[STUDY GROUP] Capital, Chapter 1:

[Junius]

[This user has been banned. However, this study group contains lots of good material, so I'm going to keep it here, but lock it. PM me for any queries - Bobkindles]


I tried to keep it as simple as possible, leave out the garbage, and focus on the content. I still think it covers the Chapter 1 fairly well.

Chapter 1:

Use-value, Exchange Value, Value and Socially Necessary Labor Time:

We begin by looking at a commodity. Why? Because in capitalism, ‘wealth is defined as an immense accumulation of commodities.’

What is a commodity? Well, it is an object which satisfies some want or another. We are not concerned with how it satisfies this want. The utility of the commodity makes it a use-value. The use-value concerns whether the commodity is useful or not; it concerns the nature of the commodity or its quality. This property is independent of the amount of labor embodied in the commodity. Marx sometimes uses the term as an adjective - to describe whether the commodity is useful or not, or as a noun 'use-values' to name commodities. E.g. 'Those are some nice use-values you've got there Engels.' We know that a commodity has a use-value when it is been consumed – i.e. is bought off the market and put to a use. Concerning the use-value of a commodity, we will go no further. It either has a use-value, or it doesn’t.

Something can be a use-value without having a value. This is the case whenever its utility to society is not due to labor. Such are air, virgin soil, natural meadows. Whoever directly satisfies her wants with the produce of her own labor, creates, indeed, use values, but not commodities. In order to produce the latter, she must not only produce use values, but use values for others, social use values. Nothing can have value, without being an object of utility. If the thing is useless, so is the labor contained in it; the labor does not count as labor, and therefore creates no value. Spending 400 hours on a seat ejector for a helicopter creates no value.

Commodities also have an exchange value – this refers to the quantitative aspect of value and constitutes the basis of a price of a commodity (although, exchange value does not have to = price). Let’s say that 10 pounds of corn = 2 pound of iron. This equation appears purely relative, and hence something which is common or inherent to them all seems a contradiction. However, 10 pounds of corn may also = 1 pound of tea or 2 pounds of coffee. From this, we can see that the exchange values of commodity express something equal in them, and that exchange value is only a mode of expression of this thing.

What is this common substance to all?

Well, we cannot look at the natural properties of a commodity as a ‘common substance’: a $100 worth of manure is the same as a $100 worth of diamonds.

This common substance is value; and value is homogeneous human labor. How do we measure this quantity of value, i.e. homogeneous human labor power? By time.

Bourgeoisie apologists will say: ‘But if the value of a commodity is determined by the time to create it, what of the slow worker? If he deliberately works slowly, will the commodity be worth more?’ Or ‘What if I find a diamond on a road next to a rock, will it be worthless since it took me five minutes to find?’

No! It is homogeneous human labor power; the average labor power of society to produce a commodity under normal conditions. In other words, the socially necessary labor time. Under normal conditions it takes vast amounts of time to expropriate diamonds from the earth.

The value of one commodity is to the value of any other, as the labor time necessary for the production of the one is to that necessary for the production of the other. “As values, all commodities are only definite masses of congealed labor time.”

Let’s go back to our example: 10 pounds of corn = 2 pound of iron. The socially necessary labor time changes with every variation in the productiveness of labor. A favorable season may reduce the time required to harvest 10 pounds of corn in halve. Hence, its value would be halve its former value. Hence, in the equation 10 pounds of corn = 2 pounds of iron would now be 10 pounds of corn = 1 pound of iron (assuming that the time required to mine iron stayed the same). Let’s say there was a drought and the time required to harvest 10 pounds of corn doubled. In that case, the value would double, hence 10 pounds of corn would now = 4 pounds of iron.

Alternatively, let’s say that the time required to mine 2 pounds of iron halved. In that case, 10 pounds of corn would now = 1 pound of iron – since the value of iron, i.e. the socially necessary labor time has halved. Let’s say that the time required to mine 2 pounds of iron doubled. In that case, 10 pounds of corn would = 4 pounds of iron.

Consequently, we can see that the equation 10 pounds of corn = 2 pounds of iron may have changed into 10 pounds of corn = 4 pounds of iron either by the doubling of the time required to harvest 10 pounds of corn, or the halving of the time required to mine 2 pounds of iron.

However, the equation 10 pounds of corn = 2 pounds of iron may remain the same if both commodities' value increase in equal proportions, or decrease in equal proportions. Hence, by only referring to other commodities can we see their real or absolute increase or decrease.

The value of a commodity, therefore, varies directly as the quantity, and inversely as the productiveness, of the labor incorporated in it.

We have said that the value of a commodity depends on the amount of labor embodied in it. But for this to be universal, labor must also be reduced to a common standard – we cannot say that the labor of a highly-specialized and educated worker is the same labor as a worker who needs no special skill to produce her commodity. We can solve this riddle by equating the skilled labor as so much intensified or multiplied simple labor. For simplicity’s sake we shall henceforth account every kind of labor to be unskilled, simple labor. What is this overall theory called? The labor theory of value.

Next, Marx introduces forms or expressions of value; ways in which to express the values of commodities.


Elementary or Accidental Form Of Value

x commodity A = y commodity B, or
x commodity A is worth y commodity B.

20 yards of linen = 1 coat, or
20 Yards of linen are worth 1 coat.

We have already covered this form of expression of value. By equating one commodity to another we are expressing its value. Nothing controversial here.


Total or Expanded Form of value
z Com. A = u Com. B or v Com. C or = w Com. D or = Com. E or = &c.
(20 yards of linen = 1 coat or = 10 lbs tea or = 40 lbs. coffee or
= 1 quarter corn or = 2 ounces gold or = ½ ton iron or = &c.)

With this form, commodities are now expressed in terms of innumerable other members of the world of commodities. Every other commodity now becomes a mirror of linen’s value. At this point, the particular use-value of linen becomes unimportant, but rather it is the magnitude of value (determined by socially necessary labor time) possessed in a quantity of linen which determines its exchange with other commodities.

In the first form, e.g. 10 pounds of corn = 2 pounds of iron, it might, for ought that otherwise appears, be pure accident, that these two commodities are exchangeable in definite quantities. In the second form, on the contrary, we perceive at once the background that determines, and is essentially different from, this accidental appearance. The value of the linen remains unaltered in magnitude, whether expressed in coats, coffee, or iron, or in numberless different commodities, the property of as many different owners. The accidental relation between two individual commodity-owners disappears. It becomes plain, that it is not the exchange of commodities which regulates the magnitude of their value; but, on the contrary, that it is the magnitude of their value which controls their exchange proportions.

What's wrong with this expression of value?

Well, its incomplete - because it is an interminable series. With the introduction of a new commodity the chain is lengthened. It is a series of fragmented forms of the elementary form. Hence:


The General Form of Value:

1coat =
10lbs of tea =
40lbs of coffee =
1quarter of corn = 20 yards of linen
2ounces of gold =
½ a ton of iron =
x Commodity A, etc. =

Now all commodities are expressed in one commodity; in a general form. Through its equation with linen, the value of every commodity is now not only differentiated from its own use-value, but from all use-values, and is, by that very fact expressed as that which is common to all commodities. By this form commodities are, for the first time, really brought into relation with each other as values, or permitted to appear to each other as exchange-values” At this juncture, one commodity (here linen) becomes a universal equivalent. It establishes the exchange between all other commodities and loses its ability to function in the relative form of value because it cannot function as its own equivalent (20 yds. of linen = 20 yds. of linen is not a meaningful expression of value).

The general value form, which represents all products of labor as mere congelations of undifferentiated human labor, shows by its very structure that it is the social resumé of the world of commodities. That form consequently makes it indisputably evident that in the world of commodities the character possessed by all labor of being human labor constitutes its specific social character.


The Money Form

20 yards of linen =
1 coat =
10 lbs of tea =
40 lbs of coffee = 2 ounces of gold
1 quarter of corn =
½ a ton of iron =
x Commodity A

When in the course of history, one commodity, through social custom takes the form of the universal equivalent that commodity becomes the money commodity and begins to serve as money.

The elementary expression of the relative value of a single commodity, such as linen, in terms of the commodity, such as gold, that plays the part of money, is the price form of that commodity. The price form of the linen is therefore 20 yards of linen = 2 ounces of gold, or, if 2 ounces of gold when coined are £2, 20 yards of linen = £2.


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I missed out commodity fetishism, will do sometime later today unless anyone else would like to do it.

[Junius]

Don't hesitate to post criticisms or pose questions.

[PRC-UTE]

I tried to keep it as simple as possible, leave out the garbage, and focus on the content. I still think it covers the Chapter 1 fairly well.

Did you edit this down yourself? Thanks for doing that

This common substance is value; and value is homogeneous human labor. How do we measure this quantity of value, i.e. homogeneous human labor power? By time.

Is this saying that time decides value because the cost of labour? I read the section below this quote and that's what it seemed to say, so I'm just double checking.

I missed out commodity fetishism, will do sometime later today unless anyone else would like to do it.

looking forward to it.

[Junius]

Is this saying that time decides value because the cost of labour?

Not exactly; if that were the case then commodities would simply be equal to wages (cost of labor)...but labor power, as we will see, creates more value than wages cost. Think about it - your wages are worth $5, yet you create $10 worth of materials. The labor cost is $5, the value created is worth $10.

Okay, that was a bit conflated, I'll try again.

Wages, must, as a bare minimum, be able to provide a worker with a basic sustenance - the capitalist has a vested interest in keeping workers healthy enough to be able to go to work the next day and work in a productive manner. In other words, wages are as a bare minimum the value of the commodities required to keep a worker alive (edit: and perpetuate their existence - i.e. enough to raise a family, enlarge the labor pool). Agreed?

A capitalist can sell commodities at value and make a profit. I'll give an example. A worker makes 10 pots out of 10 kilograms of metal in 6 hours. Let's say that the metal costs $10. The worker is paid $2 - this is at the very least the minimum required to keep the worker alive & producing effectively. Let's say that the worker consumes 1 hammer in the process of making these 10 pots, at a cost of $1 per hammer. What would be the value of these pots produced? Well, the cost of the metal $10 + the cost of the labor power $2 + the cost of the hammer $1 = $13. The capitalist goes to the market and sells the pots for $13. The capitalist has not broken even!

But, he gets the worker to continue working another 6 hours. The same cost of metal $10 + the cost of the hammer $1 =11. Where's the wage of the laborer gone?

He's already been paid!

So, at the end of the day, the worker has produced 20 pots at a cost to the capitalist of $13 + 11 = $24.

Yet, the value of the goods is actually worth $26.

Why? Because the value of labor and the value which it creates are two different things.

The value of the labor (i.e the wage was $2). The worker was paid this, but continued working.

Yet just because he was not being paid for this 'additional time' does not mean that he was not creating value!

He still was, and therein lies the capitalist's profit.

To summarize: the value of the pots contains 12 hours labor + the value of the iron and the hammer. The value of the labor power as a commodity was $2 - the day's wage. That is the cost of labor. The value produced by that labor was $4. The wage and the cost of materials equaled = $24. The amount valorized, in the production of the commodity was $2, giving $26 worth of commodities that are thrown back into the market. Everything has been paid for at its value, yet the capitalist has made a profit.

---

Don't be worried if this is new - it is not covered in the first chapter - and only begins in chapter 6, 7 and 8.

[PRC-UTE]

thanks!

[Bilan]

God damn you move fast.
Thanks for that!

[Junius]

Well owing to a thousand distractions it took me longer than expected to get back to this. Anyhow, Commodity Fetishism.

Since I can't be bothered summarizing the chapter myself, here is a summary done by someone else which does a decent job in explaining it all.

# Commodities—-[the key distinguishing feature of the capitalist economy]—-are strange things.

1. Their nature as commodities does not arise from the fact that people produce them. People in all societies produce useful goods—-but not all these goods are commodities. [435]
2. Commodities gain their peculiar nature through market exchange.
a. When people produce goods for the market, the value of those goods is set not by their usefulness, but by their ability to be exchanged for other things. [436]
b. The labor embodied in these goods thus likewise becomes valued not for its usefulness, but for its ability to generate exchange. [436-7]
c. People's labor—-an aspect of their humanity—-thus itself becomes a commodity, to be bought and sold. Different kinds of labor come to be equated, because they can be exchanged for the same amount of goods. The social character of this labor thus comes to be seen as a material relationship between things. [437-8]
3. Thus when we look at the economy, instead of seeing a set of relationships between people, we see a set of relationships between things. One ton of iron and two ounces of gold appear to be "naturally" equal in value, just as one ton of each substance is equal in weight. The social relationship that creates their equal value [the amount of labor which they embody ] disappears from our consciousness. [438]

# Economists forget the source of the value of commodities—-human labor—-and describe the world as if coats or boots trade with linen independently of human agency. They fail to see that only capitalist production treats goods in this way, and thus mystifies real social relations. [439]

1. Other economies do not hide the fact that the economy is based on the social relations of labor.
a. Robinson Crusoe's 'economy' is not based on commodities, but on labor to create useful things. This economy is not mystified, and the source of value in it—-labor—-is clear. [439-440]
b. The medieval economy was built on dependence; goods were given and goods were received on the basis of social relationships of dominance and submission. But these relationships were apparent to all. The economy was seen as a result of these social relationships, not as somehow separate from human beings. [440]
c. Peasant labor is likewise dominated by production-for-use. Here, too, the origin of the economy in human labor is open for all to see. [440]
2. One can imagine a community of free individuals, in which production arises out of free cooperation, and in which goods are shared according to the time each contributes toward their production. Here, too, the primacy of human labor in the production of goods for use is obvious. [441]

# Religion merely reflects the real world.

1. It thus makes sense that capitalist society—-which reduces actual human labor to an abstraction—-has for its dominant religion a Christianity which reduces actual human beings to abstract "Man". [441]
2. Other societies have not been so dominated by commodities and trade. They have not lost their connection with and dependence on nature, and so they worship Nature in their religions. [441-442]
3. Such mystifications cannot disappear until the process of production is actually the result of free human association, regulated by the workers themselves. For this kind of society to emerge, however, a certain material groundwork must be laid. [442]

# In capitalist society, production has mastery over people, rather than the other way around.

1. Thus commodities appear to be independent of the people that produce them—-and appear to rule over them, according to 'natural' laws. [442]
2. Bourgeois economists see this fetishism when they look at older forms of economic life. For example, they see the lunacy of treating gold and silver as having inherent value, other than the value people give them. [442]
3. These same economists do not see their own fetishisms, however. They especially fail to see, for example, that capital has no value other than what people give it through their labor. And above all, they fail to see that commodities have no value in themselves. All the value of commodities comes from the labor that created them. (Marx then gives several examples of how economists miss this point.) [442-443]

Shoot if you have questions.

[benhur]

Thanks for the detailed explanations, LC. Are you gonna continue (cuz it's informative)?

I am hoping you can explain #4 a bit more? Is it about the capitalist increasing labor hours to increase productivity, and how that reduces wages? That's the idea I am getting, correct me if I am wrong.

[Junius]

Thanks for the detailed explanations, LC. Are you gonna continue (cuz it's informative)?

Yes, I will. I finish exams this Friday, so after then I will be able to continue.

I wasn't sure of the amount of interest in it, which was surprising to see on a communist forum and with the present financial crises and what not.

Originally posted by Benhur
Is it about the capitalist increasing labor hours to increase productivity, and how that reduces wages?

Not exactly sure what you are getting at here.

Merely increasing hours worked does not increase 'productivity' (at least in the sense I understand.) But let's say we have a situation where a worker works say 10 hours a day. Let's say that 4 of those hours go directly to the workers wage. So, the other 6 hours are worked for the capitalist. What does the capitalist want to do? He wants to reduce the amount of time the worker works for himself (i.e. his wage) and lengthen the time he works for the capitalist. There are several ways the capitalist can do this. Firstly, he can reduce the wage. This only goes so far, however, since all workers need enough to survive, and will struggle to protect what they have. Another means capitalism has increased the 'profit ratio' was to somewhat indirectly decrease wages. Since we agree that wages represent, at the very least, the basic cost of maintaining a worker (i.e food, rent and so forth) then it is in capitalists interests to revolutionize these areas so that the wage of a worker is less.

For example, the Corn Laws in Britain, which the likes of Smith and Ricardo argued against, maintained an artificially high price of bread - the British government did not wish to allow for free trade of corn, so set up tariffs to protect English industries against cheaper corn. Of course, this would mean that wages for workers would have to be higher, since the cost of corn was higher. So, they argued for free trade. We can see this in plenty of other areas, for example, public housing and the use of public transport to make the daily costs of a worker at a minimum - so that the wage of a worker is also reduced. This is a look at capitalism as a whole, however and is far more complex than I have represented it.

To get back to the factory, a capitalist wants to make it so that a worker is working less for himself and more for the capitalist. One simple means a boss can do this is by extending the working day, say to 12 hours. So in our above example, a worker would still be working 4 hours a day for himself and the other 8 hours for the capitalist. The rate of exploitation s/v (surplus labor over necessary labor) in the first example was 6/4 or 150%, in the latter example it was 8/4 or 200%. This measure did nothing to increase productivity however, it merely prolonged the day with which the worker worked for the capitalist.

But looking at productivity. Say the capitalist finds a new method to produce these commodities. He (or more accurately, his workers) can now create them in halve the time. Assuming that this new method of creating commodities cost the same amount as the former method of creating commodities (I say this for the sake of simplicity) the amount of labor in the commodities would be half what it was previously.

Does this mean that the capitalist would instantly halve the prices? No, the capitalist would sell it not at halve the price previously, but lower to attack a competitor's market. However, this would also mean that he would be gaining an extra profit - since he would be selling it not at the exact value, but slightly higher. Of course, when the opposing capitalist gets his hands on this new technology the race will begin again, and the price will be drawn back down to the value.

Increased productivity by no means means increased profit. Let's say I created a machine which produced cigarettes at twice the former speed. If this machine cost more than the amount it saves, then the capitalist will probably not adopt it. Another example: say I invent a machine which cost $1000 and produces cigarettes at the same rate as 10 workers. Those ten workers wages are $5 each. I would rather pay the $50 for these 10 cheap workers, than pay $1000 for a machine which does the same job. The point is, that the machines normally do a far quicker job! Say the machine could create 100 times the amount of cigarettes that the 10 workers formally could. If we wanted to create the same equivalent using manual laborers, we would need to employ 1000 people (10 x 100) at $5 per wage = $5000. Obviously, the machine of $1000 looks like a better option! So, in that case the capitalist would be better off adopting the machine and firing the workers.

This is all stuff from later chapters.

[Bilan]

I find this hard to get my head around

But let's say we have a situation where a worker works say 10 hours a day. Let's say that 4 of those hours go directly to the workers wage. So, the other 6 hours are worked for the capitalist.

Is this here implying that, in the process of M-C(MP-L)...P...C'-M', that the amount of L(abour) going into the commodity - only a portion of which is being payed back to those who created the commodity-capital (The workers through labour)? In what sense are they working for one part for themselves, and for the other, for the capitalist?
I think the ways its worded is just throwing me off.

[Bilan]

hola?

[benhur]

double post, sorry!

[benhur]

I find this hard to get my head around

But let's say we have a situation where a worker works say 10 hours a day. Let's say that 4 of those hours go directly to the workers wage. So, the other 6 hours are worked for the capitalist.

Is this here implying that, in the process of M-C(MP-L)...P...C'-M', that the amount of L(abour) going into the commodity - only a portion of which is being payed back to those who created the commodity-capital (The workers through labour)? In what sense are they working for one part for themselves, and for the other, for the capitalist?
I think the ways its worded is just throwing me off.

Let's say they create $4 worth of products in 4 hours, and that amount goes back to them in the form of wages. But if they work for another 4 hours and still only get $4, they're getting less than the value they create. Which means, the extra value that they created ($4) goes to the capitalist, and NOT to themselves. So in effect, they work 4 hours for themselves, and 4 hours for the capitalist.

[Bilan]

So essentially, its:
Worker works X amount of hours. In that amount of hours they create products worth Y, which goes back to them in the form of wages (W). When X is doubled, and Y is doubled, and they still only retain W (not twice as much), then half the their labour is going to the capitalist, half to the worker.
That doesn't really make sense though - if you work for an hour, you get paid with X amount; if you work twice that you, X is doubled (1h = X, 2h = XX).

For example, 1 hours work where I work, for me, is worth 12dollars (i.e. $12 an hour). When I work two hours, I earn $24. (The amount we sell, and produce, though, is not equal to half - not even close.)

blahj this equation irritates me.

[benhur]

Bottom line, the value created by labor doesn't go back to labor (in its entirety) in the form of wages. Only a portion does, which is what makes surplus value possible at all. In your case also, your $12/hr is only a portion of the value you create in that one hour, NOT the whole.

[Bilan]

ahh, I get you, thanks.

[benhur]

The price form of the linen is therefore 20 yards of linen = 2 ounces of gold, or, if 2 ounces of gold when coined are £2, 20 yards of linen = £2.

Can you explain as to how this is objectively determined, like 20y of linen=2 ounces of gold, or 2ounces=$2. In the first case, or in any case involving commodities, labor time could be used as a common factor. But when it comes to $, how do we equate gold with it, since labor isn't a common factor?

[Junius]

Can you explain as to how this is objectively determined, like 20y of linen=2 ounces of gold, or 2ounces=$2. In the first case, or in any case involving commodities, labor time could be used as a common factor. But when it comes to $, how do we equate gold with it, since labor isn't a common factor?

Indeed - how is it that we can use paper money, something with little labor embodied in it, to purchase commodities valued at much more? Well, the answer is in the question - money is simply a useful means to express the value of a commodity - rather than trading the individual commodity for another commodity, we use money as a common expression of their values. As Marx says:

The first chief function of money is to supply commodities with the material for the expression of their values, or to represent their values as magnitudes of the same denomination, qualitatively equal, and quantitatively comparable. It thus serves as a universal measure of value. And only by virtue of this function does gold, the equivalent commodity par excellence, become money.

It is not money that renders commodities commensurable. Just the contrary. It is because all commodities, as values, are realised human labour, and therefore commensurable, that their values can be measured by one and the same special commodity, and the latter be converted into the common measure of their values, i.e., into money. Money as a measure of value, is the phenomenal form that must of necessity be assumed by that measure of value which is immanent in commodities, labour-time.

As measure of Value, and as standard of price, money has two entirely distinct functions to perform. It is the measure of value inasmuch as it is the socially recognised incarnation of human labour; it is the standard of price inasmuch as it is a fixed weight of metal. As the measure of value it serves to convert the values of all the manifold commodities into prices, into imaginary quantities of gold; as the standard of price it measures those quantities of gold. The measure of values measures commodities considered as values; the standard of price measures, on the contrary, quantities of gold by a unit quantity of gold, not the value of one quantity of gold by the weight of another. In order to make gold a standard of price, a certain weight must be fixed upon as the unit. In this case, as in all cases of measuring quantities of the same denomination, the establishment of an unvarying unit of measure is all-important. Hence, the less the unit is subject to variation, so much the better does the standard of price fulfil its office. But only in so far as it is itself a product of labour, and, therefore, potentially variable in value, can gold serve as a measure of value.

But to answer your real question, how is it that a certain amount of gold is therefore realized in, say, $10. Well, I'll let Marx explain:

Capital, Chapter 3, Coin and symbols of value That money takes the shape of coin, springs from its function as the circulating medium. The weight of gold represented in imagination by the prices or money-names of commodities, must confront those commodities, within the circulation, in the shape of coins or pieces of gold of a given denomination. Coining, like the establishment of a standard of prices, is the business of the State. The different national uniforms worn at home by gold and silver as coins, and doffed again in the market of the world, indicate the separation between the internal or national spheres of the circulation of commodities, and their universal sphere.

The only difference, therefore, between coin and bullion, is one of shape, and gold can at any time pass from one form to the other. But no sooner does coin leave the mint, than it immediately finds itself on the high-road to the melting pot. During their currency, coins wear away, some more, others less. Name and substance, nominal weight and real weight, begin their process of separation. Coins of the same denomination become different in value, because they are different in weight. The weight of gold fixed upon as the standard of prices, deviates from the weight that serves as the circulating medium, and the latter thereby ceases any longer to be a real equivalent of the commodities whose prices it realises. The history of coinage during the middle ages and down into the 18th century, records the ever renewed confusion arising from this cause. The natural tendency of circulation to convert coins into a mere semblance of what they profess to be, into a symbol of the weight of metal they are officially supposed to contain, is recognised by modern legislation, which fixes the loss of weight sufficient to demonetise a gold coin, or to make it no longer legal tender.

The fact that the currency of coins itself effects a separation between their nominal and their real weight, creating a distinction between them as mere pieces of metal on the one hand, and as coins with a definite function on the other — this fact implies the latent possibility of replacing metallic coins by tokens of some other material, by symbols serving the same purposes as coins. The practical difficulties in the way of coining extremely minute quantities of gold or silver, and the circumstance that at first the less precious metal is used as a measure of value instead of the-more precious, copper instead of silver, silver instead of gold, and that the less precious circulates as money until dethroned by the more precious — all these facts explain the parts historically played by silver and copper tokens as substitutes for gold coins. Silver and copper tokens take the place of gold in those regions of the circulation where coins pass from hand to hand most rapidly, and are subject to the maximum amount of wear and tear. This occurs where sales and purchases on a very small scale are continually happening. In order to prevent these satellites from establishing themselves permanently in the place of gold, positive enactments determine the extent to which they must be compulsorily received as payment instead of gold. The particular tracks pursued by the different species of coin in currency, run naturally into each other. The tokens keep company with gold, to pay fractional parts of the smallest gold coin; gold is, on the one hand, constantly pouring into retail circulation, and on the other hand is as constantly being thrown out again by being changed into tokens.

The weight of metal in the silver and copper tokens is arbitrarily fixed by law. When in currency, they wear away even more rapidly than gold coins. Hence their functions are totally independent of their weight, and consequently of all value. The function of gold as coin becomes completely independent of the metallic value of that gold. Therefore things that are relatively without value, such as paper notes, can serve as coins in its place. This purely symbolic character is to a certain extent masked in metal tokens. In paper money it stands out plainly. In fact, ce n’est que le premier pas qui coûte.

We allude here only to inconvertible paper money issued by the State and having compulsory circulation. It has its immediate origin in the metallic currency. Money based upon credit implies on the other hand conditions, which, from our standpoint of the simple circulation of commodities, are as yet totally unknown to us. But we may affirm this much, that just as true paper money takes its rise in the function of money as the circulating medium, so money based upon credit takes root spontaneously in the function of money as the means of payment.

The State puts in circulation bits of paper on which their various denominations, say £1, £5, &c., are printed. In so far as they actually take the place of gold to the same amount, their movement is subject to the laws that regulate the currency of money itself. A law peculiar to the circulation of paper money can spring up only from the proportion in which that paper money represents gold. Such a law exists; stated simply, it is as follows: the issue of paper money must not exceed in amount the gold (or silver as the case may be) which would actually circulate if not replaced by symbols. Now the quantity of gold which the circulation can absorb, constantly-fluctuates about a given level. Still, the mass of the circulating medium in a given country never sinks below a certain minimum easily ascertained by actual experience.

The fact that this minimum mass continually undergoes changes in its constituent parts, or that the pieces of gold of which it consists are being constantly replaced by fresh ones, causes of course no change either in its amount or in the continuity of its circulation. It can therefore be replaced by paper symbols. If, on the other hand, all the conduits of circulation were to-day filled with paper money to the full extent of their capacity for absorbing money, they might to-morrow be overflowing in consequence of a fluctuation in the circulation of commodities. There would no longer be any standard. If the paper money exceed its proper limit, which is the amount in gold coins of the like denomination that can actually be current, it would, apart from the danger of falling into general disrepute, represent only that quantity of gold, which, in accordance with the laws of the circulation of commodities, is required, and is alone capable of being represented by paper. If the quantity of paper money issued be double what it ought to be, then, as a matter of fact, £1 would be the money-name not of 1/4 of an ounce, but of 1/8 of an ounce of gold. The effect would be the same as if an alteration had taken place in the function of gold as a standard of prices. Those values that were previously expressed by the price of £1 would now be expressed by the price of £2.

Paper money is a token representing gold or money. The relation between it and the values of commodities is this, that the latter are ideally expressed in the same quantities of gold that are symbolically represented by the paper. Only in so far as paper money represents gold, which like all other commodities has value, is it a symbol of value.

Finally, some one may ask why gold is capable of being replaced by tokens that have no value? But, as we have already seen, it is capable of being so replaced only in so &r as it functions exclusively as coin, or as the circulating medium, and as nothing else. Now, money has other functions besides this one, and the isolated function of serving as the mere circulating medium is not necessarily the only one attached to gold coin, although this is the case with those abraded coins that continue to circulate. Each piece of money is a mere coin, or means of circulation, only so long as it actually circulates. But this is just the case with that minimum mass of gold, which is capable of being replaced by paper money. That mass remains constantly within the sphere of circulation, continually functions as a circulating medium, and exists exclusively for that purpose. Its movement therefore represents nothing but the continued alternation of the inverse phases of the metamorphosis C—M—C, phases in which commodities confront their value-forms, only to disappear again immediately. The independent existence of the exchange-value of a commodity is here a transient apparition, by means of which the commodity is immediately replaced by another commodity. Hence, in this process which continually makes money pass from hand to hand, the mere symbolical existence of money suffices. Its functional existence absorbs, so to say, its material existence. Being a transient and objective reflex of the prices of commodities, it serves only as a symbol of itself, and is therefore capable of being replaced by a token.

One thing is, however, requisite; this token must have an objective social validity of its own, and this the paper symbol acquires by its forced currency. This compulsory action of the State can take effect only within that inner sphere of circulation which is coterminous with the territories of the community, but it is also only within that sphere that money completely responds to its function of being the circulating medium, or becomes coin.

How the state actually decides upon how much gold is to equal a certain amount of money; I don't know. The gold-standard was eliminated by Nixon in the 70s. It doesn't really affect what we are looking at, however, since money must still represent an amount of homogeneous labor for it to serve its purpose. Gold and other precious metals were used in place of other materials because they firstly take a lot of labor to obtain (e.g. using a pound of dirt as a money form would be impractical) and they were malleable, measurable and so forth. Its not something I am knowledgeable about. Maybe you could look into it further.

[benhur]

How the state actually decides upon how much gold is to equal a certain amount of money; I don't know. The gold-standard was eliminated by Nixon in the 70s. It doesn't really affect what we are looking at, however, since money must still represent an amount of homogeneous labor for it to serve its purpose. Gold and other precious metals were used in place of other materials because they firstly take a lot of labor to obtain (e.g. using a pound of dirt as a money form would be impractical) and they were malleable, measurable and so forth. Its not something I am knowledgeable about. Maybe you could look into it further.

Thanks, LC, you've been helpful. My problem is, if gold or some other physical commodity is used, then 20 yards of linen (from your example) can be equated to 2 ounces of gold, because labor time is common for both of them. But if we replace gold with money, then wouldn't the whole thing become subjective, because one might as well say 20 yards is equal to any amount of money, as the latter is not measured in terms of time? So how can money then function as a medium of exchange?

[Junius]

Originally posted by Benhur
But if we replace gold with money, then wouldn't the whole thing become subjective, because one might as well say 20 yards is equal to any amount of money, as the latter is not measured in terms of time?

Well no; the money would still have to represent the value in commodities. Is it a 'subjective' determination? Well - kind of. Are the measures of money arbitrary? Yes - they have consistently changed throughout history - Marx gives the example that the English Pound no longer represented what it originally did. So in this sense it is 'subjective' - that the measure of money changes. However, money still measures something objective; value. If it was unable to do so then it wouldn't be able to function as money. Just say that 10 lamps were equal to one pot, and that one pot was equal to one ounce of gold. An ounce of gold could be used as money - hence the lamps would equal ten ounces of gold. What difference does it make then, when we substitute gold with paper money representing that? In our example above an ounce of gold could equal $1, hence the 10 lamps would be worth $10. One economy might decide that the ounce of gold could equal $447 and hence, the 10 lamps being worth 10 times more would be worth $4470. Still; we see that the value of the commodities don't stem from how money is divided up and so forth, but the exchange values between the commodities; i.e. the respective amounts of socially necessary homogeneous labor embodied in them.