Again, as detailed at length in Capital III, Marx notes that, even where capital itself is exported, so as to obtain interest on it, it is market conditions which determine whether it is exported as commodities or gold. For example, Britain might export locomotives to India, as capital, being paid a given amount of interest on the value of the equipment each year, or it might loan an equivalent amount of money-capital to India, receiving interest on it, with the Indian railways using the money to buy or produce the trains outright.
“Generally speaking these writers do not first of all examine money in its abstract form in which it develops within the framework of simple commodity circulation and grows out of the relations of commodities in circulation. As a consequence they continually vacillate between the abstract forms which money assumes, as opposed to commodities, and those forms of money which conceal concrete factors, such as capital, revenue, and so forth.” (p 187)
To summarise, contrary to the idealist conception of bourgeois economists, money does not arise from a conscious decision to create a means of exchange, to facilitate commodity exchange, and, thereby, resolve the problems associated with barter. It arises naturally within the process of commodity exchange itself. A single commodity, whose own value is well known, and which is regularly traded, becomes singled out as an indirect measure of the value of all other commodities. It becomes the general commodity with which all other commodities are equated, and, as a consequence of competition, the proportions of these relations are determined by the relative values of these different commodities.
As the general commodity, the labour involved in the production of this commodity becomes the proxy for abstract labour. In the proportional relations of every other commodity, to the money commodity, all of the different concrete and complex labours, involved in the production of use values, are reduced, by competition, to a single universal labour. The exchange-value of commodities, expressed in a quantity of the money commodity, is their money price.
If we take the value of commodities in an economy, measured in units of this universal labour, it may be equal to 1 million hours. If cattle are used as the money commodity, and each head of cattle has a value of 100 hours of labour, then the money equivalent of all commodities may be expressed as 10,000 head of cattle. This does not mean that there must be 10,000 head of cattle, actually in the economy. They act only as “ideal” money. Nor does it mean that there might not be more than 10,000 head of cattle. It means only that 10,000 head represents money, the money equivalent of the value of all commodities. Put another way, the 10,000 head of cattle represents 1 million hours of universal labour.
In each exchange of commodities, the prices are first determined, “ideally”, in cattle. If A had 10 metres of cloth, its price is first determined as, say, one head of cattle. If A seeks to exchange his 10 metres of cloth for wine, he will require, in exchange, a quantity of wine, also equal to one head of cattle. Alternatively, he may, now, sell his cloth for cattle, and, then, use the cattle to buy other commodities. So, its now clear that, to act as currency, rather than as ideal measure of value, there is no need for there to be 10,000 head of cattle. A might sell cloth for cattle, which, then, they use to buy wine from B, who uses it to buy equipment from C, and so on. If each head of cattle takes part in ten transactions, in the year, only 1,000 head of cattle are required as currency.
But, using cattle might not be practical so that, instead, commodity owners may exchange strips of leather, as tokens, each representing a head of cattle. In effect, they exchange on the basis of trust/credit, but this does not change the fact that, in order to determine the basis of the exchange, some money commodity – cattle – was required as unit of measure/universal labour, and that 10,000 head of cattle represents money/universal social labour-time, and that 1,000 are required as currency, or else, tokens representing this 1,000 head of cattle. Only 1,000 such strips can be put into circulation, or else the value of such strips would necessarily be reduced, and each would exchange for a smaller quantity of commodities, i.e. prices would rise. But, the owners of such strips would redeem them for the cattle they represent. The same applies with metallic money.
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