Capital vol 1
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The conclusion is that capitalism is an incredibly wasteful society and as Marx/Engels and others pointed out needs abolishing and replaceing with a saner society of production for use without the need of coins , bills of payment and paper/plastic notes .
Exactly! The whole financial superstructure which capitalism requires is an enormous waste of resources and there’ll be no banks or money in socialism.
But now we have started discussing that passage from Marx, there is something curious about it. Marx mentions one-pound notes but there hadn’t been any issued in England since the middle of the 1820s, a situation regularised by the Bank Act of 1833 which laid down that only Bank of England notes of at least £5 were legal tender. After that the only banks that could issue one pound notes were in Scotland and Ireland and weren’t issued in England again till 1914. I suppose Marx chose to write of one pound notes for ease of explanation (after all, it wouldn’t have mattered whether they were £1 or £5 notes as long as they were notes) or maybe he was referring to what used to happen in the 1820s.
During March and April, thousands of tons of foods were thrown away. In a world socialist society foods will not be wasted, it will be used to satisfy the needs of all human beings
there is something curious about it. Marx mentions one-pound notes but there hadn’t been any issued in England since the middle of the 1820s, a situation regularised by the Bank Act of 1833 which laid down that only Bank of England notes of at least £5 were legal tender. After that the only banks that could issue one pound notes were in Scotland and Ireland and weren’t issued in England again till 1914.
Although the Bank of England didn’t issue, I think there was still the practice of regional banks in England that were issuing notes, (a bit like the current situation in Scotland and Northern Ireland) which as I understand counted as legal money but not legal tender. I don’t know if the County Banks were able to issue notes of £1?
There is a link to some Bank of Newcastle Notes from the 1830s that are up for auction
http://www.londoncoins.co.uk/?page=Pastresults&searchterm=Newcastle&category=1&searchtype=1
Perhaps these notes circulated enough to be a common place, which might be why Marx picked it up
According to this, the Bank Notes Act of 1826 banned the issue of £1 bank notes and required their withdrawal from circulation by 1829:
https://encyclopedia-of-money.blogspot.com/2010/01/banking-acts-of-1826-england.html?m=1
It is significant that all the Newcastle £1 notes on sale date from the early 1800s and those after 1830 are all £5 or £10 notes. Incidentally, the person who made the forged one on sale there was taking a big risk as the penalty for forging notes was being put to death.
So no £1 notes would have been circulating in England when Marx was living there and writing Das Kapital (1850s and 60), though there will have been people alive who could remember them.
I still say it is curious that Marx should have referred to issuing one pound notes as if it was something bankers might do occasionally.
Did Marx make a slip or was he referring to a practice that dated from before 1826 (which, as Das Kapital was published in 1867, would be like us referring to what happened before the 1980s, e.g. pre-decimal currency and ten bob notes; which wouldn’t be unreasonable).
The important thing is that Marx statement has been clarified
Yes, we are getting there. If Marx hadn’t added the bit at the end about issuing £1 notes being a “trick” well known to bankers, the passage could have been taken as a something that was theoretically possible. But the addition suggests that he was referring to something that had actually happened. Since he is talking about a situation where bank notes were convertible into a fixed amount of gold and since he specifically mentions £1 notes, this can only have been between 1821 (when convertibility was restored after the end of the Napoleonic Wars) and 1826 (when the issue of £1 notes was banned).
£1 notes had a bad reputation because they were considered as encouraging speculation and the Act that provided for the restoration of convertibility laid down that no new ones should be allowed to be issued after 1823. However, this was not implemented as bankers lobbied for the ban to be postponed, and it was until 1833. Bankers favoured £1 notes because it meant that they could lend to a wider group and so lend more (at that time bank loans took the form of giving the borrowers bank notes) and get a larger income from interest.
The extra lending that this led to was considered to be one of the causes of the financial crash of 1825 (the first capitalist crisis). Hence the ban on issuing £1 notes brought in 1826 Bank Notes Act.
In his ‘The role of Bank of England note issues amongst the causes of the panic of 1825’ George Pickering writes that “it was argued at the time that these small notes had played a significant role during the 1825 crisis, by raising prices, encouraging speculation, and driving specie out of the banking system” (emphasis added; ‘specie’ meaning gold).
This last was precisely the point Marx was making that, with a currency composed of gold coins and convertible paper money, the amount of currency could not be increased beyond what the economy needed and that any attempt to do so by issuing more paper money would merely lead to less gold coins circulating. He chose to use £1 notes as the example because this was what had happened in the period 1821-26 as a result of bankers having successfully lobbied for the postponement of the ban on issuing £1 notes that was supposed to have come in in 1823.
So Marx did not make a slip; he deliberately chose to mention £1 notes in view of their dodgy reputation.
What he was not suggesting was that the gold coins that were driven out of circulation ended up in the pockets of the bankers. What they gained was more income as interest on the more loans that £1 notes enabled them to make — until a lot of them went bankrupt in the crash of 1825.
Marx was not saying that bankers were all tricksters, as those who see problems that capitalism causes as being due to a flawed or fraudulent banking system claim. In any event, the “flaw” of banks being able to issue £1 notes was eliminated by capitalist legislation.
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