Wednesday, 27 April 2016

Capital III, Chapter 32 - Part 11

Marx then turns to the question of how the development of credit-money affects the definition of money as the universal equivalent form of value. As he sets out in Capital I, value is labour, and the measure of value is labour-time. But, just as the measure of length cannot be based on actual human feet, because they are all different, but can only be based on an 'abstract' foot, so the measurement of value cannot be based on actual concrete labour, but can only be based on abstract labour.

But, this then begs the question – what is an hour of abstract labour? It is resolved in practice, by the continual measuring via the market, of the value of one commodity against another, and by this same process, therefore, the relation between complex and simple labour is also being continuously determined. But, as Marx says with the development of money, in the shape of a money-commodity, such as gold, the issue is resolved. The money-commodity becomes the representative of all commodities, the representative of value itself, and, therefore, the labour required for its production becomes the representative of abstract labour.

“It is a basic principle of capitalist production that money, as an independent form of value, stands in opposition to commodities, or that exchange-value must assume an independent form in money; and this is only possible when a definite commodity becomes the material whose value becomes a measure of all other commodities, so that it thus becomes the general commodity, the commodity par excellence — as distinguished from all other commodities.” (p 516)

But, the preceding analysis has demonstrated that capitalist development increasingly means the replacement of money with credit. The role of money, as means of circulation, continually declines, whereas the role of money as means of payment continually rises. But, where exchanges are conducted on this basis, i.e. the provision of credit, as a means of exchange, money is only required to settle the balance of the competing credit claims. As described earlier, today, with most people having bank accounts, and payments being made electronically, the requirement for money has been reduced even further.

But, its this which draws out the nature of money and credit that much more clearly, whenever credit contracts or stops, as in a credit crunch.

“In times of a squeeze, when credit contracts or ceases entirely, money suddenly stands as the only means of payment and true existence of value in absolute opposition to all other commodities. Hence the universal depreciation of commodities, the difficulty or even impossibility of transforming them into money, i.e., into their own purely fantastic form. Secondly, however, credit-money itself is only money to the extent that it absolutely takes the place of actual money to the amount of its nominal value. With a drain on gold its convertibility, i.e., its identity with actual gold becomes problematic. Hence coercive measures, raising the rate of interest, etc., for the purpose of safeguarding the conditions of this convertibility. This can be carried more or less to extremes by mistaken legislation, based on false theories of money and enforced upon the nation by the interests of the money-dealers, the Overstones and their ilk. The basis, however, is given with the basis of the mode of production itself.” (p 516)

In order to defend the nature and value of money, and credit-money, therefore, the value of commodities must be diminished. In previous modes of production, such a money crisis could not arise, because money acts as means of circulation, not means of payment. The inner connection between the value of commodities, as determined by the labour required for their production, remains more visible. But, under capitalism, commodity fetishism reaches its height.

“As long as the social character of labour appears as the money-existence of commodities, and thus as a thing external to actual production, money crises — independent of or as an intensification of actual crises — are inevitable.” (p 516-7)

By contrast, so long as the bank remains solvent, an extension of credit can act to reduce the panic, whereas any contraction of credit will act to intensify it.

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