The variations of the different factors may mutually compen- sate each other, so that notwithstanding their continued instability, the sum of the prices to be realised and the quantity of money in circulation remains constant; consequently, we find, especially if we take long periods into consideration, that the deviations from the average level, of the quantity of money current in any country, are much smaller than we should at first sight expect, apart of course from excessive perturbations periodically arising from industrial and commercial crises, or, less frequently, from fluctuations in the value of money.
The law, that the quantity of the circulating medium is determined by the sum of the prices of the commodities circulating, and the average velocity of currency ^ may also be 1 "There is a certain measure and proportion of money requisite to drive the trade of a nation, more or less than which would prejudice the same. Just as there is a certain proportion of farthings necessary in a small retail trade, to change silver money, and to even such reckonings as cannot be adjusted with the smallest silver pieces...Now, as the proportion of the number of farthings requisite in com- merce is to be taken from the number of people, the frequency of their exchanges: as also, and principally, from the value of the smallest silver pieces of money; so in like manner, the proportion of money [gold and silver specie] requisite in our trade, is to be likewise taken from the frequency of commutations, and from the bigness of the payments." (William Petty. " A Treatise on Taxes and Contributions." Lond. 1662, p. 17.) The Theory of Hume was defended against the attacks of J. Steuart and others, by A. Young, in his "Political Arithmetic," Lond. 1774, in which work there is a special chapter entitled "Prices depend on quantity of money," at p. 112, sqq. J have stated in "Zur Kritik, &c.," p. 149: "He (Adam Smith) passes over Money^ or the Circulation of Commodities, 99 stated as follows: given the sum of the values of commodities, and the average rapidity of their metamorphoses, the quantity of precious metal current as money depends on the value of that precious metal. The erroneous opinion that it is, on the contrary, prices that are determined by the quantity of the circulating medium, and that the latter depends on the quantity of the precious metals in a country; ^ this opinion was based by those who first held it, on the absurd hypothesis that commodities are without a price, and money without a value, when they first enter into circulation, and that, once in the circulation, an aliquot part of the medley of commodities is exchanged for an aliquot part of the heap of precious metals. ^ without remark the question as to the quantity of coin in circulation, and treats money quite wrongly as a mere commodity." This statement applies only in so far as Adam Smith, ex officio, treats of money. Now and then, however, as in his criticism of the earlier systems of political economy, he takes the right view. " The quantity of coin in every country is regulated by the value of the commodities which are to be circulated by it...The value of the goods annually bought and sold in any country requires a certain quantity of money to circulate and distribute them to their proper consumers, and can give employment to no more. The channel of circulation necessarily draws to itself a sum sufficient to fill it, and never admits any more." (" Wealth of Nations." Bk. IV., ch. I.) In like manner, ex officio, he opens his work with an apotheosis on the division of labour. Afterwards, in the last book which treats of the sources of public revenue, he occasionally repeats the denunciations of the division of labour made by his teacher, A. Ferguson.
1 "The prices of things will certainly rise in every nation, as the gold and silver increase amongst the people; and consequently, where the gold and silver decrease in any nation, the prices of all things must fall proportionably to such decrease of money." (Jacob Vanderlint: "Money answers all Things." Lond. 1734, p. 5.) A careful coniparison of this book with Hume's "Essays," proves to my mind without doubt that Hume was acquainted with and made use of Vanderlint's work, which is certainly an important one. The opinion that prices are determined by the quantity of the circulating medium, was also held by Barbon and other much earlier writers. "No inconvenience," says Vanderlint, "can arise by an unrestrained trade, but very great advantage; since, if the cash of the nation be decreased by it, which prohibitions are designed to prevent, those nations that get the cash will certainly find everything advance in price, as the cash increases amongst them. And...our manufactures, and everything else, will soon become so moderate as to turn the balance of trade in our favour, and thereby fetch the money back again." (1. c, 2 That the price of each single kind of commodity forms a part of the sum of the prices of all the commodities in circulation, is a self-evident proposition. But how use-values, which are incommensurable with regard to each other, are to be ex- changed, en masse, for the total sum of gold and silver in a country, is quite incom- prehensible. If we start from the notion that all commodities together form one single commodity, of which each is but an aliquot part, we get the following beautiful result: The total commodity = x c wt. of gold; commodity A = an aliquot part of the lOO Capitalist Prodttdion, c. Coin and symbols of value.
That money takes the shape of coin, springs from its function as the circulating medium. The weight of gold represented in imagination by the prices or money-names of commodities, must confront those commodities, within the circulation, in the shape of coins or pieces of gold of a given denomination. Coining, like the establishment of a standard of prices, is the business of the State. The different national uniforms worn at home by gold and silver as coins, and doffed again in the market of the world, indicate the separation between the internal or national spheres of the circulation of commodities, and their universal sphere.
The only difference, therefore, between coin and bullion, is one of shape, and gold can at any time pass from one form to the other.^ But no sooner does coin leave the mint, than it total commodity = the same aliquot part of x cwt. of gold. This is stated in all seriousness by Montesquieu: "Si I'on compare la masse de I'or et de I'argent qui est dans le monde avec la somme des marchandises qui y sont, il est certain que chaque denree ou marchandise, en j)articulier, pourra 6tre compar^e fi une certaine portion de le masse entiere. Supposons qu'il n'y ait qu'une seule denree ou marchandise dans le monde, ou qu'il n'y ait qu'une seule qui s'achete, et qu'elle se divise comme I'argent: Cette partie de cette marchandise repondra sL une partie de la masse de I'argent; la moiti6 du total de I'une h, la moiti6 du total de I'autre, &c...I'etablissemeut du prix des choses depend toujours fondamentalement de la raison du total des choses au total des signes." (Montesquieu 1. c. t III., pp. 12, 13.) As to the further devel- opment of this theory by Ricardo and his disciples, James Mill, Lord Overstone, and others, see "Zur KrJtik," &c., pp. 140-146, and p. 150, sqq. John Stuart Mill, with his usual eclectic logic, understands how to hold at the same time the view of his father, James Mill, and the opposite view. On a comparison of the text of his compendium, ''Principles of Pol. Econ.," with his preface to the first adition, in which preface he announces himself as the Adam Smith of his day — we do not know whether to admire more the simplicity of the man, or that of the public, who took him, in good faith, for the Adam Smith he announced himself to be, although he bears about as much resemblance to Adam Smith as say General Williams, of Kars, to the Duke of Wellington. The original researches of Mr. J. S. Mill, which are neither extensive nor profound, in the domain of political economy, will be found mustered in rank and file in his little work, " Some Unsettled Questions of Political Economy," which appeared in 1844. Locke asserts point blank the connexion between the absence of value in gold and silver, and the determination of their values by quantity alone, " Mankind having consented to put an imaginary value upon gold and silver...the intrinsick value, regarded in these metals, is nothing but the quantity." ("Some considerations, "&c., 1691, AVorks Ed. 1777, vol. IL, p. 15.)
1 It lies, of course, entirely beyond my purpose to take into consideration such details as the seigniorage on minting. I will, however, cite for the benefit of the romantic sycophant, Adam BluUer, who admires the "generous liberality" with Money, or the Ciradation of Commodities. loi immediately finds itself on the high-road to the melting pot. During their currency, coins wear away, some more, others less. Name and substance, nominal weight and real weight, begin their process of separation. Coins of the same denom- ination become different in value, because they are different in weight. The weight of gold fixed upon as the standard of j^rices, deviates from the weight that serves as the circulating medium, and the latter thereby ceases any longer to be a real equivalent of the commodities whose prices it realises. The history of coinage during the middle ages and down into the 18th century, records the ever renewed confusion arising from this cause. The natural tendency of circulation to convert coins into a mere semblance of what they profess to be, into a symbol of the weight of metal they are officially supposed to contain, is recognised by modern legislation, which fixes the loss of weight sufficient to demonetise a gold coin, or to make it no lonojer leojal tender.
The fact that the currency of coins itself effects a separation between their nominal and their real weight, creating a dis- tinction between them as mere pieces of metal on the one hand, and as coins with a definite function on the other — this fact implies the latent possibility of replacing metallic coins by tokens of some other material, by symbols serving the same purposes as coins. The practical difficulties in the way of coining extremely minute quantities of gold or silver, and the circumstance that at first the less precious metal is used as a measure of value instead of the more precious, copper instead of silver, silver instead of gold, and that the less precious circulates as money until dethroned by the more precious — all these facts explain the parts historically played by silver and which the English Government coins gratuitously, the following opinion of Sir Dudley North: "Silver and gold, like other commodities, have their ebbings and Sowings. Upon the arrival of quantities from Spain...it is carried into the Tower, and coined. Not long after there will come a demand for bullion to be exported again. If there is none, but all happens to be in coin, what then? Melt it down again; there's no loss in it, for the coining costs the owner nothing. Thus the nation has been abused, and made to pay for the twisting of straw for asses to eat. If the merchant were made to pay the price of the coinage, he would not have sent his fiilver to the Tower without consideration; and coined money would always keep a value above uncoined silver." (North, 1. c, p. 18.) North was himself one of the foremost merchants in the reign of Charles II.
I02 Capitalist Prodtution.
copper tokens as substitutes for gold coins. Silver and copper tokens take the place of gold in those regions of the circulation where coins pass from hand to hand most rapidly, and arc subject to the maximum amount of wear and tear. This occurs where sales and purchases on a very small scale are continually happening. In order to prevent these satellites from establish- ing themselves permanent^ in the place of gold, positive enactments determine the extent to which they must be com- pulsorily received as payment instead of gold. The particular tracks pursued by the different species of coin in currency, run naturally into each other. The tokens keep company with gold, to pay fractional parts of the smallest gold coin; gold is,, on the one hand, constantly pouring into retail circulation, and on the other hand is as constantly being thrown out again by beinor changed into tokens. ^ o o o o The weight of metal in the silver and copper tokens is^ arbitrarily fixed by law. When in currency, they wear away even more rapidly than gold coins. Hence their functions arc totally independent of their weight, and consequently of all value. The function of gold as coin becomes completely inde- pendent of the metallic value of that gold. Therefore things that are relatively without value, such as paper notes, can serve as coins in its place. This purely symbolic character is^ to a certain extent masked in metal tokens. In paper money it stands out plainly. In fact, ce n'est que le premier pas qui coute.
We allude here only to inconvertible paper money issued by the State and having compulsory circulation. It has its immediate origin in the metallic currency. Money based upon credit implies on the other hand conditions, which, from our 1 " If silver never exceed what is wanted for the smaller payments, it cannot be collected in sufficient quantities for the larger payments...the use of gold in the main payments necessarily implies also its use in the retail trade: those who have gold coin ojffering them for small purchases, and receiving with the commodity purchased a balance of silver in return; by which means the surplus of silver that would otherwise encumber the retail dealer, is drawn off and dispersed into general circulation. But if there is as much silver as will transact the small payments in- dependent of gold, the retail trader must then receive silver for small purchases; and it must of necessity accumulate in his hands." (David Buchanan. " Inquiry inta the Taxation and Commercial Policy of Great Britain." Edinburgh, 1844, pp. 248, 249. > Money y or the Circulation of Commodities, 103 standpoint of the simple circulation of commodities, are as yet totally unknown to us. But we may affirm this much, that just as true paper money takes its rise in the function of money as the circulating medium, so money based upon credit takes root spontaneously in the function of money as the means of payment.^ The State puts in circulation bits of paper on which their various denominations, say £1, £5, &ic., are printed. In so far as they actually take the place of gold to the same amount, their movement is subject to the laws that regulate the currency of money itself. A law peculiar to the circulation of paper money can spring up only from the proportion in which that paper money represents gold. Such a law exists; stated simply, it is as follows: the issue of paper money must not exceed in amount the gold (or silver as the case may be) which would actually circulate if not replaced by symbols. Now the quantity of gold which the circulation can absorb, constantly liuctuates about a given level. Still, the mass of the circulating medium in a given country never sinks below a certain minimum easily ascertained by actual experience. The fact that this minimum mass continually undergoes changes in its constituent parts, or that the pieces of gold of which it consists are being constantly replaced by fresh ones, causes of course no change either in its amount or in the continuity of its circula- tion. It can therefore be replaced by paper symbols. If, on the other hand, all the conduits of circulation were to-day filled with paper money to the full extent of their capacity for 1 The mandarin Wan-mao-in, the Chinese Chancellor of the Exchequer, took it into his head one day to lay before the Son of Heaven a proposal that secretly aimed at converting the assignats of the empire into convertible bank notes. The assignats Committee, in its report of April, 1854, gives him a severe snubbing. Whether he also received the traditional drubbing with bamboos is not stated. The concluding part of the report is as follows: — ' ' The Committee has carefully examined his pro- posal and finds that it is entirely in favour of the merchants, and that no advantage will result to the crown." (Arbeiten der Kaiserlich Russischen Gcsandtschaft zu Peking iiber China. Aus dem Eussischen von Dr. K. Abel und F. A. Mecklenburg. Erster Band. Berlin, 1858, pp. 47, 59.) In his evidence before the Committee of the House of Lords on the Bank Acts, a governor of the Bank of England says, with regard to the abrasion of gold coins during currency: " Every year a fresh class of sovereigns becomes too light. The class which one year passes with full weight, loses enougli by wear and tear to draw the scales next year against it." (House of Lords' Committee, 1848, n. 429.)
T04 Capitalist Production.
absorbing money, they might to-morrow be overflowing in consequence of a fluctuation in the circulation of commodities. There would no longer be any standard. If the paper money exceed its proper limit, which is the amount in gold coins of the like denomination that can actually be current, it would, apart from the danger of falling into general disrepute, re- present only that quantity of gold, which, in accordance with the laws of the circulation of commodities, is required, and is alone capable of being represented by paper. If the quantity of paper money issued be double what it ought to be, then, as a matter of fact, £1 would be the money-name not of \ of an ounce, but of \ of an ounce of gold. The eftect would be the same as if an alteration had taken place in the function of gold as a standard of prices. Those values that were previously expressed by the price of £1 would now be expressed by the price of £2.
Paper-money is a token representing gold or money. The relation between it and the values of commodities is this, that the latter are ideally expressed in the same quantities of gold that are symbolically represented by the paper. Only in so far as paper-money represents gold, which like all other com- modities has value, is it a symbol of value. ^ Finally, some one may ask why gold is capable of being replaced by tokens that have no value? But, as we have already seen, it is capable of being so replaced only in so far as it functions exclusively as coin, or as the circulating- medium, and as nothing else. Now, money has other functions besides this one, and the isolated function of serving as the mere circulating medium is not necessarily the only one 1 The following passage from Fullarton shows the want of clearness on the part of even the best writers on money, in their comprehension of its various functions: "That, as far as concerns our domestic exchanges, all the monetary functions which are usually performed by gold and silver coins, may be performed as effectually by a circulation of inconvertible notes, having no value but that factitious and conven- tional value they derive from the law, is a fact which admits, I conceive, of no denial. Value of this description may be made to answer all the purposes of intrinsic value, and supersede even the necessity for a standard, provided only the quantity of issues be kept under due limitation." (Fullarton: " Regulation of Currencies," London, 1844, p. 21.) Because the commodity that serves as money is capable of being replaced in circulation by mere symbols of value, therefore its functions as a measure of value and a standard of prices are declared to be superfluous!
Money ^ or the Circulation of Commodities. 105 attached to gold coin, although this is the case with those abraded coins that continue to circulate. Each piece of money is a mere coin, or means of circulation, only so long as it actually circulates. But this is just the case with that minimum mass of gold, which is capable of being replaced by paper-money. That mass remains constantly within the sphere of circulation, continually functions as a circulating medium, and exists ex- clusively for that purpose. Its movement therefore represents nothing but the continued alternation of the inverse phases of the metamorphosis C — M — C, phases in which commodities con- front their value-forms, only to disappear again immediately. The independent existence of the exchange value of a com- modity is here a transient apparition, by means of which the commodity is immediately replaced by another commodity. Hence, in this process which continually makes money pass from hand to hand, the mere symbolical existence of money suffices. Its functional existence absorbs, so to say, its material existence. Being a transient and objective reflex of the prices of commodities, it serves only as a symbol of itself, and is therefore capable of being replaced by a token. ^ One thing is, however, requisite; this token must have an objective social validity of its own, and this the paper symbol acquires by its forced currency. This compulsory action of the State can take effect only within that inner sphere of circula- tion which is co-terminous with the territories of the com- munity, but it is also only within that sphere that money completely responds to its function of being the circulating medium, or becomes coin.
SECTION 3. — MONEY.
The commodity that functions as a measure of value, and, 1 From the fact that gold and silver, so far as they are coins, or exclusively serve as the medium of circulation, become mere tokens of themselves, Nicholas Barbon deduces the right of Governments " to raise money," that is, to give to the weight of silver that is called a shilling the name of a greater weight, such as a crown; and so to pay creditors shillings, instead of crowns. " Money does wear and grow lighter by often telling over...It is the denomination and currency of the money that men regard in bargaining, and not the quantity of silver...'Tis tlie public authority upon the metal that makes it money." (N. Barbon, 1. c, pp. 29, 30, io6 Capitalist Production.
cither in its own person or by a representative, as the medium of circulation, is money. Gold (or silver) is therefore money. It functions as money, on the one hand, when it has to be present in its own golden person. It is then the money -com- modity, neither merely ideal, as in its function of a measure of value, nor capable of being represented, as in its function of circulating medium. On the other hand, it also functions as money, when by virtue of its function, whether that function be performed in person or by representative, it congeals into the sole form of value, the only adequate form of existence of exchange- value, in opposition to use-value, represented by all other commodities.
a. Hoarding.
The continual movement in circuits of the two antithetical metamorphoses of commodities, or the never ceasing alternation of sale and purchase, is reflected in the restless currency of money, or in the function that money performs of a perpetuum mobile of circulation. But so soon as the series of metamor- phoses is interrupted, so soon as sales are not supplemented by subsequent purchases, money ceases to be mobilised; it is trans- formed, as Boisguillebert says, from " meuble " into " im- meuble," from movable into immovable, from coin into money.
With the very earliest development of the circulation of commodities, there is also developed the necessity, and the passionate desire, to hold fast the product of the first metamor- phosis. This product is the transformed shape of the com- modity, or its gold-chrysalis. ^ Commodities are thus sold not for the purpose of buying others, but in order to replace their commodity-form by their money-form. From being the mere means of effecting the circulation of commodities, this change of form becomes the end and aim. The changed form of the commodity is thus prevented from functioning as its uncondi- tionally alienable form, or as its merely transient money-form.
1 " Une richesse en argent n'est que...richesse en productions, converties en argent." (Mercier de la Eiviere, 1. c.) "Une valeur en productions n'a fait que changer de forme." (Id., p. 486.)
Money ^ or the Circulation of Commodities, loj The money becomes petrified into a hoard, and the seller becomes a hoarder of monej^-.
In the early stages of the circulation of commodities, it is the surplus use-values alone that are converted into money. Gold and silver thus become of themselves social expressions for superfluity or wealth. This naive form of hoarding be- comes perpetuated in those communities in which the tra- ditional mode of production is carried on for the supply of a fixed and limited circle of home wants. It is thus with the people of Asia, and particularly of the East Indies. Vanderlint, who fancies that the prices of commodities in a country are determined by the quantity of gold and silver to be found in it, asks himself why Indian commodities are so cheap. An- swer: Because the Hindoos bury their money. From 1602 to 1734, he remarks, the}^ buried 150 millions of pounds sterling of silver, which originally came from America to Europe.^ In the 10 years from 1856 to 1866, England exported to India and China £120,000,000 in silver, which had been received in exchange for Australian gold. Most of the silver exported to China makes its way to India.
As the production of commodities further developes, every producer of commodities is compelled to make sure of the nexus rerum or the social pledge.^ His wants are constantly making themselves felt, and necessitate the continual purchase of other people's commodities, while the production and sale of his own goods require time, and depend upon circumstances. In order then to be able to buy without selling, he must have sold previously without buying. This operation, conducted on a general scale, appears to imply a contradiction. But the precious metals at the sources of their production are directly exchanged for other commodities. And here we have sales (by the owners of commodities) without purchases (by the owners of gold or silver).^ And subsequent sales, by other 1 " 'Tis by this practice they keep all their goods and manufactures at such low- rates." (Vanderlint, 1. c, p. 96.)
'-* "Money...is a pledge." { John Bellers: " Essays about the Poor, Manufacturers, Trade, Plantations, and Immorality," Lond., 1699, p. 13.)
3 A purchase, in a " categorical " sense, implies that gold and silver are already the converted form of commodities, or the product of a sale.
io8 Capitalist Production, producers, unfoUowed by purchases, merely bring about the distribution of the newly produced precious metals among all the owners of commodities. In this way, all along the line of exchange, hoards of gold and silver of varied extent are ac- cumulated. With the possibility of holding and storing up exchange value in the shape of a particular commodity, arises also the greed for gold. Along with the extension of circula- tion, increases the power of money, that absolutely social form of wealth ever ready for use. " Gold is a wonderful thing! Whoever possesses it is lord of all he wants. By means of gold one can even get souls into Paradise." (Columbus in his letter from Jamaica, 1503.) Since gold does not disclose what has been transformed into it, everj^thing, commodity or not, is convertible into gold. Everything becomes saleable and buyable. The circulation becomes the great social retort into which everything is thrown, to come out aga^in as a gold- crystal. Not even are the bones of saints, and still less are more delicate res sacrosanctse extra commercium hominum able to withstand this alchemy.^ Just as every qualitative difference between commodities is extinguished in money, so money, on its side, like the radical leveller that it is, does away with all distinctions.^ But money itself is a commodity,