The Value of Labor Theory: Money as a class dictatorship
Labor theorists are so used to expressing their ideas in the form of abstract, scholastic, indecipherable bullshit, they have lost all ability to state in clear language, comprehensible to the working class, the gist of the argument they wish to make.
Take, for instance, this passage from Paulani’s paper:
“the categorical evolution of money results in a need for the expulsion of the materiality of money, that is, its ‘natural’ logical movement leads it to a figure that is no longer connected with a real (produced by labour) commodity.”
What does this gibberish even mean?
First note the passive voice — a dead giveaway Paulani hasn’t the slightest idea what the fuck she is talking about. Further, to what “categorical evolution” is Paulani referring? And, concretely, who in society needs the expulsion of the materiality of money? Moreover, why does this need lead to a currency (the so-called “figure” mentioned by Paulani) that is no longer connected to “a real (produced by labor) commodity.”
Why, in other words, doesn’t the process lead to the complete abolition of money, not just to abolition of its materiality?
Paulani can only put her argument in this sort of incomprehensible gibberish because she has no idea what the fuck she is really talking about. She thinks she is talking about something happening within the “category” of money, when she is really talking about what is happening within society and the struggle raging in society between two opposing classes.
The struggle between the capitalist class and the working class — “that is, its ‘natural’ logical movement” — leads to a currency that is no longer connected to the socially necessary labor time required satisfy the needs of the social producers. Paulani, like most labor theorists discussing the emergence of the dollar as world reserve currency, wants to treat the struggle between the two classes in society as the “natural logical movement” of money.
According to Paulani then, the natural evolution of money as presented by Marx in the first three chapters of capital already implies money loses its connection to the socially necessary labor time required for production of commodities. How does this assertion square with what Marx actually wrote in the first three chapters of Capital? In fact, Paulani has to admit that Marx,
“did not predict that such a substitution would be possible in the international sphere, where, for him, there should be the gold itself.”
In other words, for Marx at least, the evolution of money may lead to extremely tenuous relations between value and the commodity, but it did not, of itself, lead to the disconnection between money and socially necessary labor time. To explain the collapse of Bretton Woods and the emergence of the dollar as world reserve currency requires an analysis not of money, but of capital.
Nevertheless, Paulani is going to show us why Marx was wrong in this assumption; she is going to show us why in her approach to the evolution of money as specified by Marx, a valueless dollar as world money is already given in his theory of money. Essentially, Paulani will argue that because money in its function as measure of value — of socially necessary labor time — implies a “constant tension” between this function and its physical material in the form of some commodity, its development inevitably leads to a valueless printed scrip — the dollar — serving as the reserve currency in the world market.
The fiat dollar is not a weapon wielded by the capitalist class in its struggle against the working class, it is the “natural” result of the development of money as a “category” of political-economy.
This, of course, is an assertion that has to be demonstrated and (I’m sure) Paulani will excuse me if I rudely demand proof of her argument. And indeed, it turns out that Paulani, like most labor theorists, does not offer any proof for this assertion at all. In the end, all she can tell us is that the material of money is often in conflict with the function of money as a universal equivalent.
To be clear on this point: the conflict between money as a produced commodity and money as universal equivalent was not breaking news for Marx in the mid-1800s: Going back over Marx’s discussion, we already know that he thought the connection between the material of money and its function as universal equivalent was concealed in mystery. In his discussion of exchange and of fetishism, Marx explains the relation between money and the value of commodities was so confused by political-economy and so shrouded in mystery that,
“What appears to happen is, not that gold becomes money, in consequence of all other commodities expressing their values in it, but, on the contrary, that all other commodities universally express their values in gold, because it is money.”
Reality gets turned upside down, so that, even 150 years after the publication of Capital, a well-known labor theorist like Chris Arthur can write that money is not the expression of value, but ‘actualises’ the commodity as a value. However, the assertion that money, as the universal equivalent, ‘actualises’ the value of commodities that otherwise only exist in our heads, as Arthur asserts, bothers Paulani, because she senses where such an argument has to lead:
“if we consider that money is a sign entirely produced by the social convention embodied by the state, we would be tempted to conclude that there is no substance in value, that is, that it is determined only by exchange”.
Even someone as apparently confused about money as Paulani still knows where Arthur’s dumb shit argument leads: If money is no more than a symbol of a social convention, then the prices of commodities are their values. As the wikipedia notes,
“In neoclassical economics, the value of an object or service is often seen as nothing but the price it would bring in an open and competitive market.”
This neoclassical argument on value is identical to that of Chris Arthur’s. Thus if Arthur is correct, there is no such thing as a labor theory of value and we are indeed all Keynesians now as the notorious fascist, Milton Friedman, once observed. To avoid Arthur’s hapless blunder into the territory of simpleton economics, Paulani gravitates toward the argument made by Moseley and Foley: fiat dollars is said to symbolically represent a certain quantum of labor time by society, but only indirectly.
In this argument, although money has lost its own value, when taken as a whole, the sum of prices must still always be equal to the sum of values produced by society. Thus, if the community creates 1000 hours of value in a single day, and this is expressed in a sum of prices amounting to $1000, 1 hour of labor would would be represented by 1 fiat dollar.
The argument made by Moseley and Foley appears to be an improvement on Arthur’s, because it assumes the values of commodities is independent of the currency in which this value is denominated. Moreover, by definition, whatever the mass of value produced, it must equal the sum of prices realized in a currency.
However, the apparent advantage over Arthur’s argument is completely illusory, because, as any first time reader of Capital learns, in labor theory, there is no way to tell how much value has been produced by society except insofar as this value is expressed in the form of exchange value. According to Marx in the opening paragraphs of Capital:
“exchange value is the only form in which the value of commodities can manifest itself or be expressed.”
And this statement is very pertinent to the discussion, because, as everyone on all sides of the debate on the dollar knows, the exchange value contained in the inconvertible fiat dollars that currently serve as the world reserve currency is zero — the dollars are dancing electrons on a computer terminal, and nothing more.
Thus, the values of commodities within the world market are being expressed in a money form that itself embodies no value and which, therefore, cannot express the value of the commodities for which it is exchanged. Marx’s argument in Capital would suggest this means either the commodities themselves have no value or Marx’s theory of money is wrong.
Fascist state debt as the expression of value?
However if Marx’s theory of money is correct, the question to be answered is how it comes to be that a commodity having value expresses this value in a money having no value. There is something rather unusual going on with fiat dollars serving as world reserve currency and Paulani explains what it is.
Before 1971, currency was only a symbolic representation of a commodity money; standing in for the commodity money in circulation. As Paulani argues, the function of the dollars as medium for circulation of commodities was mediated by gold; which is to say, it was only by reason of a definite relation of the currency to gold (in which gold served as the standard for prices) that the currency served to express the values of commodities in an exchange. Since the currency was pegged to gold, the prices denominated in the currency represented some definite quantity of gold.
What was the case after 1971? Paulani’s answer is as bizarre as one could imagine:
“the thing that does this mediation is not an ordinary commodity like gold but a financial asset (the bond issued by the US government) which ultimately leads to the money issued by the state”
The statement is startling in its absurdity: According to Paulani, today prices within the world market are being mediated by Washington’s debt, which has replaced gold (or commodity money generally) as the expression of the socially necessary labor time of society. Where dollars once symbolically represented gold, it now symbolically represents Washington’s debt.
Paulani, like a number of labor theorists, wants us to believe that Washington debt serves in this role because it is a mere extension of the function of money as means of payment, not because the fascist state is a capitalist machine, a machine for the domination of one class by the other — a class dictatorship.
“In this case, the increase in the contradiction is obviously due to the emergence of credit—which is implicit in the position of money as means of payment—and to the interest-bearing capital that follows it.”
However, there is a problem with this sort of reasoning, since, as means of payment, money was itself always tied to gold, not to a state issued fiat currency. Moreover, state issued fiat itself arises not from money in its function as means of payment, but from its function as medium for circulation of commodities; and both of these functions are carried out with reference to gold or another commodity money, not to each other.
Even if we accept Paulani’s argument that the dollar’s function as measure of value is mediated by Washington’s debt and that this grows out of the function of money as means of payment, this solves nothing: A close reading of her statement reveals that Paulani does not argue that credit money mediates fiat dollars in its function as measure of value; she argues the treasury bonds (i.e., the debt) ‘issued’ by Washington does this!
To be absolutely clear on this point: US treasuries are not credit money — an inference Paulani appears to be trying to convey — they are IOUs, the exact opposite of credit money. Moreover, aside from incidental examples, the state does not create surplus value. How then is the debt plus interest incurred by the state in the form of bonds repaid?
This is where Paulani’s transition from the so-called third movement of money to its fourth movement trips her up. Since, as she admits, she does not explain how money becomes capital, she cannot explain how the state, by borrowing interest bearing capital, mediates the function of inconvertible fiat dollars as measure of value.
Paulani is one of those labor theorists who thinks that by admitting she has not done something she thereby accomplishes it. She has not told us how money becomes capital, but admitting to this deficit in her argument, we can now all consider it explained. However mysterious the process whereby money becomes real capital, at some point in this process the money capital borrowed by the state begins to mediate fiat dollars as the measure of value within the world market.
And we’re supposed to buy this argument because WTF?
Paulani suggests once money is reduced to a valueless fiat, the function of money as measure of value is mediated by the national debt of the United States. She does not investigate this mediation further — she simply asserts it and considers her task accomplished. This is how she dealt with the problem of the transition between money and money-capital: the transition is simply asserted; money somehow becomes money-capital without being employed to purchase labor power.
Marx, however, goes much further in his investigation of money as means of payment in a crucial way: he shows that money as means of payment also has implications for the circulation of commodities themselves: it implies an interruption of the circulation of commodities.
“The appearance of the two equivalents, commodities and money, at the two poles of the process of sale, has ceased to be simultaneous.”
Paulani makes use of this argument to explain how money acquires its own circulation that is independent of the circulation of commodities; but Marx also adds,
“The circulating medium was transformed into a hoard, because the process stopped short after the first phase…”
In other words, credit money, to the extent it involves the circulation of commodities, implies a transaction has been interrupted short of being completed.
How then is this transaction to be completed?
From what I can see, the completion of the transaction is not at all given in labor theory. It can only be completed if the buyer, who incurs debt, produces a commodity for sale in the market, sells it for money, and uses the proceeds to settle her debts. In the mean time, as Marx explains, “the converted shape of the commodity, viz., the money, was withdrawn from circulation”. I could be wrong, but it seems to me Marx is saying that value is not added to circulation by the extension of credit, but withdrawn from circulation.
And why is this? Marx explains:
“The seller’s commodity circulates, and realises its price, but only in the shape of a legal claim upon money. It is converted into a use-value before it has been converted into money. The completion of its first metamorphosis follows only at a later period.”
In other words, real value is destroyed and replaced by a legal claim to some future act of production and sale. This legal claim becomes real only at some later point, when the “first act”, where the buyer sells a commodity to service her debt, is actually completed;
If, as I have argued above, the state does not produce commodities for sale in the market, this condition that is never actually accomplished by the state. Since the state never sells a commodity and never completes what is, in labor theory, considered the first act in the transaction, the seller’s commodity is permanently reduced to a legal claim on the state. In reality, when credit money is advanced to the state, the legal claim upon money can never actually become money — the transaction remains incomplete and can never be completed.
Which means, essentially, in her paper, Paulani is making the argument that this incomplete transaction — this withdrawal of money capital from circulation — is now the means by which fiat money fulfills its function as measure of value within the world market. In short, Paulani is making the rather interesting argument that state debt mediates the function of fiat as measure of value by allowing the state to consume commodities on credit without ever actually paying for them.
Paulani wants to treat this debt in the same way Marx treats money as means of payment in chapter 3 of Capital, but, clearly, there is something about state debt that is not at all like the means of payment Marx describes in the chapter. The difference has nothing to do with the money capital advanced to the buyer, nor that the money is then employed to complete the second phase of the transaction before the first. The difference is that the buyer/debtor, (in this case, the state), does not and cannot satisfy the terms of the outstanding debt within the limits of exchange. No matter what it does, the state cannot repay its debts as Marx assumes in chapter 3 of Capital.
Okay, so tell me if this makes the slightest bit of sense: The state cannot satisfy IOUs except by taxing the population and using the revenue to repay its creditors. But if the state could levy taxes on the population to repay its debts, it had no materially necessary reason to borrow the capital in the first place. The state borrows money capital from its creditors when, ultimately, the only source at the disposal of the state to repay its debts to its creditors is the revenue the state raises by taxing its creditors.
Since Washington’s debt cannot be explained by some shortfall in taxable revenues, what other purpose does it serve? The answer is obvious: by expanding its debt, the fascist state can constantly increase the length of the labor day.
I will look at this next.
To be continued