Eich on Marx on Money

I’ve been using some of Stefan Eich’s The Currency of Politics in the graduate class I’m teaching this semester. (I read it last year, after seeing a glowing mention of it by Adam Tooze.) This week, we talked about his chapter on Marx, which reminded me that I wrote some notes on it when I first read it. I thought it might be worthwhile turning them into a blogpost, incorporating some points that came out in the discussion in today’s class.

Eich begins with one commonly held idea of Marx’s views of money: that he was “a more or less closeted adherent of metallism who essentially accepted … gold-standard presumptions” — specifically, that the relative value of commodities is prior to whatever we happen to use for units of account and payments, that the value of gold (or whatever is used for money) is determined just like that of any other commodity, and that changes to the monetary system can’t have any effects on real activity (or at least, only disruptive ones). Eich’s argument is that while Marx’s theoretical views on money were more subtle and complex than this, he did share the operational conclusion that monetary reform was a dead end for political action. In Eich’s summary, while at the time of the Manifesto Marx still believed in a public takeover of the banking system as part of a socialist program, by the the 1860s he had come to believe that “any activist monetary policy to alter the level of investment, let alone … shake off exploitation, was futile.”

Marx’s arguments on money of course developed in response to the arguments of Proudhon and similar socialists like Robert Owen. For these socialists (in Eich’s telling; but it seems right to me) scarcity of gold and limits on credit were “obstacles to reciprocal exchange,” preventing people from undertaking all kinds of productive activity on a cooperative basis and creating conditions of material scarcity and dependence on employers. “A People’s Bank,” as Eich writes channeling Proudhon, “was the only way to guarantee the meaningfulness of the right to work.” Ordinary people are capable of doing much more socially useful (and remunerative) work than whatever jobs they were offered. But under the prevailing monopoly of credit, we have no way to convert our capacity to work into access to the means of production we would need to realize it.

Why, we can imagine Proudhon asking, do you need to work for a boss? Because he owns the factory. And why does he own the factory? Is it because only he had the necessary skills, dedication, and ambition to establish it? No, of course not. It’s because only he had the money to pay for it. Democratize money, and you can democratize production.

Marx turned this around. Rather than money being the reason why a small group of employers control the means of production, it is, under capitalism, simply an expression of that fact. And if we are going to attribute this control to a prior monopoly, it should be to land and the productive forces of nature, not money. The capitalist class inherits its coercive power from the landlord side of its family tree, not the banker side.

In Marx’s view, Proudhon had turned the fundamental reality of life under capitalism — that people are free to exchange their labor power for any other commodity — into an ideal. He attributed the negative  consequences of organizing society around market exchange to monopolies and other deviations from it. (This is a criticism that might also be leveled against many subsequent reformers, including the ”market socialists” of our own time.) 

That labor time is the center of gravity for prices is not a universal fact about commodities. It is a tendency — only a tendency — under capitalism specifically, as a result of several concrete social developments. First, again, production is carried out by wage labor. Second, wage labor is deskilled, homogenized, proletarianized. The equivalence of one hour of anyone’s labor for one hour of anyone else’s is a sociological fact reflecting that fact that workers really are interchangeable. Just as important, production must be carried out for profit, because capitalists compete both in the markets for their product and for the means of production. It is the objective need for them to produce at the lowest possible cost, or else cease being capitalists, that ensures that production is carried out with the socially necessary labor time and no more.

The equivalence of commodities produced by the same amount of labor is the result of proletarianization on the one side and the hard budget constraint on the other. The compulsion of the market, enforced by the “artificial” scarcity of money, is not an illegitimate deviation from the logic of equal exchange but its precondition. The need for money plays an essential coordinating function. This doesn’t mean that no other form of coordination is possible. But if you want to dethrone money-owners from control of the production process, you have to first create another way to organize it.

So one version of Marx’s response to Proudhon might go like this. In a world where production was not organized on capitalist lines, we could still have market exchange of various things. But the prices would be more or less conventional. Productive activity, on the other side, would be embedded in all kinds of other social relationships. We would not have commodities produced for sale by abstract labor, but particular use values produced by particular forms of activity carried out by particular people. Given the integration of production with the rest of life, there would be no way to quantitatively compare the amount of labor time embodied in different objects of exchange; and even if there were, the immobility of embedded labor means there would be no tendency for prices to adjust in line with those quantities. The situation that Proudhon is setting up as the ideal — prices corresponding to labor time, which can be freely exchanged for commodities of equal value — reflects a situation where labor is already proletarianized. Only when workers have lost any social ties to their work, and labor has been separated from the rest of life, does labor time become commensurable. 

In the real world, the owners of the means of production have harnessed all our collective efforts into the production of commodities by wage labor for sale in the market, in order to accumulate more means of production – that is to say, capital. In this world, and only in this world, quantitative comparisons in terms of money must reflect the amount of labor required for production. Changes to the money system cannot change these relative values. At the same time, it’s only the requirement to produce for the market that ensures that one hour of labor really is equivalent to any other. Proudhon’s system of labor chits, in which anyone who spent an hour doing something could get a claim on the product of an hour of anyone else’s labor, would destroy the equivalence that the chits are supposed to represent. (A similar criticism might be made of job guarantee proposals today.)

For the mature Marx, money is merely “the form of appearance of the measure of value which is immanent in commodities, namely labor time.” There is a great deal to unpack in a statement like this. But the conclusion that changes in the quantity or form of money can have no effect on relative prices does indeed seem to be shared with the gold-standard orthodoxy of his time (and of ours). 

The difference is that for Marx, that quantifiable labor time was not a fact of nature. People’s productive activities become uniform and homogeneous only as work is proletarianized, deskilled, and organized in pursuit of profit. It is not a general fact about exchange. Money might be neutral in the sense of not entering into the determination of relative prices, which are determined by labor time. But the existence of money is essential for there to be relative prices at all. The possibility of transforming authority over particular production processes into claims on the social product in general is a precondition for generalized wage labor to exist. 

While Marx does look like commodity money theorist in some important ways, he shared with the credit-money theorists, and greatly developed, the  idea — mostly implicit until then — that the productive capacities of a society are not something that exist prior to exchange, but develop only through the generalization of monetary exchange. Much more than earlier writers, or than Keynes and later Keynesians, he foregrounded the qualitative transformation of society that comes with the organization of production around the pursuit of money. 

You could get much of this from any number of writers on Marx. What is a bit more distinctive in the Eich chapter is the links he makes between the theory and Marx’s political engagement. When Marx was writing his critique of Proudhon’s monetary-reform proposals in the 1840s, Eich observes, he and Engels  still believed that public ownership of the banks was an important plank in the socialist program. Democratically-controlled banks would “make it possible to regulate the credit system in the interest of the people as a whole, and … undermine the dominion of the great money men. Further, by gradually substituting paper money for gold and silver coin, the universal means of exchange … will be cheapened.” At this point they still held out the idea that public credit could both alleviate monetary bottlenecks on production and be a move toward the regulation of production “according to the general interest of society as represented in the state.”

By the 1850s, however, Marx had grown skeptical of the relevance of money and banking for a socialist program. In a letter to Engels, he wrote that the only way forward was to “cut himself loose from all this ‘money shit’”; a few years later, he said, in an address to the First International, that “the currency question has nothing at all to do with the subject before us.” In the Grundrisse he asked rhetorically, “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…? Can such a transformation be undertaken without touching the existing relations of production and social relations which rest on them?” The answer, obviously, is No.

The reader of Marx’s published work might reasonably come away with something like this understanding of money: Generalized use of money is a precondition of wage labor, and leads to qualitative transformations of human life. But control over money is not the source of capitalists’ power, and the logic of capitalism doesn’t depend on the specific workings of the financial system. To understand the sources of conflict and crises under capitalism, and its transformative power and development over time, one should focus on the organization of production and the hierarchical relationships within the workplace. Capitalism is essentially a system of hierarchical control over labor. Money and finance are at best second order. 

Eich doesn’t dispute this, as a description of what Marx actually he wrote.. But he argues that this rejection of finance as a site of political action was based on the specific conditions of the times. Today, though, the power and salience of organized labor has diminished. Meanwhile, central banks are more visible as sites of power, and the allocation of credit is a major political issue. A Marx writing now, he suggests, might take a different view on the value of monetary reform to a socialist program. I’m not sure, though, if this is a judgment that many people inspired by Marx would share.