Reflections on Money

Epub of Marx's Reflections on Money. Text taken from

Submitted by KHM on July 24, 2013

Written: in March 1851;
First published: in the journal Kommunist No. 1, January 1977 (in Russian);
First published: in German in: Works of , Gesamtausgabe, Abt. 1, Bd. 10, Berlin, 1977;
Source: MECW Vol. 10.

There is a division of trade into trade between dealers and dealers on the one hand, and between dealers and consumers on the other. Transfer of capital takes place in the former case, exchange of income for capital in the latter; the former has its own money, the latter its own coin. This distinction, which was made by Adam Smith, is very important and has been emphasised by Tooke, and even earlier by the Report of the Bullion Committee. What is missing however is an examination of the relationship between these two kinds of trade and of money.

(1) All crises show in fact that the trade between dealers and dealers constantly exceeds the bounds set by the trade between dealers and consumers. All propositions advanced by economists to prove the impossibility of over-production, or at any rate universal over- production, deal only with trade between dealers and dealers, as already Sismondi rightly pointed out in his polemic against McCulloch. This becomes even more evident when one considers that at least three-quarters of the exchange between dealers and consumers consists of exchange between workers on the one hand and retail traders and artisans on the other; this exchange however depends in turn on the exchange between workers and industrial capitalists, which in its turn is determined by the exchange between dealer and dealer – cercle vicieux.

(2) It is true that, as Adam Smith says, the exchange between dealers and dealers is bound to be circumscribed by the exchange between dealers and consumers, since the prices at which the commodities are sold to the latter are the final prices, which must retrospectively balance the costs of production expended in the preceding transactions as well as the profits. However on the basis of Adam Smith’s proposition, the whole economy has been inanely over-simplified by Proudhon and others. The matter is not so simple. First , the trade between dealers and dealers in England, for example, is by no means circumscribed by the trade between dealers and consumers in England, but more or less by that between dealers and consumers on the world market as a whole. For instance, the India Company or East India merchants send indigo to the London market. There it is auctioned. This is a transaction between dealers and dealers. The purchaser of the indigo sells part of it in France, Germany, etc., where it is bought by various dealers and manufacturers. Whether they will in the end recover the price of the indigo, will depend on how the final product is sold to the consumer, who lives perhaps on the Ionian Islands or in Afghanistan or in Adelaide. It would therefore be wrong to say that the trade between dealers and dealers in one country is limited by the trade between dealers and consumers in that country. If this trade is universal, it is limited by the trade between dealers and consumers on the world market, and this is all the more the case when the trade between dealers and dealers is conducted on a large scale and the country occupies a prominent position on the world market.

Secondly. Because the working class forms the largest section of consumers, one could say the fact that the Income of the working class decreases- not in one country, as Proudhon thinks, but on the world market-leads to an imbalance between production and consumption, and hence over-production. This is largely correct. But it is modified by the growing extravagance of the propertied classes. It would be wrong to put forward this proposition unconditionally – as though the trade of the planter were determined by the consumption of his Negroes.

Thirdly. The trade between dealers and dealers largely creates the trade between dealers and consumers. For example, when manufacturers receive very large orders from speculators, workers are fully employed, their wages rise and so does their consumption. Speculative railway construction enterprises actually create large-scale consumption, which in the end proves to be entirely “unproductive.” We also find that in fact the trade between dealers

and consumers is in most cases ultimately thwarted by that between dealers and dealers. The crisis always begins in the former, often of course after the demand of the limited forces of consumption has been met, but often simply because supply exceeds ostensible estimates (e. g. in the case of speculations in corn).

Fourthly. Over-production must not be attributed solely to disproportionate production, but to the relationship between the class of capitalists and that of workers.

(3) As to the currency which is found in the two distinct forms of trade – the currency used in trade properly speaking and the currency used in the exchange of income for commodities, i. e. for particles of capital-it is insufficient to state that a division exists between the two currencies, it is also a question of their connection and interaction. The money of private individuals, of the consumers, that is in the first place of all political and ideological strata, secondly of those who live on the rent of land, thirdly of so-called (non-industrial) capitalists, of the public creditors, etc., even of the workers (in the savings-banks), in short the surplus of the receipts of the non-trading classes of the population over their everyday expenditure and over that part of their money which they themselves think they must always have at their disposal, that is which they keep (hoard) at home as a reserve-this surplus is the chief source of deposits, which in their turn form the main basis of commercial money. Transfers, credit operations, in short the entire monetary movement within this commercial world, depend on the deposits of that part of the population that consists mainly not of tradespeople. In [...] of credit failure the deposits are withdrawn from commerce. Capital becomes unproductive, because the means enabling the classes that direct production to use this capital are destroyed in their hands. On the other hand, since these classes need money for their transactions with one another and the banker no longer lends money to the grocer and the manufacturer, the income of the consumers diminishes and consequently also the amount of money in their hands, thus the complaints about lack of money move from the commercial world into the world of the consumers.

(4) It would be wrong to say that lack of credit is of paramount importance in times of crisis, and currency is of no importance. It is evident from the reasons mentioned earlier that the amount of currency is then at its lowest ebb precisely because on the one hand its velocity has decreased and secondly because cash is required in numerous transactions where it was not required previously. But it is precisely this which accentuates the great difference between the amount of money and the value of the operations transacted with a relatively small quantity of currency. There is therefore in fact a lack of currency and not a lack of capital. Capital loses its value and cannot be turned to account. But what does cannot be turned to account mean in this context? It cannot be transformed into currency, and it is precisely its convertibility which constitutes its value. But in spite of all that, capital exists.

The thing shows itself primarily in the refusal to discount bills of exchange, even those based on bona fide transactions. And the bill of exchange is commercial Money, its value represents commercial capital. The convertibility of bank-notes into gold is a minor matter, the failure of bank-notes merely aggravates the commercial crises. The real difficulty is the inconvertibility of commodities, i. e. of the actual capital, into gold and bank-notes. It is for this reason that when these phenomena appeared in 1793, 1825 and 1847, it was possible to remedy them where capital actually existed, by issuing exchequer bills and bank-notes. Moreover, it cannot be asserted that these bills and bank-notes were capital. They were merely currency. The crisis did not end, but the currency crisis did. The convertibility of bank-notes, therefore, is based on the convertibility of securities, and not only in banking but also in commerce. But even securities which by their very nature are considered to be convertible, such as government securities and short bills, cease to be convertible. It seems that this is by no means a question of commodities, but of the convertibility of the tokens of value which represent them. Commodities cease to be money, they are not convertible into money. The blame for this Is of course put on the monetary system, on a particular form of this system. It is due to the existence of the monetary system, just as the latter is based on the present mode of production. But the convertibility of bank-notes into gold is in the end necessary, because the convertibility of commodities into money is necessary, in other words because commodities have exchange value, and this requires a special equivalent distinct from the commodities, i. e. because in fact the system of private exchange prevails.

Actually the depreciation of money is even in inverse proportion to the depreciation of commodities. But bank-notes can depreciate in terms of gold only because commodities can depreciate in terms of bank-notes. In any case, what does depreciation of bank-notes mean? That at any particular moment, commodities, i. e. their value, cannot be transformed into gold or silver, and that each intermediate link between the commodities and gold, or each substitute remains only a substitute and hence without value. The principal question therefore always remains the inconvertibility of commodities, of capital itself. It is rubbish if some say, there is no lack of currency but lack of capital. Currency is of no consequence. For what matters here is precisely the difference between capital, i. e. commodities, and currency. What matters is the fact that the former does not necessarily entail the latter as its representative, that is as its price in the commercial world; that capital ceases to be currency, that it can no longer circulate and has no longer value. When capital appears to be a secondary matter, it is ridiculous to present currency as a secondary matter. However there is even more nonsense on the other side. They acknowledge the inconvertibility of capital and make fun of the convertibility of bank-notes. But they want to offset this by some artifice or other and by modifying the monetary system. As if the inconvertibility of capital were not already contained in the existence of any monetary, system, indeed as if it were not contained even in the existence of products in the form of capital. Trying to alter this on the existing basis means depriving money of its monetary qualities, without conferring on capital the quality of always being exchangeable, and moreov er at its fair price.

The existence of a monetary system entails not only, the possibility but even the reality of this separation, and the fact that this system exists proves that the inconvertibility of capital, because it is appropriate to money, is already entailed by the existence of capital, and therefore by the entire organisation of production. It would be just as wrong however to say that the pressure on the money, market was simply caused by fraudulent credit operations. Money, as such implies the credit system. Or both are produced by the same cause. The Birmingham men, 122 who want to do away with the inconveniences of money by putting large quantities of money into circulation, or by lowering the standard of money’, are of course fools. Proudhon, Gray and others who want to retain money but in such a way. that it should no longer have the properties of money, are also fools. Since it is tit the money market that the entire crisis erupts and ill the features of bourgeois production recur as symptoms, which, it is true, become incidental causes, nothing is simpler to understand than the fact that it is money that narrow-minded reformers who stick to the bourgeois standpoint want to reform. Because they want to retain value and private exchange, they retain the division between the product and its exchangeability. But they want to modify the token of this division in such a way that it expresses identity.

(5) The complete simpletons, i. e. the staunch ignorant democrats, are familiar only with money as used in the trade between dealers and consumers. They therefore do not know the sphere in which the collisions take place, the tempests of monetary crises and big financial transactions. Thus the problem, just as everything else, appears to these simpletons to be as simple and silly as they themselves are. They regard the trade between dealers and consumers as a straightforward exchange of values, in which the freedom of each individual receives its supreme practical confirmation. Class antagonism is in no way involved in this exchange. One trader confronts another, one moneyed individual confronts another. The precondition that every individual must be moneyed to be able to participate in the consumer goods trade, i.e. to be able to live, this precondition is of course automatically given by the fact that every individual must work and let his talent act, as Stirner says.

First of all it Is a historical fact, which no one can deny, that in all hitherto existing social formations which were based on separation and contradiction between castes, tribes, social estates, classes, etc., money was an essential component of this organisation, and the monetary system was always symptomatic of the heyday or decline of this organisation. It is therefore not our task to prove that the monetary system is based on class contradictions, it is up to the simpletons to prove that, in spite of all previous historical experience, the monetary system can make sense even where there are no cl-ass contradictions, and that this particular element present in all social formations up to now will be able to survive in a situation that negates all hitherto existing social formations. To confront complete simpletons with such a task would be too simple. They deal with everything in monosyllables and this constitutes their specific talent. The monetary, system and the entire present system are in their opinion as straightforward and as stupid as they themselves are.

But let us again visualise their beloved trade between consumers and dealers. They do not look beyond it, neither sideways nor forward and backward.

What does the free individual use to pay for fits purchases at the grocer? He uses an equivalent – or token of value – of his income. The worker exchanges his wages, the manufacturer his profit, the capitalist his interest, the landowner his rent – transformed into gold and silver and bank-notes – at the grocer, the cobbler, the butcher, the baker, etc. And what does the cobbler, the grocer, and so on, exchange for the money which represents wages, rent, profit and interest? He exchanges his capital for it. He replaces his capital, reproduces it and expands it in this transaction.

Thus to begin with in this seemingly so simple transaction all class relations manifest themselves and are presupposed, [i. e.] the classes of workers, of landowners, and of industrial and non-industrial capitalists. On the other hand, it first and foremost presupposes the existence of these specific social relations, which give wealth the form of capital, and separate capital from revenue. The simplicity disappears with the transformation into money.

The fact that the worker receives his wages in money-and likewise the landowner his rent and the manufacturer his profit-and not as provisions in kind, payment in kind or by means of barter, merely shows that the monetary system presupposes a high level of development and greater differentiation and separation of classes than does the absence of a monetary system in the pre-monetary stages of society. There is no wage labour without money, and therefore also no profit and interest in the latter form, and accordingly no rent of land either as this is simply a part of profit.

It is true that income in the form of money, i. e. in the form of gold, silver or bank-notes, no longer shows that it appertains to an individual exclusively as a member of a definite class, as a class individual, unless someone has obtained it by begging or stealing, that is to say by misappropriating an income of this type, and thus represents a class individual as a result of rather drastic measures. The transformation into gold or silver blurs the class character and veils it. Hence the apparent equality-apart from money-in bourgeois society. Hence in a society with a completely developed monetary. system, there is, on the other hand, actually real civil equality of individuals insofar as they have money, irrespective of their source of income. In such a society, as distinct from ancient society where only the privileged strata could exchange certain things, everything is available to any person, any kind of material exchange can be carried out by everybody, in accordance with the amount of money into which his income can be converted. Whores, science, patronage, decorations, rent of land, lickspittles, all these are objects of exchange, just as coffee, sugar and herrings are. In the case of the estate system, the consumption of the individual, his material exchange, depends on the particular division of labour to which he is subordinated. In the class system it depends only on the universal medium of exchange which he is able to acquire. In the first case, he as a socially circumscribed person takes part in exchange operations which are circumscribed by his social position. In the second case he as an owner of the universal medium of exchange is able to obtain everything that society can offer in exchange for this token of everything. In the exchange of money for commodities, in this trade between dealers and consumers, the manufacturer, when he buys at the grocer, is just as much a consumer as his worker, and the servant obtains the same commodities for the same amount of money as his master. Thus the specific nature of the income which has been transformed into money disappears in this exchange and the class characteristics of all individuals are blurred and merge in the category of buyer, who in this transaction faces the seller. Hence the illusion of seeing not an individual member of a class in this act of buying and selling, but the purchasing individual as such without class characteristics.

Now let us disregard for the moment the specific nature of the income, which is not evident in gold and silver any more than is the smell of urine in the tax on brothels, of which the Roman Emperor Hadrian said: non olet! [It doesn’t smell] This nature emerges however in the amount of money which is at the person’s disposal. The range of the purchases is in the main determined by the nature of the income. The quantity and the kind of articles bought by the largest class of consumers, the workers, is indicated by the nature of their income. It is however true that the worker can squander his wages on liquor for himself instead of buying meat and bread for his children, a thing he cannot do when he is paid in kind. His personal freedom has thereby been extended, i. e. more latitude has been allowed to the rule of liquor. On the other hand, the money the workers are able to spare after paying for the most essential means of subsistence, can be used by them to buy books, lecturers and meetings, instead of meat and bread. They are in a better position to acquire the universal powers of society, such as the intellectual ones. Where the nature of the income is still determined by the type of occupation, not only as at present by the quantity of the universal medium of exchange, but also by the nature of his occupation, the ways in which the individual can enter into relations with society and appropriate it are extremely limited, and the social organisation for the interchange of the material and intellectual products of society is from the outset restricted to a definite method and a particular content. Money, which is the supreme expression of class contradiction, therefore also obscures religious, social, intellectual and individual differences. When confronting the bourgeoisie, the feudal barons for example made futile attempts, by means of luxury laws, politically to check or break this universal levelling power of money. Thus in the commercial transactions between consumers and dealers, the qualitative class differences are transformed into the quantitative difference of a larger or smaller amount of money at the disposal of the buyer; and within a single class it is the quantitative difference which constitutes the qualitative difference. Hence big bourgeoisie, middle bourgeoisie and petty bourgeoisie.