Left reformist proponents of Modern Monetary Theory (MMT) have suggested that the government could finance its borrowing to cover the economic costs of its lockdown by printing money tokens, i.e. monetising the debt. It is a dangerous proposal, which shows a lack of understanding of what drives the economy, what money is, and what interest rates are. At root, that error is a lack of understanding of value, and a form of commodity fetishism, in this case the fetishism of the general commodity – money. Commodity fetishism results in a belief that value is inherent to the commodity, rather than being a product of labour. Modern Monetary Theory, similarly believes that value is inherent to the general commodity, money, but also believes that this money can be created out of thin air by banks and the central bank. If that is the case, then the solution to the problem is simple. For the government to spend more, or pay for its borrowing, it requires more value. If value is money – the equivalent form – then, to get more value, get more money. To get more money simply have the central bank print it, and get the commercial banks to create it, by lending it, i.e. the credit multiplier.
In other words, value no longer has to be created by labour, it can be simply increased by picking the fruit of the Magic Money Tree, which makes its bounty available, free to all who require it. Its not modern at all, but an idea as old as money itself, when the first states debased their coinage as a means of paying their debts. It is the same idea as put forward by John Law and the Pereire Brothers.
In Capital I, Marx explains the nature of commodity fetishism, in discussing real value relations throughout Man's history from the primitive commune through to capitalism, and so examining the operation of The Law of Value across all modes of production, including non-commodity producing economies. The comparison between value in non-commodity producing economies as against value in commodity producing economies is key to understanding the nature of value itself, and of commodity fetishism. In examining the nature of value in non-commodity producing economies, Marx takes the fictional example of Robinson Crusoe, alone on his island, but in order to place this example in the real world, he also examines the nature of value production in the primitive commune, and in the peasant household. In all these cases, what we have is the production of products as use values, and value takes the form of individual value, measured directly in labour-time. Value in all these cases is inseparable from use value. The same is true in the other example given by Marx that of the future communist society.
In all of these, the same basic, underlying relation exists. Rather than the production of commodities exchanged in the market, and where the value of the commodity assumes the form of an exchange-value, or money price, there is a direct production of products based on need. There is no need for the value of the product to assume the alienated form of exchange value, which is an indirect and relative measure of value, because it can take its immediate and absolute form as a quantity of labour-time. On this basis, it can be seen exactly what value is, i.e. labour, and its measure is labour-time. It does not have to be some specific form of labour such as wage labour, as against the labour of the peasant, or the labour of the member of the primitive commune or future citizen of a communist society, but labour sui generis.
It can then be seen that exchange-value/price is merely a contingent and relative form of value, representing merely the proportional relation between the value of one product/commodity to another, and so the proportional relation between the labour-time contained in one commodity as against another. When A spends 10 hours labour in producing wine, and B spends 10 hours producing linen, A can exchange his wine for B's linen and vice versa, only because they represent the same amount of value, i.e. 10 hours labour. A's wine represents a claim to 10 hours of labour in some other form, be it linen, gold or potatoes. What appears as a consequence of commodity exchange, and the representation of value in its alienated form of exchange-value, as a relation between things (commodities – wine, linen) is actually a relation between people, as they exchange their labour in one form – wine, linen – for the labour of others in a different form – linen, wine.
This is the point that Marx sets out in his Letter to Kugelmann, where he explains The Law of Value.
“Every child knows that any nation that stopped working, not for a year, but let us say, just for a few weeks, would perish. And every child knows, too, that the amounts of products corresponding to the differing amounts of needs demand differing and quantitatively determined amounts of society’s aggregate labour. It is self-evident that this necessity of the distribution of social labour in specific proportions is certainly not abolished by the specific form of social production; it can only change its form of manifestation. Natural laws cannot be abolished at all. The only thing that can change, under historically differing conditions, is the form in which those laws assert themselves. And the form in which this proportional distribution of labour asserts itself in a state of society in which the interconnection of social labour expresses itself as the private exchange of the individual products of labour, is precisely the exchange value of these products.”
As Marx sets out in Theories of Surplus Value, therefore, all commodities are money, because all commodities are a claim on an equal amount of labour-time, and that is what money is, i.e. a claim on a quantity of social labour-time. For any given commodity, it can perform this function if someone else is prepared to exchange their commodity for mine, which is the basis of barter, but for the money commodity itself, it can be exchanged for all other commodities, and so becomes the general commodity. In barter, every commodity which acts to measure the value of other commodities, indirectly, by the quantity of it that is equal to some other commodity, acts, therefore, as the equivalent form of value. The money commodity is simply a commodity that is singled out to alone perform this function, a commodity that everyone will accept in exchange, and as the indirect measure of value. It becomes the universal equivalent form of value, as Marx describes in Capital I, Chapter III.
As the general commodity, its only use value becomes to act as this universal equivalent. This is what confused Ricardo, who could not make the distinction between gold as commodity, and gold as money. It is what led to the errors of the 1844 Bank Act, which was itself based on Ricardo's fallacious theory of money. The money commodity, has to itself be a commodity, i.e. it must be a use value in its own right, and must have value, i.e. it must be the product of purposive labour. That is why Bitcoin and other crypto-currencies can never be money, because they are not use values in their own right. They have no use value other than as money tokens (no different in that respect to a piece of paper or base metal coin), and, in reality, only as objects of speculation (no different in that respect to any other financial asset or derivative, other than the latter are actually related to some actual commodities, for example a share gives a claim to interest/dividends, as a deduction from profits, produced by real capital). Its only as a commodity that the money commodity has value, and, therefore, also has exchange value, enabling it to be compared to all other commodities, i.e. as an equivalent form of value. However, in order to act as the money commodity, it must give up its use value as commodity and act purely as money. Gold does not act as the money commodity, for example, if it acts as the commodity gold used in the production of jewellery, or electronic circuitry.
The exchange-value of any commodity is ephemeral; it only exists in that moment when it is placed in an exchange relation with some other commodity, but that is not the case with money. Money is exchange value incarnate. The wine producer who exchanges wine for linen gives up the use value of the wine, but they retain its value. The value is now simply metamorphosed into the linen, whose use value they consume. But, when the wine producer sells wine for money, whilst they give up the use value of the wine and retain its value now in the form of money, the only use value of this money is to act as money. The only purpose of holding this money it to be able to obtain this use value of being able to exert a claim on a quantity of social labour-time. I do not want this money to eat it, drink it, clothe myself in it, etc., but only to act as money, and nothing else.
Its from this basis that the other properties of money derive. It is because money is the universal equivalent form of value that it can act as unit of account, and, insofar as the money commodity is durable, it can also act as store of value.
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