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Cooking the Books: Has Money Gone?

In an article “The decline of money” (Weekly Worker, 9 March) Hillel Ticktin argues that money did not exist in the USSR, does not exist in China and that fiat money issued by governments even in the West isn’t really money.

Marx saw money as having two basic functions: (1) a medium of exchange or circulation, i.e. the means through which articles produced for sale get bought and sold; and (2) a measure of value, i.e. a common unit in which the value of articles produced for sale can be expressed as a price, and is thus a standard by which they can be compared.

“The natural form of money”, Ticktin writes, “would be a commodity that could itself be produced with labour-power and would therefore have its own value.” This was certainly the typical form of money in Marx’s day and the form he discussed the most. This money-commodity (usually gold or silver) does not have to circulate itself and be used for payments. It can be replaced in circulation by tokens, including paper ones issued by the government.

Marx identified two kinds of paper token money: tokens that were convertible on demand into a fixed amount of the money-commodity and tokens which were not. The former created no problem. The latter, however, could create a problem if they were issued in a greater amount than the amount of the money-commodity that would otherwise circulate. In this case, if they circulated alongside gold or silver, the value of the tokens would depreciate, i.e. they would buy less than their face-value. If they were the only currency (as is the case today) this would result in a rise in the general price level, i.e. in a change in the standard of price.

An inconvertible paper currency has to be managed by the government or some state institution such as a central bank which, to avoid depreciation or inflation, has to calculate the correct amount to issue. In Marx’s day the case where the only currency was paper token money was a hypothetical one which he only discussed in passing. He was rather sceptical that it would work, on the grounds that it would not be possible in practice for a government to get the amount right and so there would be no stable standard of price.

Marx scepticism proved to be misplaced. He was right that there was likely to be a changing standard of price, but not that capitalism would be unable to cope with this. It has, and in fact this has become the norm, with most governments aiming at a price level rising at 2-3 percent a year.

The difference between a money-commodity and paper money, says Ticktin, is “that paper money is issued by governments and controlled by governments. It is effectively a nationalised form of money. It is not a spontaneous form, as with gold.” That is so, but Ticktin goes on to claim that “this nationalised form means that money is not really money as we understood it. One cannot say that £1 is equal to so much abstract labour. It is decided by governments and whomsoever is actually dealing with the money supply.”

It may not be the form of money Marx knew, but it is still money. It is still the medium of exchange and still a measure of value and standard of price even if a changing one. Ticktin is concerned that this “nationalised money” is controlled by ruling class technocrats instead of democratically in the interests of the working class. As if it could be.

We want, like Marx, a society based on the common ownership and democratic control of productive resources and production directly to meet people’s needs instead of for sale and profit and where money would therefore be redundant.