The Story of a Great Discovery, Vygodsky, 1965

Chapter 3

Why the "Outlines of the Critique of Political Economy" begins with the "Chapter on Money". On the track of value. The 'degradation' of money by the Proudhonists. The concept of necessary labour. Value and price. The divisibility of a commodity and its two factors. The two-fold character of labour in bourgeois society. In search of the "economic cell-form". The material content and social form of each and every economic phenomenon.


The "economic cell-form" of bourgeois society

The "Outlines of the Critique of Political Economy "[1] (Grundrisse der Kritik der politischen Íkonomie) begin with the "Chapter on Money", to which Marx gave the number 'II'. This is explained by Marx's intention to place a chapter in front of it which he first wanted to call 'Value' but later-in "A Contribution to the Critique of Political Economy "-changed to 'The Commodity'[2].

As mentioned already, Marx began work on his theory of value with the critique of Proudhon's theory of money. This circumstance should not be regarded as fortuitous. Here we come across another important feature which distinguishes Marx's method of inquiry from the method of presentation. Money is namely the most precise manifestation of the value of a commodity. "In fact we started from exchange-value, or the exchange relation of commodities, in order to get at the value that lies hidden behind it."[3] Money, or the monetary form of value, is the most advanced form of value, the form appropriate for capitalism. Accordingly, the theory of money follows directly from the theory of value. In the critique of bourgeois and petty-bourgeois political economy and thus also in the investigation of the subject itself (for, as we know, this is one and the same process with-Mars), Marx first of all proceeds from the outward manifestation to the inner nature of things. For this reason, after adding 'II' to the "Chapter on Money", he began "Grundrisse" with an investigation of the theory of money.

We are speaking here of a specific stage in the process of investigation. When the process of investigation is regarded as a whole, then the progression from the abstract to the concrete applies here, too, of course. Thus, for instance, Marx formulated the theory of value before working out the theory of surplus-value.

If, however, the individual stages in the investigation are considered, Marx starts here with the outward manifestations in order to progress to the inner nature of the things, for example, from money to the commodity and not conversely, as is characteristic of the process of representation.

Marx regarded the understanding of the category 'money' as the criterion for whether the nature of value was appreciated in actual fact. When he later criticized Ricardo's theory of value, he remarked that Ricardo "does indeed concern himself with labour only as a measure of the magnitude of value and on account of this found no relation between his theory of value and the nature of money."[4] In the "Grundrisse" and on the basis of the theory of value that he had developed, Marx made a detailed criticism of the quantity theory of money and noted "that Ricardo's monetary theory is completely refuted …"[5]

In "Grundrisse", Marx directly states that the critique of Proudhon's theory of money will "allow us to look into the most profound secret which binds Proudhon's theory of circulation with his general theory-his theory of the determination of value."[6] Let us follow Marx into the thicket of Proudhon's utopian theory of money and see how he works out his own theory of value, step by step.

The "Chapter on Money" begins with a detailed assessment of the book "De la reforme des banques" (On the reform of the banks), written by Darimon, a follower of Proudhon, and published the year before. In "A Contribution to the Critique of Political Economy", Marx characterized this book as a compendium of Proudhon's "melodramatic monetary theory".[7] The Proudhonists considered the privileged position occupied by gold and silver, as compared with all other commodities, as the cause of economic crises and, indeed, of all the evils of the capitalist system. "But it was left to M. Proudhon and his school to declare seriously that the degradation of money and the exaltation of commodities was the essence of socialism ..."[8] To get out of the difficulty, the Proudhonists wanted to replace gold and silver by `labour money' or 'hour-slips', i.e., by vouchers which were to be handed to the worker and were supposed to certify how many hours he had worked.

In this way, they believed they could kill two birds with one stone. On the one hand, the 'privilege' of gold and silver could be eliminated since the Proudhonists asserted that 'labour money.: did not need to be convertible into gold and silver like the usual paper-money since 'labour money' was supposed to be the direct expression of the labour expended. This, so they believed, overcame the basic 'cause' of economic crises, which they considered to be the lack of gold. Secondly, the introduction of `labour money' was supposed to give every commodity the form of direct exchangeability, thus solving once and for all the problem of the realization of commodities. In short, the Proudhonists proposed that money should be abolished but that commodity production and commodity relations should be retained. The critique by Marx of the Proudhonists had to show the inner relationship between commodities and money, i.e., it had to prove that the existence of money necessarily follows from the relations of commodity production. The revealing of this unavoidable relationship is one of the most important aspects of the theory of value.

`Labour money' was not the invention of Proudhon. Robert Owen was another who advanced the idea of it but for him it was clear that capitalist production had first to be eliminated and communist relations established before the essential conditions for the concept of `labour money' could emerge. The Proudhonists, however, regarded 'labour money' as the means by which the 'shortcomings' of capitalist production could be eliminated. Through his analysis, Marx showed that these 'shortcomings' are in reality the necessary consequence of capitalist production.

The Proudhonists proposed a bank reform as the practical measure with which they intended to implement their theory of 'labour money'. Marx's critique begins with an analysis of this project.

Using -the statistical material quoted by Darimon in his book, Marx proves in particular that Darimon confuses credit and the circulation of money and accordingly wildly exaggerates the role of the banks in capitalism in that he has them check the circulation of money and regulate credit and the money market in a monopolistic manner. This is why the Proudhonists also assumed that it was sufficient to do away with the metal basis of money circulation (gold) to enable the banks to carry out their function correctly as a regulator of circulation; as a result of these measures, it was believed that crises could be avoided. Marx showed that even if the metal basis of money circulation was totally lacking, under capitalist conditions no bank would be able to prevent economic crises from breaking out.

It was the view of Proudhon and his followers that the bank reform would create completely new production and circulation conditions ..."[9] Marx showed that through this the Proudhonists proclaimed the primacy of circulation over production and proved their "lack of understanding of the inner connection of the relation of production, distribution and circulation"[10]. The main objective of Marx's analysis is the clarification of precisely this inner connection. It follows from the general logic of Marx's analysis that the first important step in an examination of this connection was to explain money by the inner relations unavoidable in commodity production. Marx also formulates the problem in this manner and thus builds a bridge from monetary theory to the theory of value. "The real question is: is it not the bourgeois system of exchange itself which makes a specific instrument of exchange necessary ? Does it not inevitably create a special equivalent for all values?"[11] Marx raises here the question of the nature of money, of the necessary relationship between commodities and money.

Classical bourgeois political economy, on the other hand, was not even in a position to raise this question, to say nothing of solving it. The bourgeois economists assumed that capitalist relations were eternal. The necessity of money and other categories of bourgeois economy were self-evident for them and required no special proof. It was only from the standpoint of the materialist conception of history that Marx was able to raise the question of the necessary relationship between commodities and money. Marx posed this question for the first time in "The Poverty of Philosophy" but found the answer to it only eleven years later-in." Grundrisse".

Proudhon considered that the main advantage of `labour money' was that it did not need to he convertible into gold and silver at all. Marx begins his proof of the necessity of money by refuting this thesis "Convertibility -legal or otherwise-... must still be represented by every kind of money"[12] whether it be paper money, 'labour money' or any other money. Marx proves that "the convertibility of the banknote into gold remains an economic law, whether it exists politically or not".[13] "Convertibility into gold and silver is thus a practical measure of the value of all paper money which derives its denomination from gold or silver …"[14]

Paper money is only representative of gold or silver and is consequently not at all identical with them. Consequently, if the quantity of paper money issued were to exceed the quantity of gold necessary for circulation (when gold was in circulation), the paper money would be devalued and there could be no question any longer of its previous convertibility. "… convertibility", wrote Marx, "includes its converse, inconvertibility ..."[15] We may also add that even money in the form of gold can decline in value, as in periods in which there is a general rise in prices.

Having dealt with the problem of the convertibility of paper money, Marx assumes the case when gold is replaced by 'labour money'. If prior to this, the gold coin-for instance, the English sovereign-corresponded to a certain quantity of gold, an hour-slip representing a certain sum of expended contemporary labour, would now correspond to this quantity of gold which incorporates past labour. Marx comes to the conclusion that "... according to the general economic law, production costs consistently fall, living labour becomes consistently more productive, i.e., the labour time materialized in- products consistently depreciates, which would mean that consistent depreciation would be the unavoidable fate of this golden labour money.[16] The past labour time (as a constant magnitude) contained in a certain quantity of gold would consistently rise as compared with the present living labour time represented in the 'hour-slip'. There would be no change in this situation even if 'labour money' were to take the place of paper money based on gold. In this case, the 'hour-slip' would not be compared with a certain quantity of gold but with a certain quantity of-paper money as the representative of this gold.

From his analysis of the hour-slip', Marx now drew an important conclusion which was of fundamental significance for his theory of value: "It is not the labour time incorporated in products which determines value but the labour time necessary at the present time."[17]

The concept of necessary labour in its general form was already formulated by Marx in "The Poverty of Philosophy" where he noted that this thesis was also advanced by Ricardo. The latter, however, regarded the concept of necessary labour, the labour time required, as being part of the concept of labour in general whilst Marx made this concept an element of his theory on the specific character of social labour in capitalism.

The determination of the value of a commodity by the quantum of necessary labour time expended in its production reflects the inner relationship which exists between value as an element of the production relations and the actual level of the productive forces. By its very nature, Proudhon's theory of `labour money' assumes that value is not determined by the socially necessary labour but by labour in general. In other words, with their theory of value, the Proudhonists were back to one stage before Ricardo for whom value includes the concept of necessary labour time.

Marx now took the next step in formulating his theory of value and demonstrated that there is a basic difference between value and price. The theory of 'labour money' assumed the converse of this, that value and price are identical. In actual fact, the Proudhonists demanded the abolition of paper money although the price is nothing but the 'exchange-value of the commodity, expressed in money.

In analysing the difference between price and value. Marx introduced an important new element in the definition of value. "The value of commodities determined by labour time is only their average value"[18] which differs from the 'nominal' value, the 'money value', i.e. from the price. The value is determined by the labour time which is socially necessary for a greater or lesser period (e. g. several years). The price, on the other hand, in addition to the socially necessary labour expended, - also expresses the relation which exists at any given moment between supply and demand. This results in consistent deviations of prices from values. The introduction of 'labour money' would change nothing in this. If, instead of 'a 1 lb loaf of bread costs 8 pennies', .one says 'a 1 lb loaf of bread - so many hours of labour time (in the form of 'hour-slips ')', the right half of this equation would represent the expenditure of average 'ideal' labour time which usually differs from the actual labour time represented in the price in exactly the same way as the money price differs from value. In this case, the 'hour-slip' would not perform its function, it would not state how many hours of labour time had really been expended for the manufacture of the product concerned. "The hour-slip represented, in contrast to all commodities, an ideal labour time which would soon be exchanged for more or for less than the actual (time) ..."[19]

The next important element in the theory of value as developed by Marx in "Grundrisse" consists in the change from the quantitative characterization of value (measurement of value by the socially necessary labour time) to the determination of value as the social relation which marks the "economic quality", the "exchangeability of commodities". In this connection, Marx formulates for the first time one of the fundamental theses of his theory of value: "As values, all commodities are qualitatively equal and only quantitatively different..."[20] It is precisely this qualitative uniformity which enables them to he exchanged for each other in certain quantitative proportions. With this thesis, Marx firstly comes to the analysis of the two factors of commodities-he divided commodities into use-value and value-and secondly to the conclusion that duplication of commodities (actual in the exchange-process, ideal before the exchange) as commodity and money is necessary. The logical consequence of all this is that Marx discovers the twofold character of commodity-producing labour.

As value, a commodity does not possess any special qualitative features or natural qualities at all. This economic equivalence, this uniformity of commodities, contradicts the qualitative diversity with which commodities are able to satisfy different human needs. Commodities are only exchanged for each other for the very reason that they are different, of course. This is why 'commodities as objects and things are qualitatively different from their own value.

This contradiction between the economic uniformity of commodities and their natural diversity or, to put it in other words, this contradiction between value and use-value, leads in the exchange-process to the isolation of the value of the commodity from the commodity itself, to the duplication of commodities as commodities and money. Marx stresses that the characteristic of a commodity "as value not only can but at the same time must acquire an existence which is different from its natural one. Why? Because commodities as values only differ quantitatively from each other, each commodity must be qualitatively different from its own value. Its value must therefore also possess an existence which can be qualitatively distinguished from it and, in actual exchange, this divisibility must become an actual division ..."[21]

In itself and by its natural characteristics, a commodity does not possess any exchangeability. It is only when a commodity is exchanged for money that its exchangeability, its social nature, its value, becomes apparent. This exchange for money is the necessary intermediate link in the exchange, of one commodity for another. Marx writes "that the commodity in the actual exchange appears in two ways: as a natural product on the one hand and as an exchange-value on the other. That is, its exchange-value acquires an existence which is materially separate from it."[22]

The inner contradiction of commodities, the contradiction between the qualitative uniformity of the commodities as values and their natural diversity as use-values, is thus outwardly solved in the process of exchange in the duplication of commodities as commodities and money, in the fact that the value of the commodity acquires an independent existence in a special commodity - in money. On the basis of an analysis of the two contradictory factors in commodities, Marx comes to the conclusion that exchange-value is the necessary outward, form of value-in other words, that money is necessary. Marx demonstrates that money is the necessary product of those social relations which mark the labour-product with the social form of exchange-value. This proved that the attempt of the Proudhonists to convert commodities directly into money by means of 'labour-money', to identify commodities and money with each other and to guarantee the direct exchangeability of all commodities was an absolute utopia.

Marx also notes that money, which is the solution of the contradiction between use-value and value of commodities, intensifies all the contradictions of commodity production at the same time and raises them to a new level: "We see therefore that it is an inherent quality of money that it fulfils its purpose by negating it at the same time ; that it becomes independent in relation to commodities : that from a means it becomes an end ; that it realizes the exchange-value of commodities by separating them from it; that it facilitates exchange by dividing it; that it overcomes the difficulties of direct commodity-exchange by generalizing them; that it makes exchange independent in relation to the producers to the same extent as the producers are dependent on exchange."[23] These contradictions also make it possible for economic crises to occur.

The division of a commodity into use-value and value, the analysis of these two factors and the proof that in the process of exchange the duplication of commodities as commodities and money is necessary-all this led Marx to the discovery of the two-fold character of commodity-producing labour. The doctrine of the two-fold character of labour in commodity production forms the foundation of Marx's theory of value. It is precisely this which marks the point at which Marx's theory differs from the labour-value theory of the classics of bourgeois political economy. Not a single economist before Marx had discovered the two-fold character of labour. Marx stressed that "All understanding of the facts depends on this "[24], on the doctrine of the two-fold character of labour.

In "Grundrisse", Marx initially describes the two-fold character of labour as the difference between quantity and quality: abstract labour as "separated from its quality, only quantitatively different labour" and concrete labour as "specific, naturally specific labour, qualitatively different from other kinds of labour ".[25]

Marx proceeded with his analysis of commodity-producing labour and then characterized it as being social labour on the one hand and private on the other. This antagonistic contradiction of a commodity economy based on private ownership of the means of production was formulated by Marx as follows: Individuals still only produce "for the society and in the society" but "their production (is) not directly social..."[26] And in another place he writes "that private interest itself is already a socially determined interest..."[27]

Marx identifies here the specific nature of labour in capitalist society. Although social like all labour, under the conditions of private ownership of the means of production it does not, however, have a directly social character. It is rather the case that it is directly private labour. In the process of realization, in the conversion of commodities into money, the social character of the labour which produced these commodities is revealed and concrete labour is traced to abstract labour and private labour to social labour.

This characteristic of labour in bourgeois society being of both a private and social nature at the same time is mentioned by Marx in association with the fact that the Proudhonist theory of 'labour-money' tacitly assumed the "social character of production" whilst on "the basis of the exchange-values ... it is only by exchange that labour {is) postulated as general ".[28]

Thus Marx worked out the principal elements of his own theory of value in the critical confrontation with Proudhon's monetary theory. He demonstrates how, with the development of social production and the social division of labour, the product is changed into a commodity, the commodity into exchange-value and the exchange-value into money. At the same time this leads to a greater contradiction between the use-value and the value of the commodity. In connection with this, Marx gives some important methodological advice on the manner in which the theoretical results which he had arrived at in the course of the investigation should be presented: "It will be necessary later ... to correct the idealist manner of the presentation which gives the impression that it is only a question of definitions of terms and the dialectic of these terms. "[29] Marx points out that in particular expressions such as "the commodity is exchange-value" must be corrected or defined. A commodity exists as a perceptible, independent object but the exchange-value is only a certain social relation associated with commodities. In connection with this, Marx notes that the value-relation of commodities at first exists only in the imagination since relations in general can only be imagined and not perceived with the senses when it is a question of defining them, in contrast to the objects on which they are based and of which we say that they are in this or that relationship with each other.[30]

This is why Marx had to begin analysing the economic structure of bourgeois society not with value but with commodities as the "cell" of this society. It was a question here of commodities as the point of departure of the analysis … as the "economic cell-form" of bourgeois society. It has already been observed that Marx always worked out his theory of value on the foundation of the analysis of commodities and of the two factors they embody. Now, in the remark just quoted, it is a question of defining this in the presentation as well. In "Grundrisse", Marx sometimes still proceeds from exchange-value. Thus he writes that "the exchange-value of the commodity exists in a double form, as the specific commodity and as money..."[31] In the later presentation, Marx always starts from the commodity as the vehicle of value. "The first category in which bourgeois wealth is represented is that of commodities"[32]. In "Grundrisse", the first chapter was to have been called "Value" but in "A Contribution to the Critique of Political Economy " the title then used was "The Commodity". Of course, this is not at all merely a formal change. It expresses above all the materialist character of the dialectic and economic theory of Marx. He takes as his starting point the simplest relation of reality, commodity economy-the exchange of labour-products. Material commodities are, of course, the medium of this relation. In this connection, Marx later wrote "that with me neither 'value' nor 'exchange-value' are subjects but the commodity is ".[33] Political economy takes the category of commodity as the starting point of its analysis since "The point where this history begins must also be the starting point of the train of thought..."[34]

Marx's analysis of the commodity as the "economic cell-form" of bourgeois society forms the basis for the methodologically important thesis that a distinction must be drawn between the social form and the material content of every single economic phenomenon.

Under no circumstances may abstractions be made from this social form in the investigation of economic phenomena. The economic categories as the reflection of economic phenomena cannot be derived from the material content but only from the production relations which are precisely this social form of the economic phenomena.

It was characteristic of bourgeois political economy that it abstracted from the antagonistic form of bourgeois society and regarded the laws of this production as natural and dominating in all formations. It was precisely this circumstance which prevented it from discovering the "economic cell-form" of bourgeois society and from analysing it. The problem of the "economic cell-form" of bourgeois society is the question of the starting point for proceeding from the abstract to the concrete. The initial position of bourgeois economists who considered the capitalist mode of production to be eternal and natural misled them into abstracting from the social form of the commodity, from value as a socially determined form, and discussing only the magnitude of value. Yet it is just this form of value of the labour-product, writes Marx, which "is not only the most abstract but is also the most universal form, taken by the product in bourgeois production, and stamps that production as a particular species of social production, and thereby gives it its special historical character".[35] In its investigations, bourgeois political economy did not advance so far that it was in a position to divide up the commodity and separate its social envelope from its material content. Thus it was unable to take the social form of the commodity, the value-form of the product of labour-as Marx did-as the point of departure for analysing the capitalist economic system, for proceeding from the abstract to the concrete, for passing from the category of the commodity to the categories of money, capital and so on. At the same time, however, Marx showed that the social envelope of the labour-product under conditions of commodity production, i.e., the value-form of the labour-product, is the limit which may not be crossed by the process of scientific abstraction; otherwise it would be precisely from the basic characteristics of the mode of production in question that one would abstract. In short, the value-form of the labour-product is the point at which to begin if the intention is to set up the structure of the political economy of the capitalist mode of production.

When Marx in his theory of value divided the commodity, separated the social form of the commodity from its physical content and drew a distinction between use-value and value and between the magnitude of the value and its form, he created the essential condition for overcoming the commodity-fetishism of bourgeois political economy for which use-value and value had 'grown' together. On the surface of bourgeois society this is indeed the case but for the bourgeois economists the social characteristics of the things in general had grown together with these things themselves. Marx wrote that with them "... the material element of capital is so integrated with its social form as capital ..."[36] But neither the use-value of the commodity nor its magnitude of value -can form the foundation on which the system of categories has to be built which characterizes the capitalist mode of production. Only the social envelope of the commodity, the value-form of the product of labour, can provide this foundation.

A detailed report has been given of how Marx discovered the "economic cell-form" of bourgeois society and formulated his theory of value in the "Chapter on Money", the first chapter of "Grundrisse". In this way, he created the foundation which enabled him to proceed further with the statement of the arguments of his theory. He was obliged to do this since, of course, the category of value says nothing about the inner nature of the capitalist mode of production. The relations of a commodity economy are of a fairly comprehensive character and they are not exclusive to capitalism although it is precisely in capitalism that they attain their highest level, of development. But capital as a production relation differs both in form and in content from the simple value-relation and from the relations of the simple commodity-economy.

The relations of value form the starting point for analysing capitalism. Because, both in theory and in capitalist reality, "the concept of value precedes that of capital"[37], it has been necessary to make a thorough examination of how Marx substantiated his theory of value. It was not merely by chance that a German vulgar economist wrote in 1868: "The refutation of the theory of value is the sole task of those fighting Marx: for when this axiom is acknowledged, one must accept almost all of the conclusions which Marx draws with the strictest logic."[38]

We will now take a look at the 'really important thing', the second great discovery made by Marx-the discovery of surplus-value.


Footnotes

[1]Published by the Institute for Marxism-Leninism of the Central Committee of the CPSU, "Grundrisse der Kritik der politischen Íkonomie" was first printed in German between 1939 and 1941.

[2]The beginning of this chapter can be found right at the end of "Grundrisse": cf. K. Marx, Grundrisse der Kritik der politischen Íkonomie", 1. c,, p. 763 f.

[3]K. Marx, Capital, Vol. I, 1. c., p. 47.

[4]K. Marx, marginal notes to Adolph Wagner's "Lehrbuch der politischen Íkonomie", in: K. Marx/F. Engels, Werke, Bd. 19, p. 358.

[5]K. Marx, Grundrisse der Kritik der politischen Íkonomie, 1. c., p. 46.

[6]Ibid., p. 55.

[7]K. Marx, A Contribution to the Critique of Political Economy, 1. c., p. 86.

[8]Ibid., p. 86.

[9]K. Marx, Grundrisse der Kritik der politischen Íkonomie, l.c., p. 41.

[10]Ibid., p. 42.

[11]Ibid., p. 45.

[12]Ibid., p. 53.

[13]Ibid., p. 50.

[14]Ibid., p. 51 f.

[15]Ibid., p. 53.

[16]Ibid., p. 54.

[17]Ibid.

[18]Ibid., p. 55.

[19]ibid., p. 58.

[20]Ibid., p. 59.

[21]Ibid p. 60.

[22] p. 63.

[23]Ibid., p. 69.

[24]K. Marx, letter to Engels of 24 August 1867, in, Marx/Engels, Selected Correspondence, l.c.,

p. 232.

[25]K. Marx, Grundrisse der Kritik der politischen Íkonomie, l. c., p. 62.

[26]Ibid., p. 76.

[27]Ibid., p. 74.

[28]Ibid., p. 88.

[29]Ibid., p. 69.

[30]Cf. ibid., p. 61.

[31] p. 66.

[32]Ibid., p. 763.

[33]K. Marx, marginal notes on Adolph Wagner's " Lehrbuch der politischen Íkonomie" , Marx/F. Engels, Werke, Bd. 19, p. 358.

[34] F. Engels, Karl Marx, A Contribution to the Critique of Political Economy, l. c., p. 223.

[35]K. Marx, Capital, Vol. I, Footnote 2, l. c., p.

[36]K. Marx, Theories of Surplus-Value, Part 3, 1. c., p. 322.

[37]K. Marx. Grundrisse der Kritik der politischen Íkonomie, 1. c., p. 163.

[38]K. Marx, Mein Plagiat an F. Bastiat, in: K. Marx/F. Engels, Werke, Bd. 16, Dietz -Verlag, Berlin 1962; p. 312 (footnote).