MONEY OR SIMPLE CIRCULATION.
In a parliamentary debate on Sir Robert Peel’s Bank Act of 1844 and
1845, Gladstone remarked that not even love has made so many fools of
men as the pondering over the nature of money. He spoke of Britons to
Britons. The Dutch, on the contrary, who, from times of yore, have had,
Petty’s doubts notwithstanding, “angelical wits” for money speculation
have never lost their wits in speculations about money.
The main difficulty in the analysis of money is overcome as soon as
the evolution of money from commodity is understood. This point once
granted, it only remains to comprehend clearly the particular forms
of money, which is to some extent made difficult by the fact that all
bourgeois relations, being gilt or silver plated, have the appearance
of money relations, and money, therefore, seems to possess an endless
variety of forms, which have nothing in common with it.
In the following investigation only those forms of money are treated
of which directly grow out of the exchange of commodities; the forms
which belong to a higher stage of production, as e. g., credit money
will not be discussed here. For the sake of simplicity gold is assumed
throughout as the money commodity.
1. THE MEASURE OF VALUE.
The first process of circulation constitutes, so to say, the
theoretical preparatory process to actual circulation. To begin
with, commodities which are use-values by nature, acquire a form in
which they _appear_ in idea to each other as exchange values, as
definite quantities of incorporated _universal_ labor-time. The first
necessary step in this process is, as we have seen, the setting apart
by the commodities of a specific commodity, say _gold_, as the direct
incarnation of universal labor-time, or the universal equivalent. Let
us go back for a moment to the form in which commodities turn gold into
money.
1 ton of iron = 2 ounces of gold
1 quarter of wheat = 1 ounce of gold
1 hundred weight of Mocca coffee = 1-1/4 ounce of gold
1 hundred weight of potash = 1/2 ounce of gold
1 ton of Brazil timber = 1-1/2 ounces of gold
Y commodities = X ounces of gold
In the above series of equations iron, wheat, coffee, potash, etc.
appear to each other as embodiments, of homogeneous labor, namely,
as labor materialized in money, from which all the peculiarities of
the different kinds of concrete labor represented in the different
use-values are completely eliminated. As value they are all identical,
they are the incarnation of _the same_ labor, or _the same_ incarnation
of labor, viz., gold. As uniform embodiments of the same labor they
display only _one_ difference, a quantitative one, by appearing
as different quantities of value, because _unequal_ quantities of
labor-time are contained in their use-values. The mutual relation
of these separate commodities is that of embodiments of universal
labor-time, since they are related to universal labor-time as to an
excluded commodity, viz., gold. The same relation the development of
which causes commodities to appear to each other as exchange values,
causes the labor time contained in gold to appear as universal
labor-time, a given quantity of which is expressed in different
quantities of iron, wheat, coffee, etc,―in short, in the use-values
of all commodities, or is directly unfolded in the endless series of
commodity-equivalents. While all commodities express their exchange
values in gold, gold expresses its exchange value directly in all
commodities. While commodities assume the form of exchange value in
relation to each other, they lend to gold the form of the universal
equivalent, or of money.
Gold becomes the _measure of value_, because _all_ commodities measure
their exchange values in gold, in proportion as a certain quantity of
gold and a certain quantity of the commodity contain the same amount
of labor-time; and it is only by virtue of this function of being a
measure of value, in which capacity its own value is measured directly
in the entire series of commodity equivalents, that gold becomes
a universal equivalent or money. On the other hand, the exchange
value of all commodities is expressed in gold. In this expression,
the qualitative aspect is to be distinguished from the quantitative:
there is the exchange value of the commodity as the embodiment of the
same uniform labor-time; while the magnitude of value is exhaustively
expressed, since in the same proportion in which commodities are
equated to gold they are equated to one another. On the one hand the
_universal_ character of the labor-time contained in them is revealed;
on the other, its quantity is expressed in its golden equivalent. The
exchange value of commodities thus expressed in the form of a universal
equivalent and, moreover, as a numerical proportion of this equivalent,
in terms of one specific commodity, or represented in the form of a
series of commodities equated to one specific commodity, is PRICE.
Price is the form into which the exchange value of commodities is
converted when it _appears_ within the sphere of circulation.
By the same process by which commodities express their values in gold
prices, they turn gold into a measure of value i. e. into money. If
all of them were to measure their values in silver, wheat, or copper,
and therefore express them in the form of silver, wheat or copper
prices, then silver, wheat or copper would be measures of value and
consequently universal equivalents. In order to appear as prices in
circulation, commodities must be exchange values before they enter
circulation. Gold becomes the measure of value only because all
commodities estimate their exchange value in it.
The universality of this relation which is the result of evolution
and from which alone springs the function of gold as the measure of
value, implies however, that every single commodity is measured in
gold, in proportion to the labor-time contained in both; that the
actual common measure of the commodity and of gold is labor; or that
commodity and gold are passed for each other in direct barter as
equal exchange values. How this equalization actually takes place,
can not be discussed here when treating of simple circulation. So
much, however, is clear, that in countries producing gold and silver,
certain quantities of labor-time are directly embodied in definite
quantities of gold and silver, while in countries which do not produce
gold and silver the same result is reached in a round-about way, by
direct or indirect exchange of the commodities of those countries;
i. e. a definite portion of average national labor is given for a
definite quantity of labor-time, embodied in the gold and silver of the
mine-owning countries. In order to be able to serve as a measure of
value, gold must be as far as possible a _variable_ value, because it
can become the equivalent of other commodities only as an incarnation
of labor-time, and the same labor-time is realized in unequal volumes
of use-values with the change in the productive power of concrete
labor. In estimating all commodities in gold it is only assumed that
gold represents a given quantity of labor at a given moment, as was
done when the exchange value of any commodity was expressed in terms
of the use-value of any other commodity. As for the variations of the
value of gold, the law of exchange value formulated above holds good
in its case as well. If the exchange value of commodities remains
unchanged, then a general rise in their gold prices is possible only
in the case of a fall in the exchange value of gold. If the exchange
value of gold remains unchanged, a general rise of gold prices is
possible only when the exchange value of all commodities rises. The
reverse is true in case of a general fall in the prices of commodities.
If the value of an ounce of gold falls or rises in consequence of a
change in the labor-time required for its production, then the values
of all other commodities fall or rise to an equal extent. Thus, the
ounce of gold represents after the change, as it did before, a _given_
quantity of labor-time with regard to all commodities. The same
exchange values are now estimated in greater or smaller quantities
of gold than before, but they are estimated in proportion to the
magnitude of their values, and consequently retain the same proportion
to each other. The ratio 2 ÷ 4 ÷ 8 remains the same when expressed
as 1 ÷ 2 ÷ 4 or as 4 ÷ 8 ÷ 16. The change in the quantity of gold in
which exchange values are estimated with a variation in the value of
gold, interferes as little with the function of gold as a measure
of value, as the fifteen times smaller value of silver as compared
with that of gold interferes with the performance of that function
by the latter. Since labor-time is the common measure of gold and
commodities, and since gold figures as the measure of value only in so
far as all commodities are measured by it, the idea that money makes
commodities commensurable, is therefore a mere fiction of the process
of circulation.[39] It is rather the commensurability of commodities
as incorporated labor-time, that turns gold into money.
Commodities enter the process of exchange in the concrete form
of use-values. They are yet to be turned into the real universal
equivalent through their alienation. The determination of their prices
merely amounts to their ideal transformation into the universal
equivalent, a process of equation to gold which is yet to be realized.
But since commodities are, in their prices, transformed into gold only
in imagination, or are converted only into imaginary gold, and since
their money form is not differentiated as yet from their concrete
selves, it follows that gold has also been turned into money only
in imagination; it appears so far but as a measure of value, and in
fact definite quantities of gold serve merely as names for certain
quantities of labor-time. The form in which gold is crystallized in
money always depends upon the way in which commodities express their
own exchange value to each other.
Commodities now confront one another in a double capacity: actually as
use-values, ideally as exchange values. The twofold aspect of labor
contained in them is reflected in their mutual relations; the special
concrete labor being virtually present as their use-value, while
universal abstract labor-time is ideally represented in their price
in which commodities appear as commensurable embodiments of the same
value―substance differing merely in quantity.
The difference between exchange value and price appears to be merely
nominal or, as Adam Smith says, labor is the real price, and money
the nominal price of commodities. Instead of estimating the value of
one quarter of wheat in thirty days of labor, it is estimated in one
ounce of gold if one ounce of gold is the product of thirty days’
labor. However, far from this difference being merely nominal, all the
storms which threaten commodities in the actual process of circulation
center about it. Thirty days of labor are contained in a quarter of
wheat and it need not, therefore, be expressed in terms of labor-time.
But gold is a commodity distinct from wheat, and only in circulation
it can be ascertained, whether the quarter of wheat can be actually
turned into an ounce of gold as is anticipated in its price. That will
depend on whether or not it proves to be a use-value, whether or not
the quantity of labor-time contained in it is the quantity necessarily
required by society for the production of a quarter of wheat. The
commodity as such _is_ an exchange value, it _has_ a price. In this
difference between exchange value and price lies the demonstration of
the fact that the particular individual labor contained in a commodity
has first to be expressed through the process of alienation in terms
of its counterpart, i. e. as impersonal, abstract, universal and, only
in that form, social labor, viz. money. Whether it can be so expressed
seems to be a matter of chance. Thus, although the exchange value
of a commodity finds only ideally a distinct expression in price,
and the twofold character of labor contained in the commodity exists
as yet merely as two distinct forms of expression, and, although in
consequence thereof, the embodiment of universal labor-time, gold,
confronts actual commodities only as an imaginary measure of value, yet
the fact that exchange value exists as price, or that gold exists as a
measure of value implies the necessity of the alienation of commodities
for hard cash and the possibility of their non-alienation. In short,
here lies latent the entire contradiction which is inherent in the
fact that products are commodities or that the particular work of a
private individual can be of no account in society until it has taken
the very opposite form of abstract universal labor. For that reason,
the utopians, who want to have commodities but not money, who want a
system of production based on private exchange without the necessary
conditions underlying such a system, are consistent when they “destroy”
money not in its tangible form but in its nebulous illusory form of a
measure of value. Under the invisible measure of value there lurks the
hard cash.
The process by which gold has become the measure of value and exchange
value has been turned into price, being once assumed, all commodities
express in their prices but imagined quantities of gold of various
magnitudes. As such various quantities of the same thing, gold, they
are equated, compared and measured with each other, and thus arises the
technical necessity of referring them to a definite quantity of gold
as a unit of measure, a unit which develops into a standard measure by
virtue of its divisibility into aliquot parts, which in their turn can
be subdivided into aliquot parts.[40] But quantities of gold as such
are measured by weight.
The standard of measure is thus found ready in the general measures
of weight of metals and, therefore, where-ever metallic circulation
is in vogue, these measures serve originally as standards of price.
Since commodities no more relate to each other as exchange values to
be measured by labor-time, but as magnitudes of the same denomination
measured in gold, the latter is transformed from a _measure of value_
into a _standard of price_. The comparison of prices with each other
as different quantities of gold is thus crystallized in figures which
correspond to an assumed quantity of gold and represent it as a
standard of aliquot parts. Gold as measure of value and as standard of
price has entirely different forms of manifestation and the confusing
of the two has resulted in the wildest of theories. Gold is a measure
of value as incorporated labor-time; it is the standard of price as
certain weight of metal. Gold becomes the measure of value by virtue
of its relation as exchange value to commodities as exchange values;
as standard of price, a definite quantity of gold serves as a unit
for other quantities of gold. Gold is the measure of value, because
its value is variable; it is the standard of price, because it is
fixed as a constant unit of weight. In this case, as in all cases of
measuring quantities of the same denomination, the establishment of a
definite and unvarying unit of measure is all-important. The necessity
of settling upon a quantity of gold as a unit of measure and upon its
aliquot parts as subdivisions of that unit, has given rise to the
notion that a certain quantity of gold which has naturally a variable
value had been assigned a fixed ratio of value to the exchange values
of all commodities; the fact is overlooked that exchange values of
commodities are transformed into prices, i. e. into quantities of gold,
before gold develops as a standard of price. No matter how the value of
gold may vary, the ratios between the values of different quantities of
gold remain constant. Let the fall in the value of gold amount to 1000
per cent., still twelve ounces of gold will have a twelve times greater
value than one ounce of gold; and in prices the only thing considered
is the ratio between different quantities of gold. Since, on the other
hand, no rise or fall in the value of an ounce of gold can alter its
weight, no alteration can take place in the weight of its aliquot
parts. Thus gold always renders the same service as an invariable
standard of price, no matter how much its value may vary.[41]
An historical process which, as we shall explain later, was determined
by the nature of metallic circulation, led to the result that the
same denomination of weight was retained for a constantly changing
and decreasing weight of precious metals in their function of a
standard of price. Thus the English pound sterling denotes less than
one-third of its original weight; the pound Scot, before the Union,
only 1-36; the French livre, 1-74; the Spanish Maravedi, less than
1-1000; the Portuguese Rei, a still smaller fraction. Such was the
historical origin of the discrepancy between the current money names
of various weights of metals and their weight denominations.[42]
Since the determination of the unit of measure, of its aliquot parts,
and of their names is purely conventional, and since they should
possess within the sphere of circulation the character of universality
and compulsion, they had to be settled _by law_. The purely formal
operation thus devolved upon the government.[43] The metal which
was to serve as the money material, was found already adopted in
the community. In different countries the legal standard of price
is naturally different. In England e. g. the ounce as a weight of
metal is divided into pennyweights, grains and carats Troy, but the
ounce of gold as the unit of money is divided into 3 7-8 sovereigns,
the sovereign into 20 shillings, the shilling into 12 pence, so that
100 pounds of 22 carat gold (1200 ounces) = 4672 sovereigns and 10
shillings. In the world market, however, where national boundaries
disappear, these national characteristics of the measure of money also
disappear and give place to the general measures of weight of metals.
The price of a commodity or the quantity of gold into which it is
ideally transformed, is, therefore, now expressed in the names of
coins of the gold standard. Thus, instead of saying: a quarter of
wheat is worth an ounce of gold, it is said in England to be worth 3£
17s. 10-1/2d. All prices are thus expressed in the same denominations.
The peculiar form which commodities lend to their exchange values is
transformed into a _money-denomination_ by which commodities tell each
other how much they are worth. Money in its turn becomes _money of
account_.[44]
We transform commodities into money of account, in our mind, on paper,
in conversation, whenever it is a question of expressing any kind of
wealth in terms of exchange value.[45] For that transformation we need
the gold substance, but only in imagination. In order to estimate the
value of a thousand bales of cotton in a certain number of ounces of
gold and then to express this number of ounces in the denominations of
the ounce, £. s. d., not a single atom of gold is required. Thus, not
a single ounce of gold was in circulation in Scotland before Robert
Peel’s Bank Act of 1845, although the gold ounce, expressed in its
English standard of account, 3£ 17s. 10-1/2d., served as the legal
standard of price. In a similar manner silver serves as standard of
price in the trade between Siberia and China, although that trade
virtually amounts to barter. It is, therefore, immaterial to money,
as money of account, whether or not its entire unit of measure or the
fractions thereof are really coined. In England, at the time of William
the Conqueror, 1£, then a pound of pure silver, and the shilling, 1-20
of a pound, existed only as money of account, while the penny, 1-240
of a pound of silver, was the largest silver coin in existence. On
the other hand, there are no shillings and pence in England to-day,
although they are legal denominations for certain parts of an ounce of
gold. Money as money of account may exist exclusively in idea, while
the money in actual existence may be coined according to an entirely
different standard. Thus the money in circulation in many English
colonies of North America consisted until late in the eighteenth
century of Spanish and Portuguese coins, although the money of account
was throughout the same as in England.[46]
Owing to the fact that money, when serving as the standard of price,
appears under the same reckoning names as do the prices of commodities,
and that, therefore, the sum of 3£ 17s. 10-1/2d. may signify, on
the one hand, an ounce weight of gold, and on the other, the value
of a ton of iron, this reckoning name of money has been called its
_mint-price_. Hence, there sprang up the extraordinary notion that
the value of gold is estimated in its own material, and that, in
contradistinction to all other commodities, its price is _fixed_ by
the State. It was erroneously thought that the giving of reckoning
names to definite weights of gold is the same thing as fixing the
value of those weights.[47] In so far as gold serves as one of the
elements in determining price, i. e., where it performs the function
of money of account, it not only has no _fixed_ price, but has _no_
price whatever. In order to have a price, i. e., in order to express
itself in a _specific_ commodity as a _universal_ equivalent that
other commodity would have to play the same exclusive role in the
process of circulation as gold. But two commodities excluding all other
commodities mutually exclude each other. Therefore, wherever gold and
silver have by law been made to perform side by side the function of
money or of a measure of value it has always been tried, but in vain,
to treat them as one and the same material. To assume that there is an
invariable ratio between the quantities of gold and silver in which a
given quantity of labor-time is incorporated, is to assume, in fact,
that gold and silver are of one and the same material, and that a given
mass of the less valuable metal, silver, is a constant fraction of a
given mass of gold. From the reign of Edward III to the time of George
II, the history of money in England consists of one long series of
perturbations caused by the clashing of the legally fixed ratio between
the values of gold and silver, with the fluctuations in their real
values. At one time gold was too high; at another, silver. The metal
that for the time being was estimated below its value was withdrawn
from circulation, melted and exported. The ratio between the two metals
was then again altered by law, but the new nominal ratio soon came into
conflict again with the real one. In our own times, the slight and
transient fall in the value of gold compared with silver, which was a
consequence of the Indo-Chinese demand for silver, produced on a far
more extended scale in France the same phenomena, export of silver,
and its expulsion from circulation by gold. During the years 1855,
1856 and 1857, the excess in France of gold imports over gold exports
amounted to £41,580,000, while the excess of silver exports over silver
imports was £14,704,000. In fact, in those countries in which both
metals are legally measures of value, and therefore both legal tender,
so that every one has the option of paying in either metal, the metal
that rises in value is at a premium, and, like every other commodity,
measures its price in the over-estimated metal which alone serves
in reality as the standard of value. The result of all experience
and history with regard to this question is simply that, where two
commodities perform by law the functions of a measure of value, in
practice one alone maintains that position.[48]
B. THEORIES OF THE UNIT OF MEASURE OF MONEY.
The circumstance that commodities are converted into gold only in ideas
as prices and that gold is therefore turned into money only in idea,
gave rise to the theory of the _ideal unit of measure of money_. Since,
in the determination of prices, gold and silver serve only ideally
as money of account, it was asserted that the names pound, shilling,
pence, thaler, franc, etc., instead of denoting certain weights of
gold and silver or labor incorporated in some way, stood rather for
ideal atoms of value. Thus, if, e. g., the value of an ounce of silver
should rise it would contain more such atoms and would therefore have
to be estimated and coined in a greater number of shillings. This
doctrine, revived again during the last commercial crisis in England
and even voiced in Parliament in two separate reports attached to the
report of the select Committee on the Bank Acts sitting in July, 1858,
dates from the end of the seventeenth century.
At the time of the accession of William III., the English mint-price
of an ounce of silver was 5s. 2d., or 1-62 of an ounce of silver was
equal to a penny; 12 of these pence were called a shilling. According
to that standard, a piece of silver weighing, say, 6 ounces, would be
coined into thirty-one coins, each called a shilling. But the _market
price_ of an ounce of silver rose above its _mint price_, from 5s. 2d.
to 6s. 3d., or, in order to buy an ounce of silver bullion 6s. 3d. had
to be paid. How could the market price of an ounce of silver rise above
its mint price, when the mint price is merely a reckoning name for
aliquot parts of an ounce of silver? The riddle was easily solved. Out
of £5,600,000 of silver money which was in circulation at that time,
four millions were worn out, clipped and debased. A trial disclosed
that £57,000 of silver which were supposed to weigh 220,000 ounces,
weighed only 141,000 ounces. The mint went on coining according to
the same standard, but light-weighted shillings in actual circulation
represented smaller parts of an ounce than their name implied. Hence,
a greater quantity of these light-weighted shillings had to be paid in
the market for an ounce of silver bullion. When a general recoinage
was decided upon in consequence of the derangement that had been
produced, LOWNDES, the Secretary of the Treasury, declared that the
value of an ounce of silver had risen and therefore it must henceforth
be coined into 6s. 3d. instead of into 5s. 2d. as heretofore. His
argument practically amounted to the assertion that the rise in the
value of the ounce caused a fall in the value of its aliquot parts.
His false theory, however, served merely as an embellishment for a
just, practical purpose. The government debts were contracted in light
shillings, were they to be paid in heavy ones? Instead of saying pay
back four ounces of silver, when you had received nominally five ounces
but virtually only four, he said pay back nominally five ounces but
reduce the metallic contents to four ounces and call a shilling what
you had called four-fifths of a shilling heretofore. Thus Lowndes
practically adhered to the metallic weight while theoretically he clung
to the reckoning name. His adversaries who clung only to the name
and therefore declared the 25 to 50 per cent. lighter shilling to be
identical with the full-weight shilling maintained on the contrary that
they adhered to the metallic weight.
JOHN LOCKE, who was an advocate of the new bourgeoisie in all forms,
the manufacturers against the working classes and paupers, the
commercial class against the old fashioned usurers, the financial
aristocracy against the state debtors, and who went so far as to prove
in his own work that the bourgeois reason is the normal human reason,
also took up the challenge against Lowndes. John Locke carried the day
and money borrowed at ten or fourteen shillings to a guinea was repaid
in guineas of twenty shillings.[49] SIR JAMES STEUART sums up the
entire transaction as follows: “ ... the state gained considerably upon
the score of taxes, as well as the creditors upon their capitals and
interest; and the nation, which was the principal loser, was pleased;
because their _standard_ (The standard of their own value) was not
debased.”[50] Steuart thought that the nation would prove more alert
with the further development of commerce. He was mistaken. About 120
years later the same _quid pro quo_ was repeated.
It was just in the order of things that Bishop BERKELEY, the
representative of a mystical idealism in English philosophy, should
have given a theoretical turn to the doctrine of the ideal unit
of measure of money, something which the practical “Secretary to
the Treasury” had failed to do. He asks: “Whether the terms Crown,
Livre, Pound Sterling, etc., are not to be considered as Exponents
or Denominations of such Proportion? [namely proportions of abstract
value as such.] And whether Gold, Silver, and Paper are not Tickets
or Counters for Reckoning, Recording and Transferring thereof? (of
the proportion of value). Whether _Power_ to command the Industry of
others be not real Wealth? And whether Money be not in Truth, Tickets
or Tokens for conveying and recording such Power, and whether it be of
great consequence what Materials the Tickets are made of?”[51] Here
we find a confusion, first of the measure of value and the standard
of price, and secondly of gold and silver as measures on the one hand
and mediums of circulation on the other. Because precious metals can
be replaced by tokens in the process of circulation Berkeley comes to
the conclusion that these tokens represent nothing, i. e., only the
abstract idea of value.
SIR JAMES STEUART had so fully developed the theory of the ideal
unit of measure of money, that his successors―unconscious successors
since they do not know him―have added to it neither a new version
nor even a new example. “Money, which I call of account, is no more
than an arbitrary scale of equal parts, invented for measuring the
respective value of things vendible. Money of account, therefore, is
quite a different thing from money coin, which is price[52] and might
exist, although there was no such thing in the world as any substance
which could become an adequate and proportional equivalent, for every
commodity.... Money of account ... performs the same office with
regard to the value of things, that degrees, minutes, seconds, etc.,
do with regard to angles, or as scales do to geographical maps, or to
plans of any kind. In all these inventions, there is constantly some
denomination taken for the unit. ... The usefulness of all those
inventions being solely confined to the marking of proportion. Just so
the unit in money can have no invariable determinate proportion to any
part of value, that is to say, it cannot be fixed to any particular
quantity of gold, silver, or any other commodity whatsoever. The
unit once fixed, we can, by multiplying it, ascend to the greatest
value.... The value of commodities, therefore, depending upon a
general combination of circumstances relative to themselves and to the
fancies of men, their value ought to be considered as changing only
with respect to one another; consequently, anything which troubles or
perplexes the ascertaining those changes of proportion by the means
of a general, determinate and invariable scale, must be hurtful to
trade.... Money ... is an ideal scale of equal parts. If it be demanded
what ought to be the standard value of one part? I answer by putting
another question: What is the standard length of a degree, a minute, a
second? It has none ... but so soon as one part becomes determined by
the nature of a scale, all the rest must follow in proportion. Of this
kind of money ... we have two examples. The bank of Amsterdam presents
us with the one, the coast of Angola with the other.”[53]
Steuart speaks here simply of the part money plays in circulation
as the _standard of price_ and _money of account_. If different
commodities are marked in the price-list at 15s., 20s., 36s.,
respectively, then I care, in fact, neither for the silver substance,
nor for the name of the shilling when comparing the magnitudes of their
values. The ratios between the numbers 15, 20, 36, tell everything, and
the number 1 has become the only unit of measure. Only the abstract
proportion of numbers can at all serve as a purely abstract expression
of proportion. In order to be consistent, Steuart should have dropped
not only gold and silver, but their legal baptismal names as well.
Since he does not understand the nature of the transformation of the
measure of value into a standard of price, he naturally believes that
the definite quantity of gold which serves as a unit of measure relates
as a measure not to other quantities of gold, but to values as such.
Since commodities appear as quantities of the same denomination through
the conversion of their exchange values into prices, he denies that
property of the measure which reduces them to one denomination; and
since in this comparison of different quantities of gold the quantity
of gold which serves as a unit of measure is conventional, he does not
see the necessity of fixing it at all. Instead of calling 1-360 part
of a circle degree, he might give that name to 1-180th part; the right
angle would then be measured by 45 degrees instead of 90, and acute and
obtuse angles would be measured accordingly. Nevertheless, the measure
of the angle would remain, then, as before, first a qualitatively
definite mathematical figure, the circle, and second a quantitatively
definite part of the circle. As for Steuart’s economic illustrations,
he refutes his own argument with one and does not prove anything with
the other. The bank money of Amsterdam was, in fact, merely the
reckoning name for Spanish doubloons, which retained their full weight
by lying idly in the bank vaults, while the circulating coins became
thinner from hard rubbing against the outer world. And as for the
African idealists we have to abandon them to their fate until critical
travelers will tell us more about them.[54] The French assignat
could be called an almost ideal money in Steuart’s sense: “_National
property. Assignation of 100 francs._” To be sure, the use-value which
the assignation was supposed to represent, namely, the confiscated
land, was indicated here, but the quantitative definition of the unit
of measure was forgotten and “the franc” became a meaningless word.
How much or how little land the assignation franc represented depended
on the results of the public auctions. In practice, however, the
assignation franc circulated as a token of value of silver money and
its depreciation was, therefore, measured by this silver standard.
The period of the suspension of cash payments by the Bank of England
was hardly more fruitful of war-bulletins than of money theories. The
depreciation of bank notes and the rise of the market price of gold
above its mint price called forth again the doctrine of the ideal
unit of money on the part of some of the advocates of the Bank. Lord
Castlereagh found the classical confused expression for the confused
idea by speaking of the unit of measure of money as “a sense of value
in reference to currency as compared with commodities.” When a few
years after the peace of Paris conditions permitted the resumption of
cash payments, the same question which had been stirred up by Lowndes
under William III., came up, hardly changed in form. An enormous
government debt, as well as a mass of private debts, accumulated in
twenty years, fixed obligations, etc., had been contracted on the
basis of depreciated bank notes. Were they to be paid back in bank
notes of which £4672, 10s. nominal, actually represented 100 pounds
of 22 carat gold? THOMAS ATTWOOD, a banker of Birmingham, came forth
as _Lowndes redivivus_. The creditors were to receive nominally as
many shillings as had been nominally borrowed, but if about 1-78 of
an ounce of gold constituted a shilling according to the old standard
of coinage, then say 1-90 of an ounce should now be christened a
shilling. Attwood’s adherents are known as the Birmingham school of
“little shillingmen.” The controversy over the ideal money unit, which
had started in 1819, still went on in 1845 between Sir Robert Peel and
Attwood, whose own wisdom, as far as the function of money as a measure
is concerned, is exhaustively summed up in the following passage, in
which, referring to Sir Robert Peel’s controversy with the Birmingham
Chamber of Commerce, he says: “The substance of your queries is ...
in what sense is the word pound to be used?... To what will the sum
one pound be equivalent?... Before I venture a reply I must enquire
what constitutes a standard of value?... Is £3 17s. 10-1/2d. an _ounce_
of gold, or is it only of the _value_ of an ounce of gold? If £3 17s.
10-1/2d. be an ounce of gold, why not call things by their proper
names, and, dropping the terms pounds, shillings and pence, say ounces,
pennyweights and grains?... If we adopt the terms ounces, pennyweights
and grains of gold, as our monetary system, we should pursue a direct
system of barter.... But if gold be estimated as of the _value_ of
£3 17s. 10-1/2d. per ounce ... how is this ... that much difficulty
has been experienced at different periods to check gold from rising
to £5 4s. per ounce, and we now notice that gold is quoted at £3 17s.
9d. per ounce?... The expression _pound_ has reference to value, but
not a fixed standard value.... The term pound is the _ideal unit_....
Labour is the parent of cost and gives the relative value to gold or
iron. _Whatever denomination of words are used to express the daily or
weekly labour of a man_, such words express the cost of the commodity
produced.”[55]
In the last words the hazy conception of the ideal money measure melts
away and its real meaning breaks through. The reckoning names of gold,
pound sterling, shilling, etc., should be names for definite quantities
of labor-time. Since labor-time constitutes the substance and the
intrinsic measure of values, these names would then actually represent
definite proportions of value. In other words, labor-time is maintained
to be the true unit of measure of money. With this we leave the
Birmingham school, but should add in passing that the doctrine of the
ideal measure of money acquired new importance in the controversy over
the question of the convertibility or non-convertibility of bank notes.
If paper receives its name from gold or silver, then the convertibility
of a note or its exchangeability for gold or silver remains an economic
law, no matter what the civil law may be. Thus a Prussian paper thaler,
although legally inconvertible, would immediately depreciate if it were
worth less than a silver thaler in ordinary trade, i. e., if it were
not practically convertible. The consistent advocates of inconvertible
paper money in England, therefore, sought refuge in the ideal measure
of money. If the reckoning names of money, £, s., etc., are names of
certain quantities of atoms of value, of which a commodity absorbs or
loses now more, now less in exchange for other commodities, then an
English £5 note, e. g., is just as independent of its relation to gold
as of that to iron and cotton. Since its title would no more imply
its theoretical equality with a certain quantity of gold or any other
commodity, the demand for its convertibility, i. e., for its practical
equality with a definite quantity of a specified thing would be
excluded by the very conception of the note.
The theory of labor-time as the direct measure of money was first
systematically developed by JOHN GRAY.[56] He makes a National Central
Bank ascertain through its branches the labor-time consumed in the
production of various commodities. The producer receives an official
certificate of value in exchange for his commodity. i. e., he gets a
receipt for as much labor-time as his commodity contains,[57] and these
bank notes of one week’s labor, one day’s labor, one hour’s labor,
etc., serve at the same time as a check for an equivalent in all other
commodities stored in the bank warehouses.[58] This is the fundamental
principle carefully worked out in detail and based throughout on
existing English institutions. Under this system, says Gray, “to
sell for money may be rendered, at all times, precisely as easy as it
now is to buy with money; ... production would become the uniform and
never-failing cause of demand.”[59] The precious metals would lose
their “privilege” as against other commodities and “take their proper
place in the market beside butter and eggs, and cloth and calico, and
then the value of the precious metals will concern us just as little
... as the value of the diamond.”[60] “Shall we retain our fictitious
standard of value, gold, and thus keep the productive resources of the
country in bondage? or, shall we resort to the natural standard of
value, labour, and thereby set our productive resources free?”[61]
Labor-time being the intrinsic measure of value, why should there be
another external measure side by side with it? Why does exchange value
develop into price? Why do all commodities estimate their value in one
exclusive commodity, which is thus converted into a special embodiment
of exchange value into money? That was the problem which Gray had
to solve. Instead of solving it, he imagined that commodities could
be related directly to each other as products of social labor. But
they can relate to each other only in their capacity of commodities.
Commodities are the direct products of isolated independent private
labors, which have to be realized as universal social labor through
their alienation in the process of private exchange, that is to say,
labor based on the production of commodities becomes social labor only
through universal alienation of individual labors. But by assuming
that the labor-time contained in commodities is _directly social_
labor-time, Gray assumes it to be common labor-time or labor-time of
directly associated individuals. Under such conditions a specific
commodity like gold or silver could not confront other commodities as
the incarnation of universal labor, and exchange value would not be
turned into price; but, on the other hand, use-value would not become
exchange value, products would not become commodities and thus the
very foundation of the capitalistic system of production would be
removed. But that is not what Gray has in mind. _Products are to be
produced as commodities, but are not to be exchanged as commodities._
He entrusts a national bank with the carrying out of this pious
wish. On the one hand, society, through the bank, makes individuals
independent of the conditions of private exchange, and on the other,
it allows them to go on producing on the basis of private exchange.
The logic of things, however, compels Gray to do away with one
condition of capitalistic production after another, although he wishes
to “reform” only the money system which results from the exchange of
commodities. Thus he transforms capital into national capital,[62]
land into national property,[63] and if his bank is to be watched
closely, it will be found that it not only receives commodities with
one hand and issues certificates for work delivered with the other, but
that it regulates production as well. In his last work, “Lectures on
Money,” in which Gray is anxious to demonstrate that his labor-money
is a purely bourgeois reform, he gets tangled up in even more glaring
contradictions.
Every commodity is directly money. That was Gray’s theory deducted
from his incomplete and, therefore, false analysis of commodities.
The “organic” structure of “labor money,” the “national bank” and the
“ware-docks” are mere fantastic visions in which the dogma is made
by a legerdemain to appear to us as a universal law. The dogma that
a commodity is money or that the isolated labor of the individual
contained in it is direct social labor, will of course not become
true through the mere fact that a bank believes in it and carries on
operations accordingly. It is more likely that bankruptcy would play
in that case the part of the practical critic. What remains concealed
in Gray’s writings and hidden from himself as well, namely, that
labor-money is a well-sounding economic phrase for the pious wish to
get rid of money, and with money, of exchange value, and with exchange
value, of commodities, and with commodities, of the capitalistic mode
of production, was clearly expressed by some English socialists of whom
a few preceded and others followed Gray.[64]
But it remained for Mr. Proudhon and his school to preach in
all earnest the degradation of _money_ and the exaltation of the
_commodity_ as the gist of socialism and thus to reduce socialism to an
elementary misconception of the necessary connection between commodity
and money.[65]
2. THE MEDIUM OF CIRCULATION.
After the commodity has received in the process of price determination
the form in which it becomes capable of circulation, and after gold has
acquired the character of money in the same process, circulation will
both present and solve the contradictions which are inherent in the
process of exchange of commodities. The actual exchange of commodities,
i. e., the social interchange of matter consists of a change of form in
which is unfolded the double character of the commodity as use-value
and exchange value, and at the same time its own change of form is
crystallized in distinct forms of money. To describe this change of
form is to describe circulation. As we have seen, given a world of
commodities and with it a system of division of labor, commodity is but
a developed form of exchange value; in the same manner, circulation
implies a steady stream of exchange transactions which are being
continually renewed on all sides. The second assumption we make is that
commodities enter the process of exchange with a _definite price_ or
that they appear to each other in that process in a double capacity,
really as use-values, ideally―in price―as exchange values.
The liveliest streets of London are crowded with stores whose show
windows are filled with the riches of the world, Indian shawls,
American revolvers, Chinese porcelain, Parisian corsets, Russian furs
and tropical spices, but all of these things of joy bear fatal white
labels marked with Arabian figures with the laconic characters £, s.,
d. Such is the picture of the commodity appearing in circulation.
a. THE METAMORPHOSIS OF COMMODITIES.
On close examination the process of circulation is seen to consist of
two distinct cycles. If we denote commodity by the letter C and money
by the letter M we can express these two forms as follows:
C―M―C
M―C―M.
In this chapter we are interested exclusively in the first form, i. e.,
in the form which serves as the direct expression of the circulation of
commodities.
The process C―M―C consists of the movement C―M, the exchange of the
commodity for money, or _selling_; the opposite movement M―C, exchange
of money for a commodity, or _buying_; and of the unity of the two
movements C―M―C, exchange of the commodity for money in order to
exchange the money for a commodity, or _selling_ in order to _buy_.
But the result which marks the end of the process is C―C, exchange of
commodity for commodity, real interchange of matter.
If we look at it from the extreme end of the first commodity, C―M―C
represents its transformation into gold and its retransformation from
gold into a commodity; a movement in which the commodity exists first
as a particular use-value, then divests itself of that character,
acquires the character of exchange value or universal equivalent,
in which capacity it has nothing in common with its natural form,
then throws off the last form as well to remain finally an actual
use-value for the satisfaction of particular wants. In this last form
it falls out of the sphere of circulation into that of consumption.
The entire process of circulation C―M―C thus includes the combined
series of metamorphoses, which every single commodity undergoes
in order to become a direct use-value to its possessor. The first
metamorphosis is accomplished in the first phase of the circulation
process, C―M; the second in the last phase, M―C; and the entire
process constitutes the _curriculum vitae_ of the commodity. But
the process C―M―C represents the combined metamorphosis of a single
commodity and constitutes at the same time the sum of certain one-sided
metamorphoses of other commodities, since every metamorphosis of the
first commodity constitutes its transformation into another commodity
and therefore the transformation of the other commodity into it; hence
it constitutes a twofold transformation which takes place at the same
stage of circulation. We must then consider separately each of the two
processes of exchange into which circulation C―M―C breaks up.
C―M or _sale_: commodity C enters the process of circulation not only
as a particular use-value, e. g., a ton of iron, but as a use-value
of a certain price, say, £3 17s. 10-1/2d., or an ounce of gold.
While this price is on the one hand the exponent of the quantity of
labor-time contained in a ton of iron, i. e., of the magnitude of its
value, it at the same time expresses the pious wish of the iron to
become gold, i. e., to give to the labor-time it contains the aspect
of universal social labor-time. Unless this trans-substantiation takes
place, the ton of iron not only ceases to be a commodity, but even a
product, for it is a commodity only because it is a non-use-value to
its owner; that is to say, his labor counts as actual labor only in so
far as it is labor useful to others, and the thing is useful to him
only as abstract universal labor. It is, therefore, the business of
iron, or of its owner, to find that point in the world of commodities
where iron attracts gold. But this difficulty, the _salto mortale_
of the commodity, is overcome when the sale actually takes place, as
is assumed here on the analysis of simple circulation. When the ton
of iron is realized as a use-value through its alienation, i. e., by
passing from the hands in which it is a non-use-value to hands in which
it is a use-value, it at the same time realizes its price and from mere
imaginary gold it becomes real gold. In place of the name one ounce of
gold or £3 17s. 10-1/2d., an ounce of real gold has appeared, but the
ton of iron has cleared that place. Not only does the commodity―which
in its price had been ideally converted into gold―actually turn into
gold through the sale C―M, but gold, which as a measure of value had
been only ideal money and in fact figured merely as a money name of
commodities―is now turned into actual money[66] by the same process.
Just as gold became the ideal universal equivalent, because all
commodities measured their values by it, so does it now become the
absolutely alienable commodity, real money, because it is the product
of the universal alienation of commodities for it―and the sale C―M is
the process by means of which that universal alienation takes place.
But gold becomes real money only through sale, because the exchange
values of commodities were already ideal gold in their prices.
In the sale C―M, as well as in the purchase M―C, two commodities,
entities of exchange value and use-value, confront each other, but the
exchange value of the commodity exists only ideally as price; while
as regards gold, although it is really a use-value, its use-value
is confined only to its being the bearer of exchange value and is,
therefore, merely a formal use-value, having no relation to a real
individual want. The antithesis of use-value and exchange value is thus
distributed at the two extreme poles of C―M, so that the commodity
confronts gold as a use-value which has yet to realize in gold its
exchange value or its price, while gold confronts the commodity as an
exchange value, whose formal use-value is yet to be realized in the
commodity. Only through this duplication of the commodity as commodity
and gold, and, further, through the twofold and polar relation by
virtue of which each extreme represents but ideally what its opposite
is in reality and is in reality what its opposite is only ideally―in
short, only through the appearance of commodities as two-sided polar
opposites are the contradictions solved that are inherent in the
process of exchange.
So far we have considered C―M as sale, as the conversion of commodity
into money. But if we look at it from the other end, the same process
will assume the form M―C, or purchase, i. e., the conversion of
money into commodity. Sale is necessarily its opposite at the same
time; it is the former if we look at the process from one end, and
the latter if we regard the process from the other end. In practice
this process differs only in that the initiative in C―M originates
at the commodity end or with the seller, while in M―C it comes from
the money end or the buyer. In describing the first metamorphosis
of the commodity, its conversion into money as a result of the
completion of the first phase of circulation C―M, we assume at the
same time that another commodity has been converted into money and
is now in its second phase of circulation, M―C. Thus we get into a
vicious circle of assumptions. Circulation itself constitutes such a
vicious circle. If we did not consider M in M―C as the result of a
metamorphosis of another commodity, we would thereby take exchange out
of the process of circulation. But outside of the latter the form C―M
disappears and only two different Cs confront each other, say iron
and gold, the exchange of which does not constitute a part of the
process of circulation, being direct barter. Gold, at the source of
its production, is a commodity like any other commodity. Its relative
value and that of iron or of any other commodity is expressed here in
quantities in which they are mutually exchanged. But in the process
of circulation this operation is implied, the value of gold being
already given in the prices of commodities. Nothing can, therefore,
be more erroneous than the idea that gold and commodity enter into
the relation of direct barter _within the process of circulation_ and
that their relative values are ascertained through their exchange as
simple commodities. The illusion that gold is bartered as a simple
commodity for other commodities in the process of circulation is due to
the fact that prices represent equations in which certain quantities
of commodities are made equal to certain quantities of gold, i. e.,
that the commodities are made to relate to gold in its capacity
of money, as a universal equivalent, and, therefore, appear to be
directly exchangeable for it. In so far as the price of a commodity
is _realized_ in gold, it is exchanged for gold as a commodity, as a
particular embodiment of labor-time; but in so far as it is the _price_
that is realized in gold, the commodity is exchanged for gold in its
capacity of money and not of a commodity, i. e., it is exchanged for
gold as a universal embodiment of labor-time. But in either case the
quantity of gold for which the commodity is exchanged in the process
of circulation is not determined by exchange, but the exchange is
determined by the price of the commodity, i. e., by its exchange value
estimated in gold.[67]
Within the process of circulation gold appears in everybody’s hands as
the result of sale C―M. But since C―M, sale, is at the same time M―C,
purchase, it is apparent that while C, the commodity from which the
process starts, is passing through its first metamorphosis, another
commodity, which confronts it as the opposite pole M, is completing
its second metamorphosis and is, therefore, passing through the second
phase of circulation, while the first commodity is still in the first
phase of its course.
As a result of the first phase of circulation, the sale, we get
money which is the starting point of the second phase. In place of
the commodity in its first form appears its golden equivalent. This
result may now form a resting point, since the commodity in this
second form possesses a lasting existence of its own. The commodity,
a non-use-value in the hands of its possessor, is now on hand in an
always useful, since always exchangeable, form, and it depends upon
circumstances when and at what point of the surface of the commodity
world it will again enter circulation. Its formation into a gold
chrysalis constitutes an independent period in its life which may last
a greater or less length of time. While in the case of barter the
exchange of one particular use-value is directly bound up with the
exchange of another particular use-value, the universal character of
labor which creates exchange value is manifested in the separation and
lack of coincidence of acts of purchase and sale.
_M―C, purchase_, is the inverted movement of C―M and at the same time
the second or final metamorphosis of the commodity. As gold, i. e., in
the form of the universal equivalent, the commodity can be directly
represented in the use-values of all other commodities; the latter
aspire to gold as their hereafter, but at the same time indicate in
their prices the key in which it must sound in order that their bodies,
their use-values, may take the place of money, while their souls,
their exchange-values, may enter gold. The universal product of the
alienation of commodities is the absolutely alienable commodity. There
is no qualitative and only a quantitative limit to the transformation
of gold into commodity, namely, the limit of its own quantity or
magnitude of its value. “Everything is to be had for cash.” While in
the movement C―M, the commodity, through its alienation as a use-value,
realizes its own price and the use-value of somebody else’s money; it
realizes in the movement M―C, through its alienation as an exchange
value, its own use-value and the price of the other commodity. While
through the realization of its price the commodity transforms gold
into actual money, it turns gold into its merely fleeting money-form,
through its own retransformation. Since the circulation of commodities
implies an extensive division of labor and consequently a diversity of
wants on the part of individuals, a diversity which bears an inverse
ratio to the specialization of their own products, the purchase M―C may
appear as an equation with one commodity equivalent or split up into a
series of commodity-equivalents limited by the variety of the demands
of the purchaser and by the amount of money in his possession. Just as
a sale is a purchase, so is a purchase a sale. M―C is at the same time
C―M, but the initiative belongs in this case to gold or the purchaser.
Coming back now to C―M―C, or to circulation as a whole, it is apparent
that it contains the combined series of metamorphoses through which
a commodity passes. But at the same time as one commodity enters the
first phase of its circulation and completes its first metamorphosis,
another commodity enters the second phase of circulation, completes its
second metamorphosis and falls out of circulation; the first commodity
enters at the same time the second phase of circulation completes
its second metamorphosis and falls out of circulation, while a third
commodity enters circulation, passes through the first phase of its
course completing the first metamorphosis.
Thus, the combined circulation C―M―C, as a complete metamorphosis of a
commodity always constitutes at the same time the end of the complete
metamorphosis of another commodity and the beginning of a complete
metamorphosis of a third commodity, i. e., a series without beginning
or end. To illustrate this let us call C in either extreme C’ and C”
respectively, in order to distinguish the commodities, the series
reading thus: C’―M―C”. The first member, C’―M, presupposes in fact
that M is the result of another transaction C―M, and is thus itself
merely the last member of a series C―M―C’, while the second part M―C”
is merely a result of C”―M, or appears as the first part of C”―M―C’”,
and so on. Furthermore, although M is the result of only _one_ sale,
it appears that the last part M―C, may be represented as M―C’ + M―C”
+ M―C’”, etc., i. e., it may be split up into a number of purchases,
and consequently a number of sales, or into a number of first members
of new complete metamorphoses of commodities. Since the complete
metamorphosis of a single commodity thus appears as a link not only
of one endless chain of metamorphoses, but of many such chains, the
process of circulation in the world of commodities presents a hopeless
confusion of intertwined movements constantly ending and starting anew
at a countless number of points. But every single sale or purchase
stands as an independent isolated act, whose supplemental act may be
separated from it in time and place, and therefore does not need to
follow it directly as its continuation. Every separate process of
circulation, C―M or M―C, as a transformation of one commodity into
use-value and of another into money, i. e., as the first and second
phases of circulation respectively forms an independent halting
point from either direction; but, on the other hand, all commodities
commence their second metamorphosis in the common form of the universal
equivalent, gold, and stop at the starting point of the second phase of
circulation; for that, reason any M―C dovetails in actual circulation
with any C―M; the second chapter in the life-course of one commodity
with the first chapter of that of another commodity. A, e. g., sells
£2 worth of iron. He thus completes the transaction C―M or the first
metamorphosis of commodity iron, but postpones his purchase until some
other time. At the same time B, who sold 2 quarters of wheat for £6 a
fortnight since, buys with the same £6 a coat and trousers of Moses &
Son, thus completing M―C or the second metamorphosis of the commodity,
wheat.
The two transactions M―C and C―M appear here merely as links of one
chain, because a commodity expressed in gold looks like any other
commodity, and one cannot tell by the looks of the gold whether it is
transformed iron or transformed wheat. C―M―C appears, therefore, in the
actual process of circulation as a jumble of countless accidentally
coinciding or successively following members of different complete
metamorphoses. The actual process of circulation thus appears not as
a complete metamorphosis of a commodity, not as its movement through
opposite phases, but as a mere agglomeration of many accidentally
coinciding or successive purchases and sales. The process thus loses
all clearness of outline which is so much more the case since every
single act of circulation, e. g., sale, is at the same time its
opposite, purchase, and vice versa. On the other hand, the process
of circulation is nothing but the movement of metamorphoses in the
world of commodities and, therefore, must reflect them also in its
movement as a whole. How that reflection takes place we shall consider
in the following chapter. It may be added here that in C―M―C the two
extreme Cs constitute two forms of commodities which do not bear the
same relation to M. The first C relates to money as a commodity of a
special class to a universal commodity, while money relates to the
second C as a universal commodity to an individual commodity. C―M―C
can, therefore, be reduced by abstract logic to the final form S―U―I in
which S, standing for species, forms the first extreme; U, signifying
universality, forms the connecting medium, and I, individuality,
constitutes the last extreme.
The owners of commodities entered the sphere of circulation simply
as guardians of commodities. Within that sphere they confront each
other in the opposite roles of buyer and seller, one as a personified
sugar-loaf, the other as personified gold. As soon as the sugar-loaf
is turned into gold, the seller becomes a buyer. These definite social
functions are no outgrowths of human nature, but are the products
of relations of exchange between men who produce their goods in the
form of commodities. They are so far from being purely individual
relations between buyer and seller that both enter this relation
only to the extent that their individual labor is disregarded and
is turned into money as labor of _no_ individual. Just as it is,
therefore, childish to consider these economic bourgeois roles of
buyer and seller as eternal social forms of human individuality, so it
is on the other hand, preposterous to lament in them the extinction
of individuality.[68] They are the necessary manifestations of
individuality at a certain stage of the social system of production.
Moreover, in the opposition of buyer and seller the antagonistic nature
of capitalistic production is expressed as yet so superficially
and as mere matter of form, that this opposition belongs also to
precapitalistic forms of society, since it merely requires that
the mutual relations of individuals should be those of owners of
commodities.
Now, if we consider the result of C―M―C, it comes down to mere
interchange of matter, C―C. A commodity has been exchanged for a
commodity, a use-value for a use-value, and the transformation of the
commodity into money, or the commodity in its form of money, serves
merely as a means of effecting this interchange of matter. Money thus
appears merely as a _medium of exchange_ of commodities; not as a
medium of exchange in general, but as a means of exchange in the sphere
of circulation, i. e., a _medium of circulation_.[69]
We have seen that the process of circulation of commodities comes to
a completion in C―C, appearing as mere barter carried on by means of
money; further, that C―M―C represents in general not only two isolated
processes, but their dynamic union as well; but to draw from that the
conclusion that purchase and sale form an indivisible unit, is a mode
of thinking the criticism of which belongs to the domain of logic,
and not to that of economics. The separation of purchase and sale in
the process of exchange destroys all local, primitive, patriarchal
and naively genial barriers to interchange of matter in society. It
is, moreover, the general form of the separation of the points of
coincidence and opposition in this interchange, carrying within it the
possibility of commercial crises, because the antagonism of commodity
and money is the abstract and general form of all antagonisms with
which the capitalistic system of labor is pregnant. Hence, circulation
of money is possible without crises, but crises can not occur without
money circulation. In other words, where labor based on the system of
private exchange has not reached the stage marked by the existence
of money, it is less capable of producing those phenomena which
presuppose the full development of the capitalistic mode of production.
Bearing this in mind we can appreciate the depth of the criticism
which proposes to do away with the “shortcomings” of capitalistic
production by abolishing the “privilege” enjoyed by the precious metals
and introducing a so-called “rational monetary system.” As a sample
of economic defence of an opposite character may serve the following
piece of reasoning which has been proclaimed exceedingly keen. JAMES
MILL, the father of the well-known English economist, John Stuart Mill,
says: “Whatever ... be the amount of the annual produce, it never can
exceed the amount of the annual demand.... Of two men who perform an
exchange, the one does not come with only a supply, the other with only
a demand; each of them comes with both a demand and a supply.... The
supply which he brings is the instrument of his demand; and his demand
and supply are of course exactly equal to one another. It is therefore,
impossible that there should ever be in any country a commodity or
commodities in quantity greater than the demand, without there being,
to an equal amount, some other commodity or commodities in quantity
less than the demand.”[70]
Mill restores the balance by turning the process of circulation into
direct barter and then smuggling into direct barter the character of
buyer and seller borrowed by him from the process of circulation. To
put it in his own confused language, during certain periods when all
commodities are unsaleable there are really more buyers than sellers
of one commodity, _money_, and more sellers than buyers of _all other
money_, commodities; such was, e. g., the case at certain moments
during the commercial crisis of 1857-58 in London and Hamburg. The
metaphysical balance of purchases and sales amounts to this, that
every purchase is a sale and every sale is a purchase, which is a poor
consolation to the guardian of the commodity who can not bring about
its sale and therefore can not buy.[71]
The separation of sale and purchase makes possible a large number of
fictitious transactions side by side with genuine trade before the
final exchange between the producer and the consumer of commodities
takes place. It enables a host of parasites to penetrate the process of
production and exploit the separation. But this, again, means that with
money as the universal form of labor under the capitalist system, there
is _the possibility_ of the development of its contradictions.
b. THE CIRCULATION OF MONEY.
Actual circulation appears at first sight as a mass of purchases and
sales accidentally taking place side by side. In buying as in selling,
commodities and money always stand in the same mutual relation: the
seller, on the side of the commodity; the buyer, on that of money.
Money as a medium of circulation always appears therefore as _a means
of purchase_; and in that way the difference in its destinations in
the opposite phases of the metamorphosis of the commodity becomes
indistinguishable.
Money passes into the hands of the seller in the same transaction in
which the commodity passes into the hands of the buyer. Commodities
and money thus flow in opposite directions and this change of place
in which the commodity passes over to one side and money to the other
side, occurs simultaneously at an indefinitely large number of points
on the entire surface of bourgeois society. But the first step which
the commodity makes in the sphere of circulation is also its last
step.[72] Whether it leaves its place on account of its attraction
for gold (C―M), or on account of its attraction by gold (M―C), with
one move, with one change of place it falls out of the sphere of
circulation into that of consumption. Circulation is a continuous flow
of commodities, but different commodities all the time, since each
commodity makes but one move. Every commodity enters upon the second
phase of its circulation not as the same commodity, but as another
commodity, gold. Hence the movement of a metamorphosed commodity is the
movement of gold. The same piece of gold or the identical gold coin
which changed places with one commodity in the act C―M, reappears from
the opposite end as the starting point for M―C and thus changes places
for the second time with another commodity. Just as it passed from the
hands of buyer B into those of seller A, it now leaves A’s hands who
has become a buyer and passes into C’s hands. The path described by a
commodity in its transformation into money and its retransformation
from money, i. e., the movement of a complete metamorphosis of a
commodity assumes the aspect of an apparent movement of the same coin
that changes places twice with two different commodities. No matter in
how scattered and haphazard fashion purchases and sales may take place
near each other, there is always in actual circulation a seller for
each buyer and the money which moves into the place of the commodity
sold, before it came into the hands of the buyer, must have already
changed places with another commodity. Sooner or later it again leaves
the hands of the seller, who turns buyer, to pass into the hands of
a new seller and this frequently repeated change of place forms the
interlacing of the metamorphoses of commodities. The same coins are
moving, some more, others less frequently, from one place in the
sphere of circulation to another, always in the direction opposite to
that of the commodities moved, thus describing a longer or shorter
circulation-curve. The different movements of the same coin can follow
each other in point of time only, and on the contrary, the many
scattered purchases and sales which appear as so many separate changes
of place between commodities and money, occur simultaneously separated
only in point of space.
The circulation of commodities C―M―C in its elementary form is
completely described in the transition of money from the hands of the
buyer into those of the seller and from the hands of the latter, as
soon as he has turned buyer, into those of a new seller. This completes
the metamorphosis of the commodity and with it the movement of money
in so far as that movement is the expression of the metamorphosis.
But since new use-values are continually produced in the shape of new
commodities and must thus be constantly thrown anew into circulation,
the process C―M―C is repeatedly renewed by the same commodity owners.
The money which they have spent as buyers gets back into their hands
as soon as they appear again as vendors of commodities. The constant
renewal of the circulation of commodities finds its reflection in the
continual circulation over the entire surface of bourgeois society of
a quantity of money which, passing from hand to hand, describes at the
same time a number of different small cycles starting from numberless
points and returning each to its own starting point, to repeat the same
movement over again.
The change of form on the part of commodities appears as a mere change
of place on the part of money and the continuity of the circulation
movement is all on the side of money, since the commodity always makes
but one step in the direction opposite to money, while the latter makes
in each case the second step for the commodity; the entire movement
seems, therefore, to proceed from money, although in the case of a sale
the commodity draws money out of its place, i. e., it circulates money
as much as it is circulated by the latter in the case of a purchase.
Furthermore, owing to the fact that money always confronts commodities
in its capacity of a means of purchase, and in that capacity moves
commodities only by realizing their price, the entire movement of
circulation appears as a change of place between money and commodities,
the former realizing the prices of the latter either by separate acts
of circulation taking place simultaneously and side by side, or by
successive transactions when the same coin realizes the prices of
different commodities one after another. If we consider, e. g., the
series C―M―C’―M―C”―M―C’”, etc., without regard to the qualitative
aspects which become indistinguishable in the process of circulation,
we witness the same monotonous operation. After realizing the price
of C, M successively realizes those of C’, C”, etc., and commodities
C’, C”, C’”, etc., constantly take the place which money has left.
Money thus appears to keep commodities in circulation by realizing
their prices. In discharging this function of realization of prices,
money is itself constantly circulating, now changing its place, now
describing a curve of circulation, now completing a small circuit where
the starting and returning points coincide. As a medium of circulation,
money is subject to a circulation of its own. The change of form of
the circulating commodities appears, therefore, as a movement of money
which furthers the exchange of commodities, motionless in themselves.
The movement of the circulation process of commodities thus takes on
the form of the movement of gold as a medium of circulation, i. e. of
the _circulation of money_.
Since owners of commodities give the products of their individual labor
the appearance of products of social labor by turning one object,
viz. gold, into the direct expression of universal labor-time and
therefore into money, their own movement by which all of them effect
the interchange of the material products of their labor now appears to
them as the direct movement of that one object, as the circulation of
gold. The social movement itself appears to the owners of commodities
partly as an outward necessity and partly as a mere formal intermediary
process which enables every individual who puts any use-value into
circulation to get other use-values out of it of an equal value. The
use-value of commodities comes into play with their disappearance from
the sphere or circulation, while the use-value of money as a medium of
circulation is in its very circulation. The movement of a commodity
in the sphere of circulation is of a transitory kind, while ceaseless
motion in that sphere constitutes the function of money. Through this
special function which it performs within the sphere of circulation
money acquires a new capacity, which we have to consider now more
closely.
In the first place, we see that the circulation of money forms an
endlessly split up movement, since it reflects the splitting up of the
process of circulation into an infinitely large number of purchases
and sales and the independent separation of the mutually supplementary
phases of metamorphoses of commodities. In the small cycles described
by money, where the starting and returning points coincide, we do find
a return movement, i. e., an actual circular movement, but the fact
that there are as many starting points as there are commodities and
that the number of these cycles is infinitely large puts them beyond
all control, measurement, or computation. The time between the start
and the return of a commodity is just as indefinite. Moreover, it is
immaterial whether or not such a circuit has been actually described in
a given case. No economic fact is more generally known than that one
can spend money with one hand without getting it back with the other.
Money proceeds from an endless number of points and returns to as many
different points, but the coincidence of the starting and returning
points is a matter of chance, because in the movement C―M―C the turning
of the buyer again into a seller is not a necessary condition. Still
less does the circulation of money resemble a movement radiating
from a common centre to all points of the periphery and back from
the peripheral points to the centre. The so-called cycle described
by money, as it is pictured, amounts simply to this, that at all
points we observe its appearance and disappearance, its never ceasing
transition from place to place. In a higher, more involved form of
money circulation, e. g. bank-note circulation, we shall find that
the conditions of emission of money include those for its return. But
in the simple money circulation it is a matter of chance for the same
buyer to become again a seller. Where we really see constant cycle
motions taking place, they are only reflections of deeper forces in
the sphere of production, e. g., the manufacturer draws money from his
banker on Friday, pays it out to his working-men on Saturday, the men
immediately pay out the greater part of it to the storekeepers, etc.,
and the latter turn it in on Monday back to the banker.
We have seen that money realizes simultaneously a certain number of
prices in the variegated purchases and sales which take place side by
side at the same time. On the other hand, in so far as its movement
represents the movement of the combined metamorphoses of commodities
and the interlacing of these metamorphoses, the same coin realizes
the prices of different commodities and thus makes a larger or
smaller number of moves. If we take the circulation of a country for
a given length of time, say a day, the quantity of gold required for
the realization of prices and, consequently, for the circulation of
commodities, will be determined by two conditions: first, the sum
total of the prices; second, the average number of moves made by one
coin. This number of moves or the rapidity of circulation of money is
in its turn determined by or expresses the average rapidity with which
commodities go through the different phases of their metamorphoses, the
rapidity with which these metamorphoses succeed one another, and with
which those commodities that have gone through their metamorphoses are
replaced by new commodities in the process of circulation. We have seen
that in the process of the determination of prices the exchange value
of all commodities is ideally converted into a certain quantity of gold
of the same value and that the same amount of value is present in a
double form in either of the isolated acts of circulation M―C and C―M,
first embodied in the commodity, and second, in gold; yet gold enjoys
the capacity of a medium of circulation not by virtue of its isolated
relation to separate commodities in a state of rest, but owing to its
active presence in the dynamic world of commodities, viz., its function
of expressing the change of form of commodities by its change of place
and expressing the rapidity of their change of form by the rapidity of
its change of place. The extent to which it is present in the sphere
of circulation, i. e., the actual quantity of gold in circulation, is
thus determined by the extent to which it is discharging its function
throughout the entire process.
The circulation of money implies the circulation of commodities; money
circulates commodities which have prices, i. e., which are beforehand
ideally equated to certain quantities of gold. In the determination
of the prices of commodities, the value of the quantity of gold
which serves as a unit of measure, or the value of gold, is assumed
to be given. Under that assumption the quantity of gold necessary
for circulation is determined first of all by the sum total of the
prices of commodities that are to be realized. But this sum is itself
determined: 1. By the level of prices, the relatively high or low
exchange value of commodities estimated in gold; and 2. By the mass
of commodities circulating at fixed prices, i. e. by the number of
purchases and sales at given prices.[73] If one quarter of wheat is
worth 60 shillings, then twice as much gold is required to circulate it
or to realize its price as would be the case if it were worth only 30
shillings. To circulate 500 quarters of wheat at 60 shillings, twice
as much gold is necessary as for the circulation of 250 quarters at
the same price. Finally, to circulate 10 quarters at 100 shillings
only half as much money is necessary as when circulating 40 quarters
at 50 shillings. It follows that the quantity of gold required for
circulation may fall in spite of a rise in price, if the mass of
commodities in circulation declines in a greater ratio than the
rise of the combined sum of prices; and, inversely, the quantity of
the circulating medium may rise in spite of a decline of the mass
of commodities in circulation, if the sum total of prices rises in
a greater ratio. Thorough and minute English investigations have
demonstrated e. g. that in the early stages of a dearth of grain in
England the quantity of money in circulation increases, because the
total price of the diminished supply of grain is greater than the
former total price of a larger supply of grain, while the circulation
of the other commodities continues undisturbed for some time at their
old prices. At a later stage of the dearth of grain, there is a decline
in the quantity of circulating money, either because less goods are
sold at old prices besides grain, or the same quantity of those goods
is sold at lower prices.
But, as we have seen, the quantity of money in circulation is
determined not only by the sum total of prices of commodities that are
to be realized, but also by the rapidity with which money circulates
or with which it completes this work of realization. If the same
sovereign makes ten purchases a day, each of a commodity having a
price of one sovereign, and thus changes hands ten times, it does as
much work as would be accomplished by ten sovereigns each performing
but a single act of circulation a day.[74] Consequently, rapidity of
gold circulation can make up for its quantity, or the presence of gold
in the sphere of circulation is determined not only by its presence
as an equivalent of a commodity side by side with it, but also by
its participation in the movement of metamorphoses of commodities.
The rapidity of the circulation of money, however, can serve as a
substitute for its quantity only to a limited extent, since at any
given moment an endless number of isolated purchases and sales takes
places in different localities.
If the total price of the commodities in circulation rises, but in
a smaller ratio than the increase in the rapidity of circulation of
money, the volume of the circulating medium will diminish. If on the
contrary the rapidity of circulation decreases in a greater ratio
than the total price of the commodities in circulation, the volume
of currency will increase. An increasing volume of currency combined
with a general fall of prices or a diminishing volume of currency in
connection with a general rise of prices is one of the best known
phenomena in the history of prices. But the consideration of the
causes which bring about a simultaneous rise in the level of prices
and a still greater rise in the rate of velocity of circulation of
money, or the opposite phenomenon, falls outside of the sphere of
simple circulation. By way of illustration, it may be mentioned that
in periods of prevailing credit, the rapidity of circulation of
money grows faster than the prices of commodities, while in times
of declining credit the prices of commodities fall slower than the
rapidity of circulation. The shallow and artificial character of the
simple circulation of money is manifested in the fact that all the
elements which have a determining influence on the volume of currency,
such as the volume of commodities in circulation, prices, the rise or
fall of prices, the number of simultaneous purchases and sales, the
rapidity of the circulation of money,―depend on the metamorphic process
which takes place in the world of commodities, and that again depends
on the general character of the methods of production, the size of
population, the relation between city and country, the development of
the means of transportation, the greater or less division of labor,
credit, etc.; in short, on circumstances all of which lie _outside_ of
the sphere of simple circulation of money and are only reflected in it.
The rapidity of circulation being given, the volume of currency is
simply determined by the prices of commodities. Hence, prices are not
high or low, because there is more or less money in circulation, but
on the contrary, there is more or less money in circulation, because
prices are high or low. This is one of the most important laws, whose
demonstration in detail by means of the history of prices constitutes
perhaps the only merit of the post-Ricardian English Political Economy.
If experience shows, that the level of metallic circulation or the mass
of gold and silver in circulation in a given country is subject to
temporary ebbs and tides and very violent ones at times,[75] but on
the whole remains stationary for long periods, the deviations forming
but small oscillations about the average level, this is explained
by the antagonistic nature of the circumstances which determine the
quantity of money in circulation. Their simultaneous modifications
neutralize their effects and leave everything where it was before.
The law, that with a given rapidity of circulation of money and a given
total sum of prices of commodities the quantity of the circulating
medium is determined, may also be expressed as follows. If the exchange
values of commodities and the average rapidity of their metamorphoses
are given, the quantity of gold in circulation depends on its own
value. If, therefore, the value of gold, i. e. the labor-time necessary
for its production, should rise or fall, the prices of commodities will
rise or fall in inverse ratio, and corresponding to that rise or fall
of prices, the rapidity of circulation remaining the same, a larger or
smaller quantity of gold would be required to keep the same volume of
commodities in circulation. The same change would occur, if the old
standard of value were superseded by a more or less valuable metal.
Thus, Holland required from fourteen to fifteen times as much silver as
it had previously required gold, in order to circulate the same volume
of commodities, when out of tender regard for the government creditors
and out of fear of the effects of the discoveries in California and
Australia it substituted silver for gold money.
From the fact that the quantity of gold in circulation depends on the
variable sum total of prices of commodities and the varying rapidity
of circulation, it follows that the volume of the circulating medium
must be capable of contraction and expansion; in short, that according
to the requirements of circulation, gold must now enter, now leave the
sphere of circulation in its capacity of a medium of circulation. How
the circulation process itself realizes these conditions, we shall see
later on.
C. COIN AND SYMBOLS OF VALUE.
In its capacity of a medium of circulation, gold acquires a shape
of its own, it becomes _coin_. In order to prevent any technical
difficulties in the way of its circulation, it is coined according to
the standard of the money of account. Gold pieces whose imprints and
legends show that they contain certain weights of gold corresponding
to the reckoning names of money, £, s., etc., are coins. The
establishment of a mint-price, as well as the technical work of
coining, are the business of the state. Both as money of account and
as coin, money acquires a _local and political character_; it speaks
different languages and wears different national uniforms. The sphere
in which money circulates as coin, is distinguished as an _internal_
sphere of circulation which is separated from the _universal_ sphere of
circulation in the commodity world by national boundaries.
Yet, the only difference between gold bullion and gold coin is that
between coin denomination and weight denomination. What seems to be a
difference in name in the latter case appears as a difference in shape
in the former. Gold coin can be thrown into the melting-pot and thus be
converted again into gold _sans phrase_, just as, on the contrary, gold
bars only have to be sent to the mint to receive the shape of coins.
The conversion and reconversion from one form into another appears to
be a purely technical matter.
For 100 pounds or 1200 ounces troy of 22 carat gold one can get
£4,672-1/2 or gold sovereigns at the English mint; if these sovereigns
be put on one side of the weighing scale and one hundred pounds of
gold bullion on the other, the two will balance each other, which
proves that the sovereign is nothing but a piece of gold of certain
weight bearing this name in English coinage and having a shape and
stamp of its own. The 4,672-1/2 sovereigns are put into circulation
at different points, and once in its grasp they make a certain number
of moves per day, some sovereigns more, others less. If the average
number of moves per day of each ounce be ten, the 1200 ounces of gold
would realize 12,000 ounces or 46,725 sovereigns as the total price
of commodities. You may turn and toss an ounce of gold in any way you
like, and it will never weigh ten ounces. But here in the process of
circulation one ounce practically does weigh ten ounces. The work
performed by a coin in the sphere of circulation is equivalent to the
quantity of gold it contains multiplied by the number of its moves.
Besides the actual importance which a coin possesses by virtue of its
being an individual piece of gold of a definite weight, it acquires
an ideal significance due to its function. But whether the sovereign
circulates once or ten times, in each particular purchase or sale
it acts only as one sovereign. It is like a general who by timely
appearance at ten different points on the battle field does the work
of ten generals, but still remains the same identical general at each
point. The idealization of the means of circulation which is due to the
supplanting of quantity by rapidity in money circulation, affects only
the function of the coin within the sphere of circulation, but not the
nature of the individual coin.
The circulation of money is a movement through the outside world, and
the sovereign, though it _non olet_, keeps rather mixed company. In the
course of its friction against all kinds of hands, pouches, pockets,
purses, money-belts, bags, chests and strong-boxes, the coin rubs off,
loses one gold atom here and another one there and thus, as it wears
off in its wanderings over the world, it loses more and more of its
intrinsic substance. By being used it gets used up. Let us take up a
sovereign at the moment when its natural, inborn character has been
slightly affected. A baker, says Dodd,[76] who receives from the bank
to-day a brand new sovereign and pays it tomorrow to the miller,
does not pay the same veritable sovereign; the latter has become
lighter than it was at the time he received it. It is clear, says an
anonymous writer,[77] that in the very nature of things, coins must
depreciate one by one as a result of ordinary and unavoidable friction.
It is a physical impossibility to entirely exclude light coins from
circulation at any time, even for one day. Jacob estimates that of
the 380 million pounds sterling which were in existence in Europe in
1809, nineteen million pounds sterling entirely disappeared by 1829,
i. e., within a period of twenty years.[78] Thus, while a commodity
at its first step into the sphere of circulation, falls out of it, a
coin, after a couple of steps within that sphere represents more metal
than it actually contains. The longer a coin remains in circulation,
the rapidity of circulation remaining the same, or the greater its
rapidity of circulation within the same period of time, the greater
the discrepancy between its form as coin and its actual gold or silver
substance. What remains is _magni nominis umbra_. The body of the coin
becomes but a shadow. If at first it became heavier through the process
of circulation, it now becomes lighter on account of it, but continues
to represent the original quantity of gold in each single purchase or
sale. The sovereign, as a fictitious sovereign, as fictitious gold,
continues to perform the function of a legitimate coin. While other
beings lose their idealism in contact with the outer world, the coin is
idealized by practice, being gradually transformed into a mere phantom
of its golden or silver body. This second idealization of metal money
springing from the very process of circulation, or from the discrepancy
between its nominal weight and its real weight is exploited in all
kinds of coin counterfeiting practiced partly by governments, partly by
private adventurers. The entire history of coinage from the beginning
of the middle ages until late in the eighteenth century is nothing
but a history of these twofold and antagonistic adulterations, and
Custodi’s voluminous collection of writings of Italian economists turns
mostly about this point.
But the fictitious importance of gold due to its function, comes
in conflict with its real substance. One gold coin has lost more,
another, less of its metal substance in the course of circulation,
and one of them is, as a matter of fact, worth more now than the
other. But since in the discharge of their function of coins they
are taken at the same value, the sovereign weighing a quarter of an
ounce passing for no more than the sovereign which only stands for a
quarter of an ounce, the full-weight sovereigns are subjected in the
hands of unscrupulous owners to surgical operations which produce
artificially what the circulation process has caused in a natural way
to their more light-weighted brothers. They are clipped and reduced
and the superfluous gold fat lands in the melting pot. If 4,672-1/2
gold sovereigns when put on one side of the weighing scale weigh on an
average only 800 ounces instead of 1200, they will buy when brought
to the gold market only 800 ounces of gold; that is, the market price
of gold would rise above its mint price. Every coin, even if of full
weight would pass in its mint form for less than in bullion form. The
full weight sovereigns would be reconverted into bullion, a form in
which a greater quantity of gold is always worth more than a smaller
quantity. As soon as this decline of metallic weight would affect a
sufficiently large number of sovereigns to bring about a permanent
rise of the market price of gold above its mint price, the reckoning
names of the coins, though remaining the same, would begin to denote a
smaller quantity of gold. That is to say, the standard of money would
change and gold would be coined in the future according to this new
standard. By virtue of its idealization as a medium of circulation,
gold would react upon and change the legally determined ratios under
which it acted as the standard of price. The same revolution would
be repeated after a certain length of time and thus gold would be
subject to constant change both as a standard of price and as a
medium of circulation, a change under one of these forms leading to a
change under the other and vice versa. This explains the phenomenon
mentioned above, namely that in the history of all modern nations
the same money-name stands for a constantly diminishing quantity of
metal. The contradiction between gold as coin and gold as standard of
price becomes also one between gold as coin and gold as the universal
equivalent; in the latter capacity it circulates not only within the
limits of national boundaries, but in the world market. As a measure of
value gold was always of full weight, because it served only as ideal
gold. In its capacity of equivalent in the isolated transaction C―M it
passes at once from a state of motion to a state of rest; but in its
capacity of coin its natural substance comes in constant conflict with
its function. The transformation of the gold sovereign into fictitious
gold can not be wholly avoided, but legislation seeks to prevent its
unlimited circulation as coin by prescribing its withdrawal from
circulation as soon as its shortage of metallic substance reaches a
certain degree. According to the English law, e. g., a sovereign which
lacks more than 0.747 grains of its weight ceases to be legal tender.
The Bank of England which weighed forty-eight million gold sovereigns
in the short period between 1844 and 1848, possesses in Mr. Cotton’s
gold weighing scale a machine which not only detects a difference of
1-100 part of a grain between two sovereigns, but like a sensible
being, immediately throws out the light-weight coin on a board where
it lands under another machine which cuts it up with oriental cruelty.
That being the case, gold coins could not circulate at all were not
their circulation confined to definite spheres in which they do not
wear off so rapidly. In so far as a gold coin weighing only one-fifth
of an ounce passes in circulation for a quarter of an ounce of gold,
it is practically merely a sign or a symbol for one-twentieth of an
ounce of gold, and in that way all gold coins are transformed by the
very process of circulation into more or less of a mere sign or symbol
of their substance. But no thing can be its own symbol. Painted grapes
are no symbol of real grapes, they are imaginary grapes. Still less can
a light-weight sovereign be a symbol of a full-weighted one, just as
a lean horse can not serve as a symbol of a fat one. Since gold thus
becomes a symbol of its own self, but at the same time can not serve in
that capacity, it receives a symbolical, silver or copper substitute in
those spheres of circulation in which it is most subject to wear and
tear, namely where purchases and sales are constantly taking place on
the smallest scale. In these spheres, even if not the same identical
coins, still a certain part of the entire supply of gold money would
constantly circulate as coin. To that extent gold is substituted by
silver or copper tokens. Thus, while only a specific commodity can
perform in a given country the function of a measure of value and
therefore of money, different commodities can serve as coin side by
side with gold. These subsidiary mediums of circulation, such as silver
or copper coins, represent definite fractions of a gold coin within
the sphere of circulation. Their own silver or copper weight is,
therefore, not determined by the proportions of the respective values
of silver and copper to that of gold, but is arbitrarily fixed by law.
They may be issued only in such quantities in which the diminutive
fractions of gold coin which they represent would constantly circulate
either for purposes of change for gold coins of higher denominations,
or for realizing equally small prices of commodities. In retail trade
silver and copper tokens belong to distinct spheres of circulation. In
the nature of things, the rapidity of their circulation is in inverse
ratio to the price which they realize in each separate purchase or
sale, or to the size of the fraction of gold coin which they represent.
If we consider how immense the volume of the daily retail trade in a
country like England is, we will understand from the comparatively
insignificant proportions of its combined volume how rapid and steady
the circulation of the subsidiary coin must be. From a parliamentary
report of recent date we see, e. g., that in 1857 the English mint
coined £4,859,000 worth of gold, £733,000 of silver nominal value which
contained metal actually worth £363,000. The total amount of gold
coined in the ten years ending December 31, 1857, was £55,239,000, and
of silver only £2,434,000. The supply of copper coin in 1857 amounted
only to £6,720 nominal value containing £3,492 worth of copper; of this
£3,136 was in pennies, £2,464 in half-pennies, and £1,120 in farthings.
The total value of copper coined in the ten years was £141,477 nominal,
the metallic value being £73,503. Just as gold coin is prevented from
permanently retaining its function of coin by the legal provision of
the loss of weight which demonetizes it, so are the silver and copper
tokens prevented from passing from their spheres of circulation into
that of gold coin and acquiring the character of money by the provision
of the maximum amount for which they are legal tender. In England e.
g. copper is legal tender only to the amount of six pence and silver
up to forty shillings. If silver and copper tokens were to be issued
in greater quantities than the requirements of their spheres of
circulation call for, prices of commodities would not rise as a result,
but the accumulation of these tokens in the hands of retail dealers
would reach such an extent that they would be finally compelled to sell
them as metal. Thus in 1798 English copper coins, issued by private
individuals, accumulated in the hands of small traders to the amount
of £20,350 which they tried in vain to put again in circulation, being
finally compelled to throw them as metal on the copper market.[79]
The silver and copper tokens which represent gold coin in certain
spheres of circulation in the interior of the country, contain a
definite quantity of silver and copper prescribed by law, but after
they get into circulation, they wear off like gold coins and become
even more rapidly mere phantoms, according to the rapidity and
steadiness of their circulation. To draw again a line of demonetization
beyond which silver and copper tokens would lose their character of
coins, they would have to be replaced in turn within certain spheres
of their own circulation by some other symbolic money, say iron and
lead, and such representation of one kind of symbolic money by another
kind would form an endless process. In all countries with a well
developed circulation the very requirements of money circulation make
it necessary that the character of silver and copper tokens as money be
made independent of any loss of weight in those coins. Thus, as it was
in the nature of things, it appears that they serve as symbols of gold
coin not because they are symbols made of silver or copper, not because
they have certain value, but only in so far as they have no value.
Relatively worthless things, such as _paper_, can consequently perform
the function of symbols of gold money. That subsidiary currency
consists of metal tokens, such as silver, copper, etc., is mainly due
to the fact that in most countries the less valuable metals such as
silver in England, copper in ancient Rome, Sweden, Scotland, etc.,
had circulated as money before they were degraded by the process of
circulation to the rank of small change and replaced by a more precious
metal. Besides, it is natural that the money symbol which grows
directly out of metallic circulation, should itself be a metal. Just
as that portion of gold which would always have to circulate as small
change, is replaced by metal tokens; so can the other portion of gold
which is constantly absorbed as coin by circulation in the interior of
the country and, therefore, must continually circulate, be replaced
with worthless tokens. The level below which the mass of circulating
coin never sinks is determined in each country by experience. Thus,
the originally imperceptible difference between the nominal weight and
the metallic weight of a metal coin can grow apace until it reaches the
point of absolute separation. The mint name of money parts company with
its substance and exists outside of it in worthless slips of paper.
Just as the exchange value of commodities is crystallized by their
process of exchange into gold money, so is gold money sublimated in
its currency into its own symbol first in the form of worn coin, then
in the form of subsidiary metal currency, and finally in the form of a
worthless token, paper, mere _sign of value_.
Gold coin has produced its substitutes, first metallic and then paper,
only because in spite of its loss of metallic weight it continued to
perform the function of coin. It did not circulate because of its wear
and tear; on the contrary, it wore out to a symbol because it continued
to circulate. Only in so far as gold money becomes simply a token of
its own value in the process of circulation, can mere tokens of value
take its place.
In so far as the movement C―M―C represents a dynamic unity of two
processes C―M and M―C which pass directly one into the other, or in
so far as a commodity passes through the complete process of its
metamorphosis, it express its exchange value in price and in money
only to discard that form at once and to become again a commodity or,
rather, a use-value. That is to say, it develops _only an apparent
assertion of the independence_ of its exchange value. On the other
hand, we have seen that gold, in so far as it performs the function
of coin or in so far as it continually circulates, actually forms
only a connecting link between the metamorphoses of commodities and
constitutes _but their transitory money form_; furthermore, that it
realizes the price of one set of commodities only in order to realize
that of another, but in no case does it constitute a stable form of
exchange value or appear itself as a commodity in a state of rest. The
reality which the exchange value of commodities acquires in the process
and which is represented by gold in its circulation, is the reality of
an electric spark. Although real gold, it plays the part of fictitious
gold, and can, therefore, be replaced in this function by a token of
itself.