Tuesday, 10 February 2015

Capital II, Chapter 20 - Part 52

The capitalists who produce money commodities, like gold and silver, only throw commodities into circulation to the extent to which these commodities are used as constant capital by other capitalists. Otherwise, they throw money directly into circulation, and withdraw commodities from it.

“On the one hand all kinds of things circulate as commodities which were not produced during the given year, such as land lots, houses, etc.; furthermore goods whose period of production exceeds one year, such as cattle, timber, wine, etc. For this and other phenomena it is important to establish that aside from the quantity of money required for the immediate circulation there is always a certain quantity in a latent non-functioning state which may start functioning if the impulse is given. Furthermore, the value of such products circulates often piecemeal and gradually, like the value of houses in the rents over a number of years. 

On the other hand not all movements of the process of reproduction are effected through the circulation of money. The entire process of production, once its elements have been procured, is excluded from circulation. All products which the producer himself consumes directly, whether individually or productively, are also excluded. Under this head comes also the feeding of agricultural labourers in kind.” (p 481-2)

So, the money required to circulate commodities within the economy does not itself have to be produced during the current year. It already exists, and has been accumulated over long periods. The only gold produced, during the current year, that might be required, to meet the needs of circulation, is that required to replace worn out coins.

This, of course, is premised upon money being exclusively in the form of precious metals. Marx obviously had no delusions about that assumption, but there was a good reason for basing his analysis upon it, which is that although an analysis of paper money and credit money is necessary, the reality is that the fundamental laws are grounded upon the relations outlined above.

“This assumption is not made from mere considerations of method, although these are important enough, as demonstrated by the fact that Tooke and his school, as well as their opponents, were continually compelled in their controversies concerning the circulation of bank-notes to revert to the hypothesis of a purely metallic circulation. They were forced to do so post festum and did so very superficially, which was unavoidable, because the point of departure in their analysis thus played merely the role of an incidental point.” (p 482)

But also, Marx continues, under capitalism, money plays a prominent role, because it is the form in which variable capital is advanced. Actually, today this too is not strictly true. In Marx's time, and until quite recently, workers would have been paid their wages in actual money – though more recently in paper money tokens as opposed to coin. But, today, most workers are paid by bank transfer. Workers in turn pay many of their bills by similar means, so the actual transformation of labour-power into money, and money into commodities is effected without the same intervention of real money.

The use of money to buy wage labour, however, is quite the opposite of the situation under previous modes of production, Marx explains. For example, under slavery, the slave occupies the same position as fixed, constant capital does under capitalism. A large, single sum is paid out to buy the slave, whose value is transferred, through wear and tear, to the end product, and thereby recovered only gradually.

Once the basis of the annual flows of funds is understood, and established this then gives “rise to a methodical use of the mechanical appliances of the credit system and to a real fishing out of available loanable capitals.” (p 484)

Those flows of money, Marx lists as arising from the “exchange of the annual products” discussed above; the lump sum advances for fixed capital; the natural formation of money hoards, arising from the needs of circulation, due to a range of factors such as the varying lengths of production period, the different times money must be advanced to cover trade over varying distances, the different size of supply required by different businesses etc.

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