(c) Socialist Money

Although money will exist in a socialist society, its functions will not be quite the same then as they are to-day.

Its most important function under the present mode of production is its transformation into capital. Each unit of capital must commence to function as a sum of money. If it is lent out at interest, it retains the money form, and becomes money capital transformed into commodities It may, however, also be which are to be resold at a profit – this constitutes mercantile capital. Finally, it may be employed in the purchase of means of production and labour-power, to produce new commodities with a surplus value -this constitutes the highest form of capital, industrial capital.

Whichever forms capital may assume in the course of its circuit it must always possess the money form at the outset. On the other hand, the opportunities for employing money as capital are to-day so very profuse that almost all money that is not destined for purposes of immediate consumption may become capital, at least in the form of interest-bearing capital.

Thus it frequently happens that money is identified with capital. Consequently, the abolition of the system of capital must involve the abolition of the system of money.

In a socialist society, where all the means of production were social property, there would of course no longer be any opportunity for individuals to employ money for the purchase of means of production, that is, to transform it into industrial capital. As the production of surplus value for private individuals would cease, the fund from which trading profits and interest are paid would likewise vanish.

The merchant will be ousted by consumers’ organizations, as well as by the direct buying and selling of the great producers’ organizations among themselves.

Thus in a complete socialist society all the conditions would be lacking for the transformation of money into capital.

But this fact would not exhaust all the functions of money. Thousands of years passed before a capitalist mode of production came into existence. As the measure of value and means of circulation of products money will continue to exist in a socialist society until the dawn of that blessed second phase of communism which we do not yet know whether will ever be more than a pious wish, similar to the Millennial Kingdom.

Whatever may be the lines upon which a socialist society is organized, very careful accountancy would be required. The books of each undertaking should show at any time how much it had received, how much it had expended, how much it had gained. This object would be quite impossible of attainment if the incomings and outgoings were entered in kind.

If a machine factory delivered a threshing machine, in return for which it was assigned, let us say, 40 pigs, 100 cwt. flour, 20 cwt. butter, and 2,000 eggs, how should we be able to tell whether it had gained or lost by the transaction, whether it had done more work for agriculture than the latter had done for it? It is manifest that bookkeeping in kind would soon lead to chaos. What would have to be entered and always kept quite clear are the costs of production of each product, each item of which dissolves into labour in the last resort. It is only by virtue of the fact that all products possess the common attribute of being creations of labour that the quantities in which they exchange with each other can be measured. What is indispensable as a measuring instrument for the exchange of commodities is a commodity whose use-value consists in the fact that it represents a specific quantity of labour or value, and this commodity is money.

We find that money functions as a measure of value under conditions of barter.

In 3000 B.C. the old Egyptians used copper and gold (not silver) as a money commodity and general measure of the value of products. But the commodities measured in terms of money according to their value were generally bartered.

If a bull formed the subject of one of these transactions, its value might be fixed at 119 copper utnu. It would be exchanged for a reed mat, computed at 35 utnu, 5 measures of honey at 4 utnu, 8 measures of oil at 10 utnu, and seven other articles for the remainder.

Similarly, if exchange transactions were strictly confined to the bartering of objects, the continued use of money as a measure of value and for computing the elements of every exchange would be essential in a socialist society.

Money will therefore continue to function as a means for the circulation of products, in addition to its being a measure of value.

But would the same money be necessary for this purpose as exists or ought to exist to-day, that is, money minted from a particular commodity, which is usually gold? Instead of using money as the embodiment of labour, could not labour itself be made to serve as a measure of value, involving the creation of labour-money which attested the amount of work performed?

Such a system as this might assume the form that each worker would receive a token for every hour of labour which he performed, and this token would entitle him to the product of an hour’s labour. It would be necessary to calculate how much labour every product cost. For the wages of a working day the worker would always be able to buy products which required one day to produce.

As the calculation would be. accurately made, any kind of exploitation would be excluded as a matter of course, and the worker would possess complete freedom as to the method of expending his wages. The tutelage of an authority which allotted rations to an individual would thus be avoided.

I do not doubt that such a monetary system is conceivable. But is it practicable? Let us ignore the complications which would arise from collective labour or from different scales of wages, as heavy or unpleasant work would have to be more highly remunerated than easy and pleasant work. Consider what colossal labour would be involved in calculating for each product the amount of labour it had cost from its initial to its final stage, including transport and other incidental labour.

What labour ought actually to be reckoned? Not the labour which each product had really cost. In the latter case, different specimens of the same article, produced under conditions of varying favourableness, would bear different prices. And this would be absurd. They would necessarily have to bear the same price, which would have to be calculated not according to the labour actually expended, but according to the socially necessary labour. Could this be ascertained in respect of every product?

This involves a two-fold calculation. The worker’s remuneration would be fixed according to the labour-time he actually expended, while the price of the product would be fixed according to the labour-time socially necessary for its production. The results of these calculations ought to be identical. But this would almost never be the case.

The proposal of labour-money is beset with initial difficulties, because it is based on a mechanical conception of the law of value.

How is the law of value discovered? By observing the movements and relations of prices. Ever since the mass production, of commodities for the market has been a systematic process, it has been noted that the prices of each commodity, in spite of all its fluctuations, continuously seek a certain level, however much they might at times be above or below it. On the other hand, it was found that the relations of the prices of each commodity to each other, amid all temporary fluctuations, showed a uniform tendency. Yet these relations and this level were not unalterable magnitudes; they did not follow the fluctuations in the state of the market; they altered only with changes in the conditions of production.

When these conditions were unaltered, the level of prices and their relations to each other do not change.

This level is described as the value of the commodity.

It was perceived long ago that the level of value of a commodity was determined by the quantity of labour necessary for its production. This doctrine was applied and refined more and more consistently until it found its highest expression in the Marxian theory of value.

No other theory of value than that of labour-value has hitherto been advanced. The theories of value which are opposed to it relate to phenomena quite different from those which the theory of labour-value purports to explain. What they conceive as value is, in part, nothing else than price. It is the superficial phenomenon, and not the determining factor.

But the subjective value of the final utility theorists is something quite different from value in the sense of a Ricardo or a Marx. The former is a relationship of an individual to the commodities which surround him, while the latter is a phenomenon which, under given conditions of production, is the same for all persons, who find it already in existence, however varied their subjective needs, inclinations, or circumstances may be.

These two kinds of value have therefore nothing in common but the name, which is not precisely an aid to clear thinking.

The value which Marx has in mind arises from and reacts upon specific conditions of production. It forms the starting-point for the comprehension of these conditions. Subjective value, on the other hand, is a relation of a single individual to the things which surround him, whether they are produced by human labour or not; it contributes absolutely nothing to the knowledge of definite social conditions of production.

For that value which Marx and classical economy had in mind, no determining factor other than labour has yet been found. The theory of labour-value has stood the test, inasmuch as it has afforded us a closer insight into the laws of capitalist enterprise than any other theory. We may therefore regard labour-value as a reality. All the same, it remains merely a tendency. It is real, but not tangible and exactly measurable. Measurements are only possible in the case of its temporary phenomenal form, price.

We are unable exactly to calculate and to fix the value of a commodity. Value is a social magnitude which can only be detected through observation of the conditions of production. The law of value operates in the following manner. Whenever the market prices of commodities exhibit wide or continuous deviations from their value, certain factors of resistance are set up, in consequence of which alterations are introduced into the conditions of production, which have the effect of counteracting the deviation of price from value.

In the light of this character of value, all attempts are doomed to failure which aim at “constituting” the value of each separate commodity, that is, to determine exactly the quantity of labour contained in it, and to issue a labour token as a means of circulation of the product thus determined. The labour involved in such an effort would be interminable. Yet the new labour token could not be allowed to function until the value of all products had been constituted.

Instead of grappling with the hopeless task of measuring running water with a sieve – and the constitution of value would be a work of this nature – a Labour regime should retain the means for the circulation of commodities which it finds ready to hand, viz. their price expression, which is to-day measured in money, and which is only concealed and confused, but never abolished, by the most drastic system of inflation.

The appraisement of commodities according to the labour contained in them, which could not be achieved by the most complicated State machinery imaginable, we find to be an accomplished fact in the shape of the transmitted prices, as the result of a long historical process, imperfect and inexact, but nevertheless the only practicable foundation for the smooth functioning of the economic process of circulation.

Although at the outset socialization would not effect any change in this respect, the role of price and therefore of money will undergo a fundamental transformation within the constantly extending realm of socialization.

To-day the private producers produce for the market. They decide the quantity of products which they supply for the market, in accordance with their previous experience and future expectations. The price they must try to obtain for their products is fixed by their costs of production. But the price which they really obtain depends not upon these, but upon the relation between supply and demand.

This applies also to commodities which are not produced haphazard for the market, but are manufactured to order. The difference between these acts consists in the fact that the producer for the market may find there such an abundance of commodities that he is obliged to realize his stock at ruinous prices, whereas the producer who works to order may refuse orders which would not cover his costs of production. Yet working to order may ruin him, if the prices of the raw materials employed in the production of his commodities rise to a higher level than was to be anticipated when the price of the commodities was fixed.

The scale upon which production is continued depends upon price. When prices fall, production is restricted, while it is extended with rising prices. The method of regulating prices is typical of capitalism. It always injures the working class, which oscillates between the two antagonistic poles of dear living and unemployment.

In a socialist society this regulation would be effected in another way. The magnitude of production and the level of prices would not be the result of anarchical production for the market. The means of production would belong to the whole of the consumers, who would then be synonymous with the whole of the workers. The whole body of consumers, in conjunction with the producers of every branch of production, would determine the scale of production and the level of prices on the basis of their knowledge of the economic conditions. Production as well as prices would thenceforth move on far more uniform lines. The workers would no longer need as consumers to suffer from occasional dearness, nor as producers from occasional unemployment.

The figures of production and of the prices of particular commodities could then deviate from those transmitted from the capitalist period, if social interest required it.

This would be a far simpler operation than the calculation of the labour-value of all commodities for the purpose of introducing labour-money.

The quantity of labour at the disposal of a given society is limited, and may not be increased at will. If the socialist society desired to extend a branch of production beyond its previous dimensions, this could only be effected by the restriction of other branches of production, unless technical improvements could be introduced. By the side of this the tendency towards the adjustment and equalization of wages would exist stronger than ever.

Thus the scale upon which a particular commodity is produced, as well as the fixing of its price, would be kept within defined limits. A fall in the price of a particular commodity would not be possible through a reduction in the wages of its producers, but only through a fall in its other costs of production, that is, through an increase in the productivity of labour or through a corresponding rise in the prices of other commodities, which would have to yield a surplus, if the fall in that of the former commodity involved a deficit.

We may therefore anticipate that the law of labour-value would on the whole assert itself in a socialist society, in spite of the abolition of private production and of private competition.

If the institutions of price and money continue to exist under a socialist mode of production, and if socialist prices are grafted on to the historical form of price, it would also be necessary to adhere to the historical form of money, and to retain gold as the money commodity. Actual gold need not be used.

As measure of value, only an imaginary gold is necessary, or rather the value of gold. In order to calculate how many gold marks will constitute the price of a pair of boots, no gold mark need be in actual existence.

As a means of circulation, money can of course only serve when it is actually on the spot. But even here, the natural form of gold coins may be dispensed with to a large extent, and replaced by paper promises to pay.

Of course, behind the imaginary gold as measure of value and the paper money as means of circulation, gold as a commodity which has a definite labour-value will also continue to exist in a socialist society. It is difficult to see why the production of gold should have to be suspended, as gold would still be required for industrial purposes, for teeth-stopping or for ornament. It is to be hoped that the people of the coming society will not cease to delight in ornament, brilliance, and beauty.

Gold will continue to be produced, although not for minting purposes, as this function will fall into disuse. Consequently, gold will still involve costs of production and have a value, so that specific quantities of this metal will continue to serve the purpose of expressing the prices of commodities.

The monetary system is a machine which is indispensable for the functioning of a society with a widely ramified division of labour.

It is quite conceivable that a more perfect form of this mechanism may eventually be invented, which would replace its present form. On the other hand, it would be a relapse into barbarism to destroy this machine, in order to resort to the primitive expedients of natural economy. This method of combating capitalism recalls the simple workers of the first decades of the last century who thought they would make an end of capitalist exploitation if they smashed the machines which they found to hand.

It is not our desire to destroy the machines, but to render them serviceable to society, so that they may be shaped into a means for the emancipation of labour.