Grundrisse: Notebook I – The Chapter on Money


October 1857

The Chapter on Money

Alfred Darimon, De la réforme des banques, Paris, 1856. [1]

‘The root of the evil is the predominance which opinion obstinately assigns to the role of the precious metals in circulation and exchange.’ (pp. 1, 2.) [2]

Begins with the measures which the Banque de France adopted in October 1855 to ‘stem the progressive diminution of its reserves.’ (p. 2.) Wants to give us a statistical tableau of the condition of this bank during the six months preceding its October measures. To this end, compares its bullion assets during these three months and the ‘fluctuations du portefeuille’, i.e. the quantity of discounts extended by the bank (commercial papers, bills of exchange in its portfolio). The figure which expresses the value of the securities held by the bank, ‘represents’, according to Darimon, ‘the greater or lesser need felt by the public for its services, or, which amounts to the same thing, the requirements of circulation’. (p. 2.) Amounts to the same thing? Not at all. If the mass of bills presented for discount were identical with the ‘requirements of circulation’, of monetary turnover in the proper sense, then the turnover of banknotes would have to be determined by the quantity of discounted bills of exchange. But this movement is on the average not only not parallel, but often an inverse one. The quantity of discounted bills and the fluctuations in this quantity express the requirements of credit, whereas the quantity of money in circulation is determined by quite different influences. In order to reach any conclusions about circulation at all, Darimon would above all have had to present a column showing the amount of notes in circulation next to the column on bullion assets and the column on discounted bills. In order to discuss the requirements of circulation, it did not require a very great mental leap to look first of all at the fluctuations in circulation proper. The omission of this necessary link in the equation immediately betrays the bungling of the dilettante, and the intentional muddling together of the requirements of credit with those of monetary circulation – a confusion on which rests in fact the whole secret of Proudhonist wisdom. (A mortality chart listing illnesses on one side and deaths on the other, but forgetting births.) The two columns (see p. 3) given by Darimon, i.e. the bank’s metallic assets from April to September on the one side, the movement of its portfolio on the other, express nothing but the tautological fact, which requires no display of statistical illustration, that the bank’s portfolio filled up with bills of exchange and its vaults emptied of metal in proportion as bills of exchange were presented to it for the purpose of withdrawing metal. And the table which Darimon offers to prove this tautology does not even demonstrate it in a pure form. It shows, rather, that the metallic assets of the bank declined by about 144 million between 12 April and 13 September 1855, while its portfolio holdings increased by about 101 million. The decline in bullion thus exceeded the rise in discounted commercial papers by 43 million. The identity of both movements is wrecked against this net imbalance at the end of six months. A more detailed comparison of the figures shows us additional incongruities.

Metal in bankPaper discounted by bank
12 April – 432,614,799 fr. 12 April – 322,904,313
10 May – 420,914,028 10 May – 310,744,925

In other words: between 12 April and 10 May, the metal assets decline by 11,700,769, while the amount of securities increases by 12,159,388; i.e. the increase of securities exceeds the decline of metal by about half a million (458,619 fr.). [3] The opposite finding, but on a far more surprising scale, appears when we compare the months of May and June:

Metal in bankPaper discounted by bank
10 May – 420,914,028 10 May – 310,744,925
14 June – 407,769,813 14 June – 310,369,439

That is, between 10 May and 14 June the metal assets of the bank declined by 13,144,225 fr. Did its securities increase to the same degree? On the contrary, they fell during the same period by 375,486 fr. Here, in other words, we no longer have a merely quantitative disproportion between the decline on one side and the rise on the other. Even the inverse relation of both movements has disappeared. An enormous decline on one side is accompanied by a relatively weak decline on the other.

Metal in bankPaper discounted by bank
14 June – 407,769,813 14 June – 310,369,439
12 July – 314,629,614 12 July – 381,699,256

Comparison of the months June and July shows a decline of metal assets by 93,140,199 and an increase of securities by 71,329,817; i.e. the decline in metal assets is 21,810,382 greater than the increase of the portfolio.

Metal in bank Paper discounted by bank
12 July – 314,629,614 12 July – 381,699,256
9 August – 338,784,444 9 August – 458,689,605

Here we see an increase on both sides; metal assets by 24,154,830, and on the portfolio side the much more significant 76,990,349.

Metal in bank [Paper discounted by bank]
9 August – 338,784,444 9 August – 458,689,605
13 Sept. – 288,645,333 [13 Sept.] – 431,390,562

The decline in metal assets of 50,139,111 fr. is here accompanied by a decline in securities of 27,299,043 fr. (Despite the restrictive measures adopted by the Banque de France, its reserves again declined by 24 million in December 1855.)

What’s sauce for the gander is sauce for the goose. The conclusions that emerge from a sequential comparison of the six-month period have the same claim to validity as those which emerge from Mr Darimon’s comparison of the beginning of the series with its end. And what does the comparison show? Conclusions which reciprocally devour each other. Twice, the portfolio increases more rapidly than the metal assets decrease (April-May, June-July). Twice the metal assets and the portfolio both decline, but the former more rapidly than the latter (May – June, August-September). Finally, during one period both metal assets and the portfolio increase, but the latter more rapidly than the former. Decrease on one side, increase on the other; decrease on both sides; increase on both sides; in short, everything except a lawful regularity, above all no inverse correlation, not even an interaction, since a decline in portfolio cannot be the cause of a decline in metal assets, and an increase in portfolio cannot be the cause of an increase in metal assets. An inverse relation and an interaction are not even demonstrated by the isolated comparison which Darimon sets up between the first and last months. Since the increase in portfolio by 101 million does not cover the decrease in metal assets, 144 million, then the possibility remains open that there is no causal link whatever between the increase on one side and the decrease on the other. Instead of providing a solution, the statistical illustration threw up a quantity of intersecting questions; instead of one puzzle, a bushelful. These puzzles, it is true, would disappear the moment Mr Darimon presented columns on circulation of banknotes and on deposits next to his columns on metal assets and portfolio (discounted paper). An increase in portfolio more rapid than a decrease in metal would then be explained by a simultaneous increase in metallic deposits or by the fact that a portion of the banknotes issued in exchange for discounted paper was not converted into metal but remained instead in circulation, or, finally, that the issued banknotes immediately returned in the form of deposits or in repayment of due bills, without entering into circulation. A decrease in metal assets accompanied by a lesser decrease in portfolio could be explained by the withdrawal of deposits from the bank or the presentation of banknotes for conversion into metal, thus adversely affecting the bank’s discounts through the agency of the owners of the withdrawn deposits or of the metallized notes. Finally, a lesser decline in metal assets accompanied by a lesser decline in portfolio could be explained on the same grounds (we entirely leave out of consideration the possibility of an outflow of metal to replace silver currency inside the country, since Darimon does not bring it into the field of his observations). But a table whose columns would have explained one another reciprocally in this manner would have proved what was not supposed to be proved, namely that the fulfillment by the bank of increasing commercial needs does not necessarily entail an increase in the turnover of its notes, that the increase or decrease of this turnover does not correspond to the increase or decrease of its metallic assets, that the bank does not control the quantity of the means of circulation, etc. – a lot of conclusions which did not fit in with Mr Darimon’s intent. In his hasty effort to present in the most lurid colours his preconceived opinion that the metal basis of the bank, represented by its metallic assets, stands in contradiction to the requirements of circulation, which, in his view, are represented by the bank’s portfolio, he tears two columns of figures out of their necessary context with the result that this isolation deprives the figures of all meaning or, at the most, leads them to testify against him. We have dwelt on this fact in some detail in order to make clear with one example what the entire worth of the statistical and positive illustrations of the Proudhonists amounts to. Economic facts do not furnish them with the test of their theories; rather, they furnish the proof of their lack of mastery of the facts, in order to be able to play with them. Their manner of playing with the facts shows, rather, the genesis of their theoretical abstractions.

Let us pursue Darimon further.

When the Bank of France saw its metal assets diminished by 144 million and its portfolio increased by 101 million, it adopted, on 4 and 18 October 1855, a set of measures to defend its vaults against its portfolio. It raised its discount rate successively from 4 to 5 and from 5 to 6% and reduced the time of payment of bills presented for discount from 90 to 75 days. In other words: it raised the terms on which it made its metal available to commerce. What does this demonstrate? ‘That a bank’, says Darimon, ‘organized on present principles, i.e. on the rule of gold and silver, withdraws its services from the public precisely at the moment when the public most needs them.’ Did Mr Darimon require his figures to prove that supply increases the cost of its services to the same degree as demand makes claims upon them (and exceeds them)? And do not the gentlemen who represent the ‘public’ vis-à-vis the bank follow the same ‘agreeable customs of life’? The philanthropic grain merchants who present their bills to the bank in order to receive notes, in order to exchange the notes for the bank’s gold, in order to exchange the bank’s gold for another country’s grain, in order to exchange the grain of another country for the money of the French public – were they perhaps motivated by the idea that, since the public then had the greatest need of grain, it was therefore their duty to let them have grain on easier terms, or did they not rather rush to the bank in order to exploit the increase of grain prices, the misery of the public and the disproportion between its supply and its demand? And the bank should be made an exception to these general economic laws? Quelle idée! But perhaps the present organization of the banks has as its consequence that gold must be piled up in great quantity so that the means of purchase, which, in case of insufficient grain, could have the greatest utility for the nation, should be condemned to lie fallow; in short, so that capital, instead of passing through the necessary transformation of production, becomes the unproductive and lazy basis of circulation. In this case the problem would be, then, that the unproductive stock of metal still stands above its necessary minimum within the present system of bank organization, because hoarding of the gold and silver in circulation has not yet been restricted to its economic limits. It is a question of something more or something less, but on the same foundation. But then the question would have been deflated from the socialist heights down to the practical bourgeois plains where we find it promenading among the majority of the English bourgeois opponents of the Bank of England. What a come-down! Or is the issue not a greater or lesser saving of metal by means of banknotes and other bank arrangements, but a departure from the metal basis altogether? But then the statistical fable is worthless again, as is its moral. If, for any reason whatever, the bank must send precious metals to other countries in case of need, then it must first accumulate them, and if the other country is to accept these metals in exchange for its commodities, then the predominance of the metals must first have been secured.

The causes of the precious metals’ flight from the bank, according to Darimon, were crop failures and the consequent need to import grain from abroad. He forgets the failure of the silk harvest and the need to purchase it in vast quantities from China. Darimon further cites the numerous great undertakings coinciding with the last months of the industrial exhibition in Paris. Again he forgets the great speculations and ventures abroad launched by the Crédit Mobilier and its rivals for the purpose of showing, as Isaac Péreire [4] says, that French capital is as distinguished among capitals by its cosmopolitan nature as is the French language among languages. Plus the unproductive expenditures entailed by the Crimean War: borrowings of 750 million. That is, on one side, a great and unexpected collapse in two of the most important branches of French production! On the other, an unusual employment of French capital in foreign markets for undertakings which by no means immediately paid their way and which in part will perhaps never cover their costs of production! In order to balance the decrease of domestic production by means of imports, on the one side, and the increase of industrial undertakings abroad on the other side, what would have been required were not symbols of circulation which facilitate the exchange of equivalents, but these equivalents themselves; not money but capital. The losses in French domestic production, in any case, were not an equivalent for the employment of French capital abroad. Now suppose that the Bank of France did not rest on a metallic base, and that other countries were willing to accept the French currency or its capital in any form, not only in the specific form of the precious metals. Would the bank not have been equally forced to raise the terms of its discounting precisely at the moment when its ‘public’ clamoured most eagerly for its services? The notes with which it discounts the bills of exchange of this public are at present nothing more than drafts on gold and silver. In our hypothetical case, they would be drafts on the nation’s stock of products and on its directly employable labour force: the former is limited, the latter can be increased only within very positive limits and in certain amounts of time. The printing press, on the other hand, is inexhaustible and works like a stroke of magic. At the same time, while the crop failures in grain and silk enormously diminish the directly exchangeable wealth of the nation, the foreign railway and mining enterprises freeze the same exchangeable wealth in a form which creates no direct equivalent and therefore devours it, for the moment, without replacement! Thus, the directly exchangeable wealth of the nation (i.e. the wealth which can be circulated and is acceptable abroad) absolutely diminished! On the other side, an unlimited increase in bank drafts. Direct consequence: increase in the price of products, raw materials and labour. On the other side, decrease in price of bank drafts. The bank would not have increased the wealth of the nation through a stroke of magic, but would merely have undertaken a very ordinary operation to devalue its own paper. With this devaluation, a sudden paralysis of production! But no, says the Proudhonist. Our new organization of the banks would not be satisfied with the negative accomplishment of abolishing the metal basis and leaving everything else the way it was. It would also create entirely new conditions of production and circulation, and hence its intervention would take place under entirely new preconditions. Did not the introduction of our present banks, in its day, revolutionize the conditions of production? Would large-scale modern industry have become possible without this new financial institution, without the concentration of credit which it created, without the state revenues which it created in antithesis to ground rent, without finance in antithesis to landed property, without the moneyed interest in antithesis to the landed interest; without these things could there have been stock companies etc., and the thousand forms of circulating paper which are as much the preconditions as the product of modern commerce and modern industry?

We have here reached the fundamental question, which is no longer related to the point of departure. The general question would be this: Can the existing relations of production and the relations of distribution which correspond to them be revolutionized by a change in the instrument of circulation, in the organization of circulation? Further question: Can such a transformation of circulation be undertaken without touching the existing relations of production and the social relations which rest on them? If every such transformation of circulation presupposes changes in other conditions of production and social upheavals, there would naturally follow from this the collapse of the doctrine which proposes tricks of circulation as a way of, on the one hand, avoiding the violent character of these social changes, and, on the other, of making these changes appear to be not a presupposition but a gradual result of the transformations in circulation. An error in this fundamental premise would suffice to prove that a similar misunderstanding has occurred in relation to the inner connections between the relations of production, of distribution and of circulation. The above-mentioned historical case cannot of course decide the matter, because modern credit institutions were as much an effect as a cause of the concentration of capital, since they only form a moment of the latter, and since concentration of wealth is accelerated by a scarcity of circulation (as in ancient Rome) as much as by an increase in the facility of circulation. It should further be examined, or rather it would be part of the general question, whether the different civilized forms of money – metallic, paper, credit money, labour money (the last-named as the socialist form) – can accomplish what is demanded of them without suspending the very relation of production which is expressed in the category money, and whether it is not a self-contradictory demand to wish to get around essential determinants of a relation by means of formal modifications? Various forms of money may correspond better to social production in various stages; one form may remedy evils against which another is powerless; but none of them, as long as they remain forms of money, and as long as money remains an essential relation of production, is capable of overcoming the contradictions inherent in the money relation, and can instead only hope to reproduce these contradictions in one or another form. One form of wage labour may correct the abuses of another, but no form of wage labour can correct the abuse of wage labour itself. One lever may overcome the inertia of an immobile object better than another. All of them require inertia to act at all as levers. This general question about the relation of circulation to the other relations of production can naturally be raised only at the end. But, from the outset, it is suspect that Proudhon and his associates never even raise the question in its pure form, but merely engage in occasional declamations about it. Whenever it is touched on, we shall pay close attention.

This much is evident right at the beginning of Darimon, namely that he completely identifies monetary turnover with credit, which is economically wrong. (The notion of crédit gratuit, incidentally, is only a hypocritical, philistine and anxiety-ridden form of the saying: property is theft. Instead of the workers taking the capitalists’ capital, the capitalists are supposed to be compelled to give it to them.) This too we shall have to return to.

In the question under discussion now, Darimon got no further than the point that banks, which deal in credit, like merchants who deal in commodities or workers who deal in labour, sell at a higher price when demand rises in relation to supply, i.e. they make their services more difficult for the public to obtain at the very moment the public has the greatest need for them. We saw that the bank has to act in this way whether the notes it issues are convertible or inconvertible.

The behaviour of the Bank of France in October 1855 gave rise to an ‘immense clamour’ (p. 4) and to a ‘great debate’ between it and the spokesmen of the public. Darimon summarizes, or pretends to summarize, this debate. We will follow him here only occasionally, since his synopsis displays the weak sides of both opponents, revealed in their constant desultory irrelevances. Groping about in extrinsic arguments. Each of the antagonists is at every moment dropping his weapon in order to search for another. Neither gets to the point of striking any actual blows, not only because they are constantly changing the weapons with which they are supposed to hit each other, but also because they hardly meet on one terrain before they take rapid flight to another.

(The discount rate in France had not been raised to 6% since 1806: for 50 years the time of payment for commercial bills of exchange had stood firm at 90 days.)

The weakness of the bank’s defending arguments, as presented by Darimon, and his own misconceptions, emerge for example from the following passage in his fictitious dialogue:

Says the bank’s opponent: ‘By virtue of your monopoly you are the dispenser and regulator of credit. When you take up an attitude of severity, the discounters not only imitate you but they further exaggerate your rigour … Your measures have brought business to a standstill.’ (p. 5.)

The bank replies, and indeed ‘humbly’: ‘“What would you have me do?” the bank humbly said … “To defend myself against the foreigner, I have to defend myself against our citizens … Above all I must prevent the outflow of the currency, without which I am nothing and can do nothing.”’ (p. 5.)

The bank’s script is ridiculous. It is made to sidetrack the question, to turn it into a rhetorical generality, in order to be able to answer it with a rhetorical generality. In this dialogue the bank is made to share Darimon’s illusion that its monopoly really allows it to regulate credit. In fact the power of the bank begins only where the private ‘discounters’ stop, hence at a moment when its power is already extraordinarily limited. Suppose that during easy conditions on the money market, when everybody else is discounting at 2 1/2%, the bank holds at 5%; instead of imitating it, the discounters will discount all its business away before its very eyes. Nowhere is this more vividly demonstrated than in the history of the Bank of England since the law of 1844, which made it into a real rival of the private bankers in the business of discounting, etc. In order to secure for itself a share, and a growing share, of the discount business during the periods of easiness on the money market, the Bank of England was constantly forced to reduce its rates not only to the level adopted by the private bankers but often below it. Its ‘regulation of credit’ is thus to be taken with a grain of salt; Darimon, however, makes his superstitious faith in its absolute control of the money market and of credit into his point of departure.

Instead of analysing critically the determinants of the bank’s real power over the money market, he immediately grabs on to the phrase that cash is everything for the bank and that it has to prevent its outflow from the country. A professor of the Collège de France (Chevalier) [5] replies: ‘Gold and silver are commodities like any other … The only purpose of the bank’s metallic reserves is to make purchases abroad in moments of emergency.’ The bank rejoins: ‘Metallic money is not a commodity like any other; it is an instrument of exchange, and by virtue of this title it holds the privilege of prescribing laws for all the other commodities.’ Now Darimon leaps between the combatants: ‘Thus the privilege held by gold and silver, that of being the only authentic instrument of circulation and exchange, is responsible not only for the present crisis, but for the periodic commercial crises as well.’ In order to control all the undesirable features of crises ‘it would be enough that gold and silver were made commodities like any other, or, precisely expressed, that all commodities were made instruments of exchange on an equal footing (au même titre) with gold and silver; that products were truly exchanged for products’. (pp. 5–7.)

Shallowness with which the disputed question is presented here. If the bank issues drafts on money (notes) and promissory notes on capital repayable in gold (or silver) (deposits), then it is self-evident that it can watch and endure the decrease of its metal reserves only up to a certain point without reacting. That has nothing to do with the theory of metallic money. We will return to Darimon’s theory of crises later.

In the chapter “Short History of the Crises of Circulation”, Mr Darimon omits the English crisis of 1809–11 and confines himself to noting the appointment of the Bullion Committee in 1810; and for 1811 he again leaves out the crisis itself (which began in 1809), and merely mentions the adoption by the House of Commons of the resolution that ‘the depreciation of notes relative to bullion stems not from a depreciation of paper money but from an increase in the price of bullion’, together with Ricardo’s pamphlet which maintains the opposite thesis, the conclusion of which is supposed to read: ‘A currency is in its most perfect state when it consists wholly of paper money.’ (pp. 22, 23.) [6] The crises of 1809 and 1811 were important here because the bank at that time issued inconvertible notes, meaning that the crises did not stem from the convertibility of notes into gold (metal) and hence could not be restrained by the abolition of convertibility. Like a nimble tailor, Darimon skips over these facts which contradict his theory of crises. He clutches on to Ricardo’s aphorism, which had nothing to do with the real subject of discussion in the pamphlet, namely the depreciation of banknotes. He is unaware that Ricardo’s theory of money is as completely refuted as its false assumptions that the bank controls the quantity of notes in circulation, and that the quantity of means of circulation determines prices, whereas on the contrary prices determine the quantity of means of circulation etc. In Ricardo’s time all detailed studies of the phenomena of monetary circulation were still lacking. This by the way.

Gold and silver are commodities like the others. Gold and silver are not commodities like the others: as general instruments of exchange they are the privileged commodities and degrade the other commodities by virtue of this privilege. This is the last analysis to which Darimon reduces the antagonism. His final judgement is: abolish the privilege of gold and silver, degrade them to the rank of all other commodities. Then you no longer have the specific evils of gold and silver money, or of notes convertible into gold and silver. You abolish all evils. Or, better, elevate all commodities to the monopoly position now held by gold and silver. Let the pope remain, but make everybody pope. Abolish money by making every commodity money and by equipping it with the specific attributes of money. The question here arises whether this problem does not already pronounce its own nonsensicality, and whether the impossibility of the solution is not already contained in the premises of the question. Frequently the only possible answer is a critique of the question and the only solution is to negate the question. The real question is: does not the bourgeois system of exchange itself necessitate a specific instrument of exchange? Does it not necessarily create a specific equivalent for all values? One form of this instrument of exchange or of this equivalent may be handier, more fitting, may entail fewer inconveniences than another. But the inconveniences which arise from the existence of every specific instrument of exchange, of any specific but general equivalent, must necessarily reproduce themselves in every form, however differently. Darimon naturally skips over this question with enthusiasm. Abolish money and don’t abolish money! Abolish the exclusive privilege possessed by gold and silver in virtue of their exclusive monetary role, but turn all commodities to money, i.e. give them all together equally a quality which no longer exists once its exclusiveness is gone.

The bullion drains do in fact bring to the surface a contradiction which Darimon formulates superficially and distorts as well. It is evident that gold and silver are not commodities like the others, and that modern economics is horrified to see itself suddenly and temporarily thrown back again and again to the prejudices of the Mercantile System. The English economists attempt to overcome the difficulty by means of a distinction. What is demanded in moments of such monetary crises, they say, is not gold and silver as money, not gold and silver as coin, but gold and silver as capital. They forget to add: yes, capital, but capital in the specific form of gold and silver. Why else is there an outflow of precisely these commodities, while most of the others depreciate owing to lack of outflow, if capital were exportable in every form?

Let us take specific examples: drain as a result of domestic harvest failures in a chief food crop (e.g. grain), crop failure abroad and hence increased prices in one of the main imported consumer goods (e.g. tea); drain because of a crop failure in decisive industrial raw materials (cotton, wool, silk, flax etc.); drain because of excessive imports (caused by speculation, war etc.). The replacement of a sudden or chronic shortage (grain, tea, cotton, flax, etc.) in the case of a domestic crop failure deprives the nation doubly. A part of its invested capital or labour is not reproduced – real loss of production. A part of that capital which has been reproduced has to be shifted to fill this gap; and this part, moreover, does not stand in a simple arithmetical relation to the loss, because the deficient product rises and must rise on the world market as a result of the decreased supply and the increased demand. It is necessary to analyse precisely how such crises would look if money were disregarded, and what determinants money introduces into the given relations. (Grain crop failures and excess imports the most important cases. The impact of war is self-evident, since economically it is exactly the same as if the nation were to drop a part of its capital into the ocean.)

Case of a grain crop failure: Seen in comparison to other nations, it is clear that the nation’s capital (not only its real wealth) has diminished, just as clear as that a peasant who burns his loaves and has to buy bread at the baker’s is impoverished to the extent of the price of his purchase. In reference to the domestic situation, the rise in grain prices, as far as value enters into the question, seems to leave everything as it was. Except for the fact that the lesser quantity of grain multiplied by the increased price, in real crop failures, never = the normal quantity multiplied by the lesser price. Suppose that the entire English wheat crop were 1 quarter, and that this 1 quarter fetched the same price as 30 million quarters previously. Then, leaving aside the fact that it lacks the means to reproduce either life or wheat, and if we postulate that the working day necessary to produce 1 quarter = A, then the nation would exchange A × 30 million working days (cost of production) for 1 × A working days (product); the productive force of its capital would have diminished by millions and the sum of all values in the land would have diminished, since every working day would have depreciated by a factor of 30 million. Every unit of capital would then represent only 1/30,000,000 of its earlier value, of its equivalent in production costs, even though in this given case the nominal value of the nation’s capital would not have diminished (apart from the depreciation of land and soil), since the decrease in value of all other products would have been exactly compensated by the increase in value of the 1 quarter of wheat. The increase in the wheat price by a factor of A × 30 million would be the expression of an equivalent depreciation of all other products. This distinction between domestic and foreign, incidentally, is altogether illusory. The relation between the nation which suffers a crop failure and another nation where the former makes purchases is like that between every individual of the nation and the farmer or grain merchant. The surplus sum which it must expend in purchasing grain is a direct subtraction from its capital, from its disposable means.

So as not to obscure the question with unessential influences, it must be postulated that the nation has free trade in grain. Even if the imported grain were as cheap as the domestically produced grain, the nation would still be poorer to the amount of capital not reproduced by the farmers. However, on the above assumption of free trade, the nation always imports as much foreign grain as is possible at the normal price. The increase of imports thus presupposes a rise in the price.

The rise in the grain price is = to the fall in the price of all other commodities. The increased cost of production (represented by the price) at which the quarter of wheat is obtained is = to the decreased productivity of capital in all other forms. The surplus used to purchase grain must correspond to a deficit in the purchase of all other products and hence already a decline in their prices. With or without metallic money, or money of any other kind, the nation would find itself in a crisis not confined to grain, but extending to all other branches of production, not only because their productivity would have positively diminished and the price of their production depreciated as compared to their value, which is determined by the normal cost of production, but also because all contracts, obligations etc. rest on the average prices of products. For example, x bushels of grain have to be supplied to service the state’s indebtedness, but the cost of producing these x bushels has increased by a given factor. Quite apart from the role of money the nation would thus find itself in a general crisis. If we abstract not only from money but from exchange value as well, then products would have depreciated and the nation’s productivity diminished while all its economic relations are based on the average productivity of its labour.

A crisis caused by a failure in the grain crop is therefore not at all created by the drain of bullion, although it can be aggravated by obstacles set up to impede this drain.

In any case, we cannot agree with Proudhon either when he says that the crisis stems from the fact that the precious metals alone possess an authentic value in contrast to the other commodities; for the rise in the grain price first of all means only that more gold and silver have to be given in exchange for a certain quantity of grain, i.e. that the price of gold and silver has declined relative to the price of grain. Thus gold and silver participate with all other commodities in the depreciation relative to grain, and no privilege protects them from this. The depreciation of gold and silver relative to grain is identical with the rise of the grain price (not quite correct. The quarter of grain rises from 50s. to 100s., i.e. by 100%, but cotton goods fall by 80. Silver has declined by 50 relative to grain; cotton goods (owing to declining demand etc.) have declined by 80% relative to it. That is to say, the prices of other commodities fall to a greater extent than those of grain rise. But the opposite also occurs. For example in recent years, when grain temporarily rose by 100%, it never entered the heads of the industrial products to decline in the same proportion in which gold had declined relative to grain. This circumstance does not immediately affect the general thesis). Neither can it be said that gold possesses a privilege because its quantity is precisely and authentically defined in the coin form. One thaler (silver) remains under all circumstances one thaler. But a bushel of wheat is also always a bushel, and a yard of linen a yard.

The depreciation of most commodities (labour included) and the resultant crisis, in the case of an important crop mishap, cannot therefore be crudely ascribed to the export of gold, because depreciation and crisis would equally take place if no gold whatever were exported and no grain imported. The crisis reduces itself simply to the law of supply and demand, which, as is known, acts far more sharply and energetically within the sphere of primary needs – seen on a national scale – than in all other spheres. Exports of gold are not the cause of the grain crisis, but the grain crisis is the cause of gold exports.

Gold and silver in themselves can be said to intervene in the crisis and to aggravate its symptoms in only two ways: (1) When the export of gold is made more difficult by the metal reserve requirements to which the banks are bound; when the measures which the banks therefore undertake against the export of gold react disadvantageously on domestic circulation; (2) When the export of gold becomes necessary because foreign nations will accept capital only in the form of gold and not otherwise.

Difficulty No. 2 can remain even if difficulty No. 1 is removed. The Bank of England experienced this precisely during the period when it was legally empowered to issue inconvertible notes. [7] These notes declined in relation to gold bullion, but the mint price of gold likewise declined in relation to its bullion price. In relation to the note, gold had become a special kind of commodity. It can be said that the note still remained dependent on gold only to the extent that it nominally represented a certain quantity of gold for which it could not in fact be exchanged. Gold remained its denomination, although it was no longer legally exchangeable for this quantity of gold at the bank.

There can be hardly a doubt (?) (this is to be examined later and does not directly belong with the subject under discussion) that as long as paper money retains its denomination in gold (i.e. so long as a £5 note for example is the paper representative of 5 sovereigns), the convertibility of the note into gold remains its economic law, whether this law also exists politically or not. The Bank of England’s notes continued during the years 1799–1819 to state that they represented the value of a given quantity of gold. How can this assertion be put to the test other than by the fact that the note indeed commands so-and-so-much bullion? From the moment when bullion to the value of 5 sovereigns could no longer be had for a £5 note, the note was depreciated even though it was inconvertible. The equivalence of the note with an amount of gold equal to its face-value immediately entered into contradiction with the factual non-equivalence between banknotes and gold. The point in dispute among the English who want to keep gold as the denomination of notes is not in fact the convertibility of the note into gold – which is only the practical equivalence of what the face of the note expresses theoretically – but rather the question how this convertibility is to be secured, whether through limits imposed by law on the bank or whether the bank is to be left to its own devices. The advocates of the latter course assert that this convertibility is achieved on the average by a bank of issue which lends against bills of exchange and whose notes thus have an assured reflux, and charge that their opponents despite everything never achieved better than this average measure of security. The latter is a fact. The average, by the way, is not to be despised, and calculations on the basis of averages have to form the basis for banks just as well as for all insurance companies etc. In this regard the Scottish banks are above all, and rightly, held up as a model. The strict bullionists say for their part that they take convertibility as a serious matter, that the bank’s obligation to convert notes keeps the notes convertible, that the necessity of this convertibility is given by the denomination of the notes themselves, that this forms a barrier against over-issue, and that their opponents are pseudo-defenders of inconvertibility. Between these two sides, various shadings, a mass of little ‘species’. [8] The defenders of inconvertibility, finally, the determined anti-bullionists, are, without knowing it, just as much pseudo-defenders of convertibility as their opponents are of inconvertibility, because they retain the denomination of the note and hence make the practical equation between a note of a given denomination and a given quantity of gold the measure of their notes’ full value. Prussia has paper money of forced currency. (A reflux is secured by the obligation to pay a portion of taxes in paper.) These paper thalers are not drafts on silver; no bank will legally convert them. They are not issued by a commercial bank against bills of exchange but by the government to meet its expenses. But their denomination is that of silver. A paper thaler proclaims that it represents the same value as a silver thaler. If confidence in the government were to be thoroughly shaken, or if this paper money were issued in greater proportions than required by circulation, then the paper thaler would in practice cease to be equal to the silver thaler and would be depreciated because it had fallen beneath the value proclaimed on its face. It would even depreciate if neither of the above conditions obtained but if a special need for silver, e.g. for exports, gave silver a privileged position vis-à-vis the paper thaler. Convertibility into gold and silver is therefore the practical measure of the value of every paper currency denominated in gold or silver, whether this paper is legally convertible or not. Nominal value runs alongside its body as a mere shadow; whether the two balance can be shown only by actual convertibility (exchangeability). A fall of real value beneath nominal value is depreciation. Convertibility is when the two really run alongside each other and change places with each other. The convertibility of inconvertible notes shows itself not in the bank’s stock of bullion but in the everyday exchange between paper and the metal whose denomination the paper carries. In practice, the convertibility of convertible notes is already endangered when this is no longer confirmed by everyday routine exchange in all parts of the country, but has to be established specifically by large-scale operations on the part of the bank. In the Scottish countryside paper money is even preferred to metal money. Before 1845, when the English law of 1844 [9] was forced upon it, Scotland naturally took part in all English social crises, and experienced some crises to a higher degree because the clearing of the land proceeded more ruthlessly there. Nevertheless, Scotland never experienced a real monetary crisis (the fact that a few banks, exceptions, collapsed because they had made careless loans is irrelevant here); no depreciation of notes, no complaints and no inquiries into the sufficiency or insufficiency of the currency in circulation etc. Scotland is important here because it shows on the one hand how the monetary system can be completely regulated on the present basis – all the evils Darimon bewails can be abolished – without departing from the present social basis; while at the same time its contradictions, its antagonisms, the class contradiction etc. have reached an even higher degree than in any other country in the world. It is characteristic that both Darimon and the patron who introduces his book – Émile Girardin, [10] who complements his practical swindles with theoretical utopianism – do not find the antithesis of the monopoly banks of France and England in Scotland, but rather look for it in the United States, where the banking system, owing to the need to obtain a charter from the individual State, is only nominally free, where the prevailing system is not free competition among banks but a federation of monopoly banks. The Scottish banking and monetary system was indeed the most perilous reef for the illusions of the circulation artists. Gold or silver money (except where coins of both kinds are legal tender) are not said to depreciate no matter how often their value changes relative to other commodities. Why not? Because they form their own denomination; because their title is not a title to a value, i.e. they are not measured in a third commodity, but merely express fractional parts of their own substance, 1 sovereign = so much gold of a given weight. Gold is therefore nominally undepreciable, not because it alone expresses an authentic value, but because as money it does not express value at all, but merely expresses a given quantity of its own substance, merely carries its own quantitative definition on its forehead. (To be examined more closely later: whether this characteristic mark of gold and silver money is in the last analysis an intrinsic property of all money.) Deceived by this nominal undepreciability of metallic money, Darimon and consorts see only the one aspect which surfaces during crises: the appreciation of gold and silver in relation to nearly all other commodities; they do not see the other side, the depreciation of gold and silver or of money in relation to all other commodities (labour perhaps, not always, excluded) in periods of so-called prosperity, periods of a temporary general rise of prices. Since this depreciation of metallic money (and of all kinds of money which rest on it) always precedes its appreciation, they ought to have formulated the problem the other way round: how to prevent the periodic depreciation of money (in their language, to abolish the privileges of commodities in relation to money). In this last formulation the problem would have reduced itself to: how to overcome the rise and fall of prices. The way to do this: abolish prices. And how? By doing away with exchange value. But this problem arises: exchange corresponds to the bourgeois organization of society. Hence one last problem: to revolutionize bourgeois society economically. It would then have been self-evident from the outset that the evil of bourgeois society is not to be remedied by ‘transforming’ the banks or by founding a rational ‘money system’.

Convertibility, therefore – legal or not – remains a requirement of every kind of money whose title makes it a value-symbol, i.e. which equates it as a quantity with a third commodity. The equation already includes the antithesis, the possibility of nonequivalence; convertibility includes its opposite, inconvertibility; appreciation includes depreciation, δυνάμει, [11] as Aristotle would say. Suppose for example that the sovereign were not only called a sovereign, which is a mere honorific for the xth fraction of an ounce of gold (accounting name), in the same way that a metre is the name for a certain length, but were called, say, x hours of labour time. 1/x ounce of gold is in fact nothing more than 1/x hours of labour time materialized, objectified. But gold is labour time accumulated in the past, labour time defined. Its title would make a given quantity of labour as such into its standard. The pound of gold would have to be convertible into x hours of labour time, would have to be able to purchase it at any given moment: as soon as it could buy a greater or a lesser amount, it would be appreciated or depreciated; in the latter case its convertibility would have ceased. What determines value is not the amount of labour time incorporated in products, but rather the amount of labour time necessary at a given moment. Take the pound of gold itself: let it be the product of 20 hours’ labour time. Suppose that for some reason it later requires only 10 hours to produce a pound of gold. The pound of gold whose title advises that it = 20 hours’ labour time would now merely = 10 hours’ labour time, since 20 hours’ labour time = 2 pounds of gold. 10 hours of labour are in practice exchanged for 1 pound of gold; hence 1 pound of gold cannot any longer be exchanged for 20 hours of labour time. Gold money with the plebeian title x hours of labour would be exposed to greater fluctuations than any other sort of money and particularly more than the present gold money, because gold cannot rise or fall in relation to gold (it is equal to itself), while the labour time accumulated in a given quantity of gold, in contrast, must constantly rise or fall in relation to present, living labour time. In order to maintain its convertibility, the productivity of labour time would have to be kept stationary. Moreover, in view of the general economic law that the costs of production constantly decline, that living labour becomes constantly more productive, hence that the labour time objectified in products constantly depreciates, the inevitable fate of this golden labour money would be constant depreciation. In order to control this evil, it might be said that the title of labour time should go not to gold but, as Weitling proposed, with Englishmen ahead of him and French after, Proudhon & Co. among them, to paper money, to a mere symbol of value. The labour time incorporated in the paper itself would then have as little relevance as the paper value of banknotes. The former would be merely the representation of hours of labour, as the latter is of gold or silver. If the hour of labour became more productive, then the chit of paper which represents it would rise in buying power, and vice versa, exactly as a £5 note at present buys more or less depending on whether the relative value of gold in comparison to other commodities rises or falls. According to the same law which would subject golden labour money to a constant depreciation, paper labour money would enjoy a constant appreciation. And that is precisely what we are after; the worker would reap the joys of the rising productivity of his labour, instead of creating proportionately more alien wealth and devaluing himself as at present. Thus the socialists. But, unfortunately, there arise some small scruples. First of all: if we once presuppose money, even if it is only time-chits, then we must also presuppose the accumulation of this money, as well as contracts, obligations, fixed burdens etc., which are entered into in the form of this money. The accumulated chits would constantly appreciate together with the newly issued ones, and thus on the one hand the rising productivity of labour would go to the benefit of non-workers, and on the other hand the previously contracted burdens would keep step with the rising yield of labour. The rise and fall in the value of gold or silver would be quite irrelevant if the world could be started afresh at each new moment and if, hence, previous obligations to pay a certain quantity of gold did not survive the fluctuations in the value of gold. The same holds, here, with the time-chit and hourly productivity.

The point to be examined here is the convertibility of the time-chit. We reach the same goal if we make a detour. Although it is still too early, a few observations can be made about the delusions on which the time-chit rests, which allow us an insight into the depths of the secret which links Proudhon’s theory of circulation with his general theory – his theory of the determination of value. We find the same link e.g. in Bray [12] and Gray. [13] Whatever basis in truth it may happen to have will be examined later [14] (but first, incidentally: seen only as drafts on gold, banknotes should not be issued in amounts exceeding the quantity of gold which they pretend to replace, or they depreciate. Three drafts of £15 which I issue to three different creditors on the same £15 in gold are in fact only drafts on £15 / 3 = £5 each. Each of these notes would have depreciated to 33 1/3 per cent from the outset.)

The value (the real exchange value) of all commodities (labour included) is determined by their cost of production, in other words by the labour time required to produce them. Their price is this exchange value of theirs, expressed in money. The replacement of metal money (and of paper or fiat money denominated in metal money) by labour money denominated in labour time would therefore equate the real value (exchange value) of commodities with their nominal value, price, money value. Equation of real value and nominal value, of value and price. But such is by no means the case. The value of commodities as determined by labour time is only their average value. This average appears as an external abstraction if it is calculated out as the average figure of an epoch, e.g. 1 lb. of coffee = 1s. if the average price of coffee is taken over 25 years; but it is very real if it is at the same time recognized as the driving force and the moving principle of the oscillations which commodity prices run through during a given epoch. This reality is not merely of theoretical importance: it forms the basis of mercantile speculation, whose calculus of probabilities depends both on the median price averages which figure as the centre of oscillation, and on the average peaks and average troughs of oscillation above or below this centre. The market value is always different, is always below or above this average value of a commodity. Market value equates itself with real value by means of its constant oscillations, never by means of an equation with real value as if the latter were a third party, but rather by means of constant non-equation of itself (as Hegel would say, not by way of abstract identity, but by constant negation of the negation, i.e. of itself as negation of real value). [15] In my pamphlet against Proudhon I showed that real value itself – independently of its rule over the oscillations of the market price (seen apart from its role as the law of these oscillations) – in turn negates itself and constantly posits the real value of commodities in contradiction with its own character, that it constantly depreciates or appreciates the real value of already produced commodities; this is not the place to discuss it in greater detail. [16] Price therefore is distinguished from value not only as the nominal from the real; not only by way of the denomination in gold and silver, but because the latter appears as the law of the motions which the former runs through. But the two are constantly different and never balance out, or balance only coincidentally and exceptionally. The price of a commodity constantly stands above or below the value of the commodity, and the value of the commodity itself exists only in this up-and-down movement of commodity prices. Supply and demand constantly determine the prices of commodities; never balance, or only coincidentally; but the cost of production, for its part, determines the oscillations of supply and demand. The gold or silver in which the price of a commodity, its market value, is expressed is itself a certain quantity of accumulated labour, a certain measure of materialized labour time. On the assumption that the production costs of a commodity and the production costs of gold and silver remain constant, the rise or fall of its market price means nothing more than that a commodity, = x labour time, constantly commands > or < x labour time on the market, that it stands above or beneath its average value as determined by labour time. The first basic illusion of the time-chitters consists in this, that by annulling the nominal difference between real value and market value, between exchange value and price – that is, by expressing value in units of labour time itself instead of in a given objectification of labour time, say gold and silver – that in so doing they also remove the real difference and contradiction between price and value. Given this illusory assumption it is self-evident that the mere introduction of the time-chit does away with all crises, all faults of bourgeois production. The money price of commodities = their real value; demand = supply; production = consumption; money is simultaneously abolished and preserved; the labour time of which the commodity is the product, which is materialized in the commodity, would need only to be measured in order to create a corresponding mirror-image in the form of a value-symbol, money, time-chits. In this way every commodity would be directly transformed into money; and gold and silver, for their part, would be demoted to the rank of all other commodities.

It is not necessary to elaborate that the contradiction between exchange value and price – the average price and the prices of which it is the average – that the difference between magnitudes and average magnitudes is not overcome merely by suppressing the difference in name, e.g. by saying, instead of: 1 lb. bread costs 8d., 1 lb. bread = 1/x hours of labour. Inversely, if 8d. = 1/x hours of labour, and if the labour time which is materialized in one pound of bread is greater or less than 1/x hours of labour, then, because the measure of value would be at the same time the element in which the price is expressed, the difference between price and value, which is hidden in the gold price or silver price, would never be glaringly visible. An infinite equation would result. 1/x hours of labour (as contained in 8d. or represented by a chit) > < than 1/x hours of labour (as contained in the pound of bread).

The time-chit, representing average labour time, would never correspond to or be convertible into actual labour time; i.e. the amount of labour time objectified in a commodity would never command a quantity of labour time equal to itself, and vice versa, but would command, rather, either more or less, just as at present every oscillation of market values expresses itself in a rise or fall of the gold or silver prices of commodities.

The constant depreciation of commodities – over longer periods – in relation to time-chits, which we mentioned earlier, arises out of the law of the rising productivity of labour time, out of the disturbances within relative value itself which are created by its own inherent principle, namely labour time. This inconvertibility of the time-chits which we are now discussing is nothing more than another expression for the inconvertibility between real value and market value, between exchange value and price. In contrast to all other commodities, the time-chit would represent an ideal labour time which would be exchanged sometimes against more and sometimes against less of the actual variety, and which would achieve a separate existence of its own in the time-chit, an existence corresponding to this non-equivalence. The general equivalent, medium of circulation and measure of commodities would again confront the commodities in an individual form, following its own laws, alienated, i.e. equipped with all the properties of money as it exists at present but unable to perform the same services. The medium with which commodities – these objectified quantities of labour time – are compared would not be a third commodity but would be rather their own measure of value, labour time itself; as a result, the confusion would reach a new height altogether. Commodity A, the objectification of 3 hours’ labour time, is = 2 labour-hour-chits; commodity B, the objectification, similarly, of 3 hours’ labour, is = 4 labour-hour-chits. This contradiction is in practice expressed in money prices, but in a veiled form. The difference between price and value, between the commodity measured by the labour time whose product it is, and the product of the labour time against which it is exchanged, this difference calls for a third commodity to act as a measure in which the real exchange value of commodities is expressed. Because price is not equal to value, therefore the value-determining element – labour time – cannot be the element in which prices are expressed, because labour time would then have to express itself simultaneously as the determining and the non-determining element, as the equivalent and non-equivalent of itself. Because labour time as the measure of value exists only as an ideal, it cannot serve as the matter of price-comparisons. (Here at the same time it becomes clear how and why the value relation obtains a separate material existence in the form of money. This to be developed further.) The difference between price and value calls for values to be measured as prices on a different standard from their own. Price as distinct from value is necessarily money price. It can here be seen that the nominal difference between price and value is conditioned by their real difference.

Commodity A = 1s. (i.e. = 1/x silver); commodity B = 2s. (i.e. 2/x silver). Hence commodity B = double the value of commodity A. The value relation between A and B is expressed by means of the proportion in which they are exchanged for a quantity of a third commodity, namely silver; they are not exchanged for a value-relation.

Every commodity (product or instrument of production) is = the objectification of a given amount of labour time. Their value, the relation in which they are exchanged against other commodities, or other commodities against them, is = to the quantity of labour time realized in them. If a commodity e.g. = 1 hour of labour time, then it exchanges with all other commodities which are the product of 1 hour of labour time. (This whole reasoning on the presupposition that exchange value = market value; real value = price.) The value of the commodity is different from the commodity itself. The commodity is a value (exchange value) only within exchange (real or imagined); value is not only the exchangeability of the commodity in general, but its specific exchangeability. Value is at the same time the exponent of the relation in which the commodity is exchanged with other commodities, as well as the exponent of the relation in which it has already been exchanged with other commodities (materialized labour time) in production; it is their quantitatively determined exchangeability. Two commodities, e.g. a yard of cotton and a measure of oil, considered as cotton and as oil, are different by nature, have different properties, are measured by different measures, are incommensurable. Considered as values, all commodities are qualitatively equal and differ only quantitatively, hence can be measured against each other and substituted for one another (are mutually exchangeable, mutually convertible) in certain quantitative relations. Value is their social relation, their economic quality. A book which possesses a certain value and a loaf of bread possessing the same value are exchanged for one another, are the same value but in a different material. As a value, a commodity is an equivalent for all other commodities in a given relation. As a value, the commodity is an equivalent; as an equivalent, all its natural properties are extinguished; it no longer takes up a special, qualitative relationship towards the other commodities; but is rather the general measure as well as the general representative, the general medium of exchange of all other commodities. As value, it is money. But because the commodity, or rather the product or the instrument of production, is different from its value, its existence as value is different from its existence as product. Its property of being a value not only can but must achieve an existence different from its natural one. Why? Because commodities as values are different from one another only quantitatively; therefore each commodity must be qualitatively different from its own value. Its value must therefore have an existence which is qualitatively distinguishable from it, and in actual exchange this separability must become a real separation, because the natural distinctness of commodities must come into contradiction with their economic equivalence, and because both can exist together only if the commodity achieves a double existence, not only a natural but also a purely economic existence, in which latter it is a mere symbol, a cipher for a relation of production, a mere symbol for its own value. As a value, every commodity is equally divisible; in its natural existence this is not the case. As a value it remains the same no matter how many metamorphoses and forms of existence it goes through; in reality, commodities are exchanged only because they are not the same and correspond to different systems of needs. As a value, the commodity is general; as a real commodity it is particular. As a value it is always exchangeable; in real exchange it is exchangeable only if it fulfills particular conditions. As a value, the measure of its exchangeability is determined by itself; exchange value expresses precisely the relation in which it replaces other commodities; in real exchange it is exchangeable only in quantities which are linked with its natural properties and which correspond to the needs of the participants in exchange. (In short, all properties which may be cited as the special qualities of money are properties of the commodity as exchange value, of the product as value as distinct from the value as product.) (The exchange value of a commodity, as a separate form of existence accompanying the commodity itself, is money; the form in which all commodities equate, compare, measure themselves; into which all commodities dissolve themselves; that which dissolves itself into all commodities; the universal equivalent.) Every moment, in calculating, accounting etc., that we transform commodities into value symbols, we fix them as mere exchange values, making abstraction from the matter they are composed of and all their natural qualities. On paper, in the head, this metamorphosis proceeds by means of mere abstraction; but in the real exchange process a real mediation is required, a means to accomplish this abstraction. In its natural existence, with its natural properties, in natural identity with itself, the commodity is neither constantly exchangeable nor exchangeable against every other commodity; this it is only as something different from itself, something distinct from itself, as exchange value. We must first transpose the commodity into itself as exchange value in order then to be able to compare this exchange value with other exchange values and to exchange it. In the crudest barter, when two commodities are exchanged for one another, each is first equated with a symbol which expresses their exchange value, e.g. among certain Negroes on the West African coast, = x bars. One commodity is = 1 bar; the other = 2 bars. They are exchanged in this relation. The commodities are first transformed into bars in the head and in speech before they are exchanged for one another. They are appraised before being exchanged, and in order to appraise them they must be brought into a given numerical relation to one another. In order to bring them into such a numerical relation, in order to make them commensurable, they must obtain the same denomination (unit). (The bar has a merely imaginary existence, just as, in general, a relation can obtain a particular embodiment and become individualized only by means of abstraction.) In order to cover the excess of one value over another in exchange, in order to liquidate the balance, the crudest barter, just as with international trade today, requires payment in money.

Products (or activities) are exchanged only as commodities; commodities in exchange exist only as values; only as values are they comparable. In order to determine what amount of bread I need in order to exchange it for a yard of linen, I first equate the yard of linen with its exchange value, i.e. = 1/x hours of labour time. Similarly, I equate the pound of bread with its exchange value, = 1/x or 2/x hours of labour time. I equate each of the commodities with a third; i.e. not with themselves. This third, which differs from them both, exists initially only in the head, as a conception, since it expresses a relation; just as, in general, relations can be established as existing only by being thought, as distinct from the subjects which are in these relations with each other. In becoming an exchange value, a product (or activity) is not only transformed into a definite quantitative relation, a relative number – that is, a number which expresses the quantity of other commodities which equal it, which are its equivalent, or the relation in which it is their equivalent – but it must also at the same time be transformed qualitatively, be transposed into another element, so that both commodities become magnitudes of the same kind, of the same unit, i.e. commensurable. The commodity first has to be transposed into labour time, into something qualitatively different from itself (qualitatively different (1) because it is not labour time as labour time, but materialized labour time; labour time not in the form of motion, but at rest; not in the form of the process, but of the result; (2) because it is not the objectification of labour time in general, which exists only as a conception (it is only a conception of labour separated from its quality, subject merely to quantitative variations), but rather the specific result of a specific, of a naturally specified, kind of labour which differs qualitatively from other kinds), in order then to be compared as a specific amount of labour time, as a certain magnitude of labour, with other amounts of labour time, other magnitudes of labour. For the purpose of merely making a comparison – an appraisal of products – of determining their value ideally, it suffices to make this transformation in the head (a transformation in which the product exists merely as the expression of quantitative relations of production). This abstraction will do for comparing commodities; but in actual exchange this abstraction in turn must be objectified, must be symbolized, realized in a symbol. This necessity enters into force for the following reasons: (1) As we have already said, both the commodities to be exchanged are transformed in the head into common relations of magnitude, into exchange values, and are thus reciprocally compared. But if they are then to be exchanged in reality, their natural properties enter into contradiction with their character as exchange values and as mere denominated numbers. They are not divisible at will etc. (2) In the real exchange process, particular commodities are always exchanged against particular commodities, and the exchangeability of commodities, as well as the relation in which they are exchangeable, depends on conditions of place and time, etc. But the transformation of the commodity into exchange value does not equate it to any other particular commodity, but expresses it as equivalent, expresses its exchangeability relation, vis-à-vis all other commodities. This comparison, which the head accomplishes in one stroke, can be achieved in reality only in a delimited sphere determined by needs, and only in successive steps. (For example, I exchange an income of 100 thalers as my needs would have it one after another against a whole range of commodities whose sum = the exchange value of 100 thalers.) Thus, in order to realize the commodity as exchange value in one stroke, and in order to give it the general influence of an exchange value, it is not enough to exchange it for one particular commodity. It must be exchanged against a third thing which is not in turn itself a particular commodity, but is the symbol of the commodity as commodity, of the commodity’s exchange value itself; which thus represents, say, labour time as such, say a piece of paper or of leather, which represents a fractional part of labour time. (Such a symbol presupposes general recognition; it can only be a social symbol; it expresses, indeed, nothing more than a social relation.) This symbol represents the fractional parts of labour time; it represents exchange value in such fractional parts as are capable of expressing all relations between exchange values by means of simple arithmetical combination; this symbol, this material sign of exchange value, is a product of exchange itself, and not the execution of an idea conceived a priori. (In fact the commodity which is required as medium of exchange becomes transformed into money, into a symbol, only little by little; as soon as this has happened, it can in turn be replaced by a symbol of itself. It then becomes the conscious sign of exchange value.)

The process, then, is simply this: The product becomes a commodity, i.e. a mere moment of exchange. The commodity is transformed into exchange value. In order to equate it with itself as an exchange value, it is exchanged for a symbol which represents it as exchange value as such. As such a symbolized exchange value, it can then in turn be exchanged in definite relations for every other commodity. Because the product becomes a commodity, and the commodity becomes an exchange value, it obtains, at first only in the head, a double existence. This doubling in the idea proceeds (and must proceed) to the point where the commodity appears double in real exchange: as a natural product on one side, as exchange value on the other. I.e. the commodity’s exchange value obtains a material existence separate from the commodity.

The definition of a product as exchange value thus necessarily implies that exchange value obtains a separate existence, in isolation from the product. The exchange value which is separated from commodities and exists alongside them as itself a commodity, this is – money. In the form of money all properties of the commodity as exchange value appear as an object distinct from it, as a form of social existence separated from the natural existence of the commodity. (This to be further shown by enumerating the usual properties of money.) (The material in which this symbol is expressed is by no means a matter of indifference, even though it manifests itself in many different historical forms. In the development of society, not only the symbol but likewise the material corresponding to the symbol are worked out – a material from which society later tries to disentangle itself; if a symbol is not to be arbitrary, certain conditions are demanded of the material in which it is represented. The symbols for words, for example the alphabet etc., have an analogous history.) Thus, the exchange value of a product creates money alongside the product. Now, just as it is impossible to suspend the complications and contradictions which arise from the existence of money alongside the particular commodities merely by altering the form of money (although difficulties characteristic of a lower form of money may be avoided by moving to a higher form), so also is it impossible to abolish money itself as long as exchange value remains the social form of products. It is necessary to see this clearly in order to avoid setting impossible tasks, and in order to know the limits within which monetary reforms and transformations of circulation are able to give a new shape to the relations of production and to the social relations which rest on the latter.

The properties of money as (1) measure of commodity exchange; (2) medium of exchange; (3) representative of commodities (hence object of contracts); (4) general commodity alongside the particular commodities, all simply follow from its character as exchange value separated from commodities themselves and objectified. (By virtue of its property as the general commodity in relation to all others, as the embodiment of the exchange value of the other commodities, money at the same time becomes the realized and always realizable form of capital; the form of capital’s appearance which is always valid – a property which emerges in bullion drains; hence capital appears in history initially only in the money form; this explains, finally, the link between money and the rate of interest, and its influence on the latter.)

To the degree that production is shaped in such a way that every producer becomes dependent on the exchange value of his commodity, i.e. as the product increasingly becomes an exchange value in reality, and exchange value becomes the immediate object of production – to the same degree must money relations develop, together with the contradictions immanent in the money relation, in the relation of the product to itself as money. The need for exchange and for the transformation of the product into a pure exchange value progresses in step with the division of labour, i.e. with the increasingly social character of production. But as the latter grows, so grows the power of money, i.e. the exchange relation establishes itself as a power external to and independent of the producers. What originally appeared as a means to promote production becomes a relation alien to the producers. As the producers become more dependent on exchange, exchange appears to become more independent of them, and the gap between the product as product and the product as exchange value appears to widen. Money does not create these antitheses and contradictions; it is, rather, the development of these contradictions and antitheses which creates the seemingly transcendental power of money. (To be further developed, the influence of the transformation of all relations into money relations: taxes in kind into money taxes, rent in kind into money rent, military service into mercenary troops, all personal services in general into money services, of patriarchal, slave, serf and guild labour into pure wage labour.)

The product becomes a commodity; the commodity becomes exchange value; the exchange value of the commodity is its immanent money-property; this, its money-property, separates itself from it in the form of money, and achieves a general social existence separated from all particular commodities and their natural mode of existence; the relation of the product to itself as exchange value becomes its relation to money, existing alongside it; or, becomes the relation of all products to money, external to them all. Just as the real exchange of products creates their exchange value, so does their exchange value create money.

The next question to confront us is this: are there not contradictions, inherent in this relation itself, which are wrapped up in the existence of money alongside commodities?

Firstly: The simple fact that the commodity exists doubly, in one aspect as a specific product whose natural form of existence ideally contains (latently contains) its exchange value, and in the other aspect as manifest exchange value (money), in which all connection with the natural form of the product is stripped away again – this double, differentiated existence must develop into a difference, and the difference into antithesis and contradiction. The same contradiction between the particular nature of the commodity as product and its general nature as exchange value, which created the necessity of positing it doubly, as this particular commodity on one side and as money on the other – this contradiction between the commodity’s particular natural qualities and its general social qualities contains from the beginning the possibility that these two separated forms in which the commodity exists are not convertible into one another. The exchangeability of the commodity exists as a thing beside it, as money, as something different from the commodity, something no longer directly identical with it. As soon as money has become an external thing alongside the commodity, the exchangeability of the commodity for money becomes bound up with external conditions which may or may not be present; it is abandoned to the mercy of external conditions. The commodity is demanded in exchange because of its natural properties, because of the needs for which it is the desired object. Money, by contrast, is demanded only because of its exchange value, as exchange value. Hence, whether or not the commodity is transposable into money, whether or not it can be exchanged for money, whether its exchange value can be posited for it – this depends on circumstances which initially have nothing to do with it as exchange value and are independent of that. The transposability of the commodity depends on the natural properties of the product; that of money coincides with its existence as symbolized exchange value. There thus arises the possibility that the commodity, in its specific form as product, can no longer be exchanged for, equated with, its general form as money.

By existing outside the commodity as money, the exchangeability of the commodity has become something different from and alien to the commodity, with which it first has to be brought into equation, to which it is therefore at the beginning unequal; while the equation itself becomes dependent on external conditions, hence a matter of chance.

Secondly: Just as the exchange value of the commodity leads a double existence, as the particular commodity and as money, so does the act of exchange split into two mutually independent acts: exchange of commodities for money, exchange of money for commodities; purchase and sale. Since these have now achieved a spatially and temporally separate and mutually indifferent form of existence, their immediate identity ceases. They may correspond or not; they may balance or not; they may enter into disproportion with one another. They will of course always attempt to equalize one another; but in the place of the earlier immediate equality there now stands the constant movement of equalization, which evidently presupposes constant non-equivalence. It is now entirely possible that consonance may be reached only by passing through the most extreme dissonance.

Thirdly: With the separation of purchase and sale, with the splitting of exchange into two spatially and temporally independent acts, there further emerges another, new relation.

Just as exchange itself splits apart into two mutually independent acts, so does the overall movement of exchange itself become separate from the exchangers, the producers of commodities. Exchange for the sake of exchange separates off from exchange for the sake of commodities. A mercantile estate [17] steps between the producers; an estate which only buys in order to sell and only sells so as to buy again, and whose aim in this operation is not the possession of commodities as products but merely the obtaining of exchange values as such, of money. (A mercantile estate can take shape even with mere barter. But since only the overflow of production on both sides is at its disposal, its influence on production, and its importance as a whole, remain completely secondary.) The rise of exchange (commerce) as an independent function torn away from the exchangers corresponds to the rise of exchange value as an independent entity, as money, torn away from products. Exchange value was the measure of commodity exchange; but its aim was the direct possession of the exchanged commodity, its consumption (regardless of whether this consumption consists of serving to satisfy needs directly, i.e. serving as product, or of serving in turn as a tool of production). The purpose of commerce is not consumption, directly, but the gaining of money, of exchange values. This doubling of exchange – exchange for the sake of consumption and exchange for exchange – gives rise to a new disproportion. In his exchange, the merchant is guided merely by the difference between the purchase and sale of commodities; but the consumer who buys a commodity must replace its exchange value once and for all. Circulation, i.e. exchange within the mercantile estate, and the point at which circulation ends, i.e. exchange between the mercantile estate and the consumers – as much as they must ultimately condition one another – are determined by quite different laws and motives, and can enter into the most acute contradiction with one another. The possibility of commercial crises is already contained in this separation. But since production works directly for commerce and only indirectly for consumption, it must not only create but also and equally be seized by this incongruency between commerce and exchange for consumption. (The relations of demand and supply become entirely inverted.) (The money business then in turn separates from commerce proper.)


Aphorisms. (All commodities are perishable money; money is the imperishable commodity. With the development of the division of labour, the immediate product ceases to be a medium of exchange. The need arises for a general medium of exchange, i.e. a medium of exchange independent of the specific production of each individual. Money implies the separation between the value of things and their substance. Money is originally the representative of all values; in practice this situation is inverted, and all real products and labours become the representatives of money. In direct barter, every article cannot be exchanged for every other; a specific activity can be exchanged only for certain specific products. Money can overcome the difficulties inherent in barter only by generalizing them, making them universal. It is absolutely necessary that forcibly separated elements which essentially belong together manifest themselves by way of forcible eruption as the separation of things which belong together in essence. The unity is brought about by force. As soon as the antagonistic split leads to eruptions, the economists point to the essential unity and abstract from the alienation. Their apologetic wisdom consists in forgetting their own definitions at every decisive moment. The product as direct medium of exchange is (1) still directly bound to its natural quality, hence limited in every way by the latter; it can, for example, deteriorate etc.; (2) connected with the immediate need which another may have or not have at the time, or which he may have for his own product. When the product becomes subordinated to labour and labour to exchange, then a moment enters in which both are separated from their owner. Whether, after this separation, they return to him again in another shape becomes a matter of chance. When money enters into exchange, I am forced to exchange my product for exchange value in general or for the general capacity to exchange, hence my product becomes dependent on the state of general commerce and is torn out of its local, natural and individual boundaries. For exactly that reason it can cease to be a product.)