C. Flower
29-07-2012, 03:01 PM
In 1971 the US broke the link between the dollar and gold, under pressure from debt generated by the Vietnam War and outflow of capital from the US. From this point onwards, a pool of unbacked capital has expanded without control. With the end a very long inflationary boom, vast amounts of 'dead' cash, with no outlet for profitable investment, are now accumulating in deposits and in the holdings of corporations.
This article on Marx, Money and the Declining Rate of Profit, by a British Trotskyist, a member of the Socialist Labour League, draws attention to what Marx said about debt, and the fall in the average rate of profit. I think it is well worth re-reading today, but that Jeffries misrepresents and misunderstands the falling rate of profit, and that this misunderstanding in part accounts for why the left was so wrong-footed and shocked by the fall of the USSR, and by the Reagan/Thatcherite onslaught against trade unions in the west, having underestimated the extent to which capitalist powers were impelled to try to regain the territories lost to the "free markets."
Many of the quotations of Marx, on speculators, and the emergence of crises, could have been written yesterday.
Karl Marx on Money and the Falling Rate of Profit by Peter Jeffries
The latest round in the monetary crisis – by far the most serious since August 15, 1971 – is more than anything a great vindication of the Marxist analysis of capitalism. Throughout the post-war boom period, all the reformists and revisionists declared that capitalism had changed fundamentally. No longer was it prone to crisis and breakdown, as Marx had said.
This new type of capitalism (‘neo-capitalism’ for Ernest Mandel and the Pabloites; ‘permanent arms economy’ for the state-capitalist International Socialists) meant that social revolution and the taking of power by the working class were things of the past. Only ‘sectarians’ and ‘dogmatists’ talked about such things. Revolutionary parties were no longer necessary – ‘structural reforms’ or ‘consistent reformism’ was possible through social democracy or Stalinism.
The shallowness and bankrupt nature of this ‘new thinking’ is now plain for every worker and serious socialist to see. But along with this touching faith which the revisionists had in “welfare capitalism” went a profound ignorance of the nature of the capitalist sytem and particularly its monetary and credit system, a system which now stands at the centre of the crisis.
Each of these new-style Fabians was able to laugh at the analysis which the Socialist Labour League and the Fourth International made at each stage of this unfolding money crisis. For the revisionists, money was merely a ‘technical device,’ a clever way of overcoming the difficulties of barter. In this of course, they were only reflecting the complacency which sections of the capitalist class itself displays about money and its role during a period of capitalist expansion. During such times, the capitalists consider only ‘real’ commodities as constituting value; money is treated with contempt.
“On the eve of the crisis, the bourgeois, with the self sufficiency that springs from intoxicating prosperity, declares money to be vain imagination. Commodities alone are money. But now the cry is everywhere, money alone is a commodity! As the heart pants after water, so pants the soul after money.’ (‘Capital’ Vol 1 p.138).
This then is our first question: what is money and what is its relationship to the capitalist system? It is in ‘Capital’, particularly the opening three chapters of Volume 1, that Marx provides an answer to this now vital question.
He shows that money arises out of the contradictions within commodity production. A commodity has two ‘sides’ or ‘aspects.’ On the one hand it is an object of wealth which meets a certain definite need. Thus a coat enables its wearer to keep warm and dry. Marx refers to this quality of the commodity as a use value.
As such a use value it is the product of labour of a particular type, in this example, the work of the tailor. Marx refers to this as concrete labour. But at the same time, a commodity is also a value, that is, it has a relationship in exchange which is independent of its particular use. If we say 10 lbs of tea equals one coat, we are not comparing their particular uses. The one is for drinking and the other for wearing.
No, we are comparing their values – the fact they exchange against each other means that they are the products of equal quantities of socially necessary labour time. The fact that, under normal conditions, one coat and 10 lbs of tea take, let us assume, five hours of labour-time to produce, means that they have the same value.
Now when we compare the labour of the tea producer and the coat maker in this way, we are not comparing the concrete, particular, labour involved.
Marx shows that the development of commodity production necessitates the emergence of one commodity against which all others are measured. This commodity Marx calls the money commodity, or simply money.
What is the role of money?
Its function is to become the embodiment of value, the measure of abstract labour time. Without such a commodity, the regular exchange of commodities would be impossible, because there would be no mechanism whereby the private labour of individuals, which produces use values having an infinite number of qualities, can be compared with the labour of all other individuals.
It is through money that the social nature of labour asserts itself and makes everyone, capitalist or worker, conform to its objective laws.
How Marx would have laughed at the hopeless whose utterly false ‘theory’ of money would lead one to think that the chaos now gripping every financial centre can be eliminated if only all the bankers of the world would get around the table and devise a new means of international payment.
As against those muddleheads, Marx shows that the development of a commodity which stands against all other commodities, yet united with them (in that it is only through this money commodity that the value of any other ‘ordinary’ commodity can find its expression) is part of the emergence of capitalism.
‘Money is a crystal formed of necessity, in the course of exchange, whereby different products of labour are practically equated with one another and thus by practice converted into commodities. Thus historical and progressive extension of exchange develops contrast latent in commodities, between the use-value and the value. The necessity of giving external expression to this contrast for the purpose of commercial intercourse, urges the establishment of an independent form of value, and finds no rest until it is once and for all satisfied by the differentiation of commodities into commodities and money.’ (Capital’ Vol.1 p.87)
Gold eventually came to play the role as the major commodity within the capitalist system. This it did because of its physical qualities. In the first place a small quantity of gold contains a considerable value, because it takes a large number of hours of labour-time to prospect for, mine, refine and shape. Second, it is highly durable, does not not easily wear out or rust. Third, it is easily divisible into bars, coins, etc. all of a uniform quality.
Particularly since the last war however, gold has been augmented by the dollar as the main means of international payment and debt settlement. Indeed, the 1944 Bretton Woods arrangements were designed to lift the dollar to the rank of gold. The Americans guaranteed to exchange all dollar holdings into gold. They were able to this only because, in the immediate post-war period, they monopolised the world’s store of mined gold. But although the Americans aimed to make the dollar the equal of gold, they could never succeed. For whereas gold embodies considerable value, paper money is almost valueless: its production can be increased merely by speeding up the printing press. In other words, the dollar’s role as leading currency could only be established within definite limits, determined by the quantity of gold within the capitalist system.
‘Paper money is a token representing gold or money’....Only in so far as paper money represents gold, which like all other commodities has value, is it a symbol of value.’(‘Capital’ Vol.1 p.128)
In an attempt to keep the capitalist system going, and through their fear of the working class’s strength, the Americans after the war were forced to churn out more and more dollars an pump them in to Europe. This meant that from around the end of the 1950s onwards a considerable quantity of paper money within the capitalist system ceased to ‘represent gold.’ It was paper money, with no gold backing, with no basis in value. All the crises and the measures which the capitalist class have been forced to adopt – Special Drawing Rights, two-tier systems, etc. – have been attempts to stave off this fact.
This article on Marx, Money and the Declining Rate of Profit, by a British Trotskyist, a member of the Socialist Labour League, draws attention to what Marx said about debt, and the fall in the average rate of profit. I think it is well worth re-reading today, but that Jeffries misrepresents and misunderstands the falling rate of profit, and that this misunderstanding in part accounts for why the left was so wrong-footed and shocked by the fall of the USSR, and by the Reagan/Thatcherite onslaught against trade unions in the west, having underestimated the extent to which capitalist powers were impelled to try to regain the territories lost to the "free markets."
Many of the quotations of Marx, on speculators, and the emergence of crises, could have been written yesterday.
Karl Marx on Money and the Falling Rate of Profit by Peter Jeffries
The latest round in the monetary crisis – by far the most serious since August 15, 1971 – is more than anything a great vindication of the Marxist analysis of capitalism. Throughout the post-war boom period, all the reformists and revisionists declared that capitalism had changed fundamentally. No longer was it prone to crisis and breakdown, as Marx had said.
This new type of capitalism (‘neo-capitalism’ for Ernest Mandel and the Pabloites; ‘permanent arms economy’ for the state-capitalist International Socialists) meant that social revolution and the taking of power by the working class were things of the past. Only ‘sectarians’ and ‘dogmatists’ talked about such things. Revolutionary parties were no longer necessary – ‘structural reforms’ or ‘consistent reformism’ was possible through social democracy or Stalinism.
The shallowness and bankrupt nature of this ‘new thinking’ is now plain for every worker and serious socialist to see. But along with this touching faith which the revisionists had in “welfare capitalism” went a profound ignorance of the nature of the capitalist sytem and particularly its monetary and credit system, a system which now stands at the centre of the crisis.
Each of these new-style Fabians was able to laugh at the analysis which the Socialist Labour League and the Fourth International made at each stage of this unfolding money crisis. For the revisionists, money was merely a ‘technical device,’ a clever way of overcoming the difficulties of barter. In this of course, they were only reflecting the complacency which sections of the capitalist class itself displays about money and its role during a period of capitalist expansion. During such times, the capitalists consider only ‘real’ commodities as constituting value; money is treated with contempt.
“On the eve of the crisis, the bourgeois, with the self sufficiency that springs from intoxicating prosperity, declares money to be vain imagination. Commodities alone are money. But now the cry is everywhere, money alone is a commodity! As the heart pants after water, so pants the soul after money.’ (‘Capital’ Vol 1 p.138).
This then is our first question: what is money and what is its relationship to the capitalist system? It is in ‘Capital’, particularly the opening three chapters of Volume 1, that Marx provides an answer to this now vital question.
He shows that money arises out of the contradictions within commodity production. A commodity has two ‘sides’ or ‘aspects.’ On the one hand it is an object of wealth which meets a certain definite need. Thus a coat enables its wearer to keep warm and dry. Marx refers to this quality of the commodity as a use value.
As such a use value it is the product of labour of a particular type, in this example, the work of the tailor. Marx refers to this as concrete labour. But at the same time, a commodity is also a value, that is, it has a relationship in exchange which is independent of its particular use. If we say 10 lbs of tea equals one coat, we are not comparing their particular uses. The one is for drinking and the other for wearing.
No, we are comparing their values – the fact they exchange against each other means that they are the products of equal quantities of socially necessary labour time. The fact that, under normal conditions, one coat and 10 lbs of tea take, let us assume, five hours of labour-time to produce, means that they have the same value.
Now when we compare the labour of the tea producer and the coat maker in this way, we are not comparing the concrete, particular, labour involved.
Marx shows that the development of commodity production necessitates the emergence of one commodity against which all others are measured. This commodity Marx calls the money commodity, or simply money.
What is the role of money?
Its function is to become the embodiment of value, the measure of abstract labour time. Without such a commodity, the regular exchange of commodities would be impossible, because there would be no mechanism whereby the private labour of individuals, which produces use values having an infinite number of qualities, can be compared with the labour of all other individuals.
It is through money that the social nature of labour asserts itself and makes everyone, capitalist or worker, conform to its objective laws.
How Marx would have laughed at the hopeless whose utterly false ‘theory’ of money would lead one to think that the chaos now gripping every financial centre can be eliminated if only all the bankers of the world would get around the table and devise a new means of international payment.
As against those muddleheads, Marx shows that the development of a commodity which stands against all other commodities, yet united with them (in that it is only through this money commodity that the value of any other ‘ordinary’ commodity can find its expression) is part of the emergence of capitalism.
‘Money is a crystal formed of necessity, in the course of exchange, whereby different products of labour are practically equated with one another and thus by practice converted into commodities. Thus historical and progressive extension of exchange develops contrast latent in commodities, between the use-value and the value. The necessity of giving external expression to this contrast for the purpose of commercial intercourse, urges the establishment of an independent form of value, and finds no rest until it is once and for all satisfied by the differentiation of commodities into commodities and money.’ (Capital’ Vol.1 p.87)
Gold eventually came to play the role as the major commodity within the capitalist system. This it did because of its physical qualities. In the first place a small quantity of gold contains a considerable value, because it takes a large number of hours of labour-time to prospect for, mine, refine and shape. Second, it is highly durable, does not not easily wear out or rust. Third, it is easily divisible into bars, coins, etc. all of a uniform quality.
Particularly since the last war however, gold has been augmented by the dollar as the main means of international payment and debt settlement. Indeed, the 1944 Bretton Woods arrangements were designed to lift the dollar to the rank of gold. The Americans guaranteed to exchange all dollar holdings into gold. They were able to this only because, in the immediate post-war period, they monopolised the world’s store of mined gold. But although the Americans aimed to make the dollar the equal of gold, they could never succeed. For whereas gold embodies considerable value, paper money is almost valueless: its production can be increased merely by speeding up the printing press. In other words, the dollar’s role as leading currency could only be established within definite limits, determined by the quantity of gold within the capitalist system.
‘Paper money is a token representing gold or money’....Only in so far as paper money represents gold, which like all other commodities has value, is it a symbol of value.’(‘Capital’ Vol.1 p.128)
In an attempt to keep the capitalist system going, and through their fear of the working class’s strength, the Americans after the war were forced to churn out more and more dollars an pump them in to Europe. This meant that from around the end of the 1950s onwards a considerable quantity of paper money within the capitalist system ceased to ‘represent gold.’ It was paper money, with no gold backing, with no basis in value. All the crises and the measures which the capitalist class have been forced to adopt – Special Drawing Rights, two-tier systems, etc. – have been attempts to stave off this fact.