In these new relations, described by Marx, a legal contract exists between creditor and debtor. The commodity owner, and the buyer establish the price of the commodity in money, and it is this debt that is then written into the contract. But, now the function of money, as means of payment, rather than as measure of value/unit of account, potentially comes into conflict.
Either side of this contract may fail to perform. If A has paid £100 to B, for the supply of commodities to that value, in a month's time, commodities which, currently, B does not possess, then, in a month's time, for numerous reasons, described by Marx in Capital II, B may not be able to supply them, or the value of those commodities may have risen, as a result of input prices rising, and so on. Alternatively, the value of money/money tokens may have fallen so that, in order to replace the components of those commodities, B now requires £120, so that the £100 paid is no longer sufficient to reproduce their capital.
Conversely, A may have supplied £100 of commodities to B, giving them 30 days to pay, but, in 30 days, B may not be able to pay, or else, again, the value of inputs has risen, value of money/money tokens has fallen, so that, when B does pay the £100, it is equal to only £80 in real terms, relative to the capital to be reproduced. This is why speculative assets, like gold, silver, Bitcoin etc., can never act, now, as means of payment, because of the large fluctuations in their own price.
Marx describes one consequence of this, in Capital, in relation to the development of industrial capital. Landlords set rents in money prices, on long leases, but, when new gold discoveries reduced the value of gold, this caused an inflation of commodity prices. The money rents landlords received, from tenants, remained fixed, until new leases were established, so their money incomes fell relative to the prices of all the commodities they required for consumption.
The growing number of industrial capitalists, in the towns, sold their commodities at these higher money prices to landlords, thereby, squeezing the landlords, and transferring wealth from the countryside to the urban bourgeoisie. In addition, as the industrial capital expanded, in the towns, so the demand for agricultural materials and food, for urban workers, also expanded. This increased the revenues of tenant farmers, and creates the same process of differentiation in the countryside, into bourgeois and proletarians, that had already occurred in the towns, and also described vividly by Lenin in relation to Russia.
As soon as the landlords are squeezed, by this process, they are led to sell land to cover their debts. Land becomes a commodity, with a price, though it has no value. Some is bought by the more affluent peasants, becoming capitalist farmers, and some by the urban bourgeoisie, who become rent farmers, employing capitalist farmers and managers on this land. Its this process that gives the impetus to capitalist production entering agriculture, using its more rational and effective methods, to meet the growing needs of capitalist industry, but, which also requires the rationalisation of the land-holding via the Enclosure Acts.
“The difference between means of purchase and means of payment becomes very conspicuous, and unpleasantly so, at times of commercial crises.” (p 141)
In such conditions, D who owes £100 to C, fails to pay, but, now, C, who had no difficulty themselves, lacks the money to pay B, who also cannot, now, pay A. There may have been no overproduction by A, B, or C, but overproduction by D, an inability to sell their output at prices that enables them to pay their suppliers, leads to a cascade of failed payments, what Marx describes as a crisis of the second form, in Theories of Surplus Value. Now, C cannot reproduce their consumed capital, because, although they sold it, at its value, they do not receive payment from D, and the same applies to B and A.
D lays off workers, and may go bust. At best, they reduce their purchases from C and other suppliers. So, now D's workers have no income, or reduced wages, meaning they must reduce their own consumption. Even if all those capitals that supplied them with wage goods produce at the same level, they will have overproduced, relative to this reduced demand. The same applies to all those capitals that supplied inputs to D. They must reduce output, or else overproduce. In turn, they reduce wages, and their own demand for inputs. Consequently, all capitals, even if they produced at their old levels, would have overproduced, and as they reduce their output, so this extends further, as aggregate demand is reduced.
But, as Marx says, this crisis was not the result of credit or lack of money. It is the result of D having overproduced, and so being unable to pay, which then created this crisis of the second form.
“If the crisis appears, therefore, because purchase and sale become separated, it becomes a money crisis, as soon as money has developed as means of payment, and this second form of crisis follows as a matter of course, when the first occurs.”
(Theories of Surplus Value, Chapter 17, p 514)
To pay, money is needed, and, to have money, it is necessary to have sold.
“The evolution of the circulation process thus turns selling into a social necessity for him, quite irrespective of his individual needs. As a former buyer of commodities he is forced to become a seller of other commodities so as to obtain money, not as a means of purchase, but as a means of payment, as the absolute form of exchange-value. The conversion of commodities into money as a final act, or the first metamorphosis of commodities as the ultimate goal, which in hoarding appeared to be the whim of the commodity-owner, has now become an economic function. The motive and the content of selling for the sake of payment constitutes the content of the circulation process, a content arising from its very form.” (p 141-2)
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