Is currency necessary? [Archive]

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gla22

15th May 2008, 23:18

Hyacinth

16th May 2008, 07:32

Currency as it exists now certainly isn’t necessary. At most what you might need is some sort of accounting method (for example, labour time certificates, or energy accounting, or whatever) as a means of keeping track of consumption in an economy. And even then, it isn’t necessary if there were abundance of a certain good or service.

Moreover, even under scarcity, you could have a gift economy, which doesn’t have any sort of currency or accounting method for keeping track of consumption.

Kwisatz Haderach

16th May 2008, 10:46

In economics there is the principle called comparative advantage. Simplified it stipulates. Why grow banana's in Norway when you can grow them in Ecuador and import them for much less? I've seen an obsession regarding extreme amounts of protectionism and a hatred for foreign trade within leftist discussion. Is this really feasible to isolate economically and maintain an advanced country? Depends on the nation however many would not be able to.
Leftists do not want economic isolation. On the contrary, we would like to see an integrated world economy under socialism or communism. However, we are usually suspicious and often hostile towards capitalist globalization and the specific form of international trade promoted by neoliberal capitalism (but not towards international trade in general). This is because neoliberal capitalist trade is based on the mobility of capital and immobility of labour: Corporations can threaten to leave a country and take their business - and the jobs they provide - elsewhere if they do not get their way. Workers can make no such threat. Therefore globalization puts workers at an ever greater disadvantage than was previously the case, leading to increased exploitation and inequality.

It is also likely - though very undesirable and unfortunate - that any socialist country will have to deal with some isolation, at least in the short run, because capitalists will refuse to trade with it. The only way to avoid this is for socialism to expand quickly over a wider area than your typical single country.

Currency also seems necessary. It is alot easier to walk around carrying hundred dollar bills than a sheep on your back when you want to buy anything. Currency increases efficiency, it seems like it is also a must in modern society. However I hear leftist rhetoric on returning to a barter economy.
Not so; a barter economy is fundamentally very atomized and individualistic, in the sense that every individual produces whatever he sees fit (sheep for example) and then goes to exchange those goods for goods produced by other individuals in the same manner, and this exchange takes place in a moneyless marketplace. Barter works fine for hunter-gatherer societies, and may even work tolerably well for agricultural societies - it works as long as each single individual (or, at most, a small team) is capable of producing a finished product from beginning to end. In industrial society, however, labour is social rather than individual. Few people work on a product from beginning to end; most people work on a small part of a product. Even the simplest everyday items are produced as a result of a long process involving thousands of people and many intermediate goods. In such an economy barter is impossible - in fact markets in general, with or without money, are a bad way to organize an industrial production process. That's why so much production takes place inside large corporations and you don't see every individual worker acting as an independent self-employed contractor selling his services to every other worker in a marketplace.

Leftists don't want a barter economy because barter implies markets, and we want to get rid of markets altogether.

So how do we plan to get rid of money? Well, you have to consider the functions of money in a market economy and how the same functions could be achieved without it. Money serves to guide both production and distribution of goods and services; it gives information about supply and demand to producers, allowing them to make production decisions, and it helps determine which consumers get what. To eliminate money we need to find a different way of (a) gathering information to guide production decisions, and (b) distributing goods and services among consumers.

There are many ways of doing both of those things without money. Gathering information about our supply of natural resources and capacity to produce things is pretty straightforward; instead of measuring costs in money we could easily measure them in labour-time (so many workers with such given skills must work for so many hours in order to produce such object - that's the kind of thing all corporations already know). Gathering information about consumer demand is a bit trickier, but there are many different ways to do it. We could have polls and surveys to ask people what they want; we could have people voting online (the internet makes a moneyless economy much easier); we could have a place in each store where customers can give their input; or a combination of the above. Then we need a coordinating body to match production with demand. This could be a state if you're going for state socialism, or a gathering of workers' councils if you want something more decentralized, or we could even leave it up to public opinion (publish the information about demand and rely on social pressure to make the producers produce what is demanded - not my favourite idea, but it could work).

As far as the other role of money is concerned, creating a distribution of wealth - here we can say with nearly absolute certainty that we could easily do better in a moneyless economy. There are many ways to distribute goods and services without money, and all of them would create a better society. We could do it with labour accounting: Have a certificate or debit card-type object that records how much time a person has worked, and allows that person to buy goods and services that took an equal amount of time for other people to produce. If you worked 40 hours you can buy any combination of things that took a total of 40 hours to produce. We could do it with energy accounting: Much like the above, but measuring total energy input rather than labour time (total energy input = calories burned by human workers involved in production + energy used by machines involved in production). We could go for an egalitarian or needs-based distribution: Don't worry about accounting and just give every person a more-or-less equal share of something, adjustable up or down if they demonstrate more need than average. This can work for goods that are available in abundance and are unlikely to be over-demanded if they are given out for free - stuff like pencils, toothbrushes, and other mundane items. Very few people will take more of these than they need.

Hope that helps! :)

gla22

17th May 2008, 03:23

Holden Caulfield

17th May 2008, 18:24

currency in some form is necessary of course,

i once read an internet article from some anarkiddie saying that currency would be replaced by the trade of good and went on about trading bushels of corn etc, i think this view needs dragged into the real world,

we live in a diverse society and so some currency with 'value' is needed to help with transactions and to make sure that everybody is equal and that nobody goes without

DustWolf

17th May 2008, 19:49

Perhaps notable that currency as we know it today has gone trough many utter transformations, but retained the name. A number on a bank account is very different in behavior and practicality from cashy money not to mention gold coins or a losslessly transferable/convertible number such as a paypal thing.

I think gold coins, cash and similar ideas are useless. This is the idea of proclaiming wealth based on knowing your way around getting your hands on something other people do not have. Electronic money on the other hand gets closer to simply being a value to be used to interchange goods. Electronic money could be called credits with no problem or be any particular currency and possibly not even randomly loose value like cash does.

Something worth mentioning is that when money "looses value" in a social system it actually gains value in the sense that the same amount of money can suddenly buy a lot more than before, since the goods themselves are cheap or free. This is something we would be seeing if we were to work on getting rid of the concept of currency within a community.

Kwisatz Haderach

17th May 2008, 23:46

Wow great informative post. I think we are on the same page regarding foreign trade and isolationism ect.
However a barter economy seems like it would cause problems. Money helps so much. If you go down to the general store and you want to buy some drinks and a snack it is easier to pay with currency than to barter a sheep or a knife or something. Money is way more efficient.
What do you mean by "money?" Like I said, I don't think any socialist or communist supports a barter economy. But that doesn't mean we want to keep money - at least not in the normal sense of the word. Certainly you should have some symbolic token that represents your purchasing power. But money is more than that; money makes a full circuit in the economy. You get paid money by your boss, you use it to buy stuff from the store, the store owner uses it to buy stuff from his suppliers, and the same coin can eventually make its way back to your boss and then to you. By contrast, you could have labour credits in a socialist economy that don't go around in a full circuit: They are created to pay you when you work, and they are destroyed when you expend them to make a purchase. Or you could have a moneyless communist economy in which you are allowed to take anything you want from a communal distribution centre within certain limits, and instead of money you carry around something that proves you have not yet gone over your monthly limit.

However i think we agree on the point that money must be backed by something real and substantial, gold perhaps or an amount of various precious metals so the currency value won't fluctuate to much.
If we are to have anything similar to currency at all, it must be backed either by human labour - the source of all value - or, if you want to be more technocratic, by units of energy. The gold standard just means taking one arbitrary commodity (gold) and measuring the value of everything else compared to the value of the gold you happen to have at the moment. It's a bad idea because your gold reserves have nothing to do with the productive capacity of your economy - and if you want currency to maintain its value, without inflation or deflation, then it must be linked to the productive capacity of your economy, not to something completely random.

Another question: is abolishing the markets the best idea? Why not cooperatives and collectives operating within markets, with government regulation of course. Marx did not believe everyone should ear the same amount of money, merely that the workers own the means of production. The existence of markets isn't contrary to Marxism I believe as long as the workers own the means.
Because the existence of markets implies the existence of separate entities - firms, corporations, cooperatives or collectives, call them anything you like - which control different means of production and therefore have different amounts of power. When you divide the means of production into separate chunks and give control over each of the chunks to separate and competing entities, that means you give different amounts of power to each of the entities. And whenever you have different groups of people with different amounts of power competing with each other, you know what will happen: Some will inevitably gain enough power to oppress and exploit the others.

Case in point: If you have employee-owned collectives competing in a marketplace, you will ensure a fair distribution of wealth and power within each of the collectives, but not between them. Some collectives will control more important things than others. Over time, some collectives will acquire more and more property at the expense of others, until the poorer collectives are left with no property at all, and must rent the property of other collectives. Instead of having individual capitalists exploiting individual workers, you will have rich and powerful collectives employing the services of - and exploiting - poorer collectives.

The only way to avoid this problem is for ownership over the means of production to be collective and indivisible - everyone must own an equal share of everything. Ownership must not be separated between competing entities.

Illus

18th May 2008, 02:13

I always understood socialism as post-barter economics. Under socialism everyone provides the product of their labor to society, and in return the rest of society provides the product of it's labor to him. Currency economics distort the true productive value of labor, so it's neccessary to remove that distorting barrier put up against social products.

For foreign trade with capitalist nations, why would a currency be needed for that? It could simply be a trade relationship, as in finding equivalents of value in import and export products and trading them on that basis, except on a mass scale.

In socialist society everyone has access to the full product of their labor.

You might ask: But how is that possible? Why would someone individually want to have all they produce? Society wouldn't function if that happened.

Well of course that is correct, which is why socialist society is based on need, a worker who produces 10 pairs of shoes or example certainly doesn't need all 10 pairs to live comfortably, yes? He would keep a few pairs for himself, and make whatever the rest of what he produces available to the community. Now you might say, what is the incentive for that shoe-maker to make his shoes available to the community, well in return the rest of the community would make all it's products available to him. It's a mutual arrangement between every individual producer and every other individual, so it works in specific relationships individually (between the shoemaker who wants a hat and the hat maker who wants shoes), and collectively.

Current barter economics distort true value of labor, while removing this distorting barrier socialism lets every individual producer have access to the products of his own labor individually and other of everyone else collectively. Socialism is the ultimate combination of personal and collective interests and the only way for workers to have freedom over their labor.

The only role for a 'state' or 'government' in a socialist society is to stop individuals selling things, so that every individual has equal access to the products of modern society.

Thus in socialism the 'economy' only has one real block in the way of satisfying the people, and that's the block all human society on this earth has, and that's resource scarcity and the limits of industrial society - ALL other limits are artificial. Capitalism and wage-labor are artificial limits on the capacity of human labor to make the lives of everyone better. Resource allocation is the key, in the world today their is far enough industrial productive power for every single human being to live comfortably, but they do not because of capitalism.

Schrödinger's Cat

18th May 2008, 02:23

Gla, I recommend you look up "energy accounting." Edric did a wonderful job showing why gold standard is an absurd concept rehashed by right-libertarians in an attempt to attack a different expression of fiat. The source of wealth is from labor, or more specifically energy. Without labor (energy), string, leather, and stitches would not have the same demand as a pair of shoes.

gla22

18th May 2008, 05:27

Ok, this has been enlightening. I have to do more research though to decide where i stand on this thing.

ManyAntsDefeatSpiders

18th May 2008, 06:08

I think Comrade Edric raised some very good arguments and alternatives to the currency system. It's not something I am overtly familiar with, however.

I just thought I would raise what Marx said in the Critique of the Gotha Progamme (http://www.marxists.org/archive/marx/works/1875/gotha/ch01.htm). Substituting money, with a gift-certificate equivalent to a worker's wage, is not the abolishment of currency at all; it is merely replacing it with a more restrictive form of exchanging commodities.

The price of a commodity only expresses in money the proportion in which other commodities will be given in exchange for it; it is a useful means in purchasing products rather than actually bartering one commodity for another commodity.

For example, $10 might buy a kilo of sugar or a kilo of rice. Now, if I had a kilo of sugar, yet had no money (because currency was abolished) then I would barter that kilo of sugar with a kilo of rice. Indeed, we often see such transactions when inflation has caused money to become a useless means of conducing transactions - yet we do not call such economies communist.

So, I think the concept of a wage itself needs to be attacked, as well as the market, and have something which measures, for example, how many hours the worker laboured. That would not differentiate between the type of labour or its profitability.

But like I said, not something I am particularly knowledgeable about. :)

Kwisatz Haderach

18th May 2008, 10:17

Ok, this has been enlightening. I have to do more research though to decide where i stand on this thing.
I highly recommend the book Towards a New Socialism (http://www.ecn.wfu.edu/~cottrell/socialism_book/) (available for free online in .pdf format at that link), because it contains an excellent overview of how a socialist economy could work.

Dimentio

18th May 2008, 13:55

Kwisatz Haderach

18th May 2008, 16:11

Speaking of which, is there any list of writings on energy accounting available online somewhere?

DustWolf

18th May 2008, 16:13

I have a question though. Wouldn't a labour-hour or energy demand based system favor more work / energy intensive alternatives?

If for example you had the choice to either make a certain resource (food) using manual labor or robots, and the robots could do it more efficiently, the manual labor would be exchangeable for more other resources than the robot option.

Kwisatz Haderach

18th May 2008, 16:56

No, because the introduction of a labour/energy-saving technology would not immediately reduce the use of labour or energy - rather its short-term effect would be to increase production.

Suppose you have 10 workers doing manual labour to produce 100 widgets in a certain amount of time. Then you introduce new machinery or robots, and now those same workers can produce 100 widgets in less time, or 500 widgets in the same time that it took them to produce 100 widgets with the old technology. You don't want to cut down on your amount of labour time because that would reduce your purchasing power, so you work as long as before, except now you produce 500 widgets. That's what happens in the short run.

In the long run, it may turn out that 500 widgets are too many, so the planning organization tells you to reduce production back down to 100 widgets. This means that your workers have more time that they can use to produce other things. Less workers are needed to produce widgets, so the planning organization gives the widget-producing workers a list of other things they could be doing and asks for volunteers among them to do those other things.

Edit: Also, new technology increases the value of each labour-hour. If it takes 3000 hours to produce 100 widgets with old technology, then you must work for 30 hours at your job (whatever that job may be) to be able to afford 1 widget. But if new technology is introduced and the number of hours needed to produce 100 widgets goes down to 2000, then you only need to work 20 hours at your job (whatever that job may be) to be able to afford 1 widget. So the purchasing power of one labour-hour has increased - it used to be equivalent to 0.033 of a widget, and now it has grown to 0.05 of a widget. Everyone is richer.

gla22

19th May 2008, 00:22

I highly recommend the book Towards a New Socialism (http://www.ecn.wfu.edu/%7Ecottrell/socialism_book/) (available for free online in .pdf format at that link), because it contains an excellent overview of how a socialist economy could work.

K i read this however I have problems with using labor as "currency". This is because the ideas don't account for the value of the raw materials. We'd see a huge black market start up because even though rhetorically a car would cost as much as 1000 dresses in reality the car is worth way more. Everyone would rush for the car and then would sell them for more on the black market.

Kwisatz Haderach

19th May 2008, 13:01

But the value of raw materials comes from the labour that is used to extract them. The cost of a car, in terms of labour, is not merely equal to the amount of labour used to put all the pieces together. You must also add up the labour used to build those pieces in the first place, and the labour used to extract the raw materials for the pieces, and a portion of the labour used to run the power plants that provide the electricity to build the car.

As for black markets, those can be eliminated if you get rid of paper money and replace it with something like debit cards. Without paper money, the only way to run a black market is through barter - and you already mentioned how difficult it is to run a barter market; imagine all those difficulties plus trying to hide it all.

gla22

19th May 2008, 13:56

^^^^ yes but there is still some inherit value in natural resources even with the extra labor hours of extraction.

Kwisatz Haderach

19th May 2008, 15:06

No, not really. Even in a capitalist market economy the cost of a natural resource depends entirely on the cost of extraction.

gla22

20th May 2008, 00:01

No, not really. Even in a capitalist market economy the cost of a natural resource depends entirely on the cost of extraction.

To a large extent yes, but also the quantity that is in existence among other speculative factors.

Kwisatz Haderach

20th May 2008, 00:26

The quantity that is in existence affects the demand side of the market. It doesn't affect the cost of obtaining the resource in the first place. A coal mining company spends the same amount of money to produce a ton of coal no matter how much coal there is in the rest of the world or how many people want it. Those other speculative factors only come in when it comes time for the company to sell that ton of coal to a buyer.

MarxSchmarx

20th May 2008, 05:06

Even in a capitalist market economy the cost of a natural resource depends entirely on the cost of extraction.

Not entirely. Another factor is relative scarcity viz. demand, which has little to do with the cost of extraction.

La Comédie Noire

20th May 2008, 18:56

Not entirely. Another factor is relative scarcity viz. demand, which has little to do with the cost of extraction.

Demand is always a prerequisite when it comes to commodity production. You wouldn't spend the time extracting it unless someone found it useful.

I always thought of the cost of labour as the basis of all price, a foundation if you will. Like "this is how much we must ask for if we are to at least break even this quarter." Then depending on the supply and demand thats how much extra you could ask for like "oh people would really kill for this, we could get away with $20 dollars in profit per unit."

On the Issue of currency it depends on what you base value on, labour power? Energy? Both?

Energy power + Labour Power = Value

Since there is no owner wishing to derive surplus value from labour accounting should become much more simplistic.

"We have 100 tons of iron do we make spoons or computers with it?" "What do people want more?"

Things like that could be handled with internet referendum.

Depends on your economy as well decentralized or centralized? If it were centralized using referendums would be a lot easier.

Quite a pickle.

MarxSchmarx

21st May 2008, 06:23

Then depending on the supply and demand thats how much extra you could ask for like "oh people would really kill for this, we could get away with $20 dollars in profit per unit."

The problem with this view is that in a hypothetical situation where demand collapses, you are forced into the irrational situation where you will sell your product below the cost of production (labor time or otherwise). This would be an utterly crazy proposition if labor time formed the basis of price. The only way this contradiction is resolved in a capitalist economy is by reference to supply and demand.

I don't mean this as an attack on the labor theory of value. Au contraire, the "supply and demand" view of prices can be readily converted into the labor theory of value, making it functionally equivalent. Put another way, if we view the price of a product as contingent only on the labor of the producers, rather than the labor of the consumers, we cannot maintain the view that the cost of the good is based on the producers need to recover the cost of production. This means that the labor theory of value has to extend to the consumers as well, and so the price in question isn't so much an issue of consumer demand as it is an issue of consumer labor time expended.

But the consumer's labor time is fundamentally different from the producer's labor time, which leads to the critique of the view the producer's cost of extraction alone justifies the price; the price, whether in terms of demand or consumer labor time, is still contingent on the consumer's interest.

La Comédie Noire

21st May 2008, 18:38

The problem with this view is that in a hypothetical situation where demand collapses, you are forced into the irrational situation where you will sell your product below the cost of production (labor time or otherwise). This would be an utterly crazy proposition if labor time formed the basis of price. The only way this contradiction is resolved in a capitalist economy is by reference to supply and demand.

But doesn't that happen sometimes? I mean one guy fucks up and you end up with a bunch of useless items no one wants for so they have to sell them to ware house stores like Building 19 or Job Lot to be resold at a lower price or put awya ins torage until they are wanted.

I might be misunderstanding your objection.

the labor of the consumers

What do you mean by that?

Hans001

24th May 2008, 04:59

I don't think we need paper or labour/energy money as a mean of exchange and to put value on things & activities we do. The only reason we ask for money as "payment" is because we want to be sure that we're going to be able to buy anything we desire or afford any activity/project we decide to do.
I think that if you use labour money, then people are going to be pushed to work longer hours so they can be "rich" and be able to afford or do what they want. The issue with that is that you create the same problem as what it is happening right now, that people get jobs just for the sake of money and not because they enjoy doing what they do. The same then with many of the organizations, because the people involved are there to make the greatest profits and to cut costs as low as possible, not to help society with useful products and services (remember that people are in charged of organizations, and if they need paper or labour money to survive they'll work for the sake of money, and so they can't stop to think on how useful "X" organization is for society) That freedom of choice is important, because if you choose not to be part of an organization, then that organization can't work, so that organization disappears.

MarxSchmarx

26th May 2008, 08:59

But doesn't that happen sometimes? I mean one guy fucks up and you end up with a bunch of useless items no one wants for so they have to sell them to ware house stores like Building 19 or Job Lot to be resold at a lower price or put awya ins torage until they are wanted.Yeah absolutely this happens, and recovering some of your costs is better than recovering none of your costs. I guess what I meant was that the market does not allow any single business to get away with this as its main source of revenue on a regular basis.

the labor of the consumers What do you mean by that?Haha yeah that phrase is super silly.
The amount of labor time a consumer puts in to receive their renumeration.