Theories of Surplus Value, Part I, Chapter 4 - Part 123

The Monetary School saw wealth purely in terms of money - gold and silver. It was money that was exchangeable for anything, and which was indestructible, unlike other commodities which perished. In Smith, part of this idea remains. In his discussion of wealth, it is still in part a notion of wealth as use value not exchange value, and so those things that are more durable are seen as representing greater wealth. Hence, Smith's distinction between material and immaterial production, and also his distinction between those things which are consumed quickly, or which are consumed over a long period.

For the Monetary School, only that labour is productive which produces money – gold and silver - whereas for Smith, only that labour is productive which produces money for its buyer, i.e. which produces surplus value. But, Smith recognised that all commodities are money. That is, as described earlier, every commodity has exchange value. It is only that a certain commodity is singled out to be the universal equivalent form of value, which distinguishes it as the money commodity. Money is, in essence, only a representation of a given quantity of labour-time.

“... the Monetary system sees it only in the commodity which is the independent existence of exchange-value.” (p 304)

They did not, therefore, understand how money was made. Money, as a representation of labour-time, can only be made as a consequence of the performance of useful labour, i.e. the creation of value. In so far as this value is thereby embodied in a commodity it already represents money. Moreover, having already been made, it is not thereby destroyed, even by its consumption, but only changes its form. If 10 hours of labour are expended producing food, this food as a commodity, as exchange value, is already money. When a worker consumes this food that value is not thereby destroyed, but has now taken on the form of another commodity, i.e. the labour-power of the worker.

But, nor could the Monetary School understand how this money “... is multiplied through the consumption of commodities, and not through their transformation into gold and silver —in which they are crystallised as independent exchange-value, in which however they not only lose their use-value, but do not alter the magnitude of their value.” (p 304)

In other words, the use value of the food here disappears upon its consumption, but its value is retained, now in the shape of labour-power. If the labour-power only produces sufficient to replace what has been consumed in its own production, then this value will continue to just assume these different forms.

A quantity of labour will be expended which produces food to that value. The food is consumed by the worker, so that its use value is destroyed, but its value is now represented in the use value of the labour-power. The worker once more engages in production, and produces food again required for their consumption. No actual money commodity was required for these transactions, because each commodity, in turn, represented money, as a sum of value.

But, if the worker, having consumed a quantity of food, with a given value, then produces a greater quantity of food (assuming no change in productivity), it will have a greater value. The sum of value in society will have risen, because the worker will thereby be able to take the original quantity of food (value) out of this product of their labour, so as to reproduce their labour-power, and will now have a quantity of food (value) left over, a surplus product or surplus value. By this means, whether or not this food is ever converted into gold or silver is irrelevant. The mass of value has expanded, and as this food represents this value and could as easily act as money, therefore, as gold and silver, the mass of money has thereby also expanded.

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