A CONTRIBUTION TO
THE CRITIQUE OF
POLITICAL ECONOMY

BY KARL MARX

Translated from the Second German Edition by N. I. Stone

With an Appendix Containing Marx’s Introduction to the Critique
Recently Published among His Posthumous Papers

CHICAGO
CHARLES H. KERR & COMPANY

Copyright, 1904
By the International Library Publishing Co.

TRANSLATOR’S PREFACE.

The present translation has been made from the second edition of the “Zur Kritik der Politischen Oekonomie,” published by Karl Kautsky in 1897 with slight changes from the original edition of 1859; changes that had been indicated by Marx on the margins of his own copy of the book.

As will be seen from the author’s preface, the work was originally issued as the first instalment of a complete treatise of political economy. As he went on with his work, however, Marx modified his plans and eight years after the appearance of the “Zur Kritik” he published the first volume of his Capital, whose scope was intended to cover the entire field of political economy.

The plan to which Marx alludes in the preface to the present work was thus abandoned in its formal aspects, but not in substance. The subject matter treated here was reproduced or rather “summarized,” as Marx himself puts it, in Capital. But that was done in so far as was necessary to secure continuity of treatment. On the other hand, many important matters are treated here more thoroughly than in Capital, especially the part devoted to the discussion of money. This, as well as the chapters on the history of the theories of value and of money, which do not appear in Capital, make “Zur Kritik” a work practically complete in itself.

The recent silver agitation in this country shows how timely and useful this work still is, though written nearly half a century ago. That a great part of the working-men employed in the cities were not carried away by the Democratic-Populist agitation in 1896 and 1900 is probably due in a greater measure than is commonly realized to the direct and indirect influence of Marx, whose economic teachings guided the socialists in their counter agitation. And since the conditions which once gave rise to a demand for an inflated currency have by no means disappeared beyond a possibility of return, this book has a wide field before it, outside of the library of the college and of the student of economics, which the author’s name and prestige with the working class insures for it.

There is another reason, if any need be given why this book should have been translated into English. Marx’s preface to the present work contains the classic formulation of his historico-philosophic theory known as the Materialistic Interpretation of History. This theory, which until recently was entertained almost exclusively by socialist writers and was hardly heard of outside of socialist circles in English speaking countries, is at last receiving not only due recognition but sympathetic appreciation at the hands of men of science.1 It is rather a significant coincidence that the work which for the first time clearly formulated the law governing social evolution should have seen the light of day in the same year in which Darwin gave to the world his theory of organic evolution. And as the latter had to fight its way to recognition in the teeth of religious prejudices, so has the recognition of the former been retarded by even more powerful social and political prejudices.

The Introduction to the Critique of Political Economy which is added as a supplement to this book is for the first time published in book form in any language. It was written by Marx in 1857, but for reasons explained by him in the preface was not published and in fact was never finished by him, since according to his changed plans it would have fitted more into the last volume of Capital which was to contain a history of political economy. The introduction has been published but lately in the form of a magazine article by Karl Kautsky, editor of the Neue Zeit and literary executor of Karl Marx.

A few explanations are here in order with reference to the work of translation. No one is more keenly alive to the shortcomings of the English rendering of the original than the translator himself. While fully conscious that the translation might be greatly improved, he has at times deliberately sacrificed literary finish to closeness to the original. It will be found that many passages have been rendered more clear and concise in Capital in which, according to Marx’s own statement in the preface to that work, they were much simplified and popularized. The Hegelian phraseology is more in evidence in the present work rendering translation a more difficult task. Yet for that very reason it seemed particularly desirable to give to English speaking readers as close a version of the original as was possible. In the few cases where certain passages from this work were reproduced by Marx in Capital, the translation of the latter by Moore and Aveling was freely drawn upon with slight modifications here and there.

About the only liberty taken with Marx’s terminology has been in the case of the word “bürgerlich.” Marx speaks here of “bürgerliche Produktion” and “bürgerlicher Reichthum” and “bürgerliche Arbeit” where eight years later he used in corresponding passages in Capital the word “kapitalistische.” As the English speaking reader is more accustomed to hear of the “capitalist” system of production than of the “bourgeois” system of production, etc., the translator considered Marx’s own change of this term within a few years from the publication of “Zur Kritik” a sufficient justification for rendering the word “bürgerlich” into “capitalistic” wherever it seemed more likely to carry the meaning home to the reader.

In view of the fact that the work is likely to be read in wide circles it was thought desirable to translate the numerous quotations from Italian, Greek, Latin and French writers, the translation being given side by side with the original quotation. All English citations given by Marx in German have been restored from the original sources, which necessitated the use of four libraries, the Astor and the Columbia University libraries in New York, the Congressional Library in Washington, and the private library of Professor Seligman to whose kindness the translator is indebted for the permission to use rare works of the seventeenth century quoted by Marx. Several of Marx’s references to the pages of the books quoted by him have been found to be wrong and therefore differ here from those given in the original. In two or three cases where the original English citations could not be found they were retranslated from German with the quotation marks omitted.

This statement would be incomplete if the translator failed to mention the helpful participation in this work by his wife whose share in the translation is equal to his own.

New York, October, 1903.

AUTHOR’S PREFACE.

I consider the system of bourgeois economy in the following order: Capital, landed property, wage labor; state, foreign trade, world market. Under the first three heads I examine the conditions of the economic existence of the three great classes, which make up modern bourgeois society; the connection of the three remaining heads is self evident. The first part of the first book, treating of capital, consists of the following chapters: 1. Commodity; 2. Money, or simple circulation; 3. Capital in general. The first two chapters form the contents of the present work. The entire material lies before me in the form of monographs, written at long intervals not for publication, but for the purpose of clearing up those questions to myself, and their systematic elaboration on the plan outlined above will depend upon circumstances.

I omit a general introduction which I had prepared, as on second thought any anticipation of results that are still to be proven, seemed to me objectionable, and the reader who wishes to follow me at all, must make up his mind to pass from the special to the general. On the other hand, some remarks as to the course of my own politico-economic studies may be in place here.

The subject of my professional studies was jurisprudence, which I pursued, however, in connection with and as secondary to the studies of philosophy and history. In 1842-43, as editor of the “Rheinische Zeitung,” I found myself embarrassed at first when I had to take part in discussions concerning so-called material interests. The proceedings of the Rhine Diet in connection with forest thefts and the extreme subdivision of landed property; the official controversy about the condition of the Mosel peasants into which Herr von Schaper, at that time president of the Rhine Province, entered with the “Rheinische Zeitung;” finally, the debates on free trade and protection, gave me the first impulse to take up the study of economic questions. At the same time a weak, quasi-philosophic echo of French socialism and communism made itself heard in the “Rheinische Zeitung” in those days when the good intentions “to go ahead” greatly outweighed knowledge of facts. I declared myself against such botching, but had to admit at once in a controversy with the “Allgemeine Augsburger Zeitung” that my previous studies did not allow me to hazard an independent judgment as to the merits of the French schools. When, therefore, the publishers of the “Rheinische Zeitung” conceived the illusion that by a less aggressive policy the paper could be saved from the death sentence pronounced upon it, I was glad to grasp that opportunity to retire to my study room from public life.

The first work undertaken for the solution of the question that troubled me, was a critical revision of Hegel’s “Philosophy of Law”; the introduction to that work appeared in the “Deutsch-Französische Jahrbücher,” published in Paris in 1844. I was led by my studies to the conclusion that legal relations as well as forms of state could neither be understood by themselves, nor explained by the so-called general progress of the human mind, but that they are rooted in the material conditions of life, which are summed up by Hegel after the fashion of the English and French of the eighteenth century under the name “civic society;” the anatomy of that civic society is to be sought in political economy. The study of the latter which I had taken up in Paris, I continued at Brussels whither I emigrated on account of an order of expulsion issued by Mr. Guizot. The general conclusion at which I arrived and which, once reached, continued to serve as the leading thread in my studies, may be briefly summed up as follows: In the social production which men carry on they enter into definite relations that are indispensable and independent of their will; these relations of production correspond to a definite stage of development of their material powers of production. The sum total of these relations of production constitutes the economic structure of society—the real foundation, on which rise legal and political superstructures and to which correspond definite forms of social consciousness. The mode of production in material life determines the general character of the social, political and spiritual processes of life. It is not the consciousness of men that determines their existence, but, on the contrary, their social existence determines their consciousness. At a certain stage of their development, the material forces of production in society come in conflict with the existing relations of production, or—what is but a legal expression for the same thing—with the property relations within which they had been at work before. From forms of development of the forces of production these relations turn into their fetters. Then comes the period of social revolution. With the change of the economic foundation the entire immense superstructure is more or less rapidly transformed. In considering such transformations the distinction should always be made between the material transformation of the economic conditions of production which can be determined with the precision of natural science, and the legal, political, religious, aesthetic or philosophic—in short ideological forms in which men become conscious of this conflict and fight it out. Just as our opinion of an individual is not based on what he thinks of himself, so can we not judge of such a period of transformation by its own consciousness; on the contrary, this consciousness must rather be explained from the contradictions of material life, from the existing conflict between the social forces of production and the relations of production. No social order ever disappears before all the productive forces, for which there is room in it, have been developed; and new higher relations of production never appear before the material conditions of their existence have matured in the womb of the old society. Therefore, mankind always takes up only such problems as it can solve; since, looking at the matter more closely, we will always find that the problem itself arises only when the material conditions necessary for its solution already exist or are at least in the process of formation. In broad outlines we can designate the Asiatic, the ancient, the feudal, and the modern bourgeois methods of production as so many epochs in the progress of the economic formation of society. The bourgeois relations of production are the last antagonistic form of the social process of production—antagonistic not in the sense of individual antagonism, but of one arising from conditions surrounding the life of individuals in society; at the same time the productive forces developing in the womb of bourgeois society create the material conditions for the solution of that antagonism. This social formation constitutes, therefore, the closing chapter of the prehistoric stage of human society.

Frederick Engels, with whom I was continually corresponding and exchanging ideas since the appearance of his ingenious critical essay on economic categories (in the “Deutsch-Französische Jahrbücher”), came by a different road to the same conclusions as myself (see his “Condition of the Working Classes in England”). When he, too, settled in Brussels in the spring of 1845, we decided to work out together the contrast between our view and the idealism of the German philosophy, in fact to settle our accounts with our former philosophic conscience. The plan was carried out in the form of a criticism of the post-Hegelian philosophy. The manuscript in two solid octavo volumes had long reached the publisher in Westphalia, when we received information that conditions had so changed as not to allow of its publication. We abandoned the manuscript to the stinging criticism of the mice the more readily since we had accomplished our main purpose—the clearing up of the question to ourselves. Of the scattered writings on various subjects in which we presented our views to the public at that time, I recall only the “Manifesto of the Communist Party” written by Engels and myself, and the “Discourse on Free Trade” written by myself. The leading points of our theory were first presented scientifically, though in a polemic form, in my “Misère de la Philosophie, etc.” directed against Proudhon and published in 1847. An essay on “Wage Labor,” written by me in German, and in which I put together my lectures on the subject delivered before the German Workmen’s Club at Brussels, was prevented from leaving the hands of the printer by the February revolution and my expulsion from Belgium which followed it as a consequence.

The publication of the “Neue Rheinische Zeitung” in 1848 and 1849, and the events which took place later on, interrupted my economic studies which I could not resume before 1850 in London. The enormous material on the history of political economy which is accumulated in the British Museum; the favorable view which London offers for the observation of bourgeois society; finally, the new stage of development upon which the latter seemed to have entered with the discovery of gold in California and Australia, led me to the decision to resume my studies from the very beginning and work up critically the new material. These studies partly led to what might seem side questions, over which I nevertheless had to stop for longer or shorter periods of time. Especially was the time at my disposal cut down by the imperative necessity of working for a living. My work as contributor on the leading Anglo-American newspaper, the “New York Tribune,” at which I have now been engaged for eight years, has caused very great interruption in my studies, since I engage in newspaper work proper only occasionally. Yet articles on important economic events in England and on the continent have formed so large a part of my contributions that I have been obliged to make myself familiar with practical details which lie outside the proper sphere of political economy.

This account of the course of my studies in political economy is simply to prove that my views, whatever one may think of them, and no matter how little they agree with the interested prejudices of the ruling classes, are the result of many years of conscientious research. At the entrance to science, however, the same requirement must be put as at the entrance to hell:

Karl Marx.

London, January, 1859.

CONTENTS.

BOOK I. Capital in general.

CHAPTER I.

COMMODITIES.

At first sight the wealth of society under the capitalist system presents itself as an immense accumulation of commodities, its unit being a single commodity. But every commodity has a twofold aspect, that of use value and exchange value.2

A commodity is first of all, in the language of English economists, “any thing necessary, useful or pleasant in life,” an object of human wants, a means of existence in the broadest sense of the word. This property of commodities to serve as use-values coincides with their natural palpable existence. Wheat e. g. is a distinct use-value differing from the use-values cotton, glass, paper, etc. Use-value has a value only in use and is realized only in the process of consumption. The same use-value may be utilized in various ways. But the extent of its possible applications is circumscribed by its distinct properties. Furthermore, it is thus limited not only qualitatively but also quantitatively. According to their natural properties the various use-values have different measures, such as a bushel of wheat, a quire of paper, a yard of linen, etc.

Whatever the social form of wealth may be, use-values always have a substance of their own, independent of that form. One can not tell by the taste of wheat whether it has been raised by a Russian serf, a French peasant, or an English capitalist. Although the object of social wants and, therefore, mutually connected in society, use-values do not bear any marks of the relations of social production. Suppose, we have a commodity whose use-value is that of a diamond. We can not tell by looking at the diamond that it is a commodity. When it serves as a use-value, aesthetic or mechanical, on the breast of a harlot, or in the hand of a glasscutter, it is a diamond and not a commodity. It is the necessary pre-requisite of a commodity to be a use-value, but it is immaterial to the use-value whether it is a commodity or not. Use-value in this indifference to the nature of its economic destination, i. e. use-value as such lies outside the sphere of investigation of political economy.3 It falls within the sphere of the latter only in so far as it forms its own economic destination. It forms the material basis which directly underlies a definite economic relation called exchange value.

Exchange-value appears at first sight as a quantitative relation, as a proportion in which use-values are exchanged for one another. In such a relation they constitute equal exchangeable quantities. Thus, a volume of Propercius and eight ounces of snuff may represent the same exchange value, in spite of the dissimilar use-values of tobacco and elegy. As exchange-value, one kind of use-value is worth as much as another kind, if only taken in right proportion. The exchange value of a palace can be expressed in a certain number of boxes of shoe-blacking. On the contrary, London manufacturers of shoe-blacking have expressed the exchange value of their many boxes of blacking, in palaces. Thus, entirely apart from their natural forms and without regard to the specific kind of wants for which they serve as use-values, commodities in certain quantities equal each other, take each other’s place in exchange, pass as equivalents, and in spite of their variegated appearance, represent the same entity.

Use-values are primarily means of existence. These means of existence, however, are themselves products of social life, the result of expended human vital power, materialized labor. As the embodiment of social labor, all commodities are the crystallization of the same substance. Let us now consider the nature of this substance, i. e., of labor, which is expressed in exchange value.

Let one ounce of gold, one ton of iron, one quarter of wheat and twenty yards of silk represent equal exchange values. As equivalents, in which the qualitative difference between their use-values has been eliminated, they represent equal volumes of the same kind of labor. The labor which is equally embodied in all of them must be uniform, homogeneous, simple labor. It matters as little in the case of labor whether it be embodied in gold, iron, wheat, or silk, as it does in the case of oxygen, whether it appears in the rust of iron, in the atmosphere, in the juice of a grape, or in the blood of a human being. But the digging of gold, the extraction of iron from a mine, the raising of wheat and the weaving of silk are so many kinds of labor, differing in quality. As a matter of fact, what in reality appears as a difference in use-values, is in the process of production, a difference in the work creating those use-values. Just as labor, which creates exchange value, is indifferent to the material of use-values, so it is to the special form of labor itself. Furthermore, the different use-values are the products of the work of different individuals, consequently the result of various kinds of labor differing individually from one another. But as exchange values, they represent the same homogeneous labor, i. e., labor from which the individuality of the workers is eliminated. Labor creating exchange value is, therefore, abstract general labor.

If one ounce of gold, one ton of iron, one quarter of wheat, and twenty yards of silk are exchange values of equal magnitude or equivalents; then one ounce of gold, half a ton of iron, three bushels of wheat and five yards of silk are exchange values of different magnitudes, and this quantitative difference is the only difference of which they are capable as exchange values. As exchange values of different magnitudes, they represent greater or smaller quantities of that simple, homogeneous, abstract, general labor, which forms the substance of exchange value. The question arises, how are these quantities to be measured? Or, rather what constitutes the substance of labor, which makes it capable of quantitative measurement, since the quantitative differences of commodities in their capacity of exchange values are but quantitative differences of labor embodied in them. Just as motion is measured by time, so is labor measured by labor-time. Given the quality of labor, the difference in its duration is the only property by which it can be distinguished. As labor-time, labor has the same standard of measurement as the natural time measures, viz., hours, days, weeks, etc. Labor-time is the vital substance of labor, independent of its form, composition, individuality; it is its vital substance quantitatively, having at the same time its own inherent measure. Labor-time embodied in the use-values of commodities is the substance which makes exchange values and, therefore, commodities of them and at the same time serves to measure definite quantities of their value. Corresponding quantities of different use-values, in which the same quantity of labor-time is embodied, are equivalents; or, to put it in another form, all use-values are equivalents when taken in proportions containing the same quantity of expended, materialized labor-time. As exchange values, all commodities are but definite measures of congealed labor-time.

To understand how exchange value is determined by labor-time, the following main points must be kept in mind: The reduction of labor to simple labor, devoid of any quality, so to speak; the specific ways and means by which exchange—value-creating, i. e., commodity producing labor becomes social labor; finally, the difference between labor as the producer of use-values, and labor as the creator of exchange values.

In order to measure commodities by the labor-time contained in them, the different kinds of labor must be reduced to uniform, homogeneous, simple labor, in short, to labor which is qualitatively the same, and, therefore, differs only in quantity.

This reduction appears to be an abstraction; but it is an abstraction which takes place daily in the social process of production. The conversion of all commodities into labor-time is no greater abstraction nor a less real process than the chemical reduction of all organic bodies to air. Labor, thus measured by time, does not appear in reality as the labor of different individuals. but on the contrary, the various working individuals rather appear as mere organs of labor; or, in so far as labor is represented by exchange values, it may be defined as human labor in general. This abstraction of human labor in general virtually exists in the average labor which the average individual of a given society can perform—a certain productive expenditure of human muscles, nerves, brain, etc. It is unskilled labor to which the average individual can be put and which he has to perform in one way or another. The character of this average labor varies in different countries and at different stages of civilization, but appears fixed in a particular society. Unskilled labor constitutes the bulk of all labor performed in capitalist society, as may be seen from all statistics.

It is obvious that if A spends six hours in the production of iron and six hours on linen, and B also produces iron during six hours and linen during another six hours, it is but a different application of the same labor time that would be expended, if A produced iron during twelve hours, while B worked twelve hours on linen. But how about skilled labor which rises above the level of average labor by its higher intensity, by its greater specific gravity? This kind of labor resolves itself into unskilled labor composing it; it is simple labor of a higher intensity, so that one day of skilled labor, e. g., may equal three days of unskilled labor. This is not the place to consider the laws regulating this reduction. It is clear, however, that such reduction does take place, for, as exchange value, the product of the most skilled labor is, when taken in a certain proportion, equivalent to the product of unskilled average labor, or equal to a definite quantity of that unskilled labor.

The determination of exchange-value by means of labor-time implies, further, the fact that an equal quantity of labor is embodied in any given commodity, e. g., a ton of iron, no matter whether it is the work of A or B, that is to say, various individuals expend an equal amount of labor-time for the production of the same use-value of a given quality and quantity. It is thus assumed that the labor-time contained in a commodity is the labor-time necessary for its production, i. e., it is the labor-time which is required for the production of another specimen of the same commodity under the same general conditions of production.

The conditions of labor, which creates exchange value, as shown by the analysis of the latter, are social conditions of labor or conditions of social labor. Social, not in the ordinary, but in a special sense. It is a specific form of the social process. The homogeneous simplicity of labor means first of all equality of the labors of various individuals, a reciprocal relation of equality of their labors determined by the actual reduction of all kinds of labor to uniform labor. The labor of every individual, as far as it is expressed in exchange value possesses this social character of equality and finds expression in exchange value only in so far as it is a relation of equality with the labor of all other individuals.

Furthermore, the labor-time of a single individual is directly expressed in exchange value as universal labor-time, and this universal character of individual labor is the manifestation of its social character. The labor-time represented by exchange value is the labor-time of an individual, but of an individual undistinguished from other individuals in so far as they perform the same labor; therefore, the time required by one individual for the production of a certain commodity is the necessary labor-time which any other individual would have to spend on the production of the same commodity. It is the labor-time of an individual, his labor-time, but only as labor-time common to all, regardless as to which particular individual’s labor-time it is. As universal labor-time it is represented in a universal product, in a universal equivalent, in a definite quantity of materialized labor-time: the latter is indifferent as to the particular form of use-value in which it appears directly as the product of an individual, and may be turned at will into any other form of use-value to represent the product of any other individual. Only as such a universal quantity, is it a social quantity. In order to result in exchange value, the labor of an individual must be turned into a universal equivalent, i. e., the labor-time of an individual must be expressed as universal labor-time, or universal labor-time as that of an individual. It is the same as though different individuals had put together their labor-time and contributed the different quantities of labor-time at their common disposal in the form of different use-values. The labor-time of the individual is thus, in fact, the labor time which society requires for the production of a certain use-value, i. e., for the satisfaction of a certain want. But the question that interests us here is as to the specific form in which labor acquires a social character. Let us suppose that a certain quantity of labor-time of a spinner is realized in 100 lbs. of yarn. Suppose 100 yards of linen, the product of the weaver, represent the same quantity of labor-time. Inasmuch as these two products represent equal quantities of universal labor-time and, hence, are equivalents of every use-value which contains the same amount of labor-time, they are also equivalent to each other. Only because the labor-time of the spinner and that of the weaver take the form of universal labor-time and their products appear as universal equivalents, is the labor of the weaver realized for the spinner, and that of the spinner, for the weaver, the labor of one takes the place of the labor of the other, i. e., the social character of their labors is realized for both. Quite different it was under the patriarchal system of production, when spinner and weaver lived under the same roof, when the female members of the family did the spinning, and the male members did the weaving to supply the wants of their own family; then yarn and linen were social products, spinning and weaving were social labor within the limits of the family. But their social character did not manifest itself in the fact that yarn, as a universal equivalent, could be exchanged for linen as a universal equivalent, or that one was exchanged for another, as identical and equivalent expressions of the same universal labor-time. It was rather the family organization with its natural division of labor that impressed its peculiar social stamp on the product of labor. Or, let us take the services and payments in kind of the Middle Ages. It was the specific kind of labor performed by each individual in its natural form, the particular and not the universal aspect of labor, that constituted then the social tie. Or, let us finally take labor carried on in common in its primitive natural form, as we find it at the dawn of history of all civilized races.4 It is clear that in this case labor does not acquire its social character from the fact that the labor of the individual takes on the abstract form of universal labor or that his product assumes the form of a universal equivalent. The very nature of production under a communal system makes it impossible for the labor of the individual to be private labor and his product to be a private product; on the contrary, it makes individual labor appear as the direct function of a member of a social organism. On the contrary, labor, which is expressed in exchange value, at once appears as the labor of a separate individual. It becomes social labor only by taking on the form of its direct opposite, the form of abstract universal labor.

Labor, which creates exchange value, is, finally, characterized by the fact that even the social relations of men appear in the reversed form of a social relation of things. Only in so far as two use-values are in a mutual relation of exchange values does the labor of different persons possess the common property of being identical universal labor. Hence, if it be correct to say that exchange value is a relation between persons,5 it must be added that it is a relation disguised under a material cover. Just as a pound of iron and a pound of gold represent the same weight in spite of their different physical and chemical properties, so do two use-values, as commodities containing the same quantity of labor-time, represent the same exchange value. Exchange value thus appears as the natural social destination of use-values, a property which they possess by virtue of being things and in consequence of which they are exchanged for one another in definite proportions, or form equivalents, just as chemical elements combine in certain proportions, forming chemical equivalents. It is only through the habit of everyday life that we come to think it perfectly plain and commonplace, that a social relation of production should take on the form of a thing, so that the relation of persons in their work appears in the form of a mutual relation between things, and between things and persons.

In commodities this mystification is as yet very simple. It is more or less plain to everybody that a relation of commodities as exchange values is nothing but a mutual relation between persons in their productive activity. This semblance of simplicity disappears in higher productive relations. All the illusions in regard to the monetary system are due to the fact that money is not regarded as something representing a social relation of production, but as a product of nature endowed with certain properties. The modern economists who sneer at the illusions of the monetary system, betray the same illusion as soon as they have to deal with higher economic forms, as, e. g., capital.6 It breaks forth in their confession of naive surprise, when what they have just thought to have defined with great difficulty as a thing suddenly appears as a social relation and then reappears to tease them again as a thing, before they have barely managed to define it as a social relation.

Since the exchange value of commodities is, in fact, nothing but a mutual relation of the labors of individuals—labors which are similar and universal—nothing but a material expression of a specific social form of labor, it is a tautology to say that labor is the only source of exchange value and consequently of wealth, in so far as the latter consists of exchange values. Similarly, it is a tautology to say that matter in its natural state has no exchange value, because it does not contain any labor, and that exchange value as such does not contain matter. But when William Petty calls “labor the father and earth the mother of wealth,” or when Bishop Berkeley asks “whether the four elements and man’s labour therein, be not the true source of wealth,”7 or when the American, Thomas Cooper puts it popularly: “Take away from a piece of bread the labour bestowed by the baker on the flour, by the miller on the grain brought to him, by the farmer in ploughing, sowing, tending, gathering, threshing, cleaning and transporting the seed, and what will remain? A few grains of grass, growing wild in the woods, and unfit for any human purpose”8—then all these views do not refer to abstract labor as the source of exchange value, but to concrete labor as the source of material wealth; in short, to labor in so far as it produces use-values. In assuming that a commodity has use-value we assume the special usefulness and distinct fitness of the labor absorbed by it, but that is all there is to the view of labor as useful labor from the standpoint of commodity. Considering bread as a use-value, we are interested in its properties as an article of food and not at all in the different kinds of labor of the farmer, miller, baker, etc. If by some invention nineteen-twentieths of this labor could be saved, the loaf of bread would still render the same service as before. If it fell ready-made from the sky it would not lose a single atom of its use-value. While labor which creates exchange value is realized in the equality of commodities as universal equivalents, labor as a productive activity with a useful purpose is realized in the endless variety of use-values created by it. While labor which creates exchange values is abstract, universal and homogeneous, labor which produces use-values is concrete and special and is made up of an endless variety of kinds of labor according to the way in which and the material to which it is applied.

It is wrong to speak of labor in so far as it is applied to the production of use-values as of the only source of wealth, namely, the material wealth produced by it. Being an activity intended to adapt materials to this or that purpose, it requires matter as a pre-requisite. In different use-values the proportion between labor and raw material varies greatly, but use-value always has a natural substratum. Labor, as an activity, directed to the adaptation of raw material in one form or another, is a natural condition of human existence, a condition of exchange of matter between man and nature, independent of all social forms. On the contrary, labor producing exchange value is a specifically social form of labor. Tailoring, e. g., in its material manifestation as a distinct productive activity, produces a coat, but not the exchange value of the coat. The latter is produced not by the labor of the tailor as such, but by abstract universal labor, and that belongs to a certain organization of society which has not been brought about by the tailor. Thus, the women under the ancient system of house industry made coats without producing the exchange value of the coats. Labor as a source of material wealth was known to Moses, the legislator, as well as to Adam Smith, the customs official.9

Let us consider now some propositions which follow from the determination of exchange value by labor-time.

As a use-value, every commodity owes its usefulness to itself. Wheat, e. g., serves as an article of food. A machine saves labor to a certain extent. This function of a commodity by virtue of which it serves only as use-value, as an article of consumption, may be called its service, the service which it renders as use-value. But as an exchange value, a commodity is always regarded as a result; the question in this case is not as to the service which it renders, but as to the service10 which it has been rendered in its production. Thus, the exchange value of a machine is determined not by the quantity of labor-time which it saves, but by the quantity of labor-time which has been expended on its own production and which is, therefore, required to produce a new machine of the same kind.

If, therefore, the quantity of labor-time required for the production of commodities remained constant, their exchange value would remain the same. But the ease and the difficulty of production are constantly changing. If the productivity of labor increases, the same use-value will be produced in less time. If the productivity of labor declines, more time will be required for the production of the same use-value. Thus, the labor-time contained in a commodity or its exchange-value is a variable quantity, increasing or diminishing in an inverse ratio to the rise and fall of the productivity of labor. The productive power of labor which is applied in the manufacturing industry on a predetermined scale depends in the agricultural and extractive industries also on natural conditions which are beyond human control. The same labor will yield a greater or less output of various metals, according to their more or less close occurrence in the earth’s crust. The same labor may be embodied in two bushels of wheat in a favorable season, and only in one in an unfavorable season. In this case, scarcity or abundance, as natural conditions, seem to determine the exchange value of commodities, because they determine the productivity of certain kinds of labor which depend upon natural conditions.

Unequal volumes of different use-value contain the same quantity of labor-time or the same exchange value. The smaller the volume of a use-value containing a certain quantity of labor-time as compared with other use-values, the greater its specific exchange-value. If we find that certain use-values, such as, e. g., gold, silver, copper and iron, or wheat, rye, barley and oats, form a series of specific exchange values which, though not retaining exactly the same numerical ratio, still retain through widely remote epochs of civilization the same rough proportion of relatively larger and smaller quantities, we may draw the conclusion that the progressive development of the productive powers of society has equally, or approximately so, affected the labor-time necessary for the production of the various commodities.

The exchange value of a commodity is not revealed in its own use-value. But, as the embodiment universal social labor-time, the use-value of one commodity bears a certain ratio to the use-values of other commodities. Thus, the exchange value of one commodity is manifested in the use-values of other commodities. An equivalent is, in fact, the exchange value of one commodity expressed in the use-value of another commodity. If I say, e. g., that one yard of linen is worth two pounds of coffee, then the exchange value of linen is expressed in terms of the use-value of coffee, viz., in a certain quantity of that use-value. This ratio being given, I can express the value of any quantity of linen in coffee. It is clear that the exchange value of one commodity, say linen, is not confined to the ratio of any one commodity, e. g. coffee, as its equivalent. The quantity of universal labor-time which is represented in one yard of linen is at the same time embodied in an endless variety of volumes of use-values of all other commodities. The use-value of any other commodity forms the equivalent of one yard of linen, in the proportion in which it represents the same quantity of labor-time as that yard of linen. The exchange value of this single commodity is, therefore, fully expressed in the endless number of equations in which the use-values of all other commodities form its equivalents. Not until the exchange value of a commodity is expressed in the sum total of these equations or of the different proportions in which one commodity is exchanged for every other commodity, does it find an exhaustive expression as a universal equivalent; e. g., the series of equations:

may be represented as follows:

1 yard of linen = 1/8 lb. of tea + 1/2 lb. of coffee + 2 lbs. of bread + 1 1/2 yards of calico.

Therefore, if we had before us the sum total of the equations, in which the value of a yard of linen is exhaustively expressed, we could represent its exchange value in the form of a series. As a matter of fact, the series is an endless one, since the circle of commodities, constantly expanding, can never be closed up. But while the exchange value of one commodity is thus measured by the use-values of all other commodities, the exchange values of all the other commodities are, in their turn, measured by the use-value of this one commodity.11

If the exchange value of one yard of linen is expressed in 1/2 lb. of tea, or 2 lbs. of coffee, or 6 yards of calico, or 8 lbs. of bread, etc., it follows that coffee, tea, calico, bread, etc., are equal to each other if taken in the same proportion in which they are equal to the third article, linen; consequently, linen serves as the common measure of their exchange values. Every commodity, as the embodiment of universal labor-time, i. e., as a certain quantity of universal labor-time, expresses in turn its exchange value in definite quantities of the use-values of all other commodities, and the exchange values of all the other commodities are, on the other hand, measured by the use-value of this one exclusive commodity. But as an exchange value, every commodity is at the same time the one exclusive commodity that serves as a common measure of the exchange values of all other commodities; and, on the other hand, it is but one of the many commodities in the entire series of which every commodity expresses directly its exchange value.

The value of a commodity is not affected by the number of commodities of other kinds. But the length of the series of equations in which its exchange value is realized does depend upon the greater or less variety of other commodities. The series of equations in which the value of coffee, e. g., is represented, indicates the extent to which it is exchangeable, the limits within which it performs the function of an exchange value. The exchange value of a commodity as an embodiment of universal social labor-time is expressed in its equivalence to an endless variety of use-values.

We have seen that the exchange value of a commodity varies with the quantity of labor-time directly contained in it. Its realized exchange value, i. e., its exchange value expressed in the use-values of other commodities, must also depend on the proportion in which the labor-time spent on the production of all other commodities is changing. If, e. g., the labor-time required for the production of a bushel of wheat remained constant, while that required for the production of all other commodities doubled, the exchange value of a bushel of wheat expressed in its equivalents would become half as large as before. The result would be practically the same as if the amount of time necessary for the production of one bushel of wheat had been reduced by one-half, and that required for all other commodities had remained unchanged. The value of commodities is determined by the proportion in which they can be produced in the same labor-time. In order to see what possible changes this proportion may undergo, let us take two commodities, A and B.

First case. Let the labor-time required for the production of commodity B remain unchanged. In that case the exchange value of A, expressed in terms of B, rises and falls with the rise and fall of the labor-time required for the production of A.

Second case. Let the labor-time required for the production of commodity A remain constant. Then the exchange value of A, expressed in terms of B, falls and rises in an inverse ratio with the rise and fall of the labor-time required for the production of B.

Third case. Let the labor-time required for the production of commodities A and B rise and fall in equal proportion. Then the expression of equivalence of A and B remains unchanged. If through some cause the productivity of all kinds of labor were to decline uniformly, so that the production of all commodities would require an equally increased quantity of labor-time, then the value of all commodities would rise, though the expression of their exchange values would remain unchanged, and the actual wealth of society would decrease, because it would have to expend more labor-time on the production of the same stock of use-values.

Fourth case. Let the labor-time required for the production of A and B rise and fall, but not uniformly; that is to say, the labor-time required for the production of A may rise, while that required for B may fall, or vice versa. All of which can be reduced to the simple case where the labor-time required for the production of one commodity remains unchanged, while that required for the other rises or falls.

The exchange value of any commodity is expressed in the use-value of any other commodity, be it in integral units or in fractions thereof. As exchange value, every commodity is capable of subdivision, like the labor-time embodied in it. The equivalence of commodities is independent of their physical divisibility as use-values, just as the sum of the exchange values of commodities is indifferent to the change of form which use-values have to undergo when converted into a single new commodity.

So far we have considered commodities from a two-fold point of view, as use-values and exchange values alternately. But a commodity as such is a direct combination of use-value and exchange value; and it is a commodity only in relation to other commodities. The actual relation between commodities constitutes the process of their exchange. It is a social process participated in by individuals independent of each other but the part they take in it is that of owners of commodities only. Their mutual relations are those of their commodities, and thus they really appear as conscious factors of the process of exchange.

A commodity is a use-value, wheat, linen, a diamond, a machine, etc., but as a commodity it is, at the same time, not a use-value. If it were a use-value for its owner, i. e., a direct means for the satisfaction of his own wants, then it would not be a commodity. To him it is rather a non-use-value; it is merely the material depository of exchange-value, or simply a means of exchange; as an active bearer of exchange value, use-value becomes a means of exchange. To the owner it is a use-value only in so far as it constitutes exchange value.12

It has yet to become a use-value, viz., to others. Not being a use-value to its owner, it is a use-value to the owners of other commodities. If it is not, then the labor expended on it was useless labor, and the result of that labor is not a commodity. On the other hand, the commodity must become a use-value to the owner himself, because his means of existence lie outside of it in the use-values of commodities not belonging to him. In order to become a use-value, the commodity must meet the particular want of which it is the means of satisfaction. Use-values of commodities are thus realized use-values through a universal change of hands by passing from the hands in which they were held as means of exchange into those where they become use values. Only through this universal transfer of commodities does the labor contained in them become useful labor. In this process of their mutual interchange as use-values, commodities do not acquire any new economic forms. On the contrary, even the form which marked them as commodities disappears. Bread, e. g., by changing hands from the baker to the consumer does not change its identity as bread. On the contrary, it is only the consumer that begins to regard it as a use-value, as a certain article of food, while in the hands of the baker it was only the bearer of an economic relation, a palpable yet transcendental object. Thus, the only change of form that commodities undergo while becoming use-values, consists in the fact that they cease to be, as a matter of form, non-use-values to their owners, and use-values to those who do not own them. To become use-values commodities must be universally alienated; they must enter the sphere of exchange; but they are subject to exchange in their capacity of exchange values. Hence, in order to be realized as use-values, they must be realized as exchange values.

While the single commodity appeared from the standpoint of use-value as something independent, as exchange value it was regarded first of all in its relation to all other commodities. This relation was, however, merely theoretical, imaginary. It becomes real only in the process of exchange. On the other hand, a commodity is an exchange value in so far as a certain quantity of labor-time has been expended on it, and it consequently represents materialized labor-time. But of itself it is only materialized individual labor-time of a particular kind, and not universal labor-time. Therefore, it is not directly an exchange value, but must first become such. First of all, it is an embodiment of universal labor-time only in so far as it represents labor-time applied to a definite useful purpose, i. e., when it represents a use-value. This was the material condition under which alone labor-time contained in commodities was regarded as universal social labor. Thus, while a commodity can become a use-value only after it has been realized as an exchange value, it can, on the other hand, be realized as an exchange value only if it proves to be a use-value in the process of alienation.

A commodity can be alienated as a use-value only to one whom it serves as a use-value, i. e., as a means of satisfying a certain want. On the other hand, it is exchanged for another commodity, or, if we put ourselves on the side of the owner of the other commodity, it, too, can be alienated, i. e., be realized, only if brought in contact with that particular want of which it is the object. In the universal exchange of commodities as use-values the basis for their mutual relations is in their material difference as distinct objects which satisfy different wants by their specific properties. But as mere use-values, they are indifferent to each other, and are incommensurable. As use-values they can be exchanged only with reference to certain wants. They are exchangeable only as equivalents, and they are equivalents only as equal quantities of materialized labor-time, so that all regard to their natural properties as use-values and therefore to the relation of the commodities to particular wants is eliminated. On the contrary, a commodity is realized as an exchange value by replacing as an equivalent any definite quantity of any other commodity, regardless of whether it is a use-value for the owner of the other commodity or not. But to the owner of the other commodity it is a commodity only in so far as it is a use-value to him, and it becomes an exchange value to its owner only in so far as it is a commodity to that other person. Thus, the same relation appears as a proportion between commodities as magnitudes of the same denomination, but differing qualitatively; or, as an expression of their equivalence as embodiments of universal labor-time, and, at the same time, as a relation of qualitatively different objects, of use-values intended for the satisfaction of particular wants, in short, a relation in which they are distinguished as actual use-values. But this equivalence and non-equivalence mutually exclude each other. Thus we have before us not only a vicious circle of problems in which the solution of one implies that of the other, but a combination of contradicting claims, since the fulfillment of one is directly connected with that of its opposite.

The process of exchange of commodities must result both in the unfolding and in the solution of these contradictions, neither of which, however, can appear in that process in this simple way. We have only observed how commodities are mutually related to each other as use-values, i. e., how they appear as use-values within the process of exchange. The exchange-value, on the contrary, as we have considered it so far, appeared as an abstraction formed in our own minds, or—if we may so put it—in the mind of the individual owner of commodities, which lie stored in his warehouse as use-values, and weigh upon his conscience as exchange values. In the process of exchange, however, commodities must be not only use-values, but also exchange values to one another, and that should appear as their own mutual relation. The difficulty which we first encountered was that a commodity must be first alienated and delivered to its purchasers as a use-value, in order to appear as an exchange value, as materialized labor, while on the other hand its alienation as use-value implies its being an exchange value. But let us assume that this difficulty has been overcome. Suppose the commodity has divested itself of its use-value, and has thereby fulfilled the material condition of being socially useful labor, instead of a particular labor of an individual. In that case, the commodity must become an exchange value, a universal equivalent, an embodiment of universal labor-time for all other commodities in the process of exchange, and thus, leaving behind its limited role of a particular use-value, acquire the ability to be directly represented in all use-values as its equivalents. But every commodity is just such a commodity, appearing as a direct incarnation of universal labor-time by divesting itself of its particular use-value. On the other hand, however, commodities confront each other in the process of exchange as particular commodities, as the labor of private individuals embodied in particular use-values. Universal labor-time is itself an abstraction, which, as such, does not exist for commodities.

Let us examine the series of equations in which the exchange value of a commodity finds its concrete expression, e. g.:

These equations simply signify that equal quantities of universal social labor-time are embodied in one yard of linen, two pounds of coffee, half a pound of tea, etc. But as a matter of fact the individual labors which are represented in these particular use-values, become universal, and, in that form, also social labor, only when they are actually exchanged for one another in proportion to the labor-time contained in them. Social labor-time exists in these commodities in a latent state, so to say, and is first revealed in the process of exchange. We do not proceed from the labor of individuals as social labor, but, on the contrary, from special labor of private individuals which appears as universal social labor only by divesting itself of its original character in the process of exchange. Universal social labor is, therefore, no ready-made assumption, but a growing result. And thus we are confronted with a new difficulty, that on the one hand commodities must enter the process of exchange as embodiments of universal labor-time, while, on the other hand, this embodiment of the labor-time of individuals as social labor-time is itself a result of the process of exchange.

Every commodity becomes an exchange value by divesting itself of its use-value, or of its original nature. The commodity must therefore assume a double capacity in the process of exchange. But that second capacity of exchange value can appear only in the shape of another commodity, because only commodities confront each other in the process of exchange. How is a particular commodity to represent directly materialized universal labor-time, or—to put it differently—how is individual labor-time, which is embodied in a particular commodity to be made directly universal in character? The concrete expression of the exchange value of a commodity, i. e., of every commodity as a universal equivalent, is represented in an endless series of equations, such as:

The above form is theoretical in so far as commodities are only thought of as definite quantities of materialized universal labor-time. But the capacity of a particular commodity to serve as a universal equivalent from a mere abstraction becomes a social result of the process of exchange by a simple inversion of the above series of equations, viz.:

While coffee, tea, bread, calico, in short, all commodities express in linen the labor-time contained in them, the exchange value of linen, on the other hand, unfolds itself in all other commodities as its equivalents, and the labor-time embodied in it becomes direct universal labor-time, which is equally expressed in different volumes of all other commodities. Linen thus becomes the universal equivalent through the universal action of all other commodities upon it. As exchange value, every commodity served as a measure of value of all other commodities. Now, on the contrary, since all commodities measure their exchange values by means of a particular commodity, this excluded commodity becomes the special expression of exchange value, as a universal equivalent. At the same time, the endless series of equations in which the exchange value of every commodity was expressed, is reduced to one single equation consisting of two members. The equation 2 lbs. of coffee = 1 yard of linen now fully expresses the exchange value of coffee, for in this expression a yard of linen appears as the direct equivalent of a definite quantity of every other commodity. Thus, within the sphere of exchange all commodities are or appear to each other as exchange values in the form of linen. The proposition that commodities, as exchange values, are to each other as different quantities of materialized universal labor-time, may now be worded to the effect that commodities, as exchange values, represent nothing but different quantities of the same article, linen. Universal labor-time thus assumes the aspect of a distinct thing, as a commodity existing along with and outside of all other commodities. At the same time the equation 2 lbs. of coffee = 1 yard of linen, in which one commodity appears as the exchange value of another, is yet to be realized. Only by being alienated as use-value—which depends upon whether it proves to be in the process of exchange the object of a certain want—does the commodity actually transform its existence as coffee into the existence as linen and thus takes on the form of a universal equivalent and becomes, indeed, an exchange value for all other commodities. Conversely, since all commodities are turned into linen by being alienated as use-values, linen becomes the converted form of all other commodities, and only as a result of this transformation of all other commodities into it, it becomes the direct embodiment of universal labor-time, i. e., the product of universal exchange and of the elimination of individual labor. If commodities thus assume a twofold character in order to appear as exchange values to each other, the commodity which has been singled out as the universal equivalent becomes, on the other hand, a use-value in two ways. Besides its special use-value as a particular commodity, it assumes a universal use-value. This latter kind of use-value constitutes its special feature, emanating as it does, from the specific part which the commodity plays as a result of the universal relation which all other commodities bear toward it in the process of exchange. The use-value of every commodity as an object of a particular want, has a different value in different hands, e. g., it has a different value in the hands of the one who disposes of it, than in those of the one who acquires it. But the commodity singled out as the universal equivalent, is now an object of a universal want arising from the very process of exchange, and it has the same use-value to everybody, viz., that of serving as the depository of exchange value, of being a universal means of exchange. Thus we find in one commodity the solution of the contradiction which is inherent in commodity as such, namely, of being at one and the same time a particular use-value and a universal equivalent, and, therefore, a use-value for everybody or universal use-value. Thus, while all other commodities express their exchange value in the form of an ideal equation with the excluded commodity—an equation yet to be realized—the use-value of the special commodity, although real, appears in the process itself as a mere form which is yet to be realized through transformation into actual use-values. Originally the commodity appeared simply as commodity, as universal labor-time embodied in a particular use-value. In the process of exchange, all commodities are related to the one excluded commodity as to a simple commodity, one which appears as the embodiment of universal labor-time in a particular use-value. Thus, particular commodities become related to one particular commodity as a universal commodity.13 In that manner the mutual relations of possessors of commodities based on the fact that they regard their labor as universal social labor, takes on the aspect of their relations to commodities as exchange values; and the mutual relation of commodities as exchange values appears in the process of exchange as the relation of all of them to one particular commodity as to a specially adopted means of expression of their exchange value; again, from the point of view of that particular commodity the above relation appears as its specific relation to all other commodities, and, therefore, as its own definite, spontaneous, social character. The particular commodity which thus appears as the specially adopted expression of the exchange value of all other commodities, or the exchange value of commodities as a particular exclusive commodity, is money. Money is a crystallization of the exchange value of commodities which they themselves form in the process of exchange. Thus, while commodities become use-values to each other in the process of exchange by casting off all definite forms and entering into mutual relations in their direct material shape, they must assume a new form, viz., proceed to the formation of money in order to appear as exchange values to each other. Money is not a symbol, no more than the commodity aspect of a use-value is a symbol. That a social relation of production takes the form of an object existing outside of individuals, and that the definite relations into which individuals enter in the process of production carried on in society, assume the form of specific properties of a thing, is a perversion and by no means imaginary, but prosaically real, mystification marking all social forms of labor which creates exchange value. In money this mystification appears only more strikingly than in commodities.

The necessary physical properties of the particular commodity in which the money form of all other commodities is to be crystallized—as far as they are directly determined by the nature of exchange value—are: divisibility to any desired extent, homogeneity of its parts, and uniformity of all the specimens of the commodity. As an embodiment of universal labor-time it must be homogeneous in its structure and capable of representing only quantitative differences. Another necessary property is durability of its use-value, as it must last through the process of exchange. The precious metals excel in these qualities. Money not being a result of a scheme or agreement, but having been produced instinctively in the process of exchange, a great variety of more or less unsuited commodities had successively performed its functions. At a certain stage of development of the process of exchange, the necessity arises for a polar distribution of the functions of exchange value and use-value among commodities, so that one commodity e. g. should act as a medium of exchange, while another is being alienated as a use-value. This necessity brings it about that one or even several commodities possessing the most generally accepted use-value, begin, incidentally at first, to play the part of money. Even if not direct means of satisfying existing wants, their being the most considerable material constituent part of wealth, insures to them a more general character than to the other use-values.

Direct barter, the original natural form of exchange, represents rather the beginning of the transformation of use-values into commodities, than that of commodities into money. Exchange value has as yet no form of its own, but is still directly bound up with use-value. This is manifested in two ways. Production, in its entire organization, aims at the creation of use-values and not of exchange values, and it is only when their supply exceeds the measure of consumption that use-values cease to be use-values, and become means of exchange, i. e., commodities. At the same time, they become commodities only within the limits of being direct use-values distributed at opposite poles, so that the commodities to be exchanged by their possessors must be use-values to both,—each commodity to its non-possessor. As a matter of fact, the exchange of commodities originates not within the primitive communities,14 but where they end, on their borders at the few points, where they come in contact with other communities. That is where barter begins, and from here it strikes back into the interior of the community, decomposing it. The various use-values which first become commodities in the barter between different communities, such as slaves, cattle, metals, constitute therefore in most cases the first money within those communities themselves. We have seen how the exchange value of a commodity is manifested the more perfectly as exchange value, the longer the series of its equivalents or the greater the sphere of exchange of that commodity. With the gradual expansion of barter, the increase in the number of exchanges, and the growing diversification of the commodities drawn into exchange, commodities develop into exchange values, which leads to the formation of money and has a destructive effect on direct barter. The economists are in the habit of ascribing the origin of money to the difficulties which are encountered in the way of extensive barter, but they forget that these difficulties arise from the development of exchange value and from the fact that social labor becomes universal labor. E. g., commodities as use-values can not be subdivided at will, a property which they should possess as exchange values. Or, a commodity belonging to A may be a use-value to B, while the commodity belonging to B may not have any use-value to A. Or the owners of the commodities may need each other’s indivisible goods in unequal proportions. In other words, under the pretence of analyzing simple barter, economists bring out certain aspects of the contradiction which is inherent in commodities as entities simultaneously embodying both use-value and exchange value. On the other hand, they consistently cling to the idea that barter is the natural form of exchange, which suffers only from certain technical difficulties, for which money is a cunningly devised expedient. Arguing from this perfectly superficial view, an ingenious English economist has rightly maintained that money is merely a material instrument like a ship or a steam-engine, but not an expression of a social relation in the field of production and consequently not an economic category; and that it is, therefore, wrong to treat the subject in political economy, which really has nothing in common with technology.15

The world of commodities implies the existence of a highly developed division of labor; this division is manifested directly in the great variety of use-values, which confront each other as particular commodities and which embody as many different kinds of labor. The division of labor embracing all the particular kinds of productive occupations, is the complete expression of social labor in its material aspect viewed as labor creating use-values. But from the standpoint of commodities and within the process of exchange, it exists only in its results, in the variety of the commodities themselves.

The exchange of commodities constitutes the social metabolic process, i. e. the process in which the exchange of the special products of private individuals is the result of certain social relations of production into which the individuals enter in this interchange of matter. As they develop, the mutual relations of commodities crystalize into various aspects of the universal equivalent and thus the process of exchange becomes at the same time the process of the formation of money. The whole of this process which takes the form of a succession of processes, constitutes circulation.

NOTES ON THE HISTORY OF THE THEORY OF COMMODITIES.

The analysis of commodities according to their twofold aspect of use-value and exchange value by which the former is reduced to work or deliberate productive activity; and the latter, to labor time or homogeneous social labor, is the result of a century and a half of critical study by the classical school of political economy which dates from William Petty in England and Boisguillebert in France16 and closes with Ricardo in the former country and Sismondi in the latter.

Petty reduces use-value to labor, without deceiving himself as to the natural limitation of its creative power. As regards concrete labor, he sizes it up in the magnitude of its social aspect, as the division of labor.17 This view of the source of material wealth does not remain more or less fruitless as in the case of his contemporary, Hobbes, but leads up to his Political Arithmetic, the first form in which Political Economy is differentiated as an independent science.

He defines exchange value, however, just as it appears in the process of exchange of commodities, viz. as money; and money he defines as an existing commodity, gold and silver. Laboring under the ideas of the monetary system, he declares the special branch of labor which is devoted to the production of gold and silver as the labor which determines exchange value. What he really means is that the labor of members of society must produce not direct use-values, but commodities or use-values which by means of exchange are capable of assuming the form of gold and silver, i. e. of money, i. e. of exchange value, i. e. of embodiments of universal labor. His example, however, shows strikingly that the recognition of labor as the source of material wealth by no means excludes the misconception of the particular social form in which labor constitutes the source of exchange value.

In his turn, Boisguillebert, if not consciously, at any rate actually reduces the exchange value of a commodity to labor-time, since he determines “true value” (la juste valeur) by the right proportion in which the labor-time of individuals is distributed among the several branches of industry, and defines free competition as the social process which determines these correct proportions. At the same time, however, and in contrast with Petty he wages a fanatical war against money which, by its interference, disturbs the natural equilibrium or harmony of exchange of commodities and, like a wanton Moloch, demands all natural wealth as sacrifice. It is true that this assault on money was called forth by certain historic conditions. Since Boisguillebert attacked18 the blind destructive lust after gold which possessed the court of Louis XIV, his tax collectors, and his nobility; on the other hand, Petty extolled in the greed of gold the mighty impulse which spurred on the nation in her industrial development and in her conquest of the world-market; still, there asserts itself here a deeper antagonism of principles which constantly recurs between true English and true French19 Political Economy. Boisguillebert sees, in fact, only the material substance of wealth, its use-value, the enjoyment20 of it, and considers the capitalistic form of labor, i. e. the production of use-values as commodities and the exchange of those commodities, as the natural social form in which individual labor attains its end. When he is, therefore, confronted with the specific character of capitalistic wealth as in the case of money, he sees in it the usurping interference of extraneous elements and gets into a rage about the capitalist system of labor in one form while utopian-like he praises it in another.21 Boisguillebert furnishes us with proof that one may treat labor-time as the measure of value of commodities, and at the same time confound labor embodied in the exchange value of commodities and measured by time, with the direct natural activity of individuals.

The first sensible analysis of exchange value as labor-time, made so clear as to seem almost commonplace, is to be found in the work of a man of the New World where the bourgeois relations of production imported together with their representatives sprouted rapidly in a soil which made up its lack of historical traditions with a surplus of humus. That man was Benjamin Franklin, who formulated the fundamental law of modern political economy22 in his first work which he wrote when a mere youth and published in 1721.

He declares it necessary to look for another measure of value than precious metals. That measure is labor. “By labor may the value of silver be measured as well as other things. As, suppose one man employed to raise corn, while another is digging and refining silver; at the year’s end, or at any other period of time, the complete produce of corn, and that of silver, are the natural price of each other; and if one be twenty bushels, and the other twenty ounces, then an ounce of that silver is worth the labor of raising a bushel of that corn. Now if by the discovery of some nearer, more easy or plentiful mines, a man may get forty ounces of silver as easily as formerly he did twenty, and the same labor is still required to raise twenty bushels of corn, then two ounces of silver will be worth no more than the same labor of raising one bushel of corn, and that bushel of corn will be as cheap at two ounces, as it was before at one, ceteris paribus. Thus the riches of a country are to be valued by the quantity of labor its inhabitants are able to purchase.”23 Thus Franklin regards labor-time from the one-sided economic point of view, as the measure of value. The transformation of actual products into exchange values is self-evident with him and the only question is as to finding a quantitative measure of value. “Trade,” says he, “in general being nothing else but the exchange of labour for labour, the value of all things is, as I have said before, most justly measured by labour.”24 Substitute the word “work” for “labor” in the above statement, and the confusion of labor in one form and labor in another form becomes at once apparent. Since trade consists e. g. in the exchange of the respective labors of the shoemaker, miner, spinner, painter, etc., does it follow that the value of shoes is most justly measured by the work of a painter? On the contrary, Franklin meant that the value of shoes, mining products, yarn, paintings, etc., is determined by abstract labor which possesses no particular qualities and can, therefore, be measured only quantitatively.25 But since he does not develop the idea that labor contained in exchange value is abstract universal labor which assumes the form of social labor as a result of the universal alienation of the products of individual labor, he necessarily fails to recognize in money the direct embodiment of this alienated labor. For that reason he sees no inner connection between money and labor which creates exchange value, and considers money merely as an instrument introduced from outside into the sphere of exchange for purposes of technical convenience.26 Franklin’s analysis of exchange value did not exert any direct influence on the general trend of science, because he discussed only special questions of political economy whenever there was a definite practical occasion for it.

The contrast between useful work and labor which creates exchange value agitated all Europe during the eighteenth century in the form of this question: what particular kind of labor constitutes the source of bourgeois wealth? It was thus assumed that not every kind of labor which is realized in use-values or yields certain products does thereby directly create wealth. With the physiocrats, however, as well as with their opponents, the burning question was not, what kind of labor creates value, but which is it that creates surplus value. They approached the problem in its complicated form before they had solved it in its elementary form; such is the historical course of all sciences leading them by a labyrinth of intersecting paths to the real starting points. Unlike other builders, science not only erects castles in the air, but constructs separate stories of the building, before it has laid the foundation. Without dwelling any longer on the physiocrats and omitting quite a number of Italian economists who in some more or less ingenious ideas came close to a correct analysis of the nature of commodity,27 we pass at once to the first Briton who elaborated the general system of bourgeois economics, Sir James Steuart.28 His idea of exchange value as well as all the abstract categories of political economy still seem to be with him in the process of differentiation from the material elements they represent and therefore appear quite vague and unsettled. In one place he determines real value by labor-time (“what a workman can perform in a day”), but immediately creates confusion by introducing the elements of wages and raw material.29 In another place his struggle with the material substance of the subject he treats of is revealed even more strikingly. He calls the material of nature contained in a commodity, such as the silver in a silver plate, its “intrinsic worth,” while the labor-time contained in it he calls “useful value.” The former, he says “is ... something real in itself,” while “the value of the second must be estimated according to the labour it has cost to produce it.... The labour employed in the modification [of the substance] represents a portion of a man’s time.”30

What distinguishes Steuart from his predecessors and followers is his keen differentiation between specifically social labor which is represented in exchange value, and concrete labor which produces use-values. Labor, he says, which through its alienation creates a universal equivalent, I call industry. Labor as industry he distinguishes not only from concrete labor, but from all other social forms of labor.31 It is to him the capitalistic form of labor in contrast to its antique and mediaeval forms. He is especially interested in the difference between capitalistic and feudal labor, of which he had observed the latter in its decaying forms both in Scotland and on his extensive travels over the continent. Steuart knew, of course, very well that products took on the form of commodities and commodities, the form of money in pre-capitalistic epochs as well; but he proves conclusively that it is only in the capitalistic period of production that the commodity becomes the elementary and fundamental form of wealth, and alienation [of commodities], the ruling form of acquisition and that consequently labor creating exchange value is specifically capitalistic in its character.32

After different forms of concrete labor, such as agriculture, manufacture, navigation, trade, etc., had each in turn been declared the true source of wealth, Adam Smith proclaimed labor in general, and namely in its general social form of division of labor, to be the only source of material wealth or use-values. While ignoring in connection with the latter the part played by nature, he is troubled by it when he comes to deal with purely social wealth i. e. exchange value. To be sure, Adam determines the value of a commodity by the labor-time contained in it, but relegates the actual application of the principle to pre-Adamic times. In other words, what seems to him true from the standpoint of simple commodity, ceases to be clear as soon as the higher and more complex forms of capital, wage-labor, rent, etc. take its place. This he expresses by saying, that the value of commodities used to be measured by labor-time in the paradise lost of bourgeois society, in which men dealt with each other not as capitalists, wage-workers, landlords, tenants, usurers, etc., but merely as plain producers of commodities which they exchanged. He constantly confuses the determination of the value of commodities by the labor-time contained in them with the determination of their value by the value of labor. He becomes confused in working out the details and fails to see the objective equalization of different kinds of labor which the social process forcibly carries out, mistaking it for the subjective equality of the labors of individuals.33 The transition from concrete labor to labor creating exchange value, i. e. to labor in its fundamental capitalistic form he tries to derive from the division of labor. Yet, while it is true that private exchange implies the division of labor, it is false to maintain that division of labor implies private exchange. Among the Peruvians, e. g., labor was divided to an extraordinary extent, although there was no private exchange, no exchange of products, as commodities.

Contrary to Adam Smith, David Ricardo elaborated with great clearness the determination of the value of a commodity by labor-time and showed that this law governs also such relations of capitalistic production which seem to contradict it most. Ricardo confines his investigations exclusively to the quantitative determination of value and as regards the latter he is at least conscious of the fact that the realization of the law depends upon certain historical conditions. He says, namely, that the determination of value by labor-time holds good for commodities “only as can be increased in quantity by the exertion of human industry, and on the production of which competition operates without restraint.”34 What he really means is that the law of value presupposes for its full development an industrial society in which production is carried on a large scale and free competition prevails, i. e. the modern capitalist society. In all other respects, Ricardo considers the capitalist form of labor as the eternal natural form of social labor. He makes the primitive fisherman and the primitive hunter straightway exchange their fish and game as owners of commodities, in proportion to the labor-time embodied in these exchange values. On this occasion he commits the anachronism of making the primitive fisherman and primitive hunter consult the annuity tables in current use on the London Exchange in the year 1817 in the calculation relating to their instruments. The “parallelograms of Mr. Owen” seem to be the only form of society outside of the bourgeois form with which he was acquainted. Although confined within this bourgeois horizon, Ricardo analyzes the bourgeois economy—which looks quite different to deeper insight than it does on the surface—with such keen power of theoretical penetration that Lord Brougham could say of him: “Mr. Ricardo seemed as if he had dropped from another planet.”

In a direct controversy with Ricardo, Sismondi lays stress upon the specifically social character of labor which creates exchange value,35 and says it is “characteristic of our economic progress” to reduce the magnitude of value to the necessary labor-time, to the relation between the demand of society as a whole and the quantity of labor which is sufficient to satisfy this demand.36 Sismondi is no more laboring under Boisguillebert’s idea, that labor which creates exchange value is adulterated by money; but just as Boisguillebert denounced money, so does Sismondi denounce large industrial capital. In Ricardo political economy reached its climax, after recklessly drawing its ultimate conclusions, while Sismondi supplemented it by impersonating its doubts.

Since Ricardo gave to classical political economy its final shape, having formulated and elaborated with the greatest clearness the law of the determination of exchange value by labor-time, it is natural that all the polemics among economists should center about him. Stripped of its puerile37 form this controversy comes down to the following points:

First: Labor itself has exchange value, and different kinds of labor have different exchange values. We get into a vicious circle by making exchange value the measure of exchange value, because the measuring exchange value needs a measure itself. This objection may be reduced to the following problem: Given labor-time as the intrinsic measure of exchange value, develop from that the determination of wages. The theory of wages gives the answer to that.

Second: If the exchange value of a product is equal to the labor-time contained in it, then the exchange value of one day of labor is equal to the product of that labor. In other words, wages must be equal to the product of labor.38 But the very opposite is actually the case. Ergo. this objection comes down to the following problem: How does production, based on the determination of exchange value by labor-time only, lead to the result that the exchange value of labor is less than the exchange value of its product? This problem is solved by us in the discussion of capital.

Third: The market price of commodities either falls below or rises above its exchange value with the changing relations of supply and demand. Therefore, the exchange value of commodities is determined by the relation of supply and demand and not by the labor-time contained in them. As a matter of fact, this queer conclusion merely amounts to the question, how a market price based on exchange value can deviate from that exchange value; or, better still, how does the law of exchange value assert itself only in its antithesis? This problem is solved in the theory of competition.

Fourth: The last and apparently the most striking objection, if not raised in the usual form of queer examples: If exchange value is nothing but mere labor-time time contained in commodities, how can commodities which contain no labor possess exchange-value, or in other words, whence the exchange value of mere forces of nature? This problem is solved in the theory of rent.

CHAPTER II.

MONEY OR SIMPLE CIRCULATION.

In a parliamentary debate on Sir Robert Peel’s Bank Act of 1844 and 1845, Gladstone remarked that not even love has made so many fools of men as the pondering over the nature of money. He spoke of Britons to Britons. The Dutch, on the contrary, who, from times of yore, have had, Petty’s doubts notwithstanding, “angelical wits” for money speculation have never lost their wits in speculations about money.

The main difficulty in the analysis of money is overcome as soon as the evolution of money from commodity is understood. This point once granted, it only remains to comprehend clearly the particular forms of money, which is to some extent made difficult by the fact that all bourgeois relations, being gilt or silver plated, have the appearance of money relations, and money, therefore, seems to possess an endless variety of forms, which have nothing in common with it.

In the following investigation only those forms of money are treated of which directly grow out of the exchange of commodities; the forms which belong to a higher stage of production, as e. g., credit money will not be discussed here. For the sake of simplicity gold is assumed throughout as the money commodity.

1. THE MEASURE OF VALUE.

The first process of circulation constitutes, so to say, the theoretical preparatory process to actual circulation. To begin with, commodities which are use-values by nature, acquire a form in which they appear in idea to each other as exchange values, as definite quantities of incorporated universal labor-time. The first necessary step in this process is, as we have seen, the setting apart by the commodities of a specific commodity, say gold, as the direct incarnation of universal labor-time, or the universal equivalent. Let us go back for a moment to the form in which commodities turn gold into money.

1 ton of iron = 2 ounces of gold
1 quarter of wheat = 1 ounce of gold
1 hundred weight of Mocca coffee = 1-1/4 ounce of gold
1 hundred weight of potash = 1/2 ounce of gold
1 ton of Brazil timber = 1-1/2 ounces of gold
Y commodities = X ounces of gold

In the above series of equations iron, wheat, coffee, potash, etc. appear to each other as embodiments, of homogeneous labor, namely, as labor materialized in money, from which all the peculiarities of the different kinds of concrete labor represented in the different use-values are completely eliminated. As value they are all identical, they are the incarnation of the same labor, or the same incarnation of labor, viz., gold. As uniform embodiments of the same labor they display only one difference, a quantitative one, by appearing as different quantities of value, because unequal quantities of labor-time are contained in their use-values. The mutual relation of these separate commodities is that of embodiments of universal labor-time, since they are related to universal labor-time as to an excluded commodity, viz., gold. The same relation the development of which causes commodities to appear to each other as exchange values, causes the labor time contained in gold to appear as universal labor-time, a given quantity of which is expressed in different quantities of iron, wheat, coffee, etc,—in short, in the use-values of all commodities, or is directly unfolded in the endless series of commodity-equivalents. While all commodities express their exchange values in gold, gold expresses its exchange value directly in all commodities. While commodities assume the form of exchange value in relation to each other, they lend to gold the form of the universal equivalent, or of money.

Gold becomes the measure of value, because all commodities measure their exchange values in gold, in proportion as a certain quantity of gold and a certain quantity of the commodity contain the same amount of labor-time; and it is only by virtue of this function of being a measure of value, in which capacity its own value is measured directly in the entire series of commodity equivalents, that gold becomes a universal equivalent or money. On the other hand, the exchange value of all commodities is expressed in gold. In this expression, the qualitative aspect is to be distinguished from the quantitative: there is the exchange value of the commodity as the embodiment of the same uniform labor-time; while the magnitude of value is exhaustively expressed, since in the same proportion in which commodities are equated to gold they are equated to one another. On the one hand the universal character of the labor-time contained in them is revealed; on the other, its quantity is expressed in its golden equivalent. The exchange value of commodities thus expressed in the form of a universal equivalent and, moreover, as a numerical proportion of this equivalent, in terms of one specific commodity, or represented in the form of a series of commodities equated to one specific commodity, is PRICE. Price is the form into which the exchange value of commodities is converted when it appears within the sphere of circulation.

By the same process by which commodities express their values in gold prices, they turn gold into a measure of value i. e. into money. If all of them were to measure their values in silver, wheat, or copper, and therefore express them in the form of silver, wheat or copper prices, then silver, wheat or copper would be measures of value and consequently universal equivalents. In order to appear as prices in circulation, commodities must be exchange values before they enter circulation. Gold becomes the measure of value only because all commodities estimate their exchange value in it.

The universality of this relation which is the result of evolution and from which alone springs the function of gold as the measure of value, implies however, that every single commodity is measured in gold, in proportion to the labor-time contained in both; that the actual common measure of the commodity and of gold is labor; or that commodity and gold are passed for each other in direct barter as equal exchange values. How this equalization actually takes place, can not be discussed here when treating of simple circulation. So much, however, is clear, that in countries producing gold and silver, certain quantities of labor-time are directly embodied in definite quantities of gold and silver, while in countries which do not produce gold and silver the same result is reached in a round-about way, by direct or indirect exchange of the commodities of those countries; i. e. a definite portion of average national labor is given for a definite quantity of labor-time, embodied in the gold and silver of the mine-owning countries. In order to be able to serve as a measure of value, gold must be as far as possible a variable value, because it can become the equivalent of other commodities only as an incarnation of labor-time, and the same labor-time is realized in unequal volumes of use-values with the change in the productive power of concrete labor. In estimating all commodities in gold it is only assumed that gold represents a given quantity of labor at a given moment, as was done when the exchange value of any commodity was expressed in terms of the use-value of any other commodity. As for the variations of the value of gold, the law of exchange value formulated above holds good in its case as well. If the exchange value of commodities remains unchanged, then a general rise in their gold prices is possible only in the case of a fall in the exchange value of gold. If the exchange value of gold remains unchanged, a general rise of gold prices is possible only when the exchange value of all commodities rises. The reverse is true in case of a general fall in the prices of commodities. If the value of an ounce of gold falls or rises in consequence of a change in the labor-time required for its production, then the values of all other commodities fall or rise to an equal extent. Thus, the ounce of gold represents after the change, as it did before, a given quantity of labor-time with regard to all commodities. The same exchange values are now estimated in greater or smaller quantities of gold than before, but they are estimated in proportion to the magnitude of their values, and consequently retain the same proportion to each other. The ratio 2 ÷ 4 ÷ 8 remains the same when expressed as 1 ÷ 2 ÷ 4 or as 4 ÷ 8 ÷ 16. The change in the quantity of gold in which exchange values are estimated with a variation in the value of gold, interferes as little with the function of gold as a measure of value, as the fifteen times smaller value of silver as compared with that of gold interferes with the performance of that function by the latter. Since labor-time is the common measure of gold and commodities, and since gold figures as the measure of value only in so far as all commodities are measured by it, the idea that money makes commodities commensurable, is therefore a mere fiction of the process of circulation.39 It is rather the commensurability of commodities as incorporated labor-time, that turns gold into money.

Commodities enter the process of exchange in the concrete form of use-values. They are yet to be turned into the real universal equivalent through their alienation. The determination of their prices merely amounts to their ideal transformation into the universal equivalent, a process of equation to gold which is yet to be realized. But since commodities are, in their prices, transformed into gold only in imagination, or are converted only into imaginary gold, and since their money form is not differentiated as yet from their concrete selves, it follows that gold has also been turned into money only in imagination; it appears so far but as a measure of value, and in fact definite quantities of gold serve merely as names for certain quantities of labor-time. The form in which gold is crystallized in money always depends upon the way in which commodities express their own exchange value to each other.

Commodities now confront one another in a double capacity: actually as use-values, ideally as exchange values. The twofold aspect of labor contained in them is reflected in their mutual relations; the special concrete labor being virtually present as their use-value, while universal abstract labor-time is ideally represented in their price in which commodities appear as commensurable embodiments of the same value—substance differing merely in quantity.

The difference between exchange value and price appears to be merely nominal or, as Adam Smith says, labor is the real price, and money the nominal price of commodities. Instead of estimating the value of one quarter of wheat in thirty days of labor, it is estimated in one ounce of gold if one ounce of gold is the product of thirty days ‘labor. However, far from this difference being merely nominal, all the storms which threaten commodities in the actual process of circulation center about it. Thirty days of labor are contained in a quarter of wheat and it need not, therefore, be expressed in terms of labor-time. But gold is a commodity distinct from wheat, and only in circulation it can be ascertained, whether the quarter of wheat can be actually turned into an ounce of gold as is anticipated in its price. That will depend on whether or not it proves to be a use-value, whether or not the quantity of labor-time contained in it is the quantity necessarily required by society for the production of a quarter of wheat. The commodity as such is an exchange value, it has a price. In this difference between exchange value and price lies the demonstration of the fact that the particular individual labor contained in a commodity has first to be expressed through the process of alienation in terms of its counterpart, i. e. as impersonal, abstract, universal and, only in that form, social labor, viz. money. Whether it can be so expressed seems to be a matter of chance. Thus, although the exchange value of a commodity finds only ideally a distinct expression in price, and the twofold character of labor contained in the commodity exists as yet merely as two distinct forms of expression, and, although in consequence thereof, the embodiment of universal labor-time, gold, confronts actual commodities only as an imaginary measure of value, yet the fact that exchange value exists as price, or that gold exists as a measure of value implies the necessity of the alienation of commodities for hard cash and the possibility of their non-alienation. In short, here lies latent the entire contradiction which is inherent in the fact that products are commodities or that the particular work of a private individual can be of no account in society until it has taken the very opposite form of abstract universal labor. For that reason, the utopians, who want to have commodities but not money, who want a system of production based on private exchange without the necessary conditions underlying such a system, are consistent when they “destroy” money not in its tangible form but in its nebulous illusory form of a measure of value. Under the invisible measure of value there lurks the hard cash.

The process by which gold has become the measure of value and exchange value has been turned into price, being once assumed, all commodities express in their prices but imagined quantities of gold of various magnitudes. As such various quantities of the same thing, gold, they are equated, compared and measured with each other, and thus arises the technical necessity of referring them to a definite quantity of gold as a unit of measure, a unit which develops into a standard measure by virtue of its divisibility into aliquot parts, which in their turn can be sub-divided into aliquot parts.40 But quantities of gold as such are measured by weight.

The standard of measure is thus found ready in the general measures of weight of metals and, therefore, where-ever metallic circulation is in vogue, these measures serve originally as standards of price. Since commodities no more relate to each other as exchange values to be measured by labor-time, but as magnitudes of the same denomination measured in gold, the latter is transformed from a measure of value into a standard of price. The comparison of prices with each other as different quantities of gold is thus crystallized in figures which correspond to an assumed quantity of gold and represent it as a standard of aliquot parts. Gold as measure of value and as standard of price has entirely different forms of manifestation and the confusing of the two has resulted in the wildest of theories. Gold is a measure of value as incorporated labor-time; it is the standard of price as certain weight of metal. Gold becomes the measure of value by virtue of its relation as exchange value to commodities as exchange values; as standard of price, a definite quantity of gold serves as a unit for other quantities of gold. Gold is the measure of value, because its value is variable; it is the standard of price, because it is fixed as a constant unit of weight. In this case, as in all cases of measuring quantities of the same denomination, the establishment of a definite and unvarying unit of measure is all-important. The necessity of settling upon a quantity of gold as a unit of measure and upon its aliquot parts as subdivisions of that unit, has given rise to the notion that a certain quantity of gold which has naturally a variable value had been assigned a fixed ratio of value to the exchange values of all commodities; the fact is overlooked that exchange values of commodities are transformed into prices, i. e. into quantities of gold, before gold develops as a standard of price. No matter how the value of gold may vary, the ratios between the values of different quantities of gold remain constant. Let the fall in the value of gold amount to 1000 per cent., still twelve ounces of gold will have a twelve times greater value than one ounce of gold; and in prices the only thing considered is the ratio between different quantities of gold. Since, on the other hand, no rise or fall in the value of an ounce of gold can alter its weight, no alteration can take place in the weight of its aliquot parts. Thus gold always renders the same service as an invariable standard of price, no matter how much its value may vary.41

An historical process which, as we shall explain later, was determined by the nature of metallic circulation, led to the result that the same denomination of weight was retained for a constantly changing and decreasing weight of precious metals in their function of a standard of price. Thus the English pound sterling denotes less than one-third of its original weight; the pound Scot, before the Union, only 1-36; the French livre, 1-74; the Spanish Maravedi, less than 1-1000; the Portuguese Rei, a still smaller fraction. Such was the historical origin of the discrepancy between the current money names of various weights of metals and their weight denominations.42 Since the determination of the unit of measure, of its aliquot parts, and of their names is purely conventional, and since they should possess within the sphere of circulation the character of universality and compulsion, they had to be settled by law. The purely formal operation thus devolved upon the government.43 The metal which was to serve as the money material, was found already adopted in the community. In different countries the legal standard of price is naturally different. In England e. g. the ounce as a weight of metal is divided into pennyweights, grains and carats Troy, but the ounce of gold as the unit of money is divided into 3 7-8 sovereigns, the sovereign into 20 shillings, the shilling into 12 pence, so that 100 pounds of 22 carat gold (1200 ounces) = 4672 sovereigns and 10 shillings. In the world market, however, where national boundaries disappear, these national characteristics of the measure of money also disappear and give place to the general measures of weight of metals.

The price of a commodity or the quantity of gold into which it is ideally transformed, is, therefore, now expressed in the names of coins of the gold standard. Thus, instead of saying: a quarter of wheat is worth an ounce of gold, it is said in England to be worth 3£ 17s. 10-1/2d. All prices are thus expressed in the same denominations. The peculiar form which commodities lend to their exchange values is transformed into a money-denomination by which commodities tell each other how much they are worth. Money in its turn becomes money of account.44

We transform commodities into money of account, in our mind, on paper, in conversation, whenever it is a question of expressing any kind of wealth in terms of exchange value.45 For that transformation we need the gold substance, but only in imagination. In order to estimate the value of a thousand bales of cotton in a certain number of ounces of gold and then to express this number of ounces in the denominations of the ounce, £. s. d., not a single atom of gold is required. Thus, not a single ounce of gold was in circulation in Scotland before Robert Peel’s Bank Act of 1845, although the gold ounce, expressed in its English standard of account, 3£ 17s. 10-1/2d., served as the legal standard of price. In a similar manner silver serves as standard of price in the trade between Siberia and China, although that trade virtually amounts to barter. It is, therefore, immaterial to money, as money of account, whether or not its entire unit of measure or the fractions thereof are really coined. In England, at the time of William the Conqueror, 1£, then a pound of pure silver, and the shilling, 1-20 of a pound, existed only as money of account, while the penny, 1-240 of a pound of silver, was the largest silver coin in existence. On the other hand, there are no shillings and pence in England to-day, although they are legal denominations for certain parts of an ounce of gold. Money as money of account may exist exclusively in idea, while the money in actual existence may be coined according to an entirely different standard. Thus the money in circulation in many English colonies of North America consisted until late in the eighteenth century of Spanish and Portuguese coins, although the money of account was throughout the same as in England.46

Owing to the fact that money, when serving as the standard of price, appears under the same reckoning names as do the prices of commodities, and that, therefore, the sum of 3£ 17s. l0-1/2d. may signify, on the one hand, an ounce weight of gold, and on the other, the value of a ton of iron, this reckoning name of money has been called its mint-price. Hence, there sprang up the extraordinary notion that the value of gold is estimated in its own material, and that, in contradistinction to all other commodities, its price is fixed by the State. It was erroneously thought that the giving of reckoning names to definite weights of gold is the same thing as fixing the value of those weights.47 In so far as gold serves as one of the elements in determining price, i. e., where it performs the function of money of account, it not only has no fixed price, but has no price whatever. In order to have a price, i. e., in order to express itself in a specific commodity as a universal equivalent that other commodity would have to play the same exclusive role in the process of circulation as gold. But two commodities excluding all other commodities mutually exclude each other. Therefore, wherever gold and silver have by law been made to perform side by side the function of money or of a measure of value it has always been tried, but in vain, to treat them as one and the same material. To assume that there is an invariable ratio between the quantities of gold and silver in which a given quantity of labor-time is incorporated, is to assume, in fact, that gold and silver are of one and the same material, and that a given mass of the less valuable metal, silver, is a constant fraction of a given mass of gold. From the reign of Edward III to the time of George II, the history of money in England consists of one long series of perturbations caused by the clashing of the legally fixed ratio between the values of gold and silver, with the fluctuations in their real values. At one time gold was too high; at another, silver. The metal that for the time being was estimated below its value was withdrawn from circulation, melted and exported. The ratio between the two metals was then again altered by law, but the new nominal ratio soon came into conflict again with the real one. In our own times, the slight and transient fall in the value of gold compared with silver, which was a consequence of the Indo-Chinese demand for silver, produced on a far more extended scale in France the same phenomena, export of silver, and its expulsion from circulation by gold. During the years 1855, 1856 and 1857, the excess in France of gold imports over gold exports amounted to £41,580,000, while the excess of silver exports over silver imports was £14,704,000. In fact, in those countries in which both metals are legally measures of value, and therefore both legal tender, so that every one has the option of paying in either metal, the metal that rises in value is at a premium, and, like every other commodity, measures its price in the over-estimated metal which alone serves in reality as the standard of value. The result of all experience and history with regard to this question is simply that, where two commodities perform by law the functions of a measure of value, in practice one alone maintains that position.48

B. THEORIES OF THE UNIT OF MEASURE OF MONEY.

The circumstance that commodities are converted into gold only in ideas as prices and that gold is therefore turned into money only in idea, gave rise to the theory of the ideal unit of measure of money. Since, in the determination of prices, gold and silver serve only ideally as money of account, it was asserted that the names pound, shilling, pence, thaler, franc, etc., instead of denoting certain weights of gold and silver or labor incorporated in some way, stood rather for ideal atoms of value. Thus, if, e. g., the value of an ounce of silver should rise it would contain more such atoms and would therefore have to be estimated and coined in a greater number of shillings. This doctrine, revived again during the last commercial crisis in England and even voiced in Parliament in two separate reports attached to the report of the select Committee on the Bank Acts sitting in July, 1858, dates from the end of the seventeenth century.

At the time of the accession of William III., the English mint-price of an ounce of silver was 5s. 2d., or 1-62 of an ounce of silver was equal to a penny; 12 of these pence were called a shilling. According to that standard, a piece of silver weighing, say, 6 ounces, would be coined into thirty-one coins, each called a shilling. But the market price of an ounce of silver rose above its mint price, from 5s. 2d. to 6s. 3d., or, in order to buy an ounce of silver bullion 6s. 3d. had to be paid. How could the market price of an ounce of silver rise above its mint price, when the mint price is merely a reckoning name for aliquot parts of an ounce of silver? The riddle was easily solved. Out of £5,600,000 of silver money which was in circulation at that time, four millions were worn out, clipped and debased. A trial disclosed that £57,000 of silver which were supposed to weigh 220,000 ounces, weighed only 141,000 ounces. The mint went on coining according to the same standard, but light-weighted shillings in actual circulation represented smaller parts of an ounce than their name implied. Hence, a greater quantity of these light-weighted shillings had to be paid in the market for an ounce of silver bullion. When a general recoinage was decided upon in consequence of the derangement that had been produced, LOWNDES, the Secretary of the Treasury, declared that the value of an ounce of silver had risen and therefore it must henceforth be coined into 6s. 3d. instead of into 5s. 2d. as heretofore. His argument practically amounted to the assertion that the rise in the value of the ounce caused a fall in the value of its aliquot parts. His false theory, however, served merely as an embellishment for a just, practical purpose. The government debts were contracted in light shillings, were they to be paid in heavy ones? Instead of saying pay back four ounces of silver, when you had received nominally five ounces but virtually only four, he said pay back nominally five ounces but reduce the metallic contents to four ounces and call a shilling what you had called four-fifths of a shilling heretofore. Thus Lowndes practically adhered to the metallic weight while theoretically he clung to the reckoning name. His adversaries who clung only to the name and therefore declared the 25 to 50 per cent. lighter shilling to be identical with the full-weight shilling maintained on the contrary that they adhered to the metallic weight.

JOHN LOCKE, who was an advocate of the new bourgeoisie in all forms, the manufacturers against the working classes and paupers, the commercial class against the old fashioned usurers, the financial aristocracy against the state debtors, and who went so far as to prove in his own work that the bourgeois reason is the normal human reason, also took up the challenge against Lowndes. John Locke carried the day and money borrowed at ten or fourteen shillings to a guinea was repaid in guineas of twenty shillings.49 SIR JAMES STEUART sums up the entire transaction as follows: “ ... the state gained considerably upon the score of taxes, as well as the creditors upon their capitals and interest; and the nation, which was the principal loser, was pleased; because their standard (The standard of their own value) was not debased.”50 Steuart thought that the nation would prove more alert with the further development of commerce. He was mistaken. About 120 years later the same quid pro quo was repeated.

It was just in the order of things that Bishop BERKELEY, the representative of a mystical idealism in English philosophy, should have given a theoretical turn to the doctrine of the ideal unit of measure of money, something which the practical “Secretary to the Treasury” had failed to do. He asks: “Whether the terms Crown, Livre, Pound Sterling, etc., are not to be considered as Exponents or Denominations of such Proportion? [namely proportions of abstract value as such.] And whether Gold, Silver, and Paper are not Tickets or Counters for Reckoning, Recording and Transferring thereof? (of the proportion of value). Whether Power to command the Industry of others be not real Wealth? And whether Money be not in Truth, Tickets or Tokens for conveying and recording such Power, and whether it be of great consequence what Materials the Tickets are made of?”51 Here we find a confusion, first of the measure of value and the standard of price, and secondly of gold and silver as measures on the one hand and mediums of circulation on the other. Because precious metals can be replaced by tokens in the process of circulation Berkeley comes to the conclusion that these tokens represent nothing, i. e., only the abstract idea of value.

SIR JAMES STEUART had so fully developed the theory of the ideal unit of measure of money, that his successors—unconscious successors since they do not know him—have added to it neither a new version nor even a new example. “Money, which I call of account, is no more than an arbitrary scale of equal parts, invented for measuring the respective value of things vendible. Money of account, therefore, is quite a different thing from money coin, which is price52 and might exist, although there was no such thing in the world as any substance which could become an adequate and proportional equivalent, for every commodity.... Money of account ... performs the same office with regard to the value of things, that degrees, minutes, seconds, etc., do with regard to angles, or as scales do to geographical maps, or to plans of any kind. In all these inventions, there is constantly some denomination taken for the unit. ... The usefulness of all those inventions being solely confined to the marking of proportion. Just so the unit in money can have no invariable determinate proportion to any part of value, that is to say, it cannot be fixed to any particular quantity of gold, silver, or any other commodity whatsoever. The unit once fixed, we can, by multiplying it, ascend to the greatest value.... The value of commodities, therefore, depending upon a general combination of circumstances relative to themselves and to the fancies of men, their value ought to be considered as changing only with respect to one another; consequently, anything which troubles or perplexes the ascertaining those changes of proportion by the means of a general, determinate and invariable scale, must be hurtful to trade.... Money ... is an ideal scale of equal parts. If it be demanded what ought to be the standard value of one part? I answer by putting another question: What is the standard length of a degree, a minute, a second? It has none ... but so soon as one part becomes determined by the nature of a scale, all the rest must follow in proportion. Of this kind of money ... we have two examples. The bank of Amsterdam presents us with the one, the coast of Angola with the other.”53

Steuart speaks here simply of the part money plays in circulation as the standard of price and money of account. If different commodities are marked in the price-list at 15s., 20s., 36s., respectively, then I care, in fact, neither for the silver substance, nor for the name of the shilling when comparing the magnitudes of their values. The ratios between the numbers 15, 20, 36, tell everything, and the number 1 has become the only unit of measure. Only the abstract proportion of numbers can at all serve as a purely abstract expression of proportion. In order to be consistent, Steuart should have dropped not only gold and silver, but their legal baptismal names as well. Since he does not understand the nature of the transformation of the measure of value into a standard of price, he naturally believes that the definite quantity of gold which serves as a unit of measure relates as a measure not to other quantities of gold, but to values as such. Since commodities appear as quantities of the same denomination through the conversion of their exchange values into prices, he denies that property of the measure which reduces them to one denomination; and since in this comparison of different quantities of gold the quantity of gold which serves as a unit of measure is conventional, he does not see the necessity of fixing it at all. Instead of calling 1-360 part of a circle degree, he might give that name to 1-180th part; the right angle would then be measured by 45 degrees instead of 90, and acute and obtuse angles would be measured accordingly. Nevertheless, the measure of the angle would remain, then, as before, first a qualitatively definite mathematical figure, the circle, and second a quantitatively definite part of the circle. As for Steuart’s economic illustrations, he refutes his own argument with one and does not prove anything with the other. The bank money of Amsterdam was, in fact, merely the reckoning name for Spanish doubloons, which retained their full weight by lying idly in the bank vaults, while the circulating coins became thinner from hard rubbing against the outer world. And as for the African idealists we have to abandon them to their fate until critical travelers will tell us more about them.54 The French assignat could be called an almost ideal money in Steuart’s sense: “National property. Assignation of 100 francs.” To be sure, the use-value which the assignation was supposed to represent, namely, the confiscated land, was indicated here, but the quantitative definition of the unit of measure was forgotten and “the franc” became a meaningless word. How much or how little land the assignation franc represented depended on the results of the public auctions. In practice, however, the assignation franc circulated as a token of value of silver money and its depreciation was, therefore, measured by this silver standard.

The period of the suspension of cash payments by the Bank of England was hardly more fruitful of war-bulletins than of money theories. The depreciation of bank notes and the rise of the market price of gold above its mint price called forth again the doctrine of the ideal unit of money on the part of some of the advocates of the Bank. Lord Castlereagh found the classical confused expression for the confused idea by speaking of the unit of measure of money as “a sense of value in reference to currency as compared with commodities.” When a few years after the peace of Paris conditions permitted the resumption of cash payments, the same question which had been stirred up by Lowndes under William III., came up, hardly changed in form. An enormous government debt, as well as a mass of private debts, accumulated in twenty years, fixed obligations, etc., had been contracted on the basis of depreciated bank notes. Were they to be paid back in bank notes of which £4672, 10s. nominal, actually represented 100 pounds of 22 carat gold? THOMAS ATTWOOD, a banker of Birmingham, came forth as Lowndes redivivus. The creditors were to receive nominally as many shillings as had been nominally borrowed, but if about 1-78 of an ounce of gold constituted a shilling according to the old standard of coinage, then say 1-90 of an ounce should now be christened a shilling. Attwood’s adherents are known as the Birmingham school of “little shillingmen.” The controversy over the ideal money unit, which had started in 1819, still went on in 1845 between Sir Robert Peel and Attwood, whose own wisdom, as far as the function of money as a measure is concerned, is exhaustively summed up in the following passage, in which, referring to Sir Robert Peel’s controversy with the Birmingham Chamber of Commerce, he says: “The substance of your queries is ... in what sense is the word pound to be used?... To what will the sum one pound be equivalent?... Before I venture a reply I must enquire what constitutes a standard of value?... Is £3 17s. 10-1/2d. an ounce of gold, or is it only of the value of an ounce of gold? If £3 17s. 10-1/2d. be an ounce of gold, why not call things by their proper names, and, dropping the terms pounds, shillings and pence, say ounces, pennyweights and grains?... If we adopt the terms ounces, pennyweights and grains of gold, as our monetary system, we should pursue a direct system of barter.... But if gold be estimated as of the value of £3 17s. 10-1/2d. per ounce ... how is this ... that much difficulty has been experienced at different periods to check gold from rising to £5 4s. per ounce, and we now notice that gold is quoted at £3 17s. 9d. per ounce?... The expression pound has reference to value, but not a fixed standard value.... The term pound is the ideal unit.... Labour is the parent of cost and gives the relative value to gold or iron. Whatever denomination of words are used to express the daily or weekly labour of a man, such words express the cost of the commodity produced.”55

In the last words the hazy conception of the ideal money measure melts away and its real meaning breaks through. The reckoning names of gold, pound sterling, shilling, etc., should be names for definite quantities of labor-time. Since labor-time constitutes the substance and the intrinsic measure of values, these names would then actually represent definite proportions of value. In other words, labor-time is maintained to be the true unit of measure of money. With this we leave the Birmingham school, but should add in passing that the doctrine of the ideal measure of money acquired new importance in the controversy over the question of the convertibility or non-convertibility of bank notes. If paper receives its name from gold or silver, then the convertibility of a note or its exchangeability for gold or silver remains an economic law, no matter what the civil law may be. Thus a Prussian paper thaler, although legally inconvertible, would immediately depreciate if it were worth less than a silver thaler in ordinary trade, i. e., if it were not practically convertible. The consistent advocates of inconvertible paper money in England, therefore, sought refuge in the ideal measure of money. If the reckoning names of money, £, s., etc., are names of certain quantities of atoms of value, of which a commodity absorbs or loses now more, now less in exchange for other commodities, then an English £5 note, e. g., is just as independent of its relation to gold as of that to iron and cotton. Since its title would no more imply its theoretical equality with a certain quantity of gold or any other commodity, the demand for its convertibility, i. e., for its practical equality with a definite quantity of a specified thing would be excluded by the very conception of the note.

The theory of labor-time as the direct measure of money was first systematically developed by JOHN GRAY.56 He makes a National Central Bank ascertain through its branches the labor-time consumed in the production of various commodities. The producer receives an official certificate of value in exchange for his commodity. i. e., he gets a receipt for as much labor-time as his commodity contains,57 and these bank notes of one week’s labor, one day’s labor, one hour’s labor, etc., serve at the same time as a check for an equivalent in all other commodities stored in the bank warehouses.58 This is the fundamental principle carefully worked out in detail and based throughout on existing English institutions. Under this system, says Gray, “to sell for money may be rendered, at all times, precisely as easy as it now is to buy with money; ... production would become the uniform and never-failing cause of demand.”59 The precious metals would lose their “privilege” as against other commodities and “take their proper place in the market beside butter and eggs, and cloth and calico, and then the value of the precious metals will concern us just as little ... as the value of the diamond.”60 “Shall we retain our fictitious standard of value, gold, and thus keep the productive resources of the country in bondage? or, shall we resort to the natural standard of value, labour, and thereby set our productive resources free?”61

Labor-time being the intrinsic measure of value, why should there be another external measure side by side with it? Why does exchange value develop into price? Why do all commodities estimate their value in one exclusive commodity, which is thus converted into a special embodiment of exchange value into money? That was the problem which Gray had to solve. Instead of solving it, he imagined that commodities could be related directly to each other as products of social labor. But they can relate to each other only in their capacity of commodities. Commodities are the direct products of isolated independent private labors, which have to be realized as universal social labor through their alienation in the process of private exchange, that is to say, labor based on the production of commodities becomes social labor only through universal alienation of individual labors. But by assuming that the labor-time contained in commodities is directly social labor-time, Gray assumes it to be common labor-time or labor-time of directly associated individuals. Under such conditions a specific commodity like gold or silver could not confront other commodities as the incarnation of universal labor, and exchange value would not be turned into price; but, on the other hand, use-value would not become exchange value, products would not become commodities and thus the very foundation of the capitalistic system of production would be removed. But that is not what Gray has in mind. Products are to be produced as commodities, but are not to be exchanged as commodities. He entrusts a national bank with the carrying out of this pious wish. On the one hand, society, through the bank, makes individuals independent of the conditions of private exchange, and on the other, it allows them to go on producing on the basis of private exchange. The logic of things, however, compels Gray to do away with one condition of capitalistic production after another, although he wishes to “reform” only the money system which results from the exchange of commodities. Thus he transforms capital into national capital,62 land into national property,63 and if his bank is to be watched closely, it will be found that it not only receives commodities with one hand and issues certificates for work delivered with the other, but that it regulates production as well. In his last work, “Lectures on Money,” in which Gray is anxious to demonstrate that his labor-money is a purely bourgeois reform, he gets tangled up in even more glaring contradictions.

Every commodity is directly money. That was Gray’s theory deducted from his incomplete and, therefore, false analysis of commodities. The “organic” structure of “labor money,” the “national bank” and the “ware-docks” are mere fantastic visions in which the dogma is made by a legerdemain to appear to us as a universal law. The dogma that a commodity is money or that the isolated labor of the individual contained in it is direct social labor, will of course not become true through the mere fact that a bank believes in it and carries on operations accordingly. It is more likely that bankruptcy would play in that case the part of the practical critic. What remains concealed in Gray’s writings and hidden from himself as well, namely, that labor-money is a well-sounding economic phrase for the pious wish to get rid of money, and with money, of exchange value, and with exchange value, of commodities, and with commodities, of the capitalistic mode of production, was clearly expressed by some English socialists of whom a few preceded and others followed Gray.64

But it remained for Mr. Proudhon and his school to preach in all earnest the degradation of money and the exaltation of the commodity as the gist of socialism and thus to reduce socialism to an elementary misconception of the necessary connection between commodity and money.65

2. THE MEDIUM OF CIRCULATION.

After the commodity has received in the process of price determination the form in which it becomes capable of circulation, and after gold has acquired the character of money in the same process, circulation will both present and solve the contradictions which are inherent in the process of exchange of commodities. The actual exchange of commodities, i. e., the social interchange of matter consists of a change of form in which is unfolded the double character of the commodity as use-value and exchange value, and at the same time its own change of form is crystallized in distinct forms of money. To describe this change of form is to describe circulation. As we have seen, given a world of commodities and with it a system of division of labor, commodity is but a developed form of exchange value; in the same manner, circulation implies a steady stream of exchange transactions which are being continually renewed on all sides. The second assumption we make is that commodities enter the process of exchange with a definite price or that they appear to each other in that process in a double capacity, really as use-values, ideally—in price—as exchange values.

The liveliest streets of London are crowded with stores whose show windows are filled with the riches of the world, Indian shawls, American revolvers, Chinese porcelain, Parisian corsets, Russian furs and tropical spices, but all of these things of joy bear fatal white labels marked with Arabian figures with the laconic characters £, s., d. Such is the picture of the commodity appearing in circulation.

a. THE METAMORPHOSIS OF COMMODITIES.

On close examination the process of circulation is seen to consist of two distinct cycles. If we denote commodity by the letter C and money by the letter M we can express these two forms as follows:

C—M—C
M—C—M.

In this chapter we are interested exclusively in the first form, i. e., in the form which serves as the direct expression of the circulation of commodities.

The process C—M—C consists of the movement C—M, the exchange of the commodity for money, or selling; the opposite movement M—C, exchange of money for a commodity, or buying; and of the unity of the two movements C—M—C, exchange of the commodity for money in order to exchange the money for a commodity, or selling in order to buy. But the result which marks the end of the process is C—C, exchange of commodity for commodity, real interchange of matter.

If we look at it from the extreme end of the first commodity, C—M—C represents its transformation into gold and its retransformation from gold into a commodity; a movement in which the commodity exists first as a particular use-value, then divests itself of that character, acquires the character of exchange value or universal equivalent, in which capacity it has nothing in common with its natural form, then throws off the last form as well to remain finally an actual use-value for the satisfaction of particular wants. In this last form it falls out of the sphere of circulation into that of consumption. The entire process of circulation C—M—C thus includes the combined series of metamorphoses, which every single commodity undergoes in order to become a direct use-value to its possessor. The first metamorphosis is accomplished in the first phase of the circulation process, C—M; the second in the last phase, M—C; and the entire process constitutes the curriculum vitae of the commodity. But the process C—M—C represents the combined metamorphosis of a single commodity and constitutes at the same time the sum of certain one-sided metamorphoses of other commodities, since every metamorphosis of the first commodity constitutes its transformation into another commodity and therefore the transformation of the other commodity into it; hence it constitutes a twofold transformation which takes place at the same stage of circulation. We must then consider separately each of the two processes of exchange into which circulation C—M—C breaks up.

C—M or sale: commodity C enters the process of circulation not only as a particular use-value, e. g., a ton of iron, but as a use-value of a certain price, say, £3 17s. 10-1/2d., or an ounce of gold. While this price is on the one hand the exponent of the quantity of labor-time contained in a ton of iron, i. e., of the magnitude of its value, it at the same time expresses the pious wish of the iron to become gold, i. e., to give to the labor-time it contains the aspect of universal social labor-time. Unless this trans-substantiation takes place, the ton of iron not only ceases to be a commodity, but even a product, for it is a commodity only because it is a non-use-value to its owner; that is to say, his labor counts as actual labor only in so far as it is labor useful to others, and the thing is useful to him only as abstract universal labor. It is, therefore, the business of iron, or of its owner, to find that point in the world of commodities where iron attracts gold. But this difficulty, the salto mortale of the commodity, is overcome when the sale actually takes place, as is assumed here on the analysis of simple circulation. When the ton of iron is realized as a use-value through its alienation, i. e., by passing from the hands in which it is a non-use-value to hands in which it is a use-value, it at the same time realizes its price and from mere imaginary gold it becomes real gold. In place of the name one ounce of gold or £3 17s. 10-1/2d., an ounce of real gold has appeared, but the ton of iron has cleared that place. Not only does the commodity—which in its price had been ideally converted into gold—actually turn into gold through the sale C—M, but gold, which as a measure of value had been only ideal money and in fact figured merely as a money name of commodities—is now turned into actual money66 by the same process. Just as gold became the ideal universal equivalent, because all commodities measured their values by it, so does it now become the absolutely alienable commodity, real money, because it is the product of the universal alienation of commodities for it—and the sale C—M is the process by means of which that universal alienation takes place. But gold becomes real money only through sale, because the exchange values of commodities were already ideal gold in their prices.

In the sale C—M, as well as in the purchase M—C, two commodities, entities of exchange value and use-value, confront each other, but the exchange value of the commodity exists only ideally as price; while as regards gold, although it is really a use-value, its use-value is confined only to its being the bearer of exchange value and is, therefore, merely a formal use-value, having no relation to a real individual want. The antithesis of use-value and exchange value is thus distributed at the two extreme poles of C—M, so that the commodity confronts gold as a use-value which has yet to realize in gold its exchange value or its price, while gold confronts the commodity as an exchange value, whose formal use-value is yet to be realized in the commodity. Only through this duplication of the commodity as commodity and gold, and, further, through the twofold and polar relation by virtue of which each extreme represents but ideally what its opposite is in reality and is in reality what its opposite is only ideally—in short, only through the appearance of commodities as two-sided polar opposites are the contradictions solved that are inherent in the process of exchange.

So far we have considered C—M as sale, as the conversion of commodity into money. But if we look at it from the other end, the same process will assume the form M—C, or purchase, i. e., the conversion of money into commodity. Sale is necessarily its opposite at the same time; it is the former if we look at the process from one end, and the latter if we regard the process from the other end. In practice this process differs only in that the initiative in C—M originates at the commodity end or with the seller, while in M—C it comes from the money end or the buyer. In describing the first metamorphosis of the commodity, its conversion into money as a result of the completion of the first phase of circulation C—M, we assume at the same time that another commodity has been converted into money and is now in its second phase of circulation, M—C. Thus we get into a vicious circle of assumptions. Circulation itself constitutes such a vicious circle. If we did not consider M in M—C as the result of a metamorphosis of another commodity, we would thereby take exchange out of the process of circulation. But outside of the latter the form C—M disappears and only two different Cs confront each other, say iron and gold, the exchange of which does not constitute a part of the process of circulation, being direct barter. Gold, at the source of its production, is a commodity like any other commodity. Its relative value and that of iron or of any other commodity is expressed here in quantities in which they are mutually exchanged. But in the process of circulation this operation is implied, the value of gold being already given in the prices of commodities. Nothing can, therefore, be more erroneous than the idea that gold and commodity enter into the relation of direct barter within the process of circulation and that their relative values are ascertained through their exchange as simple commodities. The illusion that gold is bartered as a simple commodity for other commodities in the process of circulation is due to the fact that prices represent equations in which certain quantities of commodities are made equal to certain quantities of gold, i. e., that the commodities are made to relate to gold in its capacity of money, as a universal equivalent, and, therefore, appear to be directly exchangeable for it. In so far as the price of a commodity is realized in gold, it is exchanged for gold as a commodity, as a particular embodiment of labor-time; but in so far as it is the price that is realized in gold, the commodity is exchanged for gold in its capacity of money and not of a commodity, i. e., it is exchanged for gold as a universal embodiment of labor-time. But in either case the quantity of gold for which the commodity is exchanged in the process of circulation is not determined by exchange, but the exchange is determined by the price of the commodity, i. e., by its exchange value estimated in gold.67

Within the process of circulation gold appears in everybody’s hands as the result of sale C—M. But since C—M, sale, is at the same time M—C, purchase, it is apparent that while C, the commodity from which the process starts, is passing through its first metamorphosis, another commodity, which confronts it as the opposite pole M, is completing its second metamorphosis and is, therefore, passing through the second phase of circulation, while the first commodity is still in the first phase of its course.

As a result of the first phase of circulation, the sale, we get money which is the starting point of the second phase. In place of the commodity in its first form appears its golden equivalent. This result may now form a resting point, since the commodity in this second form possesses a lasting existence of its own. The commodity, a non-use-value in the hands of its possessor, is now on hand in an always useful, since always exchangeable, form, and it depends upon circumstances when and at what point of the surface of the commodity world it will again enter circulation. Its formation into a gold chrysalis constitutes an independent period in its life which may last a greater or less length of time. While in the case of barter the exchange of one particular use-value is directly bound up with the exchange of another particular use-value, the universal character of labor which creates exchange value is manifested in the separation and lack of coincidence of acts of purchase and sale.

M—C, purchase, is the inverted movement of C—M and at the same time the second or final metamorphosis of the commodity. As gold, i. e., in the form of the universal equivalent, the commodity can be directly represented in the use-values of all other commodities; the latter aspire to gold as their hereafter, but at the same time indicate in their prices the key in which it must sound in order that their bodies, their use-values, may take the place of money, while their souls, their exchange-values, may enter gold. The universal product of the alienation of commodities is the absolutely alienable commodity. There is no qualitative and only a quantitative limit to the transformation of gold into commodity, namely, the limit of its own quantity or magnitude of its value. “Everything is to be had for cash.” While in the movement C—M, the commodity, through its alienation as a use-value, realizes its own price and the use-value of somebody else’s money; it realizes in the movement M—C, through its alienation as an exchange value, its own use-value and the price of the other commodity. While through the realization of its price the commodity transforms gold into actual money, it turns gold into its merely fleeting money-form, through its own retransformation. Since the circulation of commodities implies an extensive division of labor and consequently a diversity of wants on the part of individuals, a diversity which bears an inverse ratio to the specialization of their own products, the purchase M—C may appear as an equation with one commodity equivalent or split up into a series of commodity-equivalents limited by the variety of the demands of the purchaser and by the amount of money in his possession. Just as a sale is a purchase, so is a purchase a sale. M—C is at the same time C—M, but the initiative belongs in this case to gold or the purchaser.

Coming back now to C—M—C, or to circulation as a whole, it is apparent that it contains the combined series of metamorphoses through which a commodity passes. But at the same time as one commodity enters the first phase of its circulation and completes its first metamorphosis, another commodity enters the second phase of circulation, completes its second metamorphosis and falls out of circulation; the first commodity enters at the same time the second phase of circulation completes its second metamorphosis and falls out of circulation, while a third commodity enters circulation, passes through the first phase of its course completing the first metamorphosis.

Thus, the combined circulation C—M—C, as a complete metamorphosis of a commodity always constitutes at the same time the end of the complete metamorphosis of another commodity and the beginning of a complete metamorphosis of a third commodity, i. e., a series without beginning or end. To illustrate this let us call C in either extreme C’ and C” respectively, in order to distinguish the commodities, the series reading thus: C’—M—C”. The first member, C’—M, presupposes in fact that M is the result of another transaction C—M, and is thus itself merely the last member of a series C—M—C’, while the second part M—C” is merely a result of C”—M, or appears as the first part of C”—M—C’”, and so on. Furthermore, although M is the result of only one sale, it appears that the last part M—C, may be represented as M—C’ + M—C” + M—C’”, etc., i. e., it may be split up into a number of purchases, and consequently a number of sales, or into a number of first members of new complete metamorphoses of commodities. Since the complete metamorphosis of a single commodity thus appears as a link not only of one endless chain of metamorphoses, but of many such chains, the process of circulation in the world of commodities presents a hopeless confusion of intertwined movements constantly ending and starting anew at a countless number of points. But every single sale or purchase stands as an independent isolated act, whose supplemental act may be separated from it in time and place, and therefore does not need to follow it directly as its continuation. Every separate process of circulation, C—M or M—C, as a transformation of one commodity into use-value and of another into money, i. e., as the first and second phases of circulation respectively forms an independent halting point from either direction; but, on the other hand, all commodities commence their second metamorphosis in the common form of the universal equivalent, gold, and stop at the starting point of the second phase of circulation; for that, reason any M—C dovetails in actual circulation with any C—M; the second chapter in the life-course of one commodity with the first chapter of that of another commodity. A, e. g., sells £2 worth of iron. He thus completes the transaction C—M or the first metamorphosis of commodity iron, but postpones his purchase until some other time. At the same time B, who sold 2 quarters of wheat for £6 a fortnight since, buys with the same £6 a coat and trousers of Moses & Son, thus completing M—C or the second metamorphosis of the commodity, wheat.

The two transactions M—C and C—M appear here merely as links of one chain, because a commodity expressed in gold looks like any other commodity, and one cannot tell by the looks of the gold whether it is transformed iron or transformed wheat. C—M—C appears, therefore, in the actual process of circulation as a jumble of countless accidentally coinciding or successively following members of different complete metamorphoses. The actual process of circulation thus appears not as a complete metamorphosis of a commodity, not as its movement through opposite phases, but as a mere agglomeration of many accidentally coinciding or successive purchases and sales. The process thus loses all clearness of outline which is so much more the case since every single act of circulation, e. g., sale, is at the same time its opposite, purchase, and vice versa. On the other hand, the process of circulation is nothing but the movement of metamorphoses in the world of commodities and, therefore, must reflect them also in its movement as a whole. How that reflection takes place we shall consider in the following chapter. It may be added here that in C—M—C the two extreme Cs constitute two forms of commodities which do not bear the same relation to M. The first C relates to money as a commodity of a special class to a universal commodity, while money relates to the second C as a universal commodity to an individual commodity. C—M—C can, therefore, be reduced by abstract logic to the final form S—U—I in which S, standing for species, forms the first extreme; U, signifying universality, forms the connecting medium, and I, individuality, constitutes the last extreme.

The owners of commodities entered the sphere of circulation simply as guardians of commodities. Within that sphere they confront each other in the opposite roles of buyer and seller, one as a personified sugar-loaf, the other as personified gold. As soon as the sugar-loaf is turned into gold, the seller becomes a buyer. These definite social functions are no outgrowths of human nature, but are the products of relations of exchange between men who produce their goods in the form of commodities. They are so far from being purely individual relations between buyer and seller that both enter this relation only to the extent that their individual labor is disregarded and is turned into money as labor of no individual. Just as it is, therefore, childish to consider these economic bourgeois roles of buyer and seller as eternal social forms of human individuality, so it is on the other hand, preposterous to lament in them the extinction of individuality.68 They are the necessary manifestations of individuality at a certain stage of the social system of production. Moreover, in the opposition of buyer and seller the antagonistic nature of capitalistic production is expressed as yet so superficially and as mere matter of form, that this opposition belongs also to precapitalistic forms of society, since it merely requires that the mutual relations of individuals should be those of owners of commodities.

Now, if we consider the result of C—M—C, it comes down to mere interchange of matter, C—C. A commodity has been exchanged for a commodity, a use-value for a use-value, and the transformation of the commodity into money, or the commodity in its form of money, serves merely as a means of effecting this interchange of matter. Money thus appears merely as a medium of exchange of commodities; not as a medium of exchange in general, but as a means of exchange in the sphere of circulation, i. e., a medium of circulation.69

We have seen that the process of circulation of commodities comes to a completion in C—C, appearing as mere barter carried on by means of money; further, that C—M—C represents in general not only two isolated processes, but their dynamic union as well; but to draw from that the conclusion that purchase and sale form an indivisible unit, is a mode of thinking the criticism of which belongs to the domain of logic, and not to that of economics. The separation of purchase and sale in the process of exchange destroys all local, primitive, patriarchal and naively genial barriers to interchange of matter in society. It is, moreover, the general form of the separation of the points of coincidence and opposition in this interchange, carrying within it the possibility of commercial crises, because the antagonism of commodity and money is the abstract and general form of all antagonisms with which the capitalistic system of labor is pregnant. Hence, circulation of money is possible without crises, but crises can not occur without money circulation. In other words, where labor based on the system of private exchange has not reached the stage marked by the existence of money, it is less capable of producing those phenomena which presuppose the full development of the capitalistic mode of production. Bearing this in mind we can appreciate the depth of the criticism which proposes to do away with the “shortcomings” of capitalistic production by abolishing the “privilege” enjoyed by the precious metals and introducing a so-called “rational monetary system.” As a sample of economic defence of an opposite character may serve the following piece of reasoning which has been proclaimed exceedingly keen. JAMES MILL, the father of the well-known English economist, John Stuart Mill, says: “Whatever ... be the amount of the annual produce, it never can exceed the amount of the annual demand.... Of two men who perform an exchange, the one does not come with only a supply, the other with only a demand; each of them comes with both a demand and a supply.... The supply which he brings is the instrument of his demand; and his demand and supply are of course exactly equal to one another. It is therefore, impossible that there should ever be in any country a commodity or commodities in quantity greater than the demand, without there being, to an equal amount, some other commodity or commodities in quantity less than the demand.”70

Mill restores the balance by turning the process of circulation into direct barter and then smuggling into direct barter the character of buyer and seller borrowed by him from the process of circulation. To put it in his own confused language, during certain periods when all commodities are unsaleable there are really more buyers than sellers of one commodity, money, and more sellers than buyers of all other money, commodities; such was, e. g., the case at certain moments during the commercial crisis of 1857-58 in London and Hamburg. The metaphysical balance of purchases and sales amounts to this, that every purchase is a sale and every sale is a purchase, which is a poor consolation to the guardian of the commodity who can not bring about its sale and therefore can not buy.71

The separation of sale and purchase makes possible a large number of fictitious transactions side by side with genuine trade before the final exchange between the producer and the consumer of commodities takes place. It enables a host of parasites to penetrate the process of production and exploit the separation. But this, again, means that with money as the universal form of labor under the capitalist system, there is the possibility of the development of its contradictions.

b. THE CIRCULATION OF MONEY.

Actual circulation appears at first sight as a mass of purchases and sales accidentally taking place side by side. In buying as in selling, commodities and money always stand in the same mutual relation: the seller, on the side of the commodity; the buyer, on that of money. Money as a medium of circulation always appears therefore as a means of purchase; and in that way the difference in its destinations in the opposite phases of the metamorphosis of the commodity becomes indistinguishable.

Money passes into the hands of the seller in the same transaction in which the commodity passes into the hands of the buyer. Commodities and money thus flow in opposite directions and this change of place in which the commodity passes over to one side and money to the other side, occurs simultaneously at an indefinitely large number of points on the entire surface of bourgeois society. But the first step which the commodity makes in the sphere of circulation is also its last step.72 Whether it leaves its place on account of its attraction for gold (C—M), or on account of its attraction by gold (M—C), with one move, with one change of place it falls out of the sphere of circulation into that of consumption. Circulation is a continuous flow of commodities, but different commodities all the time, since each commodity makes but one move. Every commodity enters upon the second phase of its circulation not as the same commodity, but as another commodity, gold. Hence the movement of a metamorphosed commodity is the movement of gold. The same piece of gold or the identical gold coin which changed places with one commodity in the act C—M, reappears from the opposite end as the starting point for M—C and thus changes places for the second time with another commodity. Just as it passed from the hands of buyer B into those of seller A, it now leaves A’s hands who has become a buyer and passes into C’s hands. The path described by a commodity in its transformation into money and its retransformation from money, i. e., the movement of a complete metamorphosis of a commodity assumes the aspect of an apparent movement of the same coin that changes places twice with two different commodities. No matter in how scattered and haphazard fashion purchases and sales may take place near each other, there is always in actual circulation a seller for each buyer and the money which moves into the place of the commodity sold, before it came into the hands of the buyer, must have already changed places with another commodity. Sooner or later it again leaves the hands of the seller, who turns buyer, to pass into the hands of a new seller and this frequently repeated change of place forms the interlacing of the metamorphoses of commodities. The same coins are moving, some more, others less frequently, from one place in the sphere of circulation to another, always in the direction opposite to that of the commodities moved, thus describing a longer or shorter circulation-curve. The different movements of the same coin can follow each other in point of time only, and on the contrary, the many scattered purchases and sales which appear as so many separate changes of place between commodities and money, occur simultaneously separated only in point of space.

The circulation of commodities C—M—C in its elementary form is completely described in the transition of money from the hands of the buyer into those of the seller and from the hands of the latter, as soon as he has turned buyer, into those of a new seller. This completes the metamorphosis of the commodity and with it the movement of money in so far as that movement is the expression of the metamorphosis. But since new use-values are continually produced in the shape of new commodities and must thus be constantly thrown anew into circulation, the process C—M—C is repeatedly renewed by the same commodity owners. The money which they have spent as buyers gets back into their hands as soon as they appear again as vendors of commodities. The constant renewal of the circulation of commodities finds its reflection in the continual circulation over the entire surface of bourgeois society of a quantity of money which, passing from hand to hand, describes at the same time a number of different small cycles starting from numberless points and returning each to its own starting point, to repeat the same movement over again.

The change of form on the part of commodities appears as a mere change of place on the part of money and the continuity of the circulation movement is all on the side of money, since the commodity always makes but one step in the direction opposite to money, while the latter makes in each case the second step for the commodity; the entire movement seems, therefore, to proceed from money, although in the case of a sale the commodity draws money out of its place, i. e., it circulates money as much as it is circulated by the latter in the case of a purchase. Furthermore, owing to the fact that money always confronts commodities in its capacity of a means of purchase, and in that capacity moves commodities only by realizing their price, the entire movement of circulation appears as a change of place between money and commodities, the former realizing the prices of the latter either by separate acts of circulation taking place simultaneously and side by side, or by successive transactions when the same coin realizes the prices of different commodities one after another. If we consider, e. g., the series C—M—C’—M—C”—M—C’”, etc., without regard to the qualitative aspects which become indistinguishable in the process of circulation, we witness the same monotonous operation. After realizing the price of C, M successively realizes those of C’, C”, etc., and commodities C’, C”, C’”, etc., constantly take the place which money has left. Money thus appears to keep commodities in circulation by realizing their prices. In discharging this function of realization of prices, money is itself constantly circulating, now changing its place, now describing a curve of circulation, now completing a small circuit where the starting and returning points coincide. As a medium of circulation, money is subject to a circulation of its own. The change of form of the circulating commodities appears, therefore, as a movement of money which furthers the exchange of commodities, motionless in themselves. The movement of the circulation process of commodities thus takes on the form of the movement of gold as a medium of circulation, i. e. of the circulation of money.

Since owners of commodities give the products of their individual labor the appearance of products of social labor by turning one object, viz. gold, into the direct expression of universal labor-time and therefore into money, their own movement by which all of them effect the interchange of the material products of their labor now appears to them as the direct movement of that one object, as the circulation of gold. The social movement itself appears to the owners of commodities partly as an outward necessity and partly as a mere formal intermediary process which enables every individual who puts any use-value into circulation to get other use-values out of it of an equal value. The use-value of commodities comes into play with their disappearance from the sphere or circulation, while the use-value of money as a medium of circulation is in its very circulation. The movement of a commodity in the sphere of circulation is of a transitory kind, while ceaseless motion in that sphere constitutes the function of money. Through this special function which it performs within the sphere of circulation money acquires a new capacity, which we have to consider now more closely.

In the first place, we see that the circulation of money forms an endlessly split up movement, since it reflects the splitting up of the process of circulation into an infinitely large number of purchases and sales and the independent separation of the mutually supplementary phases of metamorphoses of commodities. In the small cycles described by money, where the starting and returning points coincide, we do find a return movement, i. e., an actual circular movement, but the fact that there are as many starting points as there are commodities and that the number of these cycles is infinitely large puts them beyond all control, measurement, or computation. The time between the start and the return of a commodity is just as indefinite. Moreover, it is immaterial whether or not such a circuit has been actually described in a given case. No economic fact is more generally known than that one can spend money with one hand without getting it back with the other. Money proceeds from an endless number of points and returns to as many different points, but the coincidence of the starting and returning points is a matter of chance, because in the movement C—M—C the turning of the buyer again into a seller is not a necessary condition. Still less does the circulation of money resemble a movement radiating from a common centre to all points of the periphery and back from the peripheral points to the centre. The so-called cycle described by money, as it is pictured, amounts simply to this, that at all points we observe its appearance and disappearance, its never ceasing transition from place to place. In a higher, more involved form of money circulation, e. g. bank-note circulation, we shall find that the conditions of emission of money include those for its return. But in the simple money circulation it is a matter of chance for the same buyer to become again a seller. Where we really see constant cycle motions taking place, they are only reflections of deeper forces in the sphere of production, e. g., the manufacturer draws money from his banker on Friday, pays it out to his working-men on Saturday, the men immediately pay out the greater part of it to the storekeepers, etc., and the latter turn it in on Monday back to the banker.

We have seen that money realizes simultaneously a certain number of prices in the variegated purchases and sales which take place side by side at the same time. On the other hand, in so far as its movement represents the movement of the combined metamorphoses of commodities and the interlacing of these metamorphoses, the same coin realizes the prices of different commodities and thus makes a larger or smaller number of moves. If we take the circulation of a country for a given length of time, say a day, the quantity of gold required for the realization of prices and, consequently, for the circulation of commodities, will be determined by two conditions: first, the sum total of the prices; second, the average number of moves made by one coin. This number of moves or the rapidity of circulation of money is in its turn determined by or expresses the average rapidity with which commodities go through the different phases of their metamorphoses, the rapidity with which these metamorphoses succeed one another, and with which those commodities that have gone through their metamorphoses are replaced by new commodities in the process of circulation. We have seen that in the process of the determination of prices the exchange value of all commodities is ideally converted into a certain quantity of gold of the same value and that the same amount of value is present in a double form in either of the isolated acts of circulation M—C and C—M, first embodied in the commodity, and second, in gold; yet gold enjoys the capacity of a medium of circulation not by virtue of its isolated relation to separate commodities in a state of rest, but owing to its active presence in the dynamic world of commodities, viz., its function of expressing the change of form of commodities by its change of place and expressing the rapidity of their change of form by the rapidity of its change of place. The extent to which it is present in the sphere of circulation, i. e., the actual quantity of gold in circulation, is thus determined by the extent to which it is discharging its function throughout the entire process.

The circulation of money implies the circulation of commodities; money circulates commodities which have prices, i. e., which are beforehand ideally equated to certain quantities of gold. In the determination of the prices of commodities, the value of the quantity of gold which serves as a unit of measure, or the value of gold, is assumed to be given. Under that assumption the quantity of gold necessary for circulation is determined first of all by the sum total of the prices of commodities that are to be realized. But this sum is itself determined: 1. By the level of prices, the relatively high or low exchange value of commodities estimated in gold; and 2. By the mass of commodities circulating at fixed prices, i. e. by the number of purchases and sales at given prices.73 If one quarter of wheat is worth 60 shillings, then twice as much gold is required to circulate it or to realize its price as would be the case if it were worth only 30 shillings. To circulate 500 quarters of wheat at 60 shillings, twice as much gold is necessary as for the circulation of 250 quarters at the same price. Finally, to circulate 10 quarters at 100 shillings only half as much money is necessary as when circulating 40 quarters at 50 shillings. It follows that the quantity of gold required for circulation may fall in spite of a rise in price, if the mass of commodities in circulation declines in a greater ratio than the rise of the combined sum of prices; and, inversely, the quantity of the circulating medium may rise in spite of a decline of the mass of commodities in circulation, if the sum total of prices rises in a greater ratio. Thorough and minute English investigations have demonstrated e. g. that in the early stages of a dearth of grain in England the quantity of money in circulation increases, because the total price of the diminished supply of grain is greater than the former total price of a larger supply of grain, while the circulation of the other commodities continues undisturbed for some time at their old prices. At a later stage of the dearth of grain, there is a decline in the quantity of circulating money, either because less goods are sold at old prices besides grain, or the same quantity of those goods is sold at lower prices.

But, as we have seen, the quantity of money in circulation is determined not only by the sum total of prices of commodities that are to be realized, but also by the rapidity with which money circulates or with which it completes this work of realization. If the same sovereign makes ten purchases a day, each of a commodity having a price of one sovereign, and thus changes hands ten times, it does as much work as would be accomplished by ten sovereigns each performing but a single act of circulation a day.74 Consequently, rapidity of gold circulation can make up for its quantity, or the presence of gold in the sphere of circulation is determined not only by its presence as an equivalent of a commodity side by side with it, but also by its participation in the movement of metamorphoses of commodities. The rapidity of the circulation of money, however, can serve as a substitute for its quantity only to a limited extent, since at any given moment an endless number of isolated purchases and sales takes places in different localities.

If the total price of the commodities in circulation rises, but in a smaller ratio than the increase in the rapidity of circulation of money, the volume of the circulating medium will diminish. If on the contrary the rapidity of circulation decreases in a greater ratio than the total price of the commodities in circulation, the volume of currency will increase. An increasing volume of currency combined with a general fall of prices or a diminishing volume of currency in connection with a general rise of prices is one of the best known phenomena in the history of prices. But the consideration of the causes which bring about a simultaneous rise in the level of prices and a still greater rise in the rate of velocity of circulation of money, or the opposite phenomenon, falls outside of the sphere of simple circulation. By way of illustration, it may be mentioned that in periods of prevailing credit, the rapidity of circulation of money grows faster than the prices of commodities, while in times of declining credit the prices of commodities fall slower than the rapidity of circulation. The shallow and artificial character of the simple circulation of money is manifested in the fact that all the elements which have a determining influence on the volume of currency, such as the volume of commodities in circulation, prices, the rise or fall of prices, the number of simultaneous purchases and sales, the rapidity of the circulation of money,—depend on the metamorphic process which takes place in the world of commodities, and that again depends on the general character of the methods of production, the size of population, the relation between city and country, the development of the means of transportation, the greater or less division of labor, credit, etc.; in short, on circumstances all of which lie outside of the sphere of simple circulation of money and are only reflected in it.

The rapidity of circulation being given, the volume of currency is simply determined by the prices of commodities. Hence, prices are not high or low, because there is more or less money in circulation, but on the contrary, there is more or less money in circulation, because prices are high or low. This is one of the most important laws, whose demonstration in detail by means of the history of prices constitutes perhaps the only merit of the post-Ricardian English Political Economy. If experience shows, that the level of metallic circulation or the mass of gold and silver in circulation in a given country is subject to temporary ebbs and tides and very violent ones at times,75 but on the whole remains stationary for long periods, the deviations forming but small oscillations about the average level, this is explained by the antagonistic nature of the circumstances which determine the quantity of money in circulation. Their simultaneous modifications neutralize their effects and leave everything where it was before.

The law, that with a given rapidity of circulation of money and a given total sum of prices of commodities the quantity of the circulating medium is determined, may also be expressed as follows. If the exchange values of commodities and the average rapidity of their metamorphoses are given, the quantity of gold in circulation depends on its own value. If, therefore, the value of gold, i. e. the labor-time necessary for its production, should rise or fall, the prices of commodities will rise or fall in inverse ratio, and corresponding to that rise or fall of prices, the rapidity of circulation remaining the same, a larger or smaller quantity of gold would be required to keep the same volume of commodities in circulation. The same change would occur, if the old standard of value were superseded by a more or less valuable metal. Thus, Holland required from fourteen to fifteen times as much silver as it had previously required gold, in order to circulate the same volume of commodities, when out of tender regard for the government creditors and out of fear of the effects of the discoveries in California and Australia it substituted silver for gold money.

From the fact that the quantity of gold in circulation depends on the variable sum total of prices of commodities and the varying rapidity of circulation, it follows that the volume of the circulating medium must be capable of contraction and expansion; in short, that according to the requirements of circulation, gold must now enter, now leave the sphere of circulation in its capacity of a medium of circulation. How the circulation process itself realizes these conditions, we shall see later on.

c. COIN AND SYMBOLS OF VALUE.

In its capacity of a medium of circulation, gold acquires a shape of its own, it becomes coin. In order to prevent any technical difficulties in the way of its circulation, it is coined according to the standard of the money of account. Gold pieces whose imprints and legends show that they contain certain weights of gold corresponding to the reckoning names of money, £, s., etc., are coins. The establishment of a mint-price, as well as the technical work of coining, are the business of the state. Both as money of account and as coin, money acquires a local and political character; it speaks different languages and wears different national uniforms. The sphere in which money circulates as coin, is distinguished as an internal sphere of circulation which is separated from the universal sphere of circulation in the commodity world by national boundaries.

Yet, the only difference between gold bullion and gold coin is that between coin denomination and weight denomination. What seems to be a difference in name in the latter case appears as a difference in shape in the former. Gold coin can be thrown into the melting-pot and thus be converted again into gold sans phrase, just as, on the contrary, gold bars only have to be sent to the mint to receive the shape of coins. The conversion and reconversion from one form into another appears to be a purely technical matter.

For 100 pounds or 1200 ounces troy of 22 carat gold one can get £4,672-1/2 or gold sovereigns at the English mint; if these sovereigns be put on one side of the weighing scale and one hundred pounds of gold bullion on the other, the two will balance each other, which proves that the sovereign is nothing but a piece of gold of certain weight bearing this name in English coinage and having a shape and stamp of its own. The 4,672-1/2 sovereigns are put into circulation at different points, and once in its grasp they make a certain number of moves per day, some sovereigns more, others less. If the average number of moves per day of each ounce be ten, the 1200 ounces of gold would realize 12,000 ounces or 46,725 sovereigns as the total price of commodities. You may turn and toss an ounce of gold in any way you like, and it will never weigh ten ounces. But here in the process of circulation one ounce practically does weigh ten ounces. The work performed by a coin in the sphere of circulation is equivalent to the quantity of gold it contains multiplied by the number of its moves. Besides the actual importance which a coin possesses by virtue of its being an individual piece of gold of a definite weight, it acquires an ideal significance due to its function. But whether the sovereign circulates once or ten times, in each particular purchase or sale it acts only as one sovereign. It is like a general who by timely appearance at ten different points on the battle field does the work of ten generals, but still remains the same identical general at each point. The idealization of the means of circulation which is due to the supplanting of quantity by rapidity in money circulation, affects only the function of the coin within the sphere of circulation, but not the nature of the individual coin.

The circulation of money is a movement through the outside world, and the sovereign, though it non olet, keeps rather mixed company. In the course of its friction against all kinds of hands, pouches, pockets, purses, money-belts, bags, chests and strong-boxes, the coin rubs off, loses one gold atom here and another one there and thus, as it wears off in its wanderings over the world, it loses more and more of its intrinsic substance. By being used it gets used up. Let us take up a sovereign at the moment when its natural, inborn character has been slightly affected. A baker, says Dodd,76 who receives from the bank to-day a brand new sovereign and pays it to-morrow to the miller, does not pay the same veritable sovereign; the latter has become lighter than it was at the time he received it. It is clear, says an anonymous writer,77 that in the very nature of things, coins must depreciate one by one as a result of ordinary and unavoidable friction. It is a physical impossibility to entirely exclude light coins from circulation at any time, even for one day. Jacob estimates that of the 380 million pounds sterling which were in existence in Europe in 1809, nineteen million pounds sterling entirely disappeared by 1829, i. e., within a period of twenty years.78 Thus, while a commodity at its first step into the sphere of circulation, falls out of it, a coin, after a couple of steps within that sphere represents more metal than it actually contains. The longer a coin remains in circulation, the rapidity of circulation remaining the same, or the greater its rapidity of circulation within the same period of time, the greater the discrepancy between its form as coin and its actual gold or silver substance. What remains is magni nominis umbra. The body of the coin becomes but a shadow. If at first it became heavier through the process of circulation, it now becomes lighter on account of it, but continues to represent the original quantity of gold in each single purchase or sale. The sovereign, as a fictitious sovereign, as fictitious gold, continues to perform the function of a legitimate coin. While other beings lose their idealism in contact with the outer world, the coin is idealized by practice, being gradually transformed into a mere phantom of its golden or silver body. This second idealization of metal money springing from the very process of circulation, or from the discrepancy between its nominal weight and its real weight is exploited in all kinds of coin counterfeiting practiced partly by governments, partly by private adventurers. The entire history of coinage from the beginning of the middle ages until late in the eighteenth century is nothing but a history of these two-fold and antagonistic adulterations, and Custodi’s voluminous collection of writings of Italian economists turns mostly about this point.

But the fictitious importance of gold due to its function, comes in conflict with its real substance. One gold coin has lost more, another, less of its metal substance in the course of circulation, and one of them is, as a matter of fact, worth more now than the other. But since in the discharge of their function of coins they are taken at the same value, the sovereign weighing a quarter of an ounce passing for no more than the sovereign which only stands for a quarter of an ounce, the full-weight sovereigns are subjected in the hands of unscrupulous owners to surgical operations which produce artificially what the circulation process has caused in a natural way to their more light-weighted brothers. They are clipped and reduced and the superfluous gold fat lands in the melting pot. If 4,672-1/2 gold sovereigns when put on one side of the weighing scale weigh on an average only 800 ounces instead of 1200, they will buy when brought to the gold market only 800 ounces of gold; that is, the market price of gold would rise above its mint price. Every coin, even if of full weight would pass in its mint form for less than in bullion form. The full weight sovereigns would be reconverted into bullion, a form in which a greater quantity of gold is always worth more than a smaller quantity. As soon as this decline of metallic weight would affect a sufficiently large number of sovereigns to bring about a permanent rise of the market price of gold above its mint price, the reckoning names of the coins, though remaining the same, would begin to denote a smaller quantity of gold. That is to say, the standard of money would change and gold would be coined in the future according to this new standard. By virtue of its idealization as a medium of circulation, gold would react upon and change the legally determined ratios under which it acted as the standard of price. The same revolution would be repeated after a certain length of time and thus gold would be subject to constant change both as a standard of price and as a medium of circulation, a change under one of these forms leading to a change under the other and vice versa. This explains the phenomenon mentioned above, namely that in the history of all modern nations the same money-name stands for a constantly diminishing quantity of metal. The contradiction between gold as coin and gold as standard of price becomes also one between gold as coin and gold as the universal equivalent; in the latter capacity it circulates not only within the limits of national boundaries, but in the world market. As a measure of value gold was always of full weight, because it served only as ideal gold. In its capacity of equivalent in the isolated transaction C—M it passes at once from a state of motion to a state of rest; but in its capacity of coin its natural substance comes in constant conflict with its function. The transformation of the gold sovereign into fictitious gold can not be wholly avoided, but legislation seeks to prevent its unlimited circulation as coin by prescribing its withdrawal from circulation as soon as its shortage of metallic substance reaches a certain degree. According to the English law, e. g., a sovereign which lacks more than 0.747 grains of its weight ceases to be legal tender. The Bank of England which weighed forty-eight million gold sovereigns in the short period between 1844 and 1848, possesses in Mr. Cotton’s gold weighing scale a machine which not only detects a difference of 1-100 part of a grain between two sovereigns, but like a sensible being, immediately throws out the light-weight coin on a board where it lands under another machine which cuts it up with oriental cruelty.

That being the case, gold coins could not circulate at all were not their circulation confined to definite spheres in which they do not wear off so rapidly. In so far as a gold coin weighing only one-fifth of an ounce passes in circulation for a quarter of an ounce of gold, it is practically merely a sign or a symbol for one-twentieth of an ounce of gold, and in that way all gold coins are transformed by the very process of circulation into more or less of a mere sign or symbol of their substance. But no thing can be its own symbol. Painted grapes are no symbol of real grapes, they are imaginary grapes. Still less can a light-weight sovereign be a symbol of a full-weighted one, just as a lean horse can not serve as a symbol of a fat one. Since gold thus becomes a symbol of its own self, but at the same time can not serve in that capacity, it receives a symbolical, silver or copper substitute in those spheres of circulation in which it is most subject to wear and tear, namely where purchases and sales are constantly taking place on the smallest scale. In these spheres, even if not the same identical coins, still a certain part of the entire supply of gold money would constantly circulate as coin. To that extent gold is substituted by silver or copper tokens. Thus, while only a specific commodity can perform in a given country the function of a measure of value and therefore of money, different commodities can serve as coin side by side with gold. These subsidiary mediums of circulation, such as silver or copper coins, represent definite fractions of a gold coin within the sphere of circulation. Their own silver or copper weight is, therefore, not determined by the proportions of the respective values of silver and copper to that of gold, but is arbitrarily fixed by law. They may be issued only in such quantities in which the diminutive fractions of gold coin which they represent would constantly circulate either for purposes of change for gold coins of higher denominations, or for realizing equally small prices of commodities. In retail trade silver and copper tokens belong to distinct spheres of circulation. In the nature of things, the rapidity of their circulation is in inverse ratio to the price which they realize in each separate purchase or sale, or to the size of the fraction of gold coin which they represent. If we consider how immense the volume of the daily retail trade in a country like England is, we will understand from the comparatively insignificant proportions of its combined volume how rapid and steady the circulation of the subsidiary coin must be. From a parliamentary report of recent date we see, e. g., that in 1857 the English mint coined £4,859,000 worth of gold, £733,000 of silver nominal value which contained metal actually worth £363,000. The total amount of gold coined in the ten years ending December 31, 1857, was £55,239,000, and of silver only £2,434,000. The supply of copper coin in 1857 amounted only to £6,720 nominal value containing £3,492 worth of copper; of this £3,136 was in pennies, £2,464 in half-pennies, and £1,120 in farthings. The total value of copper coined in the ten years was £141,477 nominal, the metallic value being £73,503. Just as gold coin is prevented from permanently retaining its function of coin by the legal provision of the loss of weight which demonetizes it, so are the silver and copper tokens prevented from passing from their spheres of circulation into that of gold coin and acquiring the character of money by the provision of the maximum amount for which they are legal tender. In England e. g. copper is legal tender only to the amount of six pence and silver up to forty shillings. If silver and copper tokens were to be issued in greater quantities than the requirements of their spheres of circulation call for, prices of commodities would not rise as a result, but the accumulation of these tokens in the hands of retail dealers would reach such an extent that they would be finally compelled to sell them as metal. Thus in 1798 English copper coins, issued by private individuals, accumulated in the hands of small traders to the amount of £20,350 which they tried in vain to put again in circulation, being finally compelled to throw them as metal on the copper market.79

The silver and copper tokens which represent gold coin in certain spheres of circulation in the interior of the country, contain a definite quantity of silver and copper prescribed by law, but after they get into circulation, they wear off like gold coins and become even more rapidly mere phantoms, according to the rapidity and steadiness of their circulation. To draw again a line of demonetization beyond which silver and copper tokens would lose their character of coins, they would have to be replaced in turn within certain spheres of their own circulation by some other symbolic money, say iron and lead, and such representation of one kind of symbolic money by another kind would form an endless process. In all countries with a well developed circulation the very requirements of money circulation make it necessary that the character of silver and copper tokens as money be made independent of any loss of weight in those coins. Thus, as it was in the nature of things, it appears that they serve as symbols of gold coin not because they are symbols made of silver or copper, not because they have certain value, but only in so far as they have no value.

Relatively worthless things, such as paper, can consequently perform the function of symbols of gold money. That subsidiary currency consists of metal tokens, such as silver, copper, etc., is mainly due to the fact that in most countries the less valuable metals such as silver in England, copper in ancient Rome, Sweden, Scotland, etc., had circulated as money before they were degraded by the process of circulation to the rank of small change and replaced by a more precious metal. Besides, it is natural that the money symbol which grows directly out of metallic circulation, should itself be a metal. Just as that portion of gold which would always have to circulate as small change, is replaced by metal tokens; so can the other portion of gold which is constantly absorbed as coin by circulation in the interior of the country and, therefore, must continually circulate, be replaced with worthless tokens. The level below which the mass of circulating coin never sinks is determined in each country by experience. Thus, the originally imperceptible difference between the nominal weight and the metallic weight of a metal coin can grow apace until it reaches the point of absolute separation. The mint name of money parts company with its substance and exists outside of it in worthless slips of paper. Just as the exchange value of commodities is crystallized by their process of exchange into gold money, so is gold money sublimated in its currency into its own symbol first in the form of worn coin, then in the form of subsidiary metal currency, and finally in the form of a worthless token, paper, mere sign of value.

Gold coin has produced its substitutes, first metallic and then paper, only because in spite of its loss of metallic weight it continued to perform the function of coin. It did not circulate because of its wear and tear; on the contrary, it wore out to a symbol because it continued to circulate. Only in so far as gold money becomes simply a token of its own value in the process of circulation, can mere tokens of value take its place.