Second, at the other extreme is a set of definitions which would restrict money to what may be called commodity money. Those who hold this view insist that money is an article of direct utility with specific value based on its direct services for consumption. They hold that it must have value due to a demand for other than a monetary system. The implication is that in the absence of this other demand the article would not have any value and therefore could not properly serve as a measure of value. This view of the nature of money is definite and clear-cut, but it is not correct because the article has value if there is a demand for it, whatever the reason for that demand.
Third, between these two extremes fluctuates the view that all media of exchange and payment, whose acceptance the law requires in discharge of debts, may properly be called money. This definition confines to standard money, or inconvertible paper, if it were legal tender. Both kinds of money circulate without reference to the possibility of recovering their value from the payer if they should fail to pass, and their value as money depends entirely on the fact that they are generally acceptable in exchange[15].
Taking now in view these three standpoints of the nature of money, we could define it in these words: Legal tender, inconvertible paper, and all commodities which are used as general circulating and paying media, are properly called money.
This is one of the most typical definitions including nearly all others supported by current political economy. Tolstoy as always disagrees with the teaching of economics and he simply says that money is a new and terrible form of slavery[16]. His full definition is as follows: Money is a conventional token which gives the right, or more correctly, the possibility, to exploit the labor of other people[17]. To explain this inadequate definition of money more appropriately and in its fuller extent, it is necessary to turn our attention to the functions of money as they are enunciated by Leo Tolstoy.
One of many other functions which money performes, according to Tolstoy, is the representation of labor. There exists a common opinion that money represents wealth, but money is the product of labor, and so money represents labor[18]. This opinion, says Tolstoy sneeringly, is as correct as that other opinion that every political organization is the result of a pact (contrat social). Yes, money represents labor[19], there is no doubt about that, but whose, labor of the owner of the money, or of the other people? In that rude stage of society, Tolstoy goes on, when people voluntarily bartered the fruits of their products, or exchanged them through the medium of money, substantially money represented their individual labor. That is incontestably true, and this was only so long as in society where this exchange took place, has not appeared the violence of one man over another in any form: war, slavery, of defence of one’s labor against others. But as soon as any violence was exerted in society, the money at once lost for the owner its significance as a representative of labor, and assumed the meaning of a right which is not based on labor, but on violence[20]. This is one of the functions of the medium of exchange in the pages of Tolstoy.
The second function of money is the representation of the standard value. “Catallactics” admits this function of money. Tolstoy himself should recognize it in an ideal state of society, in a society where extortion has not made its appearance[21]. If people exchanged directly commodity for commodity; if they themselves determined the standards of values by sheep, furs, hides, and shells[22], then one could speak of money as an instrument of exchange, as an ideal standard of value in an ideal state of society. But in such a society there would be no money as such, as a common standard of values, as it has not existed and cannot exist[23]. The standard value of money is determined by law and government, and these institutions are based chiefly on deceit[24], or represent the organized force[25]. What in recent time receives a value is not what is more convenient for exchange, but what is demanded by government. If gold is demanded gold will be a common denominator, if knuckle-bones are demanded, knuckle-bones will have value[26]. If this were not so why has the issue of this medium of exchange always been the prerogative of the government? In such a state of society in which we live, the standard of values ceases to have any significance, because the standard of value of all articles depends on the arbitrary will of the oppressor[27]. By this reason we could speak only on arbitrary and conventional value of money, not of its intrinsic, nor of its standard value.
Passing now to the third function of money, enumerated by Tolstoy, we see that he attributes to it a new contingent service which is not mentioned as such in any political economy. In modern civilised society, he says, all the governments are in extreme need for money, and always in insolvable debt[28]. Wherefore they issue monetary tokens in the different countries[29]. These tokens: legal tender, inconvertible paper, coin, bills, and other governmental fiats, are distributed among the people, in order that later they could be collected as direct, indirect, and land taxes[30]. The debts of the present monetary state grow from year to year in a terrifying progression. Even so grow the budgets[31]. A state which should not levy taxes, for a comparatively short time would go to bankruptcy. The taxes and imposts required from people may be paid in form of cattle, corn, furs, skins, and other natural products, but this “natural economy” never practices in a civilised state. Governments force people to pay those taxes usually in “hard” or “soft” cash, because this kind of money best suits the purposes of rewarding the military and civil officials, of maintaining the clergy, the courts, the construction of prisons, fortresses, cannon[32], and supporting those men who aid in the seizure of the money from the people[33]. So we have the third function of money as the third method of enslavement[34], by means of tribute and taxes[35]. In modern times, since the discovery of America and the development of trade and the influx of gold, which is accepted as the universal money standard, the monetary tribute becomes, with the enforcement of the political power, the chief instrument of the enslavement of men[36], and upon it all the economic relation of men are based[37].
II
Discussing money, Tolstoy cannot separate the economic question from the political. To him it appears inevitable that money performes a social service equivalent to the instrument of extortion. He does not take into consideration those inumerable utilities which circulating medium renders to the community and particularly to the commercial world, facilitating the transfer as well as aggregation of capital. “Chremmatistics” teaches us that money is the most general form of capital, capital in the fluid state, so that it can be immediately turned to new enterprises and transfered for investment to distant places. On the other hand, capital in the form of money is the most convenient vehicle of production and distribution of wealth. Tolstoy, as a medieval canonist, regards capital and wealth to be shameful and criminal things. He absolutely repudiates the theory that in all production only three factors take part: land, capital and labor. His disconcerting controversy in these matters contains nothing fundamentally new in political economy, but it is an odd manner in which he couches the notion of money in relation to production.
It seems strange, Tolstoy’s theory runs, that economists do not recognize the natural objects in production of wealth. The power of the sun, water, food, air, and social security, are the requisites of production as much as the land or capital. Education, knowledge, and ability to speak are certain agents of production. I could fill a whole volume, says Tolstoy, with such omitted factors, and put them at the basis of science[38]. The division into three factors of production is not proper to men. It is improper, arbitrary, and senseless. It does not lie in the essence of things themselves.