PART 3
An ongoing series going through Marx, Capital Volume 1. Access free electronic copies of Volume 1 here or here. [Capital Volume I, Chapter 3, The Commodity, pgs. 188-244 of Penguin Press]
Chapter 3: Money, or the Circulation of Commodities
Marx gets warmed up to talk about money in the back half of the previous chapter, since the production of objects for the purpose of exchange gives rise both to the particular kind of object “commodity” and the need for money. But he really goes in in this chapter. Remember from part 1, that money is the solution to a problem: the problem of figuring out how much any given commodity is really worth. You could try to express the value of an object (say, a machete) by making it equal to some quantity of another object (“1 machete = 2 plantains”) but then you have just delayed the problem, because we don’t know what machetes are worth. The solution is to pick a commodity that we could give the job of being the yardstick for all the other ones.
Which commodity should we hire? Well, there should be two things on the resume. It’s gotta be able to serve as a measure of value. And from part 1, we know that Marx thinks that what gives anything its value is the labor-time put into it: so it’s gotta be an object that is product of labor (192). Any commodity will do, since all commodities are produced by labor. But it also has to be the standard of price, which means that we should be able to stably translate different amounts of it into reliable amounts that we can use to measure the value of other things. Should we choose machetes? What would it even mean to make a coin that represents a .01 machete domination? What’s that gonna be equivalent to, a nail file? Fuck you. How about staplers? Same problem, fuck you. Now, precious metals like gold, or silver can be standardized by weight, and remain gold-y and silver-y whether you’ve got an ounce or a ton of em? You’re cool.
Chapter 3: Money, or the Circulation of Commodities
Marx gets warmed up to talk about money in the back half of the previous chapter, since the production of objects for the purpose of exchange gives rise both to the particular kind of object “commodity” and the need for money. But he really goes in in this chapter. Remember from part 1, that money is the solution to a problem: the problem of figuring out how much any given commodity is really worth. You could try to express the value of an object (say, a machete) by making it equal to some quantity of another object (“1 machete = 2 plantains”) but then you have just delayed the problem, because we don’t know what machetes are worth. The solution is to pick a commodity that we could give the job of being the yardstick for all the other ones.
Which commodity should we hire? Well, there should be two things on the resume. It’s gotta be able to serve as a measure of value. And from part 1, we know that Marx thinks that what gives anything its value is the labor-time put into it: so it’s gotta be an object that is product of labor (192). Any commodity will do, since all commodities are produced by labor. But it also has to be the standard of price, which means that we should be able to stably translate different amounts of it into reliable amounts that we can use to measure the value of other things. Should we choose machetes? What would it even mean to make a coin that represents a .01 machete domination? What’s that gonna be equivalent to, a nail file? Fuck you. How about staplers? Same problem, fuck you. Now, precious metals like gold, or silver can be standardized by weight, and remain gold-y and silver-y whether you’ve got an ounce or a ton of em? You’re cool.
So we take weights of gold, print out bills (IOUs for those weights) corresponding to different weights of those, and give those names: the pound, the franc, the dollar. Bam, we’ve got money, which we can now use to measure the value of any given commodity, machete or plantain.
But there’s a catch. Value is a real thing: a certain amount of labor-time really went into making the machete, and it’s the same amount of labor-time it would take to produce some particular weight of gold in that same historical period. That particular weight of gold would be worth certain amount of dollars, and both of these hypothetical numbers (weights of gold and dollars) are ways to measure the objective value of machetes and iPhones and whatever else. Speaking ideally, that amount of gold is the embodiment of the value of the machete, it’s a (hypothetical) physical thing whose size and form would corresponds to the amount of value a machete has.
But price is (in this sense) a fake thing, its just a name for the value of the good: it’s the sticker the shopkeeper puts on the bin of plantains you want to buy from. It’s supposed to correspond to the real measure objective value of the commodity – that was the whole point of making money! But shit happens. Sometimes the price is just the price, because of various inefficiencies (conniving shop keepers, or shitty sticker handwriting). Price is the number of dollars or ounces of gold a good will be exchanged for, not the number it ought to be exchanged for. (195-198).
How C-M-C works
Exchange is also weirder than it seems. Remember that exchange, under the set of conditions talked about in the previous parts, is what makes objects into commodities. Commodities have two sources of value: exchange value (based on what you can trade for them) and use value (based on what they you can use them for). But when we exchange commodities for money, it seems like both sides of that transaction are emphasizing different things.
Plantains are commodities, they’re use values. If I’ve decided to sell my plantains for $1 I’ve decided not to eat them. Their use value isn’t what’s important about them to me in that moment. But the $1 dollar I receive for each of them stands for a certain amount of gold. That is a use value - you could use it to replace a tooth. But that’s (usually) not why I want dollars – I want the dollars because I can use them in exchange to get other use values that I am interested in at the moment, maybe bananas (if I woke up today on some fake shit). (199)
We can describe this set of economic movements from a bird’s eye view, trying to describe what changes are happening at the level of the whole economy, rather than either mine or the buyer’s perspective.
Plantain -> $1 -> Banana
We’ll quickly realize that this form can be used to describe the movement of lots of commodities at lots of prices. So let’s generalize:
Commodity -> Money -> Commodity (or C-M-C for short)
If you’ve been reading about Marx maybe you’ll recognize that bit, but you’ll get it either way. Okay, how does this work? Let’s go part by part:
Plantain -> $1 (C-M, sale)
I have a plantain that I don’t want because I hate myself deep inside (or maybe I’ve just had lunch already). You have a dollar. I want the dollar because I’m confident that now or later I can exchange it for something I do want. You had kept the dollar around for the same reason, and meeting somebody with plantains seemed like the right occasion. Come up.
If $1 is the going market price of plantains, either of us could have reasonably expected to meet the other side of this transaction at some point. On my side, I could expect enough people to be willing to hand me a dollar in exchange for a plantain to explain the market price, enough to justify turning down a buyer who offered me .85. On your side, you could expect enough people to be willing to accept a dollar for a plantain to explain the market price, enough to justify refusing to pay $1.15 to the first nigga you see, unless he successfully convinces you they’re ‘special’ plantains.
But there’s a catch. Value is a real thing: a certain amount of labor-time really went into making the machete, and it’s the same amount of labor-time it would take to produce some particular weight of gold in that same historical period. That particular weight of gold would be worth certain amount of dollars, and both of these hypothetical numbers (weights of gold and dollars) are ways to measure the objective value of machetes and iPhones and whatever else. Speaking ideally, that amount of gold is the embodiment of the value of the machete, it’s a (hypothetical) physical thing whose size and form would corresponds to the amount of value a machete has.
But price is (in this sense) a fake thing, its just a name for the value of the good: it’s the sticker the shopkeeper puts on the bin of plantains you want to buy from. It’s supposed to correspond to the real measure objective value of the commodity – that was the whole point of making money! But shit happens. Sometimes the price is just the price, because of various inefficiencies (conniving shop keepers, or shitty sticker handwriting). Price is the number of dollars or ounces of gold a good will be exchanged for, not the number it ought to be exchanged for. (195-198).
How C-M-C works
Exchange is also weirder than it seems. Remember that exchange, under the set of conditions talked about in the previous parts, is what makes objects into commodities. Commodities have two sources of value: exchange value (based on what you can trade for them) and use value (based on what they you can use them for). But when we exchange commodities for money, it seems like both sides of that transaction are emphasizing different things.
Plantains are commodities, they’re use values. If I’ve decided to sell my plantains for $1 I’ve decided not to eat them. Their use value isn’t what’s important about them to me in that moment. But the $1 dollar I receive for each of them stands for a certain amount of gold. That is a use value - you could use it to replace a tooth. But that’s (usually) not why I want dollars – I want the dollars because I can use them in exchange to get other use values that I am interested in at the moment, maybe bananas (if I woke up today on some fake shit). (199)
We can describe this set of economic movements from a bird’s eye view, trying to describe what changes are happening at the level of the whole economy, rather than either mine or the buyer’s perspective.
Plantain -> $1 -> Banana
We’ll quickly realize that this form can be used to describe the movement of lots of commodities at lots of prices. So let’s generalize:
Commodity -> Money -> Commodity (or C-M-C for short)
If you’ve been reading about Marx maybe you’ll recognize that bit, but you’ll get it either way. Okay, how does this work? Let’s go part by part:
Plantain -> $1 (C-M, sale)
I have a plantain that I don’t want because I hate myself deep inside (or maybe I’ve just had lunch already). You have a dollar. I want the dollar because I’m confident that now or later I can exchange it for something I do want. You had kept the dollar around for the same reason, and meeting somebody with plantains seemed like the right occasion. Come up.
If $1 is the going market price of plantains, either of us could have reasonably expected to meet the other side of this transaction at some point. On my side, I could expect enough people to be willing to hand me a dollar in exchange for a plantain to explain the market price, enough to justify turning down a buyer who offered me .85. On your side, you could expect enough people to be willing to accept a dollar for a plantain to explain the market price, enough to justify refusing to pay $1.15 to the first nigga you see, unless he successfully convinces you they’re ‘special’ plantains.
”Specially fortified plantains with Caveman™ formula for male vitality and, uh, total body redness”
$1 -> Banana (M-C, purchase)
I have a dollar now, from the lucrative plantain deal I signed with the CEO of Atlantic Records, (or with that guy Jeff down in the market, whichever). I’m on top of the world. Later, I get hungry, and there is a bodega with some ripe bananas. I buy one.
This goes the same way: I have money (cause I’m a hustler, baby). The store owner has some use-values that they aren’t interested in eating, but are interested in because they can trade them for money. We make a deal.
Marx’s Commentary on C-M-C
Marx makes a lot of points about the C-M-C thing. It’s worth reading this chapter whole, since the broad strokes are pretty foundational. But, to pull out some things:
Every sale (C-M) is a purchase (M-C) and every purchase is a sale. I describe the “plantain -> $1” transaction as a sale to you because I was holding the plantain beforehand, but you could have described it as a purchase because you ended up with the plantain afterwards. You might take this to imply a kind of equilibrium between sales and purchases, since every society will always have the same number of both. But that would be a mistake (208-209). What’s important is “circulation”, the exchanges yet to be made that sellers and buyers are both banking on, and are actually in the process of completing. Selling the plantain was a sensible thing to do because it opened up the opportunity of buying a banana later. More than that: it was actually the first step of that later purchase, since I bought the banana with the very dollar I got from selling the plantain. That would be news to the shop keeper, but we are all depending on circulation in this way: if I ever suspected that people would stop trading dollars for things, I would be stingier with my useful plantains.
Money (gold/silver or the coins and bills that stand for them) is useful for the fact that they can facilitate trades and purchases between any kind of commodity and any other. It has “instrumental” value, which means it has value based on what we can use it for. But since it is so flexibly usable, because it can be converted to any commodity, it’s easy to forget that its value is instrumental. People can end up thinking or behaving as if money is intrinsically valuable, that is, valuable for its own sake, itself the cause or explanation of joy and happiness rather than the usefulness of the objects it can be converted into. That is, they fetishize money. (that ‘fetishizing’ argument again! We’re starting to see why this matters).
Marx quotes Christopher Columbus’ letter from Jamaica: “Gold is a wonderful thing! Its owner is master of all he desires. Gold can even enable souls to enter Paradise!’ (229). This is an example of the fetishization that Marx uses explains the phenomenon of people hoarding money (gold, silver, or bills). There are genuine reasons to literally hoard money, especially if you’re a country’s central bank, and holding gold or cash reserves can help prevent economic crises. (243) There are trickier cases, like lending (234-236). Then there are pathological, Christopher Columbus’-oh-shit-which-hemisphere-is-this-again-let-me-pay-back-my-creditors-in-slaves lookin-ass reasons.
Don’t be that guy.
Sales and purchases complete past economic plans and anticipate future ones. But sometimes the distance in time between economic transactions is meaningful in ways that complicate shit. Pick a period of time. How much money is in circulation? You might try to just add up all the commodities that exist in that period, figure out how much they’re worth in gold-weight and then dollars, and make that your number. But not so fast: how much debt are people in and when are the payments due? What about the money in the economy that was based on past sales of commodities that don’t sell anymore (somebody has got that Sega Dreamcast money)? (237-239)
Finally, we should start thinking about universal money and what it involves: a global economy. The economies Marx has in mind aren’t self contained, but trade with each other. Marx quotes famed economist Ricardo: “World money serves…as the absolute social materialization of wealth as such (universal wealth).” (242). World money was necessary for balancing trade (imports vs. exports) across countries, as a direct means of purchase when trade was disturbed, and a default method of wealth transfer. Historically, this meant gold and silver. Gold and silver and other precious metals make good money commodities because of their physical properties. Those properties will be their properties things in any economy, but these metals don’t exist in every economy: they are physically located in particular parts of the world (think: the silver mines in Bolivia and the gold mines in Brazil, ran on the slave labor of indigenous peoples and Africans over the 15th to 19th centuries). (242-244)
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