The critical role of gold in labor theory analysis (part 3)

by Jehu

5. Marxism after the death of money?

Think of it this way: If Marx was wrong about money, he is just another dead guy whose significance is highly over-rated. Things continue much the same way as they did before. However, if Marx was right, the entire system of commodity production no longer exists and the fascist state is running the entire economy as if it were the floor of some factory.

NixonWhen Nixon closed the gold window in 1971 and severed the dollar from a definite standard of prices, the consequences of this act were not as simple and straightforward as commonly assumed. It is true there is a danger of hyperinflation, financial crises and currency crises always lurking in the wings, but these minor, secondary, issues should not concern us at all, as they are mere symptoms of a much more profound crisis.

Nixon’s act did not simply sever the connection between the dollar and gold, but also severed the connection between prices — denominated in dollars — and values — expressed in some definite quantity of a commodity money. A number of consequences result immediately once currency is severed from a commodity that can serve as the measure of value and standard of prices — these consequences profoundly effect not just money itself, but every category Marx initially analyzed in Capital. Moreover, it is precisely the expansion of capital that undermines money and all the categories that serve as the premises of capital itself. I will turn to describing a few of these implications now.

a. The detachment of exchange and exchange relations from production and production relations:

As Engels observed in Socialism, Utopian and Scientific, during the whole of the capitalist epoch crises break out periodically when the mode of production is in rebellion against the mode of exchange. With the end of Bretton Woods in 1971, however, it seems we are not simply dealing with a periodic eruption of this sort of rebellion: we must deal with the fact that the mode of production is not merely in rebellion against any particular manifestation of the mode of exchange, but has, apparently, overthrown exchange entirely.

In labor theory, it is assumed that relations of exchange are determined by relations of production. Thus, by casting off commodity money, it would appear society has been compelled to cast off the relationship between production and exchange. Unfortunately, a lot of Marxist writers focus narrowly on how money was detached from a commodity standard, while overlooking the fact that this also meant commodity production was detached from exchange.

Since in labor theory production relations determine exchange relations, the abolition of commodity money suggests production relations themselves are no longer compatible with any sort of commodity exchange at all. The abolition of commodity money implies that exchange relations themselves became obsolete — an anachronistic residue of earlier modes of production serving no material purpose for present society. Which is to say, within the world market as a whole, production is now recognized by society as social, although this recognition is entirely unconscious.

The problem for analysis, however, is that the recognition that the totality of the act of production is now directly social and can only be managed as such, appears, at first, only in the form of a blind recognition that commodity money can no longer serve as money. This is the significance of the observation by Ben Bernanke and other monetarists that money became massively non-neutral in the Great Depression of the 1930s.

Since in labor theory the conversion of the value of the commodity into commodity money is the conscious aim of production, the impossibility of this conversion at a certain point in the development of the productive forces always appears as a defect of commodity money itself, not as what it is: the incompatibility of the forces of production with existing exchange relations. With the abolition of commodity money itself however, although the source is in fact the productive forces themselves, which have become fully social, the symptom of this still remains, on the one hand, the inability of commodities to be converted into money, and, on the other hand, the inability of money to become capital.

The statement that commodities cannot become money and that money cannot become capital is, of course, unnecessarily obscure. In plain English, I am talking about overaccumulation (or overproduction) of capital. But this overaccumulation is clearly no longer a temporary or periodic outbreak of capitalist crisis as most Marxist academics think. Commodity money was dispensed with by the Nixon administration because money itself can no longer serve as medium of circulation of commodities. The crisis that finally unseats commodity money as medium of exchange is not a periodic or relative crisis, but an absolute crisis from which capital cannot exit.

b. Non-commodity money and commodity production:

Debased fiat suggests exchange as it is defined in labor theory, no longer occurs. According to Marx, the value of commodities  can only be manifested in their exchange values whenever they are exchanged. It is obvious that since debased fiat currency has no value at all, it cannot manifest the values of commodities when they are exchanged; rather, fiat currency manifests the value of all commodities as zero. The fact that fiat currency always expresses the value of commodities as zero means, of course, that the values of commodities are no longer expressed at all in exchange. This has further implications for this category of political economy.

In labor theory every commodity has two aspects: its particular use value and its value. According to Marx, the use value of an object is  “limited by the physical properties of the commodity, it has no existence apart from that commodity.” But these commodities are also “the material depositories of exchange value.”  It should be clear, however, that exchange value is not a necessary attribute of a useful object. It is, of course, a necessary attribute of a commodity, but not of a useful object itself — unless this useful object takes the form of a commodity.

In this vein, Marx gives two significant examples of conditions where use values do not take the form of commodities: primitive communities and within capitalist factories. Of the latter form, Marx says this:

“… in every factory the labour is divided according to a system, but this division is not brought about by the operatives mutually exchanging their individual products.”

Thus, even in a highly advanced society with a sophisticated division of labor, the product of labor may not assume the commodity form. Marx is very specific about the conditions under which the production of material wealth will take the form of commodity production. Only in the case where labor is carried on independently and for the private account of individuals will the product of labor become commodities and the value of the product of labor be expressed or manifested as exchange value. The argument that Marx makes here is critical to comprehending debased fiat, since Marx is essentially asserting that the spread of capitalist relations themselves progressively undermines commodity production.

Marx does not just define the commodity, he also defines the conditions under which the production of useful objects can take the form of commodities. Those conditions are explicitly stated as useful objects resulting from different kinds of labors being carried on independently and for the account of private individuals. Unless these conditions exist, useful objects will not become commodities. If they cannot become commodities, their values will not be manifested or expressed as exchange values. It is just this problem that compels society to do away with commodity money.

Marx’s argument suggests the conditions under which useful objects cannot take the form of commodities was already present in the capitalist mode of production from its very inception with the emergence of social production. And this fact constitutes a critical paradox of the mode of production: it is a form of commodity production where commodity production is progressively abolished. This progressive abolition is seen first and foremost in the monstrous growth of the credit system with its increasingly tenuous connection to commodity money. When the increasingly tenuous connection between the credit system and commodity money was broken altogether in 1971, this cannot but suggest commodity production came to an end with it.

c. The fetishistic character of the commodity, non-commodity money and wage labor:

There is, additionally, a question raised by debased fiat of the fetishistic character of the commodity and its relation to debased fiat. Marx argues the difficulty analyzing the commodity form arises from the fact that in it the social character of men’s labour appears to them as an objective character stamped upon the product of that labour. He further argues commodity production and exchange, “is a definite social relation between men, that assumes, in their eyes, the fantastic form of a relation between things.”

The function commodity money plays to make visible the social character of private labor, a function that only manifests itself in the act of exchange, is progressively rendered superfluous once the community of directly social producers arises. Thus, with state issued debased fiat the social character of labor no longer needs an objective manifestation or expression, since all labor is already directly social as in the factory system. This would suggest money, as it is defined in labor theory, and exchange relations in any form are entirely superfluous at present.

Despite the above, it would appear that this fetishistic illusion is so powerful it remains attached to the products of labor even after labor itself has lost the character of private activity carried on for the account of individuals. What accounts for the persistence of commodity fetishism? Even in the case where all labor is now directly social, and no labor is carried on for the account of private individuals, labor power is still sold as a commodity. Money relations continue because, although labor is now directly social, the means of labor remain the monopoly of the capitalist,  i.e., of the fascist state.

However, despite the existence of these money relations, non-commodity money can be used because the sale and purchase of labor power is a mere formality. Workers must sell their labor powers to access those means so long as those means remain the property of the fascist state. Which is to say, money relations continue to exist because only on this basis can the completely social means of production remain the effective private property of the fascist state, whose currency is employed to pay wages. The fascist state can, on the basis of these money relations, manage the social process of production for its own ends as social capitalist.

d. State management of production:

The argument Marx set out initially in chapter 1 of Capital, before he had even developed his argument on commodities and money, suggests commodity production itself is inherently incompatible with the capitalist factory system. This can only lead to the conclusion that the currency was debased in 1971 because production relations within the world market as a whole are themselves no longer compatible with commodity money. Which is to say, production relations today are no different than those found in any capitalist factory.

Marx says of these sorts of relations,

“the interconnection between [the workers] various labours confronts them, in the realm of ideas, as a plan drawn up by the capitalist, and, in practice, as his authority, as the powerful will of a being outside them, who subjects their activity to his purpose.”

The argument here is posed in patriarchal terms as that of a mass of workers facing the singular will of the individual owner-capitalist. However, in this example, the capitalist is only a personification of a function that in different periods of capitalist development is carried on by various individuals in increasingly socialized forms, as both Marx and Engels observed on many occasions. This increasing socialization of the functions of management ultimately led, and had to lead, to the state’s assumption of that function and to the reduction of the entire class of capitalists to a mass of superfluous speculators.

This course of development was in fact so obvious that Engels could confidently predict it in the 1880s in the book that then served as the essential popular textbook of labor theory, Socialism, Utopian and Scientific, where he wrote:

In the trusts, freedom of competition changes into its very opposite — into monopoly; and the production without any definite plan of capitalistic society capitulates to the production upon a definite plan of the invading socialistic society. Certainly, this is so far still to the benefit and advantage of the capitalists. But, in this case, the exploitation is so palpable, that it must break down. No nation will put up with production conducted by trusts, with so barefaced an exploitation of the community by a small band of dividend-mongers.

“In any case, with trusts or without, the official representative of capitalist society — the state — will ultimately have to undertake the direction of production. [4] This necessity for conversion into State property is felt first in the great institutions for intercourse and communication — the post office, the telegraphs, the railways.

“If the crises demonstrate the incapacity of the bourgeoisie for managing any longer modern productive forces, the transformation of the great establishments for production and distribution into joint-stock companies, trusts, and State property, show how unnecessary the bourgeoisie are for that purpose. All the social functions of the capitalist has no further social function than that of pocketing dividends, tearing off coupons, and gambling on the Stock Exchange, where the different capitalists despoil one another of their capital. At first, the capitalistic mode of production forces out the workers. Now, it forces out the capitalists, and reduces them, just as it reduced the workers, to the ranks of the surplus-population, although not immediately into those of the industrial reserve army.

“But, the transformation — either into joint-stock companies and trusts, or into State-ownership — does not do away with the capitalistic nature of the productive forces. In the joint-stock companies and trusts, this is obvious. And the modern State, again, is only the organization that bourgeois society takes on in order to support the external conditions of the capitalist mode of production against the encroachments as well of the workers as of individual capitalists. The modern state, no matter what its form, is essentially a capitalist machine — the state of the capitalists, the ideal personification of the total national capital. The more it proceeds to the taking over of productive forces, the more does it actually become the national capitalist, the more citizens does it exploit. The workers remain wage-workers — proletarians. The capitalist relation is not done away with. It is, rather, brought to a head. But, brought to a head, it topples over. State-ownership of the productive forces is not the solution of the conflict, but concealed within it are the technical conditions that form the elements of that solution.”

What Marxist academics ignore, because it is inconvenient to their argument, is that not just any debased valueless currency is being employed in the economy as money, but the fiat wholly owned and created by the fascist state and which constitutes the property of the state. This fiat is not an objective measure of the values of commodities described by Marx, but a completely artificial object designed  to achieve the aims of the capitalist state, the ideal representative of the interests of the capitalist class. Marxist academics have yet to explain why it is that although money in Marx’s theory plays only a passive role in the operation of the capitalist mode of production, every day we see money being used as a economic policy tool — a tool whose employment is not determined by the operation of the mode of production, but to determine its operation.

There is a massive disconnection between what we observe with our own eyes and the description of money as defined in Marx’s works that goes well beyond the silly debate over whether money is a commodity in labor theory. Rather than realizing that what passes for money in this economy is not really money, does not behave like money, and does not come into existence the way money does, Marxist academic simpletons assume Marx was wrong. Which is to say, they begin with the assumption the very methods they employ in their analysis are fatally flawed and, therefore, incapable of analyzing the capitalist mode of production.