The quantity theory of money - S. Legezo

Quanity theory of money critique

Essay of methodological criticism. (Under the Banner of Marxism, 99-132 p., no. 6, 1928 )

I. Introduction.

Every theory is a reflection and a by means of a determined method conversion in the human head of reality. "The recognition of theory as a copy, as an approximate copy of objective reality, is materialism," says Lenin apropos this.1 Hence: the scientific character of a particular theory is determined by its ability to give a relatively correct picture of objective reality, a relatively exact copy of it.

The theory, "depicting" social-production processes and relations of exchange economy, is political economy.2 Money is a socioeconomic category.3 Therefore the theory of money is part of political economy; only within its bounds and on its basis the theory of money gets its scientific significance.

However political economy deals not with exchange society "in general," i.e. not with commodity production in its immediate concreteness, but with the economic categories of this society. And since "economic categories are only the theoretical expressions, the abstractions of the social relations of production,4" then, consequently, the theoretical "depiction" of the reality of exchange economy takes place in the form of abstractions of the social-production relations. Economic categories: commodity, value, money, surplus value, capital, credit, rent, etc. - represent by themselves, thus, the theoretical expression of the abstraction of determined relations of production, or as Marx says elsewhere: "forms of existence, conditions of existence of separate aspects of bourgeois society.5"

Speaking, consequently, about the quantity theory of money, it is necessary to put the decisive methodological question, whether it depicts those real processes and relations of the socioeconomic reality of exchange society, which hide behind the phenomena of commodity-money circulation, or more precisely: whether it reveals the essence of these phenomena and, herewith, whether it establishes the real economic laws, governing the above listed processes and relations. It seems to us that only with such a statement of the question the task of methodological criticism of the quantity theory of money can be properly solved.

II. The substance of the quantity theory of money.

What is the fundamental, essentially defining, constitutive in the system of the quantity theory of money? If we leave aside all particular-specific features of this theory and take the most common-generic of its features, then this "fundament" can be reduced to the following four positions:

First of all, with the quantity-theorists "commodity circulation (in the given case the capitalist process of exchange of things[/metabolism]. - S.L.) is looked at exclusively in the form C—M—C, and this in its turn solely as the dynamic unity of sale and purchase.6" Differently stated, capitalist economy (M-C-M) is reduced to a simple commodity economy (C-M-C), and the latter - to its natural form. In fact, unity of sale-purchase is the characteristic form of exchange for the epoch of barter [/direct exchange], for the epoch of natural exchange, where there is not yet commodity, nor money in the proper sense of the word. The unity of sale-purchase: this is the characteristic form of the exchange process for the epoch of the pre-bourgeois mode of production, - in which still only the process of formation of this mode of production occurs within the bounds of the natural form of production, but, herewith, also the process of the formation of the universal category of the exchange economy, the category of commodity. This is the epoch of the development of the commodity and the birth of money. Simple, expanded and universal form of value - are only aspects of the genesis of the commodity, - moments, marking themselves determined stages of the genesis of exchange economy. Here "already" exists exchange, but not "yet" circulation, because there is no money. All relations of exchange as of yet proceed in natural form. The universal equivalent, that basic monetary form of value, too is still naturalized, it is not sufficiently separated from the use property of the product. Only the fusion of the universal equivalent form of value with a determined thing turns it into money, and this real thing (commodity) into the material carrier of this form - into coin. In this "coalescence," by the way, consists the whole meaning of the leap from direct trade to commodity circulation.

By limiting commodity circulation to the formula C-M-C and understanding the latter, as unity of sale-purchase, the quantis thereby reduce the complexity of the capitalist process of exchange of things, proceeding in the form of commodity-(capital-)circulation, to simple, direct (natural) exchange of products. Hence we can derive the first position of the quantity theory of money:

Commodity circulation is natural direct exchange of products. Therefore laws of circulation of developed forms of exchange economy are reduced to laws of simple direct (natural) exchange economy.

This reduction of commodity circulation to natural exchange inevitably naturalizes also the category of money. Therefore money in exchange for quantis proceeds in its natural form, in the form of a simple "good," in the form of an ordinary "worldly good," the distinctive feature of which consists only of the fact that it is "taken by all in exchange for other commodities" (Fisher). The quantis represent to themselves the matter in such a way that commodity circulation is a process of exchange of things which can be accomplished in principle without money, but which gets technical facilitation with the introduction of one or other medium of exchange. So, for example, Hume believed that "Money is only the instrument which men have agreed upon to facilitate the exchange of one commodity for another.7" Or: "Money is nothing but the representation of labour and commodities, and only as a method of rating or estimating them.8" Roughly in the same spirit also Fisher defines money: "Money never bears interest except in the sense of creating convenience in the process of exchange. This convenience is the special service of money." In another place Fisher characterizes the category of money as: "Any property right which is generally acceptable in exchange may be called "money." Its printed evidence is also called money.9" J.S Mill said the following on money: "It is a machine for doing quickly and commodiously, what would be done, though less quickly and commodiously, without it. 10" Thus, starting from their understanding of commodity circulation, as unity of sale-purchase, the quantis define this naturalized category - money - as technical means of facilitating exchange, as an instrument of exchange. Marx from of all this drew the following conclusion: "If commodity circulation is looked at exclusively in the form C—M—C, and this in its turn solely as the dynamic unity of sale and purchase, the specific aspect of money as means of circulation is upheld against its specific aspect as money.11" According with the above we formulate the second position of the quantity theory:

Money is a technical means of facilitating direct exchange, i.e. money is an instrument of exchange.

But money in the quality of instrument of exchange is isolated in its function, as coin. And as the "tendency of circulation is to convert coins into a mere semblance of what they profess to be (wear), into a symbol of the weight of metal they are officially supposed to contain,12" then on the basis of the economic law, which reads, that "means of circulation, isolated in its function, as coin, becomes a value-token.13" - money in the quantis is inevitably reduced to a token of value and because of this takes on the laws of circulation of these tokens.14 In this way, we can deduce the third position of the quantity theory:

Money is a token of value. The laws of circulation of value-tokens ​​are the laws of circulation of money in general.

However "in accordance with the law relating to the circulation of value-tokens... prices of commodities depend on the volume of money in circulation, and not that the volume of money in circulation depends on the prices of commodities.15" Hence the fourth position of the quantity theory of money:

Prices of commodities depend on the amount of money circulating, because they are constructed in the direct exchange on the market, by simply contrasting two not on each other dependent magnitudes: money signs and the commodity mass (two streams). The value of money, in light of this, from the viewpoint of quantis, is nothing more than a nominal magnitude and measure, which manifests itself "really" in the actual exchange, in the so called "purchasing power" of banknotes.16

To proper theory of money relate only the last three positions. The first position is only a methodological premise of this theory.

From the above scheme of the main positions of the quantity theory of money it is clearly seen that the whole primitive edifice of this theory is built on very shaky foundations. In fact the assertion that the essence of money consists just of being an instrument of exchange, means that the essence is replaced with the phenomenon, it means to assert that the phenomenon coincides with the essence. But this at the same time means, to entirely abandon theoretical economy, because, as Marx points out, if the form of appearance coincided with the essence of things, there would be no place for science. In the quantis the form of manifestation - money, as instrument of circulation - coincides with the essence. In this respect the quantity theory of money is based on the theoretical foundations of vulgar economy. The vulgar understanding of the nature of money is predetermined by the wrong methodological assumptions, which, strictly, also give the content of this theory. Therefore: 1) identification of the methodological premises of the quantity theory of money is the first objective of criticism; 2) disclosure of errors in understanding of the quantis of the nature of money represents the second task of criticism, finally, 3) scientific substantiation of the concept of "purchasing power of money" on the basis of the law of value and disclosure of the errors of the quantity theory of money in this area - represents the third objective of criticism.

III. Methodological premises of the quantity theory of money.

Inasmuch as the position of dialectical theory of knowledge is true, that method is the spirit of every cognition and that method is correlative with the object of this cognition, we can by logical means, through disclosure of the backside connections of the main positions of the quantity theory, determine the object-methodological guideline, with the help of which this theory is constructed.

The determination of "purchasing power" of money in the quantis follows from the reduction of the value of money to a coefficient of the exchange of banknotes over the mass of commodities.

The reduction of the value of money to a coefficient of exchange (and herewith also to value-tokens) follows: in some (Hume-Fisher) from the rejection, in others (Ricardo-Mill) from the incomprehension of the substantial aspect of the category of money.

In its turn the reduction of the value of money to a coefficient of exchange, and therefore also to the signs of value, is only a consequence of the fact that the main characteristic of the essence of money is reduced to their definition, as instrument of direct exchange.

But an instrument of simple, direct exchange money can only be in such an exchange economy, where there exists the unity C-M-C, i.e. under the condition of reducing developed commodity circulation to a simple naturalized process, i.e. to the process where M acts in a still undeveloped natural-equivalent form.

And this latter follows from the understanding of commodity economy: first, as an eternal and principally-immutable system of production, and secondly, as a system, which organically is not connected by any internal unity, as a system, in which the subject of production is the individual household (Robinsonades of the classics).

All this taken together is, in turn, a product of apologetics of bourgeois thought. Ricardo, for example, believed, that "society is nothing than a fictitious body, a mechanical sum of the individuals who compose it.17" This viewpoint on bourgeoisie society, as a subjectless and mechanical unity, to one or other degree prevails in bourgeois economic science also to the present day.18 Similar type of views on bourgeois society as a transhistorical and undifferentiated category, intimately connected with the metaphysical world view, typical to any theoretical thought of bourgeois ideologues and theorists. "The solitary and isolated hunter or fisherman, who serves Adam Smith and Ricardo as a starting point, is one of the unimaginative fantasies of eighteenth-century romances," Marx wrote in his time.19 However, we know that the XVIIIth century was the century of the heyday of the metaphysical world view... Separated individual households, these Robinsonades, with which Austrians "start" and "end," belong to the chimeras of the second half of XIXth century. In this sense the Austrians are the continuers of the metaphysical guidelines on exchange economy, guidelines, from which Smith and Ricardo proceeded. But with the Austrian the consanguinity is located in mathematics, and the contemporary quantist Fisher with his formula "Equation of exchange" illustrates the principles with mathematical theory, applied to the monetary circulation.

Thus we see that both historically and logically the quantity theory money with its roots starts and rests on the metaphysical method of cognition. Capitalism, as an eternal and once and for all established category, and moreover as an epistemological abstraction, as pseudo-economy etc., this is a metaphysical category. But the metaphysical guideline on the subject inherently by itself already determines the fate of the quantity theory. With such a guideline, completely is eliminated the basic premise of scientific cognition, the premise which consists in the fact that, firstly, "the condition for the knowledge of all processes of the world in their “self-movement,” in their spontaneous development, in their real life, is the knowledge of them as a unity of opposites," and secondly, that "the splitting of a single whole and the cognition of its contradictory parts" is a condition of all cognition.20 Without this methodological condition there is no scientific knowledge. Yet, from the viewpoint of bourgeois theory, capitalism, as national-economic whole, is without internal, inherent in it opposites and possesses no contradictions. Not have these opposites and contradictions, consequently, also economic categories: commodity, value, money, capital, etc., which, in the quality of abstraction of determined social-production processes and relations, would have to be carriers of contradictions, inherent in commodity economy. Yes and in general can that have a unity of opposites which by itself is not a living whole, a moving unity? Of course not. That's why quantis nowhere speak of contradictions in the above sense. That is why in them the movement of commodities is not a contradictory process, but their mechanical transfer from one hand to another. That's why in them money serves only as ancillary means of this movement. But just in this is the root of the methodological error of the quantis. This basic error determines all the rest.

IV. The problem of the nature of money in the quantity theory.

The inability to understand the essence of the phenomena of economic reality is an organic defect of bourgeois political economy. This is explained by its negative relation to the dialectical methodology of cognition. Hence, as a rule, in the theories of money of bourgeois economists almost always there lacks an analysis of the genesis of money, and in those in which it has place, such as, for example, in the nominalists, the latter is turned into a purely formal, declarative postulate. Herewith in bourgeois economists remains covered and not understood the nature of money, thanks to which all theory of money usually becomes a purely logical and rationalistic system (Knapp). In other words, the incorrect determination of the essence of money leads to a wrong construction of monetary theory. Therefore to give the theoretically correct determination of the essence of money is the starting moment in the construction of the Marxist theory of money as well as in the criticism of bourgeois monetary systems.

As we have seen above, in the quantis the nature of money is reduced: in terms of form - to means of exchange (second position), in terms of content - to signs of value ​​(third position). Under what provision would these positions be correct? Obviously, under the provision of the correctness of the first position,21i.e. if circulation of commodities in developed exchange economy was reduced to barter trade, and if such an immanent movement of commodities way of their circulation, not as "converted form of movement of commodities," but as the outside- extraneous way of "creating facilities for the process of exchange"' (Fisher) as "way of facilitating the exchange of one commodity for another" (Hume). Then indeed money would be an "instrument of circulation" in the sense, as the quantis understand it. The best money, of course, would be the most cheap and best adapted to this technical function banknotes. And then, indeed, the relation of commodities to the value of the money material, and therefore also to its amount, would be passive-indifferent, because, as Ricardo claims, "the smaller quantity of money would perform the functions of a circulating medium, as well as the larger.22" The value of the money (purchasing ability) in this case would be reduced to a coefficient of exchange of banknotes for commodity mass. And then, of course, one could talk of the correct "depiction" of factual reality by the quantity theory, talk about its scientific cognitive worth.

But the fact of the matter is that the question about commodity circulation in developed economy stands entirely different this is represented by the quantis. Direct exchange was indeed once the determined form of the exchange process, and then it determined the essential characteristics of exchange economy, found in formation. However now direct exchange is an historically outlived moment.23 It was replaced (successively one after another) by a new universal form of exchange: initially simple commodity circulation, and then commodity-capitalist circulation. Between these forms of exchange (barter trade and commodity circulation) there is a fundamental difference. "The circulation of commodities differs, - says Marx, - from the direct exchange of products, not only in form24 but in substance.25" In what consists this difference? The difference is that under direct exchange, we have a direct connection of exchange of one use-value for another, under commodity circulation, on the contrary, we observe the splitting of this connection. In the first case, each individual use-value is opposed directly to another use-value in its natural form, whereas in the second case, each individual use-value is opposed to many other use-values in their value form through the common to them all and in this sense universal form of value - through money.26

The point is that historically developing spontaneous exchange of things (C-C), on the one hand, "breaks through all local and personal bounds inseparable from direct barter and splits the to each other conjoined moments of this exchange27" and on the other - "develops the circulation of the products of social labour [/human labor in general]. 28" Objectively the split of the moments of sale-purchase is reflected in the fact that in a developed commodity exchange commodity-producers one time sell on the market a commodity, but at a different time buys many other commodities. Here "a sale leads to many purchases of various articles" (Marx), to purchases, that are usually carried out in another place at another time. Split in space and split in time the moments therefore need a general form of connection - a constantly operating universal equivalent of exchange. From the total world commodity values, in the end, is exuded this equivalent. To it also are equated with its movement the products of labor, henceforth they may not be exchanged directly.

But here it must be emphasized that the universal equivalent separates from the world of commodities and is fused with a certain thing, adopting the form of money, in the same historical sequence, in which the conjoined to each other moments of exchange lose direct connection, i.e. the emergence of the category of money takes place in the extent to which from natural economy finally stand out private producers of commodities, dealing exclusively with the manufacture of products for exchange, i.e. in the same extent in which is created a society of free commodity-producers - commodity society. And this, in its turn, means, that on the market begin to function clots of indifferent human labor.29 In other words, labor that creates products for exchange, takes on universal character, the character of human labor in general, i.e. the character of abstract labor. The universality of labor, creating products for exchange, is, thus, the expressed alteration of the mode of production, the changing socioeconomic structure of human society. Initially irregular and, to a large extent, accidental exchange of surplus products within the bounds of the natural form of economy becomes then an universal phenomenon, it becomes the social form of exchange of things, and social-production relations of people take the form of exchange relations. Exchange of things begins to take place in the form of the movement of values, rather than the movement of products. Hence the universal equivalent, as expression of universal ​​labor, creating products for exchange, is itself the reification of abstract universal labor. Herewith, if by itself abstract labor in general exists in all economic formations, then the form of exchange of things it becomes only in exchange economy with advanced commodity circulation.

We for now leave aside the question of the contradictory character of the origin of money. Here is important to note only the fact that commodity circulation brings with it in exchange such a new quality, which in direct exchange still was not. And with this new quality appears the universality, as specific social form of labor, creating products for exchange, the universality, which materializes in money. 30 Thus, the universality of labor acts in the quality of an abstraction of the universality of commodity production, in the quality of the abstraction of the bourgeois mode of production, which has become universal.31

In direct exchange there not is yet the element of universal labor, because there are not yet universal exchange relations of production. There is, therefore, not yet the commodity, as such. There is, therefore, is also not yet value, as determined form of exchange relations of production. "The direct barter of products attains the elementary form of the relative expression of value in one respect, but not in another.32"

There is, consequently, not yet money as complete economic category of commodity society. Only in the commodity circulation value takes the complete form of exchange relations of production - the form of money.

It is hardly necessary to dwell on this issue in greater detail. The principal difference of direct exchange from commodity circulation is obvious. This difference is observed in the analysis of the development of the category commodity, or more precisely: in the analysis of the development of the form of value. Precisely based on the analysis of the form of value, Marx determined the essential difference of direct exchange from commodity circulation and thereby revealed the nature of the commodity itself, as well as the nature of money. The quantis do not see this difference, and they do not see it because they do not understand the form of value. Incomprehension of the form of value follows from the point that they start from an essentially invariant exchange economy.

So, the first position of the quantity theory of money: commodity circulation is simple direct exchange of products - is not true, because it finds its confirmation neither in the analysis of the history of exchange economy, nor in the analysis of daily practice of commodity circulation, in other words, it does not reflect reality. And therefore it is not scientific. From this follows logically the falsity also of the second position: money is an instrument of simple direct exchange of products, i.e. an incorrect definition of the nature of money. Not being confined, however, with this formal conclusion, we examine the question about the false determination of the nature of money of the quantis in substance. To do this we will have to, at least briefly, outline the marxist conception of the nature of money and to oppose to it the conception of the quantis.


In what consists the nature of money in terms of marxist theoretical economy? Insofar as money is an economic category and insofar as: "economic categories are only the theoretical expressions, the abstractions of the social relations of production," the nature of money has to be sought in the socioeconomic content of the social-production relations of exchange economy.

Let's examine this question.

First of all it should be emphasized that commodity production - is an historically transient form of economy that emerges, develops and disappears. In terms of the marxist method this is not an epistemological abstraction, but an essentially-determined whole, a living moving unity. It is first of all an unity of opposites, that moves through the development of internal contradictions.33

In the quality of abstractions of determined relations of production the above named opposites and contradictions have also economic categories. Hence to uncover the oppositions of economic categories - means to determine the oppositions of those socioeconomic processes or relations, which express themselves in the given categories, i.e. to determine the real character of this relation, the actual content of it, and together with this also to uncover the nature of that economic category. Therefore to reveal the basic opposition of one or other category and thereby to arrive at the fundamental laws of exchange economy constitutes the main task of scientific analysis. Precisely so Marx proceeded in his analysis of the commodity.

Marxist theoretical economy for exchange economy establishes the following basic opposition. In pre-capitalist commodity economy: a) on one side, - the social process of production, taken as a whole, that is the social character of aggregate labor of society, and b) on the other hand, the private character of separate labor expenditure. In commodity-capitalist economy there is the same opposition, but in a modified type: here private labor expenditure is collectivized, though the appropriation of products continues to remain private. But in one and the other case private and social moments oppose each other, as oppositions of the whole. In the category of commodity these oppositions emerge in the quality of the opposition between use-value and value, between concrete and abstract labor, and, finally, between commodities, as embodiment of at once individual private and social labor, and money, as embodiment of universal social labor. In other words, the basic opposition of exchange economy, taken as a whole, is: private and social source, i.e. private and social labor.

The interaction and struggle of these oppositions deploys the general evolution of exchange economy.34 It is, so to say, the general line of movement.35 Beginning in a distant epoch of pre-bourgeois mode of production, - in the epoch of the formation of commodity economy, - in the shape of insignificant differences these oppositions in the epoch of imperialism reach their highest development and turn into insoluble contradictions of the system of exchange economy.

But the process of the development of opposites of the system by itself - is a contradictory process, a process of movement through leaps. The rise and resolution, resolution and the rise of new contradictions in the movement, the main opposites emerges, therefore, like an objective law of development of exchange economy. The nature of this law is reduced the fact that the opposition between private and social labor on determined stages of the quantitative growth of the elements of exchange economy emerges between them in such contradictions, which make impossible the further existence of this economy without creating new forms of movement of opposites. The creation of new forms of movement of opposites marks itself the appearance of a new quality, in this case new relations of production.

In other words, this is a nodal point of the development of the commodity. In these nodal points occur new forms of movement of the commodity corresponding to the occurrence of determined economic categories. So, the developed opposition between private and social labor during the period of natural economy has led to the contradiction between use and exchange value, between concrete and abstract labor (in other words, - to the contradiction between the individual producer of commodities on the market and between unorganized bourgeois society, as a whole). The contradiction is resolved with the appearance of the category of money. In money the product, destined for exchange, received a special form of its movement - the form of commodity circulation, and human relations took the form of exchange relations. Developing in this new form of movement of commodities, the basic opposition of commodity economy is the contradiction between social production and private appropriation. This contradiction, in its turn, is resolved with the emergence of the category of capital. In the category of capital the commodity once again received a special form of its movement. As the same time as simple commodity economy has become capitalist, the exchange relations of independent commodity producers took the form of capitalist relations. In its turn, the movement of capital after the historical line has created a new contradiction, the contradiction between production and consumption, a contradiction that on the basis of capitalism can no longer be resolved by the advent of new forms of movement of the commodity, i.e. the emergence of new categories. This contradiction is eventuated permanently and is once resolved in crises again on the same basis, which created it, i.e. on the basis of the contradiction between social production and private appropriation.

It's understood that the question about oppositions of exchange economy here interests us not in itself, but only in so far as it helps us to figure out why and in what ways economic categories emerge from the contradictory movement of these oppositions. In this case we are interested in the category of money. The category of money, therefore, is the result of the contradiction between private and social labor.

But as the resolution of the contradictions within the given quality is, essentially, not an elimination of these contradictions, but only interposed forms of the movement of oppositions, then M is, on the one side, - one of the forms of the historical movement of C and - on the other - the universal form of the logical movement of C, i.e. the form of commodity circulation as such. In the first case money appears as a way of ensuring the further movement of exchange society. In the second case money appears in every given act of movement of commodities as a way of their circulation. In other words, in the first case we have the development of the commodity and the birth of the category money, i.e. the genesis of money, in the second case - the execution of the daily movement of commodities, i.e. the function of money.

But the logical is the completed historical. The logical in its movement reproduces all the historical moments.36 The process of circulation with as its "foundation" money, has as its presupposition therefore the process of the genesis of money.[/Процесс обращения денег своим "основанием", своей предпосылкой имеет поэтому процесс генезиса.] Only in the genesis of money is revealed its nature.

Hence, in order to understand how money circulates, we must first understand why it circulates. Anyone who does not understand the question, why money circulates, does not understand also the question, - how it circulates, he, consequently, also does not understand the nature of money. In such a situation the quantis proved to be. Not grasped the question of why the money circulates, they don't understand either the question of how money circulates. By the way, also the mistakes of marxists, who on some issues of monetary circulation roll to the quantis (Hilferding et al.), derive from the incomprehension of the methodologically precise understanding of the nature of money.

To the question about why the money circulates, we have already partly replied in the analysis of the concepts of "direct exchange" and "commodity-circulation." There it was noted that M is an instrument of connection of the split moments of exchange purchase-sale, and that this M, as unity and means of consolidating the unity of the moments of exchange, is the expression of the universal nature of labor, creating products for exchange. But there it was not shown why private and social labor stood between each other in conflict and how these opposites were resolved with the emergence of money. This is on the one hand. On the other hand, there it was not shown how the continuous process occurs of the contradictory movement of the private and social labor - the process that manifests itself externally in the circulation of commodities.

First of all, on the contradiction, permitting the emergence of money. This contradiction consisted in the fact that the product of private labor, acting in the market in the quality of a commodity, can be exchanged only as part of the aggregate social labor, i.e. as a part of undifferentiated labor in general. The product, intended for exchange, had to have two opposite direction moments: a private and a social: As product, produced by an isolated individual, it represented itself the result of private labor. As product, produced in a society with an unorganized division of labor and intended for the general consumption through exchange, it had to represent itself the result of social labor.

As long as the exchange represented itself the unity of sale-purchase and carried a purely-limited, local character, these both coexist moments in one product, do not enter between each other in resolute conflict.

Until then products can be exchanged among themselves not through conflicting movement (change of forms C), but by simple, mechanical opposition. But inasmuch as there is a gap between the acts of purchase and sale and inasmuch as a simple exchange of product is converted in "the circulation of the products of social labour," then between these moments brew a contradiction. Private and social labor, in the end, entered between themselves in hard conflict. Further exchange already could not occur in the form of a simple opposition of concrete products, products of private labor. Developed exchange required the separation of social moments. The conflict is resolved by separation of exchange value in the form of money. The commodity split into commodity and money.37" In money is found the external separation of the social moment. The internal contradiction, splitting the commodity, as a whole, found its resolution in the external opposition C and M, in the form which from now has completed commodity circulation.

Apropos this Marx says that "the contradiction of commodity and money is the abstract and general form of all contradictions inherent in the bourgeois mode of labour.38 Thus, the relation of C and M is the form of basic opposition and of all contradictions between private and social labor. But as the relation of private and social labor in the form C and M represents itself only the different moments of the reified expression of social relations of production, then, consequently, the value relation C and M is the universal form of social relations of exchange economy, taken as a whole.

From the dialectical nature of the relation C and M follows, that their [***сняе?] is accomplished by mutually penetrating oppositions through constant transition of one pole to another. In its movement C constantly goes to M and back again. The movement both of C and M, as noted above, is the form of the movement of private and social labor. Therefore the transition of private labor into social occurs in the form of C and M, i.e. in the form of dialectical penetration of the oppositions C and M.

And from this follows the situation that private labor is blanket social labor, and social labor in its turn contains in itself converted elements of private labor. The matter, therefore, is reduced to the fact that not only bourgeois labor in general has a duality, but also each of its poles. For only thanks to the duality of these poles the realization is possible of the unity of opposites. Precisely therefore, private labor in the moment of its conversion into social, uncovers simultaneously both its private and its social character. This duality of poles of private and social labor in conditions of natural exchange of products could not be manifested in reified oppositions. It received the possibility of manifestations only in conditions of commodity circulation, i.e. conditions opposing separate products to their universal form - the form of money. Money, thus, is the instrument of the manifestation of the opposition embedded in commodity and the form of the manifestation of this opposition.

From all the above it follows logically that in the developed exchange society the being of the individual is wholly due to [..?] of that society and vice versa (mutual penetration of opposites).39

And in this relation, in the extent to which society conditions the manifestation of the social being of the private individual, in such an extent money conditions the social manifestation of private labor. Because only with the help of money, as universal equivalent, as universal labor, is made possible the inclusion of the continuous stream of private labor into social-general. But, including private into social labor, money thereby includes the separate individual into society, i.e. links him to a determined social connection. Because of this integration the unity is carried out of the poles of commodity economy and thereby is carried out the realization of social-production relations. The social role of money, thus, is reduced to the function of the developer relations of production.

Thus, in a commodity society, money is the organizer of the spontaneous process of exchange of things, and together with this also the organizer of human relations. In this consist the nature of money from the point of view of its social characteristics.


As we have seen above, in commodity society, the metabolism C-C can not be carried out without changes of the form of C. The change of the form of C is its movement with the help of the equivalent of M. But the movement of C is the movement of commodity society, as a whole. In this sense M is the form of movement of commodity society. "Money acts for the seller of the commodity, as a converted form of C, and the movement of money, as the medium of circulation, is therefore, in fact, merely the movement of commodities while changing their forms," Marx says in this regard.

However, as an independent "separated" economic category, money has its own proper, although also dependent on C, movement, and therefore also its own form and content. A comprehensive definition of the category of money from this side we find in Marx. ''Money, - he says, - emerges as a mere medium of exchange of commodities, not however as a medium of exchange in general, but a medium of exchange adapted to the process of circulation, i.e. a medium of circulation.40" From the viewpoint of form money "is a mere medium of exchange of commodities." In this respect, i.e. from the formal side, it is entirely impossible to distinguish, whether money is only a "medium of exchange in general," or whether it is a "medium of circulation." The difference can only be set when considering the content. From the viewpoint of the content money is a "medium of exchange, adapted to circulation." What does this mean? This means that gold circulates in the quality of instrument of exchange for commodities only because it once circulated in the quality of a mere commodity. In this sense gold, like also every other commodity, possesses labor value, and therefore abstract labor is the basic nature of money, the basis of its content. But historically the commodity gold becomes money only when it for its equivalent-value basis begins to act in the quality of universal measure of commodity values. Because the first function of commodity-money, which it takes as "independent" category, is "to supply commodities with the material for the expression of their values... The commodity gold thus serves as a universal measure of value. And only by virtue of this function does gold become money.41" The question is why the function of measure of value is the first and primary function of money? Because "money as a measure of value, is the phenomenal form that must of necessity be assumed by that measure of value which is immanent in commodities, labour-time.42"

The movement of C-C without changes of the form of movement of C, and the change in form without "manifestation of the measure of value immanent of commodities," cannot be carried out. The movement of C-C exists in the form of M only inasmuch as M is the form of manifestation of the "immanent to commodities measure of value." Hence the social property of gold-money, which distinguishes it from any other commodity, consists of the fact that it is the measure of value. And from this follows that that commodity, which cannot be the measure of value, can also not be money (true, not every commodity which for whatever reason can act as measure of value, is money, See the above stated on the coalescence of the universal form of value with a determined thing). In this, different from other commodities, social property of commodity-gold of being measure of value also consists the content of money. As well as in its coin expression the form of money steps out.

Herewith, if the form of money expresses itself just an external relation of monetary sign to commodities, then the content of money expresses itself the internal relation of value, contained in the commodity and money. The external relation of banknotes to the commodity world finds its expression in the function of medium of exchange. The internal relation of values, enclosed in money and commodities, finds its expression in the function of measure of value. In the first case the functional side of the category of money steps out, in the second case - the substantial. Only in the unity of the functional and substantial sides (form and content) money displays its nature.

Meanwhile the quantis limit the nature of money only to the functional side, i.e. the form. The substantial side, i.e. the content of money, is dropped in them. Not understanding the duality of bourgeois labor and its dialectical unity, the quantis mechanically counterpose the moment of production to the moment of the circulation of money. Such contrast leads to an artificial division of these moments. And therefore the means of exchange in the quantis acts as a medium of exchange in general, but not as medium of exchange, "adapted to circulation," i.e. as a technical means of exchange of products, but not as converted form of the movement of commodities.

Wherewith the disregard of the function of measure of value does not at all follow, like in the nominalists, from the denial of substance of value in monetary material. On the contrary, despite the recognition of the value basis of money, the quantis-classics came to ignore the function of measure of value. Ignoring the substantial side of the category of money was in the quantis-classics not a presupposition, but a consequence of their analysis of money. How could this happen? This happened only because they replaced the content of money with the form, the essence with the phenomenon, the qualitative moment - with the quantitative and reduced money to medium of exchange in general. Reducing money to means of exchange in general, the quantis thus severed the form and content, have emasculated in money its spirit, turned it into symbols of commodity values (or commodity prices).

It is interesting in this relation to note the circumstance that the marxist Hilferding slides to the quantis precisely in that point of his theory of money, where he begins to interpret the basic function of money - the function of measure of value, where he begins to interpret it in terms of quantity, but not quality, i.e. where he starts to substitute the qualitative moment with quantitative, and hence concludes about the possibility of defective [/inferior/неполноценные] moneys also having the capacity of measure of value. So, for example, Hilferding believes that 1) under gold currency [/circulation], with compliance to the law of proportion of paper money relative to gold, they are representatives of gold; 2) under pure paper-money currency (just as under suspended coinage [/закрытой чеканке]), they are representatives of commodity value and in this sense act as instrument of the measure of value. But Hilferding here only repeats what was before him said by Ricardo.43

However paper moneys, in conditions of a pure-paper currency are representatives of the value ​​of that real money, which should circulate on the market. Because "the absence of gold - as Lifshitz correctly says - as circulating money does not at all destroy the objective regulating significance of its value. It continues objectively to serve as measure of value of these, displaying its value across paper moneys, whose total value it regulates.44"

Money acts in value relation with commodities only because it itself has value. Without proper value no thing can be a measure of value, nor therefore be money. That is why, for example, in the era of war communism, when in commodity circulation there was no gold, the measure of value became a simple commodity (bread, salt, etc.), and precisely a commodity, as embodiment of social labor, and not some "pacifier," not some "sign." And in vain Hilferding reproaches Marx for his "detour" determination of the value of paper money, showing at the same time the "expediency" of the deduction of this value from the "socially circulating value." In so doing Hilferding separates the signs of value - paper moneys - from gold currency, the counterposition of them directly to the commodity mass, gives them the function of measure of value. But thereby he rolls down entirely to the quantis. the inadmissible error of methodological order is made also by those economists (from the Marxists), like Trachtenberg, Varga and others, who consider the quantity theory of money correct in relation to paper money, but incorrect in relation to full-fledged money. Thereby they accept that signs of value - paper notes - are also money. But they forget that gold, in the quality of instrument of circulation, also is a "symbolic money," also is a sign of value. Having said A, they should also say B, if they were consequent, i.e. acceptance of the correctness of the quantity theory in relation to symbols - paper notes, they would have had to recognize its correctness also in relation to symbols - metal signs. That is what, by the way, Lifshitz did in the question about purchasing power of money. Acceptance of the correctness of the concept of purchasing power of money in relation to signs of value, he had to extend this concept also to full-fledged money, i.e. to money in general, but thereby cde. Lifshitz went over to the quantis (See on this below).

Hilferding nevertheless needs to be done justice. Building his theory of money on the experience of Austrian monetary circulation, he had to admit that "a pure paper money, in the final light, must prove impossible," because "circulation would be subjected to constant disturbances," since there is no possible guarantee that the state will not increase arbitrarily the issue of paper money, since gold is always necessary, as a means of storing wealth in such a form in which it is always available for use, since without gold money one cannot make international settlements, etc. However, denying the possibility of pure paper money circulation practically, Hilferding admits this possibility theoretically. And in this consists his fundamental methodological error. No doubt this error in Hilferding follows from an incorrect understanding of commodity-money (its reduction to a simple commodity), and the latter - from an incorrect understanding of abstract labor. And all this taken together follows from a revisionist orientation on the object of study - exchange economy. Hilferding is attempting to revise the basic methodological position of Marx, consisting in the fact that capitalism is governed by spontaneous laws, laying at the basis of simple commodity economy. Hilferding is attempting to limit these spontaneous laws by allowing (within a certain minimum for capitalism) elements of conscious regulation. This he did in relation to pure-paper-money currency. "The social character of money, - says Hilferding, - appears directly here in the regulation of society by the state "("Finance Capital"). However Hilferding forgets that, firstly, "social regulation of the state" is only the external expression of the regulation of exchange economy by the spontaneous movement of values, and secondly, that this spontaneous movement of values ​​is fundamentally impossible without changes of their form, i.e. without the function of measure of value. But, forgetting this, Hilferding in the theory of money safely arrived to the vulgar understanding of the nature ​​money, which in this relation is exhibited by quantis on one hand, and nominalists - on the other.

Making a summation in respect to the determination of the quantis of money's nature, one can draw the following conclusion.

The quantis understand that money is a commodity, but they do not understand that it's a special kind of commodity, a commodity with a particular social property. They see in it the identity with other commodities, but do not see the existing differences.

The quantis understand that money is a commodity, but they don't understand in what way and why a determined type of commodity on a certain historical level of exchange economy becomes money.

The quantis understand that money is a means of exchange, but they do not understand that it is not just an instrument of exchange, but an instrument of exchange "adapted to circulation," i.e. that this is a form of the movement of commodity values.

The quantis understand that money is a means to facilitate exchange, but they do not understand that circulation of commodities without money fundamentally is impossible, i.e., that money is a to commodities immanent means of their circulation (as means of measure of values).

And all this the quantis do not understand because to them is alien in general the point of view of development, the point of view of the genesis of exchange society, and together with this the point of view of the genesis of the category of commodity, the point of view of development through contradictions.

From the aforesaid on the essence of money, from the viewpoint of marxist method, the following conclusions derive: 1) The genesis of the bourgeois mode of production is at the same time, the genesis of the commodity, and the genesis of the commodity is at the same time the genesis of money. 2) The existence of money (nature), as unity of the function of measure of value and the function of circulation, is entirely caused by the existence (nature) of the bourgeois mode of production. 3) The nature of the bourgeois mode of production is reduced to the fact that individual commodity producers (or capital producers) can implement their own private products of labor only through their inclusion in the general social product, i.e. to realize them as part of the aggregate social product, - a contradiction that can only be solved with money. 4) Hence the nature of money consists in the point that it a) is realization of private labor, including it in social, and herewith also the realization of social relations of production, the inclusion of separate individuals into society; b) that it carries out this realization in the quality of instrument of measure of value, and c) that money is a measure of value only because it itself possesses value.

And hence with complete clarity follows that as long as bourgeois mode of production exists in its qualitative determination as commodity circulation, which is based on the contradictory movement of oppositions between private and social labor, then there will exist also money in its qualitative determination as measure of value and means of circulation. Until then all attempts to reduce the essence of money to its function of means of circulation, and therefore to value-tokens, will be doomed to complete failure. Because, no matter how high the monopolization of capitalist production developed, no matter the extent the credit system stepped out with its "fictive" circulation and restricted gold circulation, all the same, until then, as long as there will no absolute resolution of the opposition between social production and private appropriation, or, what is the same, between private and social labor, until then the capitalist economy will not be able to jump out of its own shell, will not be able to go beyond its own limits - commodity circulation. And in the limits of this circulation there cannot be movement of commodities, without a"golden spark," without a basis of this movement - the measure of value.

That signs of value cannot independently fulfill such social functions, as, let's say, the function of measure of value, the function of hoards [/treasure/reserves], the function of payment, that they in general are not able to fluctuate, and therefore also be social instrument of organization of the mass process, is not only observed during crises and inflationary periods in the economy, but also in normal times - in international commodity circulation.45

As illustration to the stated about signs of value let's take money, well, at least, in the function of treasure, and see how much this essential function of money can be fulfilled by signs of value. What is treasure from the viewpoint of the circulation of M? Treasure is first of all an interruption of the metamorphosis of C-M. But an interruption of the metamorphosis C-M is, in essence, nothing but a transformation of coin into money, because, as Marx says, "coin itself becomes money as soon as its movement is interrupted.46" The money, which in circulation is isolated as coin, as sign of value, in treasure once again shows itself, as money: as universal equivalent, as abstract wealth, i.e. as reification of abstract labor. Consequently, in the function of hoards only full-value money can act, i.e. money in the full sense of the word.

And it is no coincidence that in the quantis the function of reserves entirely falls out of sight or takes a peculiar expression. For example, in Ricardo the function of reserves in his theory is completely absent. For J.S. Mill treasure is a completely useless social function of money. In Fisher the concept of reserves is reduced to the slow movement of money in exchange. Generally speaking, for the quantis it is characteristic that they deny the regulating role of treasure of the amount of money in circulation [/они отрицают регулирующую количество денег в обращении роль сокровища]. And all this, of course, is explained by the fact that in the quantis money - is a sign of value. For signs of value it is characteristic, that they, once issued in circulation, will not be returned.

The social role of the function of hoards for Marx boils down to spontaneous regulation of the circulating monetary mass. Treasure is the reservoir of circulation, in which surpluses of money accumulate and from which are drawn the missing in circulation amount of monetary mass.47 The role of spontaneous regulator of the amount of the circulating monetary mass cannot be by performed by non full-value money, if only already because it under the laws of circulation of value-tokens, once entered into the channels of circulation, will not be returned back.

In the quantis (Ricardo and Fisher) indeed all money goes in circulation, and therefore the function of hoarding in their theory is missing. This circumstance is quite linked with the conception of money as token of value, but this does not link with factual reality. Signs of value - are not money, and money - is not a sign of value.

In relation to the nature of money the quantity theory does not correspond to the actual situation of things, just like in relation to its conception of exchange economy, which it incorrectly reduces to the natural form of exchange.

The main methodological error of the quantis consists in the fact that they do not recognize the fundamental variance of exchange economy. And therefore they do not recognize also the historical phases of this economy: 1) direct moneyless trade, 2) simple commodity-money economy, and 3) commodity-capitalist economy, as phases, which differ from each other in several qualitative features. This is on one side. On the other side, the development of exchange economy for them is identical with simple quantitative growth of natural elements, firstly, as if it were without any fundamental change, and secondly, as if it were without any internal contradiction. For them commodity circulation differs from simple barter not in quality, but only its quantity, therefore in the basics it coincides with it. The introduction in commodity circulation of money does not significantly change anything essential.

Hence the quantis do not understand also the genesis of the bourgeois mode of production, and together with it also the genesis of the commodity, as well as the commodity nature of money. The incomprehension of the essence of money leads some to a distortion, and others to a denial of the substantial side money, and herewith also to the reduction of money to signs of the value of commodities with all the ensuing errors from this: the dependence of the value of money, as well as the prices of commodities on the amount of monetary material, the denial of (or distortion) of treasure's regulating role of the amount of money in circulation, etc.

V. So called "purchasing power of money" in light of the theory of value of Marx.

Put forward by Hume in his time, and then developed in great detail by Fisher the concept of purchasing power of money, based on the position that commodities enter circulation without price, and money without value, hardly represents itself great methodological interest, since it has as it presupposition the denial in commodities and money of labor value. Much more interest in this aspect represents the concept of purchasing power of money, developed by Ricardo-Mill and now supported by some marxists, since it presupposes a recognition of labor value in commodities and money, and therefore has a close bearing to marxist political economy. We therefore consider it expedient to focus our attention only on the understanding of purchasing power of money of Ricardo-Mill and some of its present supporters from the marxists.

The concept of "purchasing power of money," from the point of view of the quantis-classics, follows directly from the concept of "value of money." "The value of a thing is what it will exchange for: i.e. the purchasing power of money," - says on this subject J.S. Mill48. Hence the concept of purchasing power of money must be analyzed from the perspective of the value of money in general. Both Ricardo and Mill in the basics similarly understand the value of money and in the basics similarly determine its purchasing power. Therefore in the following we will talk about the value of money of Ricardo-Mill, as a single conception.

Both Ricardo and Mill proceed from the entirely correct presupposition, the determination of the value, like also the value of any other commodity, by the amount of labor time in its production,49 or, as Mill puts it, "cost of production." Proceeding from these assumptions, Ricardo in the beginning of his analysis of money makes a series of entirely correct conclusions. In agreement with the developed by him theory of relative value he, for example, considers money, as commodities, to have a determined intrinsic value, measuring the value of other commodities. And further, the amount of means of circulation is determined on the one hand by the value unit of the monetary measure, and on the other, by the sum of exchange values of commodities. 50 Because of this situation mere value-tokens, issued in proportion, determined by the value of money, can replace it in circulation and their value is measured by the value of gold, which they represent. In other words: the value of moneys given prices of commodities, these signs of value are signs of a determined amount of gold, and not substantial value lacking representatives of commodities, as is the case in Hume-Fisher.

It would seem that Ricardo, on the basis of these methodologically enduring conclusions, drawn by him on the first steps of his analysis, would have had to draw the further conclusion and build the correct scientific theory of money. Ricardo would have had first of all deduce the function of measure of value and - separately from it - the function of circulation, and herewith develop an independent theory of paper-money circulation. Based on these two functions Ricardo would have had to deduce further the function of hoarding, the function of payment and finally, the function of world money. However this he did not do and a correct theory of money did not deliver.

The unexpected "turn to the opposite point of view" Ricardo makes in the question about the relationship between C and M in exchange, in the question, which in him is turned into the question about what the relation of the value of money is to its permanently altering amount. Here Ricardo, like J.S. Mill, arrives to the conclusion that the value of money is determined not only by "cost of production," but also by demand and supply of money, and this, as we shall see, is tantamount to saying that it is determined by the quantity of money found in circulation. This quantity of money can arbitrarily be changed in one direction or another by the appropriate branch of industry (gold production), as well as by the state (banknote production).

The train of thought of Ricardo-Mill in respect to their determination of the value of money, and herewith, also its purchasing power, boils down, first of all, to the following. Commodity circulation - is naturalized exchange. The movement of C in this exchange is accomplished in the form of relative value. M - is a mere commodity, whose use in exchange does not at all alter the in natural exchange existing relation of C. M, consequently, is subject to the same laws of exchange, as every other commodity.


[...] and its value as instrument of circulation, due to a certain kind of incoherent mechanism of commodity circulation, is established by a contradiction. The value of money in circulation is constantly deviated from its labor content. However, this contradiction is eliminated by the opposite directed movements upward and downward of the values of commodities and the value of money, by movements, resulting in the process of price-formation. The conflict finds its resolution in the price level, and its expression in the purchasing power of money. According to this process of price-formation Ricardo establishes a peculiar mechanism, regulating the value of money.52

Formally the mechanism of this regulation is expressed:

1. For international commodity circulation - in constant adaptation of gold to its course, i.e. in a constant effort to maintain the same proportion between the commodity and monetary masses of different countries.

2. For internal commodity circulation - in the adaptation of gold producers (or bank production of bank-notes) to the demand for the monetary commodity, that is expressed in the expansion and contraction of production of the monetary material.

In essence this mechanism of regulation of the value of money (both for domestic and international circulation) comes down to constantly occurring deviation of the value of gold in circulation, as a consequence of market forces, ultimately still regulated by the labor content of its production.53 But in Ricardo it turns out that, regulating its own value, money thereby regulates the prices of commodities, being, thus, an active price forming factor.

The mechanism of price formation, and herewith also the mechanism of the regulation of the value of money, can be schematically represented in following way. Let's take Ricardo's position of departure, which consists in the point that "if the value of gold is given, the amount of money in circulation is determined by the exchange-value of commodities" (Marx). Based on this methodologically indisputable position, let's make in the reasoning spirit of Ricardo the assumption:

1. The sum of exchange values ​​of commodities decreases - a) due to production of a lesser amount of commodities of same value , b) due to an increase of productivity of labor, when the same mass of commodities contains less exchange-value.

2. The sum of exchange values ​​increases: a) when: with unchanged production costs the mass of commodities increases, b) when: because of increase of productivity of labor its amount increases.

Question: what becomes of the given amount of circulating metal? If one goes further from another assumption of Ricardo, namely that "gold is money only because it circulates as a medium of circulation, and if it is forced to stay in the sphere of circulation, like paper money with forced currency issued by the State" (Marx; our emphasis - S.L.).

Then: in the first case - the amount of money will be higher in relation to exchange value of metal; in the second - lower.

Hence: a) also in the first case gold would be a sign with a measure of lower value, than its own, and b) with the second - a sign of a measure with higher value.

And this means: a) in the first case gold, as a sign of value, will be constantly below; b) in the second - constantly above its intrinsic value.

In other words: a) in the first case happens the same as if commodities would be assessed by a measure of a lower; b) in the second - of a higher value.

Therefore: a) in the first case the price of commodities would increase; b) in the second - fall.

But: "The movement of commodity-prices, their rise or fall, in either case would be due to the relative expansion or contraction in the amount of gold in circulation occasioning a rise above or a fall below the level corresponding to its own value; that is the normal quantity determined by the relation between its own value and the value of the commodities which are to be circulated" (Marx; our emphasis. - S.L.).

In other words: the value of money in circulation fluctuates around its internal value; with what commodities are measured is not this internal value of the monetary material, but that value of money in circulation, i.e. the purchasing power of money. But this at once also means, that commodities come into circulation without price, and money - without value. Because, whatever the "regulatory action" of the internal value of money on its outward value, i.e. value in circulation, it remains an undeniable fact that for Ricardo it has no direct relation to the prices of commodities and also is not a measure of value. The measure of value turns out to be the value of money, or so called "purchasing power," which it supposedly gets in circulation. If we further consider that money in the quality of instrument of circulation acts in the form of signs of value, then for Ricardo is obtained, that signs of value ​​may be a measure of value of commodities. It was in this point, as we saw above, that Hilferding comes to Ricardo, but... departs from Marx.


The fateful question for Ricardo-Mill is undoubtedly the question of the interrelation of C and M. Starting from the methodological assumption that commodity circulation is identical to direct exchange, they believe, that M is a simple commodity, and its movement is identical to the movement of C. But Ricardo-Mill, as was already shown above, leave out of sight the fact that commodity circulation is fundamentally different from direct exchange, and therefore also the relation C-M, as commodities (in commodity circulation), is only formally identical with the relation of mere commodities (in direct exchange), but in essence deeply differs from it. Together with this the quantis "overlook the facts that gold, when a mere commodity, is not "yet" money,54" equally as money, considered in conditions of commodity circulation simply as gold, "already" is not a mere commodity, but a commodity with a special property. Money includes both of these moments: both the fact that gold is a mere commodity, and also that gold is more than a mere commodity. The duality of commodity - gold: as mere commodity and as commodity-money, on the one hand, is an expression of the duality of bourgeois labor in general, on the other hand, - is itself expressed in the duality of the exchange relation of C and M. In other words, the relation of C and M, on the one hand, is a mere commodity relation (and in this sense, their exchange-value is expressed in the form of relative value)55, on the other hand - that relation of polarized commodities where M acts as "alienated shape of all other commodities," (Marx), as universal equivalent and universal measure of values, i.e. as converted form of the movement of C56 (and in this sense exchange-values ​​of C and M are expressed in the universal form of value, i.e. in the form of absolute value).

For the quantis-classics there exist only the simple relative form of value, and with that also the simple exchange relation C and M. For them it is unclear that in money we have the modification of relative into absolute value.

Meanwhile, from the position that M is not a simple commodity, but in the quality of universal measure of value is a converted form of commodity, follows a different position, which in a radical way changes the matter. From this position logically follows that the movement of M derives from the movement of C and that M in its interaction with C plays a passive, rather than an active role.57

If this position deploys logically, then we get an entirely other conclusion, than the classics made.

Firstly. If C and M are taken from the viewpoint that they are only mere commodities, then between them are established simple exchange relations, relations of direct exchange. These relations exist in the exchange of commodities for gold at the source of its production.58 Here, as a result of the law of simple exchange (the interplay of labor content of value and demand-supply) is set the price of commodities and the value of money. "In this relation, however, not only the magnitude of value of the commodity may express itself, but also the greater or lesser quantity in which it can be sold under the given circumstances.59" Similarly in that exchange relation not only the magnitude of value of money may be set, but also the greater or lesser quantity in which money is excluded [/externalized/сопровождается отчуждением] under given circumstances of direct exchange.

But, "from that moment, it (gold - S.L.) always represents the realised price of some commodity.60 In other words, the prices of commodities, as well as the value of money is established before circulation. In circulation only the prices of commodities are realized, and the value of gold only "expresses this realized prices." And if in the process of circulation, by force of a whole series of spontaneous causes the prices of commodities significantly deviate both from their labor content, and from the expression which they got in money in the process of direct exchange at the source of gold production, then gold already does not suffer these deviations in circulation. And gold does not undergo these deviations, not only because "the value of gold is already given in the prices of commodities61" or that when gold "steps into circulation as money, its value is already given,62" but also because the role of gold in the interrelation of C and M is entirely other than the role of commodities. "But for what is the commodity exchanged? For the shape assumed by its own value, for the universal equivalent. And for what is the gold exchanged? For a particular form of its own use-value.63"

Herewith, if commodities express their own value in ideal gold, as universal equivalent, and their prices can fluctuate around that ideal value of money, as around its own, then money expresses foreign value with its own "ideal." Precisely in this "ideality," as absolute expression of commodity value, consists the essence of money as the universal measure of value. The function of ideal (full-value) gold - is to realize the ideal prices of commodities. And it is not its (gold's) "fault," if commodities in the market will be "realized" above or below their ideal prices, expressed in the value of money. The value of money itself from this does not undergo any own change, since in circulation it already does not act in direct relation with commodities. Change of the value of money can only happen as result of a corresponding change in the very production of gold.

That is precisely why, if one can still speak about possible deviations of the exchange-value of gold from its labor content in the conditions of direct exchange at the sources of production, then to speak about deviation of the value of money in circulation is not allowed in any case. Factually this has no place. On the contrary, a constant value of money has place in circulation. The exchange value of gold is established in direct exchange at the sources of production and enters circulation, as a given and immutable magnitude.

Secondly. Once prices of commodities are given before circulation and once the velocity of metamorphosis is certain in circulation, then thereby is given also the amount of M, which should itself serve the function of medium of circulation. The amount of money, thus, is not an arbitrarily given magnitude, as is presented by the pure quantis and like this is, albeit with a different formulation of the problem, presented by Ricardo, but is conditionally derived, because "money in reality represents the quantity or sum of gold ideally expressed beforehand by the sum of the prices of the commodities.64"

And if it is so, then it goes without saying, that the amount of money can not in any way affect the prices of commodities. It can likewise neither extend influence on its own value because under free coinage, in conditions of a gold currency, this amount is regulated by hoards. The value of money is regulated by "cost of production" not "in the final light," as J.S. Mill claims, but directly, through adaptation [/приспособления] of gold industry to the other branches of production. Another regulator for the value of money there is not and cannot be. And therefore there is also not a sort of particular purchasing power of money besides the intrinsic value, expressed with ideal gold. Therefore, there is not any necessity to use this concept in the theory of circulation, as an independent category, because it coincides with the notion of measure of value.

Perhaps, it would be legitimate to still speak about purchasing power of worthless money - signs of value. But tokens of value - are not money, just as money - is not a token of value. Signs of value are completely controlled by other laws of circulation, than full-value money, and their circulation is a derivative from the circulation of the latter. Therefore to build the concept of purchasing power of money on the basis of the law of circulation of signs of value and apply this concept to money in general - is at the least misleading.

Thus also the problem of purchasing power of money is decided not in favor of the quantis. As in the question about the nature of money, so also in the question about its purchasing power (value of money) the errors of quantity theory are due to the same methodological presuppositions: by reducing commodity circulation to direct exchange, and money - to a mere commodity, and by a wrong understanding of abstract labor, in view of the incomprehension of bourgeois labor.

But if these methodological flaws in a significant degree are extenuated for the classics, then they not in any way can be extenuated for Marxists.


Meanwhile we have among us marxists the formation of a whole direction, which believes, that form the marxist nature of money the concept follows of purchasing power of money, which finds its confirmation in the practice of monetary circulation.

Insofar as we know, the first who contrived about this is Trachtenberg.65 He developed a peculiar theory of value of the various forms of money, out of which logically follows that money in the quality of medium of circulation has its special value and, therefore, also special purchasing power. His example proved to be contagious. Along with Trachtenberg, with the him typical methodological carelessness about the category money Lubimov contrived. Recently in their work Lifshitz and Kon developed a whole system of views, justifying the concept of purchasing power of money in conditions of commodity circulation.

We believe it is necessary to dwell only on the views of Lifshitz and Kon, developed by them: by the first - in the pages of "Under the Banner of Marxism," No. 8-9 in 1924, by the second - in "Course of political economy," vol.I and the response to the review of Abezgauz, Dukor and Notkin - in the journal "Vestnik Komacademy" No. 25 in 1928 [Г.Абезгауз, Г.Дукор, А.Ноткин. Вестник Коммунистической Академии].

Lifshitz starts from the premise that in the measure of value of we have an "ideal" expression of value, whereas in the means of circulation - a "real" or, as he puts it, "reified manifestation of value." In other words: ideal value, existing in the measure of value finds its real manifestation in real value, existing in money, as instrument of circulation.66

Transferring the analogy of the prices of commodities to the category of money, Lifshitz concludes that if in the process of circulation the form of manifestation of the value of commodities is price, then in relation to money - the form of manifestation of value is the sign of value. Hence for Lifshitz, if the price of a commodity is the "monetary expression" of value of the commodity, then the token of value is the "commodity expression" of the value of money. [..?/For him] the monetary expression of value of commodities, as well as the commodity expression of the value of money - both of these "expressions" are displayed actually in the process of circulation. Before circulation we have only an ideal value of commodities and likewise value of money.

At the sources of production. -| In circulation.
1. Value of commodity -| Price - monetary expression of the value of the commodity.
2. Value of money -| Sign of value - commodity expression of the value of M.

And further, similar to how the price of a commodity is set as a result of supply and demand, in the same way also the purchasing power of money is set by supply and demand. And therefore the amount of money affects its purchasing power, and the reverse - purchasing power affects accordingly its amount.

With those marxists, whose concept of "purchasing power of money" is reduced simply to its value, Lifshitz does not agree, for the trivial reason that in the practice of monetary circulation there takes place, "a deviation, even if also temporary, of the purchasing power of gold coins (under the influence of changes of their outstanding amount) from their value, as measure, resulting in an overflow of gold coins into bullion, and back67" (Speaking of gold coins, Lifshitz, thus, ​​under the signs of value means simply full-value money, but not signs of value in the proper sense). From a similar kind of conception of purchasing power of money in Lifshitz is formed a peculiar understanding of reserves, which in him is reduced to a means of regulating the amount of money not through the measure of value, not through "full-bodied gold" directly, but through the deviation of purchasing power of money from ideal value, i.e. through purchasing power of money. Hence the notable hypothetical example of Lifshitz about indemnity [/контрибуции].

Similar to Lifshitz Kon too for money establishes the category of purchasing power or the category of price. But if Lifshitz, at least formally, "restricts" the concept of purchasing power of money to signs of value, then Kon operates in a more direct way, and calls things by their right names.

For Kon there exists an ideal price of commodities and an ideal price of gold - on the one hand, a real price of commodities, and likewise a real price of gold - on the other. The ideal value of commodities and money are established before circulation, the real - in circulation. Wherewith before circulation commodities "only" are equated to a determined amount of gold, in circulation they - "factually" are exchanged. This actual exchange also is the first direct exchange, in which commodities and money act between themselves in a real relation.

In actual exchange there takes place a deviation of the real from the ideal prices of commodities, as well as the real from the ideal value of gold. Real gold is also the purchasing power of money, or the value of money, expressed with real gold. But since the real price of commodities expresses its value in real, and not ideal gold, then the purchasing power of money is not expressed in the ideal, but in the real price of commodities. Since on the market, in the circulation process, commodities first entered into a real relation with money, then precisely here is established the real relation of C and M. What is from this obtained? Commodities realize their value under actual exchange for real gold. Gold realizes its value in its actual exchange for real prices of commodities. But after all the real price of commodity and the real price of gold, from the viewpoint of this "real" (read direct) exchange - this is nothing other, than the expression of the relative value of C and M, which Kon [volitionally], in the wake of Lifshitz, extracts from the first stage of the exchange process and brings to the second stage - in commodity circulation.

For the purpose of methodological criticism there is no need to expose with a more detailed analysis the views on this question of cde. Kon. Also the given is sufficient in order to draw the necessary conclusions.

Cde. Kon, similar to Lifshitz, introduced the concept of purchsing power of money, as a special category for the medium of circulation, thereby gives money the category of price. But thereby he emancipates M in front of all other commodities. like Ricardo-Mill, cde. Kon reduces money to a simple commodity.

The difference between Kon-Lifshitz, on the one hand, and Ricardo-Mill - on the other, consists only of the point that if in the latter commodity circulation was identified with direct exchange, then in the first the direct exchange, existing between C and M at the source of production of gold, is attempted to be identified with commodity circulation. In of the seminars on political economy (Institute of economy РАИИОН) Lifshitz, in the quality of head of seminar developed the idea that the specific conditions of production of gold are such, that already at its source gold acts as M, because, he said, there is no need talk about a two-stage process of the exchange of gold-money. There is, he said, only actual exchange in circulation. The same idea develops also Kon in his reply to the review of Abezgauz, Dukor and Notkin, where he says, that before circulation there exists only the ideal equation C and M, but not their exchange.

Hence in him the originial understanding of the "ideal price of commodities" and "ideal gold." These '"idealities" in Kon are converted in somehow epistemological concepts. Hence also the conclusion that real exchange - is an actual exchange, i.e. direct exchange.

The entire line of reasoning on this subject of Kon-Lifshitz boils down to the point that they simply slur over that basic methodological position of marxist theory of money, which states that a direct exchange of commodity and money, in which is established also price and value, exists only in barter trade at the sources of production and that "beginning with this moment - as Marx says, - money only becomes that which expresses the realized price of commodities." Lifshitz and Kon forget, that in commodity circulation the element of direct exchange acts already in the quality of surpassed moment. Here already finished the relation C and M, as commodities, here begins the relation C and M, as commodity and money. Here M acts in the quality of converted form C, in the quality of absolute and unchanging value. Here happens not the realization of the relation C and M, as commodity, but the realization of the relation C-C, through equation to M, as universal equivalent. Therefore if here also happens a deviation of value C from its absolute expression in M, then M itself remains unchanged. It remains unchanged, we repeat, because it acts not in direct relationship with C. But, forgetting all this, Lifshitz and Kon inevitably roll to the quantis in the main question of the problem of circulation, in the question about the amount of money, necessary for circulation.

In short, with the criticism of the viewpoint of Kon-Lifshitz we come to repeat all the arguments which we used in relation to the viewpoint of Ricardo-Mill. Not to regard other problems, connected with the concept of purchasing power of money (the problem of treasure, etc.), we refer to the readers to an interesting discussion on this topic, unfolding in "Vestnik of the Communist Academy," between Kon, on the one hand, and Abezgaus, Notkin, Duker - on the other.

There is no doubt that in the persons of Lifshitz-Kon, we have advocates of the long refuted theory of the circulation of money of the quantis-classics, but now resurrected by some eclectics in political economy (Katzenelenbaum et al.).

That, about which Lifshitz and Kohn speak in their work in relation to purchasing power of money has not any relation with money, as such. All of this has relation to signs of value. And that question would have had to be considered by them from the standpoint of the theory of the circulation of signs of value, but not from the standpoint of money as such.

Original title: Количественная теория денег (Опыт методологической критики); С. Легезо, под знаменем марксизма

  • 1. Materialism and Empirio-Criticism. [Legezo actually paraphrases Lenin as: 'To see in theory the depicting approximate copy of objective reality, this is what constitutes materialism.' (Видеть в теории изображение близкую копию об'ективной реальности—вот вчем состоит материализм). Lenin's words are: 'Признание теории снимком, приблизительной копией с объективной реальности, — в этом и состоит материализм.' (pedantic note by the translator)]
  • 2. Against the claims of some marxists that political economy studies "only" capitalist relations of production, we believe that the latter studies the relations of production of exchange economy, taken as a whole, as combination of the historical moments: barter, simple commodity circulation, and commodity-capitalist circulation. Therefore in the following in all cases we will use instead of the concept "capitalism" the concept of "exchange economy."
  • 3. Against the claim of chartalists who consider money to be a legal category.
  • 4. Marx, The Poverty of Philosophy, ed. 1918, 114 p.
  • 5. Marx, Critique of ..., ed. 1923, 21 p.
  • 6. Ibid, 148 p. True, what Marx says here, relates to the quantity-theorist-classics, but these views on commodity circulation are characteristic not only for quantity-theorist-classics, but in general for all quantity-theorists [For brevity's sake 'quantis']
  • 7. Hume, Essays, 20 p.
  • 8. Ibid.[312 p.]
  • 9. Fisher, The Purchasing Power of Money, 6-9 p.
  • 10. J.S. Mill, Political Economy, 438 p.
  • 11. Marx, Critique of ..., ed. 1923, 148 p.
  • 12. Marx, Capital, vol. I, 97 p. [Die naturwüchsige Tendenz des Zirkulationsprozesses, das Goldsein der Münze in Goldschein oder die Münze in ein Symbol ihres offiziellen Metallgehalts zu verwandeln]
  • 13. Marx, Critique of ... ed. 1923, 148 p.
  • 14. Here a reservation is necessary of the following character. It would be correct to say that "quantis reduce money to signs of values," only in relation to the classics (Ricardo-Mill), who recognize substantial value of commodities and money. As for Hume and Fisher, who deny substantial value of money, then in relation to them it would be correct to say that money is not reduced to signs of value, but to signs of price. However, in essence, both the signs of value of Ricardo-Mill and the signs of price of Hume-Fisher, - are one and the same, because for both value of money in the end is deduced from a mechanical juxtaposition of two not on each other dependent magnitudes, ​​- the commodity mass and banknotes.
  • 15. Marx, Critique of..., ed. 1923, 148 p.
  • 16. In this relation the quantity theory of money is close to nominalism. Not for nothing the early quantis Hume and Montesquieu were at the same time nominalists, while the modern nominalists Bendixen and Elster largely sympathize with quantis. [See also, Nominalism and the problem of the value of money.]
  • 17. Rubin, A History of Economic Thought, 226 p. [English edition p. 236]
  • 18. Struve, for example, also believes that "the social connection in economy is an imaginary connection, and social economy is a pseudo-economy"(cited after Bazarov - "Plan of econ.," No. 6, 1927, 164 p.). Bazarov says on this subject, that "for the bourgeois scientist the national-economic whole, is not a reality, but an abstraction and moreover an epistemological abstraction" (ibid.).

    The same idea Sombart expresses, when he questions the presence of a unity of the world economy: "particular national economy, - he says, - are made increasingly perfected microcosms, and the role of domestic market, as compared to the external, is becoming greater and greater. At present, separate national economies drawn weaker into the world market, than hundred years ago" (W. Sombart, History of econ. devel. of Germany in the XIXth century, 340 p. Cited after R. Luxemburg, Introduction to Pol. Econ., 63-64 p.).

  • 19. Marx, Critique of..., 1 p, ed. 1923.
  • 20. Lenin - "Bolshevik" No. 5-6, 1924 [On the Question of Dialectics]
  • 21. And this latter would be true under the provision of the correctness of the methodological premises of the quantity theory, the premises, that we above refuted.
  • 22. Ricardo, Works, 278 p., ed. 1882. [The High Price of Bullion]
  • 23. See on this in R. Luxemburg, Introduction to Political Economy, 273-280 p.
  • 24. J.S. Mill represents the matter otherwise. He believes, that the simple introduction of a special type of exchange (money. - S. L.), which consists in the fact that the first thing is exchanged for money, and then money is exchanged for some other thing, produces no significant changes in the nature of the transaction... Things which by barter would exchange for one another, will, if sold for money, sell for an equal amount of it, and so will exchange for one another still, though the process of exchanging them will consist of two operations instead of only one... The relations of commodities to one another remain unaltered by money"(Polit. ec., p. 438-439).
  • 25. Marx, Capital, vol. I, 82 p.
  • 26. At which the general form of value here necessarily is fused with some thing. Until then, there is not this fusion, in existence, there is no money yet, therefore also no commodity circulation. Even in cases where formally in history there already was an intermediary counterposing products to one another, but when this intermediary was an ordinary object of consumption (whether that object was jewelry, cattle or even gold) not standing apart in coin, not separated yet from its use properties, then the exchange factually carried the character of barter trade. Here though commodities measured their value in one or another equivalent, but factually still were exchanged directly.
  • 27. Marx, Critique of..., 93 p.
  • 28. Marx, Capital, vol. I, 82 p.
  • 29. "The general value form, which represents all products of labour as mere congelations of undifferentiated human labour, shows by its very structure that it is the social resumé of the world of commodities. That form consequently makes it indisputably evident that in the world of commodities the character possessed by all labour of being human labour constitutes its specific social character. (Capital, vol. I, 35 p.; author's italics. - S. L.).
  • 30. "The separation and independence of the acts of purchase and sale is a general feature of the labour which creates exchange-value, whereas in barter the exchange of one discrete use-value is directly tied to the exchange of another discrete use-value" (Marx, Critique of..., p. 89, ed. 1923; italics of the author. - S. L.).
  • 31. It's understood that when we talk about the universality of commodity production, it must be grasped in a relative sense. It should be grasped so that here the matter is about such a degree of universality, which was sufficient, as objective presupposition for the birth of money. It must be born in mind that commodity production itself grows on the basis of the destruction of natural economy, which a long time exists along and together with commodity production, at which only the capitalist mode of production gives commodity economy the character of universality. "Capitalist production first makes the production of commodities general and then, by degrees, transforms all commodity production into capitalist commodity production" (Marx, Capital, vol. II, 10 p.).
  • 32. Marx, Capital, vol. I, 56 p.
  • 33. The methodological presuppositions of marxist theoretical economy boils down in the following positions.

    Emerging initially in the quality of a special moment of previous (natural) forms of economy, exchange economy then develops into an independent whole, which has its own special form and content, its special nature.

    In its movement exchange economy goes through a series of stages, a series of qualitatively [..different?], but in its basic nature identical moments (unity of [..?] and differences). Hence, barter, simple commodity circulation and commodity-capitalist circulation are only special moments of exchange economy, taken as a whole.

    The movement of the whole, equally like the movement of its moments, occurs through qualitative differences in the bounds of undeveloped concreteness, through the passage of developed differences in opposition and of developed oppositions in contradiction. This entire process is a saltatory process.

    Every developed whole possesses developed oppositions.

  • 34. Private and the public, this is in general the main opposition, with it the evolution of human society throughout all of its existence. The epoch of natural economy (primitive communism, the tribal system and feudalism), this is the long epoch of a continuous (initially slowly, but then more accelerating) process of allocating private moments, i.e. the epoch of the disintegration of collective forms of economy and the formation of scattered individual households. And the farther and deeper this process went about, the more and clearly was observed the contradiction of the social and private moments. The great historical process has ended, finally, with the formation of exchange economy. The contradictions of collective natural economy were solved with the formation of separate individual economy. However, this separateness immanently generated its opposite - bourgeois society, with its irresistible tendency to socialization. The same opposition - private and social - continues to exist also here, but manifested in a new form and on a new basis. The line of movement went in the reverse direction: from private to social. The contradiction of exchange economy will get its final resolution only in communism.
  • 35. "Those contradictions, which move and develop the whole system of social relations and its separate links, do not arise in every social category, taken in isolation, but within the system, taken as a whole" (Kon - "Vestnik Com. Academy" No. 11, 1925: Discussion on the object and method of polit. economy).
  • 36. Man in the mother's womb repeats the entire traversed path of the historical [..evolution?] of the animal world. To understand the place which man occupies with other animals, it is necessary to approach him genetically. Likewise it is necessary to approach also the genesis of money, in order to understand its place in the series of other commodities.
  • 37. "The historical progress and extension of exchanges develops the contrast, latent in commodities, between use-value and value. The necessity for giving an external expression to this contrast for the purposes of commercial intercourse, urges on the establishment of an independent form of value, and finds no rest until it is once for all satisfied by the differentiation of commodities into commodities and money. At the same rate, then, as the conversion of products into commodities is being accomplished, so also is the conversion of one special commodity into money" (Capital, vol. I, 56 p. Our emphasis - S. L.)
  • 38. Marx, Critique of..., 93 p.
  • 39. The individual is contrasted to society, not as part of a whole, but as its opposition, as its polarity. The individual is not only a private person, but at the same time also a social. Therefore his private labor in a hidden state is simultaneously private and social labor. Being disconnected and cut off from society by the private side of his labor, the individual is combined with it by its social side. And this moment of combination is the moment of the manifestation of social labor, the moment connecting the individual with society, a connection which is established with the help of M.
  • 40. Marx, Critique of ..., 93 p., ed. 1923.
  • 41. Marx, Capital, vol. 1, 63 p.
  • 42. Marx, Capital, vol. 1, 63 p.
  • 43. Ricardo, Works, 402 p.
  • 44. B. Lifshitz, "Under the Banner of Marxism" № 8-9, 231-243 p., 1924. [К постановке денежной проблемы с точки зрения закона равновесия. Towards a formulation of the monetary problem from the viewpoint of the law of equilibrium. ("Оно продолжает обе'ктивно служить этим мерилом ценно­сти, проявляя свою ценность через бумажные деньги, общую ценность которых оно регулирует.")]
  • 45. And not for nothing J.S. Mill believes that signs of value may [. ..?] circulation only inside a given country. As concerns international commodity circulation, then it must be provided by full-value money. Here J.S. Mill showed that "ingenious conjecture" in relation to the nature of money, which he nonetheless couldn't unravel because of the conception of money, as a mere commodity.
  • 46. Marx, Critique of political economy, 128 p., ed. 1923.
  • 47. "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" (Capital, vol. 1, 102-103 p.).
  • 48. John Stuart Mill, Political Economy, 343 p.
  • 49. "Gold and silver, like all other commodities, have intrinsic value" (Ricardo, Works, 227 p.).
  • 50. See on this Marx, Critique of...
  • 51. [The articles of Pod Znamenem Marksizma are held in microform and only a few libraries have this Russian journal. So unless someone else is fortunate enough to be able to check out the articles for themselves (and ideally scan and share them), these translations will be imperfect, mostly because some parts of the text are illegible, and in this case also incomplete. By the way, some further translations, related to the present topic, can be found here and here]
  • 52. The presentation of the mechanism of price formation and the value of money is made after Marx. See "Critique of..."
  • 53. Ricardo - "If in the progress towards wealth, one nation advanced more rapidly than the others, that nation would require and obtain a greater proportion of the money of the world. Its commerce, its commodities, and its payments, would increase, and the general currency of the world would be divided according to the new proportions."

    "The equilibrium between that and other nations would only be restored by the exportation of part of the coin."

    But "no person ever exports or imports bullion without first considering the rate of exchange. It is by the rate of exchange that he discovers the relative value of bullion in the two countries between which it is estimated." And further: "The money of a particular country is divided amongst its different provinces by the same rules as the money of the world is divided amongst the different nations of which it is composed."

    At the basis of this redistribution of the monetary mass lies the law of demand and supply, which regulates the production of monetary material and therefore also its value: "If a mine of gold were discovered in either of these countries, the currency of that country would be lowered in value in consequence of the increased quantity of the precious metals brought into circulation... Gold and silver, whether in coin or in bullion, obeying the law which regulates all other commodities (the law of demand and supply. - S.L.), would immediately become articles of exportation."

    But - "If instead of a mine being discovered in any country, a bank were established, such as the Bank of England, with the power of issuing its notes for a circulating medium; after a large amount had been issued... the same effect would follow as in the case of the mine. The circulating medium would be lowered in value, and goods would experience a proportionate rise. The equilibrium between that and other nations would only be restored by the exportation of part of the coin."

    Likewise also the equilibrium between individual regions of a given country would be restored through reducing production of the monetary commodity.

    (Cited after the anthology of Eventov, The High Price of Bullion, 89-118 p.).

  • 54. Marx, Capital, vol. 1 , 74 p.
  • 55. "Gold, like every other commodity, cannot express the magnitude of its value except relatively in other commodities... Such quantitative determination of its relative value takes place at the source of its production by means of barter." (Capital, vol. 1, 61 p.
  • 56. The duality of the relation C and M itself reveals, that commodity circulation does not abolish simple exchange relations, but includes them in its system of movement, at with it preserves these relations for C and M, but not for C-C. Because of the monetary form of value the relation C-C acts only in the form of absolute value, but the relation C and M acts both in the relative and in the absolute form of value.
  • 57. In Ricardo-Mill both C and M play a similar active role: they at the same time condition each other and mutually determine. Between them exists only an antagonism, but not an unity of opposites, where the [primus?/*ривус] should remain on C.
  • 58. "In order that it may play the part of money, gold must of course enter the market at some point or other. This point is to be found at the source of production of the metal, at which place gold is bartered, as the immediate product of labour, for some other product of equal value." (Capital, vol.1, 79 p.).
  • 59. Marx, Capital, vol.1, 72 p. [Ehrbar's translation ("In diesem Verhältnis kann sich aber ebensowohl die Wertgröße der Ware ausdrücken, als das Mehr oder Minder, worin sie unter gegebnen Umständen veräußerlich ist [/сопровождается отчуждением].") MIA translation: "But this exchange-ratio may express either the real magnitude of that commodity’s value, or the quantity of gold deviating from that value, for which, according to circumstances, it may be parted with."
  • 60. Ibid., vol.1, 79 p.
  • 61. Marx, Critique of ..., 88 p.
  • 62. Capital, vol. 1, 61 p.
  • 63. Marx, Capital, vol. 1, 78 p.
  • 64. Marx, Capital, vol.1, p. 87.
  • 65. ['Essays on the theory of money and monetary circulation' (1918, 415 p.) ran several editions and is included in Трахтенберг И. А. 'Денежное обращение и кредит при капитализме', 1962, 783 p. In the introduction (page 10) the editors mentioned his mistaken view.]
  • 66. "Insofar as an instrument of circulation displays the "commodity price" of money, of itself is clear, that the purchasing ability of the monetary mass, serving as instrument of circulation, is determined not only by the value of the monetary material, which serves as measure of value, but also by the "conjunctural" commodity market (the mechanism of demand and supply in relation to money) (Lifshitz - "Pod Znamenem Marksizma," 1924, p. 232).

    And regardless of the fact that Lifshitz criticizes Trachtenberg for his treatment of the value of money, according to which it turns out that all forms of money have value, Lifshitz himself rolls to the recognition of a special value in the instrument of circulation.

  • 67. Lifshitz, "Under the Banner of Marxism," 233 p.

Posted By

Noa Rodman
Aug 4 2012 16:08


Attached files


Feb 15 2013 18:31

Thank you so much for this great article. Do you know where I can get some info on the author, Legezo?

Noa Rodman
Feb 15 2013 21:08

I'm sorry, I couldn't find more about Legezo [some other writings; О сознание стихийного // Октябрь мысли. 1924, № 1.; Легезо С., Файерштейн М. Советская кооперация.- М., 1925, - 160 с.; and 2 from 1930: Легезо, С. и Малухина, А. Некоторые вопросы организации и экономики льноводства в колхозах.; Якубовский Д. и Легезо, С. Этапы социалистической переделки деревни. (От XIV партконференции к XVI партсъезду).]

I'm intrigued about his comments on the function of treasure, if I had the possibility I would follow Legezo's reference to Abezgauz, Dukor and Notkin in Vestnik Kommunisticheskoĭ Akademii (Вестник Коммунистической академии), perhaps in no. 27 their article called "Свет марксовой теории в кривом зеркале."

Feb 17 2013 04:48

Thank you so much for your reply! Unfortunately I cannot read Russian. I wish I could... Anyway, it seems Legezo's critique of QT is premised upon the commodity money system. I wonder what he would say about QT if he had lived through to see the current monetary system where the connection between money and gold disappeared and where non-commodity money apparently performs all the functions of money, including the function of treasure. For one, he seems to validate QT for paper money. He says "Perhaps, it would be legitimate to still speak about purchasing power of worthless money - signs of value." I think Marx's and Legezo's anti-QT arguments are so obvious in the commodity money system. It would be more interesting to see their take on the QT in the inconvertible credit money system.

Noa Rodman
Feb 17 2013 11:39

There is google-translate, and even without understanding Russian one could make Russian texts available. For me it's mostly a problem of access to libraries, time and money, which brings us back to the subject.

Inconvertibility still allows for a gold standard to operate (e.g. pointed out by Nathan Lewis, also the Volcker shock can be seen as a gold standard mechanism and still under Greenspan there was some definite margin within which the gold price of the dollar moved). I think what you mean by "the link" to gold is a fixed denomination. The official denomination of a dollar is 42.222 on ounce, but like I said, I think the Fed had an unofficial target policy of something around 1/300 of an ounce per dollar (until the early 2000s). The problem I think is by whom the gold denomination of paper money has to be known... The Bank of Int. Settlements until 2003 had a denomination of gold franc, which set the gold price of dollar on 1/270 ounce or something (can't remember, it's on their site).

Feb 17 2013 21:50

I didn't know the google-translator works this good. Thank you so much!

Two questions if I may:

1) Can I ask what your take on Duncan Foley's position on Marx's theory of money is? For him, money does not have to be a commodity, and the value of money can still be measured; how? by pricing decisions of firms. Therefore, Marx's anti-QT arguments do not require commodity money theory.

2) Do you have any reference for your idea that "I think the Fed had an unofficial target policy of something around 1/300 of an ounce per dollar (until the early 2000s)"?

Thank you so much!

Noa Rodman
Feb 18 2013 00:32

No reference besides a relatively stable price under his chairmanship (Alan wrote in his memoirs; As I put it at a congressional hearing a few years ago, monetary policy should make even a fiat money economy behave "as though anchored by gold.").

I'm not sure why Foley et al. feel obliged to abandon the Marxist theory of money. I also liked people such as Bellofiore, who afaik gives the most well argued rejection of it (and consequent reframing of LTV), but I even don't understand it (something to do with transformation problem?!).

Feb 18 2013 19:34

Thank you so much for your reply.

As for the fact of relative price stability during Alan's chairmanship, does it evidence an implicit operation of gold standard mechanism or a possibility of monetary system without commodity base? I think the latter. In this period of state managed currency regime, inflation targeting monetary policy substituted the gold standard as a price stability measure, i.e. state policy substituting the value space as for the foundation of value of money. I think the real question for Marxian theory of money is whether this (artificial) substitution could be maintained long. And it seems to be a challenge that it has been lasting for quite long even though not without recurring turbulence.

Feb 18 2013 20:30

Do you know where I can get some info on Libcom's origin, history, its theoretical foundation? I read introductory guide but couldn't find more than its current member info. Does it also have an affinity to Austrian School (which I think is very interesting)?

I think it not surprising to find that Marxists and Austrian School people (libertarians) share the similar view on many issues, since they both understood well that the market is an organic whole with its own internal logic.

However, I think an important distinction should be made between the two. As for the gold standard, for example, Austrian School supports it out of its laissez-faire doctrine while Marxists' enthusiasm for its return on the public discourse is because it seems to validate Marx's commodity money theory, which points to a fundamental contradiction of capitalism, i.e. contradiction between money's root in the real, value dimension and the capital's mandate of self-valorization to which such real base of money is a fetter.

Feb 18 2013 21:07

I read Nathan Lewis's piece you linked. He quotes Ricardo to show that "inconvertibility still allows for a gold standard to operate". But Ricardo's argument in the quote is nothing but the quantity theory of money; his main idea is that the redemption of banknotes into specie is not necessary as long as the monetary authorities strictly control the issue of notes, and the underlying theory here is that the value of money (and thus the price level) is determined by the quantity of money. And anti-QT position would not require the control of the note issuance since the value of money would not be governed by its quantity but by its cost of production.

The idea that the paper notes can circulate 'as if' their value is the same as the value of what they replaced, i.e. metallic money, as long as the monetary authorities strictly control the note issuance, the idea shared by Nathan Lewis, David Ricardo, and Alan Greenslan, is the very essence of the Currency School's monetary thinking, which is in the tradition of classical quantity theory (even though the first three and the currency school have different position on the convertibility..).

Noa Rodman
Feb 18 2013 23:36

Marx as well writes that "If the quantity of paper money issued be double what it ought to be, then, as a matter of fact, £1 would be the money-name not of 1/4 of an ounce, but of 1/8 of an ounce of gold", though I also was a little puzzled (reading the same in Kautsky), I don't think this is QT (prices of commodities depend on the amount of money circulating, etc.) I don't have affinity to Austrian school. I put this article in the Libcom library but if you check the index to the journal PZM you see libcom distances itself from this journal.

Feb 19 2013 03:03

I followed the link and it seems fantasic! Thank you so much!

In that manuscript you linked, after describing something similar to what you quote, marx writes:

"The number of pieces of paper is thus determined by the quantity of gold currency which they represent in circulation, and as they are tokens of value only in so far as they take the place of gold currency, their value is simply determined by their quantity.”

And also this: “If the exchange-value of commodities is given, the quantity of gold in circulation depends on its value, whereas the value of paper tokens depends on the number of tokens in circulation. The amount of gold in circulation increases or decreases with the rise or fall of commodity-prices, whereas commodity-prices seem to rise or fall with the changing amount of paper in circulation.”

In these passages where the state issued inconvertible fiat money is concerned, marx is obviously validating the quantity theory. Confusion can be avoided once we recognize that Marx's point, as I see it, lies in that different forms of money are governed by different laws of monetary circulation; commodity money is governed by the law of anti-QT mechanism while inconvertible fiat money is governed by the law similar to QT. And this idea "different laws of circulation for different forms of money" is presented by Legezo in the article. But he is not as explicit as Marx is about the validity of QT. The only clue I found is the following which I quoted in the above replies:

"Perhaps, it would be legitimate to still speak about purchasing power of worthless money - signs of value."

Here as for the worthless non-commodity money Legezo is somewhat reserved about his trenchant critique of QT. So I was curious what he would say about the law of circulation that governs the most current form of money, inconvertible credit money. And this was my first question about the post.