Money, treasure-building - Karl Kautsky

This text is left out from the volume with Marxist essays on money. Readability improved by D.G. The title for the second chapter is Schatzbildung, Marx's term for money's function of 'hoarding', but in this specific text it seems appropriate to (re-)translate it more literally as 'treasure-building'.1 (NR)

Money

With trade, which since the advent of the state rapidly assumes greater dimensions, there arises the need for a medium that facilitates the cumbersome exchange of commodities for one another, that, furthermore, possesses a value in its own right and that makes it possible to measure with greater exactness the value relation in which the commodities stand to each other. Finally, it must be a medium whose use value and exchange value change only slightly in the course of time, so that it is possible to store up the profits of trade in order to be able to achieve greater results with the accumulated sum, be it in order for construction purposes, to build ships, to acquire an estate, or even just in order to be able to live a life of pleasure for a long time without having to work. The same need for the immutability of the value of this medium arose for the interest on loans.

The medium that serves to satisfy these needs was a special commodity, which became money. Just like language and writing, it was a means of association2 which grew out of men’s social intercourse, but also out of the need to retain what had been gained. Like language and writing, it evolved and was not invented, even though it was subject, in its higher forms, to various conscious regulations by the state.

Marx has already dealt exhaustively with the nature, the development, and the functioning of money in his A contribution and in Capital. Drawing on him and his theory of value, which alone explains money satisfactorily, I have written also a number of times on that topic. It is not necessary to repeat here what has often been said; I will merely refer those who want to know my views on money in more detail to the seventh chapter of my book Social-democratic remarks on the transition economy.

In its origin, money is a commodity that everyone can use and which everyone accepts. As long as such a commodity had not appeared, it was necessary for everyone who brought a commodity to the market to find a buyer, who not only needed it but also, in exchange for it, possessed a commodity which the seller himself needed. Commodity exchange was greatly facilitated when everyone became accustomed to exchange his commodity for one that was accepted by all.

Money becomes a means of circulation but, not less important, it also becomes a measure of value and a means for the accumulation of wealth.

Since with the higher development of commodity trade, greater regularity and security of traffic, the money commodity can be replaced in circulation by mere instructions on it, people often believe that money is not at all a commodity, but only an instruction on such commodity. And since the state by its stamp guarantees the quality and weight of certain pieces of the money commodity, whereby it becomes coin, many believe also that it is the state that creates money and sets its value.

Just recently, in the time of inflation, we have all felt first-hand how dangerous these errors can become.

But the people who think that merely allude to the function of money as a means of commodity circulation. They entirely forget that it also has to function as a measure of value. As such it must measure the value of another commodity with its own, which is impossible when it has itself no value and is a mere paper slip.

Whenever two commodities are exchanged for each other, the value of one is always measured by that of the other. The more the one commodity is accepted by everybody in an exchange and thereby differentiates itself from others, the more it becomes customary for the value of every commodity to be measured in definite quantities of this one generally accepted commodity, and for this quantity to be considered the price to be paid for it.

The more highly trade in commodities develops, the more it ceases to be an occasional event, the more it is regularly repeated at some points, the markets, the more numerous and varied the commodities that come onto the market, all the more does the one preferred commodity become the general means of exchange. As it does so, it simultaneously develops its functions as measure of value and as medium of circulation. However, it does not always have to exercise both functions in the same exchange operation. In the beginnings of commodity traffic it often happens that the money commodity serves only as measure of value, as expression of the price of commodities, without there being an actual payment with money, and with exchange being a natural exchange [in products, without the intervention of actual money].

The ancient Egyptians for example already used copper and gold (not silver) in the third millennium BCE as money commodity and as the general measure of value of commodities. But the commodities whose value was measured in money were mostly exchanged in kind against each other.

So in one of these exchange transactions, for example, a bull was exchanged. Its value was set at 119 copper utnu3 (14.4 kilograms of copper). For it was given in exchange a reed mat computed at 25 utnu, 5 measures of honey at 4 utnu, 8 measures of oil at 10 utnu, and seven other things for the remainder.

Here copper functioned only as measure of value. It would have functioned as means of circulation if the owner of the bull had been paid 119 copper utnu for it and had then bought the mat and the other things with them.

The fact that copper functioned in ancient Egypt more as a measure of value than as a means of circulation probably derived from the fact that copper was wanted too much as a use value. Precisely this fact made it very suitable as money commodity, but it prevented, as long as its production was not very extensive, its utilisation as a means of circulation, because as long as it circulated as such, it was of course not industrially usable.4

It is not enough, of course, that a commodity be generally readily accepted in order for it to become the money commodity. It must have other properties in addition, such as constancy of value, which requires a constancy not merely of the conditions of its production but also of the qualities determining its use value and, further, the possibility of its divisibility into small and very small pieces, each of which has the same use value as the large pieces, so that they differ only in the amounts of labour represented by each of them.

There are only few products which meet these requirements. They are missing for example in animals and therefore the use of cattle as money, which emerged in many cattle breeding nations, could not be sustained. As measure of value it may have worked to some extent, but as means of circulation its application must often have encountered difficulties. Where it was used as money, barter must still often have taken place beside it.

Rosa Luxemburg says about this:

With the transition to stock raising, cattle becomes the universal commodity in exchange and the universal measure of value. This was the case among the ancient Greeks, as Homer describes it. In describing and valuing the armor of each hero, for example, he says that the armor of Glaucus was worth a hundred head of cattle and that of Diomedes nine.

Yet she must add:

As well as cattle, however, other products also served as money among the Greeks of this time. Homer again says that during the siege of Troy, wine from Lemnos was paid sometimes in hides, sometimes in oxen, sometimes in copper or iron.5

Whether one may designate these 'other products' as money, is however very doubtful. Here the wine was simply given for other products in exchange in kind.

And so one must also raise a question mark, when Rosa Luxemburg continues:

Money, that is the universal commodity, was already completely developed, before one employed metals to make money [Geldanfertigen] at all. Already in the form of cattle, for example, money has precisely the same functions in exchange as gold coins do today: as mediator of transactions, as measure of value, as means of treasure and as embodiment of wealth.6

We will overlook the fact that Rosa Luxemburg speaks here of the employment of metals for 'making money'. One can only talk about that if one has in mind the coinage of money, which first emerged in the seventh century before the Common Era. More than two thousand years earlier people had however already used metals as money. The production of gold and silver is still not 'making money '. The precious metals were used during many thousands of years as a raw material for jewellery, before they began to function as money. But this only in passing.

More problematic however is Rosa Luxemburg's claim, that money had already been 'completely developed', before the precious metals were used as money. In my view, only the precious metals possess the qualities which made it possible to 'completely develop' money. What previously served as money, always encountered barriers that prevented its general use and therewith its complete development.

This is true not only of its use as means of circulation, but also as means of treasure, which we will consider in more detail, since it especially interests us in this context.

Comrade Luxemburg illustrates the formation and functioning of money in an imaginary example, which is in part taken very light-heartedly by her, but meant very seriously. She introduces us to a shoemaker in an economy, in which cattle functions as money and wealth. In the course of her remarks about this she says:

The cattle-form is as we have seen the official social form of labor, and the shoemaker can store labor in this form as long as he wants, as he knows that he has the opportunity at any time of exchanging the product of his labor again from the cattle-form into any other he wants – i.e. of making a purchase.

'Precisely thereby, however, cattle now becomes also the means for storing and accumulating wealth, they become a means of treasure. ... Since cattle are good for anything at any time, so he saves and stores them for the future'.7

Unfortunately this accumulation of cattle has a catch. It is 'eating capital'. The shoemaker must feed it, if it is not to become 'dead capital' and the treasure turn into a pile of useless carcasses. The limits of the food supplies and pastures of the money owner are with cattle-money also the limits of his treasure-building, of his accumulation of money.

Where the precious metals function as money, these limits do not exist. The shoemaker can gather as much precious metals as is possible for him. They do not have to be fed, nor do they belong among the treasures consumed by rust and moths. They do not change in their physical properties and hardly in their value, even when they are kept stored up for decades.8 And precious metals can be not only stored up, but also easily concealed without suffering damage, for example by burying them, which was also abundantly practised as long as there were no banks and a capitalist application for money. Treasure hunting is therefore also in the myths of ancient times a popular activity. Precious metals can also generally be transported more easily than, for example, cattle. These certainly can run, yet this is useless when moving across the sea. A few gold pieces, however, can be easily carried into a small ship to the farthest sea coasts. Through wide deserts or jungles a cow is likewise more difficult to transport than a small bag with gold.

It is only metallic money, indeed strictly speaking it is only the coin that becomes fully developed money. For one can call money fully developed only when its use-value consists exclusively in the fact that it serves as the medium of circulation, when it cannot be used as anything else. Money attains this stage only when it reaches the coin form. A gold or silver coin therefore only exists in order to buy (or pay) with it. If one wants to use it differently, for instance for filling teeth or as raw material for jewellery, or as raw material for dinnerware, one must first do away with the coin form, melt them.

In no case may one claim of the money types which existed before metal money that they were 'completely developed money', money, that is able, to fulfil all the functions that it performs in commodity trade, which the latter needs and which make possible its further development.

From commodity traffic arises not only money, but also the necessity of accumulation of money treasures, initially as operating funds and as reserve funds for the merchants. With general commodity production also the producer is unable to set in motion and continue his business without some treasure-building. This function money can completely fulfil only as precious metal.

But money cannot develop without it becoming, to quote Roscher, a 'pleasant commodity' also for people other than commodity producers and commodity traders. Whoever has money can acquire any commodity that is brought to market; he can buy services from men and even buy men themselves. Money becomes a source of power, and a very potent source of power at that. The power of money becomes the foundation of military might itself. So it finally came to the situation in which Marshal Trivulzio coined in the fifteenth century the saying which the Count of Montecuccoli repeated in the seventeenth - namely that to wage war, three things are necessary: money, money and again money. In the great French Revolution the lawyer Danton changed however the saying of the Marshal to the effect that the most necessary thing is: audacity, audacity, and again audacity.

In reality one needs them both today for waging war, along with some other things, such as for example understanding and knowledge.

But in any case, the more trade in commodities and production of commodities develop, the less is the government of a state able to maintain itself without money. The more eagerly it seeks money, all the more eager it is to transform into payments of money the tribute and services to which it obligates its subjects

An entirely different view of the course of development of money is given by the more recent theory, which is no doubt represented most outstandingly by Max Weber. In his General economic history he begins the paragraphs dealing with money and monetary history with the words:

From the evolutionary standpoint, money is the father of private property; it possesses this character from the beginning, and conversely, there is no object with the character of money which does not have that of individual ownership.

The oldest private property consists in objects of individual handiwork, the tools and weapons of the man, and articles of adornment of both men and women. They are subject to a special law of inheritance from person to person, and in the field of such objects the origin of money is primarily to be sought.9

Already these remarks are very strange. First it is said that money is the father of individual property. This can only mean that there is no individual property before money. A moment later it is said, that the oldest form of individual property consists of items that the individual manufactured himself, which of course was done without money, and that it is within this area of individual property that we have to search the emergence of money. Thus money is made the father of individual property. This property existed, however, before its father, it came out of a product manufactured by the individual!

That is already strange enough. But no less strange is the following. Weber continues:

Today, money has two special functions, serving as a prescribed means of payment and a general means of exchange. Historically, the function of a prescribed means of payment is the older of the two.10 In this stage money does not enter into exchange,11 a characteristic made possible by the fact that many transfers of value take place from one economic unit to another which do not involve exchange but yet require a means of payment. Such are tribal gifts between chieftains, the bride price, dowries, head money, damage payments, and fines-payments which must be made in a standard medium.12

This view is based on Knapp's 'state theory of money', which Max Weber accepts with a small caveat. He speaks of the 'otherwise entirely correct and as such brilliant, forever seminal state theory of money of G. F. Knapp'.13

We cannot deal here with this theory, we are interested only in the claim that the function of money as means of payment emerges before that of 'means of exchange', that is means of circulation. It is specific to Max Weber. Knapp himself declared, that 'it is first the possibility of employing it in exchange that gives it the property of becoming a means of payment'.14

Marx too makes the distinction between the function of money as means of circulation and means of payment. However, he nowhere referred to money as means of exchange. It is indeed the means, to replace an exchange by a payment. When one calls money not a means of circulation or a means of payment, but a means of exchange, it comes down to obliterating the distinction between the two essentially different operations.

First, says Marx, money serves as a means of circulation. On one side is the commodity owner, who sells the commodity, on the other side, the owner of money, who gives money for the commodity. Now in the course of development of commodity circulation circumstances arise under which the commodity owner gives his commodity without immediately getting money for it. He contents himself with the promise that he will be given the money later. At the moment of the sale, the buyer does not have the necessary sum.

The money owed is then paid later: it functions now as means of payment. It does not accomplish the acquisition of a commodity: that has been done already before; rather, it merely pays a debt.

When the production of commodities has attained a certain level and extent, the function of money as means of payment begins to spread out beyond the sphere of the circulation of commodities. It becomes the universal material of contracts. Rent, taxes and so on are transformed from payments in kind to payments in money.15

In Weber the process takes place in the opposite direction to that in Marx. First money functions as a means to pay off obligations and only then as a means to acquire commodities. According to Weber money functions as means of payment even before there is any commodity exchange, in an exchangeless economy.

To arrive at this result, he operates with the term prescribed means of payment. He says that already long before there is commodity circulation, superior powers, for example the state power, imposed services on the individual economies, in fact entirely determined services. Because the products in kind, which the individual economy had to deliver, were exactly fixed, he argues that they functioned as means of payment, thus as money! Actually they were given up without a corresponding counter-service by the recipient, therefore they were not means of exchange.

Curiously, Weber counts among the tributes forced on the individual economies, besides taxes and fines, also 'the bride price and dowries'.

As one of the examples for this, he even reports a few pages later (page 182):

Of the Missouri River Indians it is reported that the purchase price for a wife consisted of two knives, a pair of trousers, a blanket, a flint-lock, a horse, and a leather tepee. The meaning is that a woman is of equal value with a complete equipment for an Indian warrior and is sold by her tribe for this amount.

Above all the example does not attest to the application of money as means of payment. Things considered equivalent are exchanged against each other: the labour force of a woman against the equipment of a warrior. Weber himself speaks here not of paying, but of buying and selling. In reality, however, the operation cannot be termed that either. Here no money comes into consideration at all, but a pure exchange of the most various objects. All sorts of things have already been money, but nobody ever heard of trousers money yet.

In addition to the entirely absurd inclusion of the bride price in the series of 'prescribed payments', that is, one-sided services without counter-services, Weber names among them also fines, to be discharged for damages caused by infringement against others' property or others' labour force. Also these services one can regard as surrender of equivalent things for equivalent things.

So there remains left as 'exchangeless money' only the tributes and taxes which the subjects have to give over to the lords and kings. Here, however, the service corresponds to nothing in return. If one wants, one can regard them therefore as payments, certainly as prescribed payments. But it is after all a little arduous to refer to them as money, because the state fixes the products in which the tributes are to be made. Was the dog food, which, as already reported,16 the four Babylonian villages had to deliver to the satraps of Babylon, also money?

Yet Weber breaks the lance of every critique directed against his theory of money, when he himself declares:

In this stage of development, money in the unitary sense of today17 is not to be thought of; rather in each economic zone different sorts of services rendered correspond to specific sorts of goods which mediate the payment function, so that different species of money exist side by side.18

Weber begins his presentation with the words:

'Today, money has two special functions, serving as a prescribed means of payment and a general means of exchange', and he adds, that of these two functions of today's money the means of payment is the oldest. But the money used to make payments in the exchangeless economy would be not money 'in today's sense' at all.

Certainly everyone has the right to choose his terminology as he wants. But it does not add to clarity when one says that the taxes in kind, which preceded money taxes, were money taxes too, because their discharge in determined products was prescribed, imposed by the state, only that it 'should not be thought of money in the sense of today'.

Weber's distinction of prescribed means of payment and of means of exchange is somewhat reminiscent of Franz Oppenheimer's distinction between economic and political means.19 Oppenheimer says that there are, besides one's own labour, two means of acquiring products: 'the exchange against others' labour (or their products)' and 'the unrequited appropriation of others' labour'. The one is the economic, the other the political means. Oppenheimer is admittedly in places as rude as to describe this political means as robbery, while Weber prefers the milder description of 'prescribed payment'.

But in whatever relation we may set ourselves to these descriptions, and even if we wanted to completely accept the Weberian one, we still must declare it doubtful whether the violent imposition of tributes or just robbery, this most primitive form of 'prescribed payment', is older than exchange. Both robbery and exchange go back to the dim and distant past, but appeared first not as means of gaining others' 'individual property', but others' tribal property. Both, robbery and exchange, would have emerged simultaneously as a result of the division of labour between separate tribes. Depending on the opportunity and power relations one would have preferred one or the other method of acquisition of goods of other tribes that one did not possess oneself. But we have no reason to suppose that robbery is older than exchange.

The phenomenon that Max Weber has in mind when he speaks of prescribed means of payments essentially refers, however, only to the exploitation operated on account of the state, a situation in which both the quantity as well as the type of products that are to be delivered, with which thus is to be 'paid', are exactly determined by the state power.

The state and the exploitation of the working mass by it are however without any doubt of far more recent date than the exchange of commodities.

Treasure-building

Max Weber says further about money:

A further function, which is less characteristic of money today but which it has performed through long periods of history, is that of a medium for accumulating treasure. The chieftain who wished to maintain himself in his position must be prepared to support his followers and to compensate them by gifts on special occasions. Hence the extraordinary value which was placed on the thesaurus20 such as was possessed by every Indian rajah and every Merovingian king. The Nibelungen hoard is nothing else than such a thesaurus. As means of accumulation, various typical objects were employed, such things as the prince was accustomed to give as presents to his followers and which at the same time constituted objects valued for the purpose of making payments. Here again money was not a means of exchange but merely an object of class possession;21 one who possessed it kept it only on grounds of prestige and for nourishing his social self-esteem. In this function money acquired one of the most important characteristics which is demanded of it today, namely, that of durability, in contrast with that of portability. Ivory teeth and huge stones of a certain quality, and later22 gold, silver, copper, and metals of all kinds, serve as money and as a medium for accumulation.23

It is certainly true that a further function of money is treasure-building. But here again Weber does not think of 'money in the modern sense'. If he earlier designated as money everything that was demanded as means of payment (more precisely as tribute) by the state, because money can function as means of payment, here everything is designated as money that the kings piled up in their treasuries, because money can be accumulated, even if these things were mere curiosities like huge stones! They too are for Max Weber money. As means of exchange or means of payment he admits that they cannot be used, but only as a strange kind of money, which in general cannot be used for anything and is stacked up only on grounds of prestige and for 'nourishing social self-esteem'.

Further heightening the strangeness of this kind of money, which again consists of a hodgepodge of the most different objects, Weber adds that princes began to gather in their treasuries ivory teeth and huge stones earlier than gold and silver.

As for the word ivory teeth [Elfenbeinzähne], we should no doubt attribute it to the publisher of Weber's work, who after the death of the author found it in the notes of his lectures. In reality the German language only really knows the words ivory [Elfenbein] and elephant tusk [Elephantenzähne]. Should the 'huge stones' [Riesensteine] also be attributed to the publisher?

Weber throws here together two things with very different economic functions, which he regards as belonging to the same economic category because they were stored in the same treasury room. On the one hand 'objects of class possession', which the nobles and princes store only 'on grounds of prestige' and 'to nourish their social self-esteem', to which he adds striking curiosities, for instance holy relics, objects of adornment distinguished by their beauty or size, including gems, which however were not collected to remain lying in the treasury but to be worn by their owners on ceremonial occasions or otherwise to show off, therewith increasing their social prestige. They became just as little money by their placement in the treasury house, as a woman's hat turns into money by the fact that it is locked in a safe.

Incidentally, valuables of this kind would only in the rarest occasions have been gathered through 'prescribed payment' by the rulers. Tribute and other payments that must be made in kind are, as a rule, demanded in the form of products which the local economy produces regularly, for instance cereals, oil, sheep or horses. The Medes, for example, had to 'pay' (i.e. to deliver) in the Persian Empire as annual tax 100,000 sheep and 4000 horses. A 'payment' of taxes in jewellery pieces cannot be done on a regular basis. They would have come into the possession of the great lords either by trade or through robbery. The former already presupposes real money in the ordinary, not in a special 'Pickwickian' sense.

These jewellery objects, even if they were temporarily locked up in a treasure house, represented articles of use, not money. Entirely different from them are, however, the hoards of real money 'in the sense of today', which are gathered by the upper classes and the state rulers, as well as by merchants, not to serve either as a 'classy' [ständisches] or as a class [ständiges] possession, or to habitually [ständig] remain as objects of use in their possession, but to be spent again as a means of purchase. If, with developed commodity trade, merchants need large sums of money to purchase commodities, the princes need them to wage war, namely to hire mercenaries.

Weber himself refers to this utilisation when he says that the 'chieftains' needed a treasure to support their entourage and retain it. To accomplish this, the treasure had to consist of money in the sense of today, which can be used as a means of purchase. It must have consisted of means of circulation, which presupposed commodity circulation through money, and indeed precious metals as money material. Weber thinks that with hoarded money transportability does not matter. But the nomadic mercenaries, whose military services were purchased with funds of the royal treasure, doubtlessly thought otherwise, because they could not have easily carried their payment with them if it had been delivered to them, for instance, in elephant tusks and huge stones.

The accumulation of money in the treasury serves entirely different purposes than the accumulation of jewellery and curiosities. To throw them both together, since they are kept in the same building, has no more meaning than to call a museum a financial institution, because in it valuables are deposited just like in a bank.

The auri sacra fames (Virgil, Aeneid III, 57), the accursed hunger for money that cannot be stilled, arises with the appearance of metal money, which first offers the boundless possibility of filling up the treasure houses of the great and the hiding places of the merchants with lasting, easily transportable, easily storable money—and alongside that possibility soon arises also the necessity for such hoarding. Weber speaks of the treasures of the rajahs and the Merovingians as well as the Nibelungen hoard, but all these treasures were made up of 'red' glistening gold or silver; they were formed in times when these metals had already become the money commodity.

Of the various products that the tributaries delivered as 'means of payment' to their lords, the latter could consume only certain amounts together with their entourage. Therewith definite limits were set to the demands made by the mighty of a country on those subject to them, because the tributes paid in kind were not money, and could be used only in natura.

Of money, however, one can never have too much, once it has become indestructible metallic money that can be hoarded with no practical time limit. The more money one has, the more of it one can spend in order to buy means of power or of pleasure. All the more, however, one also must spend for means of power, for the enemies who covet one’s hoard become all the more numerous.

To the same extent that precious metals become the money-commodity, the craving of the states for the sources of these metals grows. In antiquity there were, in the areas covered by states, far more gold and silver mines than today. Since many of them had been in operation already millennia before the Common Era, most of them were already exhausted in the Middle Ages. New mines were opened where the ancient civilisation had not yet reached, in Germany and Hungary, later in Central and South America, finally in our days in California, Australia, South Africa and eventually at the Arctic circle.

Gold production must retreat ever more outside the reach of civilisation.

In antiquity there were rich mines of precious metals in Egypt, in southern Arabia, in Lydia, in Greece, in Spain, all of which are now exhausted and give only low yield or were entirely discontinued.

To conquer and retain such mines was a strong endeavour of states from early times. Heeren, for example, quotes the Arab geographer Maqrizi, who reported about the Egyptian mines near Aswan, saying:

They abound in silver, copper, iron and precious stones; but gold is chiefly sought for. The Pharaohs themselves made war against this country for the sake of these mines. The Greeks did the same when they were masters of Egypt.24

The greatness and power of Egyptian Thebes was to no small degree due to these mines.

The most productive mines, especially silver but also gold mines, were in antiquity the Spanish mines. For their sake, the Phoenician sailors went from the far east of the Mediterranean to its far west. They established a colony there, Carthage, which became their successor. To conquer and retain Spain, the Carthaginians increased their land armies. On the other hand it was Spain’s gold and silver which allowed them to recruit numerous mercenary soldiers.

For the sake of Spain, Carthage wanted to become not just the strongest naval power in the western Mediterranean but also the strongest land power there. This pursuit brought about their downfall, just like it did recently with the empire of the Hohenzollern, which in a similar fashion wanted to turn Germany simultaneously into the strongest land and sea power.

The first war between Rome and Carthage, the first Punic War (264-241 BCE), had still been a battle for supremacy in Italy, a battle for Sicily. It gave Rome mastery of the whole of Italy.

All the more so Carthage then attempted to bring the whole of Spain into its possession, where it had hitherto occupied only individual regions. The second Punic War, which began in 219 and ended in 201 BCE with the complete defeat of Carthage, began as a struggle for Spain and ended with the conquest of Spain by the winner, Rome, which then came into possession of rich mines that infinitely increased its power, but also instilled money greed and hedonism into its ruling classes, and therefore their corruption. The Carthaginian state, however, lost with the mines of Spain its backbone. The third Punic War (149–146 BCE) was just an outbreak of hopeless despair. It could only end with the utter destruction of Carthage.

The power of attraction that the gold and silver mines exercised on the rulers of states in the age of simple commodity production – before the development of capitalist industry – and the great power conferred on them by the mines constitute an important moment in the history of states, which, as a rule, receives too little attention.

How much the silver mines of the Laurion mountains and the gold mines of the island of Thasos have influenced Greek history, was already pointed out by us in the third book.25

In the era of industrial capitalism, however, locations with coal, iron, and finally oil become more important for the history of the states than gold, not to speak of silver, which as a money metal has been completely dethroned. If we are to believe Professor Oppel, probably for the reason that it has lost its metallic properties.

Precious metal is of course not hauled from the mines, to stay in the hands of the mine owner and his labourers. Insofar as the mine owners do not turn the precious metal into jewellery or appliances for their own use, they spend it as money, in order to buy commodities or services with it. Thus metallic money finally reaches as a rule the hands of those who have surpluses of desired commodities they can part with, or who trade with such surpluses.

The gold-hungry state rulers found in trade the second source from which they could draw precious metal. The Persians imposed money tributes mostly on the port cities, on the agricultural areas in contrast they imposed tributes in kind.

In the course of history, the ability of single places to pay money tributes has changed dramatically with the volume and nature of their trade. There is one great territory however, that, as far as the historical records go back, always exported much more commodities than it imported. It produces almost everything it needs itself, alongside much else that foreign countries desire, so that its trade balance has been positive since time immemorial, although it did not send merchants abroad but left its entire foreign trade in the hands of foreign merchants, who extorted from it unusually high trading profits and freight charges.

This land is India, which therefore, although it produces relatively little gold and silver, nevertheless is immensely rich in precious metals, which are mostly used for display, and partly pile up in treasuries. It comprises more than 300 million people, yet produced in 1924 only 12,400 kg of gold. The United States, with 100 million inhabitants, in contrast, produced 78,000 kg of gold, and South Africa with 10 million almost 300,000 kg.26 India imports annually an enormous mass of precious metals. In 1911 it amounted to 322 million marks in gold and 116 million in silver.27

But already in the first century of our common era Pliny observed in his Historia Naturalis book 6, chapter 26:

[I]n no year does India drain our empire of less than 1,500,000 sesterces,28 giving back her own wares in exchange, which are sold among us at fully one hundred times their prime cost.

Thanks to their durability, the precious metals belong to the materials that are not, like most products of human labour, consumed in the course of the year or abraded to almost the same extent as produced or replaced annually due to their wear and tear. The extent of their abrasion is, as a rule, much lower than the amount of their production in a given period, and so the mass of precious metals, along with the mass of money, grows ever more among the peoples who use money, thus multiplying also the treasures of their exploiters and rulers.

This was true also for India (just as for Mexico and Peru, there admittedly not due to a positive trade but to richer mines). Immense masses of precious metal were piled up in the states of India that lured the poor neighbouring nomads time and again, still more than the silver mines of Spain attracted the rulers of the Western Mediterranean.

But all the numerous invasions that India endured, from the incursion by the Iranian Aryans, about which we don’t even know in which millennium before our era it occurred, to the invasion of the Mongols in the sixteenth century of the Common Era, did not deprive India of its gold treasures, because its conquerors stayed in the country. The fate of India changed dramatically when gold-hungry Western Europeans hurled themselves in the east on India since the age of discovery, just like they did in the west on Mexico and Peru, lured in both cases by the treasures of precious metals which the indigenous great exploiters had accumulated in the course of thousands of years – in Mexico and Peru, however, not as money but only as use values, as appliances and jewellery. While in America it were the Spaniards, in the states of India it were the Portuguese, Dutch, French and finally the English who came, not as conquerors to settle in the country, but to loot it and take away its treasures. Fabulous quantities of precious metals were at the time brought to Europe, from India mostly by the British, not because the Portuguese, Dutch, French were less rapacious, but because the British were able to assert themselves militarily against their opponents coming from the area of higher civilisation. [Robert] Clive alone, [the Commander-in-Chief of British India,] who came in 1743 as a young clerk at the service of the East India Company, retired in 1767 with a fortune which according to his apologist Malcolm gave him 40,000 pounds sterling (800,000 marks) in annual interest, although he estimates it as low as possible. In the same way, everyone who was in the service of the Company to which the English state had handed over the exploitation of India, plundered the land, and first properly robbed of course the Company itself, which was after all founded for that purpose.

Despite the constant looting which India has since then been exposed to (which has been limited and regulated in recent decades), it still draws through its commodity export precious metals from abroad. Its commodity exports are certainly still greater than the sum of its imports of commodities and precious metals. It sent abroad in 1913 approximately 3,000 million gold marks, against commodity imports of only 1,700 million and imports of precious metals of around 440 million, together 2,140 million. There remains a surplus of exports of nearly 900 million marks. That was the tribute which, in the form of salaries and pensions to English officials and of interest for British capital in railways and factories, India delivered to its 'mother country' still shortly before the war. Admittedly this sum pales in comparison to the numbers which the world war and its conclusion have made us familiar with.

Even though the profits from trade and industry became, in addition to the mines, immense sources of money revenues for princes and lords, they were still not enough to quench their money hunger. They sooner or later everywhere undertook to transform into money-taxes the taxes paid in kind by the peasants, who everywhere formed the great mass of the population until well into the last century. Following Weber’s terminology, one would probably have to describe this transformation as one in which the hitherto prescribed means of payment for tributes were called off29 and means of exchange were prescribed as new means of payment.

Whatever designation one may prefer for the operation, it had a murderous effect on the peasants everywhere. They had previously been accustomed to produce for their own use and to deliver for the use of their lords a certain amount of their products, as well as to sacrifice a number of work days for them. They had little to do with the market. Now they had not just to produce the amount of their taxes, but also to sell their surplus product in the market before they could pay their taxes. Unfamiliar with the tricks of the marketplace, they were confronted with traders who were very well acquainted with all its ruses. And they were now made dependent on the favourableness and the inclemency not only of the weather, but also of the market. Whereas earlier crop failures were ruinous to them, while a good harvest was always a blessing, now an abundant harvest could also become a curse if it could be sold only at low prices or not at all, something that could easily happen under the bad transport conditions that confined the peasant to a single market.

The peasant’s indebtedness, his being sucked dry by usurers, now assumed very large proportions and it accelerated all the more the ruin of the peasantry, inasmuch as now the usurious interest charges, too, became payable in money.

At the same time, the transformation of taxes in kind into money-taxes also enormously strengthened the drive to raise taxes. For, as already stated, the extent of taxes in kind is limited by the natural needs of the rulers which they are meant to satisfy. This limit disappears for money taxes.

'The hoarding drive is boundless in its nature', Marx says.30 It is boundless not least because, with the development of commodity production, a growing number of demands must be met with money. The needs for treasure-building become ever greater, but the possibilities of satisfying them do not always grow to the same extent. The European princes since the Middle Ages have almost never come out of their money scarcity due to their constant wars and hedonism [...]. What they now accumulate are, as a rule, not treasures but debts, which they however, thanks to their position of power, may register not as personal but as sovereign debt. Frederick William I of Prussia was an oddity, since he was able to leave Frederick the Great a war chest of 10 million thalers, which the latter immediately squandered.

Whether the rulers of the state were driven by the boundlessness of the drive of treasure-building or by the pressure of debt, in any case the tendency grows toward constant tax increases in agriculture with the introduction of money.

Unlike the taxing of merchants, this tendency does not plague strata that are able to defend themselves somewhat, but rather completely helpless elements. Like the slaves and the other forced labourers in the gold and silver mines, when money-taxes have been imposed, the peasants, too, belong for a long period of time to the most tormented and exploited creatures (see Marx's Capital, first volume, second paragraph in the tenth chapter, The voracious appetite for surplus labour, page 345 onward).

Thus, as soon as it has assumed metallic forms, money is a means of aggravating the antagonisms between the classes and between states and peoples, of strengthening the drive to extend the territorial range and the degree of exploitation, and at the same time also of increasing the power of the exploiters and the belligerents, and of making the effects of war and of exploitation ever more horrible.

It is no wonder that gold (and silver along with it) was accused from early times of being the worst of all social forces. In Capital (page 230) Marx cites Sophocles' Antigone, where money is indicted in the following words:

To teache folk to practice villanies,
and to know every godless deed.

And Shakespeare's Timon of Athens, which brands gold, the precious, shimmering red gold:

Common whore, that put'st odds among the route of nations.

It was only to be expected that all the exploited and their advocates came to believe that social ills could not be cured unless money was eliminated.

The great Utopian Thomas More deemed it necessary to degrade gold as much as possible in his socialist co-operative commonwealth of the future: it was to be turned into chamber pots and close stools for slaves.

Ever since the capitalist mode of production has emerged, the opposition of socialists directs itself above all against capital, whose starting point indeed must always be money, which however represents only a temporary form of appearance of functioning capital. And moreover, although gold remains the starting point of money, it constitutes in no way its only form of appearance, and the piling up of gold treasures, even in the vaults of banks, has lost much significance in relative terms. Gold becomes at times an embarrassment for the Americans, who after all do not, as the Indian rulers or the Peruvian Incas formerly did, enjoy the mere sight of glistening gold.

Nevertheless there still are socialists who think it is imperative that money should be abolished. They do not know how to distinguish between technology and the economy, and hold a technical instrument (money is nothing else) responsible for the deplorable circumstances associated with its use under certain economic conditions.

They forget, that in a world of class contradictions every technical progress, indeed every progress in general, has the tendency to be monopolised by the exploiting and ruling classes and used as means of augmenting the exploitation and subjugation. But the evil lies in the monopolisation of progress, not in progress itself.

That was already true of writing and of the science emerging from it31 ; it still holds in our time for the machine as well as for money.

It is an indispensable means to overcome the barriers that were set in the primitive tribe to the expansion of the division of labour and the variety of products. It is indispensable if the individual is to be able to freely acquire by peaceful means precisely those products that his individuality desires.

Without the auxiliary means of money the entire division of labour must be reversed, the co-operative commonwealth must take the form of a prison or barracks state, in which everyone is apportioned the same rations, everyone wears the same uniform, lives in the same cubicle and beyond that knows no needs, or where every production organism is nothing but a self-sufficient family.

This does not mean that in a gigantically extended production with an infinitely wider division of labour money will always be required as a means to enable each individual to satisfy his particular individual needs. One can imagine a situation in which the productivity of human labour has flourished so infinitely and work has become such a pleasure, that all the products will be available in abundance and everyone will be able to freely take from them as much as he pleases.

Unfortunately, this blissful age has not yet been reached. We do not yet swim in abundance, most productive work is still annoying, so that everyone strives for the acquisition of the products that he needs and cannot make himself in such a way that for the labour that he performs he receives products containing at least the same amount of labour. As long as this is the case, a far-reaching division of labour and an extensive individualisation of need satisfaction will make money indispensable precisely when it is appreciated that no one must work gratuitously for others and no one must be exploited.

The task of the socialists is directed not at abolishing money, but to abolish the class relations that cause an indispensable technical means of the expansion of the division of labour in society to act as a means of exploitation and oppression.

• 1Geld, Schatzbildung (pp. 185–204) chapters in Die Materialistische Geschichtsauffassung Volume 2: Der Staat und die Entwicklung der Menschheit, Berlin: Dietz.
• 2[Verkehrsmittel, also a means to carry out commerce or means of transportation.]
• 3[Commonly referred to today as 'deben'.]
• 4Kautsky 1918.
• 5Luxemburg 2013 [1925, pp. 227, 228].

  Introduction to political economy, in The complete works of Rosa Luxemburg, Economic writings Volume 1, New York: Verso.

• 6Luxemburg 2013 [1925, p. 229].
• 7Luxemburg 2013 [1925, p. 219].
• 8Professor Alwin Oppel traces the value of gold and silver only back to their corporal nature. He asks: 'Why is gold valued higher than silver? The answer is: because it has the metallic properties to a higher degree than the latter. Both are homogeneous, can be divided and united again, but gold more so' (Oppel 1904, p. 315). He does not tell us why a diamond is still more valuable than gold, although it lacks the metallic properties, and he also does no tell us, why in the last century, due to the change in production methods that made the extraction of silver much cheaper than that of gold, the value of silver fell tremendously against gold, although after all its 'metallic properties' in no way diminished.

  Oppel, Alwin 1904, Natur und Arbeit, Leipzig: Bibliographisches Institut.

• 9Weber 1961, p. 179.

  Weber, Max 1961, General economic history, tr. F. Knight, New York: Collier.

• 10Underlined by me. K.
• 11Underlined by Weber. K. [tauschloses Geld: exchangeless money.]
• 12Weber 1961, p. 179.
• 13Weber 1978, p. 78.

  1978, Economy and society, Berkeley: University of California Press.

• 14Knapp 1924, p. 6.

  Knapp, Georg F. 1924 [1905], The state theory of money, tr. H.M. Lucas and J. Bonar, London: Macmillan.

• 15Marx, 1976, p. 238.
• 16[On p. 172 in chapter 6 'Writing' (Kautsky 1927 volume 2).]
• 17Underlined by me. K.
• 18Weber 1961, p. 179.
• 19Oppenheimer 1907, pp. 14 and following. [Discussed earlier by Kautsky 1927 on pp. 147 and following.

  Oppenheimer, Franz 1907, Der Staat, Frankfurt am Main: Rütten & Loening.]

• 20Treasure. K.
• 21Underlined by Weber. K. [ständische Besitzobjekte]
• 22Underlined by me. K.
• 23Weber 1961, p. 180.
• 24Cited in Heeren 1833, p. 337.

  Heeren, A.H.L. 1833, Historical researches into the politics, intercourse, and trade of the principal nations of antiquity [tr. from German], vol. 5, Oxford: D. A. Talboys.

• 25[Kautsky 1927 volume 1, pp. 687, 691–2, again in volume 2, p. 244.].
• 26Woytinsky 1926, p. 194.

  Woytinsky, Wladimir 1926, Die Welt in Zahlen IV, Berlin: Rudolf Mosse.

• 27Kautsky 1913, p. 43.
• 28Five sesterces approximately equal to one gold mark. K. [The 1855 English translation (p. 63) came up with a different number, likely mistaking the Roman numerals.

  Pliny (the Elder) 1855, The natural history Volume II, tr. J. Bostock and H. T. Riley, London: H. G. Bohn.]

• 29[Or as Kautsky wits: 'unprescribed for prescribed payments'.]
• 30Marx 1976, p. 230.
• 31[Subjects of the preceding chapters in Kautsky's book.]