Marxism Explained (What the hell is money?)

G_Haile12 · #1 (**permalink**) 06-23-2008, 12:03 AM

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AND NOW, this is my next installment in 'Marxism Explained' series, a series of articles by me aimed by making Marxist economic theory (and in general a understanding of capitalism) more understandable to the ordinary person.

We will start our investigation of money by looking at some of the basic problems of barter. We’ll see how money solves these problems but, in doing so, creates some problems of its own. As money evolves from, shells and salt to gold, to paper money, to bank notes and credit instruments, we will see a common theme reappearing over and over, taking different forms as money takes different forms: that money is always trying to resolve the contradiction between being a measure of value and a medium of circulation.

To begin with barter:

The basic problem of barter is how to measure the values at which commodities exchange. We call this exchange value. Without some notion of exchange value we have no idea how many shoes to trade for how many potatoes, how many eggs for swords….

All commodities have two different aspects that relate to their exchange value: before they can be used they have to be made. Thus, all commodities have a use value and a labor value.

Use value tells us how much demand there is for something, and thus lets workers know how much of a commodity to produce. But it still doesn’t tell us how much of one commodity exchanges for another.

…Which is why we need a labor theory of value which states that commodities exchange for one another based around the amount of labor that went into making them. In early barter economies, when considering a trade the logic is always: “How long would it take me to make that myself?” Similarly, when I go into a store to buy something with my money, that money represents work I was paid for. When I exchange my labor with the labor of the person who made the commodity I am valuing my labor in relation to theirs.

And this is what money allows us to do that barter can’t: measure the amount of value in commodities so that we can exchange them.

All sorts of commodities have been used as money. No matter what commodity is chosen by society as money, that commodity becomes a universal equivalent, meaning the values of all commodities are expressed relative to the money commodity.

So money solves the problem of exchange by internalizing the duality of use value and labor value. Money then does two different, yet connected things:

1. it measures value. (labor value)
2. it allows commodities to circulate. (its use)

Smarty-pants economists say money is a “measure of value” and a “medium of circulation”. It measures value because it is a commodity itself, made by human labor, and thus has a labor value. [In this day and age, when our paper money is no longer backed by the gold commodity we forget that for the vast majority of human history money has been a tangible commodity. For now, let's put aside the thorny question of non-convertible paper money, and just deal with money as a commodity.] Because money represents a clear labor value it is safe to use as a measure of value. In contrast, if we used something without a labor value- maple leaves, or dirt, or smiles, we would have no guarantee that this money would be valued by anyone else. If you sell a pair of shoes for a handful of dirt, you are screwed because nobody else wants your handful of dirt because they could just go get their own handful of dirt. Similarly, if the value of the paper dollar was to fall tomorrow, we’d all be screwed because paper has very little value. So what makes a money strong is its ability to represent the value of commodities in the economy, and this is usually a result of money being a commodity with a high value itself.

But money isn’t just used to measure value, its used to circulate commodities (it’s second property as a medium of circulation.) This means that it takes on an exchange value different from its labor value.[camera close up] Money expresses the value of all commodities as they relate to each other. Thus it becomes worth “what it will buy” instead of “what it took to make it.” We call this its reflex value, because its a reflection of the value of all commodities in relation to each other.

The reflex value is formed by the relation of the supply of money to its demand. If there is less of the money commodity than is needed to circulate goods in the economy then the price of the money commodity goes up (deflation). If the supply of the money commodity rises above the amount needed to circulate commodities then the price of the money commodity goes down (inflation).

Let’s take a look at a modern day example of a money commodity: the use of cigarettes as money in prisons. Here’s a 2006 Onion article:

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OOOOOOO · #2 (**permalink**) 06-23-2008, 12:32 AM

WHO CARES?

ANSWER: ONLY THE FAR-LEFT FRINGE WHO MADE UP THEIR MINDS ON WHO THEY WILL VOTE FOR ALREADY.

PLEASE KEEP PEDDLING THIS DISCREDITED IDEOLOGY

Ronin-Talgar · #3 (**permalink**) 06-23-2008, 03:14 AM

The Hanging Gardens and a rude tent. Thanks G_Haile12, always interesting.

hairymarx · #4 (**permalink**) 06-24-2008, 01:39 PM

All things under capitalism have become reduced to exchange values where the logic of the market prevails.

White Fox · #5 (**permalink**) 06-24-2008, 02:07 PM

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Originally Posted by G_Haile12

1. it measures value. (labor value)
2. it allows commodities to circulate. (its use)

You forgot the use of money as a store of value, a function quite important to the agricultural industry as their products cannot be stored for long periods of time without losing their value. That function is more than just a measure of value.

CptnRodent · #6 (**permalink**) 06-24-2008, 02:22 PM

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Originally Posted by White Fox

You forgot the use of money as a store of value, a function quite important to the agricultural industry as their products cannot be stored for long periods of time without losing their value. That function is more than just a measure of value.

I believe the OP eventually hits that point...

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So these additional aspects of money- that it can be a “store of value” and a “means of payment”- both must be seen as ways of resolving the contradictions between money as a measure of value a medium of circulation.

Anyway, great thread and post. Very informative. I doubt OOOOOO even bothered to read any of it; while I'm no proponent of Marxism, this is a very interesting read.

White Fox · #7 (**permalink**) 06-24-2008, 02:27 PM

Quote:

Originally Posted by CptnRodent

I believe the OP eventually hits that point...

Anyway, great thread and post. Very informative. I doubt OOOOOO even bothered to read any of it; while I'm no proponent of Marxism, this is a very interesting read.

Oh, I just saw it missing from that particular list.

Marx's economic theories were well ahead of their time at explaining how capitalism worked, and many of them are still used today. Marx does deserve credit for this. Unfortunately, the "ism" associated with Marx has very few positive components or affects on the societies that have used it or attempted to use it in the past

CptnRodent · #8 (**permalink**) 06-24-2008, 02:31 PM

Quote:

Originally Posted by White Fox

Oh, I just saw it missing from that particular list.

Marx's economic theories were well ahead of their time at explaining how capitalism worked, and many of them are still used today. Marx does deserve credit for this. Unfortunately, the "ism" associated with Marx has very few positive components or affects on the societies that have used it or attempted to use it in the past

Marxism has become synonymous with socialism, communism, and liberalism to many people; it has become a buzz word to be thrown about in political debate to discredit the other side. As a result, the understanding of these concepts has become very diluted.

OOOOOOO · #9 (**permalink**) 06-24-2008, 03:58 PM

Quote:

Originally Posted by CptnRodent

I believe the OP eventually hits that point...

Anyway, great thread and post. Very informative. I doubt OOOOOO even bothered to read any of it; while I'm no proponent of Marxism, this is a very interesting read.

Oh, I read it, just thought it was time the OP had one of HIS pompous and arrogant threads "answered".

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AND NOW, this is my next installment in 'Marxism Explained' series, a series of articles by me aimed by making Marxist economic theory (and in general a understanding of capitalism) more understandable to the ordinary person.

To the "ordinary person".

This coming from somebody who doesn't even realize "The Onion" is a satrical site.

Let me save you some trouble:

http://kapitalism101.wordpress.com/

YouTube - What the hell is money? 2 of 2

Using the internet to post bad marxist propoganda bit by bit to the "masses". Yeah, BRILLIANT!

GovernmentCheese · #10 (**permalink**) 06-24-2008, 08:29 PM

How are the Marxits supposed to make deals with the American Indian tribes. Heck even they have a form of free trade called barter. I mean they hang out together.

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