Marx assumes
gold to be the money commodity throughout Capital for simplicity. He
writes,
“The
first chief function of money is to supply commodities with the
material for the expression of their values, or to represent their
values as magnitudes of the same denomination, qualitatively equal,
and quantitatively comparable. It thus serves as a universal
measure of value. And only by virtue of this function
does gold, the equivalent commodity par excellence,
become money.” (p 97)
But,
contrary to those who fetishise gold, and see in it the basis of
measuring the Value of commodities, he goes on,
“It is
not money that renders commodities commensurable. Just the contrary.
It is because all commodities, as values, are realised human labour,
and therefore commensurable, that their values can be measured by one
and the same special commodity, and the latter be converted into the
common measure of their values, i.e., into
money. Money as a measure of value, is the phenomenal form that must
of necessity be assumed by that measure of value which is immanent in
commodities, labour-time.” (p 97)
We have seen how Exchange Value goes through several historical and
logical stages until it reaches the point whereby all commodities can
be measured by one single universal equivalent – money.
“The
expression of the value of a commodity in gold — x
commodity A = y money-commodity — is its
money-form or price. A single equation, such as 1 ton of iron = 2
ounces of gold, now suffices to express the value of the iron in a
socially valid manner.” (p 97)
Expressing
the Value of any commodity, in terms of a certain amount of gold,
does not thereby require that amount of gold to be present for the
purpose. For this purpose, imaginary money equally performs the
function.
“When,
therefore, money serves as a measure of value; it is employed only as
imaginary or ideal money.” (p 99)
But, to serve the function of money, this ideal money must have the
same attributes as the actual money commodity i.e. it must be a
representative of the same Value, the same amount of labour-time.
During some periods, there have been two money commodities operating
side by side e.g. Gold and Silver.
“If,
therefore, two different commodities, such as gold and silver, are
simultaneously measures of value, all commodities have two prices —
one a gold-price, the other a silver-price. These exist quietly side
by side, so long as the ratio of the value of silver to that of gold
remains unchanged, say, at 15:1. Every change in their ratio disturbs
the ratio which exists between the gold-prices and the silver-prices
of commodities, and thus proves, by facts, that a double standard of
value is inconsistent with the functions of a standard.” (p 99)
As Marx
points out, where attempts were made by law to fix the relation
between these two money commodities, it always failed, because the
labour-time required for the production of each, and therefore, their
Value constantly changed. So, the commodity that was undervalued
ended up being withdrawn from circulation, melted down and exported.
“The
result of all experience and history with regard to this equation is
simply that, where two commodities perform by law the functions of a
measure of value, in practice one alone maintains that position.”
(note 2 pp 99-100)
Different
amounts of different commodities can all be expressed as varying
amounts of gold. For example, 1 coat – 1 oz. Gold, 100 yards of
linen = 2 oz. Gold etc. These standard measures of weight of gold
and silver then give their names to the standard units of money. For
example, a Pound Sterling was originally 1 lb. of Sterling Silver.
Over time these units become divorced from their origins, as we shall
see later.
There are
two distinct functions of money that are in conflict. Money acts as
a measure of Value only because it comes to represent labour-time.
But, as a standard of price, for example, a Pound, it is preferable
that as far as possible this standard, this unit of measurement,
should be as fixed as possible – just as we want a 'foot ruler' to
be the same length as another, and not to vary over time or
conditions. But, it is precisely because the money commodity, as
itself the product of labour, is able to represent labour-time, that
means its own Value is constantly changing.
As a
standard of price, these changes do not affect its function, because
however its Value changes, 10 oz. gold are still worth 10 times what
1 oz. is worth. Nor does the change in the Value of the gold
interfere with its function as measure of Value, because the change
affects its relation to all commodities in the same proportion.
What, of course it does change, is the amount of gold that now
exchanges for these commodities. So, if the Value of gold falls,
more gold will have to be exchanged for all commodities i.e. money
prices will rise.
“A
general rise in the prices of commodities can result only, either
from a rise in their values — the value of money remaining constant
— or from a fall in the value of money, the values of commodities
remaining constant.” (p 101)
The same is
true in reverse for a general fall in prices. If the Value of Money
falls, but the Value of commodities falls in the same proportion
money prices remain the same, and vice versa.
Later in
Capital, Marx describes one of the important consequences of this in
the development of Capitalism in Britain. As a consequence of new
gold discoveries the Value of Gold fell, and the prices of
agricultural products rose. This meant that capitalist farmers
incomes rose. However, their rents had been fixed with Landlords for
leases running several years. Higher money incomes and constant
money rents, meant that Capitalist farmers were able to accumulate
Capital, an important factor in what Marx calls Primary Accumulation In fact, because the landlords had to pay the
higher money prices for commodities, whilst their money rents
remained constant, the fall in the value of gold money, resulted in a
transfer of wealth from Landlords to Capitalist farmers.
Marx
describes the process by which the names originally given to the
units of money becomes separated from their actual weights. For
example, foreign units of money become imported. Various rulers
debase the currency by clipping amounts of gold or silver from the
coins so that although it retains the same name, over time it comes
to represent an actual smaller weight. As societies become more
wealthy, they move to more valuable metals. So, Britain originally
used silver but moved to gold. The Pound Sterling was retained as
the standard unit of money, but became equated with gold of a
fifteenth the weight, because that was the Exchange Value of silver
in gold. As the relative values of gold and silver diverged the more
a Pound became separated from its origin as a pound of silver.
The various
subdivisions of the standard of money, for example, “Crown”,
“Half-Crown”, “Florin”, “Shilling”, “Penny”,
“Farthing”, are defined by law even though initially they may
take the form of metal themselves such as silver and copper, whose
Value continually changes. Now the prices of commodities become
described not as certain weights of gold and silver, but as a certain
amount of these coins.
“Hence,
instead of saying: A quarter of wheat is worth an ounce of gold; we
say, it is worth £3 17s. 10 1/2d. In this way commodities express by
their prices how much they are worth, and money serves as money
of account whenever it is a question of fixing the value
of an article in its money-form.” (p 103)
NB. A
couple of years ago, as copper prices rose sharply due to the global
economic boom, the value of the copper content of certain 2p coins
rose to be higher than the face value of the coin. If my memory is
correct, a ton of these coins would net you a £2,500 Capital Gain,
when melted down, over their face value!
Through
these money names that have lost all connection to the commodities
they originally represented, so the value relation between
commodities and money becomes hidden.
Although,
the Value of a commodity is expressed as a certain amount of money
i.e. a money price, it does not follow that a money price necessarily
reflects the Value of a commodity. The Value of a commodity, as we
have seen, is determined by the labour-time required for its
production, say 10 hours. Ten hours may also represent 1 oz. of
gold, which may have the money name £1. However, prices can differ
from Values. Suppose the labour-time required for the production of
the commodity remains 10 hours. Its Value remains unaltered.
However, if there is a sudden rise in demand for the commodity, the
law of Supply and Demand will cause the market price to rise to say
£3. If demand falls then similarly the market price may fall to £1.
All the money name measures is the market price, not the Value of
the commodity.
In fact,
price can cease to represent Value. Many things which have no Value
can acquire a price. For example, unimproved land has no Value.
Like air it is provided free by Nature. It has required no human
labour to produce it – though human labour can be used to improve
it. But, over time, land has been appropriated and monopolised. The
owners of the land, thereby demand a price for its use in the form of
Rent, and place a price on the land for sale based on a
capitalisation of the rent i.e. they demand the equivalent of 20
years rent, as a single payment to buy it.
We can
imagine the Exchange Value of a commodity such as 100 yards of linen
as a certain amount of gold, but for the linen to actually be such an
exchange Value, it must be sold – converted into real gold. I
could not take the 100 yards of linen to someone and offer it for
payment, saying its worth an ounce of gold. They will want the
actual money, so I have to convert the linen into money.
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