Lecture
The most general characteristic of capitalist production is the production of goods as commodities. Whereas for other modes of production within an economic social formation, producing goods for exchange, for the market, is only one form among others (and not the most significant one), with the bulk of production carried out on the basis of a natural, subsistence economy, under capitalism commodity production becomes a universal, all-embracing form of production. It is precisely on the basis of the capitalist mode of production, therefore, that commodity production most fully reveals all its properties and potentials, and, accordingly, the most accurate scientific understanding of commodity production can be developed.
Commodities are the products of mutually independent, private forms of labor that enter social consumption through exchange on the market. The useful properties of a product of labor take, under commodity production, the form of the commodity's use value — that is, its usefulness, its capacity to satisfy particular social needs. What is at issue here is not the needs of the producer of the commodity itself, but — since the product is intended for sale — the needs of other people, the usefulness of the commodity for them. The presence of use value in a commodity is a necessary condition for its production and sale.
A commodity's capacity to be exchanged on the market for other commodities in a certain proportion constitutes the exchange value of the commodity.
Use value of a commodity — the usefulness of a commodity, its capacity to satisfy particular social needs. Exchange value of a commodity
— the capacity of a commodity to be exchanged on the market in a certain proportion. Thus the commodity appears as a thing possessing a dual nature.
On the one hand it appears as a use value, and on the other as an exchange value. The dual nature of the commodity: a commodity appears, on the one hand, as a use value, and on the other, as an exchange value.
But what determines the exchange value of a commodity — its capacity to be exchanged for other commodities, and the proportion in which this exchange takes place?
Contemporary neoclassical theory, which is the most widespread, provides no definite answer to this question at all. According to this theory, the exchange ratio is established through the reconciliation of buyers' and sellers' preferences (that is, of supply and demand). Supply and demand, in turn, are determined by a great many different factors. In doing so, neoclassical theory immediately commits several egregious logical errors. First, the exchange ratio is treated straightaway as a price — that is, a monetary valuation of the commodity — even though the category of money has not yet been introduced or defined at this stage of the analysis. Thus the magnitudes of supply and demand are also assumed to be expressed in monetary form, although we still know nothing about the nature of money.
Second, among the most important factors said to shape demand are such things as consumers' money incomes and the prices of related goods, while among those said to shape supply are such things as the prices of resources and the prices of other goods. In other words, the concept of... price is used to define price. A closed logical circle arises in the definition. Moreover, the undefined and unintroduced concept of money income is again brought in. This "carelessness" is no accident. Neoclassical theory is in fact not interested in the nature of price or in the basis on which exchange proportions are established. It is interested only in the mechanism by which supply and demand are reconciled, and indeed not so much in the mechanism itself as in its quantitative expression. At the same time, however, neoclassical theory categorically rejects the labor theory of value adopted in classical political economy. Nevertheless, in its subsequent analysis, neoclassical theory in fact acknowledges production costs (expenditures of labor and material resources — that is, of materialized labor) as determining factors in price formation.
The labor theory of value proceeds from the fact that, in the exchange of the most diverse commodities, the only possible basis for equating them with one another is the fact, common to the overwhelming majority of them, that commodities are products of labor. Moreover, in exchanging commodities, producers must economically recoup, through that exchange, their expenditures on producing the commodities. Correspondingly, the amount of labor expended on their production serves as the basis for establishing the exchange ratio. One might object that not only labor but other resources as well are expended in making commodities. However, these resources themselves are nothing other than products of labor (materialized labor). Therefore, ultimately, all expenditures on the production of commodities can be reduced to human labor: to expenditures of living labor, that is, to the working time expended on producing the commodity, and to expenditures of materialized (past) labor, that is, to expenditures of the means of production used in making the commodity (raw materials, supplies, and tools).
Labor theory of value: it proceeds from the fact that, in the exchange of the most diverse commodities, the only possible basis for equating them with one another is the fact, common to the overwhelming majority of them, that commodities are products of labor. Moreover, in exchanging commodities, producers must economically recoup, through that exchange, their expenditures on producing the commodities. Correspondingly, the amount of labor expended on their production serves as the basis for establishing the exchange ratio. Expenditures of materialized labor (the value of the raw materials and supplies used up, and the value of the wear on tools) are transferred to the finished product by means of living labor. It is precisely the purposeful activity of the worker that allows the means of production expended to become embodied in a useful product, and thereby allows them not to lose their useful properties but to have those properties carried over into the properties of the product of labor created.
That is why their value, too, is transferred to the product of labor and added to the value of the living labor expended. Under commodity production, the exchange ratio (the exchange value of a commodity) is determined not by the labor actually expended, not by the number of hours of labor that were spent on making that particular commodity. Under commodity production, only socially necessary labor time is recognized in exchange. This is the average labor time, under given conditions, spent on producing (or more precisely, reproducing — that is, on the regularly renewed production of) that quantity of commodities of the given type which the market has recognized as meeting buyers' needs.
It is precisely this quantity of labor, which determines the exchange value (that is, the exchange ratio) of a commodity, that constitutes the value of that commodity. Socially necessary labor time — the average labor time, under given conditions, spent on producing (or more precisely, reproducing — that is, on the regularly renewed production of) that quantity of commodities of the given type which the market has recognized as meeting buyers' needs.
Producers who spend more working time on producing a given commodity than is socially necessary (that is, who have lower labor productivity) receive, in exchange for their commodities, a relatively smaller quantity of the other kind of commodity, since over a given period of time they themselves produce fewer commodities for sale than producers with higher labor productivity. In this way, the relations of production of commodity production push producers, under threat of impoverishment and ruin, to raise labor productivity. So, whereas the commodity initially appeared to us as a unity of use value and exchange value, we now discover that at the base of exchange value lies a property of the commodity that is its value.
Thus the commodity now appears as a unity of use value and value. The distinction between these two aspects of the commodity also determines the distinction between the properties of the labor expended in making it.
The labor that creates a commodity's use value is determined by the need to impart to the commodity certain definite, concrete physical properties, so that the commodity constitutes a useful product. Such labor is called concrete labor. (The transfer of the value of the means of production to the finished product mentioned above, being conditioned by the purposeful character of the labor process, is a property specifically of concrete labor.)
Concrete labor — labor that creates a commodity's use value, determined by the need to impart to the commodity certain definite, concrete physical properties, so that the commodity constitutes a useful product. The labor whose magnitude of expenditure determines the exchange ratio, and which underlies the value of a commodity, appears indifferent to whatever particular concrete form it may take. It is any kind of labor expended on producing a commodity that has been recognized by the market. What matters is only the fact that these are expenditures of human labor that have received social recognition, and it is this that gives commodities, for all their differences, a qualitative homogeneity as products of labor. Such labor, indifferent to any particular concrete form, appears as abstract labor.
Abstract labor — labor indifferent to any particular concrete form, for which the only thing that matters is the fact that it is an expenditure of human labor that has received social recognition, and it is this that gives commodities, for all their differences, a qualitative homogeneity as products of labor possessing the property of value.
Thus the labor that produces a commodity likewise appears as something dual — as a unity of concrete and abstract labor. Since commodities are the products of the labor of private individuals independent of one another, their labor appears as private labor.
Private labor — labor performed by private individuals independent of one another, at their own risk and on their own account. However, this is labor that is performed within a system of the social division of labor. Each producer specializes in producing some particular commodity intended to satisfy the needs of other people, to satisfy a social need for that commodity. That is why the labor of a commodity producer simultaneously also appears as social labor.
Social labor — labor performed within a system of the social division of labor, and intended to satisfy a social need (that is, the need of other people, rather than of the producer himself). However, the labor embodied in a commodity is not social labor directly, immediately upon its production. After all, it is also private labor, that is, it is performed by the commodity producer at his own risk, outside the direct influence of society. It must therefore still prove its social character, its capacity to satisfy social needs and to be a necessary link in the social division of labor, through exchange on the market. Thus the labor that produces a commodity also appears as a unity of private and social labor. How does a commodity's exchange value come to be revealed on the market, and what visible form of expression does it acquire? Even with respect to the simplest exchange of one commodity for another, we must pose and clarify this question. For the seller of a commodity, the sole measure of the value of his commodity is the quantity of the other commodity received in exchange for it.
In the equation: x of commodity A = y of commodity B
"y of commodity B" is the equivalent for "x of commodity A."
Thus the body of the commodity — that is, the use value of commodity B — serves as the form of value of commodity A. The equation given above is the formula for the simple form of value.
Form of value of a commodity — the expression of the value of one commodity through its exchange value, that is, through the quantity of use value for which the given commodity is exchanged.
In more developed exchange, when commodity A can be set not only against commodity B but against a multitude of other commodity-equivalents, the form of value of commodity A finds its expanded expression in them. The formula:
x of commodity A = y of commodity B = ... = z of commodity C = ... etc.
is the expanded form of value. When commodity production attains a sufficiently developed character, and a significant mass of various products of labor is produced in the form of commodities, the entire remainder of the commodity world potentially confronts any particular commodity as its equivalents. Correspondingly, all commodities available on the market serve as equivalents for commodity A. Such a form of expressing the value of a commodity in a potentially infinite number of commodity bodies (use values) of commodity-equivalents opposed to it is the universal form of value. In turn, in the expression of the value of commodity A through all other commodities, commodity A serves, for the owners of those other commodities, as the equivalent of the value of their commodities. When this role of equivalent becomes firmly fused with the commodity body of one particular commodity, that commodity acquires the properties of a universal equivalent. The stable existence of some particular commodity in the role of a commodity that is the universal equivalent confers on it the property of money.
Price of a commodity:
The expression of the value of a commodity in money is called the price of the commodity.
Does neoclassical theory examine the nature of money?
Neoclassical economic theory declines to clarify or examine the nature of money. For it, money is anything at all that can function as such. That is, money is essentially defined only through its functions. These functions themselves are introduced empirically, without any theoretical grounding. For example, the statement that money performs the function of a measure of value is not accompanied by any explanation of the category of value or any clarification of how value relates to price.
Thus, theoretical analysis of the nature of money is replaced by a description of its empirically observed existence. Without clarifying the nature of money, neoclassical theory is at the same time unable to explain the proportions in which commodities are exchanged without introducing the category of money into the study — that is, independently of their monetary valuation. At early stages in the development of commodity production, among different peoples, the role of universal equivalent was played by the most varied commodities — grain, livestock, seashells, the pelts of fur-bearing animals, jewelry. But over time this role became firmly fixed on the precious metals — gold and silver. Gold and silver play the role of money because their natural properties are best suited to this role. Small amounts by weight of the precious metals have great value. Gold and silver are easily divided into parts, do not spoil in storage, and wear away slowly in the process of circulation. Since commodities are the products of mutually independent private forms of labor, producers of commodities can enter into relations with one another only through the exchange of the products of their labor — commodities — on the market. That is why private forms of labor constitute the necessary links of aggregate social labor only through the relations that exchange establishes between products of labor.
For this reason, the social relations of their private labor appear to producers as being exactly what they actually are — that is, not directly as social relations among people in their labor, but as thing-like relations among persons and social relations among things. The social character of the equality of heterogeneous kinds of labor embodied in a product appears to commodity producers in the form that all these various products of labor possess value. In equating their various products with one another as values in exchange, producers equate their various kinds of labor with one another as human labor. They need not necessarily be aware of this, but they do it nonetheless. A specific feature of commodity production is that the social character of mutually independent private forms of labor consists in their equality as human labor in general, and that this character takes the form of the value-character of the products of labor.
In the eyes of commodity producers, their own social relations take on the form of the movement of external things — commodities — under whose control they find themselves, instead of controlling that movement themselves. "These are socially valid, and therefore objective, thought-forms for the relations of production of this historically determined social mode of production — commodity production."¹ This thing-like appearance of the social determinations of labor constitutes the fetishism inherent in the world of commodities.
Commodity fetishism: the transformation of the man-made world of things into a social force independent of him and dominating him.
Commodity fetishism is the first and most general basis of the alienation of social relations under capitalism. In what follows we shall see new, more varied and more complex manifestations of this alienation. Differences between K. Marx's treatment of the labor theory of value and its treatment in the classical political economy of A. Smith and D. Ricardo: We can now summarize the differences between Marx's treatment of the labor theory of value and its treatment in classical English political economy (Adam Smith and David Ricardo).
This needs to be done, since an ignorant misconception that no such differences exist is widespread. These differences consist, first, in the clear and consistent application, throughout the entire analysis of the commodity, of an understanding of its dual character — on the one hand as value, on the other as use value. Although these two aspects of the commodity were known to economists long before Marx, most of them tended to conflate the two, and in any case paid little attention to the differing role that one or the other aspect of the commodity plays in the economic relations of commodity production.
Correspondingly, there was also a lack of clarity as to which particular aspect of the commodity was being addressed at any given stage of the investigation. Second, K. Marx was the first to show the dual nature of the labor that creates a commodity: as a unity, on the one hand, of concrete purposeful labor, which creates use value, and on the other, of abstract labor (labor considered and regarded in abstraction from its concrete varieties), which creates the value of the commodity.
Such a duality in human labor activity under conditions of commodity production had not been investigated by anyone before Marx. Third, K. Marx put forward his own conception of the origin and nature of money on the basis of his analysis of the form of value of a commodity (the very concept of the form of value was first introduced by Marx) and of the historical evolution of that form. Finally, through his analysis of the categories characterizing the nature of a commodity's value, K. Marx laid bare the contradictions in people's relations of production under commodity production, uncovered the cause of the fetishistic (alienated) character of these relations, and showed the development of these relations of production through the movement of the contradictions inherent in them.
Money (that is, the commodity that has secured for itself the functions of universal equivalent) is a commodity of a special kind. It differs in its properties from all other commodities. Money's firmly acquired property of being the universal equivalent means that money can be exchanged for any commodity. Money acquires the capacity for universal exchangeability, unlike all other commodities, which still have to prove their necessity through market exchange. Money appears as embodied value, and its value looks as though it were given in advance (although in fact it too is determined by the socially necessary labor expended on producing gold or silver), unlike other commodities, which still have to prove that they possess value through exchange on the market. Money — a commodity of a special kind, whose natural form (use value) has become firmly fused with that commodity's performance of the role of universal equivalent for all other commodities. Thus money, unlike all other commodities, acquires the property of universal exchangeability.
The first function in which money appears is to serve as a measure of the value of commodities. Money can serve as a measure of the value of commodities because it is itself a commodity, that is, it possesses (like gold and silver) a certain real use value and value. Money performs this function initially in the form of ideal money — every commodity, not yet embodied in a monetary equivalent, not yet exchanged for money (that is, not yet purchased), already enters the market with an ideal expression of its value in the form of a price. However, the fact that a commodity has such an ideal form of expression of value in the form of a price does not yet mean that this is its actual price and that it will actually be bought at this price, that is, that it will be exchanged for real money. While the owner of money can freely buy with his money any commodity of corresponding value, the owner of the commodity faces the problem of realization. The commodity may not be sold at all, or may be sold not at the price originally indicated. For the convenience of gold's and silver's performance of the function of money as a measure of value, they came to be divided into strictly defined portions by weight (this is reflected in the historical names of monetary units — for example, the pound sterling formerly denoted a specific portion by weight of silver; the ancient talent was likewise a weight-based name).
To exclude errors and dishonesty in determining the weight of monetary units, while at the same time avoiding the need to reweigh pieces of gold and silver every time, the state took to certifying the weight of these pieces by stamping them with a mark bearing the name of the monetary unit, an image of the state's coat of arms, or a portrait of its ruler. This is how the coin came into being. The issuing of coin became a state monopoly (the minting prerogative), which protected the coin from counterfeiting or debasement (a deliberate reduction of the coin's established weight for the purpose of appropriating the corresponding quantity of gold or silver). At times, however, the state itself resorted to debasing the coinage in order to increase treasury revenues. In simple commodity exchange (C—C), the owner of a commodity exchanges it for another because the equivalent commodity represents for him a use value that he needs.
In commodity-money exchange, the owner of a commodity sells it for money, in which is embodied the possibility of satisfying any need whatsoever. Having money, one can buy any commodity. And the owner of the commodity, having sold his commodity and received money for it, does exactly that. Usually no one sells solely for the sake of obtaining money. Having sold one's commodity and received money, one uses it to buy the goods one needs. The exchange of a commodity for money (C—M) is followed by the exchange of money for commodities (M—C). Thus, in this relation, money serves as an intermediary in the exchange of one commodity for other commodities. The formula for direct commodity exchange, C—C, is replaced by the formula for commodity-money circulation, C—M—C. This formula makes sense provided one keeps in mind that the commodities denoted by the letter C at the beginning and end of the formula are necessarily different commodities, commodities possessing different use values. So the second function of money is to serve as a means of circulation of commodities. Whereas commodities, once sold, leave the market, leave circulation, and enter the sphere of consumption, money is not consumed. Its specific use value as money (which it possesses over and above the use value of gold and silver) is its property of universal exchangeability.
Money is used again and again to buy and sell commodities, and, temporarily leaving circulation, immediately re-enters the market — some buy commodities with money (M—C) and then bring them back to market so that others may sell them their commodities for that same money (C—M). In this way, the continuous process of commodity-money circulation is sustained. Money remains constantly within this process, completing its own circuit: M—C—M. Once commodity-money circulation had become a stable phenomenon, it was fairly quickly observed that a coin could sometimes perform its function properly even when the quantity of gold or silver marked on it did not correspond to its actual weight. This gave rise to the illusion that the value of a coin (and of money in general) is established by the state (the sovereign) and depends entirely on its will. Thus arose the nominalist theory of money: according to this theory, it is the establishment of a coin's face value (that is, the quantitative expression of its worth) that turns it into money, and the state (the sovereign) can, at its own discretion, assign a coin any face value whatsoever. The fallacy of this view was confirmed by numerous crises of monetary circulation in antiquity and the Middle Ages. It has already been said above that money can serve as a measure of the value of commodities because it is itself a commodity, that is, it possesses (like gold and silver) a certain real value and use value.
The same holds for its function as a means of circulation. However, it is also a fact that the face value of a coin can in some cases diverge from its actual metal content without provoking monetary crises or disruptions of circulation. This can happen because, in its function as a means of circulation, money serves only as a fleeting intermediary, and in this capacity the participants in circulation are, properly speaking, not at all interested in its gold or silver content. I sold my commodity, received money, and immediately exchanged it for the goods I need — and what difference does it make to me how much gold or silver was in the coins that lingered in my hands for a few minutes (or hours)? In this function, money is capable of freeing itself from its bodily gold or silver form, since it is quite sufficient that it appear simply as a certain sign of value. And indeed, in practice, coin made of precious metals turned out to be replaceable in circulation by promissory notes or bills of exchange. It became clear that, as a means of circulation, metallic money could be replaced by any signs of value whatsoever. In the end, coin made of precious metals was everywhere displaced by paper money. However, neither the reduction of a coin's gold (silver) content relative to its face value, nor the replacement of metallic coin by paper money, can be carried out arbitrarily, on any scale or in any quantity whatsoever.
There exist objective economic laws of commodity-money circulation, the violation of which leads to disruption of that circulation and to crises. Monetary circulation remains stable so long as the total face value of the metallic coin in circulation corresponds to the quantity of gold or silver necessary for normal commodity circulation. How, then, is this quantity to be determined? The quantity of gold (or silver) necessary for circulation over a given period (for example, a year) is equal to the sum of the values of the commodities in circulation during that period, divided by the velocity of circulation of money (that is, by the average number of transactions performed by one monetary unit). As we already mentioned in the "Introduction," this regularity was formulated by K. Marx in Volume I of Capital in the following form: "For the process of circulation over a given interval of time: [sum of the prices of commodities] / [number of turnovers of like-named monetary units] = [the mass of money functioning as means of circulation]." Taking credit money into account, Marx's law of monetary circulation takes the following form:
QM = (PC − CS + P − MOP)/n, where:
QM — the quantity of money required for circulation during the given period,
PC — the sum of the prices of commodities to be sold,
CS — the sum of the prices of commodities sold on credit, payments for which fall outside the given period,
P — the sum of the prices of commodities sold on credit in a preceding period, whose payment has now fallen due,
MOP — the sum of mutually offsetting payments,
n — the number of turnovers of the monetary unit.
In 1911, this same regularity was formulated (without reference to K. Marx) by the economist I. Fisher and expressed as an algebraic formula¹:
MV = PQ, where:
M — the mass of money in circulation,
V — the velocity of circulation of money,
P — the prices of commodities,
Q — the physical volume of commodities in circulation.
Thus, if the face value of the money in circulation turns out to be smaller than this required quantity, difficulties arise in selling commodities because of a shortage of money. This leads to the values of the commodities offered on the market coming to be expressed in a relatively smaller number of monetary units; the nominal prices of commodities fall, while demand for gold and silver rises. This usually stimulates additional mining of them, and equilibrium in the market is restored. If, on the other hand, the face value of the money in circulation exceeds the necessary quantity, the prices of the commodities in circulation come to be expressed in a relatively larger number of monetary units; commodity prices rise. The purchasing power of a unit of money (a coin) falls. This too leads to disruption in the sale of commodities. Where there is a surplus of full-weight coin, such a hitch is eliminated fairly quickly — the surplus quantity of coin simply settles in people's hands and drops out of circulation. More serious crises often arose in antiquity when the state, in order to cover the expenses of the treasury (or of the royal court), regularly issued into circulation an excessive quantity of coin with a reduced weight of gold or silver.
¹ For more detail, see the box "Turning to the Primary Sources: The Law of Monetary Circulation in K. Marx and the Fisher Equation," given by us in the "Introduction."
All owners of commodities try to rid themselves as quickly as possible of such depreciating money, which increases the velocity of circulation and thereby increases the relative surplus of money. Accordingly, a way out of such a crisis is possible, for example, through the forced replacement of the depreciated coin with new, full-weight coin, issued in a strictly necessary quantity. The circulation of paper money is subject to the same regularity. Since paper money serves as a substitute for gold and silver, the necessary nominal quantity of paper money in circulation must correspond to the value of the gold or silver that this paper money replaces. Likewise, a shortage of paper money in circulation leads to deflation (a fall in commodity prices), while a surplus leads to inflation (a rise in commodity prices). The presence, within commodity-money circulation (C—M—C), of two successive acts — the exchange of a commodity for money (C—M) and the exchange of money for a commodity (M—C) — creates the possibility of a considerable separation of these acts in time. This possibility is realized, for example, when the commodity is handed over to the buyer in the first act, while the corresponding movement of money is deferred. A situation of deferred payment then arises. The first act of commodity-money circulation remains incomplete.
It is quite possible that this incompleteness (the seller has not received real money in exchange for his commodity) is caused by the incompleteness of another act of commodity-money circulation, in which the buyer is involved. He himself, in turn, has not yet sold his own commodity, and for the time being he has nothing with which to pay. When the agreed time for payment of the money arrives, the money now actually ends up in the seller's hands, and he is then in a position to purchase commodities himself, completing the second act of commodity-money circulation. When the previously deferred transfer of real money to the seller of the commodity takes place, money is being used in the function of a means of payment.
The functioning of money as a means of payment creates a formal possibility for crises of commodity-money circulation. If the act of purchasing a commodity is not actually completed, and if a situation arises in which this act of commodity-money circulation becomes detached from the subsequent one, then any disruption, any hitch in the commodity market can trigger a payment crisis. If, for some reason, I am unable to sell my commodity and do not receive money for it, then I will not be able to pay another seller for the commodity I have bought from him.
He, in turn, will also be unable to make the agreed payments, and so on. The situation becomes still more complicated when we are dealing with deferred payments drawn up in the form of bills of exchange, and these bills themselves circulate, replacing real money in settlements. Then a refusal, for whatever reason, to honor a bill of exchange at the agreed time can trigger a chain reaction in which other counterparties become unable to carry out the agreed settlements. Confidence in bills of exchange as means of circulation is undermined, they are refused for settlements, and the sale of commodities comes to a halt...
The functioning of money as a means of payment complicates the determination of the quantity of money required for circulation. Owners of commodities who have mutual obligations arising from trade operations may avoid using real money for settlement, may not actually make offsetting payments to each other, and may instead net out their mutual debts. Thus money is, in effect, not needed for the corresponding volume of transactions. Moreover, at certain periods a situation may arise in which payments that have fallen due exceed, in volume, the deferred payments. To the extent of this difference, more real money will be required in circulation. The opposite situation may also occur — the sum of payments deferred over a given period may exceed the sum of payments falling due. Correspondingly, to the extent of the difference between these sums, less real money will be required.
Marx's formula therefore ultimately took the following form:
It is easy to see that this formula, being far more precise than Fisher's formula, takes account of the realities of monetary circulation, and makes it possible to avoid mistaken interpretations arising from ignoring the problems potentially inherent in the function of money as a means of payment.
In particular, on the basis of Fisher's formula, the processes at work in Russian monetary circulation in 1992–1998 turned out to be utterly inexplicable, a period when deferred payments (the accumulation of debt), mutual offsetting of payments, and non-monetary exchange (barter) became extremely widespread. When money is temporarily withdrawn from the sphere of circulation — for example, in order to gradually accumulate the sum needed to make a payment — it thereby performs the function of a hoard. The functioning of money as a hoard is significant not merely as a way of preserving and accumulating personal wealth.
Money as a hoard plays a very important role in ensuring the stability of monetary circulation. When the quantity of gold and silver in circulation exceeds what is necessary to maintain the equilibrium of commodity-money circulation, it is set aside in reserve, settling as a hoard (that is, the hoarding of gold takes place). When there is not enough gold in circulation, it is withdrawn from reserves and put back into circulation.
A similar mechanism operates to maintain the equilibrium of paper-money circulation under a system of free convertibility of paper money into gold at a fixed rate. If there is too much paper money in circulation (and, correspondingly, commodity prices rise and money depreciates), its holders prefer not to buy commodities at rising prices but rather to exchange paper money tokens for gold. When there is not enough money in circulation, the reverse process takes place — gold is exchanged for paper money, and the latter is put into circulation. The mechanism of monetary circulation functions in a far more complex way in the absence of free convertibility of paper money tokens into gold. But such a mechanism rests on the relations of highly developed capitalism, and it would be premature to address its analysis at this stage of the investigation. The existence of money as a hoard gives rise to specific contradictions. Money, as has already been shown above, is a universal commodity possessing the property of universal exchangeability. Money grants its owner a qualitatively unlimited capacity to satisfy needs — with money, any commodity, however exotic, can be bought. With money one can sometimes even buy things that are not by nature commodities at all — honor, conscience, loyalty. Yet for all its qualitative limitlessness, money is quantitatively limited. You can buy any commodity with your money — but will the sum of money you have be enough for it?
It is precisely the contradiction between the qualitative limitlessness of money, in terms of its capacity to serve the satisfaction of any need whatsoever, and its quantitative limitedness, which sets a bound on the satisfaction of these needs, that serves as one of the most important motives driving the accumulation of hoards in pursuit of an ever-growing capacity to buy — a pursuit that runs up against the necessity of denying oneself these purchases for the sake of accumulating money. There is no limit to wealth that men can see. He who already has an abundance of every kind of good wants just as much again. And no one can be satisfied. Theognis¹ The last function in which money appears, and in which the specifically national guise of monetary and coinage systems disappears, leaving only the role of money as the independent value-existence of the commodity, as the universal equivalent of commodity values — is its function as world money.
In this function, money sheds all its specific national garb, passes through the borders of national markets, and serves as the means of uniting all commodity markets into a single international market.
COMMODITIES — the products of mutually independent, private forms of labor that enter social consumption through exchange on the market.
USE VALUE OF A COMMODITY — the usefulness of a commodity, its capacity to satisfy particular social needs.
EXCHANGE VALUE OF A COMMODITY — the capacity of a commodity to be exchanged on the market for other commodities in a certain proportion.
DUAL NATURE OF THE COMMODITY: a commodity appears, on the one hand, as a use value, and on the other, as an exchange value.
LABOR THEORY OF VALUE: it proceeds from the fact that, in the exchange of the most diverse commodities, the only possible basis for equating them with one another is the fact, common to the overwhelming majority of them, that commodities are products of labor. Moreover, in exchanging commodities, producers must economically recoup, through that exchange, their expenditures on producing the commodities. Correspondingly, the amount of labor expended on their production serves as the basis for establishing the exchange ratio.
SOCIALLY NECESSARY LABOR TIME — the average labor time, under given conditions, spent on producing (or more precisely, reproducing — that is, on the regularly renewed production of) that quantity of commodities of the given type which the market has recognized as meeting buyers' needs.
CONCRETE LABOR — labor that creates a commodity's use value, determined by the need to impart to the commodity certain definite, concrete physical properties, so that the commodity constitutes a useful product.
ABSTRACT LABOR — labor indifferent to any particular concrete form, for which the only thing that matters is the fact that it is an expenditure of human labor that has received social recognition, and it is this that gives commodities, for all their differences, a qualitative homogeneity as products of labor possessing the property of value.
PRIVATE LABOR — labor performed by private individuals independent of one another, at their own risk and on their own account.
SOCIAL LABOR — labor performed within a system of the social division of labor, and intended to satisfy a social need (that is, the need of other people, rather than of the producer himself).
FORM OF VALUE OF A COMMODITY — the expression of the value of one commodity through its exchange value, that is, through the quantity of use value for which the given commodity is exchanged.
PRICE OF A COMMODITY: the expression of the value of a commodity in money is called the price of the commodity.
COMMODITY FETISHISM: the transformation of the man-made world of things into a social force independent of him and dominating him.
MONEY is a special kind of commodity whose natural form (use value) has become firmly fused with the performance of the role of universal equivalent for all other commodities. As a result, money, unlike all other commodities, acquires the property of universal exchangeability.
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