Home > political-economy > The Great Financial Crisis: The end of capitalism?

The Great Financial Crisis: The end of capitalism?

I figured I would take a step back to gain some perspective on events like Occupy Wall Street and the unfolding crisis in Europe, in order to figure out just what all of these events mean for us. The Great Financial Crisis provides the broad back drop for a number of these events. At root, the financial crisis expresses all the contradictions inherent in money and exchange itself; it, therefore, goes to the heart of things in a way nothing has in the past 30 years or so. But, what is money? What does it imply about our present society? The answers to these questiions took me back to the very earliest writings of Karl Marx, and to Anitra Nelson’s work, “MARX’S CONCEPT  OF MONEY:  The god of commodities”.

Below is the result of my investigation.

Marx once offered that, with credit, people serve as the money. Which throws an interesting light on the financial crisis: To put it simply, with the financial crisis people could no longer serve as money. Notice I did not say, “they could not pay their debts”; rather they could not serve as the money in the economy. They were supposed to convert their physical selves into money for the purpose of creating inflationary economic growth. But, at some point, this conversion reached its limit.

In other words, before the financial crisis, working people were figuratively coining themselves to maintain their standard of living.

The cancerous nature of debt is somehow captured by Marx’s simple phrase: With credit, people stand in for money. But, he also called credit money the highest form of money; essentially saying people standing in for money perfected money itself. While money begins in the alienation of human capacities and talents, the highest form is when the person herself functions as her own money. She literally becomes the material embodiment of her own alienation from herself.

So, when, as now, the person is no longer able to stand in for money – to function in her person as her money – what happens to the alienation? And, what happens to the capitalist relations of production based on this alienation?

Marx’s observation on credit money demonstrates the difference between money and an ex nihilo currency like the dollar. It also shows why gold may be money, but money is not gold. Which is to say commodity money is not the essence of money but only its form.

The debate over whether Marx had a nominalist view of money or a commodity view of money is simply a debate over politics. The ambiguity detected in his view by some is nothing more than a confusion of the legal definition of money with its essence. The state defines what is to serve legally as money, but it cannot define money itself. Money, the social relation, is outside its control.

Whether money is legally defined as gold or silver or even ex nihilo dollars is a state function — i.e., a political question. Despite this legal definition, however, money must take the form of a commodity; and, moreover, no political act of the state can alter this. For instance, the state can legally determine that money is to be denominated in dollars, but it cannot create the money that is to be denominated in dollars. It is, therefore, entirely possible that the legal definition of money and the actual thing serving as money may differ. Moreover, this is not only possible, it is inevitable for reasons having nothing to do with money itself. Since the legal definition of money is a political act, while the thing actually serving as money arises from material relations, the possibility exists already in the abstract of a divergence between the one and the other — that each devolve on a different instrument. Having devolved on different objects, each now serves as the condition of the existence of the other.

But, this contradiction already precedes the legal definition of money, and is given in the existence of money itself: first, in that money is no “thing”, but a social relation that must take the form of a socially valid object. Second, in the act of exchange, when money serves as a mere token of itself. Third in the division of money into various instruments: gold, silver, credit money; and the division of money into various functions: medium of circulation and measure of value.

Anitra Nelson describes Marx’s earliest writings on money as “disconcerting and confusing”, particularly his analogy of money to God. Aside from the confusion over the analogy, Nelson argues Marx appears ambiguous: is money real or imaginary? Is it a commodity or simply a thing gaining its value from market forces? She definitely wants Marx to put his foot down somewhere in his early writings and state unambiguously that money is a commodity.

Nelson’s problem with the money-God analogy shows the extent to which she misses Marx’s point. She takes from the analogy that Marx comes close to reducing money to an idea or concept, and commerce into religious ritual, etc. This ambiguity, she argues, continues all the way through Marx’s mature works; and she blames it for present confusion within Marxism.

In fact, the money-God analogy is not the least ambiguous: In religion, one loves ones neighbor, not because it is right, but because it is God’s commandment — the means of getting into Heaven. It is an act of love based completely in selfishness. This interpretation is obvious from Adam Smith’s writings on down, with private gain as the entire motive for social cooperation. Money appears in this analogy as the God of commerce because it is the aim and object of all commercial activity.

I think Marx, in these writings, is not describing money at all, but the material premise of money in social relations. Before money exists as a thing — whether that thing is a piece of paper or a precious metal — it exists as money relations — i.e., relations between individuals in society who alienate their labor in the act of exchange of commodities.

By the end of her review of Marx’s earliest writings, Anitra Nelson thinks she has established that Marx, while offering a “richer and more social” theory of money has provided us with no tools for the technical analysis of money. She argues that his passages on credit have no technical content; that they are only intelligible as political-philosophical criticism. She also argues that Marx never produces an explicit analysis of the relation between money and value.

She seems to be saying all of this might be forgiven if he addressed these issues later in his more mature works, but Marx does not. In fact, as she points out, Marx maintains the “images and analogies” of his earliest works through his later works without much development. Her argument points to a refutation of the view dividing Marx’s work into two periods: his earlier works and his mature works. If she is correct in her analysis Marx’s earlier view on money, the state, etc. get carried into his later works in almost complete form. From her argument, the emphasis on young Marx with his theory of alienation versus the older economic determinist Marx is bullshit. While far from conclusive, she indicates Marx’s view of society, his condemnation of the state and of money characterizes his entire works.

(In this regard, Maximilien Rubel’s 1973 work, “Marx, theoretician of anarchism“, becomes entirely plausible. Rather than situating Marx in opposition to anarchism, Rubel argues Marx was from the first an anarchist who sought to place anarchism on a scientific basis. Rubel’s argument clarifies a number of things for me personally; like, for instance, why Bakunin was the first to translate Capital into Russian, despite their differences.)

While she is very pointed in her allegations of Marx’s paucity of technical details regarding money she’s less clear about what he did argue. If Nelson is correct that Marx’s early views on money underwent little substantial development later, how would she summarize his view? At the risk of overstepping my bounds, I would offer this summary based on Nelson’s own analysis:

First, money is not a thing, but a reflection of a material defect in the organization of society, no matter the form this reflection takes. This reflection merely gives a definite socially valid form to the social relations that have completely escaped the control of mankind. Attempting to control money without gaining control over these social relations is a waste of time and effort. This is precisely because money itself implies we have no control over our material social relations. Marx’s criticism of primitive communism (or anarchism) with its various proposals to reform money relations consists entirely of this.

Second, as a material, money is rooted in the exchange of commodities itself; it cannot be abolished without abolishing exchange. In its simplest form, money essentially is the commodity and emerges directly out of the commodity as commodity money. No matter the subsequent forms of money that emerge, ultimately all refer back to this initial defect arising out of exchange itself. Once again we are led back to the conclusion that all attempts to reform money are no more than attempts to overcome the defects of exchange. In crises the reversion to hard money is simply an attempt to bring exchange under the control of society expressed as hunger for hard money.

Third, because social production operates in and through exchange of commodities, the importance of money must increase along with exchange. Money becomes an independent power dominating society, despite being only a product of society. Stripped of religious analogy, money becomes the necessary mediator of all social intercourse, including politics.

This last point shows the limitation of Nelson’s analysis: her preoccupation with money as a concept versus money as commodity ignores that in all of this money is an inanimate object. She, in fact, stumbles over this very conclusion. She writes:

“Neither a sword(sman), horse(rider) nor land(user) need be, that is in themselves are, automatic powers over people. Only in a particular social context do they represent or actively become specific instruments or kinds of social power. Land, horse and sword are however palpably physical resources or instruments, even if socially defined entities, while money is not necessarily physical since its relevant quality is wholly social. Money is a term for a social function rather than for a specific material object.The use of money as universal purchasing power is dependent entirely on social acknowledgment, on a well-established custom and social order based on market exchange; it is absolutely unnatural or supernatural, purely social. The analogy between money and sword, horse or land is too vague and probably misleading: they are all means of social power, but what seems just as important is the distinction that might be made between money and the others. Money has no power in itself as a sword does as a dangerous instrument, or a horse as a handy vehicle, or land as a means of subsistence, regardless of social structure. Significantly this might suggest, by implication, that Marx already conceives of money proper as a commodity, as gold say, rather than as tokens or paper, because then a limited correspondence is more easily made between money and the others. ”

My takeaway from Nelson is this: money can’t become a social power until it emerges as a distinct part of the social division of labor within society. Money emerges as an independent social power subsequent to the emergence of individuals whose activities are uniquely bound up with the functions money must perform in the act of exchange. What Marx in these early works appears to be feeling his way toward is not, “What is money?”, but “What is Capital”; i.e., what is money as an independent power in society.

The technical details of money appear absolutely insignificant from this vantage point. Marx is not concerned with what material serves as money, but with the social qualities of money as an independent social power standing over against the mass of society.

Nelson argues that Marx’s insistence that money ultimately must be a commodity flies in the face of late 20th Century credit money. This, she argues in her preface, has led Marxist theorists away from Marx’s analysis and into the nominalist camp, which he opposed. Yet, she admits, “credit money dominated British currency even in Marx’s day.” This implies either Marx ignored the actual existing domination of credit money in exchange during this period, or thought that, as a mere “technical detail” it had no more importance in the analysis of money than he gave it.

She should have at least investigated the latter possibility — that despite the specific technical changes in form, in the final analysis money had to be a commodity. Accepting this assumption by Marx would have forced her to examine the implications of ex nihilo currency for exchange itself. If indeed money ultimately has to be a commodity, what are the implications of an entirely ex nihilo currency economy, where no commodity money exists or can exist? In other words, what are the implications of this necessity for the sort of financial crisis we are now experiencing? It is true, Nelson’s book was completed well before the present financial crisis, but even before its publication the world had been hit by a series of financial crises of increasing scale. Rather than accepting observations of useless academic Marxists who conceded to the apparent stability of an ex nihilo financial system, Nelson should have been the first to point out how all the contradictions discovered by Marx in the category of money were of necessity contained in all subsequent forms of money that emerged later. This implies that ex nihilo money itself was a massive catastrophe in the making.

Connect the above idea with Marx’s argument that with credit money the individual herself was now effectively the money, and with the tell-tale unsustainable growth of consumer debt in the last quarter of the 20th Century, the outline of the present crisis appears in all its glory. If money is the negation of private property, and credit money the highest form of this negation, the implication of this crisis is obvious. Once the working class can no longer stand in the place of money, once they can no longer coin themselves by sinking deeper into debt, the estrangement of the individual from herself has reached its end-point.

Can capitalism be far behind?

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Categories: political-economy
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