Capital III, Chapter 30 - Part 3

Because the fluctuations in the value of shares can be affected by a whole range of factors – changes in interest rates, changes in market conditions, changes in investor sentiment – as well as the potential of future profits and dividends, trading in them becomes more simply a matter of gambling. Moreover, as part of this process, the ownership of the shares themselves becomes concentrated in fewer hands.

“In order to quickly settle this question, let us point out that one could also mean by the accumulation of money-capital the accumulation of wealth in the hands of bankers (money-lenders by profession), acting as middlemen between private money-capitalists on the one hand, and the state, communities, and reproducing borrowers on the other. For the entire vast extension of the credit system, and all credit in general, is exploited by them as their private capital. These fellows always possess capital and incomes in money-form or in direct claims on money. The accumulation of the wealth of this class may take place completely differently than actual accumulation, but it proves at any rate that this class pockets a good deal of the real accumulation.” (p 478)

All of these things, such as shares, bonds and other securities, are means of loaning money-capital. They are effectively a certificate saying that the money has been loaned. But, these certificates are not the loan capital itself. It has passed out of the hands of the lender and into the hands of the borrower, who may or may not use it to purchase real capital, but who will be charged interest on it as if they had anyway.

For a capitalist, who owns one of the securities, it cannot act for him as money-capital. He cannot use it to buy materials or labour-power, etc. If he wants to buy any of these things, what he actually needs is money. Consequently, if he needs money, and cannot get it any other way, he may use such securities as collateral to obtain a loan from a bank, or alternatively may sell them to obtain the money value they represent.

It is this loanable capital, the capital loaned out to businesses that Marx is now interested in, and its accumulation. The starting point is the commercial credit that firms provide to each other. In other words, when a business supplies goods and services to another firm, it invoices the buyer for this amount, with the terms for payment, which normally stipulate that the invoice should be paid within 30 days, 60 days, or 90 days etc. In effect, the buyer is being provided with credit to the value of the invoice, for the time in which they have to pay.

These payments, in Marx’s time, were often made by bills of exchange. These bills, which entitled the owner to collect the amount stipulated, could also be endorsed and used to pay debts run up by the owner. Or, if the owner needed cash, they could take the bill to the bank and have it discounted, i.e. obtain its value in cash, less an amount charged by the bank as interest, which was a more or less amount depending on how long the bank itself would have to wait to collect on the bill.

“To the extent that these bills of exchange circulate among the merchants themselves as means of payment again, by endorsement from one to another — without, however, the mediation of discounting — it is merely a transfer of the claim from A to B and does not change the picture in the least. It merely replaces one person by another. And even in this case, the liquidation can take place without the intervention of money.” (p 479)

Marx's analysis of the process of social reproduction,
based on the Tableau Economique, demonstrates that
these exchanges show that every commodity is money.
  In most cases, commodities are bought by commodities
by this process of exchange, and money only acts as
 means of circulation, being advanced only to flow back.
Money only acts to buy commodities, where they are
not bought by commodities, i.e. where it acts as means
of payment.  But, any piece of paper, such as a bill of
 exchange can fulfill that function of facilitating
 circulation.  It is only money fetishism that creates
the delusion that money has a more specific role.

In other words, if there is A, B and C, and B buys £10 of goods from A, whilst C buys £10 of goods from B, and A buys £10 of goods from C, they each draw up bills of exchange, which in total cancel each other out. So, no money is required. Only if the bills did not cancel each other, would money be required, and then only for the balance. What this relies on is that there is a return flow of capital. If at some point, in the chain, described above, the goods thrown on to the market are not sold, the capital consumed in their production does not flow back, and so the capital that should then have flowed back to cover previous payments cannot be made, so that a failure of payments takes place along the chain.

In fact, even if the goods are sold, a disruption may still occur.

“If the corn speculator has a bill of exchange drawn upon his agent, the agent can pay the money if the corn has been sold in the interim at the expected price. These payments, therefore, depend on the fluidity of reproduction, that is, the production and consumption processes. But since the credits are mutual, the solvency of one depends upon the solvency of another; for in drawing his bill of exchange, one may have counted either on the return flow of the capital in his own business or on the return flow of the capital in a third party’s business whose bill of exchange is due in the meantime.” (p 479-80)

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