Follow the money …

by Jehu

I am still looking for a good formulation of the idea that Washington is using the dollar to control all capital in the world market.

And it ain’t easy.

I think the elements of the basic argument can be found in Anitra Nelson’s, Claus Germer’s and Suzanne de Brunhoff’s chapters in “Marx’s Theory of Money“. The three together establish that insofar as labor theory is concerned the dollar is not money; doesn’t behave like money; and doesn’t serve any of the functions of money.  At best the dollar can be considered a token of money with the caveat that tokens do not behave like money, nor do they fulfill any of the functions of money beyond that minimum required as medium for the circulation of commodities.

dollar_marxThe first point is obvious: the dollar is not a commodity, nor does it possess anything more than a negligible value of its own. This fact is aggravated by such glaring problems as that a sheet of one dollar bills requires no less time for production than a sheet of twenty, fifty, or one hundred dollar bills. The problems is further aggravated by the instantaneous creation of any quantity of dollars at a computer terminal. (During the recent crisis, for instance, Bernanke showed the television audience that he simply created the currency to bail out the banks at a computer terminal.) This suggests not only is the labor time required for the creation of a dollar negligible, it is, in addition, indeterminant.

The second argument — the dollar does not behave like money — is equally easy to establish. In labor theory, the circulation of money is merely a reflex of the circulation of commodities. This reflexive movement is not the least bit true for any fiat currency at present, including the dollar. Although this might seem to be a small point, it is, in fact, quite significant, since it implies the dollar is not a medium of circulation. As medium for the circulation of commodities, money no more explains the movement of commodities than water explains the movement of fish. This argument, of course, does not deny that money, like water itself, is subject to forces that influence the movement of commodities, as water might for fish, but it suggests the effect on their movement is secondary. It is altogether the opposite with fiat dollars otherwise how could fascist state monetary policy exist at all?

The third argument is that fiat dollars neither can serve as measure of value nor standard of prices as money does in labor theory. I would argue that it is not as if these two core functions of money are separate: no money can serve as a measure of value if it cannot serve as a standard of price. Although as measure of value the function of money is merely an ideal one, this ideal function must be grounded in some actual relationship between the socially necessary labor time contained both in the money and in the commodity.

Assuming for the sake of this argument that these three problems of fiat currency are settled in labor theory, what then is fiat currency? I would argue 99% of the problem Marxist academics encounter with fiat money in labor theory is that they have no explanation for it if fiat dollars are not money. We are, in effect, dealing with an economy that functions entirely without money — which appears absurd. So far as labor theory is concerned, a moneyless economy is incompatible with capitalist relations of production. Since we are apparently dealing with a capitalist economy, the default theoretical position must be that fiat dollars are money unless proven otherwise.

This, in turn, leads to the proposition that Marx must have made an error in his conception of money as a category of analysis. At this point further Marxist analysis of fiat dollars shuts down owing to an apparently irresolvable theoretical contradiction.

I propose there is a way out of this seeming irresolvable contradiction: money capital is not money. Money is only the premise of capital, it is not itself capital. Money capital does not behave anything like money and cannot behave anything like money, since the aim of money capital is self-expansion. According to Marx’s argument in Critique of Political Economy, money is only fully money when it is at rest in a hoard of precious metal.

“Gold as money was in the first place divorced from the medium of circulation because the metamorphosis of the commodity was interrupted and the commodity remained in the form of gold. This happens whenever a sale is not immediately turned into a purchase. The fact that gold as money assumes an independent existence is thus above all a tangible expression of the separation of the process of circulation or of the metamorphosis of commodities into two discrete and separate transactions which exist side by side. The coin itself becomes money as soon as its movement is interrupted. In the hands of the seller who receives it in return for a commodity it is money, and not coin; but when it leaves his hands it becomes a coin once more.”

Money capital, by contrast, is only fully money capital when it is in circulation as capital according to Marx in Capital.

” The simple circulation of commodities – selling in order to buy – is a means of carrying out a purpose unconnected with circulation, namely, the appropriation of use-values, the satisfaction of wants. The circulation of money as capital is, on the contrary, an end in itself, for the expansion of value takes place only within this constantly renewed movement. The circulation of capital has therefore no limits.”

Understood properly, money capital is the active negation of money, since it requires as its mode of existence to always circulate. While money, by its very nature, must be a commodity, money capital, by its very nature, can only be a token of money. The very nature of capital is that it cannot be idled, it cannot be a hoard of dead gold outside of circulation.

According to Marx, all commodity money in circulation, no matter its material, is simply a token of itself as money. It is this token appearance of money in circulation, however, that constitutes the mode of existence of money capital.

An Irreconcilable Contradiction

In labor theory, the circulation of the commodity is not at all the same as the circulation of capital and money does not play the same role. In the circulation of commodities, money is mere medium, whose movement is merely the reflex of the movement of commodities themselves. In capital, however, the movement of money is the aim of circulation — money is NOT a reflex of the movement of commodities.

What has to be clear is this: We are describing two contradictory aims within the same movement, not two different movements. In some of his earlier works (for instance Reflections on Money in 1851) Marx criticizes arguments that looked only at the circulation of commodities, but ignored the circulation of capital. Almost all thinking on money by Marxist academics begins by examining its role in the circulation of commodities, and ignores its role as an aim in itself. However, if we are to understand Marx’s full argument on money, in the circulation of commodities, money itself must be a commodity. But in the circulation of capital, money cannot be a commodity — it must when circulating as capital be only a token of money. As Claus Germer explains, this is an irreconcilable contradiction within capital:

“the fact that social labour – or value – should be represented in a commodity, money, is for Marx one of the inherent contradictions of capitalism, from which capitalists are unable to free themselves, notwithstanding their continuous efforts to do so. This opinion of Marx can be illustrated by the following passages from Capital, Volume III, Part V:

“with the development of the credit system, capitalist production continually strives to overcome the metal barrier [money], which is simultaneously a material and imaginative barrier of wealth and its movement, but again and again it breaks its back on this barrier… but it should always be borne in mind that… money – in the form of precious metal – remains the foundation from which the credit system, by its very nature, can never detach itself. The banking system shows. by substituting various forms of circulating credit in place of money, that money. as antithetical to the basis of private production, must always appear in the last analysis as a thing, a special commodity, alongside other commodities.”

As a system of commodity production, the aim of capital is not the production of commodities, but the self-expansion of money. Debased fiat dollars is telling us these two contradictory aims are no longer possible within the same movement.

In other words, whether money is a commodity or not is a question that raises far more than a problem with Marx’s definition of money. If Marx was fundamentally wrong about money, he was also fundamentally wrong about capital. His fundamental description of money is also, alternately, a fundamental description of money capital and capital itself. The historical tendency of money under the capitalist mode of production is in the direction of M => M’. Which is to say, the self-expansion of capital has as its historical tendency to free itself from commodity production entirely. In this historical tendency, capital runs into the ‘metal barrier’ posed by money itself — that it is itself a commodity. For capital to actually free itself from commodity production, it must free itself from the money commodity as well.

And capital, Marx argues, can never free itself of commodity production. Full stop. Period. The end.

The American System, i.e., Barbarism

So what regime of production have we been living under since 1971? Labor theory says it sure as hell ain’t capitalism. The absence of commodity money implies the absence of commodity production in its entirety.

Marx is very clear where the absence of commodity production can be found in an advanced capitalist society: the factory system:

“To all the different varieties of values in use there correspond as many different kinds of useful labour, classified according to the order, genus, species, and variety to which they belong in the social division of labour. This division of labour is a necessary condition for the production of commodities, but it does not follow, conversely, that the production of commodities is a necessary condition for the division of labour. In the primitive Indian community there is social division of labour, without production of commodities. Or, to take an example nearer home, 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. Only such products can become commodities with regard to each other, as result from different kinds of labour, each kind being carried on independently and for the account of private individuals.”

The absence of commodity money suggests labor that is “carried on independently and for the account of private individuals” no longer applies anywhere in society today. The fact that we are not aware of the absence of commodity production is no demonstration that it presently exists.

It just means we are idiots.

Marx’s argument on money suggests the only commodity existing at present is labor power, and this commodity only exist as a mere formality. It exists because the labor power is still sold and bought in our society. But this existence is a mere formality since no worker can avoid selling her labor power to capital, which is now wholly under the control of a single state power.

The comparison of this state of affairs to the Soviet Union, where labor power also existed only formally, is unavoidable. The distinction between the Soviet system and the American system is two-fold, 1. The former was limited, while the latter is unbounded; 2. In the former, it was the starting point of development, while in the latter it is the necessary result of historical development. On this basis, the collapse of the Soviet system is seen as peculiar to it, not the necessary result of all forms of capitalist development.

If we were to describe what is called capitalism today, it might be more accurate to refer to it as the American system. I have labeled this system fascism. Barbarism is also a term that can be applied to it. In labor theory, barbarism is probably the more useful label of the three, since its roots can be traced directly back to Engels and Marx. People have big problems with the term fascism owing to its historical origins and ‘American system’ might make it appear limited to the US.

Objections To This Idea

The idea that the capitalist mode of production, as it described in labor theory, no longer exists is, in my opinion, conclusive. Capitalism is a system of commodity production and as such requires the use of a commodity to serve as the money in transactions. The notion that, in the absence of commodity money, capital as a social relation continues to exist rests on the mistaken notion the exchange of fiat dollars for labor power constitutes commodity exchange. Several writers have discussed this in relation to the Soviet system and denied any such connection.

The question is very touchy, since a lot of research proceeeds on the assumption capital still exists. You start questioning this assumption and a ton of shit comes down. This why, I think, barbarism is always seen as a threat in the future tense: as in “Socialism or Barbarism”. To say ‘We are living in barbarism now.’ has no theoretical expression. And I think I can show why this is true: Why barbarism is not a theoretical problem. If we are living presently in barbarism: labor, property and the state must immediately be overthrown together. No other issue exists, no other front of struggle, no other aim than this immediate one. Thus, the only solution presently possible is beyond the imagination of society itself.

Michael Lowy claims barbarism is, in fact, not a concept to be found in Marx and Engels writings in the sense Luxemburg uses it. According the wiki, Lowy claims:

“Engels had not used the term “Barbarism” but a less resounding formulation: “If the whole of modern society is not to perish, a revolution in the mode of production and distribution must take place”

Says Lowy himself:

“The argument of Engels – primarily economic, and not political, like that of “Junius” – is rather rhetorical, a kind of reductio ad absurdum of the need for socialism, if we want to avoid the “destruction” of modern society – a vague formula: it is not  easy to see exactly what it encompasses.”

According to wiki: “Reductio ad absurdum, … is a common form of argument which seeks to demonstrate that a statement is true by showing that a false, untenable, or absurd result follows from its denial”

Lowy is, in effect, arguing Engels meant ‘Capitalism must be overthrown or it won’t be — and this latter is impossible.’ The argument Lowy make’s here is very interesting. Essentially, Lowy argues Rosa Luxemburg refers to Engels to try to give more legitimacy to a fairly heterodox thesis invented by her. I will show Lowy is in fact full of shit and needs to take his tired ass argument and shove it up his ass. (In academic-speak, that means Lowy argument is indefensible.)

As a matter of fact Engels did propose that society was headed toward a crossroads in which society would have to take the total social capital under its direct control. He did in fact argue this would either be accomplished by an association of the proletariat or in the form of the capitalist state. In either case society would not be able to avoid this historical result of the process of capitalist mode of production. Far from this conception appearing, as Lowy stated, as some reduction to the absurd, Engels actually proposed it as a necessary outcome.

Engels actually made a very developed, nuanced, argument that the total social capital of society must be controlled either by the state or by an association of the working class. In either case, Engels argued, it would mark an advance in the relations of production of society. If by seizure of the state power by the working class, we mean socialism, it is obvious that seizure of the total capital by the state constitutes barbarism. While Lowy may or may not be correct that Engels never used the term barbarism in this context, it is equally clear that Luxemburg means by barbarism what later became fascism. And this state seizure of the total capital was fully predicted by Engels.

The biggest distinction, however, between Luxemburg and Engels is that Engels does not refer to this as a ‘regression’, but an ‘advance’. Engels states this advance would technically solve the problem of transition to communism itself. The reason for the difference in emphasis is not difficult to figure out: although the state did seize the means of production, it did it first to wage war on its rivals. Just as the bourgeoisie had previously enlisted the working class to batter down the other property owning classes, it now enlisted it to batter down other national capitalist states.