Chapter 2.3 Money
Money emerges naturally from the exchange of commodities, C – M – C. Commodities, under barter, are directly exchanged for each other. However, as seen, in order to compare the value of the first C with the second C, given that they are both the result of different quantities of heterogeneous, concrete labour, they come to be compared to a quantity of some other commodity, whose value is well known, and which is regularly traded, for example cattle. It is, then, not necessary for this third commodity to be actually present, in such transactions. This third commodity simply becomes the proxy for universal labour, i.e. it reduces the actual labour, contained in the other two commodities, to this universal labour, abstracting from their physical characteristics as concrete labour, and subsuming the individual labour/value of any any specific producer/commodity into a market value, based upon average, socially necessary labour. This is the role of money that Gray, Thompson, Bray, Proudhon, and, today, the proponents of MMT do not understand.
By equating the first and second commodities, not on the basis of the actual amount of concrete labour used for their specific production (embodied labour), but only on the basis of the amount of this universal labour they represent, their exchange ratio can be determined. This is the function of money as measure of value/unit of account, as opposed to currency. Currency, in the form of coins or other money tokens, however, arises, naturally, from the mediating role of money, as measure of value, because, as proxy for universal labour, it also becomes the proxy for all other use values. By possessing this one use value, it is possible to possess any and all other use values, simply by exchanging it for them.
If I possess wine, I may or may not be able to exchange it for linen, and so obtain the use value of linen, because that depends on an owner of linen wishing to exchange it for my wine, but, if I own money, it is always possible to exchange it for linen, or any other commodity. So, it inevitably becomes the case that, as well as money acting as measure of value, in C – M – C, the owners of commodities seek to sell them for money, or to obtain money tokens, in order to the use that money/tokens to buy other commodities. But, once money exists as currency, rather than just as measure of value, the circuit C – M – C implies, also, both C – M, and M – C, but, then, M – C, implies also C – M, so that, as well as the circuit C – M – C, we also have a circuit M – C – M.
“In the form C—M—C it is the commodity that is the beginning and the end of the transaction; in the form M—C—M it is money. Money mediates the exchange of commodities in the first circuit, the commodities mediates the evolution of money into money in the second circuit. Money, which serves solely as a medium in the first circuit, appears as the goal of circulation in the second, whereas the commodity, which was the goal in the first circuit, appears simply as a means in the second. Because money itself is already the result of the circuit C—M—C, the result of circulation appears to be also its point of departure in the form M—C—M. The exchange of material is the content of C—M—C, whereas the real content of the second circuit, M—C—M, is the commodity in the form in which it emerged from the first circuit.” (p 122-3)
In other words, money emerges, naturally, from the exchange of commodities, and this is quite different from the idealist conception of money, put forward by Ricardo and others, and adopted by modern orthodox economics, in which it arises ready formed, in its phenomenal form as currency, devised in Men's heads simply to facilitate exchange. The point of producing products, in order to enjoy their use value, in consumption, is clear, as is the point of exchanging these products as use values, for another, i.e. to exchange one use value for some other, which provides you with greater utility, and so raises your level of social welfare. This, indeed, is the foundation of the transformation of products into commodities, and the development of commodity production and exchange, the separation of value from use-value, and conversion of individual value into exchange-value. But, what then is the point of exchanging money for money? Initially, the point of obtaining money is obvious.
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