Labor Money

Discussion

Marx’s Critique of Labor-Money

David Adam:

"Marx’s critique of labor-money is predicated on the idea that it cannot do what it is intended to do. He calls it a “pseudo-economic term.” 31 That socialists would propose such an ineffective solution to the problems of capitalism suggested to Marx an inadequate understanding of the role of money in capitalist society. As early as 1844, in his notes on James Mill’s Elements of Political Economy, Marx was developing a distinct theory of money within the framework of his understanding of human alienation. Marx views money as expressive of particular social relations—relations that have escaped genuine human control. He writes that “the mediating movement of man engaged in exchange is not a social, human movement, it is no human relationship: it is the abstract relation of private property to private property, and this abstract relation is the value which acquires a real existence as value only in the form of money.” 32 It is precisely this understanding of the genesis of money that Marx uses against Proudhon, when he exclaims, “Money is not a thing, it is a social relation.” 33 This understanding of money is reaffirmed in the Grundrisse, where Marx writes that in money “individuals have alienated their own social relationship from themselves so that it takes the form of a thing.” 34

It is on this basis that Marx criticized the advocates of labor-money. Since the value-form, and thus money, springs from the social relation of private exchange, simply modifying the token used to effect this exchange cannot do away with the basic inadequacies of the capitalist mode of production. Marx explains that criticism is often directed at money and interest to the exclusion of the social basis of capitalism due to the fact that all of the irrationality of capitalism appears most forcefully in the money market. As Marx wrote in 1851,

   Since it is in the money market that the entire crisis erupts and all the features of bourgeois production recur as symptoms, which, it is true, become incidental causes, nothing is simpler to understand than the fact that it is money that narrow-minded reformers who stick to the bourgeois standpoint want to reform. Because they want to retain value and private exchange, they retain the division between the product and its exchangeability. But they want to modify the token of this division in such a way that it expresses identity. 35

Marx’s most extended treatment of these reformers is in the Grundrisse, where Marx criticizes the Proudhonist Darimon and the Ricardian socialist John Gray. Those who proposed labor-money sought to eliminate harmful or unjust aspects of capitalism such as economic crises and unequal exchanges (such as the exchange between capital and labor). They imagined that a bank could identify prices with values through the use of labor-money—tokens representing a certain number of labor hours—and that this could do away with the anarchic fluctuation of supply and demand in a capitalist monetary economy. Marx accused them of utopianism: wanting to establish socialism on the basis of commodity production. The labor theory of value was seen by Proudhon, for example, as a sort of program for justice to be realized. 36 Marx’s view was quite different: “I say … that commodity-production is necessarily, at a certain point, turned into ‘capitalist’ commodity-production, and that according to the law of value governing it, ‘surplus value’ is properly due to the capitalist, and not to the labourer.” 37

A key point in Marx’s critique of the labor-money proposals is that while value expresses the social character of labor under capitalism, it can only do so through a market price that is distinct from value. The “time-chitters” erroneously believe, Marx writes, “that by annulling the nominal difference between real value and market value, between exchange value and price—that is, by expressing value in units of labour-time itself instead of in a given objectification of labour time, say gold and silver—that in so doing they also remove the real difference and contradiction between price and value.” 38 Marx holds that this proposed solution does not strike at the root of the contradiction, namely the lack of social control over production.

Darimon and other advocates of labor-money wished to overturn the privileged role of precious metals in circulation and exchange. Marx characterizes Darimon’s aim in the following manner: “Let the pope remain, but make everybody pope. Abolish money by making every commodity money and by equipping it with the specific attributes of money.” 39 Marx argues that commodities cannot directly represent their universal exchangeability in terms of labor-time, but that the labor expended individually on a commodity must be represented as socially uniform labor through the medium of some universal equivalent, or money. If labor-money was used to abolish the special role of money in the economy, the value commanded by labor-money in exchange would necessarily diverge from its nominal value in terms of labor-time, and it could not effect the social equalization of diverse labors while simultaneously representing an equivalent amount of labor-time for individual commodities. When one commodity is produced more efficiently than another of the same type, it commands the same amount of money on the market; however, if labor-money were to exchange in equal quantities for these commodities, it could not at the same time represent a specific amount of labor-time. The sort of organization of social production adequate to a society of commodity producers relies on the competitive dynamic of price movements.

Also relevant in this connection is Marx’s discussion of the Simple Form of value in Capital, Volume I, where he analyzes the relative and equivalent forms, whereby one commodity (in the relative form) expresses its value through the body of another commodity (in the equivalent form). Marx writes that these forms “exclude each other as polar opposites.” 40 This is significant insofar as the private labor expended on a commodity cannot directly represent social labor independently of the exchange relationship, and here only the commodity in the equivalent form, which expresses the value of the other commodity, represents social labor in its material form. The social relations of value production thus necessarily manifest themselves in the relation between two things, as the attribute of a thing, as an intrinsic property. Money is described as a general equivalent, a commodity through which all other commodities express their value.

In Capital, Marx links his analysis of the form of value to his critique of Proudhon and the Ricardian socialists, once again using his pope metaphor: “It is by no means self-evident that the form of direct and universal exchangeability is an antagonistic form, as inseparable from its opposite, the form of non-direct exchangeability, as the positivity of one pole of a magnet is from the negativity of the other pole. This has allowed the illusion to arise that all commodities can simultaneously be imprinted with the stamp of direct exchangeability, in the same way that it might be imagined that all Catholics can be popes.” 41 Not only do the Catholics rely on their pope, but also the pope would not have his position if there were no Catholics. In the same way, the products of mutually indifferent producers cannot be socially distributed without money, and money would not exist if goods were not produced as commodities.

The dual character of the commodity, discussed at the start of Capital, is foundational for Marx’s treatment of money. The commodity is both a use-value and a value because it is produced for exchange, rather than simply as an object of consumption for the producers. For the owner, the commodity represents a claim on a portion of the social product. Its social form as a value is evident in the way we act and the way we speak of commodities and their worth in a developed capitalist society. Only with the expansion of the market and the various branches of industry can the vast majority of goods be produced as commodities. This development of industry and the division of labor develops the social character of the commodity, the necessity for its evaluation against all of the other goods on the market. According to Marx, the commodity as use-value enters into contradiction with its character as an exchangeable value, in which capacity it is related to the whole world of commodities in various proportions. As a use-value, the commodity is not divisible at will into the various proportions in which it might be exchangeable with the diverse commodities necessary for consumption and the maintenance of industry. The necessity of money is the necessity for an independent representation of value as such. Every commodity can thus be expressed as a component part of the total social product without production being determined by the needs of the consumers.

The claim on a portion of the social product represented by the commodity may or may not be realized on the market. Even if nothing but socially necessary labor time is expended on a commodity, it can still turn out that superfluous labor was expended if demand for a particular commodity is insufficient. The seller of the commodity supplies a use-value and demands its exchange-value, but the demand for the commodity is not determined by the value the seller wishes to realize in exchange. The buyer may not desire the quantity of use-value supplied at the offered price. Insofar as supply and demand determine price fluctuations, prices for individual commodities—the monetary value the capitalist hopes to realize in exchange—will naturally diverge from commodity values, determined by socially necessary labor time.

In the section of the Grundrisse dealing with John Gray, Marx develops the contradictions inherent in his ideas about labor-money. Starting out from the assumption of commodity production, and assuming that a central bank issues labor-money, Marx argues that the only way the vicissitudes of the market could be eliminated is if the bank became the “general buyer and seller, but also the general producer.” If private producers actually receive labor-money in proportion to the labor time spent producing their goods, the regulative role of supply and demand would be annulled, leading to economic collapse; whereas, if the bank itself makes determinations of value, it comes to act as the real organizer of production. In other words, the bank would have to impose a despotic plan on an unplanned economy. Gray’s goals can only be achieved in opposition to his premises. Marx also considers the social function of this despotic bank from the point of view of the common ownership of the means of production: “In fact either it would be a despotic ruler of production and trustee of distribution, or it would indeed be nothing more than a board which keeps the books and accounts for a society producing in common.” 42 Naturally, Marx favors the latter alternative.

Marx claims that Gray assumes an economic foundation of private production instead of common, society-wide control, but wishes to do away with the economic consequences of private production. The labor-money system of equal exchange on the basis of commodity production, carried to its logical conclusion of doing away with the evils of the monetary system, necessitates leaving commodity production behind, just as commodity production necessitates the divergence of price from value and other things Gray dislikes. Marx’s discussion of Gray’s system in A Contribution to the Critique of Political Economy sheds light on the passages from the Grundrisse. Marx writes, “On the one hand, society in the shape of the bank makes the individuals independent of the conditions of private exchange, and, on the other hand, it causes them to continue to produce on the basis of private exchange. Although Gray merely wants ‘to reform’ the money evolved by commodity exchange, he is compelled by the intrinsic logic of the subject-matter to repudiate one condition of bourgeois production after another.” 43

It is this desire to try to solve the problems of capitalism by reforming the money system that Marx singles out as the essence of the labor-money schemes. In the Grundrisse, when Marx is criticizing Darimon, he summarizes the issue in this way: “The general question would be this: Can the existing relations of production and the relations of distribution which correspond to them be revolutionized by a change in the instrument of circulation, in the organization of circulation?” 44 The proponents of the labor-money schemes focused attention on the medium of exchange without understanding the underlying relations of production. As John Gray wrote, “A defective system of exchange is not one amongst many other evils of nearly equal importance: it is the evil—the disease—the stumbling block of the whole society.” 45 Marx believed that the evils of bourgeois society which the advocates of labor-money aimed to cure, such as the rising and falling of prices, are “not to be remedied by ‘transforming’ the banks or by founding a rational ‘money system.’” 46 For Marx, it is utopian to “wish to retain commodities but not money, production based on private exchange without the essential conditions for this type of production . . ..” 47

Marx expressed these ideas in his critique of Gray in the Contribution to the Critique of Political Economy:

   Commodities are the direct products of isolated independent individual kinds of labour, and through their alienation in the course of individual exchange they must prove that they are general social labor, in other words, on the basis of commodity production, labour becomes social labour only as a result of the universal alienation of individual kinds of labour. But as Gray presupposes that the labour-time contained in commodities is immediately social labour-time, he presupposes that it is communal labour-time or labour-time of directly associated individuals. In that case, it would indeed be impossible for a specific commodity, such as gold or silver, to confront other commodities as the incarnation of universal labour and exchange-value would not be turned into price; but neither would use-value be turned into exchange-value and the product into a commodity, and thus the very basis of bourgeois production would be abolished. But this is by no means what Gray had—goods are to be produced as commodities but not exchanged as commodities . . .. But it was left to M. Proudhon and his school to declare seriously that the degradation of money and the exaltation of commodities was the essence of socialism and thereby to reduce socialism to an elementary misunderstanding of the inevitable correlation existing between commodities and money. 48

Money is simply a development of the relation between commodity and commodity, hence the “inevitable correlation existing between commodities and money.” Marx believed that Ricardo and classical political economy inadequately understood this connection.

Marx’s discussion of the value-form in Capital, Volume I, referred to above, is a detailed analysis of the connection between commodity and money, an analysis “never even attempted by bourgeois economics.” 49 His thesis is that “the money-form of the commodity is only the further developed shape of the simple value-form, i.e. of the expression of value of a commodity in any other commodity . . ..” 50 That these products of labor are commodities in the first place rests on the premise that they are “products of separate private labours carried on independently of one another.” 51 The social control and accounting undertaken by the associated producers in a communist society abolishes the value-relation, and for this reason abolishes money." (http://libcom.org/library/marx%E2%80%99s-critique-socialist-labor-money-schemes-myth-council-communism%E2%80%99s-proudhonism)

References

31. Karl Marx, A Contribution to the Critique of Political Economy (New York: International Publishers, 1970), p. 86.

32. Karl Marx, Early Writings (New York: Vintage, 1975), p. 261.

33. Karl Marx, The Poverty of Philosophy (New York: International Publishers, 1992) p. 59.

34. Marx, Grundrisse, p. 160.

35. Karl Marx, “Reflections,” in Karl Marx and Friedrich Engels, Collected Works, Vol. 10 (New York: International Publishers, 1978) p. 588.

36. “How many nails is a pair of shoes worth? If we can solve this appalling problem, we shall have the key to [the] social system which humanity has sought for six thousand years.” Pierre-Joseph Proudhon, What is Property? (Cambridge: Cambridge UP, 2007) p. 106.

37. Karl Marx, “‘Notes’ on Adolph Wagner,” in Later Political Writings, p. 255.

38. Marx, Grundrisse, p. 138.

39. Ibid., p. 126.

40. Marx, Capital: Volume I, p. 140.

41. Ibid., p. 161.

42. Marx, Grundrisse, p. 155-6.

43. Marx, A Contribution to the Critique of Political Economy, p. 85.

44. Marx, Grundrisse, p. 122.

45. Quoted in Alfredo Saad-Filho, “Labor, Money, and ‘Labour-Money’: A Review of Marx's Critique of John Gray's Monetary Analysis,” in History of Political Economy, vol. 25, no. 1, p. 67.

46. Marx, Grundrisse, p. 134.

47. Marx, A Contribution to the Critique of Political Economy, p. 70.

48. Ibid., pp. 85-6.

49. Marx, Capital: Volume I, p. 139.

50. Karl Marx, “The Value-Form,” in Capital & Class, no. 4, p. 141.

51. Ibid., 140.