A Contribution to the Critique of Political Economy

by Karl Marx

B. THEORIES OF THE UNIT OF MEASURE OF MONEY.

The circumstance that commodities are converted into gold only in ideas as prices and that gold is therefore turned into money only in idea, gave rise to the theory of the ideal unit of measure of money. Since, in the determination of prices, gold and silver serve only ideally as money of account, it was asserted that the names pound, shilling, pence, thaler, franc, etc., instead of denoting certain weights of gold and silver or labor incorporated in some way, stood rather for ideal atoms of value. Thus, if, e. g., the value of an ounce of silver should rise it would contain more such atoms and would therefore have to be estimated and coined in a greater number of shillings. This doctrine, revived again during the last commercial crisis in England and even voiced in Parliament in two separate reports attached to the report of the select Committee on the Bank Acts sitting in July, 1858, dates from the end of the seventeenth century.

At the time of the accession of William III., the English mint-price of an ounce of silver was 5s. 2d., or 1-62 of an ounce of silver was equal to a penny; 12 of these pence were called a shilling. According to that standard, a piece of silver weighing, say, 6 ounces, would be coined into thirty-one coins, each called a shilling. But the market price of an ounce of silver rose above its mint price, from 5s. 2d. to 6s. 3d., or, in order to buy an ounce of silver bullion 6s. 3d. had to be paid. How could the market price of an ounce of silver rise above its mint price, when the mint price is merely a reckoning name for aliquot parts of an ounce of silver? The riddle was easily solved. Out of £5,600,000 of silver money which was in circulation at that time, four millions were worn out, clipped and debased. A trial disclosed that £57,000 of silver which were supposed to weigh 220,000 ounces, weighed only 141,000 ounces. The mint went on coining according to the same standard, but light-weighted shillings in actual circulation represented smaller parts of an ounce than their name implied. Hence, a greater quantity of these light-weighted shillings had to be paid in the market for an ounce of silver bullion. When a general recoinage was decided upon in consequence of the derangement that had been produced, LOWNDES, the Secretary of the Treasury, declared that the value of an ounce of silver had risen and therefore it must henceforth be coined into 6s. 3d. instead of into 5s. 2d. as heretofore. His argument practically amounted to the assertion that the rise in the value of the ounce caused a fall in the value of its aliquot parts. His false theory, however, served merely as an embellishment for a just, practical purpose. The government debts were contracted in light shillings, were they to be paid in heavy ones? Instead of saying pay back four ounces of silver, when you had received nominally five ounces but virtually only four, he said pay back nominally five ounces but reduce the metallic contents to four ounces and call a shilling what you had called four-fifths of a shilling heretofore. Thus Lowndes practically adhered to the metallic weight while theoretically he clung to the reckoning name. His adversaries who clung only to the name and therefore declared the 25 to 50 per cent. lighter shilling to be identical with the full-weight shilling maintained on the contrary that they adhered to the metallic weight.

JOHN LOCKE, who was an advocate of the new bourgeoisie in all forms, the manufacturers against the working classes and paupers, the commercial class against the old fashioned usurers, the financial aristocracy against the state debtors, and who went so far as to prove in his own work that the bourgeois reason is the normal human reason, also took up the challenge against Lowndes. John Locke carried the day and money borrowed at ten or fourteen shillings to a guinea was repaid in guineas of twenty shillings.[49] SIR JAMES STEUART sums up the entire transaction as follows: “ ... the state gained considerably upon the score of taxes, as well as the creditors upon their capitals and interest; and the nation, which was the principal loser, was pleased; because their standard (The standard of their own value) was not debased.”[50] Steuart thought that the nation would prove more alert with the further development of commerce. He was mistaken. About 120 years later the same quid pro quo was repeated.

It was just in the order of things that Bishop BERKELEY, the representative of a mystical idealism in English philosophy, should have given a theoretical turn to the doctrine of the ideal unit of measure of money, something which the practical “Secretary to the Treasury” had failed to do. He asks: “Whether the terms Crown, Livre, Pound Sterling, etc., are not to be considered as Exponents or Denominations of such Proportion? [namely proportions of abstract value as such.] And whether Gold, Silver, and Paper are not Tickets or Counters for Reckoning, Recording and Transferring thereof? (of the proportion of value). Whether Power to command the Industry of others be not real Wealth? And whether Money be not in Truth, Tickets or Tokens for conveying and recording such Power, and whether it be of great consequence what Materials the Tickets are made of?”[51] Here we find a confusion, first of the measure of value and the standard of price, and secondly of gold and silver as measures on the one hand and mediums of circulation on the other. Because precious metals can be replaced by tokens in the process of circulation Berkeley comes to the conclusion that these tokens represent nothing, i. e., only the abstract idea of value.

SIR JAMES STEUART had so fully developed the theory of the ideal unit of measure of money, that his successors—unconscious successors since they do not know him—have added to it neither a new version nor even a new example. “Money, which I call of account, is no more than an arbitrary scale of equal parts, invented for measuring the respective value of things vendible. Money of account, therefore, is quite a different thing from money coin, which is price[52] and might exist, although there was no such thing in the world as any substance which could become an adequate and proportional equivalent, for every commodity.... Money of account ... performs the same office with regard to the value of things, that degrees, minutes, seconds, etc., do with regard to angles, or as scales do to geographical maps, or to plans of any kind. In all these inventions, there is constantly some denomination taken for the unit. ... The usefulness of all those inventions being solely confined to the marking of proportion. Just so the unit in money can have no invariable determinate proportion to any part of value, that is to say, it cannot be fixed to any particular quantity of gold, silver, or any other commodity whatsoever. The unit once fixed, we can, by multiplying it, ascend to the greatest value.... The value of commodities, therefore, depending upon a general combination of circumstances relative to themselves and to the fancies of men, their value ought to be considered as changing only with respect to one another; consequently, anything which troubles or perplexes the ascertaining those changes of proportion by the means of a general, determinate and invariable scale, must be hurtful to trade.... Money ... is an ideal scale of equal parts. If it be demanded what ought to be the standard value of one part? I answer by putting another question: What is the standard length of a degree, a minute, a second? It has none ... but so soon as one part becomes determined by the nature of a scale, all the rest must follow in proportion. Of this kind of money ... we have two examples. The bank of Amsterdam presents us with the one, the coast of Angola with the other.”[53]

Steuart speaks here simply of the part money plays in circulation as the standard of price and money of account. If different commodities are marked in the price-list at 15s., 20s., 36s., respectively, then I care, in fact, neither for the silver substance, nor for the name of the shilling when comparing the magnitudes of their values. The ratios between the numbers 15, 20, 36, tell everything, and the number 1 has become the only unit of measure. Only the abstract proportion of numbers can at all serve as a purely abstract expression of proportion. In order to be consistent, Steuart should have dropped not only gold and silver, but their legal baptismal names as well. Since he does not understand the nature of the transformation of the measure of value into a standard of price, he naturally believes that the definite quantity of gold which serves as a unit of measure relates as a measure not to other quantities of gold, but to values as such. Since commodities appear as quantities of the same denomination through the conversion of their exchange values into prices, he denies that property of the measure which reduces them to one denomination; and since in this comparison of different quantities of gold the quantity of gold which serves as a unit of measure is conventional, he does not see the necessity of fixing it at all. Instead of calling 1-360 part of a circle degree, he might give that name to 1-180th part; the right angle would then be measured by 45 degrees instead of 90, and acute and obtuse angles would be measured accordingly. Nevertheless, the measure of the angle would remain, then, as before, first a qualitatively definite mathematical figure, the circle, and second a quantitatively definite part of the circle. As for Steuart’s economic illustrations, he refutes his own argument with one and does not prove anything with the other. The bank money of Amsterdam was, in fact, merely the reckoning name for Spanish doubloons, which retained their full weight by lying idly in the bank vaults, while the circulating coins became thinner from hard rubbing against the outer world. And as for the African idealists we have to abandon them to their fate until critical travelers will tell us more about them.[54] The French assignat could be called an almost ideal money in Steuart’s sense: “National property. Assignation of 100 francs.” To be sure, the use-value which the assignation was supposed to represent, namely, the confiscated land, was indicated here, but the quantitative definition of the unit of measure was forgotten and “the franc” became a meaningless word. How much or how little land the assignation franc represented depended on the results of the public auctions. In practice, however, the assignation franc circulated as a token of value of silver money and its depreciation was, therefore, measured by this silver standard.

The period of the suspension of cash payments by the Bank of England was hardly more fruitful of war-bulletins than of money theories. The depreciation of bank notes and the rise of the market price of gold above its mint price called forth again the doctrine of the ideal unit of money on the part of some of the advocates of the Bank. Lord Castlereagh found the classical confused expression for the confused idea by speaking of the unit of measure of money as “a sense of value in reference to currency as compared with commodities.” When a few years after the peace of Paris conditions permitted the resumption of cash payments, the same question which had been stirred up by Lowndes under William III., came up, hardly changed in form. An enormous government debt, as well as a mass of private debts, accumulated in twenty years, fixed obligations, etc., had been contracted on the basis of depreciated bank notes. Were they to be paid back in bank notes of which £4672, 10s. nominal, actually represented 100 pounds of 22 carat gold? THOMAS ATTWOOD, a banker of Birmingham, came forth as Lowndes redivivus. The creditors were to receive nominally as many shillings as had been nominally borrowed, but if about 1-78 of an ounce of gold constituted a shilling according to the old standard of coinage, then say 1-90 of an ounce should now be christened a shilling. Attwood’s adherents are known as the Birmingham school of “little shillingmen.” The controversy over the ideal money unit, which had started in 1819, still went on in 1845 between Sir Robert Peel and Attwood, whose own wisdom, as far as the function of money as a measure is concerned, is exhaustively summed up in the following passage, in which, referring to Sir Robert Peel’s controversy with the Birmingham Chamber of Commerce, he says: “The substance of your queries is ... in what sense is the word pound to be used?... To what will the sum one pound be equivalent?... Before I venture a reply I must enquire what constitutes a standard of value?... Is £3 17s. 10-1/2d. an ounce of gold, or is it only of the value of an ounce of gold? If £3 17s. 10-1/2d. be an ounce of gold, why not call things by their proper names, and, dropping the terms pounds, shillings and pence, say ounces, pennyweights and grains?... If we adopt the terms ounces, pennyweights and grains of gold, as our monetary system, we should pursue a direct system of barter.... But if gold be estimated as of the value of £3 17s. 10-1/2d. per ounce ... how is this ... that much difficulty has been experienced at different periods to check gold from rising to £5 4s. per ounce, and we now notice that gold is quoted at £3 17s. 9d. per ounce?... The expression pound has reference to value, but not a fixed standard value.... The term pound is the ideal unit.... Labour is the parent of cost and gives the relative value to gold or iron. Whatever denomination of words are used to express the daily or weekly labour of a man, such words express the cost of the commodity produced.”[55]

In the last words the hazy conception of the ideal money measure melts away and its real meaning breaks through. The reckoning names of gold, pound sterling, shilling, etc., should be names for definite quantities of labor-time. Since labor-time constitutes the substance and the intrinsic measure of values, these names would then actually represent definite proportions of value. In other words, labor-time is maintained to be the true unit of measure of money. With this we leave the Birmingham school, but should add in passing that the doctrine of the ideal measure of money acquired new importance in the controversy over the question of the convertibility or non-convertibility of bank notes. If paper receives its name from gold or silver, then the convertibility of a note or its exchangeability for gold or silver remains an economic law, no matter what the civil law may be. Thus a Prussian paper thaler, although legally inconvertible, would immediately depreciate if it were worth less than a silver thaler in ordinary trade, i. e., if it were not practically convertible. The consistent advocates of inconvertible paper money in England, therefore, sought refuge in the ideal measure of money. If the reckoning names of money, £, s., etc., are names of certain quantities of atoms of value, of which a commodity absorbs or loses now more, now less in exchange for other commodities, then an English £5 note, e. g., is just as independent of its relation to gold as of that to iron and cotton. Since its title would no more imply its theoretical equality with a certain quantity of gold or any other commodity, the demand for its convertibility, i. e., for its practical equality with a definite quantity of a specified thing would be excluded by the very conception of the note.

The theory of labor-time as the direct measure of money was first systematically developed by JOHN GRAY.[56] He makes a National Central Bank ascertain through its branches the labor-time consumed in the production of various commodities. The producer receives an official certificate of value in exchange for his commodity. i. e., he gets a receipt for as much labor-time as his commodity contains,[57] and these bank notes of one week’s labor, one day’s labor, one hour’s labor, etc., serve at the same time as a check for an equivalent in all other commodities stored in the bank warehouses.[58] This is the fundamental principle carefully worked out in detail and based throughout on existing English institutions. Under this system, says Gray, “to sell for money may be rendered, at all times, precisely as easy as it now is to buy with money; ... production would become the uniform and never-failing cause of demand.”[59] The precious metals would lose their “privilege” as against other commodities and “take their proper place in the market beside butter and eggs, and cloth and calico, and then the value of the precious metals will concern us just as little ... as the value of the diamond.”[60] “Shall we retain our fictitious standard of value, gold, and thus keep the productive resources of the country in bondage? or, shall we resort to the natural standard of value, labour, and thereby set our productive resources free?”[61]

Labor-time being the intrinsic measure of value, why should there be another external measure side by side with it? Why does exchange value develop into price? Why do all commodities estimate their value in one exclusive commodity, which is thus converted into a special embodiment of exchange value into money? That was the problem which Gray had to solve. Instead of solving it, he imagined that commodities could be related directly to each other as products of social labor. But they can relate to each other only in their capacity of commodities. Commodities are the direct products of isolated independent private labors, which have to be realized as universal social labor through their alienation in the process of private exchange, that is to say, labor based on the production of commodities becomes social labor only through universal alienation of individual labors. But by assuming that the labor-time contained in commodities is directly social labor-time, Gray assumes it to be common labor-time or labor-time of directly associated individuals. Under such conditions a specific commodity like gold or silver could not confront other commodities as the incarnation of universal labor, and exchange value would not be turned into price; but, on the other hand, use-value would not become exchange value, products would not become commodities and thus the very foundation of the capitalistic system of production would be removed. But that is not what Gray has in mind. Products are to be produced as commodities, but are not to be exchanged as commodities. He entrusts a national bank with the carrying out of this pious wish. On the one hand, society, through the bank, makes individuals independent of the conditions of private exchange, and on the other, it allows them to go on producing on the basis of private exchange. The logic of things, however, compels Gray to do away with one condition of capitalistic production after another, although he wishes to “reform” only the money system which results from the exchange of commodities. Thus he transforms capital into national capital,[62] land into national property,[63] and if his bank is to be watched closely, it will be found that it not only receives commodities with one hand and issues certificates for work delivered with the other, but that it regulates production as well. In his last work, “Lectures on Money,” in which Gray is anxious to demonstrate that his labor-money is a purely bourgeois reform, he gets tangled up in even more glaring contradictions.

Every commodity is directly money. That was Gray’s theory deducted from his incomplete and, therefore, false analysis of commodities. The “organic” structure of “labor money,” the “national bank” and the “ware-docks” are mere fantastic visions in which the dogma is made by a legerdemain to appear to us as a universal law. The dogma that a commodity is money or that the isolated labor of the individual contained in it is direct social labor, will of course not become true through the mere fact that a bank believes in it and carries on operations accordingly. It is more likely that bankruptcy would play in that case the part of the practical critic. What remains concealed in Gray’s writings and hidden from himself as well, namely, that labor-money is a well-sounding economic phrase for the pious wish to get rid of money, and with money, of exchange value, and with exchange value, of commodities, and with commodities, of the capitalistic mode of production, was clearly expressed by some English socialists of whom a few preceded and others followed Gray.[64]

But it remained for Mr. Proudhon and his school to preach in all earnest the degradation of money and the exaltation of the commodity as the gist of socialism and thus to reduce socialism to an elementary misconception of the necessary connection between commodity and money.[65]

2. THE MEDIUM OF CIRCULATION.

After the commodity has received in the process of price determination the form in which it becomes capable of circulation, and after gold has acquired the character of money in the same process, circulation will both present and solve the contradictions which are inherent in the process of exchange of commodities. The actual exchange of commodities, i. e., the social interchange of matter consists of a change of form in which is unfolded the double character of the commodity as use-value and exchange value, and at the same time its own change of form is crystallized in distinct forms of money. To describe this change of form is to describe circulation. As we have seen, given a world of commodities and with it a system of division of labor, commodity is but a developed form of exchange value; in the same manner, circulation implies a steady stream of exchange transactions which are being continually renewed on all sides. The second assumption we make is that commodities enter the process of exchange with a definite price or that they appear to each other in that process in a double capacity, really as use-values, ideally—in price—as exchange values.

The liveliest streets of London are crowded with stores whose show windows are filled with the riches of the world, Indian shawls, American revolvers, Chinese porcelain, Parisian corsets, Russian furs and tropical spices, but all of these things of joy bear fatal white labels marked with Arabian figures with the laconic characters £, s., d. Such is the picture of the commodity appearing in circulation.

a. THE METAMORPHOSIS OF COMMODITIES.

On close examination the process of circulation is seen to consist of two distinct cycles. If we denote commodity by the letter C and money by the letter M we can express these two forms as follows:

C—M—C
M—C—M.

In this chapter we are interested exclusively in the first form, i. e., in the form which serves as the direct expression of the circulation of commodities.

The process C—M—C consists of the movement C—M, the exchange of the commodity for money, or selling; the opposite movement M—C, exchange of money for a commodity, or buying; and of the unity of the two movements C—M—C, exchange of the commodity for money in order to exchange the money for a commodity, or selling in order to buy. But the result which marks the end of the process is C—C, exchange of commodity for commodity, real interchange of matter.

If we look at it from the extreme end of the first commodity, C—M—C represents its transformation into gold and its retransformation from gold into a commodity; a movement in which the commodity exists first as a particular use-value, then divests itself of that character, acquires the character of exchange value or universal equivalent, in which capacity it has nothing in common with its natural form, then throws off the last form as well to remain finally an actual use-value for the satisfaction of particular wants. In this last form it falls out of the sphere of circulation into that of consumption. The entire process of circulation C—M—C thus includes the combined series of metamorphoses, which every single commodity undergoes in order to become a direct use-value to its possessor. The first metamorphosis is accomplished in the first phase of the circulation process, C—M; the second in the last phase, M—C; and the entire process constitutes the curriculum vitae of the commodity. But the process C—M—C represents the combined metamorphosis of a single commodity and constitutes at the same time the sum of certain one-sided metamorphoses of other commodities, since every metamorphosis of the first commodity constitutes its transformation into another commodity and therefore the transformation of the other commodity into it; hence it constitutes a twofold transformation which takes place at the same stage of circulation. We must then consider separately each of the two processes of exchange into which circulation C—M—C breaks up.

C—M or sale: commodity C enters the process of circulation not only as a particular use-value, e. g., a ton of iron, but as a use-value of a certain price, say, £3 17s. 10-1/2d., or an ounce of gold. While this price is on the one hand the exponent of the quantity of labor-time contained in a ton of iron, i. e., of the magnitude of its value, it at the same time expresses the pious wish of the iron to become gold, i. e., to give to the labor-time it contains the aspect of universal social labor-time. Unless this trans-substantiation takes place, the ton of iron not only ceases to be a commodity, but even a product, for it is a commodity only because it is a non-use-value to its owner; that is to say, his labor counts as actual labor only in so far as it is labor useful to others, and the thing is useful to him only as abstract universal labor. It is, therefore, the business of iron, or of its owner, to find that point in the world of commodities where iron attracts gold. But this difficulty, the salto mortale of the commodity, is overcome when the sale actually takes place, as is assumed here on the analysis of simple circulation. When the ton of iron is realized as a use-value through its alienation, i. e., by passing from the hands in which it is a non-use-value to hands in which it is a use-value, it at the same time realizes its price and from mere imaginary gold it becomes real gold. In place of the name one ounce of gold or £3 17s. 10-1/2d., an ounce of real gold has appeared, but the ton of iron has cleared that place. Not only does the commodity—which in its price had been ideally converted into gold—actually turn into gold through the sale C—M, but gold, which as a measure of value had been only ideal money and in fact figured merely as a money name of commodities—is now turned into actual money[66] by the same process. Just as gold became the ideal universal equivalent, because all commodities measured their values by it, so does it now become the absolutely alienable commodity, real money, because it is the product of the universal alienation of commodities for it—and the sale C—M is the process by means of which that universal alienation takes place. But gold becomes real money only through sale, because the exchange values of commodities were already ideal gold in their prices.

In the sale C—M, as well as in the purchase M—C, two commodities, entities of exchange value and use-value, confront each other, but the exchange value of the commodity exists only ideally as price; while as regards gold, although it is really a use-value, its use-value is confined only to its being the bearer of exchange value and is, therefore, merely a formal use-value, having no relation to a real individual want. The antithesis of use-value and exchange value is thus distributed at the two extreme poles of C—M, so that the commodity confronts gold as a use-value which has yet to realize in gold its exchange value or its price, while gold confronts the commodity as an exchange value, whose formal use-value is yet to be realized in the commodity. Only through this duplication of the commodity as commodity and gold, and, further, through the twofold and polar relation by virtue of which each extreme represents but ideally what its opposite is in reality and is in reality what its opposite is only ideally—in short, only through the appearance of commodities as two-sided polar opposites are the contradictions solved that are inherent in the process of exchange.

So far we have considered C—M as sale, as the conversion of commodity into money. But if we look at it from the other end, the same process will assume the form M—C, or purchase, i. e., the conversion of money into commodity. Sale is necessarily its opposite at the same time; it is the former if we look at the process from one end, and the latter if we regard the process from the other end. In practice this process differs only in that the initiative in C—M originates at the commodity end or with the seller, while in M—C it comes from the money end or the buyer. In describing the first metamorphosis of the commodity, its conversion into money as a result of the completion of the first phase of circulation C—M, we assume at the same time that another commodity has been converted into money and is now in its second phase of circulation, M—C. Thus we get into a vicious circle of assumptions. Circulation itself constitutes such a vicious circle. If we did not consider M in M—C as the result of a metamorphosis of another commodity, we would thereby take exchange out of the process of circulation. But outside of the latter the form C—M disappears and only two different Cs confront each other, say iron and gold, the exchange of which does not constitute a part of the process of circulation, being direct barter. Gold, at the source of its production, is a commodity like any other commodity. Its relative value and that of iron or of any other commodity is expressed here in quantities in which they are mutually exchanged. But in the process of circulation this operation is implied, the value of gold being already given in the prices of commodities. Nothing can, therefore, be more erroneous than the idea that gold and commodity enter into the relation of direct barter within the process of circulation and that their relative values are ascertained through their exchange as simple commodities. The illusion that gold is bartered as a simple commodity for other commodities in the process of circulation is due to the fact that prices represent equations in which certain quantities of commodities are made equal to certain quantities of gold, i. e., that the commodities are made to relate to gold in its capacity of money, as a universal equivalent, and, therefore, appear to be directly exchangeable for it. In so far as the price of a commodity is realized in gold, it is exchanged for gold as a commodity, as a particular embodiment of labor-time; but in so far as it is the price that is realized in gold, the commodity is exchanged for gold in its capacity of money and not of a commodity, i. e., it is exchanged for gold as a universal embodiment of labor-time. But in either case the quantity of gold for which the commodity is exchanged in the process of circulation is not determined by exchange, but the exchange is determined by the price of the commodity, i. e., by its exchange value estimated in gold.[67]

Within the process of circulation gold appears in everybody’s hands as the result of sale C—M. But since C—M, sale, is at the same time M—C, purchase, it is apparent that while C, the commodity from which the process starts, is passing through its first metamorphosis, another commodity, which confronts it as the opposite pole M, is completing its second metamorphosis and is, therefore, passing through the second phase of circulation, while the first commodity is still in the first phase of its course.

As a result of the first phase of circulation, the sale, we get money which is the starting point of the second phase. In place of the commodity in its first form appears its golden equivalent. This result may now form a resting point, since the commodity in this second form possesses a lasting existence of its own. The commodity, a non-use-value in the hands of its possessor, is now on hand in an always useful, since always exchangeable, form, and it depends upon circumstances when and at what point of the surface of the commodity world it will again enter circulation. Its formation into a gold chrysalis constitutes an independent period in its life which may last a greater or less length of time. While in the case of barter the exchange of one particular use-value is directly bound up with the exchange of another particular use-value, the universal character of labor which creates exchange value is manifested in the separation and lack of coincidence of acts of purchase and sale.

M—C, purchase, is the inverted movement of C—M and at the same time the second or final metamorphosis of the commodity. As gold, i. e., in the form of the universal equivalent, the commodity can be directly represented in the use-values of all other commodities; the latter aspire to gold as their hereafter, but at the same time indicate in their prices the key in which it must sound in order that their bodies, their use-values, may take the place of money, while their souls, their exchange-values, may enter gold. The universal product of the alienation of commodities is the absolutely alienable commodity. There is no qualitative and only a quantitative limit to the transformation of gold into commodity, namely, the limit of its own quantity or magnitude of its value. “Everything is to be had for cash.” While in the movement C—M, the commodity, through its alienation as a use-value, realizes its own price and the use-value of somebody else’s money; it realizes in the movement M—C, through its alienation as an exchange value, its own use-value and the price of the other commodity. While through the realization of its price the commodity transforms gold into actual money, it turns gold into its merely fleeting money-form, through its own retransformation. Since the circulation of commodities implies an extensive division of labor and consequently a diversity of wants on the part of individuals, a diversity which bears an inverse ratio to the specialization of their own products, the purchase M—C may appear as an equation with one commodity equivalent or split up into a series of commodity-equivalents limited by the variety of the demands of the purchaser and by the amount of money in his possession. Just as a sale is a purchase, so is a purchase a sale. M—C is at the same time C—M, but the initiative belongs in this case to gold or the purchaser.

Coming back now to C—M—C, or to circulation as a whole, it is apparent that it contains the combined series of metamorphoses through which a commodity passes. But at the same time as one commodity enters the first phase of its circulation and completes its first metamorphosis, another commodity enters the second phase of circulation, completes its second metamorphosis and falls out of circulation; the first commodity enters at the same time the second phase of circulation completes its second metamorphosis and falls out of circulation, while a third commodity enters circulation, passes through the first phase of its course completing the first metamorphosis.

Thus, the combined circulation C—M—C, as a complete metamorphosis of a commodity always constitutes at the same time the end of the complete metamorphosis of another commodity and the beginning of a complete metamorphosis of a third commodity, i. e., a series without beginning or end. To illustrate this let us call C in either extreme C’ and C” respectively, in order to distinguish the commodities, the series reading thus: C’—M—C”. The first member, C’—M, presupposes in fact that M is the result of another transaction C—M, and is thus itself merely the last member of a series C—M—C’, while the second part M—C” is merely a result of C”—M, or appears as the first part of C”—M—C’”, and so on. Furthermore, although M is the result of only one sale, it appears that the last part M—C, may be represented as M—C’ + M—C” + M—C’”, etc., i. e., it may be split up into a number of purchases, and consequently a number of sales, or into a number of first members of new complete metamorphoses of commodities. Since the complete metamorphosis of a single commodity thus appears as a link not only of one endless chain of metamorphoses, but of many such chains, the process of circulation in the world of commodities presents a hopeless confusion of intertwined movements constantly ending and starting anew at a countless number of points. But every single sale or purchase stands as an independent isolated act, whose supplemental act may be separated from it in time and place, and therefore does not need to follow it directly as its continuation. Every separate process of circulation, C—M or M—C, as a transformation of one commodity into use-value and of another into money, i. e., as the first and second phases of circulation respectively forms an independent halting point from either direction; but, on the other hand, all commodities commence their second metamorphosis in the common form of the universal equivalent, gold, and stop at the starting point of the second phase of circulation; for that, reason any M—C dovetails in actual circulation with any C—M; the second chapter in the life-course of one commodity with the first chapter of that of another commodity. A, e. g., sells £2 worth of iron. He thus completes the transaction C—M or the first metamorphosis of commodity iron, but postpones his purchase until some other time. At the same time B, who sold 2 quarters of wheat for £6 a fortnight since, buys with the same £6 a coat and trousers of Moses & Son, thus completing M—C or the second metamorphosis of the commodity, wheat.

The two transactions M—C and C—M appear here merely as links of one chain, because a commodity expressed in gold looks like any other commodity, and one cannot tell by the looks of the gold whether it is transformed iron or transformed wheat. C—M—C appears, therefore, in the actual process of circulation as a jumble of countless accidentally coinciding or successively following members of different complete metamorphoses. The actual process of circulation thus appears not as a complete metamorphosis of a commodity, not as its movement through opposite phases, but as a mere agglomeration of many accidentally coinciding or successive purchases and sales. The process thus loses all clearness of outline which is so much more the case since every single act of circulation, e. g., sale, is at the same time its opposite, purchase, and vice versa. On the other hand, the process of circulation is nothing but the movement of metamorphoses in the world of commodities and, therefore, must reflect them also in its movement as a whole. How that reflection takes place we shall consider in the following chapter. It may be added here that in C—M—C the two extreme Cs constitute two forms of commodities which do not bear the same relation to M. The first C relates to money as a commodity of a special class to a universal commodity, while money relates to the second C as a universal commodity to an individual commodity. C—M—C can, therefore, be reduced by abstract logic to the final form S—U—I in which S, standing for species, forms the first extreme; U, signifying universality, forms the connecting medium, and I, individuality, constitutes the last extreme.

The owners of commodities entered the sphere of circulation simply as guardians of commodities. Within that sphere they confront each other in the opposite roles of buyer and seller, one as a personified sugar-loaf, the other as personified gold. As soon as the sugar-loaf is turned into gold, the seller becomes a buyer. These definite social functions are no outgrowths of human nature, but are the products of relations of exchange between men who produce their goods in the form of commodities. They are so far from being purely individual relations between buyer and seller that both enter this relation only to the extent that their individual labor is disregarded and is turned into money as labor of no individual. Just as it is, therefore, childish to consider these economic bourgeois roles of buyer and seller as eternal social forms of human individuality, so it is on the other hand, preposterous to lament in them the extinction of individuality.[68] They are the necessary manifestations of individuality at a certain stage of the social system of production. Moreover, in the opposition of buyer and seller the antagonistic nature of capitalistic production is expressed as yet so superficially and as mere matter of form, that this opposition belongs also to precapitalistic forms of society, since it merely requires that the mutual relations of individuals should be those of owners of commodities.

Now, if we consider the result of C—M—C, it comes down to mere interchange of matter, C—C. A commodity has been exchanged for a commodity, a use-value for a use-value, and the transformation of the commodity into money, or the commodity in its form of money, serves merely as a means of effecting this interchange of matter. Money thus appears merely as a medium of exchange of commodities; not as a medium of exchange in general, but as a means of exchange in the sphere of circulation, i. e., a medium of circulation.[69]

We have seen that the process of circulation of commodities comes to a completion in C—C, appearing as mere barter carried on by means of money; further, that C—M—C represents in general not only two isolated processes, but their dynamic union as well; but to draw from that the conclusion that purchase and sale form an indivisible unit, is a mode of thinking the criticism of which belongs to the domain of logic, and not to that of economics. The separation of purchase and sale in the process of exchange destroys all local, primitive, patriarchal and naively genial barriers to interchange of matter in society. It is, moreover, the general form of the separation of the points of coincidence and opposition in this interchange, carrying within it the possibility of commercial crises, because the antagonism of commodity and money is the abstract and general form of all antagonisms with which the capitalistic system of labor is pregnant. Hence, circulation of money is possible without crises, but crises can not occur without money circulation. In other words, where labor based on the system of private exchange has not reached the stage marked by the existence of money, it is less capable of producing those phenomena which presuppose the full development of the capitalistic mode of production. Bearing this in mind we can appreciate the depth of the criticism which proposes to do away with the “shortcomings” of capitalistic production by abolishing the “privilege” enjoyed by the precious metals and introducing a so-called “rational monetary system.” As a sample of economic defence of an opposite character may serve the following piece of reasoning which has been proclaimed exceedingly keen. JAMES MILL, the father of the well-known English economist, John Stuart Mill, says: “Whatever ... be the amount of the annual produce, it never can exceed the amount of the annual demand.... Of two men who perform an exchange, the one does not come with only a supply, the other with only a demand; each of them comes with both a demand and a supply.... The supply which he brings is the instrument of his demand; and his demand and supply are of course exactly equal to one another. It is therefore, impossible that there should ever be in any country a commodity or commodities in quantity greater than the demand, without there being, to an equal amount, some other commodity or commodities in quantity less than the demand.”[70]

Mill restores the balance by turning the process of circulation into direct barter and then smuggling into direct barter the character of buyer and seller borrowed by him from the process of circulation. To put it in his own confused language, during certain periods when all commodities are unsaleable there are really more buyers than sellers of one commodity, money, and more sellers than buyers of all other money, commodities; such was, e. g., the case at certain moments during the commercial crisis of 1857-58 in London and Hamburg. The metaphysical balance of purchases and sales amounts to this, that every purchase is a sale and every sale is a purchase, which is a poor consolation to the guardian of the commodity who can not bring about its sale and therefore can not buy.[71]

The separation of sale and purchase makes possible a large number of fictitious transactions side by side with genuine trade before the final exchange between the producer and the consumer of commodities takes place. It enables a host of parasites to penetrate the process of production and exploit the separation. But this, again, means that with money as the universal form of labor under the capitalist system, there is the possibility of the development of its contradictions.

b. THE CIRCULATION OF MONEY.

Actual circulation appears at first sight as a mass of purchases and sales accidentally taking place side by side. In buying as in selling, commodities and money always stand in the same mutual relation: the seller, on the side of the commodity; the buyer, on that of money. Money as a medium of circulation always appears therefore as a means of purchase; and in that way the difference in its destinations in the opposite phases of the metamorphosis of the commodity becomes indistinguishable.

Money passes into the hands of the seller in the same transaction in which the commodity passes into the hands of the buyer. Commodities and money thus flow in opposite directions and this change of place in which the commodity passes over to one side and money to the other side, occurs simultaneously at an indefinitely large number of points on the entire surface of bourgeois society. But the first step which the commodity makes in the sphere of circulation is also its last step.[72] Whether it leaves its place on account of its attraction for gold (C—M), or on account of its attraction by gold (M—C), with one move, with one change of place it falls out of the sphere of circulation into that of consumption. Circulation is a continuous flow of commodities, but different commodities all the time, since each commodity makes but one move. Every commodity enters upon the second phase of its circulation not as the same commodity, but as another commodity, gold. Hence the movement of a metamorphosed commodity is the movement of gold. The same piece of gold or the identical gold coin which changed places with one commodity in the act C—M, reappears from the opposite end as the starting point for M—C and thus changes places for the second time with another commodity. Just as it passed from the hands of buyer B into those of seller A, it now leaves A’s hands who has become a buyer and passes into C’s hands. The path described by a commodity in its transformation into money and its retransformation from money, i. e., the movement of a complete metamorphosis of a commodity assumes the aspect of an apparent movement of the same coin that changes places twice with two different commodities. No matter in how scattered and haphazard fashion purchases and sales may take place near each other, there is always in actual circulation a seller for each buyer and the money which moves into the place of the commodity sold, before it came into the hands of the buyer, must have already changed places with another commodity. Sooner or later it again leaves the hands of the seller, who turns buyer, to pass into the hands of a new seller and this frequently repeated change of place forms the interlacing of the metamorphoses of commodities. The same coins are moving, some more, others less frequently, from one place in the sphere of circulation to another, always in the direction opposite to that of the commodities moved, thus describing a longer or shorter circulation-curve. The different movements of the same coin can follow each other in point of time only, and on the contrary, the many scattered purchases and sales which appear as so many separate changes of place between commodities and money, occur simultaneously separated only in point of space.

The circulation of commodities C—M—C in its elementary form is completely described in the transition of money from the hands of the buyer into those of the seller and from the hands of the latter, as soon as he has turned buyer, into those of a new seller. This completes the metamorphosis of the commodity and with it the movement of money in so far as that movement is the expression of the metamorphosis. But since new use-values are continually produced in the shape of new commodities and must thus be constantly thrown anew into circulation, the process C—M—C is repeatedly renewed by the same commodity owners. The money which they have spent as buyers gets back into their hands as soon as they appear again as vendors of commodities. The constant renewal of the circulation of commodities finds its reflection in the continual circulation over the entire surface of bourgeois society of a quantity of money which, passing from hand to hand, describes at the same time a number of different small cycles starting from numberless points and returning each to its own starting point, to repeat the same movement over again.

The change of form on the part of commodities appears as a mere change of place on the part of money and the continuity of the circulation movement is all on the side of money, since the commodity always makes but one step in the direction opposite to money, while the latter makes in each case the second step for the commodity; the entire movement seems, therefore, to proceed from money, although in the case of a sale the commodity draws money out of its place, i. e., it circulates money as much as it is circulated by the latter in the case of a purchase. Furthermore, owing to the fact that money always confronts commodities in its capacity of a means of purchase, and in that capacity moves commodities only by realizing their price, the entire movement of circulation appears as a change of place between money and commodities, the former realizing the prices of the latter either by separate acts of circulation taking place simultaneously and side by side, or by successive transactions when the same coin realizes the prices of different commodities one after another. If we consider, e. g., the series C—M—C’—M—C”—M—C’”, etc., without regard to the qualitative aspects which become indistinguishable in the process of circulation, we witness the same monotonous operation. After realizing the price of C, M successively realizes those of C’, C”, etc., and commodities C’, C”, C’”, etc., constantly take the place which money has left. Money thus appears to keep commodities in circulation by realizing their prices. In discharging this function of realization of prices, money is itself constantly circulating, now changing its place, now describing a curve of circulation, now completing a small circuit where the starting and returning points coincide. As a medium of circulation, money is subject to a circulation of its own. The change of form of the circulating commodities appears, therefore, as a movement of money which furthers the exchange of commodities, motionless in themselves. The movement of the circulation process of commodities thus takes on the form of the movement of gold as a medium of circulation, i. e. of the circulation of money.

Since owners of commodities give the products of their individual labor the appearance of products of social labor by turning one object, viz. gold, into the direct expression of universal labor-time and therefore into money, their own movement by which all of them effect the interchange of the material products of their labor now appears to them as the direct movement of that one object, as the circulation of gold. The social movement itself appears to the owners of commodities partly as an outward necessity and partly as a mere formal intermediary process which enables every individual who puts any use-value into circulation to get other use-values out of it of an equal value. The use-value of commodities comes into play with their disappearance from the sphere or circulation, while the use-value of money as a medium of circulation is in its very circulation. The movement of a commodity in the sphere of circulation is of a transitory kind, while ceaseless motion in that sphere constitutes the function of money. Through this special function which it performs within the sphere of circulation money acquires a new capacity, which we have to consider now more closely.

In the first place, we see that the circulation of money forms an endlessly split up movement, since it reflects the splitting up of the process of circulation into an infinitely large number of purchases and sales and the independent separation of the mutually supplementary phases of metamorphoses of commodities. In the small cycles described by money, where the starting and returning points coincide, we do find a return movement, i. e., an actual circular movement, but the fact that there are as many starting points as there are commodities and that the number of these cycles is infinitely large puts them beyond all control, measurement, or computation. The time between the start and the return of a commodity is just as indefinite. Moreover, it is immaterial whether or not such a circuit has been actually described in a given case. No economic fact is more generally known than that one can spend money with one hand without getting it back with the other. Money proceeds from an endless number of points and returns to as many different points, but the coincidence of the starting and returning points is a matter of chance, because in the movement C—M—C the turning of the buyer again into a seller is not a necessary condition. Still less does the circulation of money resemble a movement radiating from a common centre to all points of the periphery and back from the peripheral points to the centre. The so-called cycle described by money, as it is pictured, amounts simply to this, that at all points we observe its appearance and disappearance, its never ceasing transition from place to place. In a higher, more involved form of money circulation, e. g. bank-note circulation, we shall find that the conditions of emission of money include those for its return. But in the simple money circulation it is a matter of chance for the same buyer to become again a seller. Where we really see constant cycle motions taking place, they are only reflections of deeper forces in the sphere of production, e. g., the manufacturer draws money from his banker on Friday, pays it out to his working-men on Saturday, the men immediately pay out the greater part of it to the storekeepers, etc., and the latter turn it in on Monday back to the banker.

We have seen that money realizes simultaneously a certain number of prices in the variegated purchases and sales which take place side by side at the same time. On the other hand, in so far as its movement represents the movement of the combined metamorphoses of commodities and the interlacing of these metamorphoses, the same coin realizes the prices of different commodities and thus makes a larger or smaller number of moves. If we take the circulation of a country for a given length of time, say a day, the quantity of gold required for the realization of prices and, consequently, for the circulation of commodities, will be determined by two conditions: first, the sum total of the prices; second, the average number of moves made by one coin. This number of moves or the rapidity of circulation of money is in its turn determined by or expresses the average rapidity with which commodities go through the different phases of their metamorphoses, the rapidity with which these metamorphoses succeed one another, and with which those commodities that have gone through their metamorphoses are replaced by new commodities in the process of circulation. We have seen that in the process of the determination of prices the exchange value of all commodities is ideally converted into a certain quantity of gold of the same value and that the same amount of value is present in a double form in either of the isolated acts of circulation M—C and C—M, first embodied in the commodity, and second, in gold; yet gold enjoys the capacity of a medium of circulation not by virtue of its isolated relation to separate commodities in a state of rest, but owing to its active presence in the dynamic world of commodities, viz., its function of expressing the change of form of commodities by its change of place and expressing the rapidity of their change of form by the rapidity of its change of place. The extent to which it is present in the sphere of circulation, i. e., the actual quantity of gold in circulation, is thus determined by the extent to which it is discharging its function throughout the entire process.

The circulation of money implies the circulation of commodities; money circulates commodities which have prices, i. e., which are beforehand ideally equated to certain quantities of gold. In the determination of the prices of commodities, the value of the quantity of gold which serves as a unit of measure, or the value of gold, is assumed to be given. Under that assumption the quantity of gold necessary for circulation is determined first of all by the sum total of the prices of commodities that are to be realized. But this sum is itself determined: 1. By the level of prices, the relatively high or low exchange value of commodities estimated in gold; and 2. By the mass of commodities circulating at fixed prices, i. e. by the number of purchases and sales at given prices.[73] If one quarter of wheat is worth 60 shillings, then twice as much gold is required to circulate it or to realize its price as would be the case if it were worth only 30 shillings. To circulate 500 quarters of wheat at 60 shillings, twice as much gold is necessary as for the circulation of 250 quarters at the same price. Finally, to circulate 10 quarters at 100 shillings only half as much money is necessary as when circulating 40 quarters at 50 shillings. It follows that the quantity of gold required for circulation may fall in spite of a rise in price, if the mass of commodities in circulation declines in a greater ratio than the rise of the combined sum of prices; and, inversely, the quantity of the circulating medium may rise in spite of a decline of the mass of commodities in circulation, if the sum total of prices rises in a greater ratio. Thorough and minute English investigations have demonstrated e. g. that in the early stages of a dearth of grain in England the quantity of money in circulation increases, because the total price of the diminished supply of grain is greater than the former total price of a larger supply of grain, while the circulation of the other commodities continues undisturbed for some time at their old prices. At a later stage of the dearth of grain, there is a decline in the quantity of circulating money, either because less goods are sold at old prices besides grain, or the same quantity of those goods is sold at lower prices.

But, as we have seen, the quantity of money in circulation is determined not only by the sum total of prices of commodities that are to be realized, but also by the rapidity with which money circulates or with which it completes this work of realization. If the same sovereign makes ten purchases a day, each of a commodity having a price of one sovereign, and thus changes hands ten times, it does as much work as would be accomplished by ten sovereigns each performing but a single act of circulation a day.[74] Consequently, rapidity of gold circulation can make up for its quantity, or the presence of gold in the sphere of circulation is determined not only by its presence as an equivalent of a commodity side by side with it, but also by its participation in the movement of metamorphoses of commodities. The rapidity of the circulation of money, however, can serve as a substitute for its quantity only to a limited extent, since at any given moment an endless number of isolated purchases and sales takes places in different localities.

If the total price of the commodities in circulation rises, but in a smaller ratio than the increase in the rapidity of circulation of money, the volume of the circulating medium will diminish. If on the contrary the rapidity of circulation decreases in a greater ratio than the total price of the commodities in circulation, the volume of currency will increase. An increasing volume of currency combined with a general fall of prices or a diminishing volume of currency in connection with a general rise of prices is one of the best known phenomena in the history of prices. But the consideration of the causes which bring about a simultaneous rise in the level of prices and a still greater rise in the rate of velocity of circulation of money, or the opposite phenomenon, falls outside of the sphere of simple circulation. By way of illustration, it may be mentioned that in periods of prevailing credit, the rapidity of circulation of money grows faster than the prices of commodities, while in times of declining credit the prices of commodities fall slower than the rapidity of circulation. The shallow and artificial character of the simple circulation of money is manifested in the fact that all the elements which have a determining influence on the volume of currency, such as the volume of commodities in circulation, prices, the rise or fall of prices, the number of simultaneous purchases and sales, the rapidity of the circulation of money,—depend on the metamorphic process which takes place in the world of commodities, and that again depends on the general character of the methods of production, the size of population, the relation between city and country, the development of the means of transportation, the greater or less division of labor, credit, etc.; in short, on circumstances all of which lie outside of the sphere of simple circulation of money and are only reflected in it.

The rapidity of circulation being given, the volume of currency is simply determined by the prices of commodities. Hence, prices are not high or low, because there is more or less money in circulation, but on the contrary, there is more or less money in circulation, because prices are high or low. This is one of the most important laws, whose demonstration in detail by means of the history of prices constitutes perhaps the only merit of the post-Ricardian English Political Economy. If experience shows, that the level of metallic circulation or the mass of gold and silver in circulation in a given country is subject to temporary ebbs and tides and very violent ones at times,[75] but on the whole remains stationary for long periods, the deviations forming but small oscillations about the average level, this is explained by the antagonistic nature of the circumstances which determine the quantity of money in circulation. Their simultaneous modifications neutralize their effects and leave everything where it was before.

The law, that with a given rapidity of circulation of money and a given total sum of prices of commodities the quantity of the circulating medium is determined, may also be expressed as follows. If the exchange values of commodities and the average rapidity of their metamorphoses are given, the quantity of gold in circulation depends on its own value. If, therefore, the value of gold, i. e. the labor-time necessary for its production, should rise or fall, the prices of commodities will rise or fall in inverse ratio, and corresponding to that rise or fall of prices, the rapidity of circulation remaining the same, a larger or smaller quantity of gold would be required to keep the same volume of commodities in circulation. The same change would occur, if the old standard of value were superseded by a more or less valuable metal. Thus, Holland required from fourteen to fifteen times as much silver as it had previously required gold, in order to circulate the same volume of commodities, when out of tender regard for the government creditors and out of fear of the effects of the discoveries in California and Australia it substituted silver for gold money.

From the fact that the quantity of gold in circulation depends on the variable sum total of prices of commodities and the varying rapidity of circulation, it follows that the volume of the circulating medium must be capable of contraction and expansion; in short, that according to the requirements of circulation, gold must now enter, now leave the sphere of circulation in its capacity of a medium of circulation. How the circulation process itself realizes these conditions, we shall see later on.

c. COIN AND SYMBOLS OF VALUE.

In its capacity of a medium of circulation, gold acquires a shape of its own, it becomes coin. In order to prevent any technical difficulties in the way of its circulation, it is coined according to the standard of the money of account. Gold pieces whose imprints and legends show that they contain certain weights of gold corresponding to the reckoning names of money, £, s., etc., are coins. The establishment of a mint-price, as well as the technical work of coining, are the business of the state. Both as money of account and as coin, money acquires a local and political character; it speaks different languages and wears different national uniforms. The sphere in which money circulates as coin, is distinguished as an internal sphere of circulation which is separated from the universal sphere of circulation in the commodity world by national boundaries.

Yet, the only difference between gold bullion and gold coin is that between coin denomination and weight denomination. What seems to be a difference in name in the latter case appears as a difference in shape in the former. Gold coin can be thrown into the melting-pot and thus be converted again into gold sans phrase, just as, on the contrary, gold bars only have to be sent to the mint to receive the shape of coins. The conversion and reconversion from one form into another appears to be a purely technical matter.

For 100 pounds or 1200 ounces troy of 22 carat gold one can get £4,672-1/2 or gold sovereigns at the English mint; if these sovereigns be put on one side of the weighing scale and one hundred pounds of gold bullion on the other, the two will balance each other, which proves that the sovereign is nothing but a piece of gold of certain weight bearing this name in English coinage and having a shape and stamp of its own. The 4,672-1/2 sovereigns are put into circulation at different points, and once in its grasp they make a certain number of moves per day, some sovereigns more, others less. If the average number of moves per day of each ounce be ten, the 1200 ounces of gold would realize 12,000 ounces or 46,725 sovereigns as the total price of commodities. You may turn and toss an ounce of gold in any way you like, and it will never weigh ten ounces. But here in the process of circulation one ounce practically does weigh ten ounces. The work performed by a coin in the sphere of circulation is equivalent to the quantity of gold it contains multiplied by the number of its moves. Besides the actual importance which a coin possesses by virtue of its being an individual piece of gold of a definite weight, it acquires an ideal significance due to its function. But whether the sovereign circulates once or ten times, in each particular purchase or sale it acts only as one sovereign. It is like a general who by timely appearance at ten different points on the battle field does the work of ten generals, but still remains the same identical general at each point. The idealization of the means of circulation which is due to the supplanting of quantity by rapidity in money circulation, affects only the function of the coin within the sphere of circulation, but not the nature of the individual coin.

The circulation of money is a movement through the outside world, and the sovereign, though it non olet, keeps rather mixed company. In the course of its friction against all kinds of hands, pouches, pockets, purses, money-belts, bags, chests and strong-boxes, the coin rubs off, loses one gold atom here and another one there and thus, as it wears off in its wanderings over the world, it loses more and more of its intrinsic substance. By being used it gets used up. Let us take up a sovereign at the moment when its natural, inborn character has been slightly affected. A baker, says Dodd,[76] who receives from the bank to-day a brand new sovereign and pays it to-morrow to the miller, does not pay the same veritable sovereign; the latter has become lighter than it was at the time he received it. It is clear, says an anonymous writer,[77] that in the very nature of things, coins must depreciate one by one as a result of ordinary and unavoidable friction. It is a physical impossibility to entirely exclude light coins from circulation at any time, even for one day. Jacob estimates that of the 380 million pounds sterling which were in existence in Europe in 1809, nineteen million pounds sterling entirely disappeared by 1829, i. e., within a period of twenty years.[78] Thus, while a commodity at its first step into the sphere of circulation, falls out of it, a coin, after a couple of steps within that sphere represents more metal than it actually contains. The longer a coin remains in circulation, the rapidity of circulation remaining the same, or the greater its rapidity of circulation within the same period of time, the greater the discrepancy between its form as coin and its actual gold or silver substance. What remains is magni nominis umbra. The body of the coin becomes but a shadow. If at first it became heavier through the process of circulation, it now becomes lighter on account of it, but continues to represent the original quantity of gold in each single purchase or sale. The sovereign, as a fictitious sovereign, as fictitious gold, continues to perform the function of a legitimate coin. While other beings lose their idealism in contact with the outer world, the coin is idealized by practice, being gradually transformed into a mere phantom of its golden or silver body. This second idealization of metal money springing from the very process of circulation, or from the discrepancy between its nominal weight and its real weight is exploited in all kinds of coin counterfeiting practiced partly by governments, partly by private adventurers. The entire history of coinage from the beginning of the middle ages until late in the eighteenth century is nothing but a history of these two-fold and antagonistic adulterations, and Custodi’s voluminous collection of writings of Italian economists turns mostly about this point.

But the fictitious importance of gold due to its function, comes in conflict with its real substance. One gold coin has lost more, another, less of its metal substance in the course of circulation, and one of them is, as a matter of fact, worth more now than the other. But since in the discharge of their function of coins they are taken at the same value, the sovereign weighing a quarter of an ounce passing for no more than the sovereign which only stands for a quarter of an ounce, the full-weight sovereigns are subjected in the hands of unscrupulous owners to surgical operations which produce artificially what the circulation process has caused in a natural way to their more light-weighted brothers. They are clipped and reduced and the superfluous gold fat lands in the melting pot. If 4,672-1/2 gold sovereigns when put on one side of the weighing scale weigh on an average only 800 ounces instead of 1200, they will buy when brought to the gold market only 800 ounces of gold; that is, the market price of gold would rise above its mint price. Every coin, even if of full weight would pass in its mint form for less than in bullion form. The full weight sovereigns would be reconverted into bullion, a form in which a greater quantity of gold is always worth more than a smaller quantity. As soon as this decline of metallic weight would affect a sufficiently large number of sovereigns to bring about a permanent rise of the market price of gold above its mint price, the reckoning names of the coins, though remaining the same, would begin to denote a smaller quantity of gold. That is to say, the standard of money would change and gold would be coined in the future according to this new standard. By virtue of its idealization as a medium of circulation, gold would react upon and change the legally determined ratios under which it acted as the standard of price. The same revolution would be repeated after a certain length of time and thus gold would be subject to constant change both as a standard of price and as a medium of circulation, a change under one of these forms leading to a change under the other and vice versa. This explains the phenomenon mentioned above, namely that in the history of all modern nations the same money-name stands for a constantly diminishing quantity of metal. The contradiction between gold as coin and gold as standard of price becomes also one between gold as coin and gold as the universal equivalent; in the latter capacity it circulates not only within the limits of national boundaries, but in the world market. As a measure of value gold was always of full weight, because it served only as ideal gold. In its capacity of equivalent in the isolated transaction C—M it passes at once from a state of motion to a state of rest; but in its capacity of coin its natural substance comes in constant conflict with its function. The transformation of the gold sovereign into fictitious gold can not be wholly avoided, but legislation seeks to prevent its unlimited circulation as coin by prescribing its withdrawal from circulation as soon as its shortage of metallic substance reaches a certain degree. According to the English law, e. g., a sovereign which lacks more than 0.747 grains of its weight ceases to be legal tender. The Bank of England which weighed forty-eight million gold sovereigns in the short period between 1844 and 1848, possesses in Mr. Cotton’s gold weighing scale a machine which not only detects a difference of 1-100 part of a grain between two sovereigns, but like a sensible being, immediately throws out the light-weight coin on a board where it lands under another machine which cuts it up with oriental cruelty.

That being the case, gold coins could not circulate at all were not their circulation confined to definite spheres in which they do not wear off so rapidly. In so far as a gold coin weighing only one-fifth of an ounce passes in circulation for a quarter of an ounce of gold, it is practically merely a sign or a symbol for one-twentieth of an ounce of gold, and in that way all gold coins are transformed by the very process of circulation into more or less of a mere sign or symbol of their substance. But no thing can be its own symbol. Painted grapes are no symbol of real grapes, they are imaginary grapes. Still less can a light-weight sovereign be a symbol of a full-weighted one, just as a lean horse can not serve as a symbol of a fat one. Since gold thus becomes a symbol of its own self, but at the same time can not serve in that capacity, it receives a symbolical, silver or copper substitute in those spheres of circulation in which it is most subject to wear and tear, namely where purchases and sales are constantly taking place on the smallest scale. In these spheres, even if not the same identical coins, still a certain part of the entire supply of gold money would constantly circulate as coin. To that extent gold is substituted by silver or copper tokens. Thus, while only a specific commodity can perform in a given country the function of a measure of value and therefore of money, different commodities can serve as coin side by side with gold. These subsidiary mediums of circulation, such as silver or copper coins, represent definite fractions of a gold coin within the sphere of circulation. Their own silver or copper weight is, therefore, not determined by the proportions of the respective values of silver and copper to that of gold, but is arbitrarily fixed by law. They may be issued only in such quantities in which the diminutive fractions of gold coin which they represent would constantly circulate either for purposes of change for gold coins of higher denominations, or for realizing equally small prices of commodities. In retail trade silver and copper tokens belong to distinct spheres of circulation. In the nature of things, the rapidity of their circulation is in inverse ratio to the price which they realize in each separate purchase or sale, or to the size of the fraction of gold coin which they represent. If we consider how immense the volume of the daily retail trade in a country like England is, we will understand from the comparatively insignificant proportions of its combined volume how rapid and steady the circulation of the subsidiary coin must be. From a parliamentary report of recent date we see, e. g., that in 1857 the English mint coined £4,859,000 worth of gold, £733,000 of silver nominal value which contained metal actually worth £363,000. The total amount of gold coined in the ten years ending December 31, 1857, was £55,239,000, and of silver only £2,434,000. The supply of copper coin in 1857 amounted only to £6,720 nominal value containing £3,492 worth of copper; of this £3,136 was in pennies, £2,464 in half-pennies, and £1,120 in farthings. The total value of copper coined in the ten years was £141,477 nominal, the metallic value being £73,503. Just as gold coin is prevented from permanently retaining its function of coin by the legal provision of the loss of weight which demonetizes it, so are the silver and copper tokens prevented from passing from their spheres of circulation into that of gold coin and acquiring the character of money by the provision of the maximum amount for which they are legal tender. In England e. g. copper is legal tender only to the amount of six pence and silver up to forty shillings. If silver and copper tokens were to be issued in greater quantities than the requirements of their spheres of circulation call for, prices of commodities would not rise as a result, but the accumulation of these tokens in the hands of retail dealers would reach such an extent that they would be finally compelled to sell them as metal. Thus in 1798 English copper coins, issued by private individuals, accumulated in the hands of small traders to the amount of £20,350 which they tried in vain to put again in circulation, being finally compelled to throw them as metal on the copper market.[79]

The silver and copper tokens which represent gold coin in certain spheres of circulation in the interior of the country, contain a definite quantity of silver and copper prescribed by law, but after they get into circulation, they wear off like gold coins and become even more rapidly mere phantoms, according to the rapidity and steadiness of their circulation. To draw again a line of demonetization beyond which silver and copper tokens would lose their character of coins, they would have to be replaced in turn within certain spheres of their own circulation by some other symbolic money, say iron and lead, and such representation of one kind of symbolic money by another kind would form an endless process. In all countries with a well developed circulation the very requirements of money circulation make it necessary that the character of silver and copper tokens as money be made independent of any loss of weight in those coins. Thus, as it was in the nature of things, it appears that they serve as symbols of gold coin not because they are symbols made of silver or copper, not because they have certain value, but only in so far as they have no value.

Relatively worthless things, such as paper, can consequently perform the function of symbols of gold money. That subsidiary currency consists of metal tokens, such as silver, copper, etc., is mainly due to the fact that in most countries the less valuable metals such as silver in England, copper in ancient Rome, Sweden, Scotland, etc., had circulated as money before they were degraded by the process of circulation to the rank of small change and replaced by a more precious metal. Besides, it is natural that the money symbol which grows directly out of metallic circulation, should itself be a metal. Just as that portion of gold which would always have to circulate as small change, is replaced by metal tokens; so can the other portion of gold which is constantly absorbed as coin by circulation in the interior of the country and, therefore, must continually circulate, be replaced with worthless tokens. The level below which the mass of circulating coin never sinks is determined in each country by experience. Thus, the originally imperceptible difference between the nominal weight and the metallic weight of a metal coin can grow apace until it reaches the point of absolute separation. The mint name of money parts company with its substance and exists outside of it in worthless slips of paper. Just as the exchange value of commodities is crystallized by their process of exchange into gold money, so is gold money sublimated in its currency into its own symbol first in the form of worn coin, then in the form of subsidiary metal currency, and finally in the form of a worthless token, paper, mere sign of value.

Gold coin has produced its substitutes, first metallic and then paper, only because in spite of its loss of metallic weight it continued to perform the function of coin. It did not circulate because of its wear and tear; on the contrary, it wore out to a symbol because it continued to circulate. Only in so far as gold money becomes simply a token of its own value in the process of circulation, can mere tokens of value take its place.

In so far as the movement C—M—C represents a dynamic unity of two processes C—M and M—C which pass directly one into the other, or in so far as a commodity passes through the complete process of its metamorphosis, it express its exchange value in price and in money only to discard that form at once and to become again a commodity or, rather, a use-value. That is to say, it develops only an apparent assertion of the independence of its exchange value. On the other hand, we have seen that gold, in so far as it performs the function of coin or in so far as it continually circulates, actually forms only a connecting link between the metamorphoses of commodities and constitutes but their transitory money form; furthermore, that it realizes the price of one set of commodities only in order to realize that of another, but in no case does it constitute a stable form of exchange value or appear itself as a commodity in a state of rest. The reality which the exchange value of commodities acquires in the process and which is represented by gold in its circulation, is the reality of an electric spark. Although real gold, it plays the part of fictitious gold, and can, therefore, be replaced in this function by a token of itself.

The token of value, say paper, which plays the part of coin, is the token of a quantity of gold expressed in its currency name, i. e., it is a gold token. Just as a certain quantity of gold does not in itself express a value ratio, so is that true of the token which takes its place. In so far as a certain quantity of gold, as embodied labor-time, has a value of a certain magnitude, the gold token represents value. But the magnitude of the value which it represents depends all the time on the value of the quantity of gold for which it stands. As regards commodities the token of value expresses the reality of their price, it is signum pretii and sign of their value only because their value is expressed in their price. In the process C—M—C, in so far as it represents the dynamic unity or direct alternation of the two metamorphoses—and that is the aspect it assumes in the sphere of circulation in which the token of value discharges its function—the exchange value of commodities acquires in price only an ideal expression and in money only an imaginary symbolic existence. Exchange value thus acquires only an imaginary though material expression, but it has no real existence except in the commodities themselves, in so far as a certain quantity of labor-time is embodied in them. It appears, therefore, that the token of value represents directly the value of commodities, by figuring not as a token of gold but as a token of the value which exists in the commodity alone and is only expressed in price. But it is a false appearance. The token of value is directly only a token of price, i. e., a token of gold, and only indirectly a token of value of a commodity. Unlike Peter Shlemihl, gold has not sold its shadow, but buys with its shadow. The token of value operates only in so far as it represents the price of one commodity as against that of another within the sphere of circulation, or in so far as it represents gold to every owner of commodities. A certain comparatively worthless object such as a piece of leather, a slip of paper, etc., becomes by force of custom a token of money material, but maintains its existence in that capacity only so long as its character as a symbol of money is guaranteed by the general acquiescence of the owners of commodities, i. e., so long as it enjoys a legally established conventional existence and compulsory circulation. Paper money issued by the state and circulating as legal tender is the perfected form of the token of value, and the only form of paper money, which has its immediate origin in metallic circulation or even in the simple circulation of commodities. Credit money belongs to a higher sphere of the social process of production and is governed by entirely different laws. Symbolic paper money does not in fact, differ in the least from subsidiary metal coin, except that it reaches wider spheres of circulation. We have seen that the mere technical development of the standard of price or of the mint price and later the shaping of gold bullion into coin have called forth the interference of the state; this circumstance brought about a visible separation of national circulation from the world circulation of commodities: this separation is completed by the evolution of coin into a token of value. As a mere medium of circulation money can assume an independent existence only within the sphere of national circulation.[80]

Our presentation has shown that the coin form of gold as a token of value differentiated from the gold substance itself, has its direct origin in the process of circulation and not in any agreement or state interference. Russia offers a striking example of the natural origin of the token of value. At the time when hides and furs played there the part of money, the conflict between the perishable and bulky nature of the material and its function as a medium of circulation resulted in the custom of replacing it by small pieces of stamped leather which thus became a kind of draft payable in hides and furs. Later on they became under the name of copecs mere tokens for fractions of the silver rouble and remained in use in some parts until 1700, when Peter the Great ordered their withdrawal in exchange for small copper coins issued by the state. Ancient writers who could observe the phenomena of exclusively metallic circulation, already took the view of coin as a symbol or token of value. That is true both of Plato[81] and Aristotle.[82] In countries where credit is not developed, as e. g. in China, legal tender paper money is found at an early date[83]. Early advocates of paper money expressly point out the fact that metallic coin is transformed into a token of value in the very process of circulation. So Benjamin Franklin[84] and Bishop Berkeley.[85]

How many reams of paper cut up into bills can circulate as money? Put in that way, the question would be absurd. The worthless tokens are signs of value only in so far as they represent gold within the sphere of circulation and they represent it only to the extent to which it would itself be absorbed as coin by the process of circulation; this quantity is determined by its own value, the exchange values of the commodities and the rapidity of their metamorphoses being given. Bills of a denomination of £5 could circulate in a quantity five times less than those of £1 denomination, and if all payments were made in shilling bills, then twenty times as many shilling bills would have to be in circulation as are one pound bills. If the gold currency were represented by bills of different denominations, e. g. five pound, one pound and ten shilling bills, then the quantity of these different tokens of value would be determined not only by the quantity of gold necessary for circulation as a whole, but also by that required in the sphere of circulation of each kind of bills. If fourteen million pounds sterling (this is the provision of the English Bank Law, not for the entire currency but only for credit money) were the level below which the circulation of a country never sank, then fourteen million paper bills, each a token of value of one pound, could circulate. If the value of gold fell or rose because the labor-time necessary for its production had fallen or risen, then, the exchange value of the same volume of commodities remaining the same, the number of one pound bills in circulation would rise or fall in inverse ratio to the change in the value of gold. If gold were replaced by silver as a measure of value, the ratio of the respective values of silver and gold being 1:15, and if each bill were to represent now the same quantity of silver as it represented gold before, then there would be 210 million one pound bills in circulation instead of the previous fourteen million. The number of paper bills is thus determined by the quantity of gold money which they represent in circulation, and since they are tokens of value only in so far as they represent it, their value is simply determined by their quantity. Thus, while the quantity of gold in circulation is determined by the prices of commodities, the value of the paper bills in circulation, on the contrary, depends exclusively on their own quantity.

The interference of the state which issues paper money as legal tender—and we are treating of paper money of that kind only—seems to do away with the economic law. The state which in its mint price gave a certain name to a piece of gold of certain weight, and in the act of coinage only impressed its stamp on gold, seems now to turn paper into gold by the magic of its stamp. Since paper bills are legal tender, no one can prevent the state from forcing as large a quantity of them as it desires into circulation and from impressing upon it any coin denomination, such as £1, £5, £20. The bills which have once gotten into circulation can not be removed, since on the one hand their course is hemmed in by the frontier posts of the country and on the other they lose all value, use-value, as well as exchange-value, outside of circulation. Take away from them their function and they become worthless rags of paper. Yet this power of the state is a mere fiction. It may throw into circulation any desired quantity of paper bills of whatever denomination, but with this mechanical act its control ceases. Once in the grip of circulation and the token of value or paper money becomes subject to its intrinsic laws.

If fourteen million pounds sterling were the quantity of gold required for the circulation of commodities and if the state were to put into circulation two hundred and ten million bills each of the denomination of £1, then these two hundred and ten millions would become the representatives of gold to the amount of fourteen million pounds sterling. It would be the same as if the state were to make the one pound bills represent a fifteen times less valuable metal or a fifteen times smaller weight of gold. Nothing would be changed but the nomenclature of the standard of price, which by its very nature is conventional, no matter whether such change takes place as a direct result of a change of the mint standard or indirectly owing to an increase of paper bills to an extent required by a new lower standard. Since the name £ would stand now for a fifteen times smaller quantity of gold, the prices of all commodities would increase fifteen times and two hundred and ten million one pound bills would now be actually as necessary as fourteen million had been before. To the same extent to which the combined quantity of tokens of value would increase now, the quantity of gold which each of them represents would decrease. The rise of prices would constitute but a reaction on the part of the process of circulation which forcibly equates the tokens of value to the quantity of gold which they are supposed to replace.

In the history of the debasement of money in England and France by their governments, we find repeatedly that prices had not risen in the same proportion in which the silver coinage had been debased. That was simply due to the fact that the proportion in which the currency was increased did not correspond to the proportion in which it had been debased; that is to say, because an inadequate quantity of coins of the poorer metallic composition was issued, if the exchange values of commodities were to be estimated in the future in the new coin as a measure of value and be realized in coins corresponding to this smaller unit of measure. This solves the difficulty left unsettled in the controversy between Locke and Lowndes. The ratio which a token of value, whether made of paper or of debased gold or silver, bears to certain weights of gold or silver estimated according to the mint price, depends not on its own composition but on the quantity in which it is found in circulation. The difficulty in understanding this is due to the fact that money in its two functions of a measure of value and a medium of circulation is subject to two not only opposite but apparently contradictory laws corresponding to the difference in the two functions. In the discharge of its function of a measure of value where money serves merely as money of account and gold only as ideal gold, everything depends on the natural substance of money. Estimated in silver or expressed in silver prices exchange values are naturally estimated quite differently than when measured in gold or as gold prices. On the contrary, in its function of a medium of circulation, where gold is not only imagined but is actually present side by side with other commodities, its substance is immaterial and everything depends on its quantity. For the unit of measure the determining factor is whether it consists of a pound of gold, silver or copper; while in the case of coin, no matter what its own composition is, it will become the embodiment of each of these units of measure in accordance with its quantity. But it goes against common sense that in the case of mere imaginary money everything should depend on its material substance, while in that of the palpably present coin all should be determined by an ideal ratio of numbers.

The rise or fall of prices of commodities following a rise or fall of the quantity of paper notes—the latter only where paper currency constitutes the exclusive medium of circulation—is thus nothing but an assertion through the process of circulation of a law mechanically violated from without; namely, that the quantity of gold in circulation is determined by the prices of commodities, and the quantity of tokens of value in circulation is determined by the quantity of gold coin which it represents. For that reason any desired number of paper notes will be absorbed and equally digested by the process of circulation, because the token of value, no matter with what gold title it may enter circulation, will be compressed within the latter to a token of that quantity of gold which could actually circulate in its place.

In the case of the circulation of tokens of value all laws pertaining to the circulation of real money appear to be reversed and standing on their heads. While gold circulates because it has value, paper has value because it circulates. While with a given exchange value of commodities, the quantity of gold in circulation depends on its own value, the value of paper depends on its own quantity in circulation. While the quantity of gold in circulation rises or falls with the rise or fall of prices of commodities, the prices of commodities seem to rise or fall with the change in the quantity of paper in circulation. While the circulation of commodities can absorb only a definite quantity of gold coin and as a result of that the alternating contraction and expansion of the currency appears as a necessary law, paper money seems to enter circulation in any desired amount. While the state is guilty of debasing gold and silver coin and of disturbing their function of a medium of circulation, if it turns out a coin, only 1-100 of a grain below its nominal weight; it performs a perfectly proper operation by issuing absolutely worthless paper notes which contain nothing of the metal except its mint denomination. While gold coin apparently represents the value of commodities only in so far as that value is itself estimated in gold or is expressed in price, the token of value seems to represent directly the value of commodities. It is, therefore, clear why students who examined one-sidedly the phenomena of circulation of money by confining their observations to the circulation of legal tender paper money, should have failed to grasp the intrinsic laws governing the circulation of money. As a matter of fact, these laws appear not only reversed but extinct in the circulation of tokens of value, since paper currency, if issued in the right quantity, goes through certain movements which are not in its nature as a token of value, while its proper movement instead of growing directly out of the metamorphosis of commodities, springs from the violation of its proper proportion to gold.

3. MONEY.

Money as distinguished from coin, the result of the circulation process C—M—C, forms the starting point of the circulation process M—C—M, i. e. the exchange of money for commodity in order to exchange commodity for money. In the form C—M—C, commodity forms the starting and final points of the movement; in the form M—C—M, money plays that part. In the former case money is the medium of exchange of commodities, in the latter the commodity helps money to become money. Money which appears merely as a means of circulation in the first form becomes an end in the second form; while commodity which appeared first as the end, now becomes but a means. Since money is itself the result of circulation C—M—C, the result of circulation appears at the same time as its starting point in the form M—C—M. While in the case of C—M—C the interchange of matter constituted the real import of the process, the form of the commodity resulting from this first process constitutes the import of the second process M—C—M.

In the form C—M—C the two extreme members are commodities of the same value, but qualitatively different use-values. Their mutual exchange C—C constitutes actual interchange of matter. In the form M—C—M the two extremes are gold and at the same time gold of equal value. To exchange gold for a commodity in order to exchange the commodity for gold, or if we consider the final result M—M, to exchange gold for gold, seems absurd. But if we translate the formula M—C—M into the expression: to buy in order to sell, which means nothing but to exchange gold for gold through an intervening movement, we recognize at once the prevailing form of capitalist production. In actual practice, however, people do not buy in order to sell, but they buy cheap in order to sell dear. Money is exchanged for a commodity in order to exchange the same commodity for a larger amount of money, so that the extremes M, M are, if not qualitatively, then quantitatively different. Such a quantitative difference presupposes the exchange of non-equivalents, yet commodity and money as such are only opposite forms of the same commodity, i. e. they are different forms of the same magnitude of value. The circuit M—C—M thus conceals under the forms of money and commodity more highly developed relations of production, and is but a reflection within the sphere of simple circulation of a movement of a more advanced character. Money, as distinguished from the medium of circulation, must therefore be developed from the direct form of circulation of commodities, C—M—C.

Gold, i. e., the specific commodity which serves as a measure of value and a medium of circulation, becomes money without any further assistance on the part of society. In England, where silver is neither the measure of value nor the prevailing medium of circulation, it does not become money, just as gold in Holland, as soon as it had been dethroned as a measure of value, ceased to be money. A commodity thus becomes money only in its combined capacity of a measure of value and medium of circulation; or, the unity of the measure of value and medium of circulation is money. As such a unity, however, gold has a separate existence independent of its existence in the two functions. As a measure of value it is only ideal money and ideal gold; as a mere medium of circulation it is symbolic money and symbolic gold; but in its plain metallic bodily form gold is money or money is real gold.

Let us now consider for a moment the commodity gold when it is in a state of rest, and plays the part of money in its relation to other commodities. All commodities represent in their prices a certain quantity of gold, that is to say, they are merely imaginary gold or imaginary money, representatives of gold, just as, on the other hand, money in the form of a token of value appeared as a mere representative of prices of commodities.[86] Since all commodities are thus but imaginary money, money is the only real commodity. Contrary to commodities, which only represent the independently existing exchange value, i. e., universal social labor, or abstract wealth, gold is the material form of abstract wealth. Through its use-value, every commodity, by its relation to some particular want, expresses only one aspect of material wealth, but one side of wealth. Money, however, satisfies every want since it can be directly converted into the object of any want. Its own use-value is realized in the endless series of use-values which form its equivalents. In its virgin metallic state it holds locked up all the material wealth which lies unfolded in the world of commodities. Thus, while commodities represent in their prices the universal equivalent or abstract wealth, viz., gold, the latter represents in its use-value the use-values of all commodities. Gold is, therefore, the bodily representative of material wealth. It is the “precis de toutes les choses” (Boisguillebert), the compendium of the wealth of society. At one and the same time, it is the direct incarnation of universal labor in its form, and the aggregate of all concrete labor in its substance. It is universal wealth individualized.[87] As a medium of circulation it underwent all kinds of injury, was clipped, and even reduced to the condition of a mere symbolic paper rag. As money it is restored to its golden glory.[88] From a serve it becomes a lord. From a mere understrapper it rises to the position of Lord of commodities.[89]

a. HOARDING.

Gold separates itself as money from the process of circulation whenever a commodity interrupts the process of its metamorphosis and remains in its form of a gold chrysalis. This occurs every time a sale is not immediately followed by purchase. The independent isolation of gold as money is, thus, a material expression of the disintegration of the process of circulation, or of the metamorphosis of commodities, into two separate acts independent of each other. The coin itself becomes money as soon as its course is interrupted. In the hands of the seller who takes it in exchange for his commodity, it is money and not coin; as soon as it passes out of his hands it is again coin. Everybody is a seller of the one commodity which he produces, but a buyer of all other commodities which he needs for his existence in society. While his selling is determined by the labor-time required for the production of his commodity, his buying is determined by the continual renewal of the wants of life. In order to be able to buy without having sold anything, he must sell without buying. In fact, the circulation process C—M—C is a dynamic unity of sale and purchase only in so far as it constitutes at the same time the constant process of its separation. In order that money should flow continuously as coin, coin must constantly coagulate as money. The continuous flow of coin depends on its constant accumulations in the form of reserve-funds of coin which spring up throughout the sphere of circulation and form sources of supply; the formation, distribution, disappearance, and reformation of these reserve funds is constantly changing, their existence constantly disappears, their disappearance constantly exists. Adam Smith expressed this never-ceasing transformation of coin into money and of money into coin by saying that every owner of commodities must always keep in supply besides the particular commodity which he sells, a certain quantity of the universal commodity with which he buys. We saw, that in the process C—M—C the second member M—C splits up into a series of purchases which do not take place at once, but at intervals of time, so that one part of M circulates as money while the other rests as money. Money is in that case only suspended coin and the separate parts of the circulating mass of coins appear now in one form, now in another, constantly changing. This first transformation of the medium of circulation into money represents, therefore, but a technical aspect of money circulation.[90]

The primitive form of wealth is that of a surplus or superabundance, i. e., that part of the products which are not immediately required as use-values, or the possession of such products whose use-value falls outside the sphere of mere necessaries. When considering the transition of commodity into money we saw that this surplus or superabundance of products constitutes the proper sphere of exchange at a low stage of development of production. Superfluous products become exchangeable products or commodities. The adequate form of this surplus is gold and silver, the first form in which wealth as abstract social wealth is preserved. Commodities can not only be stored up in the form of gold and silver, i. e., in the substance of money, but gold and silver are wealth in preserved form. While every use-value performs its service as such by being consumed, i. e., destroyed, the use-value of gold as money consists in its being the bearer of exchange value, in embodying universal labor-time as a shapeless raw material. As shapeless metal, exchange value possesses an indestructible form. Gold or silver thus brought to rest as money, forms a hoard. Among nations with an exclusively metallic circulation, such as the ancients were, hoarding is practiced universally from the individual to the state which guards its state hoard. In more ancient times, in Asia and Egypt, these hoards under the protection of kings and priests appear rather as a mark of their power. In Greece and Rome it was part of public policy to accumulate state hoards as the safest and most available form of surplus. The quick transfer of such hoards by conquerors from one country to another and the sudden outpour of a part of these hoards into the general circulation constitute a peculiar feature of ancient economy.

As the incarnation of labor-time gold is a pledge for its own value, and since it is the embodiment of universal labor-time, the process of circulation pledges gold its constant rôle of exchange value. Owing to the mere fact that the owner of commodities can retain his commodity in the form of exchange value or retain the exchange-value as a commodity, the exchange of commodities for the purpose of retaining them in the transformed shape of gold becomes circulation’s own motive. The metamorphosis C—M takes place for the sake of the metamorphosis, i. e., in order to transform it from particular natural wealth into universal social wealth. Instead of change of matter, change of form becomes its own purpose. From a mere form of the movement exchange value becomes its substance. Commodity is preserved as wealth, as commodity, only in so far as it keeps within the sphere of circulation, and it keeps in that fluent state only in so far as it solidifies in the form of silver and gold. It remains in the stream of circulation as its crystal. At the same time gold and silver themselves become money only in so far as they do not play the part of mediums of circulation. As non-mediums of circulation they become money. The withdrawal of a commodity from circulation in the form of gold is therefore the only means of keeping it constantly within the sphere of circulation.

The owner of commodities can receive money from circulation only in return for a commodity which he gives to it. Constant selling, continual throwing of commodities into circulation is, therefore, the first condition of hoarding from the standpoint of the circulation of commodities. On the other hand, money as a medium of circulation constantly disappears in the very process of circulation by being realized all the time in use-values and becoming dissolved in fleeting pleasures. It must, therefore, be taken out of the all-consuming stream of circulation or the commodity must be kept up in its first metamorphosis, so that money is prevented from performing its function of a means of purchase. The commodity owner who has now become a hoarder, must sell as much as possible and buy as little as possible, as old Cato had taught: “patrem familias vendacem, non emacem esse.” While industry constitutes the positive condition of hoarding, saving forms the negative one. The less the equivalent of a commodity is withdrawn from circulation in the form of particular commodities or use-values, the more it is withdrawn in the shape of money or exchange value.[91] The acquisition of wealth in its universal form thus requires abstinence from wealth in its material reality. Thus the stimulating impulse for hoarding is greed, the objects of which are not commodities as use-values, but exchange value as commodity. In order to get possession of the surplus in its universal form, the particular wants must be treated as so much luxury and excess. Thus the Cortes presented a report to Philipp II., in 1593, in which, among other things, was said: “The Cortes of Valladolid in the year 1586 petitioned Your Majesty not to allow the further importation into the Kingdom of candles, glassware, jewelry, knives and similar articles; these things useless to human life come from abroad to be exchanged for gold, as though the Spaniards were Indians.” The hoarder despises the worldly, temporary and transitory enjoyments in his hunt after the eternal treasure, which neither moth nor rust can eat, which is perfectly celestial and earthly at the same time. “The general remote cause of our want of money is the great excess of this Kingdom in consuming the Commodities of Forreine Countries, which prove to us discommodities, in hindering us of so much treasure, which otherwise would bee brought in, in lieu of those toyes.... Wee ... consume amongst us, that great abundance of the Wines of Spaine, of France, of the Rhene, of the Levant ... the Raisins of Spaine, the Corints of the Levant, the Lawnes and Cambricks of Hannaults ... the Silkes of Italie, the Sugers and Tobaco of the West Indies, the Spices of the East Indies: All which are of no necessetie unto us and yet are bought with ready mony.”[92]

In the form of gold and silver, wealth is indestructible, both because exchange value is preserved in the shape of indestructible metal, and, especially, because gold and silver are prevented from becoming, as mediums of circulation, mere vanishing money forms of the commodity. The destructible substance is thus sacrificed for the indestructible form. “If money be taken (by means of taxation) from him, who spendeth the same ... upon eating and drinking, or any other perishing Commodity; and the same transferred to one that bestoweth it on Cloaths; I say that even in this case the Commonwealth hath some little advantage; because Cloaths do not altogether perish so soon as Meats and Drinks. But if the same be spent in Furniture of Houses, the advantage is yet a little more; if in Building of Houses, yet more; if in improving of Lands, working of Mines, Fishing, etc., yet more; but most of all, in bringing Gold and Silver into the Country; because those things are not only not perishable, but are esteemed for Wealth at all times and everywhere; whereas other Commodities which are perishable, or whose value depends upon the Fashion; or which are contingently scarce and plentiful, are Wealth, but pro hic et nunc.”[93] The withdrawal of money from the stream of circulation and the saving of it from the social interchange of matter reaches its extreme form in the burying of money, so that social wealth is brought as an underground indestructible treasure into a perfectly secret private relation with the owner of commodities. Dr. Bernier, who stayed for some time at the court of Aurenzeb at Delhi, tells us how the merchants, especially the Mohammedan heathens, who control nearly all the trade and all money, secretly bury their money deep in the ground, “being imbued with the faith that the gold and silver which they put away during their lives will serve them after death in the next world.”[94] However, in so far as the asceticism of the hoarder is combined with active industry, he is rather a Protestant by religion and still more a Puritan. “It can not be denied that buying and selling are necessary, that one can not get along without them, and that one can buy like a Christian especially things that serve in need and in honor; for the patriarchs had also bought and sold cattle, wool, grain, butter, milk and other goods. They are gifts of God which He gives out of the earth and divides among men. But foreign trade which brings over from Calcutta, India and other such places commodities consisting of costly silks, and gold ware, and spices which only serve for luxury and are of no use, draining the land and the people of their money, should not be tolerated if we but had a government of princes. Yet I do not wish to write of that now, for I believe it will have to stop of itself, when we have no money any longer; and so will luxury and gluttony; for no writing or teaching will help until want and poverty will force us.”[95]

In times of disturbance in the process of the social interchange of matter, the burying of money takes place even in bourgeois societies which are at a high stage of development. The social bond in its compact form is being saved from the social movement (with the owner of commodities this bond is the commodity and the adequate form of the commodity is money). The social nervus rerum is buried next to the body whose nerve it is.

The hoard would now become mere useless metal, its money soul would depart from it and it would remain as the burnt ashes of circulation, as its caput mortuum, if it did not constantly tend to get back into circulation. Money, or crystallized exchange value, is, according to its nature, the form of abstract wealth; but, on the other hand, any given sum of money is a quantitatively limited magnitude of value. The quantitative limitation of exchange value is in contradiction with its qualitative universality and the hoarder conceives in it a barrier which turns, in fact, into a qualitative barrier as well and makes of the hoard merely a limited representative of material wealth. Money, in its capacity of a universal equivalent, appears, as we have seen, as a member of an equation, the other member of which consists of an endless series of commodities. It depends on the magnitude of the exchange value to what extent money will be realized in such an endless series, i. e., to what degree it corresponds to the conception of it as an exchange value. The automatic movement of exchange value as exchange value can only tend to its passing beyond its quantitative limits. But by exceeding the quantitative limits of the hoard a new limit is created which must be removed in its turn. There is no definite limit which appears as a barrier to further hoarding, every limit plays that part. Hoard accumulation has, therefore, no inherent limits, no inherent measure; it is an endless process which finds in each successive result an impulse for a new beginning. While the hoard is increased only by being preserved, it is preserved only by being increased.

Money is not only an object of the passion for riches; it is the object of that passion. The latter is essentially auri sacra fames. The passion for riches, contrary to that for special kinds of natural wealth or use-values, such as clothing, ornaments, herds, etc., is possible only when universal wealth has been individualized as such in a particular object and can, therefore, be retained in the form of a single commodity. Money appears then no less as an object than as a source of the passion for riches.[96] The underlying fact of the matter is that exchange value as such and with it its increase become the final aim. Greed holds the hoard fast by not allowing the money to become a medium of circulation, but the thirst for gold saves the money soul of the hoard by keeping up the lasting affinity of gold for circulation.

To sum up, the activity by which hoards are built up resolves itself into withdrawal of money from circulation by continually repeated sales, and simple hoarding or accumulation. In fact, it is only in the sphere of simple circulation and, especially, in the form of hoarding, that accumulation of wealth as such takes place, while, as we shall see later, in the case of other so-called forms of accumulation it is only a misnomer to call them by that name in mere recollection of the simple accumulation of money. All other commodities are hoarded either as use-values, in which case the manner of storing them up is determined by the peculiarities of their use-value: the storing of grain, e. g., requires special equipment; the accumulation of sheep makes one a shepherd; the accumulation of slaves and land creates relations of master and servant, etc.; the accumulation of particular kinds of wealth requires special processes different from the simple act of hoarding, and develops special individual traits. Or, wealth in the form of commodities is hoarded as exchange-value and in that case hoarding appears as a commercial or a specific economic operation. The one who carries on such operations becomes a dealer in corn, in cattle, etc. Gold and silver are money not through some activity of the individual who accumulates it, but as crystals of the process of circulation which goes on without any aid on his part. He has nothing to do but to put them aside, adding new weights of metal to his hoard, a perfectly senseless operation which, if applied to all other commodities, would deprive them of all value.[97]

Our hoarder appears as a martyr of exchange value, a holy ascetic crowning the metal pillar. He cares for wealth only in its social form and therefore he buries it away from society. He wants to have the commodity in the form in which it is always capable of entering circulation and therefore he withdraws it from circulation. He dreams of exchange value and therefore does not exchange. The fluid form of wealth and its petrification, the elixir of life and the stone of wisdom madly haunt each other in alchemic fashion. In his imaginary unlimited passion for enjoyment he denies himself all enjoyment. Because he wishes to satisfy all social wants, he barely satisfies his elementary natural wants. While holding fast to his wealth in its metallic bodily form, the latter escapes him as a phantom. As a matter of fact, however, the hoarding of money for the sake of money is the barbaric form of production for production’s sake, i. e., the development of the productive forces of social labor beyond the limits of ordinary wants. The less the production of commodities is developed, the more important is the first crystallization of exchange value into money, or hoarding, which plays, therefore, an important part among the ancient nations, in Asia until the present day, and among modern agricultural nations where exchange value has not as yet taken hold of all the relations of production. Before taking up the consideration of the specific economic function of hoarding within the sphere of metallic circulation, let us mention another form of hoarding.

Quite apart from their aesthetic properties, silver and gold commodities are convertible into money, since the material of which they are made is a money material; and, inversely, gold money and gold bullion can be converted into commodities. Because gold and silver constitute the material of abstract wealth, the greatest display of wealth consists of the utilization of these metals as concrete use-values, and if the owner of commodities hides his treasure at certain stages of production, he is very anxious to appear before other owners of commodities as rico hombre whenever he can do so with safety. He gilds himself and his house.[98] In Asia, especially in India, where, unlike under the capitalist system, the hoarding of wealth appears not as a subordinate function of the system of production, but as an end in itself, gold and silver commodities are practically but aesthetic forms of hoards. In mediaeval England gold and silver commodities were considered before the law as mere forms of treasure, since their value was but slightly increased by the crude labor spent upon them. They were destined to re-enter circulation and their fineness was therefore prescribed in the same manner as that of coin. The increasing use of gold and silver as objects of luxury with the growth of wealth is such a simple matter that it was perfectly clear to the ancients,[99] while modern economists have advanced the erroneous proposition that the use of silver and gold articles increases not in proportion to the growth of wealth, but in proportion to the fall in value of the precious metals. Their otherwise accurate references to the use of Californian and Australian gold are inconclusive, since the increased consumption of gold as a raw material does not find justification, according to their theory, in any corresponding decline in its value. From 1810 to 1830, in consequence of the struggle of the American colonies against Spain and the interruption of mining caused by revolutions, the annual average production of precious metals declined by more than one-half. The decline of coin in circulation in Europe amounted to nearly one-sixth, comparing the years 1829 and 1809. Although the quantity produced had thus declined and the cost of production, if it had changed at all, had increased, yet the consumption of precious metals as objects of luxury increased to an extraordinary extent in England during the very war and on the continent after the Peace of Paris. The consumption increased with the general growth of wealth.[100] It may be stated as a general law that the conversion of gold and silver money into articles of luxury prevails in times of peace, while their reconversion into bullion or even coin takes place in stormy periods.[101] How considerable the proportion is of the gold and silver treasure in the form of articles of luxury to the quantity of precious metals serving as money may be seen from the fact that in 1829 the proportion in England, according to Jacob, was two to one, and in entire Europe and America the precious metals in the form of articles of luxury exceeded those in the form of money by one-fourth.

We have seen that the circulation of money is but the manifestation of the metamorphoses of commodities, or of the form under which the social interchange of matter takes place. With the change in the total price of commodities in circulation or in the volume of their simultaneous metamorphoses, the rapidity of their change of form in each case being given, the total quantity of gold in circulation must always expand or contract. That is possible only under the condition that the total quantity of money in the country continually bear a varying ratio to the quantity of money in circulation. This condition is met by the process of hoarding. With a fall in prices or rise in the rapidity of circulation, the hoard-reservoirs absorb that part of money which is thrown out of circulation; with a rise in price or a decline in the rapidity of circulation, the hoards open up and return a part of their contents to the stream of circulation. The solidification of circulating money into hoards and the outpouring of hoards into circulation is a constantly oscillating movement in which the prevalence of the one or the other tendency is determined exclusively by fluctuations in the circulation of commodities. Hoards thus serve as conduits for the supply and withdrawal of money to or from circulation, so that every time only that quantity of money circulates as coin which is required by the immediate needs of circulation. If the volume of the entire circulation suddenly expands and the fluent unity of sale and purchase assumes such dimensions that the total sum of prices to be realized increases more rapidly than the rapidity of the circulation of money, the hoards decrease perceptibly; but when the combined movement slackens to an unusual extent, or the movement of buying and selling steadies itself, the medium of circulation solidifies into money in large measure, and the treasure reservoirs fill up far above their average level. In countries with an exclusively metallic circulation or where production is at a low stage of development, the hoards are endlessly split up and scattered all over the land, while in countries where the capitalist system is developed they are concentrated in bank reservoirs. Hoards are not to be confounded with coin reservoirs, which form a constituent part of the total supply of money in circulation, while the interaction between hoards and currency implies the decline or rise of its total supply. Gold and silver commodities form, as we have seen, both conduits for the withdrawal of precious metals, as well as sources of their supply. In ordinary times only their former function is of importance to the economy of metallic circulation.[102]

b. MEANS OF PAYMENT.

The two forms which have so far distinguished money from the circulating medium are those of suspended coin and of the hoard. The temporary transformation of coin into money in the case of the former means that the second phase of C—M—C, namely purchase M—C, must break up within a certain sphere of circulation into a series of successive purchases. As to hoarding, it is simply based on the isolation of the act C—M when it does not immediately pass into M—C, or is but an independent development of the first metamorphosis of a commodity; it represents money as the result of the alienation of all commodities in contra-distinction to the medium of circulation as the embodiment of commodities in their always alienable form. Coin reserves and hoards are money only as non-circulating mediums and are non-circulating mediums only because they do not circulate. In the capacity in which we consider money now, it circulates or enters circulation, but does not perform the function of a circulating medium. As a medium of circulation money is always a means of purchase, now it does not act in that capacity.

As soon as money develops through the process of hoarding into the embodiment of abstract social wealth and the tangible representative of material wealth, it assumes in that capacity special functions within the process of circulation. If money circulates merely as a medium of circulation and therefore as a means of purchase, it is understood that commodity and money confront each other at the same time, i. e., that the same value is present in a double form: at one pole, as a commodity in the hands of the seller; at the other pole as money in the hands of the buyer. This simultaneous existence of the two equivalents at opposite poles and their simultaneous change of places or mutual alienation presupposes in its turn that seller and buyer enter into relations as owners of equivalents that are on hand. But in the course of time, the process of the metamorphosis of commodities which produces the different forms of money, transforms also the owners of commodities or changes the character in which they appear before each other in the community. In the process of metamorphosis of the commodity the guardian of the latter changes his skin as often as the commodity changes place or as the money assumes new forms. Thus, the owners of commodities originally confronted each other only as commodity owners, but later on they became one a buyer, the other a seller; then each became alternately buyer and seller, then hoarders, and finally rich men. In that manner, the owners of commodities do not come out of the process of circulation the same men that they entered. In fact the different forms which money assumes in the process of circulation are but crystallized changes of form of the commodities themselves, which in their turn are but concrete expressions of the changing social relations in which commodity owners carry on the interchange of matter with one another. New trade relations spring up in the process of circulation, and, as representatives of these changed relations, commodity owners assume new economic roles. Just as gold becomes idealized within the process of circulation and plain paper, in its capacity of a representative of gold, performs the function of money, so does the same process of circulation lend the weight of actual seller and buyer to the buyer and seller who enter it merely as representatives of future money and future commodities.

All the forms in which gold develops into money, are but the unfolding of potentialities which the metamorphosis of commodities bears within itself. These forms did not become distinctly differentiated in the process of simple money circulation where money appears as coin and the movement C—M—C forms a dynamic unity; at most, they appeared as mere potentialities as, e. g., in the case of the break in the metamorphosis of a commodity. We have seen that in the process C—M the relations between the commodity and money were those of an actual use-value and ideal exchange-value to an actual exchange value and only ideal use-value. By alienating his commodity as a use-value the seller realized its own exchange value and the use-value of money. On the contrary, the buyer, by alienating his money as exchange value, realized its own use-value and the price of the commodity. Commodity and money changed places accordingly. When it comes to a realization in actual life of this bi-polar contrast, a new break occurs. The seller actually alienates his commodity, but realizes its price only in idea: he has sold his commodity at its price, which is to be realized, however, only subsequently, at a time agreed upon. The purchaser buys as the representative of future money, while the vender sells as the owner of present goods. On the part of the vender, the commodity as use-value is actually alienated, without the price being actually realized; on the part of the purchaser, money is actually realized in the use-value of the commodity, without being actually alienated as exchange value. Instead of a token of value representing money symbolically as was the case before, the purchaser himself performs that part now. And just as in the former case the symbolic nature of the token of value called forth the guarantee of the state which has made it legal tender, so does the personal symbolism of the buyer bring about legally enforcible private contracts among commodity owners.

The contrary may happen in the process M—C, where the money can be alienated as a real means of purchase, and in that way the price of the commodity can be realized before the use-value of the money is realized and the commodity actually delivered. This occurs constantly under the everyday form of pre-payments. And it is under this form that the English government purchases opium from the ryots of India, or, foreign merchants residing in Russia mostly buy agricultural products. In these cases, however, the money always acts in its well known role of a means of purchase and therefore, does not assume any new forms.[103] We need not dwell, therefore, on this case any longer; but with reference to the changed form which the two processes M—C and C—M assume now, we may note that the difference between purchase and sale which appeared but imaginary in the direct process of circulation, now becomes a real difference, since in the former case only the money is present and in the latter only the commodity, and in either case only that extreme is present from which the initiative comes. Besides, the two forms have this in common: that in either, one of the equivalents is present only in the common will of the buyer and seller,—a will that is binding on both and assumes definite legal forms.

Seller and buyer become creditor and debtor. While the commodity owner looked comical as the guardian of a treasure, he now becomes awe-inspiring, since he no longer identifies himself but his neighbor with a certain sum of money and makes him and not himself a martyr of exchange value. From a believer he becomes a creditor, for religion he substitutes law.

“I stay here on my bond!”

Thus, in the modified form C—M in which the commodity is present and money is only represented, money plays first of all the part of a measure of value. The exchange value of the commodity is estimated in money as its measure; but as exchange value, established by contract, price exists not only in the mind of the seller, but also as a measure of obligation on the part of the buyer. Besides serving as a measure of value, money plays here the part of a means of purchase, although in that capacity it only casts ahead the shadow of its future existence. It attracts the commodity from its position in the hand of the seller into that of the buyer. As soon as the term of the contract expires, money enters circulation, since it changes its position by passing from the hands of the former buyer into those of the former seller. But it does not enter circulation as a circulating medium or as a means of purchase. It performed those functions before it was present and it appears after it has ceased to perform them. It now enters circulation as the only adequate equivalent of the commodity, as the absolute form of existence of exchange value, as the last word of the process of exchange, in short as money, and money in its distinct role of a universal means of payment. In this capacity of a means of payment money appears as the absolute commodity, but within the sphere of circulation and not without it as was the case with hoards. The difference between the means of purchase and the means of payment makes itself unpleasantly felt in periods of commercial crises.[104]

Originally, the conversion of the product into money in the sphere of circulation appears only as an individual necessity for the commodity owner in so far as his own product has no use-value to him, but has to acquire it first by being alienated. But in order to pay at the expiration of the contract, he must have sold commodities before that. Thus, entirely apart from his individual wants, the movement of the circulation process makes selling a social necessity with every owner of commodities. As a former buyer of a commodity he is compelled to become a seller of another commodity in order to get money not as a means of purchase but as a means of payment, as the absolute form of exchange value. The conversion of commodity into money as a final act, or the first metamorphosis of a commodity as an end in itself which in the case of hoarding seemed to be a matter of caprice on the part of the commodity owner, becomes now an economic function. The motive and essence of sale for the sake of payment becomes from a mere form of the process of circulation its self emanating substance.

In this form of sale the commodity completes its change of position; it circulates while it postpones its first metamorphosis, viz. its transformation into money. On the contrary, on the part of the buyer the second metamorphosis is completed, i. e. money is reconverted into a commodity before the first metamorphosis has taken place, i. e., before the commodity has been turned into money. The first metamorphosis thus takes place after the second in point of time; and thereby, money i. e. the form of the commodity in its first metamorphosis, acquires a new destination. Money or the spontaneous development of exchange value, is no longer a mere intermediary form of the circulation of commodities, but its final result.

That such time sales in which the two poles of the sale are separated in point of time, have their natural origin in the simple circulation of commodities, requires no elaborate proof. In the first place, the development of circulation leads to a continual repetition of the mutual transactions between the same commodity owners who confront each other as seller and buyer. The repetition is not accidental; on the contrary, goods are ordered, let us say, for a certain date in the future when they are to be delivered and paid for. In that case the sale is ideal, i. e. it is legally accomplished without the actual presence of the goods and money. Both forms of money, those of a medium of circulation and of a means of payment still coincide here, since in the first place, commodity and money change places simultaneously, and secondly, the money does not buy the commodity, but realizes the price of the commodity purchased before. In the second place, the nature of a great many use-values makes the simultaneous alienation and delivery of the goods impossible, and delivery has to be postponed for a certain time; e. g., when the use of a house is sold for one month, the use-value of the house is delivered only at the expiration of the month, although it changes hands at the beginning of the month. Since the actual transfer of the use-value and its virtual alienation are separated here in point of time, the realization of its price occurs also after its change of place. Finally, the difference in the seasons and in the length of time required for the production of various commodities brings about a situation where one tries to sell his goods, while the other is not ready to buy; and with the repeated purchases and sales between the same commodity owners the two ends of sale fall apart according to the conditions of production of the respective commodities. Thus arises a relation of creditor and debtor between the owners of commodities which, though constituting the natural foundation of the credit system, may be fully developed before the latter comes into existence. It is clear that with the extension of the credit system, and, consequently, with the development of the capitalist system of production in general, the function of money as a means of payment will extend at the expense of its function as a means of purchase and, still more, as an element of hoarding. In England, e. g., money as coin has been almost completely banished into the sphere of retail and petty trade between producers and consumers, while it dominates the sphere of large commercial transactions as a means of payment.[105]

As the universal means of payment money becomes the universal commodity of all contracts, at first only in the sphere of circulation of commodities.[106] But with the development of this function of money, all other forms of payment are gradually converted into money payments. The extent to which money is developed as the exclusive means of payment indicates the degree to which exchange value has taken hold of production in its depth and breadth.[107]

The volume of money in circulation, as a means of payment, is determined in the first place, by the amount of payments, i. e. by the sum total of the prices of the commodities alienated, but not about to be alienated, as in the case of the simple circulation of money. The quantity thus determined is subject, however, to two modifications. The first modification is due to the rapidity with which the same piece of money repeats the same function, i. e. with which the several payments succeed one another. A pays B, whereupon B pays C, and so forth. The rapidity with which the same coin repeats its function as a means of payment, depends first, upon the continuity of the relation of creditor and debtor among the owners of commodities, the same commodity owner being the creditor of one person and the debtor of another, etc., and secondly, upon the interval which separates the times of various payments. This chain of payments or of supplementary first metamorphoses of commodities is qualitatively different from the chain of metamorphoses which is formed by the circulation of money as a circulating medium. The latter not only makes its appearance gradually, but is even formed in that manner. A commodity is first converted into money, then again into a commodity, thereby enabling another commodity to become money, etc.; or, seller becomes buyer, whereby another commodity owner turns seller. This successive connection is accidentally formed in the very process of the exchange of commodities. But when the money which A has paid to B is passed on from B to C, from C to D, etc., and that, too, at intervals rapidly succeeding one another, then this external connection reveals but an already existing social connection. The same money passes through different hands not because it appears as a means of payment; it passes as a means of payment because the different hands have already clasped each other. The rapidity with which money circulates as a means of payment thus shows that individuals have been drawn into the process of circulation much deeper than would be indicated by the same rapidity of the circulation of money as coin or as a means of purchase.

The sum total of prices made up by all the purchases and sales taking place at the same time, and, therefore, side by side, constitutes the limit for the substitution of the volume of coin by the rapidity of its circulation. If the payments that are to be made simultaneously are concentrated at one place—which naturally arises at first at points where the circulation of commodities is largest—the payments balance each other as negative and positive quantities: A is under obligations to pay B, while he has to be paid by C. etc. The quantity of money required as a means of payment will, therefore, be determined not by the total amount of payments which have to be made simultaneously, but by the greater or less concentration of the same and by the magnitude of the balance remaining after their mutual neutralization as negative and positive quantities. Special arrangements are made for settlements of this kind even where the credit system is not developed at all, as was the case e. g. in ancient Rome. The consideration of these arrangements, however, as well as that of the general time limits of payment, which are everywhere established among certain elements in the community, does not belong here. We may add that the specific influence which these time settlements exert on the periodic fluctuations in the quantity of money in circulation, has been scientifically investigated but lately.

In so far as the payments mutually balance as positive and negative quantities, no money actually appears on the scene. It figures here only in its capacity of a measure of value: first, in the prices of commodities, and second, in the magnitude of mutual obligations. Aside from its ideal form, exchange value does not exist here independently, not even in the form of a token of value; that is to say, money plays here only the part of ideal money of account. The function of money as a means of payment thus implies a contradiction. On the one hand, in so far as payments balance, it serves only ideally as a measure of value. On the other hand, in so far as a payment has actually to be made, money enters circulation not as a transient circulating medium, but as the final resting form of the universal equivalent, as the absolute commodity, in a word, as money. Therefore, whenever such a thing as a chain of payments and an artificial system of settling them, is developed, money suddenly changes its visionary nebulous shape as a measure of value, turning into hard cash or means of payment, as soon as some shock causes a violent interruption of the flow of payments and disturbs the mechanism of their settlement. Thus, under conditions of fully developed capitalist production, where the commodity owner has long become a capitalist, knows his Adam Smith, and condescendingly laughs at the superstition that gold and silver alone constitute money or that money differs at all from other commodities as the absolute commodity, money suddenly reappears not as a medium of circulation, but as the only adequate form of exchange value, as the only form of wealth, exactly as it is looked upon by the hoarder. In its capacity of such an exclusive form of wealth, it reveals itself, unlike under the monetary system, not in mere imaginary, but in actual depreciation and worthlessness of all material wealth. That is what constitutes the particular phase of crises of the world market which is known as a money crisis. The summum bonum for which everybody is crying at such times as for the only form of wealth, is cash, hard cash; and by the side of it all other commodities just because they are use-values, appear useless like so many trifles and toys, or, as our Dr. Martin Luther says, as mere objects of ornament and gluttony. This sudden reversion from a system of credit to a system of hard cash heaps theoretical fright on top of the practical panic; and the dealers by whose agency circulation is affected shudder before the impenetrable mystery in which their own economical relations are involved.[108]

Payments, in their turn, require the formation of reserve funds, the accumulation of money as a means of payment. The building up of reserve funds appears no longer as a practice carried on outside of the sphere of circulation, as in the case of hoarding; nor as a mere technical accumulation of coin, as in the case of coin reserves; on the contrary, money must now be gradually accumulated to be available on certain future dates when payments become due. While hoarding, in its abstract form as a means of enrichment, declines with the development of the capitalist system of production, that species of hoarding which is directly called for by the process of production, increases; or, to put it differently, a part of the treasure which is generally formed in the sphere of circulation of commodities, is absorbed as a reserve fund of means of payment. The more developed the capitalist system of production, the more these reserve funds are limited to the necessary minimum. Locke, in his work “On the Lowering of Interest”[109] furnishes interesting data with reference to the size of these reserve funds in his time. They show what a considerable part of the total money in circulation the reservoirs for means of payment absorbed in England just at the time when banking began to develop.

The law as to quantity of money in circulation, as it has been formulated in the analysis of the simple circulation of money, receives an essential modification when the circulation of the means of payment is taken into account. The rapidity of the circulation of money whether as circulating medium or as means of payment—being given, the total amount of money in circulation at a given time will be determined by the sum total of the prices of commodities to be realized, plus the total amount of payments falling due at the same time, minus the amount of payments balancing each other. The general law that the volume of money in circulation depends on the prices of commodities is not affected by this in the least, since the extent of the payments is itself determined by the prices stipulated in contracts. What is, however, strikingly demonstrated, is that even if the rapidity of circulation and the economy of payments be assumed to remain the same, the sum total of the prices of the commodities circulating in a given period of time, say one day, and the volume of money in circulation on the same day are by no means equal, because there is a large number of commodities in circulation whose prices have yet to be realized in money at a future date, and there is a quantity of money in circulation which constitutes the payment for commodities which have long gone out of circulation. The latter amount will depend on the sum of payments falling due on the same day although contracted for at entirely different periods.

We have seen that a change in the values of gold and silver does not affect their function as measures of value or money of account. But this change is of decisive importance for money as a hoard, since with the rise or fall of value of gold and silver, the total value of a gold or silver hoard will also rise or fall. Of still greater importance is the effect of this change on money as a means of payment. The payment takes place after the sale of the commodity, or the money serves in two different capacities at two different periods; first, as a measure of value, then as a means of payment corresponding to the measurement. If, during this interval, the value of the precious metals or the labor-time necessary for their production undergoes a change, the same quantity of gold or silver will be worth more or less when it appears as a means of payment than what it was when it served as a measure of value, i. e., when the contract was concluded. The function of a particular commodity, like gold or silver, to serve as money or independent exchange value comes here in conflict with the nature of the particular commodity whose magnitude of value depends on changes in the cost of its production. The great social revolution which caused the fall in value of the precious metals in Europe, is as well known as the revolution of an opposite character which had been brought about at an early period in the history of the ancient Roman republic by the rise in value of copper in terms of which the debts of the plebeians had been contracted. Without attempting here to follow any further the fluctuations of value of the precious metals and their effect on the system of bourgeois political economy, it is at once apparent that a fall in the value of the precious metals favors the debtors at the expense of the creditors, while a rise in their value favors the creditors at the expense of the debtors.

c. WORLD MONEY.

Gold becomes money as distinguished from coin only after it is withdrawn from circulation in the shape of a hoard; it then enters circulation as a non-medium of circulation, and finally breaks through the barriers of home circulation to assume the part of a universal equivalent in the world of commodities. It becomes world money.

While the general measures of weight of the precious metals served as their original measures of value, the reverse process takes place now in the world market, and the reckoning names of money are turned back into corresponding weight names. In the same way, while shapeless crude metal (aes rude) was the original form of the medium of circulation and the coin form constituted but the official stamp certifying that a given piece of metal was of a certain weight, now the precious metal in its capacity of a world coin throws off its stamp and shape and reassumes the indistinguishable bullion form; and even if national coins, such as Russian imperials, Mexican dollars, and English sovereigns, do circulate abroad, their name is of no importance, and only their contents count. Finally, as international money, the precious metals come again to perform their original function of mediums of exchange, which, like the exchange of commodities, arose first not within the various primitive communities, but at their points of contact with one another. As world money, money thus reassumes its primitive form. On leaving the sphere of home circulation, it strips off the particular forms which it has acquired in the course of the development of the process of exchange within that particular national sphere, those local garbs of standard of price, of coin, of auxiliary coin, and of token of value.

We have seen that in the home circulation of a country, only one commodity serves as a measure of value. Since, however, that function is performed by gold in some countries and by silver in others, there is a double standard of value in the world market and money assumes two forms in all its other functions. The translation of the values of commodities from gold prices into silver prices and vice versa depends in each case upon the relative value of the two metals, which is constantly changing and, therefore, appears to be constantly in the process of determination. Commodity owners in every national sphere of circulation have to use gold and silver alternately for foreign circulation and thus to exchange the metal which is accepted as money at home for the metal which they happen to need as money abroad. Every nation is, therefore, utilizing both metals, gold and silver, as world money.

In the international circulation of commodities, gold and silver appear not as mediums of circulation, but as universal mediums of exchange. The universal medium of exchange performs its function only under its two developed forms of a means of purchase and of a means of payment, whose mutual relation in the world market is the very reverse of what it is at home. In the sphere of home circulation, money in the form of coin, played exclusively the part of a means of purchase, either as the intermediary in the dynamic unity C—M—C or as the representative of the transient form of exchange value in the unceasing change of positions by commodities. In the world market it is just the contrary. Gold and silver appear here as a means of purchase when the exchange of matter is but one-sided, and purchase and sale do not coincide. The frontier trade at Kiachta e. g. is both actually and according to treaty, one of barter, in which silver plays only the part of a measure of value. The war of 1857-58 compelled the Chinese to sell without buying. Silver suddenly appeared now as a means of purchase. Out of regard to the letter of the treaty, the Russians made up the French five frank coins into crude silver commodities, which were made to serve as a means of exchange. Silver has always served as a means of purchase between Europe and America on one side and Asia on the other, where it settles down in the form of hoards. Furthermore, the precious metals serve as international means of purchase whenever the ordinary balance of exchange of matter between two nations is suddenly upset, as e. g. when a failure of crops forces one of them to buy on an extraordinary scale. Finally, the precious metals are international means of purchase in the hands of gold and silver producing countries, in which case they directly constitute a product and commodity and not merely a converted form of a commodity. The more the exchange of commodities between different national spheres of circulation is developed, the more important becomes the function of world money to serve as a means of payment for the settlement of international balances.

Like home circulation, international circulation requires a constantly changing quantity of gold and silver. A part of the accumulated hoards serves therefore, in each country as a reserve fund of world money, which now declines, now rises, according to the fluctuations of the exchange of commodities.[110] Besides the special movements which take place between national spheres of circulation, world-money possesses a universal movement, whose starting points are at the sources of production from which gold and silver streams spread out in different directions all over the world market. Here gold and silver enter the world circulation as commodities and are exchanged for commodity equivalents in proportion to the labor-time contained in them, before they penetrate national spheres of circulation. In the latter, they appear now with a given magnitude of value. Every fall or rise in the cost of their production equally affects, therefore, their relative value throughout the world market; on the other hand, that value is entirely independent of the extent to which the different national spheres of circulation absorb gold or silver. The part of the metal stream which is caught up by every separate sphere in the world of commodities, partly enters directly the home circulation of money to make up for worn out coin; partly is dammed up in the different reservoirs containing hoards of coin, means of payment and world-money; partly is turned into articles of luxury, while the rest simply forms a treasure. At an advanced stage of development of the capitalist system of production the formation of hoards is reduced to the minimum required by the various processes of circulation for the free play of their mechanism. The hoard as such becomes idle wealth, unless it appears as a temporary form of a surplus resulting from a favorable balance of payments or as the result of an interrupted exchange of matter, i. e. as the solidification of a commodity in its first metamorphosis.

Gold and silver, in their capacity of money, being by conception universal commodities, assume in their capacity of world money the form adapted to a universal commodity. To the extent to which all commodities are exchanged for them, they become the transformed impersonation of all commodities and, therefore, universally alienable commodities. Their function of serving as the embodiment of universal labor-time is realized more and more as the interchange of matter produced by concrete labor embraces increasing parts of the world. They become universal equivalents to the extent to which the series of particular equivalents which constitute their spheres of exchange, increases. Since in the sphere of world circulation commodities unfold their own exchange value on a universal scale, they assume the form of world money when transformed into gold and silver. As commodity owning nations are thus turning gold into money by their diversified industry and universal trade, industry and trade appear to them only as a means of getting money out of the world market in the shape of gold and silver. Gold and silver, as world money, are, therefore, as much products of the universal circulation of commodities as they are means of widening its sphere. Like chemistry which grew up behind the backs of the alchemists who tried to find a way of making gold, so do the sources of world industry and world trade spring up behind the backs of the owners of commodities, while they are hunting for the commodity in its magic form. Gold and silver help to create the world market by anticipating its existence in their conception of money. That this magic effect of the precious metals is by no means confined to the period of infancy of capitalist society but is a necessary outgrowth of the perverse conception which the representatives of the commodity world have of their own work in society, is shown by the extraordinary influence exerted in the middle of the nineteenth century by the discovery of new gold fields.

Just as money develops into world-money, so the commodity owner develops into a cosmopolitan. The cosmopolitan relation of men is originally only a relation of commodity owners. The commodity as such rises above all religious, political, national, and language barriers. Price is its universal language and money, its common form. But with the development of world-money as distinguished from national coin, there develops the cosmopolitanism of the commodity owner as the faith of practical reason opposed to traditional, religious, national and other prejudices which hinder the interchange of matter among mankind. As the identical gold that lands in England in the form of American eagles, turns there into sovereigns and three days later circulates in Paris in the form of Napoleons, only to emerge in Venice in a few weeks as so many ducats, retaining all the while the same value, it becomes clear to the commodity owner that nationality “is but the guinea’s stamp.” The lofty idea which he conceives of the entire world is that of a market, the world market.[111]

4. THE PRECIOUS METALS.

The process of capitalist production first of all takes hold of the metallic circulation as of a ready, transmitted organ which, though undergoing a gradual transformation, always retains its fundamental structure. The question as to why gold and silver and not other commodities serve as money material falls outside the limits of the capitalist system. We shall, therefore, confine ourselves to summing up the most essential points.

Since universal labor-time admits of quantitative differences only, the object which is to serve as its specific incarnation must be capable of representing purely quantitative differences, i. e., it must be homogeneous and uniform in quality throughout. That is the first condition a commodity must satisfy to perform the function of a measure of value. If commodities were estimated in oxen, hides, grain, etc., they would really have to be estimated in an ideal average ox, or average hide, since there are qualitative differences between an ox and an ox, grain and grain, hide and hide. On the contrary, gold and silver, as elementary substances, are always the same, and equal quantities of them represent, therefore, values of equal magnitude.[112] The other condition which a commodity that is to serve as a universal equivalent must satisfy and which follows directly from its function of representing purely quantitative differences, is that it must be capable of being divided and re-united at will, so that money of account may be represented materially as well. Gold and silver possess these properties to a superior degree.

As mediums of circulation, gold and silver have this advantage over other commodities, that their high specific gravity which condenses much weight in little space, corresponds to their economic specific gravity which condenses relatively much labor-time, i. e. a great quantity of exchange value in a small volume. This insures facility of transport, of transition from hand to hand and from one country to another, the ability to appear as rapidly as to disappear, in short, that material mobility which constitutes the sine qua non of the commodity that is to serve as the perpetuum mobile of the process of circulation.

The high specific value of the precious metals, their durability, comparative indestructibility, insusceptibility of oxidation through the action of the air, in the case of gold insolubility in acids except in aqua regia,—all these natural properties make the precious metals the natural material for hoarding. Peter Martyr who seems to have been a great lover of chocolate, remarks, therefore, of the cacao-bags which formed a species of Mexican gold: “O felicem monetam, quae suavem utilemque praebet humano generi potum, et a tartarea peste avaritiae suos immunes servat possessores, quod suffodi aut diu servari nequeat.”[113]

The great importance of metals in general in the direct process of production is due to the part they play as instruments of production. Apart from their scarcity, the great softness of gold and silver as compared with iron and even copper (in the hardened state in which it was used by the ancients), makes them unfit for that application and deprives them, therefore, to a great extent, of that property on which the use-value of metals is generally based. Useless as they are in the direct process of production, they are easily dispensed with as means of existence, as articles of consumption. For that reason any desired quantity of them may be absorbed by the social process of circulation without disturbing the processes of direct production and consumption. Their individual use-value does not come in conflict with their economic function. Furthermore, gold and silver are not only negatively superfluous, i. e. dispensable articles, but their aesthetic properties make them the natural material of luxury, ornamentation, splendor, festive occasions, in short, the positive form of abundance and wealth. They appear, in a way, as spontaneous light brought out from the underground world, since silver reflects all rays of light in their original combination, and gold only the color of highest intensity, viz. red light. The sensation of color is, generally speaking, the most popular form of aesthetic sense. The etymological connection between the names of the precious metals, and the relations of colors, in the different Indo-Germanic languages has been established by Jacob Grimm (see his History of the German Language).

Finally, the susceptibility of gold and silver of being turned from coin into bullion, from bullion into articles of luxury and vice versa, i. e. the advantage they possess as against other commodities in not being tied down to a definite, exclusive form in which they can be used, makes them the natural material of money, which must constantly change from one form to another.

Nature no more produces money than it does bankers or discount rates. But since the capitalist system of production requires the crystallization of wealth as a fetich in the form of a single article, gold and silver appear as its appropriate incarnation. Gold and silver are not money by nature, but money is by nature gold and silver. In the first place, the silver or gold money crystal is not only the product of the process of circulation, but in fact its only final product. In the second place, gold and silver are ready and direct products of nature, not distinguished by any difference of form. The universal product of the social process or the social process itself as a product is a peculiar natural product, a metal hidden in the bowels of the earth and extracted therefrom.[114]

We have seen that gold and silver are unable to fulfill the requirements which they are expected to meet in their capacity of money, viz. to remain values of unvarying magnitude. Still, as Aristotle had already observed, they possess a more constant value than the average of other commodities. Apart from the universal effect of an appreciation or depreciation of the precious metals, the fluctuations in the ratio between the values of gold and silver has a special importance, since both serve side by side in the world market as money material. The purely economic causes of this change of value must be traced to the change in the labor-time required for the production of these metals; conquests and other political upheavals which exercised a great influence on the value of metals in the ancient world, have nowadays only a local and transitory effect. The labor-time required for the production of the metals will depend on the degree of their natural scarcity, as well as on the greater or less difficulty with which they can be obtained in a purely metallic state. As a matter of fact, gold is the first metal discovered by man. This is due to the fact that nature itself furnishes it partly in pure crystalline form, individualized, free from chemical combination with other substances, or, as the alchemists used to say, in a virgin state; and so far as it does not appear in that state, nature does the technical work in the great gold washeries of rivers. Only the crudest kind of labor is thus required of man in the extraction of gold, either from rivers or from alluvial deposits; while the extraction of silver presupposes the development of mining and a comparatively high degree of technical skill generally. For that reason the value of silver is originally greater than that of gold in spite of the lesser absolute scarcity of the former. Strabo’s assertion that a certain Arabian tribe gave ten pounds of gold for one pound of iron and two pounds of gold for one pound of silver, seems by no means incredible. But as the productive powers of labor in society are developed and the product of unskilled labor rises in value as compared with the product of skilled labor; as the earth’s crust is more thoroughly broken up and the original superficial sources of gold supply give out, the value of silver begins to fall in proportion to that of gold. At a given stage of development of engineering and of the means of communication, the discovery of new gold or silver fields become the decisive factor. In ancient Asia the ratio of gold to silver was 6 to 1 or 8 to 1; the latter ratio prevailed in China and Japan as late as the beginning of the nineteenth century; 10 to 1, the ratio in Xenophon’s time, may be considered as the average ratio of the middle period of antiquity. The exploitation of the Spanish silver mines by Carthage and later by Rome had about the same effect in antiquity, as the discovery of the American mines in modern Europe. For the period of the Roman empire 15 or 16 to 1 may be assumed as a rough average, although we frequently find cases of still greater depreciation of silver in Rome. The same movement beginning with the relative depreciation of gold and concluding with the fall in the value of silver, is repeated in the following epoch which has lasted from the Middle Ages to the present time. As in Xenophon’s times the average ratio in the Middle Ages was 10 to 1, changing to 16 or 15 to 1 in consequence of the discovery of the American mines. The discovery of the Australian, Californian and Columbian gold sources makes a new fall in the value of gold probable.[115]