditions for accumulation of a hoard in the primitive form that we have been describing are: a certain level of development of labour productivity and the development of money as the ‘absolutely social form of wealth which is always ready to be used’^{[1454] [1455] and which, for that reason, is always attractive to the commodity owner. Thanks to the first condition, the commod­ity producer acquires a certain monetary surplus after selling his products and covering the necessary expenses, while the second condition persuades him to avoid spending this surplus on increasing his personal consumption; the result is that the monetary surplus is retained in the form of an ‘accumulating hoard’. The accumulation of a hoard, becoming a permanent feature, indicates that the economy of the given commodity producer has already outgrown the lim­its dictated by the need to satisfy his personal requirements and those of his family. ‘The accumulation of money for the sake of money is in fact the bar­baric form of production for the sake of production, i.e., the development of the productive powers of social labour beyond the limits of customary require­ments'?79}

In capitalist society, the accumulation of hoards is transformed into the accumulation of capital, and its character completely changes. As in the case of the person accumulating a hoard, the capitalist does not spend the surplus revenue (or spends very little of it) on expanding personal consumption, but instead he ‘accumulates’ (this is the so-called ‘accumulating part of surplus value', as distinct from the part being ‘consumed’). But unlike the accumulator of a hoard, he puts this additional money to work rather than withdrawing it from circulation: he either expands his own production, i.e. purchases new means of production and more labour power, or else he lends the money, usu­ally through the mediation of a bank, to other capitalists for expansion of their production. Even for the brief interval of time during which this money is not at work, he does not keep it to himself but places it in a current account at the bank, receiving a corresponding payment of interest. A modern banking sys­tem makes it possible for the capitalist to retain the ‘social power’ that money represents (namely, the possibility of entering at any moment, as an active par­ticipant, into the production relation of exchange) without keeping his money to himself. The capitalist concentrates in his own hands the social ‘power of money’ without retaining in his own possession the things that in themselves have the properties of money. But, at primitive stages of development, concen­tration of the social ‘power of money’ in the hands of individual commodity producers - as with the ‘reification’ of production relations between people that is inherent in commodity economy - is possible only in the form of a real concentration of things, of money (as gold). ‘To the simple owner of commod­ities among the barbarians, and even to the peasant of Western Europe, value is inseparable from the value-form, hence an increase in his hoard of gold and silver is an increase in value’.^{[1456] [1457] The item being accumulated is, so to speak, ‘money in kind’, in the form of gold and silver coins or bars that can be trans­formed into coins. The habit of burying money in the ground is widespread in the East∕8i while in Europe money was hidden in ‘cash-boxes’, ‘stockings’, etc. This primitive form of accumulating a hoard was widespread during the pre-capitalist period and the early stages of the capitalist period, and it is still encountered in petty-bourgeois circles, particularly among the peasantry.}

Along with the accumulation of a hoard in the form of coins and bars, there is also the accumulation of ‘a hoard in aesthetic form’, in the form of gold and silver commodities as concrete items of consumption and luxury (vessels, adornments, etc.). The fact that these items are made from the same material that serves as money distinguishes them from other items of consumption. Although in their direct form they are concrete items of consumption, in the first place they can at any moment be converted into money, and secondly, their utilisation as use-values serves as the most flamboyant and demonstrative indicator of the social power of money that is concentrated in the hands of their owner. ‘Although at certain stages of production the commodity owner hides his treasures, he is impelled to show to other commodity owners that he is a rico hombre, whenever he can safely do so. He bedecks himself and his house with gold’.^{[1458] [1459] [1460] Whereas in peasant and petty-bourgeois contexts one often encounters ‘avaricious’ types, who gather their hoards brick by brick at the cost of denying their own necessities, at further stages of the bourgeoisie’s development there are expenditures on items of luxury. In tranquil times, their own norms of luxury emerge among circles of the middle bourgeoisie: it is shameful to have fewer gold items than is customary in the given social circle, but it is also shameful to flaunt an excess of luxury items that clearly does not correspond to the material status of the particular family. To exceed the norm dramatically converts use of precious things from a form of collecting a hoard into an indicator of the misappropriation of cash, into ‘prodigality’ and ‘extravagance’. Such excessive use of luxury items is usually widespread among circles of the bourgeoisie who are rapidly becoming rich, among the upstarts of the ‘nouveaux riches’. If the small and middle bourgeoisie, at the turning point from feudalism to capitalism, lead a ‘puritan’283 way of life and sharply condemn the feudal nobility for prodigality and extravagance, the upper bourgeoisie, who are rapidly becoming wealthy, endeavour to eclipse them [the nobles] with the splendour of their own way of life.284}

The gold that is withdrawn from circulation in one form or another (a reserve fund of coin, a reserve fund of money, an accumulating hoard or a hoard in aes­thetic form), is not separated by an insurmountable boundary from the gold that circulates. Gold routinely moves from the sphere of circulation into the form of a hoard and back again. If the two processes balance each other, the quantitative relation between circulating gold and the hoards remains con­stant. If the circulation sphere requires more gold - due, for example, to an increase in the commodity turnover or a rise in commodity prices - then a por­tion of the gold flows from the form of a hoard into the sphere of circulation. Conversely, i.e. when the opposite conditions prevail, there is an increase of the hoard. Thus, the hoard fulfils the role of a reservoir from which the sphere of cir­culation acquires any additional quantity of money it needs and into which it discards any excessive quantity of money. The quantity of money in circulation thereby adjusts to the needs of commodity circulation, and money circula­tion ‘never overflows’ its banks.^{[1461] [1462] With a metallic circulation, the quantity of money in circulation is automatically regulated by the spontaneous mechan­ism of money circulation.}

The link between hoards and the sphere of circulation differs, however, for different portions of the gold that is withdrawn from circulation. The reserve fund of coin flows continuously into circulation and, properly speaking, can be regarded as being constantly in the sphere of circulation. The money reserve fund flows into circulation at times determined by its character and purpose (for example, when a machine wears out or a payment falls due). An accu­mulating hoard (in a capitalist society, bank reserves) partially flows into the sphere of circulation, usually at moments when the latter has an increased need for money, for example, at moments when the conjuncture reaches its peak, when the quantity of circulating commodities increases at the same time as their prices rise. And finally, the most remote and weakest link connects the sphere of circulation with a hoard in aesthetic form, i.e. with gold and sil­ver commodities. It is only in periods of social storms, wars, revolutions and so forth that such items of luxury are transformed into money in significant amounts.286

The passage of gold from the form of a hoard into the sphere of circulation and back signifies an alteration of its social function or form, even though in most cases its natural form remains constant. The same gold coins can serve today as medium of circulation, tomorrow as a reserve fund, and subsequently as an accumulating hoard. Insofar as the latter consists not of coin but of gold and silver bars, they can enter, in the same form of bars, into the sphere of international circulation, or they can just as easily be minted again into coin to meet the needs of domestic circulation. Likewise, gold and silver commodities can easily be minted, if necessary, into coin. This ability of the precious metals to pass from the form of coin into the form of bars, and from the latter into the form of luxury items and back again - makes them the material most highly suited to fulfil the function of ‘money, which must constantly change from one form into another’.^{[1463] [1464] [1465]}

Marx’s conclusions regarding the function of money as a hoard refer mainly to the primitive form of accumulating a hoard, which corresponds to the conditions of simple commodity economy. For that reason they provide us with comparatively little material for understanding the economic functions and character of a hoard in conditions of a capitalist economy, with its highly developed and extremely complex credit system. But, on the other hand, these conclusions from Marx do provide us with extremely interesting sociological material that often escapes attention and, for that reason, requires that we consider it in more detail.

Earlier, in the chapter on the medium of circulation, we saw that money fulfils a determinate function (medium of circulation) only in the presence of certain production relations between commodity owners (who are altern­ately fulfilling the roles of seller and buyer) and a certain form of commodity circulation (the circuit c-M-c). Now we must show the same link between vari­ous social phenomena (the production relations between people, the forms of commodity circulation, and the functions or forms of money) in the case of money’s function as a hoard. We have already noted above that money is transformed into a hoard ‘because the metamorphosis of the commodity was interrupted’ and ‘a sale is not immediately turned into a purchase'.288 A dis­ruption occurs between c-M and M-c, and the very character of commodity circulation changes as a consequence. ‘The money is petrified into a hoard, and the seller of commodities becomes a hoarder ofmoney^,.289 What we see is the process of a simultaneous and parallel change in the social character of people, commodities and money. Let us consider what this change in the production relations between people entails, i.e. what it is that distinguishes the position of the accumulator of a hoard in the social production process from the posi­tion of the commodity owner who is not accumulating a hoard.

Money’s function as medium of circulation, in an uninterrupted circuit of c-M-c, assumed that each private establishment buys products with the full sum of money for which it previously sold its own products, i.e. equilibrium was assumed between the production and consumption of each private under­taking. Accumulation of a hoard by a given commodity owner begins precisely when the equilibrium between his production and consumption is disrupted, when the former exceeds the latter, when more commodities are thrown into circulation (i.e. for a greater sum of exchange-value or money) than are drawn from it in the form of commodities, and the entire difference is removed from circulation in the form of money and preserved as a hoard. ‘The owner of commodities who has now become a hoarder of money must sell as much as possible and buy as little as possible’.^{[1466] [1467] [1468] [1469] The surplus of production over consumption means a change in the position occupied by the given private establishment in the total social production process; a change of the quantitat­ive relationship between sellers and buyers means a qualitative change of the production relations that connect the given commodity owner with the others.}

Thus, when the collector of a hoard sells his commodity^¹ this act of sale, c-M, appears externally to be no different from similar acts of sale being com­pleted by the commodity owners who are not accumulating a hoard. But there is an essential and profound difference between them. The commodity owner, as participant in the circuit c-M-c, sells his production, which later he con­sumes in changed form292 (i.e. after selling it and buying means of consump­tion and means of production with the money received), and thus after the social role of seller he fulfils the role of buyer. The collector of a hoard sells the commodity for a sum that creates an excess of his production over con­sumption; he acts one-sidedly in the social role of seller and simultaneously as the collector of a hoards³ The act of sale c-M, occurring in isolation, differs from the act of sale c-M as part of the uninterrupted circuit c-M-c, not only in terms of its origin and objective result but also in terms of its subjective motive. In the circuit c-M-c, sale occurs precisely for the sake of the ensuing purchase, and thus its goal is to replace one use-value c₁, by means of the money M, with another use-value c2. The final goal of the circuit c-M-c lies in consump­tion. With the accumulation of a hoard, sale c-M occurs not with the goal of acquiring money for purchasing, but exclusively in order to convert c into M, to acquire its money equivalent in place of the commodity. ‘Commodities are sold not in order to buy commodities, but in order to replace their commodity-form by their money-form. Instead of being merely a way of mediating the metabolic process [Stoffwechsel], this change of form becomes an end in itself’.^{[1470] [1471] As we see, the transformation of money from medium of circulation into a hoard presupposes an entire complex of social phenomena involving a simultaneous and parallel change of the relation between production and consumption, of the production relations between commodity owners, of the driving motives behind exchange, of the forms of commodity circulation, and of the functions or forms of money.}

At first sight, it may appear that the final cause of the move from circuit c-M- c to the accumulation of a hoard is a change in the driving motives of the com­modity producer who is participating in the exchange. Such an understanding, which searches for the final cause of a change of economic phenomena in the psyche of an individual economic actor, could not be more foreign to Marx. True to the method of historical materialism, Marx strongly emphasises in this case that the very fact of appearance among the actors in exchange of a new type of economic motivation is the result of a change that has occurred in the production relations between people. The endeavour to convert the commod­ity into money can become an autonomous motive of exchange only provided that there has already been a detachment of the money-form of the product from its commodity-form; that is, if commodity owners, through their activit­ies, have already assigned to one commodity the character of money, which has the capacity for universal and direct exchangeability.

The passion for enrichment by contrast with the urge to acquire particular material wealth, i.e., use-values, such as clothes, jewellery, herds of cattle, etc., becomes possible only when general wealth as such is represented by a specific thing and can thus be retained as a particular commodity. Money therefore appears both as the object and the source of the desire for riches.29⁵

If the passion for enrichment is already the result of money’s appearance, then conversely the latter necessarily gives birth to a new driving motive for exchange, the endeavour to exchange the commodity for money with the aim of accumulating a hoard. ‘When the circulation of commodities first develops, there also develops the necessity and the passionate endeavour to hold fast to the product of the first metamorphosis. This product is the transformed shape of the commodity, or its gold chrysalis’.^[1472] ‘With the possibility of keeping hold of the commodity as exchange-value, or exchange-value as a commodity, the lust for gold awakens’?^[1473] ‘The simple fact that the commodity-owner is able to retain his commodities in the form of exchange-value, or to retain the exchange-value as commodities, makes the exchange of commodities, in order to recover them transformed into gold, the specific motive of circulation’^^{[1474] [1475]} New economic ‘facts’ give birth to new economic ‘motives’, and the social activity of commodity producers, which results in the appearance of money, also calls to life a new type of economic motivation.

This new type of economic motivation consists of the fact that the commod­ity owner already enters into exchange not with the goal of acquiring ‘subsist­ence’, or replacing one use-value with another as in the circuit c-M-c, but with the goal of acquiring and retaining the money-form of his commodity. His only wish is to complete the ‘change of form’, more precisely, to give his product a different social form (the money-form) and himself a different social charac­ter, the character of subject of ‘the social power of money’, with the ability to appear at any moment as the active participant in the production relations of exchange. The accumulation of a hoard effects the first breach in simple com­modity (handicraft and peasant) economy, which is based upon ‘the idea of subsistence’. The goal of economic activity becomes exchange-value in itself, not as a means for acquiring use-value. ‘The underlying reason is the fact that exchange-value as such becomes the goal, and consequently also an expan­sion of exchange-value’.299 This drive to multiply exchange-value is common both to the collector of a hoard and to the capitalist.^[1476] But there is a profound difference between them. The latter, in the presence of a developed capitalist economy, and particularly of a class of wage-workers, has the ability to increase his value, throwing it into circulation. The formula for the movement of cap­ital is M-c-s-(M+m), i.e. the ‘self-expansion’ of value in the process of circulation (which includes the process of production). In the pre-capitalist epoch, the col­lector of a hoard has only one, quite different way to multiply exchange-value: to repeat the act of sale c₁-M₁, C2-M2, C3-M3 etc., retaining sums of money in his own hands and gradually adding one to another. In place of the ‘self-expansion’ of value, here only its ‘accumulation’ is possible in the literal sense of the word, i.e. the accumulation or addition of one sum to another: M1+M2+M3 and so forth. Whereas the capitalist throws money into circulation, the collector of a hoard ‘rescues’ it from circulation, keeping it to himself and preventing it from fulfilling the function of medium of circulation.

Does this not mean that the money, as a hoard, fulfils no social function at all, that the hoarding of money, especially in the form of burying it in the ground, tears it from the network of social ties and represents the complete, even if temporary, cessation of its social functions? There are some economists who suggest that a hoard fulfils a special ‘economic function’ only from the moment when it is put out by its owner as a loan to another person,^{[1477] [1478] [1479] [1480] [1481] [1482] but not during the time when it is withdrawn from circulation. Marx foresaw this doubt and responded to it. His attention, as always, was focused not on the gold buried in the ground but on the social production relation of which it is the carrier. ‘If the hoard were not constantly in tension with circulation, it would now simply be a heap of useless metal, its monetary soul would have disappeared and nothing but burnt-out ashes of circulation, its caput mortuum, would remain’^2 Marx’s idea, expressed in a metaphorical way, only becomes understandable in light of his teaching on the social production relations between people. These social relations constitute the ‘soul’ of things, without which they become ‘burnt­out ashes’, a ‘body’ without ‘a social nervus rerum,.303 In commodity economy a ‘social power’, consisting of the ability to establish production relations of exchange, belongs to the individual as owner of ‘an external object capable of becoming the private property of an individual. Thus the social power becomes the private power of private persons’.304 It is precisely in order to concentrate in his own hands this social power of commodity owners that he wrests gold from its social ties in the process of circulation. Social wealth ‘is turned into an imperishable subterranean hoard with an entirely furtive private relation­ship to the commodity-owner’.305 ‘The social connection, in its compact (com­pacted) form - for the commodity owner this connection consists of the com­modity, and the adequate form of the commodity is money - is withheld from the social movement’^6 By burying a hoard in the ground, however, its pos­sessor does not tear himself from the network of social ties that connect him with the entire society of commodity producers. Denying essentials to himself, and following an anchorite’s[1483] [1484] [1485] [1486] [1487] way of life, he is by no means an anchorite who has fled into the desert to avoid people. Gold’s possessor, even when it is buried in the ground, does not cease to be possessor of the social power of which it is the carrier. This power remains a potential, and with the onset of favourable conditions it actively appears: the collector of the hoard then turns into the moneylender, the merchant or the industrial capitalist. But even before that happens - and despite all his seemingly asocial character - he in fact represents a certain definite social type. He acquires his hoard by means of certain social activities, namely, through a series of repeated acts of sale that are not comple­mented by acts of purchase^8 He endlessly strives to repeat these activities. The words we have quoted from Marx - saying that the hoard is ‘constantly in tension with circulation’ - refer, of course, to the collector of the hoard. The hoard itself can be buried in the ground, but ‘its monetary soul’ and constant ‘tension with circulation’309 continue to live in its possessor as the striving con­stantly to repeat the acts of sale and accumulation.}

Marx also derives this tendency of accumulation, its repetitiousness or ‘unlimited character’, from the social nature of money as the object of accu­mulation.

Qualitatively or formally considered, money is independent of all limits, that is, it is the universal representative of material wealth because it is directly convertible into any other commodity. But at the same time every actual sum of money is limited in amount, and therefore has only a limited efficacy as a means of purchase. This contradiction between the quantitative limitation and the qualitative lack of limitation of money keeps driving the hoarder back to his Sisyphean task: accumulation.31o

‘The formation of hoards, therefore, has no intrinsic limits, no bounds in itself, but is an unending process, each particular result of which provides an impulse for a new beginning’?¹¹ The social nature of money, as the universal equivalent, not only calls to life the accumulation of money as a new compelling motive of exchange but also continuously sustains the activity resulting from this motive. It creates the tendency towards repeated acts of accumulation and the intensification of its motives. Repetition and intensification of a particular type of economic motivation leaves its imprint on the entire psyche of the hoarder. Repeated acts of accumulation make their subject into a definite social type or economic character.

Marx devotes a few lines to portraying the psychology of the hoarder, which is replete with contradictions and has often been described in literature. The collector of a hoard ‘cares for wealth only in its social form, and accordingly he hides it away from society. He wants commodities in a form in which they can always circulate, and he therefore withdraws them from circulation. He adores exchange-value, and he consequently refrains from exchange’.^{[1488] [1489] [1490] [1491] At the basis of this contradiction lies the contradiction between the ‘functional’ and the ‘material’ existence of money, between the social production relation and the thing that is their carrier: the need to retain the thing in his ‘private’ possession, in order to have the ability to act as the subject of ‘social’ relations, is what gives the accumulation of hoards its character founded upon contradictions.}

The repetitiveness of the acts of accumulation and their inherent driv­ing motives make their subject into a definite social-economic type. In this respect, the social role of the hoarder differs from the social role of the ordin­ary commodity owner who participates in the circuit c-M-c. The buyer or seller in the circuit c-M-c completes a definite ‘social act’ or fulfils an ‘eco­nomic function’.3i3 But fulfilling this sort of function (for example, that of the seller) already presupposes the need for the same person to fulfil the opposing function (i.e. of the buyer). Each person alternately fulfils different functions. ‘Consequently, buying and selling are not functions that are fixed, but func­tions that are constantly changing in the process of commodity circulation in terms of the people who fulfil them’^3M As distinct from ‘transient’ roles that ‘are played alternately by the same actors’ in circulation, there are economic roles that are ‘capable of a more rigid crystallisation’^⁵ i.e. they become affixed to separate individuals, as their special economic function, and they make a per­manent impression upon them. In one of our opening chapters, we showed that the opposition between buyer and seller represents the first, rudimentary form of social differentiation between commodity producers. But that was only a dif­ferentiation of economic functions, without any differentiation of individuals, since every commodity owner briefly and alternately fulfilled both functions. But insofar as an economic function creates a tendency towards repetition of a specific kind of actions and the exclusion of opposing ones, it makes the given subject into a definite social-economic type. And precisely such capacity for crystallisation is especially marked in the accumulation of a hoard, with its tendency to affix a definite type of economic motivation and to involve repe­tition of particular activities. Thus, accumulation of a hoard creates the ‘pro­fessional hoarder', and the differentiation of economic functions becomes fixed as the dif'erentiation of individuals. A given production relation of commod­ity owners - or what is the same thing, their social activity - in creating the conditions for its continuous reproduction and repetition by one and the same individuals, makes a certain imprint both on the individual engaging in the activity and on the things that figure as the links connecting the individuals. Accumulation of a hoard, as a series of repeated actions, becomes ‘fixed' or ‘crystallised': 1) in the function of money as a hoard and 2) in the social type of the hoarder, with his characteristic mental disposition. The social character of people's activities determines the social type of the people involved and of their mentality, on the one hand, and the social form of things on the other. The differentiation of economic functions (i.e. of production relations) leads to differentiation of the economic characters of people on the one hand, and of material economic categories on the other. The transformation of the simple commodity producer into the collector of a hoard represents the first step on the road from a society of equal commodity producers towards a capitalist society, with its profound differentiation of individuals expressed in the class division of society.

The passage from the ‘transitory role' of buyer or seller to the ‘crystallised' role of collector of a hoard has an interesting parallel in the passage from the ‘transitory' function of money, as medium of circulation, to its ‘congealed' or ‘crystallised' function as a hoard. Marx makes a precise distinction between ‘money in its fluid form' and money ‘as a crystalline product of circulation'.^{[1492] [1493]} To the first belongs the medium of circulation; to the latter, a hoard as well as means of payment. To clarify the difference between them, Marx often reverts to figuratively comparing them with the process of crystallisation and with the general processes of a substance's transition from a liquid to a solid state. The medium of circulation stands opposed to a hoard, as the ‘liquid form of wealth' does to its ‘petrification'^⁷ ‘In order for money to flow constantly in the form of coin, coin must constantly congeal^[1494] in the form of money’.^[1495] ‘The medium of circulation solidified (erstarrt) as money’^[1496] The passage of the medium of circulation into a hoard is characterised as ‘solidification’ (Erstarrung); the hoard, in the return passage into circulation, ‘streams’ (ergiessen).32i Of course, in this case all of these comparisons occur to Marx because of a single fact - that gold, as medium of circulation, really does move or ‘flow’, while as a hoard, as the primitive form of accumulation, it actually lies idle and ‘solidifies’. But we must not fail to notice that Marx uses the same comparisons in cases where there can be no talk of any real immobilisation of one or another real thing. For him, ‘crystallisation’ most often means the enduring affixation to a thing of a determinate social form, or to an individual, of a determinate social character. Consequently, we must conclude that Marx designates the medium of circulation as the ‘fluid’ form of money not only because the thing that fulfils this function really does move, but also because the corresponding economic functions of sale or purchase have a ‘transitory’ character, being fulfilled briefly and alternately by different individuals³22 A hoard is designated as one of the ‘frozen’ and ‘crystallised’ forms of money not simply because it lies immobile in the ground or in a cash-box, but also because the corresponding economic function of collecting a hoard has a tendency to ‘become crystallised’, or affixed over a long period, to a particular individual. And here, as elsewhere in the Marxist system, a difference in the social form of things reflects a difference in the social production relations between people.