A. Interpretation of Money.
I
Assuming that our society may exist without positive laws it could
also exist without money. The Russian reformer, Leo N. Tolstoy, is
consistent with his doctrine of social reform[1]. According to him
enacted law is violence, private property is evil, and subsequently
“money as a centre around which economic science clusters”[2] cannot be
anything else, but a medium of oppression[3]. Describing the economic
nature and offices performed by money, he dissents widely from the
politico-economists and disapproves of their teachings on the same
subject-matter.
At the outset of the seventeenth chapter of his notable work, _What
Shall We Do Then_, Tolstoy inquires, What is money? And further on
he proceeds: “I have met educated people who asserted that money
represents the labor of him who possesses it. I must confess that
formerly I in some obscure manner shared this opinion. But I had
to go to the bottom of what money was, and so to find this out,
I turned to science. Science says that there is nothing unjust
and prejudicial about money, that money is a natural condition of
social life--necessary: 1. for convenience of exchange; 2. for
the establishment of measures of value; 3. for saving; and 4. for
payments”[4].
Are these theories true? According to the teaching of economics they
are; according to Tolstoy they are not. Many writers even those of
the earliest time argued that money is a medium of exchange[5].
The founders of classical economics, Smith[6], Ricardo[7], Mill[8],
Carey[9], socialist reformers, Lassalle[10], and Marx[11], all agree
in the main that money is an exchangeable commodity by means of which
people measure the value of other commodities. Professor Fisher
shortly and precisely defines money as _What is generally acceptable
in exchange for goods_[12]. More acute determination of the nature of
money is given by Prof. Kinley in his elaborate study on _Money_[13].
According to this author no definition of medium of exchange can be
framed on the basis of the material of which it is made but on the
basis of its services, and its essential services are three fold:
First, money is sometimes used to describe all media of exchange--gold,
silver, paper, checks, bank drafts or the deposits which they
represent, commercial bills of exchange, and even corporation stocks.
These things all effect exchanges; in a way they all relieve the
difficulties of barter. But this definition, however, is too inclusive,
Prof. Kinley contends. It is inclusive because all mentioned articles
do not attain the character of media of exchange because there is a
demand for them for that purpose primarily. The medium of exchange
includes money but its content is greater than that of money. All money
can be a medium of exchange but all medium of exchange is not money[14].
Second, at the other extreme is a set of definitions which would
restrict money to what may be called commodity money. Those who hold
this view insist that money is an article of direct utility with
specific value based on its direct services for consumption. They hold
that it must have value due to a demand for other than a monetary
system. The implication is that in the absence of this other demand
the article would not have any value and therefore could not properly
serve as a measure of value. This view of the nature of money is
definite and clear-cut, but it is not correct because the article has
value if there is a demand for it, whatever the reason for that demand.
Third, between these two extremes fluctuates the view that all media of
exchange and payment, whose acceptance the law requires in discharge
of debts, may properly be called money. This definition confines to
standard money, or inconvertible paper, if it were legal tender. Both
kinds of money circulate without reference to the possibility of
recovering their value from the payer if they should fail to pass,
and their value as money depends entirely on the fact that they are
generally acceptable in exchange[15].
Taking now in view these three standpoints of the nature of money, we
could define it in these words: Legal tender, inconvertible paper, and
all commodities which are used as general circulating and paying media,
are properly called money.
This is one of the most typical definitions including nearly all others
supported by current political economy. Tolstoy as always disagrees
with the teaching of economics and he simply says that money is a new
and terrible form of slavery[16]. His full definition is as follows:
Money is a conventional token which gives the right, or more correctly,
the possibility, to exploit the labor of other people[17]. To explain
this inadequate definition of money more appropriately and in its
fuller extent, it is necessary to turn our attention to the functions
of money as they are enunciated by Leo Tolstoy.
One of many other functions which money performes, according to
Tolstoy, is the representation of labor. There exists a common opinion
that money represents wealth, but money is the product of labor, and
so money represents labor[18]. This opinion, says Tolstoy sneeringly,
is as correct as that other opinion that every political organization
is the result of a pact (_contrat social_). Yes, money represents
labor[19], there is no doubt about that, but whose, labor of the owner
of the money, or of the other people? In that rude stage of society,
Tolstoy goes on, when people voluntarily bartered the fruits of their
products, or exchanged them through the medium of money, substantially
money represented their individual labor. That is incontestably true,
and this was only so long as in society where this exchange took place,
has not appeared the violence of one man over another in any form: war,
slavery, of defence of one’s labor against others. But as soon as any
violence was exerted in society, the money at once lost for the owner
its significance as a representative of labor, and assumed the meaning
of a right which is not based on labor, but on violence[20]. This is
one of the functions of the medium of exchange in the pages of Tolstoy.
The second function of money is the representation of the standard
value. “Catallactics” admits this function of money. Tolstoy himself
should recognize it in an ideal state of society, in a society where
extortion has not made its appearance[21]. If people exchanged directly
commodity for commodity; if they themselves determined the standards
of values by sheep, furs, hides, and shells[22], then one could speak
of money as an instrument of exchange, as an ideal standard of value
in an ideal state of society. But in such a society there would be no
money as such, as a common standard of values, as it has not existed
and cannot exist[23]. The standard value of money is determined by law
and government, and these institutions are based chiefly on deceit[24],
or represent the organized force[25]. What in recent time receives a
value is not what is more convenient for exchange, but what is demanded
by government. If gold is demanded gold will be a common denominator,
if knuckle-bones are demanded, knuckle-bones will have value[26]. If
this were not so why has the issue of this medium of exchange always
been the prerogative of the government? In such a state of society in
which we live, the standard of values ceases to have any significance,
because the standard of value of all articles depends on the arbitrary
will of the oppressor[27]. By this reason we could speak only on
arbitrary and conventional value of money, not of its intrinsic, nor of
its standard value.
Passing now to the third function of money, enumerated by Tolstoy,
we see that he attributes to it a new contingent service which is
not mentioned as such in any political economy. In modern civilised
society, he says, all the governments are in extreme need for money,
and always in insolvable debt[28]. Wherefore they issue monetary
tokens in the different countries[29]. These tokens: legal tender,
inconvertible paper, coin, bills, and other governmental fiats,
are distributed among the people, in order that later they could
be collected as direct, indirect, and land taxes[30]. The debts of
the present monetary state grow from year to year in a terrifying
progression. Even so grow the budgets[31]. A state which should not
levy taxes, for a comparatively short time would go to bankruptcy. The
taxes and imposts required from people may be paid in form of cattle,
corn, furs, skins, and other natural products, but this “natural
economy” never practices in a civilised state. Governments force people
to pay those taxes usually in “hard” or “soft” cash, because this kind
of money best suits the purposes of rewarding the military and civil
officials, of maintaining the clergy, the courts, the construction of
prisons, fortresses, cannon[32], and supporting those men who aid in
the seizure of the money from the people[33]. So we have the third
function of money as the third method of enslavement[34], by means of
tribute and taxes[35]. In modern times, since the discovery of America
and the development of trade and the influx of gold, which is accepted
as the universal money standard, the monetary tribute becomes, with
the enforcement of the political power, the chief instrument of the
enslavement of men[36], and upon it all the economic relation of men
are based[37].