SUZANNE
DE BRUNHOFF
Translated by
Maurice J. Goldbloom
Preface by
Duncan K. Foley
URIZEN BOOKS, New York
@ 1973 Editions sociales, Paris
Translation @1976 Urizen Books, Inc., New York
ALL RIGHTS RESERVED
PRINTED IN THE UNITED STATES OF AMERICA
ISBN-0-916354-43-1
44-x
PREFACE
his little book is a guide to Marx's views on money. 11 is a
,.
point of access to ideas that have been much neglected in
twentieth·century debates on monetary theory and policy,
but provide. I think, valuable and plausible scientific alternatives
to the views that have dominated these debates.
The first thing a student of money notices is that in a monetary
economy the movements of money and commodities are intertwined. At the level of the individual transaction some means
of payment moves in one direction and some commodity moves
in the opposite direction. The theoretical question then arises as
to which is the determining factor. Does the movement of money
determine the movement of commodities or the movement of
commodities determine the movement of money? Even if we
come to acknowledge a large measure of mutual determination
between the movements of money and commodities this question still provides the starting point for theories of money, and in
the end we will want to know from our theory which aspect is the
primary determining factor.
Consider for example the early form of the Quantity Theory of
Money. Since in every transaction a certain amount of money
changes places with commodities having a certain price, it is
clear that the total money price of commodities that a given
quantity of money can exchange for in a period is proportional
to the average number of times each unit of money moves in the
period, its velocity. This identity is the quantity equation of
money. The quantity theory asserts that all existing money participates equally in this circulation, so that the existing quantity
of money, and velocity, which depends on social and technical
factors outside the monetary sphere, determine the total price of
commodities exchanged in a period. In this theory the proximate
determinant of changes in the amounts of commodities exchanged is the effort of individuals to acquire or get rid of
money. The quantity theory usually argues that in long-run
equilibrium the money prices of commodities will adjust proportionately to the quantity of existing money, so that the actual
quantities of commodities exchanged in the long-run equilibrium
V
PREFACE
vi
are determined by nonmonetary factors like tastes and technology. Still it is clear that the starting point of the early quantity
theory is the idea that movements of money determine movements of commodities. Keynes and those who adopt his monetary theory by and large take up a similar, though somewhat
modified position. Changes in asset prices, interest rates, and,
as a consequence, 1n spending within Keynes' theoretical
framework are the result of the attempts of individual wealthholders to adjust their holdings of money to some desired level.
Again, changes in commodity flows are in large part determined
by monetary changes.
As this book makes clear, Marx started from the opposite view
that the movement of commodities is largely determined outside
the monetary sphere, and that movements of money in most
cases are determined by those commodity movements. Marx
thus emphasizes a view of money as a medium through which
. commodity exchange takes place, a medium that transmits, but
in most instances does not create. impulses of spending that
originate outside itself. Units of money are moved by the exchange of commodities as molecules of water are displaced by
a wave propagating through a pond. This general point of view
is well illustrated, as de Brunhoff shows in the first part of this
book, by Marx's discussion of the quantity equation. on which
he bases his laY" of circulation. Not only the quantities of commodities produced and exchanged and the transactions velocity
of money, but also the money prices of commodities are taken
by Marx as determined outside the circulation process. lt is the
quantity of circulating money in Marx's view that adjusts to satisfy
the quantity equation, a sharp reversal of the quantity theory interpretation.
This view that money is primarily a transmitting medium rather
than an active disturbing element in the economy also carries
over to Marx's complex and incomplete discussion of credit and
interest. Here interest appears as a simple quantitative division
of total profit. with no power to determine the rate of profit or the
rate of investment. This is in sharp contrast to Keynes' view that
the rate of interest is an important determining factor in invest-
NLHセ⦅ィ・@
PREFACE
yjj
ment through its influence on the "marginal efficiency of capital"
profit rate on current investment).
Despite the fact that Marx sees movements of money as
primarily determined by movements of commodities, he does
not argue that money is "neutral" or "a veil," or that it "does not
matter." For example, Marx emphasizes that the existence of
money and the possibility of hoarding are preconditions for a
general crisis of overproduction in a capitalist economy. This is
one instance where Marx's unified treatment of "macroeconomics" and "microeconomics" is clearly advantageous.
Marx never separates the theoretical terms in which he discusses the reproduction of particular capitals from the terms in
which he discusses the reproduction of the capitalist system as
a whole. At each level Marx explicitly analyzes the role and
movement of money and makes clear its qualitative importance.
In this way he avoids the theoretical embarrassment of having
distinct and incompatible theories of macroeconomics and microeconomics. Modern bourgeois economics begins with a theory of the firm and the household which abstracts from the existence of money and assumes that commodities can be exchanged directly for each other without the intervention of
money. This type of theory leads to a notion of equilibrium for
the economy as a whole that rules out crises of overproduction
and widespread unemployment of labor. To explairi these important features of capitalist economic development bourgeois
economics adopts a quite different theory, developed from the
work of Keynes, which is unfortunately inconsistent With the
bourgeois microeconomic theory of the firm and household in
several ways. A leading theoretical problem in modern
bourgeois economics is to reconcile these two theories with
each other in an appropriate way. Marx avoids this problem by
creating a unified treatment of individual capital and the
capitalist system as a whole, a treatment which at every level
acknowledges the role that money plays. This feature should
recommend the study of his theory of money to modern students of monetary problems.
Marx-'s treatment of money, which as Suzanne de Brunhoff
PREFACE
viil
shows, represents his reading and criticism of the major writers
on money available to him, offers a consistent scientific explanation of the major phenomena of monetary economies. Furthermore, this explanation is distinctly different from the dominant. positions in twentieth-century monetary theory, and yields
different explanations of particular historical events. An instance
of this is the question of the degree to which the monetary policy of the state can create or moderate crises in the accumulation of capital. Keynes' analysis of this question, which concludes that within broad limits monetary policy can alter the rate
of investment and determine aggregate demand, is at sharp variance with the presumption we arrive at on the basis of Marx's
discussion, which limits the effects of monetary policy to the
sphere of money and credit, and sees monetary policy having
its major impact on the concentration of capitals in periods of
crisis.
To discover and formulate these differences in a form sufficiently precise for use in statistical and historical studies is a
substantial theoretical task. Marx's writings on money remain in
a "pre-model" stage, and it will be necessary for us to bring this
theoretical position to the point of exact expression in a series of
models. De Brunhoff's work in this book represents an invaluable first investigation of this problem on which much further
work can be built.
As de Brunhoff shows, the question of money is one of the
central organizing threads in· Marx's analysis of capitalist production. In the course of outlining Marx's thoughts on money this
book provides very valuable insights into the structure of his
study of capitalism and throws light on certain very difficult
questions of Marxist interpretation. A good example is the vexed
question of the starting point for CclJiitctl, the question of why
Marx began his studies of capitalism with an analysis of commodity and money forms. Marx on Money provides an illuminating discussion on this problem. De Brunhoff's method of
analysis also gives us a complete overview of the structure and
argument of the three volumes of CaJiifal taken together.
Most modern monetary theory has been undertaken with the
explicit aim of improving state monetary policies in modern
PREFACE
ix
capitalism. This study of Marx's monetary theory shows how little
Marx was motivated in this direction. In monetary theory, as in
most of his analytical work on capitalism, Marx see.ks first of all
to discover the objective determinants of social phenomena, the
laws of motion of the system. A correct understanding of the relation of money to the production and exchange of commodities,
which is clearly the aim of Marx's contribution, is a precondition
for a sensible evaluation of the potential and performance of
monetary policy in capitalist society. But Marx's approach does
not necessarily lead directly to results that will help monetary
policy-makers in their problems.
This does not mean that Marx's monetary theory has no political consequences. In advanced capitalist societies the monetary
mechanism is closely bound up with the State, and political
struggles often focus around monetary policy and management.
Inflation and unemployment are in advanced capitalist societies
major issues over which class struggle is fought out. Workers
who have again and again been asked and forced to accept
lower or less rapidly rising wages or unemployment as part of a
national policy against inflation can testify to this. These issues
are intimately connected to monetary theory and policy. A scientific understanding of the nature and consequences of monetary
policy is necessary for a correct strategy of political struggle
and debate over these questions of national economic policy.
Those who are engaged in these struggles on the side of the
working class can only be weakened by relying on a monetary
analysis adopted from Keynes or other bourgeois economists to
the extent that this analysis is incorrect. A correct theory of
money firmly based on the principles of the materialist conception of history is essential. Marx worked to formulate such a
theory in its basics, and Suzanne de Brunhoff in this book takes
the first steps toward recovering and completing that theory.
Marx cm Moneu IS in thiS sense an important intellectual contribution to political struggle.
-Duncan K. Foley
CONTENTS
Preface V
Introduction XIII
Part One
The Marxist Theory of Money
A. A "General" Theory of Money, 19
B. A "Complete" Theory of Money, 25
a. Money, Measure of Value, 26
b. Money, Medium of Circulation, 30
c. Money, Instrument of Hoarding, 38
1. Hoarding, 39
2. Money as "Means of Payment" and "Universal
Money," 44
d. Mcmeu and Social Porccr, 45
Table of the Forms of Money, 48
Part Two
Money and Capitalism
I. The Financing of Capitalist Production, 51
A. Money and the Capital Cycle, 52
B. Money and Reproduction of the Social Product, 58
a. The Circulation of Surplus Value, 60
b. The Financial Rettllirements for EttHilibriwn, 64
11.
Credit: Structures and Cycle 72
A. The Structures of Credit, 74
a. A Monetary TheonJ of Credit, 77
1. Marx's Method, 77
2. "Credit Money" 80
b. A Unitary Concept uf Credit, 86
1. Unity of Capital Markets and of the Rate of Interest,
86
xi
B.
2. Induction of the Financial Circuits. 91
The Banks, 91
The Balance of Payments and the "Demand for
World Money," 99
Credit and Business Cycle, 107
a. The Financial Cucle, 109
b. The Crisis and the Credit Sustem, 114
c. Banking Policu alld Molle!J Fencer, 119
Postscript to the Second Edition 125
Notes and References 131
xii
INTRODUCTION 1
A
t first glance one does not know what to make of the analyses of money which appear at the beginning of CaJiital.
Marx began his study of capitalist production with an analysis of commodities, exchanges, and circulation in terms of a
process of commodity production without socially determined
conditions: money would at first appear not to have a capitalist
context. Why did Marx not rather follow Ricardo, who proposed
to choose a commodity standard based on the social conditions·
of commodity production?". Schumpeter thought the theory of
money one of the weak points of CaJJital. and considered Marx
inferior to Ricardo on this question.
The lack of attention given to this part of CaJiilal seems to
have represented an acceptance of Marx's surprising approach.
For some Marxists money, without any scientific meaning, has
become a symbol of the "reification" of social relations between
private producers. Others have gone along with the letter of
Marx's analyses without looking for logical, rather than historical,
reasons why they are at the beginning of Capital. But this is not
due to the fact that a commercial economy preceded capitalism.
Otherwise Marx·s analysis would have been altogether different.
lt would have taken account of the fact that capitalism is still a
commercial economy, and linked the monetary character of
money to the requirements of the form of production. it would,
for example, have taken up Ricardo's suggestion that the average proportions of labor and capital determine the choice of a
money, so that money would be the standard commodity of a
particular form of commodity production.
In contrast Marx, before examining credit under capitalism,
gives us a study of money which disregards the organic composition· of capital. lt is this abstract study of the monetary characteristics of money which leads into the analysis of the financing of capitalist production. Not only is money studied in
abstraction from capitalism, but its place at the beginning of
Capital is not dependent on the priority of pre-capitalfst
economies. The question is how this method, doubly separated
xiii
INTRODUCTION
xiv
from history, makes it possible to understand the economic role
of money.
Marx knows that his analysis differs profoundly from that of
other economists, and he gives the reason. "it is one of the chief
failings of classical economy that it has never succeeded, by
means of its analysis of commodities, and, 1n particular, of the1r
value, in discovering that form under which value becomes
exchange-value .... We consequently f1nd that econom1sts, who
are thoroughly agreed as to labour t1me be1ng the measure of
the magnitude of value, have the most strange and contrad1ctory
ideas of money, the perfected form of the general equ1valent.
This is seen in a striking manner when they treat of banking,
where the commonplace definitions of money will no longer hold
water."3
To determine the nature of money, the po1nt of departure must
then be a "deductive" analys1s, without regard to 1ts concrete
forms and its role in capitalism. This should enable us to avoid
two errors which hinder our understanding of the role of money
in capitalism, the confusion of money w1th commodities and of
money w1th capital.
To put together the mean1ng of th1s theory of money, which
f1rst appears in the in1tial pages of the f1rst volume and is the
framework for the notes on cred1t 1n Part 3 of Volume 11, 1s to
read Ca]Jitcd as a whole. L. Althusser" has shown the differences
between Marx's theones m CaJ•ital and those of the classical
economists, thereby furnish1ng a bas1s for understanding how
they all fit together. A m1sunderstand1ng of the prem1ses of
Marx's theory of money may prevent one from understanding
everything that follows, especially the relation between money
and credit. In this way a large part o! the analyses. of the financing of accumulation and the role of credit, conta1ned in Parts 2
and 3, is lost. (Thus H. Denis, who supports a labor-value theory
of money much closer to R1cardo than to Marx, has little to say
about them. 5 ) Or else these analyses are used 1n the examination of credit and banks, but without bemg organ1cally linked to
the theory of money in Part 1. Th1s disassociation has probably
been one of the reasons for the overestimation of the role of "finance capital," fn the manner of Hilferding. In either case it has
INTRODUCTION
XV
both reflected and led to a poor understanding of the relat1on
that exists between the different parts of Capital.
But what is the point of thus illuminating the coherence of a
theory if that theory has no relevance? Have there not been
such radical changes 1n monetary systems in the past half century that, when one discusses f!JOney, one is talking aboyt something entirely different from what Marx was dealing-with? eカセョ@
an explanation solely in terms of the "history of ideas" would
then risk being full of misinterpretations.
But this object1on IS not valid, because the content of a theory
of money does not depend mainly on the "particular kind of
money" used (metallic money or convertible paper or inconvertible paper). What needs to be explained IS the economic basis
for the existence of money, not merely as a measure of value
and a means of Circulation, but as the object of a specific demand even when its predommant form 1s Inconvertible pap.er"This is the monetary characteristic of money which is the basis
of its economic existence: "we cannot get nd of money even by
abolishing gold and Silver and legal tender instruments." 6 Marx
discovered this eighty years before Keynes. lt IS necessary to
recall how and why.
THE MARXIST
THEORY OF MONEY
A. A "GENERAL" THEORY OF MONEY
The Marxist theory of money Interests us primarily because of its
integration with the theory of the capitalist form of production.
Since money is part of the machinery of capitalism, its role is
determined by its functions within the entire pattern of capitalist
economic relations. According to Marx money is "a social relation of production"; therefore, under capitalism, it is part of the
capitalist system of relations of production. But it participates in
them in its special fashion, by existing in the form of money, and
the monetary problem consists precisely in knowing the meaning of this strange existence as money, inseparable but distinct
from the other relations characteristic of capitalism. Often forgotten or made parenthetical in the analyses "in real terms" of our
contemporaries, money suddenly reappears, incapable of reduction to the other "variables" of the system. Handed over to
specialists, it disappears again, but only after inconveniencing
everyone and disrupting a good number of plans and projects.
An analysis of money as an integral part of capitalist relationships of production can offer an explanation of the fundamental
relations of adjustment and maladjustment between the "real"
and the "monetary" in terms of the financing of accumulation
and its cyclical metamorphoses. But it is not enough to formulate a theonJ of the specific fonn of mone!J, i.e., of those monetary
phenomena which persist or recur in contradistinction to other
economic phenomena.
Hence a theory of money applicable to the capitalist system
must be subsumed under a theory of money in general, valid for
every monetary economy; in other words, a general theory of
money. And Marx's examination of this question bears fruit in the
Mar:t:ist theonj of money expounded in the first section of Part 1
of Capital. Thus Marx considers it necessary to begin with a
study of money in its general aspect. independent of the capitalist
form of production in order, among other things, to determine its
role in the capitalist form of production.
This method can be disconcerting if one has misunderstood
the purpose of a theory of money and does not see that to start
with money as it functions in the capitalist form of production is.
while seeming faithful to Marxism, to misinterpret Marx's theory
19
MARX ON MONEY
20
of money as a description of a "monetary relationship" separate
from the capitalist relation of production, and to make the relation between money and credit incomprehensible. Thus it is
wrong to regard the first section of Capital as the elaboration of
a hypothetical structure1 in which the common sense views or
vulgar concepts of money and commodities become elements
of a theoretical analysis, leaving the problem of money to be resolved elsewhere by the theory of production. This makes Section 1 represent a sort of theory of the non-theory of money.
Such an interpretation is erroneous: in the first section of CaJiital, Marx gives a general theory of the circulation of commodities and money. The causes of this error lie in a poor understanding of the structure of the capitalist form of production,
which combines economic elements differing in nature, origin,
and manner of action: its consequence is to aggravate this misunderstanding. One becomes unable to see how the general
laws of monetary circulation continue to function in the capitalist
form of production where there is a 8pecial monetary circulation,
that of credit.
Another aspect ·at the same error consists in accepting as
complete the partial account of the functions of money analyzed
by Marx in Chapter Ill of Part I in the first volume of Capital,
when only the exposition as a whole constitutes the theory of
money. This point will be discussed further, but it is necessary
here to point out the inadequacy of such an analysis as that of
Hilferding. He begins his study of Fi1wuce CaJiila/ 2 with three
chapters. which seem to follow the order of the presentation in
Capital: 1) The need for money: 2) Money in the process of circulation; 3) Money as means of payment, credit money. But Hilferding devotes himself to discussing 1nconvert1ble paper and
credit money, contemporary forms of money linked to the
capitalist form of production, without first explaining the ensemble of the functions of money which in their entirety constitute
the general theory of money. Money as an instrument of hoarding does not appear in the first chapters of his study. This omission in regard to money in general has grave consequences,
since the monetary theory of credit inwlve-1" a knowledge of the
role of hoarding. Hilferding's error has the same roots as the one
THE MARXIST THEORY OF MONEY
21
referred to above. To want to describe the functions of money
under capitalist conditions without first stating the entire general
theory of money is to miss their meaning.
Nevertheless Marx gave numerous indications of his method.
They can be grouped under three heads:
1) The circulation of commodities and money is characteristic
of "commodity production," defined entirely by general social relationship: "private exchange presupposes private production."
Since money is the expression of a general relationship of exchange between private economic agents, "the money-economy
is common to all commodity production." 3
One may ask if the notion of commodity production is not the
result of a simple combination of the analysis of exchange and
the theory of value, a combinat1on so general that it cannot
serve as the starting-point for the study of capitalist production.
But the science of production requires an appropriate analysis
of monetary exchanges if it is not to find itself obstructed by a
money whose economic status has not been previously defined.
The capitalist economy is necessarily a monetary economy. And
only if one assigns a definite economic existence to money can
one separate the barter economy from the monetary economy
completely and without harm to the study of production. Then
one will see that hoarding meets a need and represents a conversion of value by private economic agents, marking the dividing line between the monetary and barter economies in such a
way that it is impossible to analyze the equilibrium of exchanges
in capitalist production in "real" terms as if money had no
economic role. The preliminary analysis of monetary exchanges
is closely linked to the grand design of Capital.
2) Consequently, "it is ... wrong to attempt to derive the
specific properties and functions which characterise meney as
money and commodities as commodities from their quality as
capital. ... " 4
3) That is why it is necessary to begin with the simple circulation of metallic money in constructing the (general) theory of
money, rather than to start with credit in the capitalist form of
production. A historical reason is given by Marx in Capital:
" ... this is the historical order: credit money plays only a very
MARX ON MONEY
22
minor role, or none at all, during the first epoch of capitalist production."
Nevertheless I think that the principal reason is this: "In the
second place, the necessity of this order is demonstrated
theoretically by the fact that everything of a critical nature which
Tooke and others hitherto expounded in regard to the circulation
of credit-money compelled them to hark back again and again
to the question of what would be the aspect of the matter if nothing but metal-money were in circulation." 5 On several occasions
Marx returns to this point, as when he criticizes Macleod for
wanting to derive money in general from its most advanced
form, credit, or when he indicates that Tooke and Fullarton confuse money with capital or with commodities because they "do
not first of all examine money in its abstract form in which it develops within the framework of J>imple commodity circulation and
grows out of the relations of commodities in circulation." 6
Marx considers it necessary to begin with "simple," i.e.,
abstract, circulation in order to understand money in the
capitalist form of production. Only thus can one construct a
general theory of money. The simplification of starting from
metallic money is nothing but "the good abstraction" necessary
to determine the specific character of every "monetary relation."
lt is necessary to be specific on this point, in order not to be
the victim of a new paradox. In simple circulation one studies
the ebb and flow of money in relation to other commodities; this
abstraction has the appearance of a visible datum, with all the
brilliance and solidity of metal. In contrast, the network of debts
and credits which Marx rejects as a starting-point for the
analysis of money, forms an immaterial circuit in which reciprocal obligations and rights confront and counterbalance one
another. Why does "the good abstraction" take as its initial object the metallic material of money and not some of the elements
already spontaneously abstracted by the very process of
monetary circulation? In another form, it is the same question of
the starting-point which is raised anew when Marx relates credit
to the capitalist form of production and differentiates it from the
general concept of money, valid for all commodity production.
But the answer to this question now requires that we return to
THE MARXIST THEORY OF MONEY
23
the reason why the specific form of money follows from the
monetary role of gold.
Metallic circulation serves as a starting point because "the
simple commodity form is ... the germ of the money form," 7
and because to discover the genesis of the money-commodity
form is to show how a commodity-metal becomes the moneycommodity. Gold is able to play the role of money in relation to
other commodities because it has already played the role of
commodity in relation to them. This is the best-known point in
Marx's exposition. lt is unquestionably a necessary link. but if
one isolates it from what follows, one still does not see the special character of the money form. The commodity excluded from
the series of commodities as "the general equivalent or money"
simultaneously excludes all other commodities from the character of general equivalent. lt has a socially validated monopoly of
equivalence, and this is what characterizes its social function as
money; moreover, it pre.seroes and reproduces it.self incessantly in
its distinct fonn. Without clarity on this basic point, the idea of
money as commodity can give birth to the opposite idea, that of
gold as a simple symbol of the value of commodities. For if gold
remains a commodity like the others, then inversely "Every
commodity is immediately money" 8 and the monetary privilege
assigned to gold appears arbitrary and unfounded. Since the
inherent measure of value is labor-time. money could be a simple record of rights acquired in return for labor-time furnished for
the production of different commodities. This, says Marx, was
Gray's theory, deduced from his incomplete and therefore incorrect analysis of commodities. A complete analysis of commodities should include the genesis of the money form, i.e .. the
transformation of one commodity into a general equivalent distinct from all commodities. lt should cover the proceGs of the
formation of money as something different from commodities
and set off against them. Without this, every commodity would
be money and all money a simple commodity, so that there
would be neither money nor commodity production in which
"private exchange presupposes private production."
The historical reason why the theory of money should consider
metallic money first is thus logically subordinate to the theoreti-
MARX ON MONEY
24
cal reason, which establishes the necessity for money in all
commodity production by starting with the genesis of the form
"general equivalent or money." This idea of Marx constitutes the
essential difference between the Marxist theory of money and
the theories not only of Macleod and Fullarton, but of R:cardo
as well.
Nevertheless Ricardo makes use of the same premises as
Marx; he begins by the study of gold as money commodity, determining its value in the same way as that of other commodities. "To begin with, Ricardo determines the value of gold
and silver, like the value of all other commodities, by the quantity of labour-time materialised in them. The value of other commodities is measured in terms of the precious metals, which are
commodities of a determinate value. " 9
One sees a great similarity, and it is tempting to think that
Marx began his examination of money by an analysis of metallic
money in order to combine the tradition of the money commodity
with the theory of value as labor, as Ricardo had previously
done. But such an interpretation would make it impossible to
understand why Ricardo, according to Marx, showed himself unfaithful to his own premises, or why Marx criticizes the error of
those who treat ·money as a simple commodity, determining its
value as a commodity without understanding what differentiates
money from commodities. In Capital the initial simplification effected by the examination of metallic circulation is not a return to
Richardo's premises. Rather, it permits Marx to transform the
import of these premises, and to abstract the special meaning of
money which differentiates it from commodities, at the point at
which it at first appears impossible to show that essential difference, since money as a metal commodity is of the same nature
as other commodities. lt is because "The difficulty lies, not in
comprehending that money is a commodity, but in discovering
how, why, and by what means a commodity becomes money," 10
that the necessary starting-point for the general theory of money
is the study of "simple" circulation, a fruitful simplification or
abstraction.
Thus the Marxist theory of money starts with the identification
of the "general equivalent form or money" which differentiates
THE MARXIST THEORY OF MONEY
25
one commodity from all others and all commodities from money.
This is really a general theory ol money, since the form thus
analyzed is what gives all money, in every "monetary economy,"
its principal meaning. But a second step is necessary to describe the relationship between this money "form" and the multiple functions and aspects of money. The latter should all be
like forms of the money form. But the relationship established by
Marx is not at all that which could exist between an "essential"
character of money and the "phenomena" which express it. All
the forms of the "general equivalent form" which he analyzes
are functions of money which complement one another, different
yet necessarily linked with each other, u:hich only in combination
preserve and reproduce the general equivalent fonn. To omit a
single one, or to misplace it in relation to the others, is to put in
doubt both the specific character of money and the general
meaning of the monetary theory. In other words, only a complete
theory of the functions of money makes it possible to completely
define the specific form of money and achieve a general monetary theory. That is why the functions of money now need to be
analyzed in relation to one another and in an order fixed by the
requirements of the complete definition of the money form-the
same order followed by Marx in Chapter Ill of the first section of
Capital.
B. A "COMPLETE" THEORY OF MONEY
1) "The Measure of Value"; 2) "The Medium of Circulation"; 3)
"Money." These are the three major points analyzed in succession by Marx. One is immediately struck by the discussion of the
third point under the heading "Money" in a chapter entirely devoted to money and its various functions. The functions of "measure of value" and "medium of circulation" nevertheless have no
meaning independent of the "money form or general equivalent." But they do not always imply the "presence in person" of
money as a tangible embodiment of the general equivalent form.
Thus the order followed is a progression organized in terms of
the "money form" which determines all the connected steps, including the final appearance of money "in the full sense of the
MARX ON MONEY
26
term." But it is only at the end of the three steps that "the
econamic existence" of money is fully defined, although its character of general equivalent is the animating principle of all its functions and their articulation.
a. Money, Measure of Value
Money as "measure of value" or "the money form as the price of
commodities" is deduced directly from the origin of the general
equivalent. "Gold becomes the measure of value because the
exchange-value of all commodities is measured in gold, as expressed in the relation of a definite quantity of gold and a definite quantity of commodity containing equal amounts of labourtime,}1 What will turn up later as, in Wicksell's words, "the
monetary problem par excellence,"" that of knowing how to determine "the general price level" as opposed to the relative prices
determined in the exchange of products among themselves,
does not exist here as a monetanJ problem. There are no "circulating use values" whose respective utilities confront one another,
independent of monetary prices dependent on a money of undetermined value. Only commodities circulate; since they cannot
be· exchanged immediately among themselves, their circulation
implies money. 12 Commodities enter into circulation with a price
and money with a value; the "monetary problem par excellence'"
has been posed and resolved even before the entrance of
money onto エィセ@
scene, in the transition from the "relative" form
of value to the general equivalent form, 13 in such a way that the
fixing of monetary prices is identical with the emergence of the
money form.
Nevertheless the money form implies the production of money
as a commodity. And if the value of gold (the labor-time needed
for its production) changes while the values of all commodities
remain the same, then, all other things being equal, the general
price level changes. If the labor-time necessary to produce a
given quantity of gold doubles, monetary prices will fall by a
half-first those of commodities bought by the producers-sellers
of gold, then bit by bit those of all commodities as their prices
adapt themselves to their relative values, which by hypothesis
do not change during the process. There is thus a modification
THE MARXIST THEORY OF MONEY
27
of the monetary prices alone, due to the change in the relative
value of gold as a commodity. Does this bring one back to
Wicksell's monetary problem and what our contemporaries call
the "dichotomy" of the "real" sector (commodities by themselves) and the "monetary" sector (commodities in relation to
money)? No, by hypothesis, since according to Marx money is
a special commodity transformed into money. But at this stage of
the analysis money remains rooted in the exchange of equivalent
commodities, and Marx's analysis differs from that of Ricardo
only in his insistence on the uniqueness of the money form.
The possible deviation of the price of a commodity (its
exchange-ratio with money) from the value of that commodity,
which does not vary if the necessary labor expended in its production remains the same, represents the specific difference in
the ratio of the nwney fonn to equivalent commodities.
But although price, being the exponent of the magnitude of a
commodity's t·alue, is tlu? exponent of its exchange-ratio tcith
money, it does not follotc that the exponent of this exchange-ratio
is necessarily the exponent of the commodity's r:alue. Suppose ttco
equal quantities of socially necessary labor to be respectir;e/y represented by one quarter of IL·heat and £ 2 (nearly lh oz. of gold),
£ 2 is the expression in nwney of the magnitude of the r;a/ue of the
LfiUtrter of tcheat, or is its price. If 1101c circumstances allotc of this
price being raised to £ 3, or compel it to be reduced to £ 1, then
although £ 1 and £ 3 may be too small or too great properly to
express the magnitude of the tcheat's mlue, nerertheless tltey are
its prices, for they are, ill the j)rst place, the fonn under tchiclt it11
r:alue appears, i.e., money; and i11 the second place, the exponents
of its exchange-ratio tcith money . ... The possibility, therefore, of
quantitatice incongruity betlceen price and magnitude of wlue, or
the der;iation of the fanner from the latter, is inherent in the pricefonn itself 14
The distinction Marx makes between the money and commodity forms, and its consequences for the relation between the
price and value of a commodity, cannot be assimilated to the
dichotomy between "relative prices" in the "real" sector and
MARX ON MONEY
28
"monetary prices." That dichotomy has reference to the determination of all prices and all values by markets (supply and demand of goods and money). At this stage 1n Marx's exposition,
there is no examination of the relations between markets of different types, but only a study of the general conditions of the
circulation of commodities, including money. In its role of "measure of value," the money commodity is "neutral" in relation to
the exchange yalue of commodities. But there is no place here
for the idea of the dichotomy of the two sectors, attributed to the
"classical" economists, or for the approach which attempts to
suppress that dichotomy by postulating an interplay of '"demand" for money and the "supply" of it. In Capital, the problem
of the distinction between price and value, so far as it concerns
the value relationships of the gold price and the commodity
value of the commodity, is simultaneously posed and resolved
by the definition of the money form. So far as it concerns the
market price of commodity values, it cannot be resolved or even
posed in the study of simple circulation, since it has reference to
the analysis of markets in a capitalist society. Hence the problem of divergence between money prices and relative values of
commodities is not "the monetary problem par excelleuce." The
problem here, that of the money form and its solution as previously noted, does not depend on the way different markets are
interconnected, but on the exchange of equivalents and the
coming into existence of a general equivalent. "Price, in its general meaning, is but value in the form of money." 15
The divergence between price and value does not, then, prevent money from serving as measure of r;a/ue. That function depends at one and the same time on the equivalence of commodities and money and on their formal difference. The conditions under which it operates involve their own general limits;
one aspect of these is the divergence between price and value.
The role of money as a measure of value involves two complementary determinations. Since the starting-point of the
analysis of money is the exchange of equivalent commodities,
gold as a commodity "has a potentially variable value." To give
it a fixed value would be to destroy the basis of the monetary
function of gold as measure of value, its nature as a commodity,
THE MARXIST THEORY OF MONEY
29
and to attribute to it a mysterious power to make commodities
commensurate with one another. Nevertheless, the same reason
which makes it necessary to attribute a variable value to gold
prevents it from having a price, i.e., serving as its own equivalent. If it did, it would remain one commodity among the others
and lose its character of general equivalent and its function as
measure of value. One sees why the order of arguments must
be observed; in succession Marx discusses a "market price" of
money as med1um of circulation and then. 1n the analysis of credit, the price of money on a money market. But to speak of a
mea.wre of wlue would lead to confusion.
price of オキアj。Nセ@
it is likewise to avoid this confusion that Marx di8tinguislw8 between the characteristics of gold as mea.wre of fjalue (its value
varies with the circumstances under which it is produced) and
those of gold as standard of price, where a weight of metal fixed
by custom serves as a unit of measurement which permits the
comparison of the prices of commodities with one another,
whatever the variations in the value of gold. This distinction is
very close to that made by Ricardo in his Principle.y of Political
Eccmomuand Taxatiou. But for Ricardo 1t is the hypothesis of the
invariability of the monetary standard that determines the
mon!")tary character of a commodity whose value is variable like
that of all other commodities. But for Marx, money is different
from commodities even before: being fixed as a standard.
In simple circulation, the standard of price has a "monetary
price" fixed by convention.
A gir;en u:eight of one of the precious metals, cm ounce of gold, for
dirided iuto alitfiWf 11arts, rcit/r /c:gallu
instauce, hecome.Y 」セoOゥ。ャオ@
hestou:ed uames, such a8 JICIIIIId, dollar, etc. Tlre8e cdit(IIOI parts,
rchic/r lrencc:jcwtlr wrre a8 uuits 」セヲ@ IIIOIIC!J. are tlren subdil"ided iuto
。Nセ@
slrilliug, JlC'Illl!J, etc.
other cdit(IIOt Jlarls rL"itlt legal rwmes, セ^オ」ャイ@
But, botlr before and cdier these dirisicms are made, a dejluite
u:eiglrt of metal is tire staudard 」セヲB@ metallic moue!J . ... T!te JWicc:s,
or Cflllllllities of gold. into rchic/r the ralues of commodities are ideallrr clumged, are therefore uorc exJwessed in the rwmes of coius, or
in tire legallu wlid names 」セヲB@ t!te subclirisious of tire gold standard.
3D
MARX ON MONEY
1-/c:ncc:, inMead 」セイ@ .muing: A cJrwrter 」セイ@ rdreat
gold: rce tifly, it is rwrtlr £3 17s. 10 1/u1. 16
is
u:ortlr an vwrce
The name given a certain amount of gold, or "monetary
price," serves as a unit of account. "The specific form which the
exchange-value of commodities assumes is converted into denominations of money, by which their value is expressed. Money
in turn becomes moneu vf account. " 17
One will see under the following point (No. 2) that only the
"monetary price" belongs to gold as standard unit of account.
and that it has nothing to do with gold as measure of value,
which cannot have a price. Every confusion between the different aspects of money, every exposition which disturbs the order
indicated by Marx, has the effect of destroying the specific
character of the money form, 1.e., the very essence of the Marxist
theory of money.
I shall return subsequently to the conventional character of the
monetary standard. which implies state intervention. Marx repeatedly speaks of the monetary role of the state, whose significance it is necessary to define. But for that it is first necessary
to know all the elements of the theory of money and arrange
them in order. Moreover, it is difficult otherwise to understand
why, in his theoretical explanations Marx omitted a large part of
the considerations on the "money power" which are present in a
fragment of the first draft version of Tire Critique of Political
Economy. 1 e
b. Money, Medium of Circulation
The distinction and necessary connection between the forms of
money, presented in an irreversible order, explain the role of
gold as medium of circulation once it has been established as
the measure of value. On the one hand, money serves as the
medium of circulation once it has been established as the measure of value and standard of price. On the other, in the development of the analysis, money as medium of circulation is not
merely the manifestation but the practical guarantee of the role
of money as measure of value. The fixing of prices permits the
comparison of commodities to be exchanged; it does not
THE MARXIST THEORY OF MONEY
31
guarantee their effective circulation, that is, their sale in exchange tor a sum of money which makes it possible to continue
with purchases and sales. Only c1rculat1on, 1n which money effectively replaces commodities;, gives the fixing of prices its full
significance. The first function of money is the condition for the
second, but the second is the necessary complement of the
first. Without this connection, money would have only a purely
functional character, as medium of circulation, or a purely
"ideal" character, as unit of account. The initial measurement of
value by gold as a commodity would change nothing, since it
implies only a single initial exchange. In a peculiar phrase, Marx
says that "the sphere of circulation has an opening through
which gold (or the material of money generally) enters into it as
a commodity" 19 with a value established at a given moment. But
nevertheless not all the stock of gold produced and sold, which
"enters in," circulates.
"lt is clear that, if gold and silver themselves have value, quite
irrespective of all other laws of circulation, only a definite quantity of gold and silver can circulate as the equivalent of a given
aggregate value of commodities." 20 And the quantity of gold that
can actually circulate depends on the actual exchanges of
commodities. Here Marx departs radically from Ricardo, to
whom he was just so close.
New characteristics appear belonging to money as instrument
of circulation. The quantity of gold that circulates is a variable
dependent on prices and the volume and speed of transactions.
The first function of money has as a condition the variability of
its value; the second implies the variability of the quantity that
circulates. The two conditions are different.
"The law, that the quantity of the circulating medium is determined by the sum of the prices of the commodities circulating
and the average velocity of currency; may also be stated as follows: given the sum of the values of commodities, and the average rapidity of their metamorphoses, the quantity of precious
metal current as money depends on the value of that precious
metal." 21
But the reciprocal_ is not true. "Any scholarly investigation of
the relation between the volume of means of circulation and
MARX ON MONEY
32
movements in commodity-prices must assume that the value of
the monetary material is given." 22
The value of money varies in its production and initial sale
(function No. 1), but as the instrument of circulation it has by
hypothesis a given value, while its quantity is variable. The difference between the total stock of gold and the amount which
circulates is absorbed by hoarding. (Third function of money, to
be examined later.) These points form the basis for Marx's refutation ol the Ouant1ty Theory ol Money. Thus the 1ntnns1c connection between these functions rules out not only their separation but their presentation in any old order and their confusion
with one another. Hence the metamorphoses of money in circulation do not raise any question about the value of gold as general equivalent and measure of value; they affect only the instrument of circulation. Minted into coins and transformed into
currency, gold can, in circulating, demonetize itself; it loses its
weight of metal and becomes the shadow of its own metallic
substance. This loss of its matter explains the difference between the "monetary price" and the "market price" of gold; 23 the
public mint always produces coins according to the same standard but the pieces in circulation, used and clipped, weigh less
than their name indicates. Having become lighter, they only correspond to a smailer quant1ty of gold, and the monetary pnce is
less than the market price for the same quantity. "The weight of
gold fixed upon as the standard of prices deviates from the
weight that serves as the circulating medium, and the latter
thereby ceases any longer to be a real equivalent of the commodities whose prices it realizes. " 24
Nevertheless, this demonetization of the currency does not detract from the dependence of the instrument of circulation on the
true value of the gold. The quantity which actually circulates remains distinct from the total quantity of gold, and the course of
its circulation continues to be determined by the value relationships between money as general equivalent and the prices of
commodities. The modification of the coins affects only the special form of the medium of circulation.
Nevertheless the process of dematerialization continues in the
course of circulation, where gold can be replaced by "relatively
THE MARXIST THEORY OF MONEY
33
valueless things, such as paper bills," which are fiat money with
compulsory currency (as distinguished from banknotes, which
are credit money). lt should then seem that the instrument of
circulation, completely detached from its metallic substance,
also serves as the measure of the value of commodities, with a
value of its own. In that case the distinction between the functions of money would end up in a complete separation, depriving money of its initial significance and leaving it only a value
dependent on 1ts quant1ty. Instead ol l1av1ng a g1ven value and a
variable quantity as an instrument of circulation, paper money
has a quantity determined by the amount printed, irrespective of
the requirements ol circulation, and a value inversely proportional to that quantity. What Marx called "the inherent laws of
circulation," based on the role of the money commodity, appear
to be abolished when the medium of circulation, with no intrinsic
value, depends on governmental decisions which fix the amount
issued. Marx's refutation of the quantitativism of Ricardo would
lose its general character if paper money were excepted from it.
According to Ricardo, given the amount of money, the value
of money depends on the relation between its volume and the
volume of commodities; this applies to all money, including gold.
If the sum of the values of commodities in circulation diminishes,
or if the amount of gold produced increases, there is too much
gold in circulation in relation to the value in exchange of the
same volume of commodities, and hence in relation to the value
of gold. The gold in circulation devalues itself in relation to its
own value, and commodities are evaluated in a metal with a
value less than that of gold. Their prices rise, because the
amount of gold in circulation exceeds the amount in the initial
state of equilibrium, and this increase absorbs the excess
money. But the value relations between gold at the point of production and commodities remain altered. The fall of gold, which
circulates below its cost of production, causes a decrease in its
production and reduces the amount in circulation, which makes
prices fall. At the end of this process, equilibrium (value of gold
at the point of production-value of gold in circulation-value of
commodities) is reestablished. 25 In the case of paper money,
this can be done in a different way, if its issuance is restricted
MARX ON MONEY
34
sufficiently by the state. Marx accepted this idea of Ricardo's in
his criticism of Proudhon in The Powrty of Philosophy.
So long as there ゥNセ@
a certain JlrOJIOrlion ohserred bettL·een the re-
quirements 」セヲ@ circulaticm mul the liiiWUIIt of IIIOIW!f issued, be it
paper, gold, platinum or copper money, there can be 110 CJUe.yfion
of a prOJJOrtion to be obsen·ed betrceen the intrin.yic ralue (co.yt of
production 1 and the nominal ralue of mo1wy . ... Ricardo undertruth so n·d/ that, 」セサゥ・イ@
basi11g his tdwle system Oll ralue
stood エOLゥNセ@
detennined by labour time, and after saying: "Gold and sih·er, like
all other collwwditie!i, are raluable only in JlrOJwrtion to the quantity of labour nece!i.mry to Jlrocluce them, and bring them to market," he adds, ner:ertheless, that the ralue of money is not determined by the labour time its .mbstallce embodies. lwt by the /me of
.mpply and demand only. 26
Marx subsequently indicated that money has a relative scarcity which constitutes its value.
But the theses advanced in The Poverty of Philosophy are rejected and refuted in Capital. There, as H. Bartoli has shown,
Marx integrates the value of money into his general economic
theory. Since paper money does not lend itself well to that integration, can one nevertheless say with H. Bartoli 27 that Marx, resolutely anti-quantitativist in dealing with metallic money, returns to
quantitativism when he analyzes paper money?
Several points make this questionable. (One must nevertheless recognize that Marx never expla1ned them all clearly.) Following Tooke, Marx criticizes the contusion created by Ricardo
in attributing the same econom1c role to all sorts of moneygold, fiat money, and banknotes-and holding that variations in
the price level are determined by the variations in the total
amount of money of all kinds. Marx says that if Ricardo tails to
、ゥセエョァオウィ@
between the various kinds of money and their different forms, it is because he is obsessed by the role of the quantity of the medium of circulation. 28 Charles Rist summarized the
monetary views of Ricardo 1n terms close to those of Marx: "The
notion of quantity entirely dominates Ricardo's monetary theory:
the price level depends on the amount of money, whether metal
THE MARXIST THEORY OF MONEY
35
or paper.... Never pnor to Ricardo had anyone formulated so
simplified a theory of the relationship between money, whatever
it was, and prices."29
Marx rejects this concept completely, not because he himself
adheres to an exclusively "metallicist" concept of money, but
because the idea of identifying fiat money and credit money with
metallic money rests on a confusion of the different functions of
money, reducing it to the single form of medium of circulation.
Ricardo's mistake is that he "regards currency, the fluiq form of
money, in isolation." 30 The distinction Marx makes between
paper fiat money and metallic money is a part of the basic distinction between money as measure of value and money as medium of circulation. Instead of tending toward a quantity theory
of paper money, he seeks to get rid of quantity theory for all
kinds of money. Marx completely rejects the Quantity Theory of
Money: to accept it on a limited point would undermine the logic
of his monetary theory.
That is why the analysis of the nature of paper money is included in that of the process of dematerialization of all circulating money, a process which also affects metal coins. The loss of
metallic substance in circulation never results in reducing money
to a mere medium of circulation. Rather, it is an indication of the
function,ql difference between money as measure of value and
money as instrument of circulation.
Nevertheless, the analysis of paper money is not entirely clear
in Capital. Paper fiat money is without any doubt money. But it is
hard to tell whether it is "false money," as Pareto was later to
say, or true money whose monetary role is entirely derivative
from that of gold. In either case, one can agree with Charles Rist
that "The theory of paper money is to that of metallic money as
in medicine the study of the pathology of an organ is to that of
its norm!'J.I anatomy and physiology." 3 1
Marx describes a "pathological" effect of paper money when
he says that the circulation of bills issued at will by the state
"mechanically infringes by extraneous action" the laws of simple
circulation. 32 He subsequently shows that in the end these laws
nonetheless impose themselves, since paper money is only a
symbol of gold and its circulation is in the last analysis regulated
by the need for metallic money. If the state issues too much
paper money m· relation to the amount of gold 1t represents,
the paper money devalues itself and the rise of prices absorbs
the excess bills. "The effect would be the same as if an alteration had taken place in the function of gold as a standard of
prices. 33
Equilibrium reestablishes itself in terms of a given value for
monetary gold, which remains distinct from paper money. The
nominal increase in prices thus has no economic importance, in
the sense that it does not affect the primary determination of
prices. (In the same way, though for different reasons, Keynes
explains in the Treafi.w: un l\luuer1 34 that if the quantity of money
is doubled, the level of prices is multiplied by two, but that this
relation is purely a phenomenon of equilibrium which has nothing to do with the economic process of the determination of the
price level.) According to Marx paper money is true money, related to gold as its symbol; i.e., the demonetization of the gold
replaced by paper implies a compensatory "monetization" of the
latter by the role gold plays indirectly.
But in another respect fiat money nevertheless has some of
the character of "false money," insofar as it is condemned to
remain in circulation. 35 The state can issue paper money at its
discretion, but it cannot subsequently withdraw it from circulation. And all the paper issued has to circulate; it is spent by the
recipients of public payments, who neither keep it nor hold it in
reserve. That is Marx's opinion. In contrast, H. Denis 36 and
Charles Rist3 7 think that inconvertible fiat money can be put
away by private individuals and serve as a reserve of value,
even if only an imperfect and precarious one. In that sense
paper money would be a true but bad money; it would reproduce all the characteristics of the general monetary equivalent.
But Marx says nothing of the sort: on the contrary, he 1ndicates
that gold cannot be replaced by things without value, by mere
symbols, except when it "is a mere coin, or means of circulation."38 Paper money, true money insofar as it is a symbol of
gold, also partakes of the character of "false money" precisely
because it can never be anything but a symbol, condemned to
circulate without rest.
THE MARXIST THEORY OF MONEY
37
Only this last point. which is not made sufficiently specific and
clear in Capital, could support the idea that Marx's monetary
theory is mainly "metallicist" and that his criticism of the quantity theory therefore does not apply to paper money. And his
agreement that immediate proportional changes in prices reestablish equilibrium shows to what extent Marx here remains
under the influence of Ricardo. But the inadequacy of Marx's
explanation on this point should not make us lose sight of the
logic of his general concept of money, cumpletely oppusecl tu that
of tlte Quantity Tlleoru of 111oneu. In this light. the fundamental
problem posed by the circulation of fiat money with no intrinsic
value is that of tire demonetbtticm of ctll money in circulation by
the rery j(tct of its employment as c111 instrument of circulation. The
case of inconvertible fiat money is no different from that of coins:
both involve the general problem of reconciling the j)rst tn·o jilllctions of money.
Tilt• rate at tchich a token of ralue-tdtelher it 」ッオNセゥウャ@
of JlaJJer
or bogus gold and silt-er is quite irrelenmt-<.'CIII take the Jllace of
dej)nite quantities of gold and silr:er calculated according to the
mint-price depends on the number of tokem in circulation and by
no means 011 the material of u:lrich they are made. The dij})culty in
grasping this relation is due to the }ttct that tl1e ttco jimctions of
money-as a stcmdard of r.alue and a medium of circulation-are
gor:;erned not only by conflicting lmr:s, but by lcut·s lt·hich appear to
be at r:ariance tcith the cmtitl1etical features of the trw .fimctions.
As regards its function cts a standard of wlue, rdu?n money serres
solely as money of account and gold merely as nominal gold. it is
the physical material used tdlich is the crucial j(tctor. ... On the
other lumcl, rchen it jimctions as ct medium of circulation, rdwn
money is not just imaginary but must be Jlresent as a real thing
side by .side rdth other commodities, its material is i1Te/ercmt and
its qucmtity becomes the crucial j(tctor. 3 9
Thus in terms of the analysis of paper money one returns to
the starting point of the general analysis of money as an instrument of circulation distinct from the measure of value on which it
is based. lt is necessary to recall briefly the difference between
MARX ON MONEY
38
the two functions, and its consequence; from it arises the need
for money's third function, as a means of hoarding.
The difference between the amount of commodity money with
a variable value originally produced, and the amount of money
with a given value in actual circulation, must· be reabsorbed.
(Wicksell shows that he has not read Capital well when, to defend the quantity theory, he writes that Marx does not show
how this adjustment takes place or where the money goes that
is taken out of circulation.) 40 Nevertheless, by virtue of their very
difference, the two functions of money already analyzed are
both compatible with the possibility of a demonetization of the
money commodity. The measure of value does not imply the actual circulation of money, once there has been the initial exchange which makes it possible to set up the equation of price,
x commodity C=y money commodity. it is only money as instrument of circulation that makes it possible to establish the
formula for cash transactions, C-M-C (commodity-moneycommodity). But the money which circulates in causing commodities to circulate and is hence to be found present "side by
side with them" is not necessarily present as the money commodity. As currency, it can be represented by the symbol of
gold, and "Its functional existence absorbs, so to say, its material existence." 41 The differences of nature and quantity between
the measure of value and the currency both have the effect of
separating the general equivalent from its money form, the
specific commodity which functions as such in practice. From
this arises hoarding, the third function of money, which gold fulfills when "in person or by representative, it congeals into the
sole form of value, the only adequate form of existence of
exchange-value, in opposition to use-value, represented by all
other commodities."42
Money, Instrument of Hoarding
As the instrument of hoarding, money is "the money-commodity,
neither merely ideal, as in its function of a measure of value, nor
capable of being represented, as in its function of circulating
medium." 43 The paradox of this third function is that it introduces
money "proper" at the end of an analysis entirely devoted to
THE MARXIST THEORY OF MONEY
39
money. The place assigned to it, and the special role it plays as
the final element of a complete theory of money, should enable
us to understand why it is on the borderline between money and
credit, as well as between internal circulation and international
money.
1. Hoarding. Hoarding is an interruption in the circulation of commodities: the series of exchanges is broken and temporarily confined to the exchange C-M. This break rellects a desire to fasten M
down and keep it. "The money becomes petrified into a hoard, and
the seller becomes a hoarder of money." 44 Hoarding is a demand
for money as money, the general equivalent possessing special
qualities that distinguish it from all commodities.
Nevertheless money as an instrument of hoarding can only be
analyzed after the other two functions of money. lt implies the
value of the money commodity, the basis of its commensurability
with all commodities. lt likewise ·implies the actual circulation of
commodities; without this it would Jose its own object, monetary
gold. Without the first two functions, the third would have no
meaning; it would be a simple demand for ュ・セャN@
Gold, thus
brought back from its "economic existence" to its "metallic existence," would disappear as money. But hoarding, in its turn,
plays a fundamental role in completing the economic definition
of money. Gold and silver "remain liquid as the crystallisation of
the process of circulation. But gold and silver establish themselves as money only in so far as they do not function as means
of circulation."45
Hoarding, the specific demand for money, serves to
ceaselessly preserve and reconstitute the money form as such,
whatever the deformations, transformations, and disappearances
it undergoes as a result of the other two functions. Produced by
these, it becomes in its turn a condition of their functioning. it
modifies the characteristics of each. Simultaneously, both the
"natural material" and the unit of account of the measure of
value (function No. 1) correspond to the "money form congealed" by hoarding. On the other hand, "the withdrawal of
commodities from circulation in the form of gold is ... the only
means of keeping them continuously in circulation"4e and
MARX ON MONEY
40
guaranteeing the permanence of the second function of money
by preserving the monetary character of the means of circulation. Thus hoarding helps to adjust the relationship between the
measure of value and the medium of circulation. lt absorbs the
supply of money in excess of the needs arising from transactions. The original "supply" of the money commodity is balanced
by a "demand" for money for transactions and a "demand" for
"money as treasure," which serves as a fluctuating regulator.
"In order that the mass of money, actually current, may constantly saturate the absorbing power of the circulation, it is
necessary that the quantity of gold and silver in a country be
greater than the quantity required to function as coin. This condition is fulfilled by money taking the form of hoards. These reserves serve as conduits for the supply or withdrawal of money
to or from the circulation, which in this way never overflows its
banks." 47
This regulatory function of hoarding can be fulfilled not only by
gold but by every kind of currency. 48 it is one of the conditions
of circulation; if it has a meaning, it is because money has a
value and a specific form.
The role of hoarding, or the demand for money specifically as
the "general equivalent," in unifying and regulating the functions
of money, does not nevertheless abolish the contradictory characteristics inherent in monetary circulation. On the contrary,
hoarding, which preserves the money form as distinct from all
commodities, preserves at the same time !he risks of disequilibrium involved in the circulation of commodities. To understand
this it is necessary to consider the characteristics of its special
dynamic.
The hoarder's desire for money "is in its very nature unsatiable."49 lt attaches itself to the "qualitative aspect" of money in
which it "has no bounds to its efficacy ... because it is directly
convertible into any other commodity" 50-what today is called
the "liquidity" of money. But the amount of money that the hoarder can accumulate always remains limited, and hence relatively
restricted in comparison with the infinite power of money. This
results in a continual arbitrage between money in commerce
and hoarded money.
THE MARXIST THEORY OF MONEY
41
One sees here what differentiates the hoarding analyzed by
Marx from the liquidity preference defined by Keynes. Both
imply a trade-off, between money and commodities according to
Marx and between money and capital assets according to
Keynes. This trade-off originates in the disequilibrium between a
finite quantity (according to Marx) or a limited supply (according
to Keynes) of disposable money and a specific quality of
money, its universal power of exchange. Nevertheless, neither
the condit1ons nor tile effects ol hoard1ng are the same 1n the
two writers.
In a paradoxical way, it is Marx's analysis of hoarding which
seems to be based entirely on the psychology of the hoarder:
avarice, a taste for the esthetic qualities of gold, frenzied accumulation .... But these motives have a single object and a
single effect which completely exhaust them as psychological
causes. The greed of the hoarder is explained by the unique
quality of money as general equivalent, and its function is to
preserve the uniqueness. That is why it is "unsatiable." In contrast, Keynes's "liquidity preference," observable behavior in a
monetary market and sensitive to variations .in taxes and interest,
is related to a "speculative motive" which is not completely determined by its function in the monetary market. There is a difference between the measurable tendency at the meeting point
of the curves of demand for and supply of money and the cause
which cannot be completely adequate to its own effects; this
has given rise to innumerable discussions on the exact nature of
cash hoarded for purposes of speculation and its difference
from other forms of cash. In the background of the liquidity preference there is a zone of psychological shadow. Hence the differences between Marx's analysis and that of Keynes-which
are connected with the fact that, for the moment, Marx is dealing
with hoarding as it acts in simple circulation before capitalist
markets evolve-are related to fundamental methodological and
conceptual differences. Marx·s· seemingly more "psychological"
description is entirely integrated into an analysis of the. monetary
role of hoarding, while Keynes's functional and psychological
analysis leaves a psychological residue.
In attaching itself to the special quality of money as general
MARX ON MONEY
42
equivalent, exchangeable for any commodity at all, hoarding
nevertheless preserves, along with the normal functioning of
money, the possibility of monetary disturbances which is already
present in the other two functions of money. The circulation of
commodities is interrupted, as well as preserved and regulated,
by hoarding.
"Since the first metamorphosis of a commodity is at once a
sale and a purchase, it is also an independent process in itself.
The purchaser has the commodity, the seller has the money,
i.e.,. a commodity ready to go into circulation. at any time. No
one can sell unless someone else purchases. But no one is
forthwith bound to purchase, because he has just sold." 51
This implies "the possibility, and no more than the possibility,
of crisis." 52 For that reason the price form of the commodity can
remain purely ideal, separate from any actual exchange. "Every
trader knows that he is far from having turned his goods into
money when he has expressed their value in a price or in imaginary money, and that it does not require the least bit of real
gold to estimate in that metal millions of pounds' worth of
goods." 53 If the money commodity's own value is the basis for
the power of money as general equivalent, there is nevertheless
no measure that can be applied to both that determinate value
and the "infinite power" of money.
Hoarding thus completes the economic description of money
in the simple circulation of commodities. One sees the unity of
the functional aspects of money, as measure of value, instrument of circulation, and object of hoarding. One also sees how
the separation of these functions disrupts the series of exchanges, so that monetary troubles represent the disequilibriums inherent in the circulation of commodities produced by
private economic agents. The economic importance of money
has to do not with the effect of variations in its quantity on
prices, but with its form as general equivalent. Marx specifically
says that simple circulation explains nothing, and that it has a
"shallow and artificial character" because it depends "on circumstances all of which lie outside the framework of simple
money circulation and are merely mirrored in it."54 But this sec-.
ondary character of money does not destroy its importance. At
THE MARXIST THEORY OF MONEY
43
the end of his study, Marx has defined all the conditions of the
economic existence of money. The money form only is preserved as such by virtue of the plurality of its functions and the
insurmountable duality of its character, represented by the alternative hoarding-dishoarding.
This long analysis explains nothing, nothing except the condi·
tions of the existence of money; by doing this, it prevents the
disruptive intrusion of the analysis of money into that of production. Money is produced like other commodities, but it circulates
in its own way. Behind all the simultaneous transactions, something is produced, an accumulation of money in the treasuries of
individuals. The exchanges of all the equivalent products do not.
therefore, necessarily take place at a given moment. The excess
quantity of money of the quantitative analysts is only such in relation to a narrow concept of exchanges and a forced identification of commodities and money, followed by an equally forced
contraposition of their quantities. Ricardo made the mistake of
neglecting hoarding, through which money temporarily ceases
to be a social flux and becomes the object of a private possession which restores it to its first state as general equivalent.
Money does not just follow a straight course of demonetization
and transformation into currency; it goes through a continuous
circuit between non-circulation and circulation.
The result is that money, despite the secondary nature of its
importance, is not neutral and can never be completely neutralized (whether by the development of credit or by monetary
policy), since it puts into effect certain private decisions. Money
in circulation really belongs to no one, but its very circulation is
conditioned on the formation of hoards. These latter are reserves
of value which sustain the value of the general equivalent. Their
accumulation is sterile, for "Exclusion of money from circulation
would also exclude absolutely its self-expansion as capital .... "55
Marx follows Malthus in making a distinction between "saving"
and "hoarding." But Ricardo is wrong in thinking that "to save is
to spend," and to misinterpret hoarding as "accumulation of
abstract wealth." Nevertheless this demand for value, fundamentally different from the demand for capital, gives an extra dimension to the world of transactions, forming a reservoir in it which
MARX ON MONEY
44
can replace "saving" proper in the circulation of capital. The
consequences of this theory of money will be analyzed in the
second part of this study, following the plan of Capital. But from
the first section on, Marx applies his concept in showing that
every exchange of commodities implies a certain role of money.
2. Money as "Means of Payment" and "Universal Money." Alter
the examination of hoard1ng, money "properly so-called" appears
as "means of payment" and "universal money," 1.e., as the means
of settling transactions. "Gold becomes money, as distinct from
coin, first by being withdrawn from circulation and hoarded, then
by entering circulation· as a non-means of circulation, finally
however by breaking through the barriers of domestic circulation
in order to function as universal equivalent in the world Gf commodities."56 Only a very summary account is given here; the
meaning df Marx's analyses must be found in the study of credit
and the balance of payments.
Hoarding has appeared as a separation of the sale and purchase of commodities, or. to use Marx's customary symbols,
C-M// ... C. Money as means of payment plays its role at the end
of a sale on credit, commodities having actually circulated without monetary means of circulation, in the pattern: C-credit. .. -M
(means of payment). To settle with his creditor, the debtor has to
sell C and put the money in reserve to pay on the due date. The
whole chain of commercial credit can be put together from
these transactions as a starting-point; they rest on the agreement of the parties to an exchange on their reciprocal obligations and rights. To meet the maturities, money enters into circulation as means of payment, it "appears to be the absolute
commodity, but within the sphere of circulation, not outside it as
with the hoards." 57 Nevertheless, in case of ·a commercial crisis,
it is loudly hailed as the "unique form of wealth, exactly as it is
regarded by the hoarder," 58 and there is a "sudden transformation of the credit system into a monetary system." 59 This fundamental point, to be explained in the course of the analysis of
credit, shows that the theory of money preserves its significance
however much money may in practice be eliminated by credit.
Finally, the "universal money" is gold, the general equivalent,
THE MARXIST THEORY OF MONEY
45
in "its original form of bullion." 60 "it is only in the markets of the
world that money acquires to the full extent the character of the
commodity whose bodily form is also the immediate social incarnation of human labour in the abstract. Its real mode of existence in this sphere adequately corresponds to its ideal concept. " 61 All the functions of money are then fulfilled by this universal money. Nevertheless. "W1th the development of commodity
exchange between different national spheres of circulation, the
function which world money fulfils as mecms 」セヲ@ Jlayment for settling international balances develops also. " 62
Every country must establish a gold reserve fund. On this
point, Marx accepts in part the validity of the mercantilist idea
that states must establish gold stocks. In contrast, as will subsequently be seen, he completely rejects Ricardo's theory of the
automatic equilibrium of the balance of payments.
Before developing these points, it is necessary to finish with
the role attributed by Marx to money as such, as the object of
hoarding, and as the instrument for the accumulation of reserves
to settle credit and international transactions. In simple circulation it is possible to see some of the beginnings of the role of
money in the financing of capitalist accumulation, when monetary reserves are set up for purposes of investment. But this new
function, belonging to the capitalist economy, does not affect
the validity of the theory of money, which takes account of all
the economic effects attributable solely to "monetary relations"
among economic entities.
There remains one last point to be considered here: if Marx's
theory of money is general and complete, how does it incorporate the social and political effects of money with the economic
effects?
d. Money and Social Power
According to the Critique cif Political Eccmml!!J, the acquisition of
money is a source of power, primarily pqiHical. On the historical
plane, Marx refers to it in the case of ·ihe absolute monarchy
"which needs that material lever, the power of the general equivalent," convertible into any commodity and "always mobilizable"; this corresponds to the establishment of a general and uni-
MARX ON MONEY
46
form state power over the entire national territory. 53 In the same
way a state, in its relations with other nations. needs a stock of
gold, the universal money. "Behold the reason why, in the mercantilist system, gold and silver serve to measure the power of
different societies." And Marx quotes· Sir James Steuart: "As
soon as the precious metals become objects of commerce, the
universal equivalent for everything, they also become the measure of power between nations."s4
This political effect of the possession of money explains the
establishment of a hoard by the state. Nevertheless this public
hoarding has the same roots as private hoarding. "Money is
'impersonal' property. lt permits me to transport on my person,
in my pocket, social power and social relations in general: the
substance of society. Money puts social power in material form
into the hands of private persons, who exercise it as individuals."65
But Marx did not retain these analyses of the political and social power inherent in money as a part of his theory of money.
And the little that remains is found in a context that significantly
modifies its meaning. Discussing the monetary role of the state,
Marx has described how the state sets and guarantees the
standard of coinage. He then writes: "Since the standard of
money is on the one hand purely conventional, and must on the
other hand find general acceptance, it is in the end regulated by
law." 66
Furthermore, the state mints the instrument of circulation and
can itself issue monetary paper with compulsory currency, which
has social validity by virtue of public coercive action. 67 That role
permits it, for instance, to utilize the depreciation of the currency
in relation to the gold which it supposedly represents by repaying its debts either in lighter money, without taking account of its
effective devaluation, or in devalued money.sa Because it is the
guarantor of the nominal relationship between the monetary
standard and the coinage, it can make use of the difterences
between the standardized weights of gold and coins in circulation. But that action takes place within the process of circulation;
it does not imply any economic power of the state to determine
the value of money. The monetary power of the state, which is
THE MARXIST THEORY OF MONEY
47
genuine, is itself dependent on the "immanent laws" of monetary
circulation, that is, on the determination of the money form in
simple circulation in the way previously described. The social relation which is the basis for the existence and role of money is
that of private exchange between private producers of commodities. lt is a sign of an essential division of society, on which
the economic power of money rests.
That is why the monetary power of the state is necessarily limited by the social power which money gives to the private individuals who hoard it. Public hoarding and private hoarding have
the same root, but they are in opposition to one another. The
state, or "the power which has become independent of society,"69 hoards in order to consolidate its power over private individuals. But private hoarding means that "social power becomes
the private power of private persons." 70 On the other hand, the
public hoarding of a nation means that the monetary power of a
state is limited by that of other states. The political and social
effects of money are dependent on its economic nature as an
expression of the division of society into autonomous economic
individuals.
Thus one understands why Marx did not include in his theoretical exposition of the functions of money all the aspects of the
power conferred by gold, but only those which are involved in
the definition of money as a specific social relation. One can
doubtless regret that Marx was not specific on this point; his
analysis would have been more complete if he had given the
reasons why it omitted certain elaborations. But one must not
misinterpret these omissions, which are not lacunae, lest one fall
into error subsequently in regard to the accumulation of money
by capitalists and the role of banks and monetary policy.
TABLE OF THE FORMS OF MONEY
Formal Characters
Functions
Laws of
Simple Circulation
Origin of the
general equivalent
I.
Measure of
Commodity of
Determination of the
value.
variable value,
without price.
prices of commodities
.j.
of price.
Standard
inversely proportional,
Weights of gold with
all other tllings
being equal to the
a conventionally
value of money.
fixed "monetary
price."
=money as "unit
of account"
11.
Medium of
Value given, amount
Factors of circulation:
circulation.
which circulates
variable.
price, mass of
commodities that
circulate, speed of
circulation of money
.\.
currency: -minted
coins.
Demonetization and
gap between
. "monetary price" and
"market price" of
-inconvertible fiat
money.
gold. Symbols of
gold, although issued
in arbitrary amount.
(Possible effects
on the numerical
variations of
commodity prices.)
I + 11: Dematerialization of money
Ill. Instrument of
hoarding.
Demand for money
"in person" as
Absorption and
preservation of the
universal equivalent.
difference between
the total money
supply and money
in circulation.
Preservation of the form "general equivalent."
セ@
Monetary base of
capitalist credit,
and international
transactions.
PlaiT
'"·
MONEY
AND CAPITALISM
T
he basic purpose of CaJiital IS the theoretical study of the
capitalist form of production. If Marx began by constructing a theory of money valid for every monetary economy,
it was because that same theory would be of serv1ce 1n the
analysis of capitalism. Not only IS it not subsequently called into
question, but all the results obta1ned play the1r part in the total1ty
of the exposition in CaJJital. Thus suice money has already been
defined as such, there is no subsequent monetary theory of
capitalist phenomena. The theory of money bears solely on finance.
The integration of the theory of money into the theory of
capitalist production is thus accomplished by the study of the
modalities of capitalist financing. In a first stage, money appears
as a capitalist instrument in its own right in such a way that the
analysis of financing preserves the concept defined in the
monetary analysis. The problem of financ1ng is then only a financial problem, that of using the available money in proper
amounts.
Nevertheless the specific mechanisms of finance which develop along with capitalist production form the "system of credit"
which Marx distinguishes from the "monetary system." They
must be studied as such. But if Marx, like Tooke and unlike
Ricardo, makes a distinction between credit and money, it is
because he adopts a monetary theory of credit and not a theory
of credit money (similar to Schumpeter's distinction between the
monetary theory of credit and the credit theonJ of money. )1
lt is after resolving the general theoretical problem of money
that Marx deals with all the specific financial problems of
capitalism. His method rests on his theory of value, which is responsible tor the order of problems and solutions and the combination of analyses of simple circulation, the circulation of capital, anq the capital markets.
I. THE FINANCING OF CAPITALIST PRODUCTION
The financing problems connected with the "circulation of
capital" analyzed in Part 11 involve the determination of the avail-
51
52
MARX ON MONEY
able monetary resources needed to permit productive capital to
start functioning and to reproduce itself indefinitely. The financing
of capitalist production is also the financing of the reproduction
of capital (whether on the same scale, "simple reproduction," or
on a different scale, "expanded reproduction.") That is why
Marx begins by analyzing the concept of "money capital,"
describing the general conditions under which money plays a financial role in the circulation of capital.
The laws of simple circulation are first brought into question
by the production of surplus value, which disrupts the exchange
of equivalent commodities. The capitalist, who purchases the
means of production and labor power for a value M = C, profits
at the end of the productive process by a surplus value m and
finds himself in the possession of a sum of money M'= M+ m,
larger than his initial expenses. 2 But the laws of the circulation of
capital are subject to those of simple circulation, insofar as the
reproduction of capital implies a definite amount of money not
only at the beginning of the process but at its end, which is itself
necessarily the beginning of a new process of circulation of
capital.
The role of money capital depends not only on this movement
of capital, but on the patterns of reproduction of the social product M' and their state of equilibrium during a given period. The
proportions necessary if money as such is to play its role as a
capitalist instrument are defined in successive stages, first in the
functioning of the capital cycle M-C.. P.. C'-M', then in the social
product cycle C' ... M-C.. P.. C'.
A. MONEY AND THE CAPITAL CYCLE
In the first part of Volume 11, Marx sums up the whole process of
the -circulation of capital as follows: 3
I. M-C... P... C'-M'
11. P... Tc ... P
Ill. Tc ... P(C')
money-capital cycle
productive capital cycle
commodity-capital cycle
53
MONEY AND CAPITALISM
The meaning of the symbols used has already been indicated,
except for P, production, and Tc, the total process of circulation.
The first cycle, that of money capital, represents "the movement
of capital" common to the three cycles, i.e., "the valorization of
value" M... M'. At the beginn1ng of the whole process IS money
capital or "capital in monetary form" as the "prime motor" for
every capitalist who starts a business and has to buy productive
commodities (labor power, means of production.) Just as the
circulation of commodities presupposes the circulation of
money, so the circulation of capital implies that of money
capital. This is present not only at the beginning of the cycle,
but also at its end, where capital reappears in the monetary
form M'. Money capital constantly accompanies the productive
and reproductive movement of industrial capital. As the means
of financing, it shows the effect of the general laws of simple
circulation, and of the existence of money, on capitalist
production. "We see ... money in general is the form in which
every individual capital (apart from credit) must make its appearance in order to transform itself into productive capital; this
follows from the nature of capitalist production and of
commodity production in general." 4
But this role of money does not pose any new monetary problem; there is only a problem of financial proportions, that of
adjusting the quantity of money capital to the requirements of
the production and reproduction of capital. Before developing
this point, it is useful to group the symbols M-C ... P... C'-M' in
the following table:
Investments of
Capitalists
Monetary . Real
M=C
Resources of Capitalists
Production
C... P... C'
• Labor power
producing
surplus value
·Means of
production
Real
Monetary
C' = C + c = M + m
"c"
=
M'
MARX ON MONEY
54
Money M, used for the purchase of commodities for
production, is "advanced" by the capitalist at the beginning of
the first cycle of the process because "Capital in the form of
money must always be available for the payment of wages, before production can be carried on capitalistically. " 5 The
"productive" investments of the capitalist are represented by
M-C. If money can buy labor power, it is because this is a
function of money as medium of circulation, which the capitalist
spends as uwiH.'!/ capital. There is really an exchange of
equivalents between the advances of money on the one side
and wages and means of production on the other. But if money
can be spent for wages and can put labor power at the disposal
of the capitalist, it is because it serves here as money capital.
The relation between buyer and seller becomes the relation between capitalist and wage-laborer, which alone "permits of the
transformation of a mere money-function Jnto a capitalfunction."6 Money capital thus represents a specific relation between social relationships of different types. "In the relation of
capitalist and wage-labourer, the relation between the buyer and
the seller, the money-relation, a relation inherent in production.'' 7
Undoubtedly the form of production takes precedence over
the form of exchange, and that of capital over that of money. But
the monetary relation "immanent" in the capitalist relation
preserves its nature and its specific role. Capital must return to a
monetary form for the initial exchange M-C to be able to take
place and reproduce itself.
it is of little importance here what kind of money is used:
metal money, credit money, token money, etc. The sole
fundamental monetary requirement is "that the capital to be
advanced must be advanced in the form of money." 8 But the
amount advanced should be adequate, because "The process
of circulation of industrial capital ... is determined by the
general laws previously set forth (Volume I, Chapter Ill), in so far
as it is only a series of acts within the general circulation of
commodities.''9
If the quantity C is given by hypothesis, the amount of money
advanced depends, all other things being equal, on the rapidity
of monetary circulation or, if the rapidity is given, on the cost of
MONEY AND CAPITALISM
55
the com111odities, or if the rapidity and cost are given, on the
value of the money itself. If the quantity C is taken as a variable,
the amount of M varies as a function of C: "that portion of the
advanced capital-value which must be continually advanced
and renewed in the form of money differs in its ratio to the
productive capital which it sets in motion, i.e., in its ratio セッ@ the
continuous scale of production, depending on the particular
length of the period of turnover10 and the particular ratio between its two component parts-the working period and the
period of circulation." 11
The amount M is then a function of the requirements of the
production to be financed. Nevertheless,. whatever the origin of
the variations of M as a function of C and the amount of M
required in relation to the quantity C, "the portion of the capitalvalue in process which can continually function as productive
capital is limited in any event by that portion of the advanced
capital-value which must always exist beside the productive
capital in the form of money."12
What does that limit represent. if not the effect of monetary
financing on the movement of productive capital? Undoubtedly
the scale and efficiency of capitalist production are not
dependent on financial resources, which in no way constitute
the "absolute limits" of the process of production. The results of
the use of the productive commodities C, financed by M, are not
and cannot be directly proportional to the volume of money
capital advanced, since they depend on the effectiveness of the
concrete elements which in combination constitute productive
capital. This difference between the effects of financial
resources in their own right and the effects attributable to their
productive use gives the formal difference between money
capital and productive capital a content such that capital
undergoes real metamorphoses in the course of its circulation.
Hence the "limit" fixed by the amount M available at the
beginning of the process is relative to the whole process of
circulation, as is shown by the existence at the end of the process of M', or M+ m. And this ··relatire" limit set by financial
resources means simply that the concept of money capital ·is a
relation between two distinct terms which cannot be merged.
MARX ON MONEY
56
One cannot derive the function of money from its character of
capital, nor that of capital from its money form. according to
Marx; 13 to do so is to misunderstand both money and capitalism.
The problem of financing thus reduces itself to the determination of the suitable proportions of M in relation to C. In the case
of simple rewoduction, the ma1ntenance of the same scale of
production. the final difference between M and M' (the surplus
value in its monetary form m) is entirely spent by the capitalist
on consumption goods. The capitalist spends all the surplus
value as revenue (no hoardmg) but not more (no dishoarding for
consumption). Without this last condition, the amount M advanced at the beginning of the cycle would not function entirely
as money capital; there would be "disinvestment" and a break
in the circuit of capital. Money would lose its character of capital
and capital would cease to reproduce itself through its vanous
metamorphoses. Simple reproduction implies the preservation of
M as means of financing. The capitalist cannot then consume
more than c = m. The expenditure of m on objects of consumption, a real "flight" out of the circu1t of reproduction, absorbs c,
the surplus of commodities produced; its role is then entirely defined by its function IL'itllin the circuit of simple reproduction.
In the same way the commodities c consumed by the
capitalist are 'here simply non-productive commodities, corresponding to money not invested. Marx has not yet analyzed the
composition of the social product and distinguished objects of
consumption from the means of production "from the point of
view of the replacement of the value as well as the substance of
the individual component parts of C'." 14 In terms of the financing
of simple reproduction described so far, the consumption of c
has meaning only in relation to the preservation of the ratios
M-C ...C'-M'. The problem of financing is resolved before the
problem of division of the social product is posed. At this stage
of Marx's argument the problem of financing is not even really a
financial problem, in the sense that bu ilrnwtllesis the capitalist
has money at the beginning of the process of the circulation of
capital and can spend it for productive commodities, i.e., invest
it, recover it, reinvest it, etc.
This hypothesis explains why Marx speaks of simple repro-
MONEY AND CAPITALISM
57
duction and the consumption of surplus value by the capitalist
IJt:/im: completely analyz1ng the soc1al product. Here the consumption of c is in terms of the closing of the circuit
M... M' ... M. This is also why Marx speaks without distinction of
simple reproduction by the capitalist or by the cap1talist class.
"What 1s true of the individual capitalist, applies to the capitalist
class."' 5
The circuit closes itself in the same way whether the capitalist
consumes all his surplus value or all the capitalists consume all
the surplus value produced. The interdependent decisions
bearing on consumption, investment, and financing, still have no
content other than that of the exchange of equivalent
commodities: c, the surplus of commodities, is necessarily sold
(bought) in exchange for m. This exchange of equivalents has
as its only object and effect the preservation of the circuit of
capital, "individual" or total, "individual" and total, disregarding
for the moment the socially complementary nature of the various
commodities produced and the various economic agents.
The analysis of the financing of reproduction on c111 enlarged
scale adds nothing essentially new to that of simple
reproduction; it nevertheless permits the clarification of the
specific effect of the money form of capital.
Instead of consuming the entire surplus value, the capitalist
can put part or all of it aside to invest and produce on an
enlarged scale. He "saves," i.e., he does not spend as revenue
the whole surplus value created by his workers, but he does not
"hoard" if the profit is immediately spent on additional
productive commodities. The financing of reproduction on an
enlarged scale rests on the "abstinence" of the "capitalist of the
classical type" which Marx has already mentioned in Volume I,
particularly in reference to Malthus. 16
Nevertheless accumulation can require a certain hoarding of
surplus value "until it has increased sufficiently for the extension
of his old business or the opening of a side-line." 17 Everything
depends on the degree to which the process of production can
be expanded at a given moment in the different branches of
industry. Deferred investment implies the establishment of a
reserve fund and hence "hoarding." This is provisional and rela-
MARX ON MONEY
58
tive; it represents "a part of capital in a preliminary stage of its
accumulation" and "latent money capital." 18 But it still comes
under the general definition of hoarding as the interruption of the
series of exchanges. "So long as the formation of the hoard
continues, it does not increase the demand of the capitalist. The
money is immobilized. lt does not withdraw from the
commodity-market any equivalent in commodities for the
money-equivalent withdrawn from it for commodities supplied. 19
"The formation of a hoard thus appears here as a factor
included in the process of capitalist accumulation,
accompanying it, but nevertheless essentially different from it;
for the process of reproduction is not expanded by the formation
of latent capital. On the contrary, latent money-capital is here
fanned because the capitalist producer cannot at once expand
the scale of his production." 2o
The effect of the process thus described by Marx would today
be called "deflationary" disequilibrium. The limits of the
financing of individual enterprises can unquestionably be
pushed back by the centralization of the capitals of a section of
the capitalists, and by means of credit; 21 the redistribution of
available resources for the profit of the investors is a means of
more rapidly and efficiently solving the problem of the
mobilization of the necessary funds. But this does not remove
the necessity for social saving in monetary form,· without which
there would be danger of troubles, this time "inflationary." 22
Thus in capitalist production, hoarding preserves the
ambivalence that it has in simple circulation. As an interruption
of the process of circulation, it plays a role which is at the same
time qestructive of equilibrium and regulative. The preservation
of that duality shows that money as an instrument of capitalism
preserves its own monetary functions. Thus Marx, having
constructed his general theory of money before examining the
role of money in capitalism, finds his method vindicated.
B. MONEY AND REPRODUCTION OF THE SOCIAL PRODUCT
There is no specific problem, either monetary or even financial,
in regard to the circulation of capital in the form M-
MONEY AND CAPITALISM
59
C... P... C'-M'. By ''!lllothesis the sum of money M is at the
disposal of the capitalist at the beginning of the cycle of
money-capital and is again present at the beginning of the
circuit once the first one has been completed. Nor does ·the
money used as money-capital u:hile preserving its ou:n functions
present any new monetary problem; the conditions of
equilibrium of simple circulation are again found in the attributes
of the circulation of capital.
it is nevertheless not possible to stop there, since the
complementary character of the decisions on saving and
investment by the agents of the financing has not yet been considered. it is by virtue of the restrictive hypotheses referred to
above that Marx was able, as a first stage, to analyze capitalist
financing before examining all the conditions of the reproduction
of the social product. The theoretical results obtained in this first
stage remain valid in the rest of the analysis. They are
indispensable to understand the terms and solutions of the problem of financing in a second stage, and this in turn must be
traversed for a complete determination of the conditions of
financing.
At the end of the first stage, the circulation of money already
appears "as an immanent element of the process of
reproduction" of capital. But that "immanence" is only
completely intelligible after the analysis of the patterns of simple
and expanded reproduction of the social product, which shows
the need for a financial equilibrium between the balance-sheets
of the capitalists producing different commodities.
Marx, in fact, introduces a new method of analyzing the
"circulation of capital." He divides social production into two
main sections, the production of the means of production
(Department I) and the production of the means of consumption
(Department 11). He breaks down the value of the product of
each ,of these departments into constant capital consumed
within the year, variable capital (wages), and surplus value.
Letting c1 and c2 represent the constant capital included in the
product of the two departments, r 1 and 1· 2 the variable capital,
and 8 1 and 8 2 the surplus value, the value of the total product
equals c 1 + c2 + 1· 1 + 1· 2 + s 1 + s 2 • Marx analyzes the re-
production of the social product by studying the relations
among these components. Equality between the sum of the
variable capital (wages) and the surplus value included in the
product of Department I and the constant capital expended by
the capitalists of Department 11, expressed by the equation
t' 1 + .s, + c 2 , is the condition for general equilibrium of the
balance-sheets of all capitalists. This equilibrium Marx studies
from a financial point of view "in its primitive form." 23 i.e., in
terms of a monetary circulation carried out in metallic form. with
no intervention of credit operations. Consequently the capitalists
producing gold play a role that has to be integrated into the
whole pattern. lt follows that the financ•ng of investments rests
here on the "self-financing" of the capitalists.
These last points show how far Marx remains faithful to his
initial method in regard to the analysis of money. Even in
analy;;;ing the pattern of the reproduction of the social product,
although it represents a different level of analysis, he is able to
use the results obtained in the examination of simple circulation in
general and the circulation of capital in the form M-C ... P...
C'-M'. Butin order to avoid errors in interpretation, it is necessary to
understand how Marx proceeds. Here again there is great
disorder in the exposition, and Marx's plan often seems
confused. lt is important to reconstruct carefully the articulation
of the two stages of the financial analysis of the circulation of
capital, before going on to examine financing u:ithin the pattern
of reproduction as a whole.
a. The Circulation of Surplus Value
One asks oneself why, at the end of the analysis of the
circulation of capital within the framework M-C ... P... C'-M',
Marx discusses what he calls the question of the "circulation of
surplus value," a question he poses as follows:
An opponent of Tooke. u:lw clings to the formula M-C-M'. asks
him hare: the capitalist manages ahc:ays to rc:ithdrmc: more money
from circulation than he throtc:s into it. Mind you! The question at
issue l1ere is not the l(mnation of surplus-ralue. This, the ouly secret, is a matter of course from the capitalist standpoint. The sum
MONEY AND CAPITALISM
61
of r;alues employed tcould not be capital if it did not enrich itself
by me1111s of surplus-r;ctfue. But as it is capital by assumptio11,
surplus-r;a/ue is taken jiw granted.
The questio11, then, is not 1chere the surplus-r:alue comes from
but re hence the money comes into 1chich it is tunwd. 24
Marx answers: the problem of the circulation of surplus value
does not exist, but this false problem ... has a true solution.
This means that in terms of the analyses already made, no new
monetary or financial problem presents itself, and that the only
additional clarifications called for at the moment are of a
technical nature.
1. The problem of financing surplus value does not exist as a
monetary or financial problem. In fact, if one asks where the
money comes from to "monetize surplus value," one must ask
where the money comes from to finance the .purchase of C at
the beginning of the cycle M-C. In thus generalizing the problem, one abolishes it. Or is it a question of finding the amount of
money needed to finance production, and then: "So far as any
problem exists here, it coincides with the general problem:
Where does the money required for the circulation of the
commodities of a certain country come from?" 25
The general solution has already been given by the laws of
simple circulation, in the theory of money.
Or the question is that of the initial appropriation of a supply
of money by the capitalists. But this is included in the question,
analyzed elsewhere. 2 s of the historical conditions for the creation
of a capitalist class. Here it is assumed that the capitalist is the
"money-man," the man who can lay out the money to buy
commodities for production and for consumption as well. "But it
is a decided trait of the capitalist to be able to live on means in
his possession until surplus-value begins to return." 27
In any case, there is no special .problem of "the circulation of
surplus-value," and Marx is quite right to say: "the I!Jroblem itself
therefore does not exist. " 28 the more so as he has limited it to a
problem of "circulation" and not of "realization" of surplus value.
Has he thus juggled away the second problem in favor of the
first. and made the question of the "real demand" purely one of
MARX ON MONEY
62
monetary availability? Rosa Luxemburg thought so, asking in
vain where the demand for accumulated surplus value was to
be found in the system of reproduction. This would have meant
that Marx overestimated the financial aspect of the accumulation
of capital at the expense of its "real" aspect. We will return to
this point subsequently, after examining the whole analysis of
financing. 29
2. Some technical clarifications are nevertheless necessary in
regard to the way a supply of gold is obtained. Marx here
introduces the capitalists who produce gold, incorporating their
role into the format M-C... P...C'-M' in the following way:
Appropriated by
the Capitalists
M:C.
(Production)
Gold
Commodities
Resources ot
the Capitalists
Other
capitalists
Gold
producers
c:m
m
C'=M'
'"'C
This diagram indicates that the producers of gold can
immediately spend the commodity they produce. "The product is
money even in its bodily form; there is no need therefore of
transforming· it into money by means of exchange, by a process
of circulation. , .. The money-form of the circulating capital
consumed in labor-power and means of production is replaced,
not by the sale of the product, but by the bodily form of the
product itself; hence, not by once more withdrawing its value
from circulation in money-form, but by additional, newly
produced money."30
Hence, tchereas one pitrt of the capitalist class throtL'S into circulation commodities greater in calue, (greater by the amount of
surplus-calue) than the money-capital adcanced by them, another
part of the caJlitalilitli throtcli into circulation money of greater
t:alue (greater by the amount of the surplus-mluel than the cam-
MONEY AND CAPITALISM
63
modifies tchich theu constantlu tcitlulrmc from circulation for the
production of gold. Wln·rea!> one JUirt of tl1e caJlitalist class constantly pumps more gold out of the circulation than if pours into it,
the part that produces gold constantly pumps more money into it
than it takes out in means of production. 31
The process thus described follows from the preceding
analyses (no "hoarding" by the producers of gold, etc.). lt
simply represents the technical solution of the general problem
of monetary circulation which has already been solved on the
theoretical plane.
These are the two aspects of Marx's ·response to the false
problem of the circulation of surplus value. But the second point
obviously has a transitory and even transitional character. The
technical response to the general problem of monetary
circulation, if it is not a mere tautology (the function of the
producers of gold being ... to produce gold), implies the
insertion of the role of these producers within the system of
circulation, as has been done above. But there is a danger that
this diagram itself will lead to confusion. For it indicates that to
get gold the capitalists sell all their surplus value to the
producers of gold, so that their surplus value "m" is equal to the
total surplus value, and the entire surplus product of society
therefore passes through their hands. 32 That would make no
sense in terms of the system of reproduction (C' ...C'). Valid for
the first stage of the analysis of circulation, the diagram becomes
absurd in the second stage, that of the equilibrium of the
balance-sheets of all capitalists producing different commodities (including the producers of gold). That is why it has a
transitional significance. The production of gold, the technical
solution of a monetary problem long since solved, is also the
indication of a new financial problem which has not yet been
posed. Here is the connection between the two major parts of the
monetanJ analysis of financing. The intrinsic linkage between the
financial and "real" mechanisms of accumulation is only
obtained insofar as the capacity of the capitalists for financing is
integrated into the whole set of conditions under which the
social product is reproduced.
64
MARX ON MONEY
In the second stage of the analysis of financing it is necessary
first to integrate the balance-sheet of the producers of gold into
the totality of balance-sheets in conformity with the conditions for
equilibrium, and then clarify the financial requirements of
general equilibrium for all capitalists.
b. The Financial Requirements for Equilibrium
1. The relations between the balance-sheets of the producers
of gold, as capitalists of Department I, and those of capitalists of
Department 11, must be subject to the condition of equilibrium
c 1 + s1 = c2 • But at first one does not see how this is possible
since the producers of gold only sell a small portion of their
product as constant industrial capital cm.
Marx gives some examples in figures, which appear in the
following table:
DEPARTMENT I
DEPARTMENT 11
SUB-SECTION OF
PRODUCERS OF GOLD
CAPITALISTS PRODUCING
COMMODITIES FOR CONSUMPTION
Appropriations
5c,
5s,
Resources
Appropriations
Resources
2 c. industrial
2 c. industrial
5·c 1
gold
gold
8 c2 gold
8 c. hoarded
money
Total
10
10
5 s,
gold
10
10
The major part of the appropriations v1 + s1 is compensated
by the monetary resources of the producers of gold, which correspond to hoarding by the capitalists of Department 11.
Equilibrium is obtained in terms of the equation "money
produced =hoarding." Without this the producers of gold would
have a deficit, and the capitalists of Department 11 would not be
able to invest in c2 the resources derived from the sale of their
products for 。エセ@ amount c 1 +s 1• Hoarding here has the character of an appropriation in constant capital.
Two complementary points should be noted: the status of the
producers of gold as part of Department I on the one hand, and
MONEY AND CAPITALISM
65
on the other, the meaning in respect to hoarding by the
capitalists of Department II. According to Marx, "The production
of gold, like that of metals generally, belongs to Department I,
the category which embraces the production of means of
production."33
In her work The Accumulation of Capital Rosa Luxemburg
criticizes this concept of Marx, and proposes to distinguish a
third department, that of. the production of the means of
exchange. She argues that money, useless for both
consumption and industrial production, is produced as a
specific commodity and should be included in a special section
of the social product.
In saying this, Rosa Luxemburg appears completely faithful to
Marx's theory of money, more faithful than Marx himself! For a
third department, that of the production of the medium of
circulation, would have as its product money as such, an
indispensable instrument of capitalist reproduction but a medium of circulation relatively independent of and much older
than capitalism. 34 Money would thus be incorporated into the
system of capitalist reproduction in a way appropriate to its own
nature as the specific incarnation of "abstract social labor" 35 in
all commodity production.
Nevertheless, I think that this involves an error of interpretation
which undermines Marx's theory of money. For the creation of a
third department, devoted to the production of means of
circulation, gives money the character of a third kind of
commodity and thus of a commodity on the same plane as the
others. To isolate the production of gold in order to respect the
special character of money is in fact to destroy that special
character, which contraposes money to all commodities. When
Marx includes the production of gold in Department I, it is
because the monetary character of gold as "general equivalent"
does ncit result from the particular character of its production as
a commodity.3s
This error by Rosa Luxemburg is coupled with an incorrect
interpretation of the role of the hoarding of the gold produced,
the second point to be noted here. Indeed, Rosa Luxemburg
thinks that, since money cannot serve as productive capital, the
\
insertion of the production of gold into Department I implies a
social deficit in the means of production equal to the gold
produced, or 8 for the capitalists of Department 11 in terms of the
figures used above. The cond1t1on of equillbnum, r 1 + s 1 = c 2 ,
is no longer satisfied, since the capitalists of Department 11
cannot use gold as a means of product1on c 2 • Since the
production of gold cannot be usefully absorbed by the
capitalists· producing consumption goods, its insertion into
Department I upsets the equilibrium of the system of
reproduction.
lt is true that hoarding is by definition a non-demand for
commodities and that the capitalist producer of consumption
goods, who does not need the newly produced gold to buy the
means of production or pay wages, and cannot spend
additional gold for his own consumption, is forced to hoard. But
Rosa Luxemburg is in error in not making clear the special
function of hoarding here. According to Marx, the hoarded gold
is a fraction of the constant capital of Department 11, and
therefore, "even simple reproduction ... necessarily includes the
storing up, or hoarding, of money. And as this is annually
repeated, it explains the assumption from which we started in
the analysis of capitalist production, namely, that at the
beginning of the reproduction a supply of money corresponding
to the exchange of commodities is in the hands of the capitalists
of Departments I and 11."37
From this point o.t view, hoarding has the meaning of an
"investment" in money, by which the supply of money needed
for transactions is formed and re-formed. This investment in gold
is a special form of hoarding which, Marx says, parallels the
annual production of gold. Far from upsetting the general
equilibrium of production, this hoarding guarantees its
continuance, on the secondary level where it produces its effect.
In all cases, hoarding has the same general definition as an
interruption of the series of exchanges. But its effect is modified
in terms of its function in the systems of reproduction. Marx differentiates the hoarding which absorbs the new production of
gold from that which corresponds to the amortization of capital
and the net investment, and which is an element of the general
MONEY AND CAPITALISM
67
financial equilibrium of the balance-sheets of the capitalists. 38
2. Given the value of money and the necessary and sufficient
amount of gold, the problem of financing which Marx goes on to
discuss is that of adjusting the decisions of the capitalists who
save in monetary form, i.e., hoard, and those of the capitalists
who dishoard when they invest. (This concerns only a special
aspect of gross saving and investment, which are necessarily
equal ex post facto.)as
The complementary effects of these decisions at a given
moment can guarantee financial equilibrium if it is at the same
time otherwise in accordance with the laws of monetary
circulation, those of the circulation of capital, and the specific
requirements of the reproduction of the social product.
One could, Marx says, imagine the possibility of simultaneous
hoarding by all the capitalists (except the producers of gold).
He immediately 40 adds that in terms of the systems of
reproduction, this hypothesis is absurd. But it permits a genuine
argument from the absurd, whose conclusion is that
"accumulation in the form of money never takes place simultaneously at all points." 41 That is, the decisions on hoarding and
dishoarding balance one another at a given moment. Marx
shows this in regard to simple reproduction42 in discussing the
financing of accumulation in Department 1:
It is evident that both the investments of capital in the numerous
lines of industry constituting Department I, and the different
individual investments of capital within each of these lines of
industnj, according to their age, i.e., the space of time during
which they have already functioned, quite aside from their
volumes, technical conditions, market conditions, etc., are in dif
ferent stages of the process of successive transformation from
surplus-value into po-tential money-capital . ... One part of the
capitalists is continually converting its potential money-capital,
grown to an appropriate si::.e, into productive capital. Another part
of the capitalists is meanwhile still engaged in hoarding its
potential money-capital. Capitalists belonging to these two
categories confront each other: some as buyers, the others as
sellers. and each one of the t1co exclusit·ely in oue of these roles. 43
\
MARX ON MONEY
68
The same analysis 。ーャゥセウ@
to accumulation in Department 11. 44
The decisions of the one group in regard to expenditures for
investment and of the other in regard to hoarding should
therefore balance one another at a given moment. Indeed, the
question has to do strictly with the financial conditions of
reproduction. For the condition of general equilibrium, the
equation r, + 8 1 = c", Implies in contrast the 8iuwltam•uu8 sale
and purchase of the various commodities making up the social
product, i.e., the 。「Nセ・Q」@
of hoarding. lt also involves the
distinction between the annual "saving" and hoarding. For all the
product of Department I to be sold, it must be absorbed by the
demand of the capitalists of the two departments for the means
of production. (This corresponds to a "gross annual saving.") 45
But the fact remains that during the same period a part of the
capitalists hoard, and thus sell without buying. The effect of this
hoarding must be counterbalanced by the demand of the other
capitalists who spend their monetary reserves. The "pure
supply" of commodities of the one group mL,st be
counterbalanced by the "pure demand" of the other, or
reciprocally the hoarding of one part of the capitalists must be
neutralized by a "pure supply" of money. 46 The reserves
previously set up for amortization of fixed capital and net
investment cannot be simultaneously expended by all the
enterprises; at the same time as some capitalists hoard, others
must put their monetary reserves into circulation in the market
for means of production, 1n such a way that the global
equilibrium of gross investment and "saving" may be
guaranteed without financial disturbances.
Nevertheless the counterbalancing of hoarding and
dishoarding necessarily involves an element of uncertainty.
Undoubtedly the financial decisions are here subordinated to
the conditions of reproduction as a whole, and do not operate
autonomously. The impossibility of simultaneous hoarding by all
capitalists is one of the conditions for the possibility of the
reproduction of the social product. But Marx analyzes capitalist
reproduction, the conditions for whose equilibrium are ultimately
the result of the contradictory effects of private decisions. And
the com]JiemeutanJ relation between the balance-sheets of differ-
MONEY AND CAPITALISM
69
ent capitalists, which is on the financial plane simultaneously a
consequence and a condition of the system of reproduction, is
only actualized by a compensation after the fact, which includes
the risk of financial disorder. Money, now completely defined as
an "immanent element of the process of reproduction," retains
its ambivalent effect along with its specific character. Its
"immanence" is never, according to Marx, its "neutrality."
Everything is in accord with the principles of Marx's monetary
theory, based on the law of value and the significance of the
general equivalent. The conditions of the balanced financing of
capitalist reproduction include money as a specific social
relationship between private producers. Marx's financial analysis
thus differs not only from that of J. B. Say, for example, but from
the theories of monetary equilibrium which follow Walras;
according to these latter, the excess demand tor money is zero
only when monetary equilibrium is present simultaneously with
equilibrium in the market for goods (that is when M''-M" = 0
while G•-G'' = 0). Money is neutral when there is general
equilibrium. Undoubtedly part of Marx's analysis, which I am
about to describe, seems to f1t this concept of equilibrium, since
the excess demand for money must be compensated for by an
equivalent demand for commodities. But the concepts actually
differ fundamentally. For Marx money IS not neutral, even in
equilibrium, since its financial role is included in the system of
capitalist reproduction, where the combination of decisions is
the subsequent effect of relations of interdependence. Hence the
nature and significance of money as general equivalent are
preserved, whether there is financial equilibrium or
disequilibrium. Equilibrium and disequilibrium between hoarding
and dishoarding both show the continued presence of money as
a specific social relation. Thus money is not "neutral" even when
Bョ・オエイセャゥコ、@
in equilibrium.
This is a further reason why it seems to me impossible to
conceive of the production of money as belonging to a third
department of the social product. The Marxist economist Paul M.
Sweezy, for theoretical reasons different from those of Rosa
Luxemburg, thinks it necessary to set money apart, this time
produced as a "unit of account" whose value would be identical
\
MARX ON MONEY
70
with its price. 47 Sweezy does not first reconstitute Marx's theory
of money; he only gets to money when explaining the systems of
reproduction. According to Marx, these systems should show
how the commodities produced can be exchanged in the
required proportions, in accordance with their values, tcith the
ralue cif money giren. The determination of pnces does not come
in here, whether because it has already been explained in the
theory of money or because it involves other conditions which
will only be explained later, in examining the formation of the
average rate of profit. Sweezy, on the other hand, follows
Bortkiewicz in trying to interpret the systems of reproduction with
reference to the prices of commodities. He formulates the
equations of reproduction in terms of relative prices and
introduces a supplementary equation, that of the unit of account.
The monetary prices of commodities are calculated in units of
. the money commodity, produced by a certain number of hours
of labor and with a price assumed to be equal to its value. This
hypothesis permits the preservation on an overall basis of the
equality between the sum of the prices and the sum of the values of all commodities. it implies that the production of gold
takes place under conditions such that the organic composition of
the capital of section 11 I (that is, the relat1on between the
expenditures of constant and variable capital, the relation between c and r) is equal to the average social organic composition, or in other words that the production of money takes place
under neutral capitalist conditions. But this is not Marx at all, but
rather Ricardo, who sought as an invariable standard of prices a
commodity produced under the average conditions of social
production, and who accepted the hypothesis that gold could
play that role. Money thus conceived in terms of specific type of
production would be defined as money by the circumstances of
its production.
In proceeding thus, Sweezy calls into question Marx's theory
of money and the financial conditions of reproduction by
upsetting the order of the reason1ng. He introduces the problem
of the prices of commodities into the systems of reproduction,
where Marx has excluded this problem by hypothesis and taken
the value of money and the value of commodities as g1vens. If
MONEY AND CAPITALISM
71
money is treated as a unit of account possessing a price, it
loses its specificity, and if its price is equal to its labor value, it
can be considered as neutral. The confusion of the problem of
prices and that of the conditions of reproduction, and the introduction of a money-commodity unit of account, wreck the bases
of Marx's theory of money.
In contrast, the whole examination of financing described here
shows that money as a financial instrument preserves its
specific characteristics as a non-commodity, and that there is
consequently no uwnetanJ problem of financing on the theoretical
plane. Financial equilibrium of the balance-sheets of the industrial capitalists requires only that the combination of the
monetary social relationship and the capitalist social relationship
observe the prescribed proportions. But this combination does
not detract from the role of the monetary relationship when it has
become "immanent" in capitalist reproduction. In simple
circulation, money as general equivalent is distinct from all the
commodities exchanged by private producers. In the circulation
of capital "money-capital evidently plays a prominent role, seeing that it is the form in which the variable capital is
advanced," 48 insofar as "the wage system predominates." 49 The
use of the money is thus doubly determined by the social
relationships between private economic agents. But money still
remains true to its nature, witness the financial role of hoarding.
At the end of this analysis of the financing of capitalist
reproduction one sees how Marx conceived the joint role of
money and capital in the circulation of capital M-C... P... C'-M'
and in the reproduction of the social product C' ... C'. This
approach has been subjected to different but converging
criticisms. According to some, including Rosa Luxemburg, Marx
attached too much importance to the capacity of the capitalists
for investment, neglecting the real conditions for the stimulation
of investment. Moreover the analysis of financing gives money a
functional role, since hoarding is subordinated to the will of the
capitalists to invest. The theory of accumulation, simultaneously
too monetary and insufficiently so, leads to a static conception,
that of the general equilibrium of exchanges, rather than to a
knowledge of the actual conditions of investment.
\
MARX ON MONEY
72
lt is true that the accumulation of capital, reduced to its
abstract mechanism, merges its own real and financial
conditions; the stimulus to invest is then only an aspect of the
capacity to invest, which implies a determinate division of the
social product. Neither long tenn nor cyclical problems come in at
this stage of the analysis; when they do come under
consideration, it is in connection with other analyses, especially
those relating to cyclical financial disequilibrium. Above all, Marx
does not give a monetary theory of accumulation which would
collapse under a double criticism of underestimating or
overestimating the role of money. The question is that of the
financing of accunwlation in a monetary economy, where the
circulation of money is combined with that of capital.- Since the
theory of money is not mixed up with that of production, there is
no monetary theory of the "realization of surplus value" or of the
accumulation of capital.
The specifically monetary analys1s of fmancing takes place in
the discussion of credit. which introduces new elements. The
problem of the financial equilibrium of balance-sheets, so far
confined to its "natural and primitive form" (on the basis of
metallic money and self-financing) and its general functional
aspect (without taking cyclical metamorphoses into
consideration), will become much more complex. But the
discussion which follows involves the knowledge and use of all
the monetary and financial concepts analyzed up to this point.
11. CREDIT: STRUCTURES AND CYCLE
Some introductory remarks are necessary here. My explanation
of the theory of money and of the financing of capitalist
reproduction has adhered to the order of argument indicated by
Marx himself, whatever the confusion of certain passages of
Capital. The analysis of credit should be conducted in the same
way to reconstitute the monetanJ theory of credit logically. The
coherence of Marx's theory of money is evidence of the
cohesion of Capital on the basis of the scientific abstraction
developed by Marx.
MONEY AND CAPITALISM
73
But a careful reading of Capital shows a seemingly
insurmountable obstacle: the texts in regard to credit were
scarcely edited by Marx. In his preface to Volume Ill (dated
October 4, 1894), Engels points out the difficulties of editing the
last part of CaJiital: "The greatest difficulty was presented by
Part V, which treated of the most complicated subject in the
entire volume"-credit! "Here, then,"' says Engels. "we had no
finished draft, not even a scheme whose outlines might have
been filled out, but only the beginning of an elaboration-often
just a disorderly mass of notes, comments and extracts." 50
This is particularly true of the chapters dealing with the
machinery of banking, polemics on credit policy, and the balanc:e of payments. Does it make sense under these conditions,
even with. the arrangement of the material by Engels, to confer
the name of "Theory of credit" on the notes accumulated by
Marx, and to present their theoretical content? Does one have
the right to "write" Capital on this point while pretending to
"read" it?
The difficulty is nevertheless not insurmountable for several
reasons. First, if Marx did not edit all his notes on credit, at least
he wrote them, and their great number shows the extent of his
theoretical, historical, and political knowledge of the field. But
above all, in the course of his previous discussions, Marx
assigned a definite place to the analysis of credit. Since the financial mechanisms in question were not a simple expression of the
monetary mechanisms already considered, they could not be
studied before or simultaneously with them. The logical order
which makes it possible to give the part of Volume Ill dealing
with credit its proper place within Capital, likewise makes it
possible to dissect it in a logical way, by methods similar to
those used thus far. One can thus illuminate an essential point,
relation between the theory of money and the
the ャッァゥ」セ@
analysis of credit which makes it possible to speak of a
"monetary theory of credit," even if Marx's analyses on such
points as the banking system and the balance of payments are
more stimuli to thought than constituent elements of a completed
theory.·
Marx distinguishes "the monetary system" from "the credit
\
MARX ON MONEY
74
system" and "the monetary economy" from "the so-called credit
economy," which he nevertheless calls "only a form of the
monetary economy." 51 But "in developed capitalist production,
the monetary economy no longer appears except as the basis of
the credit economy." 52 One can then ask oneself if the important
thing is not to examine the differences between the monetary
and financial mechanisms to arrive at a theory of credit money.
There being none, the principle of a monetary theory of credit is
established in Capital. lt is not that Marx holds a monetary theory
of credit in spite of the difference between credit and money; on
the contrary, the distinction between the two permits Marx to
include credit in his general theory of money. The method
followed in Capital defines itself negatively by the rejection of
two temptations: that of a purely monetary analysis which would
make credit only a surface expression of an eternal monetary
essence, and that of a purely financial analysis which would
examine credit solely in terms of the capitalist economy. Neither
of these analyses would take into consideration the theoretical
results developed in the examination of money and the
circulation of capital. The "credit system" is the child of
capitalist production and monetary circulation.
A. THE STRUCTURES OF CREDIT
In Volume Ill of Capital Marx returns to the question of credit a
number of times. The place he assigns to loans and the lenders
of money-capital is clearly indicated in a digression in a
discussion of financing:
"The circulation of commodities always requires two things:
commodities which are thrown into circulation, and money which
is likewise thrown into it." 53 This phrase obviously refers to the
general theory of money.
The "special conditions" of the reproduction of the social product are subject to "the general law ... by which the money
which the producers of commodities advance into circulation
returns to them when the circulation of commodities takes place
normally." (This is in regard to the financing of reproduction.)
MONEY AND CAPITALISM
75
From u:hich it incidentally jiJ!lmcs that, if behind the producer of
the commodities himself there is a financial capitalist who in turn
advances money capital (in the strictest sense of the word, capital
value in the form of nwney) to the industrial capitalist, then the
exact point to which that money will flow back is the pocket of the
financial capitalist. Thus although money passes more or less
through everybody's hands, the mass of the money in circulation
belongs to the department of finance capital, concentrated and
organized in the form of banks, etc. It is the way in which it
advances its capital which, in the last analysis, produces the
constant return of that capital to it in the fonn of money, although
this process is in turn made possible by the reconversion of industrial capital into nwnetanJ capital.
This third point, "incidental" in the context of the system of
reproduction, is fundamental in introducing the analysis of the
structures of credit.
Marx is here about to put the third stage of his. monetary
theory, the "system of credit," in place. He has already
indicated that credit functions in a circular pattern, and has at
the same time shown that the relations between money,
money-capital, and credit depend on the specific relationships
between economic agents, with the capitalist class here divided
into industrial capitalists and financial capitalists, who share the
surplus value. The majority of the constituent elements of the
monetary theory of credit have thus already been introduced before being brought together again in Part V of Volume Ill of
Capital. The same is true of the idea of financial capital, referred
to in the passage cited above and defined in Chapter XIX of
Volume Ill.
Financial capital is money-capital, a fraction of total capital.
But it is money-capital functioning "autonomously" to provide the
financing of capitalist operations: its "capitalist function consists
exclusively in performing these operations for the entire class of
industrial and commercial capitalists." 54
A technical division of labor takes place between the
capitalists who take charge of the financial function and industrial capitalists. lt reflects the role of money-capital in the
\
circulation of capital, but is never total, "Because a part of the
technical operations connected with money circulation must be
carried out by the dealers and producers of commodities
themselves." 55
The financial function of financial capital is derived from that
of money-capital. "The vanous operations, whose individualization into specific businesses gives rise to the money
trade, spring from the different purposes of money itself and
from its functions, which capital in its money-form must therefore
likewise carry out. " 56 This explains why credit can only be
discussed after nwney and money-capital.
The technical division of labor between financial and industrial
capitalists assigns the money-lenders the function of centralizing
and redistributing the money available for the financing of production. But these "financial intermediaries" are capitalists; that
is, it is only in their interest to undertake the technical performance of financial functions insofar as they profit by it as the
result of a division of surplus value. After analyzing the formation
of a general rate of profit ("'average rate of profit"), and the
''transformation of the values of commodities into prices of production," Marx discusses the "division of profit into interest and
profits of enterprise" in Section V of Volume Ill, the part of Capital devoted to credit. Here the technical and economic aspects
of the financial machinery of credit are combined.
I think that it is necessary to adopt a different order than that
of the chapters of this section. A discussion of the structures of
credit in conformity with Marx's general method should first
show what the "system of credit" means in relation to the
"monetary system" before analyzing the capital markets and the
ways in which profit is divided between industrial and financial
capital. Indeed, we shall see that the monetary theory of credit
as conceived by Marx leads to a unitary concept of credit which
includes the financial structures (markets and credit institutions)
and their cyclical role in an interpretation tied to the unique
properties of money and money-capital. One of the consequences of this concept is that financial capital participates in
the division of an annual average rate of profit which is already
given, and not in the formation of the average rate of profit; this
MONEY AND CAPITALISM
77
can be understood and justified only in the context of a
systematic discussion of the monetary characteristics of credit.
a. A Monetary Theory of Credit
1. Marx's method. Marx exam1nes the "credit system" in the context of the capitalist form of production. where "capital has established its sway over production and imparted to it a wholly
changed and specific form" 57 from that under other systems.
The question, then, is not one of credit in general but of its role
under specific conditions. "On the whole, interest-beanng capital under the modern cred1t system is adapted to the conditions
of the capitalist mode of production."ss
On a number of occasions Marx points out that "merchant's
capital," that is, commercial capital and interest-bearing capital,
historically preceded and in part created the conditions for the
capitalist form of production. "Interest-bearing capital, or
usurer's capital, as we may call it in its antiquated form,
belonging together with its twin brother, merchant capital, to the
antediluvian forms of capital, which long precede the capitalist
mode of production and are to be found in the most diverse
economic formations of society." 59
Thus the medieval usurer, who is to the merchant as the financial capitalist is to the industrial capitalist, "converts his
hoard of money into capital for himself" 60 according to the
formula applicable to all capital, M-M', with the surplus m being
in this case interest.
Because credit has this double aspect, ancient and modern,
its study presents the same methodological problem as did that
of money, with the same kind of solution, though in an inverted
form. Marx constructed a general theory of money before
analyzing the role of money in capitalism. He separated the
discussion of simple circulation from that of the capitalist mode
of production, in which on the one hand circulation has seized
hold of production, while on the other, the process of production
has absorbed circulation as one of its phases.s 1 Inversely, he
now takes as the subject of his examination "the modern credit
system,'' corresponding to the capitalist mode of production and
therefore having such specific structures as paper money, fi-
\
nancial markets, etc. Yet interest-bearing capital is as old as
commercial production, since "it requires no other condition for
its existence ... outside those necessary for the simple
circulation of money and commodities." 62 Marx speaks of
"merchants' capital" in his notes on "pre-capitalist conditions, "63
after having a first historical survey in another chapter, 64 but he
only gives a general theoretical treatment to the functioning of
the credit system proper in modern capitalism.
The method followed in the two cases has the same dual
character, in that the primitive forms of money and credit are differentiated from their function in the capitalist mode of
production, while the "credit system" is only analyzed in
capitalism. Marx has given a dual solution to the same
methodological problem, reversing the order of its elements,
since in the theory of money the analysis deals with the primitive
form of the monetary system, while the theory of credit deals
with the developed form of interest-bearing capital, the credit
system.
This inversion takes place because it is impossible to
understand the function of credit in the capitalist mode of
production by considering it as merely the modern form of
merchants' capital. There is a real break when merchants'
capital is incorporated into the capitalist form of production and
"functions only as an agent of productive capital." 65 This has
been shown in the examination of the circulation of capital.
Since the "modern credit system" has no meaning except in
relation to the financing of capitalist reproduction, it becomes
one of the elements of the new mode of production. Past forms
of financial capital cannot serve as the starting point for the
discussion of credit in the capitalist mode of production. But if it
is impossible to start with the examination of ancient forms of
interest-bearing capital, it is also a mistake to view
"commodity-capital and money-capital, and later commercial
capital and money-dealing capital as forms arising necessarily
from the process of production as such, whereas they are due
to the specific form of the capitalist mode of production which
above all presupposes the circulation of commodities, and
hence of money, as its basis."ee
This would be to confuse all commercial production with
capitalist production. 67 That is why it is necessary to study the
structure of the "credit system," which is not just a technique for
financing production. lt is necessary to see how the capitalist
conditions, in rchich financial capital functions in a specific way,
preserve the commodity basis of the whole system, and hence its
"monetanJ basis."
The preservation of this basis explains the survival of the practice of usury in the modern credit system.
Usury as such does not only continue to exist, but is even freed,
among nations with a developed capitalist production, from the
fetters imposed upon it by all previous legislation. Interest-bearing
capital retains the form of usurer's capital in relation to persons or
classes, or in circumstances where borrowing does not, nor can,
take place in the sense corresponding to the capitalist mode of
production; where borrowing takes place as a result of individual
need, as at the pawnshop; where money is borrowed by wealthy
spendthrifts for the purpose of squandering; or where the producer
is a non-capitalist producer, such as a small farmer or craftsman,
who is thus still, as the immediate producer, the owner of his own
mea118 of production; finally where the capitalist producer himself
operates on such a small scale that he resembles those selfemJlloyed Jlroducers. 68
Usury survives "in the pores of production" under capitalism.
But that survival is only possible because of the existence of
what Marx calls the "monetary basis" of the credit system itself.
Just as the interdependence of the industrial capitalist and the
financial capitalist corresponds to _the different phases of the
circulation of capital, so the mutual dependence of credit and
money, based on the role of money as "general equivalent" and
on the law of value, corresponds to the differences between the
"monetary system" and the "credit system." That is why the
analysis of the specific structures of credit takes place in terms
of a monetary theory of credit which makes it possible to
understand such survivals as usury, and the disturbances of the
\
MARX ON MONEY
80
modern credit system itself which take place in the course of the
cyclical changes discussed further on.
2. "Credit money." Following Tooke, and unlike Ricardo and
the "Currency School," Marx distinguishes convertible banknotes
from money proper (gold and substitutes for gold). Nevertheless
such instruments of credit are themselves a medium of
circulation, subject to the general laws of circulation: "We have
already demonstrated in the discussion of the simple circulation
of commodities (Volume I, Chapter Ill, 2), that the mass of actual
circulating money, assuming the velocity of currency and
economy of payments as given, is determined by the prices of
commodities and the quantity of transactions. The same law
governs the circulation of notes." 69 "Hence only the requirements of business itself exert an 1nfluence on the quantity
of circulating money-notes and gold."7°
These two points, the difference between money and
banknotes and the monetary character of the latter, must be
examined in turn. To understand their relationship is to see that
the main distinction Marx makes is that between the "monetary
system" and the "credit system," and that this distinction has
meaning only in terms of a IIWmeutary theory of credit mouey. In
this respect among others Marx's ideas part company not only
with those of Ricardo but in part with those of Tooke, from whom
he. nevertheless borrows much of his description of the credit
system.
The paper currency issued by banks has its origin in the
credit instruments used by merchants and industrialists. The
credit system includes acceptances, bills of exchange,
banknotes, and checks-in short, all evidences of debt, whether
used only between merchants or monetized by the banks and
used as a medium of circulation. Nevertheless, it is necessary to
distinguish, within this single system, between "commercial
credit, that is, the credit which the capitalists engaged in
reproduction grant one another," and "banking credit. which
constitutes another, quite different, element." 71 The first "forms
the basis of the credit system. Its representative is the bill of
exchange, a certificate of indebtedness whose payment is due
MONEY AND CAPITALISM
81
on a certain date," 72 which can circulate from one merchant to
another by endorsement without any intervening discount. This
commercial credit, "the natural basis of the credit system," 73 has
its own roots in simple circulation, when money acquires the
function of means of payment, with the seller becoming the
creditor and the buyer becoming the debtor. 74
"Credit-money springs directly out of the function of money as
a means of payment. Certificates of the debts owing for the purchased commodities circulate for the purpose of transferring
these debts to others. On the other hand, to the same extent as
the system of credit is extended, so is the function of money as
a means of payment. "75
Commercial credit is thus on the borderline betu;een the
monetary system and the credit system. Incorpomted into the
latter, it introduces into it the contradiction inherent in the
function of money as a means of paynumt,7 6 which represents simultaneously the ultimate dematerialization of money and its reembodiment.
The dematerialization of money manifests itself in the
substitution for simultaneous exchanges of commodities and
money of "legally executed private contracts" between creditors
and debtors, in which money only makes its appearance as the
measure of value in fixing the prices of the commodities sold,
and hence as the measure of the debtor's obligation; the
juridical and contractual character of the debts is here
inextricably bound up with the economic function of money. To
the extent that the payments balance, money does not make its
appearance, just as if there were a pure system of commercial
credit in which the accounts of the merchants and producers
were in a state of equilibrium, with all financial transactions
canceling one another out completely.
Bsーゥョセ・イ@
A, for example, has to pay a bill to cotton broker B,
and the latter to importer C. Now, if C also exports yarn, which
happens often enough, he may buy yarn from A on a bill of
exchange and the Spinner A may pay the broker 8 with the broker's own bill which was received in payment from C. At most. a
balance will have to be paid in money."n
If the series of transactions ended in complete compensation,
there would be neither the contradiction of money as means of
payment nor money at all-once the monetary prices of the
commodities had been initially fixed. But Marx immediately
points out the limits of commercial crediF 8 and thus reintroduces
in the credit system a demand for money in the shape of a need for
"ready cash." The circuit is in fact never completely closed, and
so "This credit system does not do away with the necessity for
cash payments. For one thing, a large portion of expenses must
always be paid in cash, e.g., wages, taxes, etc. Furthermore,
capitalist B, who has received from C a bill of exchange in place
of cash. payment, may have to pay a bill of his own which has
fallen due to D before C's bill becomes due, and so he must
have ready cash. A complete circuit of reproduction as that
assumed above, i.e., from cotton planter to cotton spinner and
back again, can only constitute an exception; it will be
constantly interrupted at many points."7 9
Because of the diversity of the branches of production, the totality of transactions between capitalists cannot constitute a
complete circle of debts with a balance of zero left over. "For
example, the claim of the spinner on the weaver is not settled by
the claim of the coal-dealer on the machine-builder. The spinner
never has any counter-claims in his business on the machinebuilder, in his business, because his product, yarn, never enters
as an element in the machine-builder's reproduction process.
Such claims must, therefore, be settled by money."80
lt is also necessary to take into account the due dates of the
obligations and the fluctuations in the salability and prices of
commodities; these also create a need for cash in hand. The
circuit of commercial credit can never be entirely closed without
any use of cash. Gaps occur, and money reappears as the
general equivalent to settle the transactions; its function as
means of payment now involves the presence of cash, the reembodiment of money.
If it is gold that serves as the means of payment, money presents itself in a material form adequate to its function. At the
same time it cancels out the credit transaction which it has
completed. But in the context of the credit system, gold may be
replaced by banknotes which "do not rest upon the circulation
MONEY AND CAPITALISM
83
of money, be it metallic or government-issued paper money, but
rather upon the circulation of bills of exchange."a,
"A bank note is nothing but a draft upon the banker, payable
at any time to the bearer, and given by the banker in place of
private drafts. This last form of credit appears particularly
important and striking to the layman, first, because this form of
credit-money breaks out of the confines of mere commercial
circulation into general circulation and serves there as
money .... " 82
The problem, then, is to know how to define the monetary
characteristics of this "credit money," whose basis is the
circulation of debts, that is, a non-circulation of money.
According to Marx, it is just because credit money is part of
·the credit system and differs completely from gold, that it obeys
the general laws of monetary circulation and thus becomes
"money." If credit money were confused with gold, the quantity
of notes issued by the banks would depend on the amount of
gold needed to satisfy the requirements of circulation. This
would make the given quantity of gold the keystone of the entire
means of payment, including the monetary system and the
credit system without distinction, in accordance with Ricardo's
concept. In contrast, to differentiate credit money from gold is not
to remove the latter from the laws of monetanJ circulation; on the
contrary, from Marx's anti-quantitative viewpoint, it is to subject it
to them. The movement of the medium of circulation depends on
the needs of the economic agents, that is, on their demand for
money. The bankers are no more able than the producers of
gold to force the effective circulation of an amount of money
greater or smaller than that for which there is a demand. The
difference between the amount of money produced or issued
and the amount needed for effective circulation always corresponds to a hoarding or dishoarding.
The "credit money" implicit in the credit system then
necessarily has monetary characteristics analogous to those of
gold; it is not only a medium of circulation, but an instrument of
hoarding. On this point Marx parts company with Tooke and
Fullarton who, according to him, did not know how to analyze in
the abstract the way in which the monetary characteristics of a
MARX ON MONEY
84
money are constituted, 83 and did not properly understand the
significance of the demand for banknotes as a demand for
"means of payment. "84
Nevertheless, the first function of money, that of the measure
of values, cannot be directly fulfilled by credit money. In that
sense, "credit money" is only "money insofar as it absolutely
takes the place of actual money to the amount of its nominal
value." 85 But this convertibility has only theoretical significance:
in normal times it does not in any way imply an effective
convertibility, since banknotes are not symbols of gold but
monetized debt. That is why "Note circulation is just as
independent of the state of the gold reserve in the vaults of the
bank, which guarantees the convertibility of these notes, as it is
of the will of the Bank of England." 86 That is also why, as we
shall see later, Marx criticizes the monetary policy inspired by
Ricardo which limits the circulation of notes in relation to the size
of the gold reserve. Under these conditions, what significance is
there to the maintenance of the principle of convertibility? I think
that for Marx it only means that the determination of monetary
prices depends originally on the function of the money
commodity as measure of value. But that initial determination
does not cover either the formation of the relative prices of
commodities, taking into account the average rate of profit, or
the cyclical variations of relative prices and the general price
level. The problem of prices is not, for Marx, a monetary problem,87 once the origin of the general equivalent has been estab:
lished. The maintenance of the principle of convertibility serves
to preserve the primitive role of money as measure of value. But
except in a credit crisis, that principle is not applied, because
the economically important variations of prices under capitalism
do not depend on the variations in the value of gold (which is
postulated}, but on the contrary the circulation of all money is
itself dependent on prices. For these reasons it seems to ine
pointless to defend Marx's monetary theory, as H. Denis has
done in his book on money, 88 by showing that the movements of
prices from 1820 to 1914 were tied to the variation of the price
of gold. This method neglects all the intermediate steps
introduced in Capital between the initial determination of
MONEY AND CAPITALISM
85
monetary prices and the determination of the variations of these
prices under the capitalist system. it is not only pointless but
dangerous, since it can indirectly open the way to Ricardo's
ideas if we follow the advice of Wicksell, 89 who recommended
that the theory of the cost of production be made an element of
the Quantity Theory of Money.sg
According to Marx "credit money," convertible in principle,
has in the last analysis all the characteristics of a money
although it initially develops as a non-money. That is why the
credit system preserves as its foundation the monetary system
for which it is a substitute. The laws of the circulation of
commodities, adapting themselves to the specific financial
conditions of the capitalist mode of production, inevitably remain
valid. Where there is production of commodities, there is
circulation of money; if credit replaces money, it is because it
has monetary characteristics. which can brutally reveal
themselves as such in a period of crisis. Contrary to what one
commentator on Marx's monetary theory says, 90 even wellplanned production would not permit the complete elimination of
money by credit, if it remained a production of commodities; its
instruments of circulation necessarily take the character of
money.
The monetization of debts by the banks, examined so far in
terms of the monetary theory of credit. translates itself in the
balance-sheets of the banks into a l"ist of assets which includes
the commercial loans and a list of liabilities which includes the
banknotes. But the banks are not pure issuers of money,
meeting technical needs, but also capitalist institutions carrying
on the money trade and having a loan capital available for this
purpose. This, says Marx, is "the other side of the credit
system," 91 which must now be discussed. But the two aspects
are linked; his monetary theory leads Marx to a unitary concept
of credit. Unity of capital markets, a single rate of interest,
complementary character of financial circuits: all these concepts
which are used today, for instance, by the French National
Accounts in studying the total supply and demand for capital.
are to be found in Volume Ill of Capital. But since, according to
Marx, the unity of the financial system depends logically on the
MARX ON MONEY
86
monetary basis of credit, it is simultaneously indestructible and
fragile, continually reconstructing itself from its own ruins. This
double aspect, to be seen in the examination of the structures of
credit, will reveal itself completely in the discussion of cycles.
b. A Unitary Concept of Credit.
The implications of the "monetary theory of credit" are far from
being systematically developed by Marx. In order not to
exaggerate the cohesion of the material on this question in
Volume Ill of Capital, I prefer to speak of the unitary "concept"
of credit which flows from the monetary theory.
1. Unity of capital markets and of the rate of interest. In certain passages, Marx deals with the different aspects of the capital
markets, distinguishing between the financial market for longterm loans and the monetary market for bank credit. 92 But in his
analyses he subordinates these differences to a fundamental
unity of the market for monetary resources, where the supply
comes mainly from financial capitalists, including the banks; for a
certain price, the rate of interest. they satisfy the demand of the
industrial capitalists for money. This financing mechanism, which
implies a division of the capitalist class, is the consequence of
the relations already analyzed between commodities and
money, productive capital and money capital, industrial capital
and financial capital. lt is based on the commodity supplied and
sought in it, ュッョセケN@
and it underlines the significance of Marx's
use of the word "system" to characterize the modern organization of credit.
Financial capital, we have seen, is money capital devoted to
financing operations; historically, these developed from the trade
in gold and that in foreign exchange. 93 Before the formation of
the credit system, "This circulation of money itself, a phase in
commodity-circulation, is taken for granted in money-dealing.
What the latter promotes is merely the technical operations of
money-circulation which it concentrates, shortens, and
simplifies. " 94
Modern credit renders analogous technical services. it
reduces the costs of circulation, and "accelerates the phases"
MONEY AND CAPITALISM
87
of the circulation of commodities and capital. 95 But its technical
role can be fulfilled only in the context of a system based on the
concentration of the monetary resources needed to satisfy the
demand of the capitalists who need to monetize debts or borrow
for long terms. Marx examines mainly:
the money-capital on the market . . . the available loanable capital
in general.
In the money market only lenders and borrowers face one
another. The commodity has the same form-money . ... Moreocer,
with the development of large-scale industry, money-capital, so far
as it appears on the market, is not represented by some individual
capitalist, not the owner of one or another fraction of the capital
on the market, but assumes the nature of a concentrated, organized
mass, which, quite different from actual production, is subject to
the control of bankers, i.e., the representatives of social capital. So
that, as concerns the form of demand, loanable capital is
confronted by the class as a whole, whereas in the province of
supply it is lonable capital tchich obtains en masse. 96
The unity of the capital markets thus rests on the form of the
commodity whose supply and demand it brings together, on the
function of the agents of that supply and demand, and finally on
the centralizing role of the bankers who, serving as intermediaries, "confront the industrial capitalists and the
commercial capitalists as representatives of all money
lenders .... A bank represents a centralization of money-capital,
of the lenders, on the one hand, and on the other a centralization of the borrowers."97
"The credit system, which has its focus in the so-called
national banks and the big money-lenders and usurers
surrounding them, constitutes enormous centralization" of
monetary funds by a part of the capitalists, who "are augmented
by financiers and stock jobbers."9 a Given all these constituent
elements of the credit system, the differences between the types
of credits and loans, short or long term, are secondary in comparison to the unity of the market in monetary resources.
MARX ON MONEY
88
cans, short or long term, are secondary in comparison to the
unity of the market in monetary resources.
But this unity of the credit system rests on the division of the
capitalist class into financial capitalists, characterized by Marx
as "parasites" and "honorable bandits," 99 and industrial
capitalists. lt is this which leads to the existence of the rate of
interest. deducted by the lenders from the profits of the "active
capitalists"; the profits of the banks come from the difference
between the rate at which they borrow and the rate at which
they lend. 10D In general, Marx speaks of the rate of interest as a
single category, without taking into consideration the differences
between monetary rates and rates on the financial market. 101 lt
would be going too far to deduce from this, as Fan Hung
does, 102 that Marx, like Keynes later, considers interest a
monetary rate whose "determination ... is specifically a
monetary problem." lt nevertheless remains true that in Capital
the category of the rate of interest rests principally on the
analysis of the supply and demand for monetary resources
which are distinct from "real capital" just as money is distinct
from commodities, money-capital from productive capital-and
the financial capitalist from the industrial capitalist. In this sense
one can, with Fan Hung, speak of a monetary theory of the rate
of interest in Capital.
Uke the concept of the credit system, the category of the rate
of interest implies an analysis of the relation between financial
capitalists and industrial capitalists. Credit is obviously an aid in
the accumulation of industrial capital. The limits within which the
individual capitalist has money-capital available by means of
self-financing are transcended "thanks to credit." 103 The same is
true of the monetary limits of social accumulation: "This
disposes also of the absurd question, whether capitalist
production in its present volume would be possible without the
credit system (even if regarded only from this point of view), that
is, with the circulation of metallic coin alone. Evidently this is not
the case. lt would rather have encountered barriers in the
volume of production of precious metals." 1D4
Furthermore credit, by increasing the mobility of capital,
facilitates the equalization of the rate of profit in the different
MONEY AND CAPITALISM
89
branches of industry. 105 The industrial capitalists thus need a
credit system and derive profit from its existence-on condition
that they reward the financial capitalists with a part of their profit.
The division of the average profit (determined elsewhere) into
interest and entrepreneurial profit then depends only on the
conditions of supply and demand on the market for monetary
resources; it is thus competition, or the balance of forces between lenders and borrowers, which determines "the market rate
of interest." 106 One can calculate "an average rate of interest"
differing from the constantly fluctuating market rate if one calculates the average rates during the industrial cycles and "the rate
of interest for investments which require long-term loans of capltal."107 But the determination of th1s average rate is also purely
empincal: "There is no good reason why average conditions of
competition, the balance between lenders and borrowers,
should give the lender a rate of interest of 3, 4, 5 percent, etc.,
on his capital, or else a certam percentage of the gross profit. ... "108
There is no general law "except that enforced by competition"1o9 governing the division between interest and
entrepreneurial profit "because it is merely a question of dividing
the gross profit between two owners of capital under different title."11o The sole preconditions of the division are then that the
rate of interest cannot be zero, and that it cannot equal or
exceed the average rate of profit. This contingent character of
the rate of interest is tied to the special character of the capital
market.
Monetary resources are not sold like commodities; there is no
simultaneous exchange of equivalents. "In an ordinary exchange
of commodities, money always comes from the buyer's side; but
in a loan it comes from the side of the seller. He is the one who
gives money for a certain period, and the buyer of capital is the
one who receives it as a commodity. But this is only possible as
long as the money acts as capital and is therefore advanced. 111
Interest is not the price of capital. lt does not express the
intrinsic value of capital, tor that depends on the value produced
by the employment of the money-capital lent to the producers.
Nor does it express the social scarcity of capital, since it merely
MARX CIN MONEY
90
reflects the inadequacy of the resources of the investors. lt is
then purely a form of division of the mass of the profit, such that
its economic existence is shown only by its empirically determined rate. Marx goes so far in this reduction of interest to a
simple diversion of the part of the profit that he does not take
into account the risk, the calculations, and the expectations of
the lenders and borrowers, all things that could give interest a
special significance.
If the "quantitative" division of the profit nevertheless is
transformed into a "qualitative" division, it is because of "the
assumption, that the money-capitalist and the industrial capitalist
really confront one another, not just as legally different persons,
but as persons playing entirely different roles in the reproduction
process, or as persons in whose hands the same capital really
performs a two-fold and wholly different movement. The one
merely loans it; the other employs it productively." 11 2
Loan capital is "real" money in the hands of the borrower who
puts it to productive use but a title to money for the lender who
participates in the financing of production. 113 What appears as
an antagonism in terms of the division of profit corresponds to
the functional difference between productive capital and
money-capital; the latter, though unproductive in itself, is an
indispensable link in the circulation of capital. The category of
interest simultaneously reflects the difference between selffinancing and credit and that between all financing and
production. Marx's Saint-Simonian way of brutally describing the
financiers as "parasites" is explained by his whole theory of
money and the role of money-capital.
One sees in what terms the unitary concept of the capital
market is drawn .. This unification can be considered as a rough
sketch of the function of financing today as described by the
National Accounts. But its other side is the failure to examine the
effects of calculation and expectations on the decisions of
lenders and borrowers. This gives a static character to the
concept of speculation, to be defined further on.
lt is the analysis of the role of the banks which, despite its
incompleteness, is most interesting. For it incorporates the problem of money into that of financing in a new way. As a result, the
unification of the credit system takes on a novel aspect.
2. Induction of the financial circuits. The Bauh. The credit system has numerous ramifications, corresponding to the vanous
types of credit (commercial, financial, monetary). All compete 1n
.supplying monetary resources. lt is nevertheless necessary to
analyze the way in which the different branches of the system
complement one another. While preserving their differences
(commercial credits, for example, are not credit money), the
forms of credit are complete in themselves and can in part be
substituted for one another, since their modes of circulation
have common characteristics. For one thing, most credits
circulate "in a circuit"; their creation implies their cancellation by
repayment. For another, they all tend to break out of that
particular form of circulation, to the extent that they are
themselves commodities negotiable on the capital markets. Thus
in the case of credit money, "the conditions governing the 1ssue
of money determine also its reflux," 114 just as the creation of
commercial obligations implies their liquidation. Nevertheless
new circuits are continually being formed; they become
entangled by the sale and purchase of obligations which have
become commodities, in such a way that the financial system
tends to grow by feeding on its own substance. These two
aspects of the complementary nature of the circuits are reflected
in the way the system of bank credit functions. The banks
appear in turn as financial intermediaries underwriting the operation of a particular circuit, and as the machinery of a banking
system with a tendency to become imprisoned in itself and lose
its functional character. In a general way: "If the loaned capital
is circulating capital, it is likewise returned in the manner
peculiar to circulating capital. ... But as for loan capital, its reflux assumes the fonn of return payments, because its advance,
by which it is transferred, possesses the form of a loan."11s
The basis of the circularity of credit operations is thus to be
found in ·the productive capitalist's need and receipt of funds,
that is, in the circulation of capital M... M'. Marx remains true to
the order he has established between the different concepts; the
cycle of capital and money-capital, loan capital and the· banking
circuit, are the successively assembled links in a chain of
transactions.
Because of their centralizing role, the banks have at their
disposal a considerable mass of loan capital: rotating funds and
reserve funds of industrial capitalists and merchants, deposits of
financial capitalists, liquid savings, and temporarily unemployed
money of all social classes. 116 Banking credit thus has as a solid
base a social supply of monetary resources centralized by the
banks. Indeed, "In countries with a developed credit, we can
assume that all money-capital available for lending exists in the
form of deposits with banks and money-lenders." 117 This centralization of funds by the banking system can only perpetuate
itself because of the circularity of the system.
Just as there is a circuit of commercial credit which implies its
own closing, that is, its liquidation by the offsetting of obligations
and the payment of balances, so there is a banking circuit in
which the notes issued to monetize debts return to the issuing
banks. These notes return first as the means of payment, to
cancel the debts of the borrowers. This is the "reflux," analyzed
by Tooke and Fullarton before Man<. The banknotes can likewise
return as deposits in the banks, so that the closing of the circuit
does not involve its liquidation, but rather its indefinite
continuance. In short, the mechanism of the banking circuit
furnishes a substitute for the hoarding of newly mined gold
engaged in by a section of the capitalists. 118 Just as the
producers of gold are the permanent suppliers of metallic
money to the capitalists, so the banking system remains indefinitely the creditor of the industrial capitalists as a whole. In a
normal period, moreover, the total of centralized deposits
remains stable, offsetting credit money in a way analogous to
that in which the dishoarding of investors offsets the hoarding of
capitalists setting up reserve furids: 119 "The deposits, unless tied
up by agreement for a certain time, are always at the disposal of
the depositors. They are in a state of continual fluctuation. But
while one depositor draws on his account, another deposits, so
that the general average sum total of deposits fluctuates little
during periods of normal business." 12 o
The consequence of these two processes, the deposit of the
banknotes issued and the offsetting of deposits and withdrawals, is that the banking circuit can close and reproduce
itself indefinitely by the continuous reconstitution of its financial
MONEY AND CAPITALISM
93
base. The financing function of the various financial circuits can
then be represented by the way one of these circuits, that of
bank credit, functions. Its circular form and its manner of
reproduction are similar to those of the majority of credit operations.
"On the basis of commercial credit, one person lends to
another the money required for the reproduction process. But
this now assumes the following form: the banker, who receives
the money as a loan from one group of the reproductive
capitalists. lends it to another group of the reproductive
capitalists. " 121
The banker here only takes the place of one industrial
capitalist, the "pnmary lender, " 122 1n relat1on to another, the
"deficitary," 122 playing the role of a "financial intermediary," 122
complementary to that of the primary lender; the basis of his
activities is the primary credit relationship between industrial
capitalists.
Nevertheless, only the bank can settle credit transactions in
cash and put means of payment into circulation. Marx
distinguishes between two types of banking activities, the
monetization of debts and the advance of money-capital. The
first is associated with a specific monetary interest rate, the second with a financial rate that depends on the total amount of
loan capital in relation to the demand. Nevertheless these two
different functions both involve the functioning of a financial
circuit, and together they constitute the elements of the liabilities
and assets of the banking system considered as a whole. That is
why the consolidated balance-sheet of that system reflects the
complementary nature of the multiple circuits of financing.
Up to this point the credit money issued by the banks has
developed out of the general conditions of financing. The banker
has given a monetary character to drafts on himself only as a
substitute for direct obligations; his function has depended on
the obligations contracted between producers and merchants,
and on his own obligations to his creditors, the depositors.
There has been no creation of money, but only the reconstitution
by the bank of the monetary character of a whole collection of
credits, when money has become lost in the relations of credit.
The bank's action has made the expansion of credits into a
multiplication of the means of payment.
But the banking system is not merely an intermediary between
depositors and borrowers; a bank also creates deposits by the
credits it extends. 123 The complementary nature of these two
activities shows itself in a tangle of composite elements which
sometimes represent a social supply of loan capital and
sometimes a purely banking supply of credit. Hence one part of
banking assets rests entirely on banking activity itself and does
not correspond to any liquid savings. Even more, these assets
tend to become purely "fictitious"; Marx means by this that they
tend to evade the conditions of the circulation of capital. Here
the credit system takes on a third aspect.
In the same way as the circuit of commercial credit could be
completely closed if there were complete compensation, 124 the
circuit of bank credit could function as a closed circuit. In the
banking system there is a true creation of deposits on the basis
of the credits granted to borrowers. The tangible basis of the
bank's liabilities, the supply of funds by the depositors,
disappears when the banker lends "on overdraft" and, for
example, opens a credit for the borrower which simultaneously
inflates the bank's assets and liabilities. "The bank may open a
credit account for A, in which case this A, the bank's debtor,
becomes its imaginary depositor. He pays his creditors with
cheques on the bank, and the r·ecipient of these cheques
passes them on to his own banker, who exchanges them for the
cheques outstanding against him in the clearing house. In this
case no mediation of notes takes place at all, and the entire
transaction is confined to the fact that the bank settles its own
debt with a cheque drawn on itself, and its actual recompense
consists in its claim on A."12s
Like circulating metallic money, credit money thus becomes
"dematerialized" when it becomes a pure instrument of
circulation, and its circuit is no longer closed by virtue of a
compensatory hoarding, but as a result of its circular form alone.
The unity of the credit system then presents an altogether different aspect. Almost all banking assets take on a "fictitious"
character when they circulate; their circulation becomes
l
v
MONEY AND CAPITALISM
95
independent of that of "real capital" and even of the circular
form which reflects, in terms of financing, the cycle of capital.
"Bank capital consists of 1) cash money, gold or notes; 2)
securities. The latter can be subdivided into two parts:
commercial paper or bills of exchange, which run for a period,
become due from time to time, and whose discounting
constitutes the essential business of the banker; and public
securities, such as government bonds, treasury notes, stocks of
all kinds, in short, interest-bearing paper which is however significantly different from bills of exchange. Mortgages may also be
included here." 126
Point 1, in regard to the reserve funds or cash of the banks,
will be examined later. The monetization of commercial paper by
the banks has already been discussed. We still must examine
what Marx means when he speaks of the fictitious character of
the public securities and the stocks held by the banks.
The public debt only represents "purely fictitious capital" 127
since the money-capital lent to the state has long since been
spent by it. The obligations held by the cred1tors of the state represent an annual revenue: they can circulate in their own way
by being sold to other individuals. But they cannot be canceled
by repayment of the "principal." Because they do not represent
any capital, that is, any "self-preserving value," 128 they are not
subject to either the movement of the circulation of capital, or
the circular movement of the credit financing of productive
activities. This kind of asset, animated by "its own laws of
motion," 129 can circulate indefinitely despite its "fictitious" character, or rather thanks to that character which preserves the
public debt as such.
"The independent movement of the value" 130 of titles of
ownership appears more clearly in the case of stocks which, unlike the public debt, represent "real" capital. "The stocks of
railways, mines, navigation companies, and the like, represent
actual capital, namely the capital invested and functioning in
such enterprises, or the amount of money advanced by the
stockholders for the purpose of being used as capital in such
enterprises." 13 1
These stocks have a nominal value, that of the amount of
MARX ON MONEY
96
money for which they were initially purchased. But as
commodities which circulate in the stock market, they also have
a price which depends on the1r rate of capitalization. Their
market value "is in part speculative since it is determined not
only by the actual income, but also by the anticipated income,
which is calculated in advance." 132
But, says Marx, even if the income of the business remained
constant, or the annual payment was fixed by law, the market
price of the "obligation" would vary inversely with the rate of
interest: "Their value is always merely capitalized income, that
is, the income calculated on the basis of a fictitious ·capital at
the prevailing rate of interest." 133 The circulation of titles of
ownership as stock market commodities gives them a "fictitious
capital value" for everyone: "the money-value of the capital represented by this paper ... 1s 1tself fictitious, 1n so far as the
paper consists of drafts on guaranteed revenue (e.g.,
government securities), or titles of ownership to real capital
(e.g., stocks), and that this value is regulated differently from
that of the real capital. which the paper represents at least in
part."134
The circulation of titles under the specific conditions of the financial market represents the past and future but never the
present of the circulation of productive capital. "The greater
portion of the banker's capital is, therefore, purely fictitious and
consists of claims (bills of exchange), government securities
(which represent spent capital), and stocks (drafts on future
revenue). " 135
The accumulation of bank capital then becomes purely a
problem of the redistribution of the income created by industrial
capital. To the extent that the financial system feeds on its own
circulation, even in taking part in the financing of capitalist
reproduction, it itself produces without limit-financial capitalists. 1as Its parasitical character is mseparable from its
functional role.
Loan capital, by the very fact that it circulates, takes on a
"fictitious" character. The circuit of credit, in enclosing itself
completely within itself, reveals itself on a market of obligations
which evades the conditions of the circulation of capital. From
this .POint of view, the metamorphoses of banking capital represent those of the whole system of credit.
Marx says: "Even assuming that the form in which loan capital
exists is exclusively that of real money, gold or silver-the
commodity whose substance serves as a measure of value-a
large portion of this money-capital is always necessarily purely
fictitious, that is, a title to value-just as paper money. " 137 All
money which circulates dematerializes itself; all loan capital
tends to become fictitious.
Marx insists on this point at length when, in opposition to
Tooke, Fullarton, and Macleod, he differentiates credit money
and money-capital. issuance of instruments of circulation and
loans of capital. How can these different elements be not only
complementary but mixed up in a common process of
dematerialization? This flows from the financial function of the
credit system, which tends to put into circulation almost all the
constituent parts of the system. Then a law of the monetary
system, that of the dematerialization of the instruments of
circulation, makes itself felt. In the same degree that the credit
system evades the conditions of the circulation of capital, it
becomes dependent on one of the general laws of simple
circulation. Credit is undoubtedly an aid in the accumulation of
real capital, but in its own way. One must not confuse loan
capital and "real" capital any more than money and commodity.
"Everything in this credit system is doubled and trebled and
transformed into a mere phantom of the imagination ... " 138everything but the "reserve funds" of the banking system, 13 9 the
first section of banking capital which we put aside a little while
back, the only asset which corresponds to a real investment in
liquidity on the part of the depositors.
"The reserve funds of the banks, in countries with developed
」。ーゥエャセ@
production, always express on the average the
quantity of money existing in the form of a hoard, and a portion
of this hoard in turn consists of paper, mere drafts upon gold,
which have no value in themselves." 14o
In spite of the absence of intrinsic value in this paper money,
the significant thing here is its place in the reserve, its noncirculation. While all the other elements of the bank balance-
sheets circulate, animated by a movement of their own, tangled
up with one another, one part of bank capital does not circulate,
and thereby preserves a tangible character. Thus the credit
system, in its way, follows the same path as the monetary
system: development on the basis of real transactions,
dematerialization, then reconstitution of a solid element, the
'Tletallic reserve of the banks corresponding to a hoarding of
liquid assets. That is why the reserve fund of the banks
"contracts or expands in accordance with the requirements of
actual circulation," 141 just as hoarding of metallic money
increases or diminishes as a function of the requirements of
simple circulation. 142 Thus although the deposits multiplied or
created by bank credits remain instruments of circulation, they
cannot all circulate, lest the banker's credit be threatened along
with his liquidity. Thus credit money obeys the general laws of
monetary circulation; it only remains money if it does not
circulate completely and continuously.
To finish with this point, one can say that the complementary
nature of the financial circuits is reflected in the consolidated
balance-sheets of the banks, which are at the same time issuers
of. money and lenders of money-capital. The function of the
banks in financing rests on the circular character of banking operations, by virtue of which the banking system maintains and
reproduces itself. At the same time a purely financial circulation
develops; while it gives the credit system a "fictitious" character,
it also preserves it as a financial system. Although the circuits of
financing remain in the last analysis dependent on the needs of
the productive capitalists, they can endlessly revolve confusedly
about themselves, independent of the circulation of capital.
That is why credit, organized as a system, combines even
under capitalism a composite of pre-capitalist elements (money
and the money trade) and post-capitalist elements (the circuit of
credit being "a superior circulation, effected by intermediaries,
completed within itself, and already placed under social
contro1"). 143 Though adapted to the needs of capitalism, credit is
never really contemporaneous with capital. The system of
financing born of the capitalist form of production remains a
bastard. And its "monetary base" makes its appearance when
MONEY AND CAPITALISM
99
there is danger that it will be put out of service, whether it is a
question of internal or international 'financial circuits. Before
discussing this in detail in connection with the question of
cycles, it is necessary to complete this analysis with an
examination of the circuits of international payments.
The Balance of Payments and the "Demand for World Money." In
terms of the monetary theory of credit, the reserve funds of the
banking system are a means of hoarding. Their field of activity is
both national and international. "Just as every country needs a
reserve of money for its home circulation, so, too, it requires one
for external circulation in the markets of the world. The functions
of hoards, therefore, arise in part out of the function of money as
the medium of home circulation and home payments, and in
part out of its function of money of the world." 144
Internal and international financial circuits complement each
other. But the significance of this complementary nature must be
examined with care, since on this point Marx is opposed both to
Ricardo's ideas as a whole and to certain analyses of Tooke and
Fullarton.
The discussion of the balance of payments and the demand
for "world" money is placed at the border between the structural
and cyclical cuwly.se.y of credit. The latter analysis nevertheless
remains in terms of the former except for the specifically cyclical
question of speculation. 145 lt is misunderstanding of the structure of the monetary system and the credit system that leads
Ricardo to an erroneous analysis of the variations in the international circulation of gold. "I have shown by the example of
Ricardo in what way their false conception of the laws that regulate the quantity of the circulating medium is reflected in their
equally false conception of the international movement in the
precious. metals." 146
Ricardo "asserts, for instance, that in periods of crop failure,
which occurred frequently in England between 1800 and 1820,
gold is exported, not because corn is needed and gold constitutes money, i.e., it is always an efficacious means of purchase
and means of payment on the world market, but because the
value of gold has fallen in relation to other commodities and
MARX ON MONEY
100
hence the currenc!J of the country suffering from crop failure is
depreciated in relation to the other national currencies. "147
This erroneous concept of the interdependence of internal and
international monetary circuits rests on the Quantity Theory of
Money. According to Ricardo, the money in circulation becomes
relatively overabundant in relation to commodities (here, wheat)
and hence loses its own gold value. Thus it simultaneously devalues itself in relation. to domestic commodities, whose prices
rise, and to foreign currencies, in whose favor the exchange rate
changes. Nevertheless monetary equilibrium is automatically reestablished by the contraction of the national currency, whether
by a decrease in the production of gold or by the export of gold
(with a corresponding import of commodities). This concept,
vigorously criticized by Malthus and by other economists, "ends
by attributing to increases and decreases in the amount of precious metals an absolute influence on bourgeois economy such
as was never imagined even in the superstitious concepts of the
Monetary System." 14a
The criticism of Ricardo's ideas by Malthus, Tooke, and
Fullarton is taken up by Marx in terms of his general theory,
according to which "increases or decreases in the amount of
currency when the value of precious metals remains constant
are always the consequence, never the cause, of price
variations." 149 Two consequences flow from this and become the
premises of the cyclical analysis of financial mechanisms: the
amount of money in circulation in a country does not influence
the rate of interest, which in general depends solely on the
capital market. 1 50 and it does not influence the rate of exchange
in a "normal" period (one without a crisis). On the contrary, the
cyclical variations of prices influence the demand for money for
commerce, whether internal credit money or specie. The mutual
dependence of internal and international financial circuits, all
subordinated to the banking machinery, changes the functional
significance of the cycle. That is why, according to Marx, the
international circulation of gold must be considered in the
context of the world market, and in terms of a general financial
cycle. This view is justified primarily because the financial cycle
is only a reflection of the economic cycle: monetary and financial
movements reflect non-monetary and non-financial internal and
international disturbances. But they reflect them in their own way
because of the existence of specific financial structures. Thus,
although international commerce is only complementary to
domestic commerce, "The balance of payment differs from the
balance of trade in that it is a balance of trade which must be
settled at a definite time"; 151 one finds here, on another level,
the mechanism which transforms commercial relations into a financial system. Consequently there is a specific demand for
international money, different from the demand for internal
instruments of circulation. But it is when the combined variations
of the two affect the volume of the national store of gold that
cyclical tensions influence both the internal credit system and
international payments.
This is the logical sequence of Marx's analyses, scattered
through numerous chapters of Volume Ill of Capital, but all
dependent on his general theory of money and credit. it will then
suffice to present Marx's comments in order, and to quote them
at length.
Marx criticizes the procedure of starting with the excess
money circulating in a single country and estimating its
international effects, a method which misunderstands the
meaning of monetary and financial phenomena. "it is characteristic of the English economic writers ... that they look upon
the exports of precious metals in times of crisis, in spite of the
turn in the rates of exchange, only from the standpoint of
England, as a purely national phenomenon." 152
it is necessary at least to start by examining the mechanism of
disequilibrium in bilateral transactions. For instance, if English
cotton goods are exported to India and sold on credit, the balance of trade is favorable to England when Indian exports are
smaller. 153 But the loan to India is an expenditure of English
money-capital, with a corresponding import of obligations from
India, that is, a debit for England. If colonial exploitation, the
interest on English capital invested in India, and other sources
of income in Indian money do not make up for the English debit,
the English balance of payments is in deficit and must be
settled by the export of gold. it is thus necessary to consider the
MARX ON MONEY
102
balance of payments as a whole to understand the reasons for
the export of gold. Even by starting from the single case of
England and India, one sees the error of Ricardo's ideas on the
exodus of gold, which is never due directly to a relative excess
of money internally, and which thus does not have the effects
imagined by Ricardo on the prices of commodities. The bilateral
movements of capital exert pressure on the English and
international financial markets, and thus on the rate of interest in
England and the rate of exchange between the pound sterling
and the Indian rupee; they can directly affect "financial" prices
but not those of English commodities. And they also affect the
Indian financial market.
Marx emphasizes that, in a period of cyclical stress, the
disequilibrium of the English balance of payments is necessarily
contagious.
It should be noted in regard to imports and exports, that, one
after another, all countries become involved in a crisis and that it
then becomes evident that all of them, u:ith feu: exceptions, have
exported uud imJWrted too much, so that they all lull e an
オョヲセ@
ourable balance of pnrmenb. The trouble, therefore, does
not actually lie with the balance of payments. For example,
England suffers from a drain of gold. It has imported too much.
But at the same time all other countries are over-supplied with
English goods. They have thus also imported too much . ... The
crisis may first break out in England, the countn) which advances
most of the credit and takes the least, because the balance of
payments, the balance of payments due, which must be settled
immediately, is unfitlourable, et'ell though the general balance of
trade is hnourable. This is explained partly as et result of the Lredit
which it has granted, and partly as a result of the huge quantity of
capital loaned to foreign countries, so that a large quantity of
returns jlou: back to it in 」ッュ、ゥエ・Nセ@
. ... The Crash in England,
initiated and accompanied by a gold drain, settles England's balance of Jlayments, Jiartly by a bankruJitcy of its importers ... Jlllrtly by disposing of a portion of its commoditycapital at low prices abroad, and partly by the sale of foreign
securities, the purchase of English securities, etc. Now comes the
turn of some other country . ... England now has a return flow of
gold, the other countn) a gold drain . ...
MONEY AND CAPITALISM
103
The balance of payments is in times of general cnsts
unfavourable to every nation, at least to every commercially
developed nation, but altcays to each country in succession, as in
volley firing, i.e., as soon as each one's turn comes for making
payments; and once the crisis has broken out, e.g., in England, it
cmnpresses the series of these terms into a venJ short period. It
then becomes evident that all these nations have simultaneously
over-exported (thus over-produced) and over-imported (thus overtraded), that prices tL·ere inflated in all of them, and credit
stretched too far. And the same break-dou·n takes place in all of
them. The phenomenon of a gold drain then takes place
successively in all of them and proves precisely by its general character 1) that gold drain is just a phenomenon of a crisis, not its
cause; 2) that the sequence in which it hits the various countries
indicates only tdten their judgement-day has come, i.e., tchen the
crisis started and its latent element.s come to the fore there. 154
This long quotation shows why and how a financial cns1s
spreads. Because of its own disequilibriums, each country finds
itself affected by the financial troubles of its partners.
Nevertheless the international diffusion of financial troubles is "a
question of time," a composite time which includes the distance
between the place of production and the market where the product is finally sold, the delay between the delivery of the
commodity and payment for it in cash, the difference between
the original and final prices due to speculation, etc. This
commercial and financial time only reveals its presence at the
hour of settlement, when it is necessary to produce hard cash
and pay all debts at the same time; it is then reabsorbed in a
world financial space. plowed under by gold, the universal
money.
The contagious character of financial troubles is characteristic
of a cyclical crisis. In a normal period, there is a functioning
international financial circuit which is a simple proportionate
reproduction of the national financial circuits. The "gold and
silver ... distribute themselves once more in the proportions in
which they existed in a state of equilibrium as individual hoards
of the various countries. Other conditions being equal, the rela-
\
MARX ON MONEY
104
tive magnitude of a hoard in each country will be determined by
the role of that country in the world-market." 155
During a period of disequilibrium, in contrast, a complex
tangle of overextended markets develops. The upsetting of one
national balance of payments leads to similar problems
elsewhere. Then the variations 1n exchange rates and the export
of gold, without special importance in normal times, become the
elements of an international financial crisis.
In a general way, "The foreign rates of exchange may
change:
1) In consequence of the immediate balance of payment, no
matter u:lwt the cause-a Jlllrely maca11tile o11e, or cajlital
investment abroad, or govemment expenditures for u:ars, etc., in so
}ctr as cash Jlaymellts are uwde to foreigu couutries. 156
21 111 conselfllellce of money deprc•ciafioll-lcliether meted or
paper-in aJICirficular country. This is Jlllrelyuominal. 1fone JWIIIId
sterling should represent only half as much money as fonnerly, it
u:ould naturally be cow1ted as 12.5 ji·aucs instead 」セヲG@ 25 .fi'w•cs. 157
3) When it is a matter qf a rate of exchange between countries,
of which one uses silver and the other gold as "money," the rate of
exchange depends upoli the relative fluctuations of the value of
these IIL'O metals 158
Variations in the rate of exchange depend mainly on a
specific demand for foreign money for international transactions
of all sorts. lt is not an excessive internal supply of money
which, by its effect on prices, explains the fall of English exchange at a given moment. Rather. it is the English demand for
foreign money which, dependent on the state of the balance of
payments, causes the pound to fall on the exchange market.
Like Tooke and Fullarton, Marx differentiates between the demands for domestic and for international instruments of circulation and payment.
Marx does not speak of the system of the international gold
standard, which was only developed after 1870, with the
intention of stabilizing the rates of exchange of the various
national currencies. But the analysis in CaJiital indicates clearly
MONEY AND CAPITALISM
105
that in normal times variations in rates of exchange and
international movements of the precious metals have little
1mportance, whereas in a period of stress they inevitably have
serious financial consequences, represented by the loss of gold
by one nation after another. Since the export of gold is not the
cause of the initial disequilibrum, it is also not the cause of the
equilibrium finally attained by monetary deflation. lt merely
reflects on a monetary and financial plane a global crisis which
is its own solution.
There is none the less a financial crisis, because of the existence of specific financial structures; the gold drain is only an
index of the general crisis, but it is gold that is in demand at that
particular moment. And under any circumstances it is gold
which seNes as "world money" to settle a balance of payments,
and is demanded as such.
Nevertheless the mechanism of the banking supply of means
of payment to settle debts is the same, whether it is a question
of internal or international financial circUits. The banker is a
money-changer.
"If the demand for money accommodation arises from an
unfavourable national balance of payments and thereby implies a
drain of gold, the matter is very simple. The bills of exchange
are discounted in bank-notes. The bank-notes are exchanged
for gold by the Bank itself ... and this gold is exported. lt is as
though the Bank paid out gold directly, without the mediation of
notes, on discounting bills." 159
The national bank keeps custody of a common metallic
reseNe fund for the whole banking system; this serves as the
basis of all banking operations.
The determinalicm of the metal rc.yerre of tin• .w-callcd
national banks, a detennination, however, which does not by itself
regulate the magnitude of this metal hoard, for it can grow solely
by the paralysis of domestic and foreign trade, is threefold: 1)
reserve fund for international payments, in other words, reserve
fund of world-money; 2) reserve fund for alternately expanding and
cu1itracti11g domestic metal circulation: 31 reserre ji111d .fiJr the
payment of deposits and for the convertibility of notes. . . . The
reserve fund can, therefore, also be influenced by conditions which
aj]"ect et·enJ one of the.se thrr:e jimction.s. 160
In a period of stress the reserve funds of the central bank become the focal point of the different circuits of capital, internal
and internationaL But in general, as an instrument of hoarding,
they serve on the one hand as the monetary basis of the internal
currency circulation, and on the other as the guarantee of the
country's international credit
The internal supply of means of payment being thus
consolidated, the amount of the reserves depends chiefly on the
demand for gold as world money. "The inland market does not
need any metal even now," 161 at least when the credit system is
functioning welL In contrast, on the world market the precious
metal remains the real money, the un1versal general equivalent
lt is simultaneously currency and money-capital. Exported as
means of payment, it functions "as a valuabie substance in
itself, as a quantity of value. it is at the same time capital, not
capital as commodity-capital, but as money-capital, capital not
in the form of commodities but in the form of money (and, at that.
of money in the eminent sense of the word, in which it exists as
universal world-market commodity). lt is not a contradiction here
between a demand for money as a means of payment and a
demand for capital. The contradiction is rather between capital
in its money-form and capital in its commodity-form; and the
form which is here demanded and in which alone it can
function, is its money-form." 162
In opposition to Tooke and Fullarton, who often confuse
money and capital, Marx specifies that the gold demanded to
settle an unfavorable balance is world money, with a specific
character. Once again one finds the fundamental distinction between money and commodity, between money-capital and
commodity-capital, a distinction here linked with that between
national money and world money. Thus the problem of the balance of payments, a monetary problem, has two aspects: that of
credit, and that of gold. The two only occasionally merge.
As the diverse functions of the single reserve fund show, there
is a demand for world money which differs from that for
MONEY AND CAPITALISM
107
domestic money. Hence despite the complementary nature of
the financial circuits and their common basis in the national
hoard, the external capital market can function with relative
autonomy. Thus "An unfavorable rate of exchange, or even a
drain on gold, can take place when there is a great abundance
of money in England, the interest rate is low and the price for
securities is high."1ea
Everything depends on the business cycle. When there is an
outflow of gold, and at the same time the internal demand for
money already exceeds the supply of loan capital, the interest
rate rises and the exchange rate becomes unfavorable. The
exchange can straighten itself out if the rise in the interest rate
curbs the export of money-capital. Under these conditions, the
gold standard plays a role and "The interest rate may affect the
rates of exchange, and the rates may affect the interest
rate .... " 164 But this reciprocal action of the capital markets is
essentially dependent on the financial cycle. The latter does not
act directly on the prices of commodities; it only determines the
moments when "the movements of the interest rate adhere
closely to those of the metal reserve and the rates of exchange."165
The examination of the financ1al circuits as a whole necessarily leads ·to the discussion of the f1nanc1al cycle. The monetary
theory of credit, being unitary, 1ncludes the cyclical analysis
which will now be undertaken.
B. CREDIT AND BUSINESS CYCLE
Was Marx, often regarded as a mediocre monetary theorist, a
"mediocre cyclical theorist?" H. Bartoli says: "Marxian theory, a
theory of general equilibrium, makes it possible to investigate why
the equilibrium is disturbed but seems not to work when it comes to
finding out.why the-cycle is the form of development of
capitalism." 166 lt is indisputable that, as Bartoli says, Marx did not
construct a theory of the business cycle; a negative proof ofthis gap
is the multiplication of Marxist cyclical theories, all basing themselves on some passage in Capital. But if the cyclical disequilibriums described by Marx are not the regular fluctuations of the
business cycle, neither are they the partial accidents of which
MARX ON MONEY
108
Bartoli speaks; they correspond to the manner in which capitalist
structures function, and to the patterns of overall adjustment of
different economic, financial, and political structures.
The examination of the financial cycle, which completes that of
structures of capitalist financing, includes a number of comments
on this point which I shall outline before discussing them in detail.
a) Entirely external to itself, a simple comb1nation of financial circuits
adapted to the financing of capitalist reproduction, and at the same
time entirely self-contained in the sense that it has its beginning and
end in the special movement of the credit system: b) although the
general crisis is not a monetary phenomenon, the financial crisis
plays a role in the business cycle as a whole. But its effect is mainly
of a financial nature; in temporarily making the credit system inoperative, it reconstitutes the system's monetary basis and enables
it to serve again in the financing of capitalist reproduction: c) monetary policy has meaning precisely because of the double character
of the business cycle and the financial crisis. If the financial system
were only functional and confined to the financing of the economy, it
would only be possible to take action on financial crises by a
transformation of the form of production. If it were purely selfcontained, monetary policy would have no economic significance.
Marx's very numerous descriptions of the financial cycle in Volume Ill of Capital are presented in great disorder, but they all rest
directly on the monetary theory of financial structures. They make it
possible to understand better both the role of crises and the general
structural significance of the business cycle. The following quotation, which relates to mercantile capital and therefore in part to
financial capital, is the best introduction to the cyclical discussion of
credit:
Inspiteofits independent status, the movement ofmerclwnt's capital is
nerer more than tile moremeut 」セサゥャ、オウエイ。@
ca}litaltcitliiutlie .s}lliere 」セヲG@
MONEY AND CAPITALISM
109
circulation. But by virtue of its independent status it moves within
certain limits, independently ofthe bounds ofthe reproduction process
and thereby et·en drires the latter beyond if.s bounds. Thi.s iutemal
dependence and external independence push merchant's capital to a
point where the internal connection is violently restored through a
crisis.
Hence the phenomenon that crises do not come to the surface, do not
break out, in the retail business first, which deals with direct consumption, but ir1 the spheres of wholesale trade, and of banking, which
places the moueu-caJlital at the disposal of the fonuer. 167
a. The Financial Cycle
Financial movements initially only reflect those of the monetary
circulation, which in turn are dependent on the circulation of commodities and capital. We have seen that the credit system develops
with the monetary system as its foundation, and that the circulation
of money is a prerequisite of "money-dealing." 168 The financial
cycle is thus mainly dependent on the demand of the industrial
capitalists and merchants for "ready cash." When production
and incomes are growing, the amount of money in circulation which
is used for the payment of income increases. At the same time
transactions between capitalists make use of commercial credit
without increasing the demand for resources. In a period of recession, in contrast, the demand for money for the payment of income
falls, while the demand of the capitalists for means of payment
increases. Marx says that "the demand for currency between consumers and dealers predominates in periods of prosperity, and the
demand for currency between capitalists predominates in periods
of depression." 169
This is not, properly speaking, a reference to the financial cycle;
the movements of monetary circulation adapt themselves to the
demand f_or the medium of circulation, a demand which changes in
meaning rather than volume as a function of the general cycle. A
financial cycle as such only appears when one considers, not the
demand for the medium of circulation, but the relation between the
demand and supply of credit. Contrary to what Fullarton thinks, "it is
by no means the strong demand for loans ... which distinguishes
the period of depression from that of prosperity, but the ease with
MARX ON MONEY
110
which this demand is satisfied in prosperity, and the difficulties
which it meets in periods of depression. lt is precisely the enormous
development of the credit system during a prosperity period, hence
also the enormous increase in the demand for loan capital and the
readiness with which the supply meets it in such periods, キセゥ」ィ@
brings about a shortage of credit during a period of depression. " 170
lt is therefore necessary to examine the way in which the demand
and supply of credit adjust themselves and the resulting changes in
the interest rate. At the beginning of a period of expansion, commercial credit is plentiful and the demand for monetary resources is
weak compared to the supply. The industrial capitalists do not have
much need for the financial capitalists.
After the process of reproduction has again reached that state of
prosperity, which precedes that of over-exertion, commercial credit
becomes venJ much extended; this fonns, indeed, the "sound" basis
again for a ready flow of returns and extended production. In this state
the rate ofinterest is still low, although it rises above its minimum. This
is, in fact, the only time that it can be said a low rate of interest, and
consequently a relative abundance ofloan able capital, coincides with a
real expansion of industrial capital. The ready flow and regularity of
the returns, linked with extensive commercial credit, ensures the supply of loan capital in spite ofthe increased demand for it, and prevents
of the rate of iuterest from risiug. 1 7 1
the ャ・セ[{@
"An abundance of loan capital is available simultaneously with a
great expansion of industrial capital." 172 At this stage of the cycle,
financial fluctuations are absorbed in the economic movement as a
whole.
But there are other cyclical phases when "the movement of
loan capital, as expressed in the rate of interest, is in the opposite direction to that of industrial capital." 173 At the beginning of
the cycle, before the recovery, when there is "contraction of industrial capital," the low level of the interest rate indicates a relative surplus of loan capital. At the end of the cycle, in a period
of "abundant industrial capital," the rate reaches its maximum
and thus indicates a shortage of money-capital, its scarcity in re-
MONEY AND CAPITALISM
111
lation to the demand. There is thus a specific financial cycle
which reflects the general cycle.
The relative independence of the financial cycle is shown by
the differing variations of the rate of interest, associated with it,
and of prices, associated with the general business cycle. The
rate of interest depends solely on the capital market and on the
conditions which at a given moment determine the relative
strengths of lenders and borrowers and the division of the average profit between them. A rise in the interest rate, according to
Marx, does not depend on an increase in the prices of commodities, and if it does not enter into the computations determining their net prices, it does not affect those prices. The price of
commodities is distinct from the price of money, just as commodities differ from money. m
The specific character of the financial cycle means that it behaves in its own way within the general cycle. Its specific effect
is linked to the functional character of the credit system, which
enables capitalist production to develop and extend itself "beyond its own boundaries." The operations of the capital market
and those of the commodity markets intersect at certain points
in the cycle, since both are subject to the "speculation" which is
rooted in the expansion of industry and commerce, develops
through credit, and eventually merges with the specifically financial speculative operations.
For Marx, speculation has a very broad meaning, involving all
the buying and selling of industrialists and merchants, whether
they make material investments or put money into financial operations, stockpile goods or sell them immediately, etc. One of
its bases in capitalist reproduction itself is long-term investment,
which immobilizes capital without an immediate counterpart.
On the one hand pressure is brought to bear on the moneymarket, while on the other, an easy money-market calls such enterprises into being en masse. thus creating the r;enJ circumstances
which later give rise to pressure on the money-market. Pressure is
brought to bear on the money-market, since large advances of
money-capital are constantly needed here for long periods of time.
MARX ON MONEY
112
And this regardless of the fact that industrialists and merchants
throw the money-capital necessanJ to camJ on their business into
speculative railway schemes, etc., and make it good by borrowing
in the money-market.
On the other hand pressure on society's available productive capital. Since elements of productive capital are for ever being withdrawn from the market and only an equivalent in money is thrown
on the market in their place, the effective demand rises without itself furnishing any element of supply. Hence a rise in the prices of
productive materials as well as means of subsistence. To this must
be added that stock-jobbing is a regular practice and capital is
transferred on a large scale. A band of speculators, contractors,
engineers, lawyers, etc., enrich themselves. They create a strong
demand for articles of consumption on the market, wages rising at
the same time . ... Hence excessive imports and speculation in this
line of the import business. 175
As Tooke had said, financial speculation has its origin in the
general economic situation; the expansion of credit is the effect,
before it is the cause, of the general speculation of industrialists
and merchants.
In this context, financial speculation develops on its own level
and feeds the financial boom by increasing the demand for
money-capital and helping to raise the rate of interest. But it is
necessary to make clear the significance Marx gives it. Originating in the specific area of credit operations, financial speculation
is analyzed in Capital mainly in terms of its effects at a given
moment on the division of the assets of all the capitalists, and
the redistribution of resources among the capitalists. Undoubtedly Marx mentions the role of expectations in speculation for a
rise or fall, whether of product commodities or securitycommodities.176 But he does not analyze expectations as such,
or the way in which they determine speculative phenomena. In a
general way, to borrow a definition from P. Dieterlen, "speculation includes all those choices which, being made for the sake
of a use or a result which is not immediate, arise from an expectation."177 But what interests Marx most-and one unques-
MONEY AND CAPITALISM
113
tionably sees here the static character of part of his analysis of
financing-is the effect of speculative choices on the division of
monetary resources. Financial speculation. conditioned by the
particular term of credit operations and by a certain expectation
in regard to the future, has immediate effects-pressure on the
capital market and a new division of funds-which in Marx's
eyes give it its real significance. Thus. unlike the industrial
capitalist, who also speculates in h1s way, "the chevalier of credit discounts his notes as cavalry w1th wh1ch to expand his
business and cover one dubious- operation with another, not for
the purpose of making a profit but in order to take over the capital of others. " 178
Favorable circumstances for this are offered by the general
development, thanks to credit, of that speculation of which financial speculation is only a caricature.
Nevertheless, the relatively autonomous financial cycle only
has an economic effect if the general circumstances set the
stage for it, as we have seen above in the case of outflows of
gold. 179 Thus "The drain of bullion, which created an independent money panic in April 1847, was ... but a precursor of the
crisis, and a turn had already taken place before it broke out,"
that is, the exchange had become favorable to England before
the crash. And "In 1839 a heavy drain of bullion took place for
grain, etc., while business was strongly depressed, but there
was no crisis or money panic." 18° The financial crisis, characterized by the relative scarcity of money-capital, only occurs at
certain stages of the cycle. lt unfolds independent of the general
movements of the cycle, but is only a mere episode in it. This
strange behavior stems from the particular structures of the credit system. The financial system has its own rhythm and develops by itself, but "the accumulation of juridical titles to future
production" has no economic guarantee except a good market
for the actual production.
That is why the financial crisis has an ambiguous character. lt
is the moment of truth, when "an enormous quantity of ... plain
swindle ... collapses." 1B1 But it makes it possible for the credit
system to develop anew afterwards.
·, MARX ON MONEY
114
b. The Crisis and the Credit System
Marx differentiates the monetary crisis which is a phase of every
industrial crisis from the crisis "which also is called a monetary
crisis, but which may be produced by itself as an independent
phenomenon in such a way as to react only mdirectly on industry
and commerce." 182 The monetary crisis of the first type involves
the need for ready cash on the part of industrialists and merchants in difficulties, while the second type has as its "sphere of
direct action,, . banking, the stock exchange, and finance." lt
can occur and end before the general crisis, of which it is
nevertheless an indirect condition and consequence. But in all
cases when a crisis temporarily puts the credit system out of action, there are simultaneous monetary and financial crises.
A credit crisis can, during a period of cyclical stress, be unleashed by miniscule events. If the relative scarcity· of moneycapital and the rise of the interest rate are major, the credit system becomes fragile and a marginal variation can suffice to unleash a financial crisis, and combine financial and general
crises. The threshold of monetary sensitivity is then very low.
And Marx indicates that expectations, so far neglected in the
analysis of speculation, play a considerable role.
If credit operations are expanded rather than curtailed by the
export of gold, the rise in the interest rate, and the raising of the
central bank's discount rate (a point to which we shall subsequently return), it is because a cumulative phenomenon occurs as a consequence of general financial speculation resulting
from pessimistic expectations .
. . . as soon as somewhat threatening conditions induce the bank
to raise its discount rate ... the general apprehension spreads that
this will rise in crescendo. EvenJone, and above all the credit swindler, will therefore strive to discount the future and have as many
means of credit as possible at his command at the given time.
These reasons, then, amount to this: it is not the mere quantity of
imported or e·xported precious metal as such which makes its influence felt, but that it exerts its effect, firstly, by virtue of the
specific character of precious metal as capital in nwney-form, and
secondly, by acting like a feather which when added to the weight
MONEY AND CAPITALISM
115
on the scales, suffices to tip the oscillating balance definitely to one
side; it acts because it arises under conditions tvhen any addition
decides in favour of one or the other side. Without these grounds,
it would be quite inexplicable why a drain of gold amounting to,
say, jke or eight million JIOI/IIcls sterling-aucl this is the limit of
e:rJierience to 、。エ・MNセャキオ」@
hare any llJIJirl!ciable c:lfect. This small
decrease or increase of capital, which seems insignificant even
compared to the seventy million pounds in gold which circulate on
an average in England, is really a negligibly small magnitude u:hen
compared to production of such volume as that of the English.
But it is precisely the development of the credit and banking system, which tends, on the one hand, to press all money-capital into
(or what amounts to the same thing, to
the service of ーイッ、セ」エゥョ@
transfonn all money into capital), and which, on the other hand,
reduces the metal reserve to a minimum in a certain phase of the
cycle, so that it can no longer perfonn the functions for which it is
intended-it is the dereloped credit and banking system rdrich
creates this over-sensitiveness of the whole organism. At less developed stages of production, the decrease or increase of the hoard
below or above its average level is a relatively insignificant matter.
Similarly, on the other hand, even ci very considerable drain of
gold is relatively ineffective if it does not occur in the critical
Jll!riud of the industrial cycle. 18 3
This passage, which sums up and completes the points developed above, seems to me essential: the special sensitivity qf
developed capitalist economies to phenomena which are doubly
marginal-that is, relatively unimportant and not specifically
capitalist-is due precisely to the way in which capitalism has
been able to incorporate these phenomena and make them
elements of its own development. This explains the nature and
function of the financial crisis.
According to Marx, the crisis of the credit system represents a
regression of the whole capitalist financial organization, a "sudden change of the credit system into a monetary system." From
this point of view. the financial crisis and the monetary crisis
merge; both deprive money of its function as medium of circulation and give it the character of the "absolute commodity."
MARX ON MONEY
116
"In a crisis, the antithesis between commodities and their
value-form, money, becomes heightened into an absolute contradiction. Hence, in such events, the form under which money
appears is of no importance. The. money famine continues,
whether payments have to be made in gold or in credit money
such as bank notes." 1B4
"Under conditions of advanced bourgeois production, when
the commodity-owner has long since become a capitalist, knows
his Adam Smith and smiles superciliously at the superstition that
only gold and silver constitute money or that money is after all
the absolute commodity as distinct from other commoditiesmoney then suddenly appears not as the medium of circulation
but once more as the only adequate form of exchange-value, as
a unique form of wealth just as it is regarded by the hoarder." 185
The "sudden change of the credit system into a monetary system" means that there is a contraction of the functions of money
into just one, that of money as object of hoarding.
The credit system, which had relieved the internal economy of
payments in metallic money, once more falls under the sway of
gold and silver. "In the crisis, the demand is made that all bills
of exchange, securities, and commodities shall be simultaneously convertible into bank money, and all this bank money, in
turn, into gold." 186
But this regression of the system is connected with the very
conditions in which it developed. We have seen above how the
system of credit, even while substituting itself for the monetary
system, preserves a "monetary base" embodied in the gold reserve of the central bank. The cnsis merely isolates this "monetary base," which in normal times is merely a condition of the
circulation of credit money. as if in a caricature. The hoarding
peculiar to a crisis, says Marx, no longer corresponds to an imaginary depreciation of the value of commodities, but to an effective devalorization of all commodities, commodity capital, and
financial paper. "A part of the gold and silver lies unused, i.e.,
does not function as capital." 187
Since this aspect of hoarding is peculiar to the crisis of credit,
and to its capitalist conditions, the hoarding has a special function: it serves to restore the connection between the credit sys-
MONEY AND CAPITALISM
117
tern, overdeveloped by speculation, and the real supply of
money-capital for lending.
The banking system starts hoarding when its liquidity decreases too much, though the circuit continues to turn. "The appearance of rapid and reliable refluxes always keeps up for a
longer period after they are over in reality by virtue of the credit
that is under way, since credit refluxes take the place of the real
ones. The banks scent danger as soon as their clients deposit
more bills of exchange than money." 1aa
The banks then hoard, in the sense that they refuse to lend.
By doing so they unleash or increase the financial panic. 189 But
they also tend to avoid the collapse of their own credit, and to
preserve themselves as organs of the credit system. The hoarding by the banks, while it ties up the system, also helps to preserve it. lt seeks to limit the credit supplied by the banks in accordance with the relative scarcity of loan capital supplied by
the depositors.
As to the other participants in the financial crisis, Marx says
that their demand for the means of hoarding results from the absence of credit. Even in a period of crisis it can be translated
into an increase in the amount of money in circulation, if the increase of notes as a means of payment is greater than the decrease in the circulation of notes as a means of purchase. 19 o
The amount of money circulating then depends on the credit
policy of the banks, which can alleviate or aggravate the crisis.
The banks' margin of maneuver is, however, limited by the
necessity of preserving a certain degree of liquidity. Hoarding
as a refusal to lend then has a double function: it ties up the
credit system, but it preserves the credit of the banking system.
Undoubtedly it is this hoarding by banks in a period of crisis
that explains what Marx says in the following passage: "The absolute amount of circulation has a determining influence on the
rate of interest only in times of stringency. The demand for full
circulation can either reflect merely a demand for hoarding medium ... owmg to lack of cred1t ... or 1t may be that more
means of circulation are actually required under the circumstances, as was the case in 1857." 19 1
Even when the interest rate in general depends on a given
MARX ON MONEY
118
state of the capital market, the latter being distinct from monetary circulation, it can in exceptional cases be affected by the
quantity of money in circulation due to variations in bank credit.
Since the financial crisis is also a monetary crisis, all circuits are
momentarily merged as a result of the demand for liquid money.
The rate of interest then depends on the scarcity of credit
money and money-capital for lending. But this idea does not fit
well with the analyses in Volume 11 which argue that credit restrictions do not necessarily affect the quantity of money in circulation, which in turn has no effect on the interest rate. From
this point of view the discussion of the supply of bank credit
lacks clarity.
In conclusion, the analysis of the financial crisis starts by
showing the secondary role of that crisis in the business cycle
as a whole: "what appears as a crisis on the money-market is in
reality an expression of abnormal conditions in the very process
of production and reproduction." 192 The hoarding in a crisis is
only the reverse side of the failure to sell commodities and the
cessation of investment which follow an excessive expansion of
production and commerce. On the other hand, the financial
crisis plays a fundamental role in the functioning of the financial
system. lt shows there that the capitalist form of production is
unable to give an entirely functional character to the conditions
under which it functions; the credit system preserves a relatively
autonomous development. The resurgence of the monetary system in times of crisis is a sign of that autonomy, since the demand for money is completely outside the movement of real
production. But the financial crisis also reduces the "fictitious"
mushrooming of credits and restores the monetary basis of credit. As Fan Hung 19 3 says, Marx regards debts as themselves
money only to the extent that they replace money (as means of
purchase or of payment) in proportion to its normal value. The
crisis, a brutal manifestation of the law of value, makes it possible for credit to further replace money in the financing of
capitalist production. And monetary policy can help or hinder.
this spontaneous process.
MONEY AND CAPITALISM
119
c. Banking Policy and Money Power
"But if, on the one hand, it is a popular delusion to ascribe
stagnation in production and circulation to insufficiency of the
circulating medium, it by no means follows, on the other hand,
that an actual paucity of the medium in consequence, e.g., of
bungling legislative interference with the regulation of the currency, may not give rise to such stagnation." 194
Every monetary policy, whether good or bad, has effects on
the financial cycle, according to Mar><. The effectiveness of intervention by the monetary authorities depends on the ability of
the national bank to act, which rests on the centralization of the
banking system and the relation between the national bank and
the state. But it also depends on a good understanding of the
specific character of credit.
There can be a monetary policy without a policy for the whole
economy, because of the special character of money. Banking
policy must nevertheless be adapted to the particular character
of the credit system. If it c::onfuses the monetary system and the
credit system, as does the Bank Act of 1844, based on the
ideas of Ricardo and the Currency School, it has harmful effects,
and can transform a financial crisis into general bankruptcy for
the sole benefit of some big bankers, speculating on the shortage.195 The Bank Act regulated the operation of the Bank of
England in such a way that the notes issued by the bank were
almost completely covered by reserves in specie or gold ingots.
A decrease in the reserve, e.g., through export of gold, automatically brought about a restriction of the note issue. The stresses
on the financial market were then aggravated by a credit policy
which misunderstood the special character of the system it was
to regulate. And finally, the speculative hoarding of the great
private banks in need of nationally valid banknotes get them by
panic."19s
In place of the erroneous policy of the Bank Act, Tooke advocated an increase in the discount rate, based on the special
banking role of the Bank of England. Just as industrialists get
monetary resources by discounting their bills of exchange, so
MARX ON MONEY
120
·._private banks in need of nationally valid banknotes get them by
· rediscounting their bills of exchange at the national bank, which
then plays the role of bank of banks. In raising the discount rate,
the national bank influences the rate at which all the banks lend.
This raises the price of credit, and can correct the speculative
excesses in the supply and demand for money. 197
Marx agrees with Tooke that the artificial limitation of
banknotes aggravates the financial crisis instead of alleviating it
Since the centralized organization of credit in England makes it
possible in time of crisis to use the national bank's own credit.
"guaranteed by the credit of the nation," 198 it is necessary in
times of scarcity to increase the supply of banknotes so as to
avoid the collapse of the system of payments and limit the effects of speculative hoarding. lt is not because he supports the
quantity theory that Marx favors a d1shoarding of banknotes.
Rather, it is because he thinks that this increase in supply compensates for a partly artificial scarcity, makes it possible to
satisfy the increased demand for money, and preserves the
special elasticity of credit in relation to metallic reserves.
On the other hand, Marx thinks that the rise in the discount
rate recommended by Tooke runs the risk of aggravating speculation and producing the cumulative phenomena which create a
financial panic. He therefore opposes it. But he thinks that it is
inevitable because of the intrinsic limits of "good" credit policy,
which can avert panic and bankruptcy but cannot eliminate
either the crises of confidence which periodically disrupt credit
nor the speculative activity of the banking system. Marx is obviously no more a monetary reformer than he is a Saint-Simonian
reformist. The limits of monetary policy are clearly indicated by
him.
By definition, no monetary policy can abolish the economic
causes of financial stresses; the relative autonomy which makes
it possible for monetary policy to have an effect also sets the
bounds of its field of action. The narrow scope for action by the
national bank in times of financial crisis represents the intrinsically limited character of all monetary policy.
The method of alleviating the crisis recommended by Marx,
the increase in the supply of means of payment, implies the cen-
MONEY AND CAPITALISM
121
tralization of the banking system, whose pivot is the national
bank. lt is on the level of this central bank, which has a
monopoly on the issuance of banknotes accepted throughout
the country, and with which the gold reserves of all the banks
are deposited, that banking policy can be a monetary policy.
The central bank is from this point of view a part of the state
apparatus. But this political role which gives the central bank its
strength also gives it a great fragility. 199 The gold reserves it
centralizes cannot fall too much, lest the "national credit" itself
be endangered. That, says Marx, is why "The fear which the
modern banking system has of gold exports exceeds anything
ever dreamt by the monetary system, which considered precious metals as the only true wealth."2oo
The centralization of the metallic reserves gives them a central
importance which makes them extremely sensitive to slight variations. The power of. the central bank over the credit system is
real, but also as strictly limited as that of the state over
money. 2o1
In addition, the central bank, a "semi-private" organism, can
itself seek to profit from financial crises to increase its own
power. "Nevertheless, the Bank of England, being a public institution under government protection, cannot exploit its power
as ruthlessly as does private business."202
But because it is "a peculiar mixture of national and private
banks," 203 its function is ambiguous. Its strategy represents a
compromise between public monetary policy and the private
decisions of the possessors of money. The monetary power of
the state is thus limited not only by that of private individuals,
but by that of the banking system, whose center is nevertheless
directly linked to the state apparatus.
The organic base of monetary policy, although real, is thus
fragile. And even if the policy applied is a "good" public monetary policy, the central bank's room for maneuver remains limited
by the monetary base of the credit system. This conclusion in
regard to credit in the capitalist form of production is combined
with that of the general theory of money and Marx's startingpoint, the origin and significance of the general equivalent.
MARX ON MONEY
122
It is a basic principle of capitalist production that money, as an
independent form of value, stands in oppwition to commodities, or
that exchange-value must assume an independent form in 1110ney;
and this is only possible when a definite commodity becomes the
material whose value becomes a measure of all o-ther commodities,
sa that it thus becomes the general commodity, the commodity par
exce/lence-·as distinguished from all other commodities. This must
manifest itself in two respects, particularly among capitalistically
developed nations, which to a large extent replace money, on the
one hand, by credit operatio-ns, and on the other by credit-money.
In times of a squeeze, when credit contracts or ceases entirely,
mo-ney suddenly stands as the only means of payment and true existence of value in abso-lute opposition to all other commodities.
Hence the universal depreciation of commodities, the difficult!J or
even impossibility of transforming them into. mo-ney, i.e., into their
own purely fantastic form. Secondly, however, credit-money itself
is only money to the extent that it absolutely takes the place of actual money to the amount of its no-minal value. With a drain on
gold its com.:ertibility, i.e., its identity 1cith actual gold. becomes
problematic. Hence coercive measure.s, raising the rate of interest,
etc., for the purpose of safeguarding the conditions of this convertibility. This can be carried mare or less to extremes by mistaken
legislation, based on false theories of mo-ney and enforced upon the
nation by th8 interests of the money-dealers, the Overstones and
tlutir ilk. The basis, however, is given with the basis of the mode of
production itself A depreciation of credit-money (not to mention,
incidentally, a purely imaginary loss of its character as money)
would unsettle all existing relations. Therefo-re, the value of commodities is sacrificed for the purpose of safeguarding the fantastic
and indl?pendent existence of this wlue in mo-ney. 204
The capitalist form of production, which has been able to develop a credit system fitting its financial needs, is much more
sensitive to monetary crises than previous forms of production.
No monetary policy can prevent financial crises from occurring
and playing their role of re-establishing money, the general
equivalent, as a means of hoarding.
MONEY AND CAPITALISM
123
These analyses of Capital show that no money can be permanently a mere means of circulation, if it is to retain its credibility.
In the credit system, hoarding has a preservative role. Unquestionably the "hunger for gold" when a developed and efficient
banking system exists is often thought of by Marx as a real reversion to the beginnings of the capitalist system. But hoarding,
which in times of crisis appears as a relic of the monetary system, is. a condition for the survival of the credit system. In this
sense the most advanced capitalist society always has with it 1ts
mercantilist past.
But nowhere in Capital does the theory of money expand into
a monetary theory of the economy; it remains purely a theory of
the monetary economy. Without it, one understands capitalism
poorly, but through it one never understands just money.
POSTSCRIPT TO THE SECOND EDITION
hen a manuscript has been published, or even simply
completed, one often says to oneself: "Today, I would
not write 1t that way." Some years later one has to say
the same thing again, after having done research which makes
clear in retrospect the weaknesses of the previous manuscript.
But it is no longer possible to retouch the original text, which
becomes a way-station on the road of research. Marx on Money
is an essay, complementary to other studies already published
or still in preparation; instead of retouching the text, it is better to
try to put it in context. That is, to emphasize what today, after
numerous lively discussions and a vision less restrained by
practical social concerns, appear to be strong points which
have stood the test, along with certain weaknesses.
The solid part relates primarily to the subject itself, which was
previously largely unknown. Marx on Money shows that money is
not a technical problem, a subject reserved for study by some
specialists, or an area reserved for so-called "bourgeois" political economy. All who want to understand the whole contribution
of Marx's historical materialism should read the first section, of
Volume 1 of Capital, where a theory of commodities and money
is presented.
Readers can certainly be turned away by the difficulty of that
section, where Marx uses a Hegelian terminology. But it is
necessary to go through it, tor without commodities and money,
which crystallize value in particular forms, there is neither
surplus value nor capital. One should then seek to know why
and how Marx analyzes commodities and money which, although not peculiar to any particular form of production, are not
purely economic relationships but social relationships. This last
point is clear when one follows the discussion of the reproduction of money as general equivalent, an indispensable reproduction, which takes place through contradictions arising from the
diversity of the forms and functions of money. Marx breaks decisively with Aicardo's economic theory here, as well as with all
"bourgeois" economic theories.
125
MARX ON MONEY
126
Marx's concept of money is often treated as a simple concept
of the money commodity, even as a "metallism" making gold the
sole money, so that there would be no perceptible difference on
this point between Marx and Jacques Rueff. In contrast, Marx on
Money seeks to show the prime importance of the concept of
"general equivalent," and the special position of "the money
form" within Marx's theory of commodities. That is why the
analysis of the beginning of Capital is not invalidated by that of
commercial and banking credit money in connection with Volume Ill, where Marx's notes on credit money in the capitalist
form of production are gathereGI together. The examination of financial circulation shows that credit, while adapted to the needs
of capitalism, "is never really contemporaneous with capital."
Thus the formation and circulation of credit money cannot be
considered as depending on what is today called a "function of
financing," an expression which masks the compulsions and social, economic, and political contradictions associated with
every use of money. Marx on Money has tried to pave the way to
a "functional" and at the same time "voluntarist" interpretation of
credit money, with state and central bank as "free suppliers" of
money.
Nevertheless, this little book has its weak points, not all of
which have as yet been eliminated by subsequent books and
some of which are still the subjects of research.
In the first place, it is necessary to reconsider what is said in
the introduction to justify the placing of the discussion of money
at the beginning of Capital. lt is written there that Marx followed
this course for theoretical reasons. This remains true, but it
seems to me today that the theoretical reasons are inseparable
from historical considerations, from the fact that value, commodity, and money are social processes.
N.B.: This is by no means to adopt the interpretation of Engels,
whereby value in exchange would be viewed as belonging to
the period before the capitalist form of production, in which
"prices of production" would appear. Such a break between
value in exchange and price of production, which has now surfaced again in the neo-Ricardian school led by Sraffa, seems to
have no basis. There is no longer a "mercantile form of produc-
POSTSCRIPT TO THE SECOND EDITION
127
tion," but only "pockets" of mercantile production and circulation, of greater or 'smaller extent according to the various types
of production. These are characterized by special relations of
production. (The term "relations of production" is applied to the
socio-economic relationships between direct producers, slaves,
peasant serfs, and wage-workers on the one side and, on the
other, those who are able to expropriate the products of the
surplus labor of the first group in one way or another, surplus
value being lhe form characteristic of the capitalist mode of
production.) On the contrary, although elements of mercantile
economy come into existence and reproduce themselves (e.g.,
mercantile exchanges of surplus products between various
types of peasants and city dwellers, or between artisans and villagers, etc.), no relation of exploitation and dependence connected with relations of production can reveal itself directly. That
is why the producers exchanging their products in mercantile
production and circulation, of whom Marx speaks at the beginning of Capital, are considered as individual workers with equal
rights to the possession of the commodities which they have
themselves produced for exchange. This is a "good abstraction!"
Compulsions and social contradictions are no less present because the relation of exchange between independent producers
is included in what Marx calls "a spontaneous organization of
production whose threads have been woven and continue to be
woven without the knowledge of the producers carrying on the
exchanges." lt does not matter that they are the free possessors
of the commodities they exchange; they nevertheless do not control the social process of production and exchange. Hence its contradictory character, which shows itself particularly in the operation of a relative "valorization" or "devalorization" of commodities
in comparison with each other, and an "appreciation" or "depreciation" of commodities in relation to money, in terms of the
"labor time socially necessary" to produce commodities and
money at a given time. The meaning of this "law of value"
should have been explained at the beginning of Mim on Money.
That would have avoided the risk of separating the "economic,"
the "social," the "historical," and even the "political," a risk
MARX ON MONEY
128
present in certain formulations in the first part, at the beginning
of point A and the end of point B, and not sufficiently compensated for by other formulations.
Moreover, the meaning of the disparity between the "market
price" and the value of a commodity could have been presented
more clearly. This leads to a more general point, which is not
made in Marx on Money in spite. of a brief critique of Paul M.
Sweezy's ideas on "prices of production." This point. which has
emerged in the course of further research by other Marxists as
well as myself, and a number of joint discussions, is that there is
in Capital no general theonJ of prices which would cover both the
market prices at the beginning of Capital and the prices of production peculiar to capitalism, which Marx discusses in Volume
Ill. Although the "price form" is clearly analyzed, as is shown
elsewhere in Marx on Mo11ey, the formation of the various types
of prices and their interconnection is never made satisfactorily
clear. Nevertheless we do not know whether it is a question of a
theoretical gap which Marx might have tried unsuccessfully to
fill, or whether the problem is a false one! In the second case
we would be speaking of the absence of a general theory of
prices in Capital as if such a theory had a meaning and necessarily existed, although in reality we would be asking Marx a
question arising from a "bourgeois" idea of the economy and
meaningless from a Marxist perspective. True or false problem?
The present state of studies on the question does not seem to
me to permit an answer.
The second part of Mar:r on Mo11ey has a number of obvious
weaknesses. In particular, the discussion of '.'the financial requirements of equilibrium," bound up with the discussion of the
"balance-sheets" of the capitalists of Department I (production
of production goods) and Department 11 (production of consumption goods), rests on an "uncritical" consideration of the
idea of economic and financial equilibrium. it is true that this
error is in part compensated for subsequently in the text, where
it is pointed out that money, as a particular social relationship, is
never "neutral" whether there is equilibrium or not. lt is also
clearly stated that the "credit system" does not have a merely
functional character in relation to the financing of capitalism, and
POSTSCRIPT TO THE SECOND EDITION
129
that it is necessary to analyze "financial cycles" and monetary
crises with care. Nevertheless, a critical analysis of the concept
of equilibrium and its theoretical implications was needed.
These are the principal things which it now seems to me need
to be said in regard to Man: on Money. This essay, it must be
repeated, is one stage on a long journey, in the course of which
both errors and truths will necessarily be launched and subjected to criticism.
NOTES AND REFERENCES
INTRODUCTION
1. Renw i!crmomiqm•. Jan. 1967.
2. David Ricardo, Tl1e u:orh mu/ C:orrrs]mnclence of Daricl Riccmlo,
Vol. I, The Principles C!f'Political Ecmwmy and Taxation, Piero Sraffa,
ed. (Cambridge: Cambridge University Press, 1961 ).
3. Karl Marx. Capital, (New York: International Publishers, 1970), I,
80-81. All references to Capital hereafter are to this edition.
4. Louis Althusser and Etienne Balibar, Reading Capital (New York:
Pantheon, 1970).
5. H. Denis, La Mcmnaie (Paris: Editions sociales, 1951).
6. John Maynard Keynes, The General Theory of Em]lloyment, lnterest
and Mcmey (New York: Harcourt, Brace & Co., 1936).
PART ONE
1. R. Establet. Reading Capital, op. cit.
2. The discussion of Hilferding's book as a whole will be the subject
of a subsequent work.
3. Ca]lital, 11, 116.
4. Ibid., 11, 81.
5. Ibid., 11, 112.
6. Karl Marx, A Contribution to the Criti<tuc• of Political Eccmmny (New
York: New World Paperbacks, 1970), p. 187. Hereafter cited as
Critique for all references to this edition.
7. Ibid. p. 65.
8. Ibid. p. 85.
9. Ibid. p. 170.
10. Ca]lital, I, 92.
11. Critique, pp. 65-66.
12. Capital, I, 68-69.
13. Ibid., I, 67.
14. Ibid., I, 101-102.
15. Ibid., Ill, 193.
16. Ibid., I, 100.
17. Critirtlle, p. 73.
18. Ibid., pp. 200 ff.
19. Cct]litctl, I, 118.
20. CritiCJlll!, p. 164.
21. Cct]litctl, I, 123.
22. Critiq11e, p. 160.
131
MARX ON MONEY
132
23. The market price is here the price at which a certain quantity of
pieces of money can be exchanged against uncoined gold. This
gold market, in simple circulation, has to do with the exchange of
material metal; it is completely different from the money market associated with credit.
24. Capital, I, 125-126.
25. The theory of the balance of payments and foreign exchange will
be examined in the second major part of this study. See pp. 144 If.
26. Karl Marx, The Pocerty of Philosopl<rf (New York: New World Paperbacks, 1967), pp. 87-88.
27. H. Bartoli, Lc1 doctrine eccmrnnitflle et sociale de Marx (Paris, 1950).
28. Crili<flle, pp. 169 If.
29. C. Rist, Historie des 、ッ」エイゥョ・Nセ@
rdcllin• cw cri•c/it et ci la IIIOIIIICiie
(Sirey, 1951), pp. 170-171.
30. Critiq11e, p. 185.
31. C. Rist, op. cit., p. 343.
32. Criliq11e, p. 121.
33. Capital, I, 128.
34. J. M. Keynes, The P11re Theory 4 Mouey. vol. I of A Treatise ou
Mouey (New York: Harcourt, Brace & Co., 1930), pp. 146-147.
35. Critiq11e, p. 119.
36. C. Rist, op. cit., p. 51.
37. C. Rist, op. cit., p. 362.
38. Capital, Vol. I, part I, p. 129. Nevertheless on p. 130 Marx indicates that the "representatives" of gold can be hoarded. But he
does not develop the point.
39. Crititflll!, pp. 120-121.
40. Knut Wicksell: Lecture., ou Puliliccd Ecuuomy (London: Roulledge,
1934), p. 150.
41. Capital, I, 129.
42. Ibid., I, 130.
43. Ibid.
44. Ibid.
45. Critique, p. 128.
46. Ibid.
47. Capital, I, 134.
48. Critique, p. 126. See also my Note 38.
49. Capital, I, 133.
50. Ibid.
51. Ibid., I, 113.
52. Ibid., I, 114.
53. Ibid., I, 95-96.
54. Critique, p. 105.
55. Capital, I, 589.
56. Crititflll!, p. 149.
NOTES AND REFERENCES
133
57.
58.
59.
60.
61.
62.
63.
64.
65.
66.
67.
68.
Ibid., p. 141.
Ibid., p. 146.
Ibid.
Capital, I, 142.
Ibid.
Critique, p. 150.
Ibid.
Ibid.
Ibid.
Capital, I, 100.
Ibid., I, 129.
Ccmtrilmtion to the CriticJIIC! of Political Ecouomy, pp. 76-77. In the
first case, the state profits as debtor. In the second case, the creditors profit from the operation, but so does the state, as the collector of taxes.
69. Ibid.
70. Capital, I, 132.
PART TWO
1. Joseph A. Schumpeter, History of Economic Analysis (New York:
Oxford University Press), p. 718.
2. See the first volume of Capital, Chapter IV, where Marx analyzes
"the transformation of money into capital."
3. Capital, 11, 100.
4. Ibid., 11, 358.
5. lbid, 11, 31.
6. Ibid., 11, 30.
7. Ibid., 11, 117.
8. Ibid., 11. 358.
9. Ibid., 11, 112-113.
10. I shall not discuss the "period of turnover" so as not to prolong the
exposition.
11. Capital, 11, 354.
12. Ibid.
13. Ibid., 11, 30.
14. Ibid., 11, 393.
15. Ibid., 11, 118.
16. Capital, I, 593-598.
17. Ibid., 11, 120.
18. Ibid., 11, 85.
19. Ibid., 11, 120.
20. Ibid., 11, 78.
21. Ibid., I. 625 ff. and 11, 312 and 333 ff.
22. Cf. Capital, 11, pp. 364. But this "inflation", like the "deflation" re-
23.
24.
25.
26.
27.
28.
29.
30.
31.
32.
33.
34.
ferred to above, is a disequilibrium considered outside the cyclical
context.
Cctpital, 11, 501.
Ibid., 11, 330.
Ibid., 11, 333.
Ibid., 11, 344. See also I, Ch. XXIII, and Ill, Ch. IV.
Ibid. 11, 336.
Ibid., 11, 333.
See p. 70.
Capital, 11, 327.
Ibid., 11, 336.
Ibid., 11, 491.
Ibid., 11, 470.
The Accumulation of CctJJital (New York: Monthly Review Press,
1964).
35. Ibid., p. 100. Rosa Luxemburg is here faithful to the letter of what
Marx says. Cf. Capital, 11, 135-136.
36. Hence the necessity of beginning with Marx's theory of money, cf.,
First Part.
37. Capital, 11, 472-473.
38. Ibid., 11, 479-480.
39. H. Denis, Hi.storie de la Pensee eCOIIOIIIique (P.U.F., 1966), pp. 426429.
40. Capital, 11, 491.
41. Ibid., 11, 349.
42. Ibid., 11, 347 ff.
43. Ibid., 11, 492.
44. Ibid., 11, 522-523.
45. Cf. H. Denis, op. cit. lt is nevertheless necessary to make clear
that Marx here confines himself to the saving of enterprises, or
self-financing. Wage-laborers do not save, and their demand for
consumption goods is equal to their wages, V (cf. Capital, 11, 118).
But there is sometimes a certain confusion of the terms "saving"
and "hoarding" in Vol. 11 of Capital: thus failure of the worker to
consume is a saving, that is, Marx makes clear (p. 118), a hoarding, as retention of money corresponding to non-purchase. This is
because in the absence of a system of credit, the savings of the
laborer cannot be invested.
46. I borrow the terms "pure supply" and "pure demand" from H.
Neisser and J.G. Koopmans: in 1933 the latter formulated the
equation セ@ = L (that the increase of active money, M, must be
equal to that of hoarding), as the condition of equilibrium in terms
of the equality of investment and saving. But as I indicate below,
NOTES AND REFERENCES
47.
48.
49.
50.
51.
52.
53.
54.
55.
56.
57.
58.
59.
60.
61.
62.
63.
64.
65.
66.
67.
68.
69.
70.
72.
73.
74.
75.
76.
77.
78.
79.
BO.
81.
82.
83.
84.
85.
86.
87.
135
the concept of equilibrium does not have the same meaning in
Marx.
Paul Sweezy, The Theory vf c。ーゥエ」ONセ@
Dl.'rl'loJimeut (New York
Monthly Review Press, 1968).
Capital. 11, 478.
Ibid.
Ibid., Ill, 4.
Ibid .. 11, 116.
Ibid.
Ibid .. 11, 413.
Ibid .. Ill, 315.
Ibid .. Ill, 322.
Ibid., Ill, 317.
Ibid., Ill, 326.
Ibid., Ill, 600.
Ibid., Ill, 593.
Ibid., Ill, 598.
Ibid., Ill, 328.
Ibid., Ill, 325.
Karl Marx, Coutributiou ii la criticJue de l'i!couomie politiCJIIl' (Paris:
Editions sociales, 1972), p. 181.
Ibid., p. 189.
Ibid., p. 182.
Capitcd, Ill, 324.
Ibid.
Ibid., Ill, 600.
Ibid., Ill, 522.
Ibid., Ill, 479-480.
Ibid.
Ibid., Ill, 400.
See pp. 77 If.
Capital, i, 139.
Ibid., I, 137-138.
Ibid., Ill, 479.
Ibid., Ill, 480.
Ibid.
Ibid.
Ibid., Ill, 401.
Ibid., Ill, 403.
Critique, pp. 185 If.
Capital. Ill, 458.
Ibid.
Ibid., Ill, 425.
See pp. 25-26.
MARX ON MONEY
136
88. H. Denis, op. cit., pp. 129-144.
89. In Lecture5· on Political Economy, op. cit., vol. 1, p. 149.
90. Fan Hung, in The Ret:ie1c of Economic Studies, vol. 7, No. 1, Oct.
1939.
91. Capital, Ill, 402.
92. Cf. especially Chapter 27 of Volume Ill, "The Role of Credit in
Capitalist Production," where Marx speaks in turn of credit money
and stock companies.
93. Capital, Ill. 317-318.
94. Ibid., Ill, 321.
95. Ibid., Ill, 436.
96. Ibid., Ill, 368.
97. Ibid., Ill, 462.
98. Ibid., Ill, 544-545.
99. Ibid., Ill, 545.
100. Ibid., Ill, 402-403.
101. An altogether diflerent interpretation is given by H. Denis in an article entitled "Trois theories de /'interet du capital," Rewe
economique, 1!;150.
102. Article cited. Fan Hung himself makes certain reservations.
103. Capital, 11, 357.
104. Capital, 11, 346.
105. Ibid., Ill, 435.
106. Ibid., Ill, 370.
107. Ibid., Ill, 362.
108. Ibid., Ill, 363.
109. Ibid., Ill, 356.
110. Ibid., Ill, 364.
111. Ibid., Ill, 352-353.
112. Ibid., Ill, 372.
113. Ibid., Ill, 509-510.
114. Critique, p. 102.
115. Capital, Ill, 344.
116. Ibid., Ill, 403 ..
117. Ibid., Ill, 499.
118. See pp. 66-67.
119. See pp. 68-69.
120. Capital, Ill, 469.
121. Ibid., Ill, 506.
122. These terms are borrowed by me from the National Accounts.
123. Capital, Ill, 470 and 537.
124. See pp. 80-81.
125. Capital, Ill, 457.
126. Ibid., Ill, 463.
127. Ibid., Ill, 466.
128. Ibid., Ill, 465.
129. Ibid.
130. Ibid., Ill, 467.
131. Ibid., Ill, 466.
132. Ibid., Ill, 467.
133. Ibid.
134. Ibid., Ill, 469.
135. Ibid.
136. Ibid., Ill, 502.
137. Ibid., Ill, 509.
138. Ibid., Ill, 472.
139. Seep. 97.
140. CaJJital, Ill, 469.
141. ·Ibid.
142. See first part of this study, pp. 39-40.
143. Critique, p. 176.
144. Capital, I, 144.
145. See pp. 165 11. of Ms.
146. Capital, I, 143, N.1.
147. Critique, p. 177.
148. Ibid., p. 185.
149. Ibid., p. 186.
150. See pp. 87-88. and pp. 108-110.
151. Capital, Ill, 517.
139. Marx's phrase which I quote ends, on the contrary, by saying that
the fictitious quality of credit likewise "applies to the 'reserve fund,'
where one would at last hope to grasp something solid." But Marx
is speaking here of the concentration of the reserves of the private
banks in the common funds of the Bank of England, while my
comments apply to the banking system as a whole.
152. Ibid., Ill, 492-493.
153. Ibid., 11, 317-318.
154. Ibid., Ill, 491-492.
155. Ibid., Ill, 569-570.
156. Marx here takes over the comments of Newmarch, cited in Capital,
Ill, 570, No. 15. They are particularly interesting in connection with
the present balance of payments difficulties of the U.S.A.
157. This arithmetic concept of devaluation is unfortunately the only one
discussed here by Marx.
158. Capital, Ill, 591.
159. Ibid., Ill, 451.
160. Ibid., Ill, 567-568.
161. Ibid., Ill, 517. Thornton had already showed this in 1802.
162. Capital, Ill, 460.
163. Ibid., Ill, 592.
MARX ON MONEY
138
164. Ibid., Ill, 581.
165. Ibid., Ill, 588.
166. H. Bartoli, Lt/ cloctrine i!conomique et sociale cle Marx. 19.50, p. 221.
Cf. also the same author's discussion of Marxist theories on crises
in Fluctrwtions eCOIIOIIIi'fll!'>·, Domat-Monchrestien. 1954 (symposium).
167. Capital, Ill, 304.
168. Ibid., Ill, 321.
169. Ibid., Ill, 450.
170. Ibid.
171. Ibid., Ill, 488.
172. Ibid., Ill, 489.
173. Ibid. .
174. Ibid., Ill, 178 If. On this point Marx follows a tradition originating in
Cantillon and unknown to Ricardo. Cf. Charles Rist. op. cit., pp.
118-119 and 169.
175. Capital, 11, 315-316.
176. Ibid., Ill, 467-468,480-481,502, and 11,254-255 and 316.
177. P. Dieterlen, Que/que enseignements de OB・セ[ッオエゥョ@
moni!taire
fram;aise cle 1948 ii 1952, A. Colin, 1954, p. 82.
178. Ibid., p. 91.
179. See pp. 106-107.
180. Capital, Ill, 569.
181. Ibid .. Ill. 490.
182. Ibid. I, 138, N.1.
183. Ibid., Ill, 571-572.
184. Ibid., I, 138.
185. Critique, p. 146.
186. Capital, Ill, 574.
187. Ibid., Ill. 254.
188. Ibid., Ill, 447.
189. See point c) below.
190. Capital, Ill, 458-459.
191. Ibid., Ill, 530.
192. Ibid., 11, 318.
193. Fan Hung, op. cit.
194. Capital, I, 122.
195. Ibid., Ill, Ch. 33.
196. Ibid., Ill, 541.
197. C. Rist, op. cit., p. 237.
198. Capital, Ill. 403-404, " ... the principal banks issuing notes ... actually have the national credit to back them, and their notes are
more or less legal tender. ... "
NOTES AND REFERENCES
139
199. Marx does not discuss in this connection the monetization of the
public debt by the central bank and its effect on the politics of
monetary control. He only views \his financial relationship between
the bank and the state as a method of accumulating funds at the
expense of the taxpayers. (Ccrpital, I. 754 ff.)
200. Capital, Ill, 452.
201. See Part I, p. 47.
202. Capital, Ill, 543.
203. Ibid., Ill, 404.
204. Ibid., Ill, 516-517.