Inicio > Economía marxista > “Marx’s Explanation of Money’s Functions: Overturning the Quantity Theory”: Martha Campbell

“Marx’s Explanation of Money’s Functions: Overturning the Quantity Theory”: Martha Campbell

At the beginning of the Chapter on Money in the Grundrisse, Marx discusses the operation and effects of ‘modern credit institutions’, touching on several of the questions he will later consider in Capital, Vol. III. An argument he will later present in Capital, Vol. II is implicit in his rhetorical question: would ‘large scale modern industry’ be possible ‘without the concentration of credit …created’ by “our present banks’? Referring to the great variety of financial instruments generated by the credit system, he states that ‘the thousand forms of circulating paper…are as much the preconditions as the product of modern commerce and modern industry’.

It is clear from this that Marx knows that capitalist money is not gold and, moreover, that capitalism could not have developed as it did without the credit system. The obvious question, then, is, if he knows it is unrealistic to assume that money is gold, why does he do this throughout Capital? There is the obvious ‘expositional’ advantage that gold money gives Marx a way of presenting money and value so that he can proceed to the concept of capital, which presupposes both; banking, by contrast, presupposes not only capital but the division into different kinds of capital.2 Another expositional convenience is that Marx uses gold money throughout Capital, Vol. I as the measure, or expression of value, in order to explain, for example, the origin of surplus value and the factors that influence its quantity. By treating gold as the direct equivalent of the labor hours devoted to its production, Marx gives the expression of value a transparency that it lacks in reality. This, however, is unrelated to the theory of money itself.

While these are both reasons for the gold money assumption, I will argue that it serves a more fundamental purpose in Marx’s monetary theory than expositional convenience. For Marx as for Keynes, the main obstacle to understanding anything about money is the quantity theory, and this is still true today. Even though Ricardo entertained both, the quantity theory is incompatible with the theory of value. This is evident immediately from its claim that the value of money is determined by the quantity of money in circulation. As we will see, however, this is just the tip of the iceberg. The quantity theory also means that commodities are made commensurable in circulation (they have no value), that money cannot be anything but a medium of circulation (it is not the measure of value), that money is established by the state (rather than inherent in value) and that its quantity is determined arbitrarily and exogenously.

Beginning from commodity money enables Marx to trace the phenomena on which the quantity theory is based back to their source. The source is the metamorphosis of commodities and the phenomena in which it is manifested are inversions or reflections of it. By showing that the quantity theory mistakes the reflection for the reality, Marx establishes that it is false. Although Marx has already identified one of these inversions in Chapter 2, his full reconstruction of the inversions underlying the quantity theory is completed only at the end of the second section of Chapter 3 (on money’s function as means of circulation). With the quantity theory behind him, Marx proceeds in the third section of Chapter 3, to develop the theory of credit money.

Marx’s Explanation of Money’s Functions Overturning the Quantity Theory

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