Greece and the Money Myth - Part 3

In Part 2, it was indicated how money acts to obscure what are relations between human beings, turning them instead into relations between things. In the first instance, the workers gave the employers 1 billion hours of their labour-time, by working for five days, 200 million hours per day. In return, the employers have given the workers commodities with a value of 800 million hours of labour-time. This seems to be an unequal exchange, and viewed in this way it is. The employers have obtained 200 million hours of labour-time for which they have paid nothing. It is represented by a surplus product, which constitutes 20% of the total product.

However, viewed purely in terms of the laws of commodity exchange, it is not unequal. The workers sold to the employers a commodity, labour-power, whose value is equal to 800 million hours of labour-time, i.e. that is how much labour-time is required to produce it. In exchange for that commodity they were given 800 million hours of value in commodities. So equal values were exchanged.

The reason the workers provide the additional 200 hours of labour-time for free, is because they have no choice. The workers, to work, have to have factories to work in, machines to work with and materials to process. They own none of those things. They are all owned by the employers as are the other things the workers require, the food to eat, the property to live in and so on.

In order to obtain any of the latter, the workers must work, but to work they must be allowed to use the means of production in the hands of the employers, and so the employers say, “We will allow you to use our means of production on condition that you work for free for a part of the day.”

The real issue facing Greece, therefore, should not be whether there are enough Euro notes and coins in existence to make payments, but whether, in the relations described above, there is adequate capital. That is the situation described above can continue so long as, of the 1 billion hours of labour expended by workers, only 800 million hours are required for their reproduction. That can be seen quite easily again in the example of the kind of situation that the Physiocrats described of the agricultural worker.

Suppose the agricultural worker produces the quantity of food they require for their own subsistence in 4 days, as above. They work for 5 days, as above, so that a surplus product/value equal to 1 day (20%) is produced. However, suppose there is a crop failure. The workers continue to work for 5 days, as before, and so, as before, create 5 days of new value. But, the workers still require the same quantity of food as they did previously for their subsistence. As Marx makes clear their subsistence needs are a function of use value not value. Suppose, now then that after the crop failure, it takes 6 days rather than 4 to produce the food they require.

In that case, although they continue to produce 5 days of new value, the value of their labour-power has risen to 6 days, because that is what is now required to reproduce it. Instead of producing a surplus value, therefore, they produce a loss of 1 day. In order for the worker's labour-power to be reproduced out of current production, not only would the capitalist have to give up their surplus value, but they would have to make up the deficit out of their capital. This can be seen in those instances in poor countries where such crop failures do occur, where the seed that should have replaced that used in production, is instead consumed, thereby leading to a contraction of capital and output.

As this example shows, money itself is an actual irrelevance. It is merely an equivalent form of value, acting as nothing more than a physical visible representation and measure of these different components of value. Whether the means of production and labour-power consumed in the production process have or have not acted as capital, i.e. whether they have resulted in the production of a surplus value, has absolutely nothing to do with money, whether that money takes the form of a money commodity, such as gold or silver, or takes the form of money tokens, such as Euros, or the form of credit money.

It comes down only to the question of whether the new value created by labour is greater than the value of the labour-power that created it. To allow a money fetish to get in the way of this understanding, is as Marx says, ridiculous.

As Marx describes, in 1847, a severe crisis occurred because the 1844 Bank Act limited the amount of Bank of England banknotes put into circulation by the amount of gold reserves in the country. So, at the very moment the country needed additional liquidity put into circulation, the Bank Act curtailed it, creating a credit crunch, from which followed a 37% economic contraction.

As Marx put it, the bankers, in order to defend a nominal value of paper notes, and the nominal wealth of the money lenders, created the destruction of millions of pounds of real capital and real wealth. To destroy millions of Euros of capital in Greece, for the sole purpose of protecting the nominal value of paper Euros, makes no more sense, and yet that is what the policy of austerity has done, in the last five years, as economic activity was shrunk by 25%.

The question for Greece comes down to a question of capital not money. In other words, are the means of production and labour-power acting as capital? But, in that case, why is so much being made of the shortage of money? Why are people queuing at cash machines to take out notes?

I will examine that in Part 4