Ending the Exchange Economy
Many people think that money has always existed and therefore it always will. Wrong. Human beings have lived on this planet for hundreds of thousands of years without using money. When they were hungry, they ate. When they were thirsty, they drank. Whatever was available to anyone was available to everyone.
Many people see money simply as a useful tool to facilitate the exchange of goods giving people a wider choice of things to consume and there is an element of truth in this. Without cash, bank accounts and credit cards, exchange at existing levels would be impossible, and wage and salary earners are better off being paid in money than in kind as it means that they, not their employer or the government, can decide what to consume. Money is a social relation. It links together people and their work, but, it’s an insidious social relation. Once introduced into society it tends to spread and undermine and ultimately dissolve all other social relationships. Removing money from the current economic equation would strike most people as impossible, unthinkable, absolutely imponderable. Everything we do, every transaction we make, from a simple cup of tea to sending a space probe to Mars, from birth to death and at every step in between, money has become a necessary part of getting what we require. It has become an accepted, entrenched method of acquiring anything and everything. Money is vital to the capitalist system, if you have capitalism people need money, but capitalism is not indispensable to human society.
A monetary economy gives rise to the illusion that the “cost” of producing something is merely financial. Money is the universal unit of measurement, the “general equivalent” that allows everything to be compared with everything else under all circumstances—but only in terms of their labour-time cost or the total time needed on average to produce them from start to finish. Such non-monetary calculation of course already happens, on the technical level, under capitalism. Once the choice of productive method has been made (according to expected profitability as revealed by monetary calculation) then the real calculations in kind of what is needed to produce a specific good commence with so many raw materials, so much energy, so much labour. In socialism it is not the case that the choice of productive method will become a technical choice that can be left to engineers, as is sometimes misunderstood by critics, but that this choice too will be made in real terms, in terms of the real advantages and disadvantages of alternative methods and in terms of, on the one hand, the utility of some good or some project in a particular circumstance at a particular time and, on the other hand, of the real “costs” in the same circumstances and at the same time of the required materials, energy and productive effort.
By the replacement of the exchange economy with common ownership basically what would happen is that wealth would cease to take the form of exchange value, so that all the expressions of this social relationship peculiar to an exchange economy, such as money and prices, would automatically disappear. In other words, goods would cease to have an economic value and would become simply physical objects that human beings could use to satisfy some want or other. The disappearance of economic value would mean the end of economic calculation in the sense of calculation in units of value whether measured by money or directly in some unit of labour-time. It would mean that there was no longer any common unit of calculation for making decisions regarding the production of goods. Socialism is a money-free society in which use-values would be produced from other use-values, there would need no have a universal unit of account but could calculate exclusively in kind. The only calculations that would be necessary for socialism would be calculations in kind. On the one side would be recorded the resources (materials, energy, equipment, labour) used up in production and on the other side the amount of the good produced, together with any by-products. This, of course, is done under capitalism but it is doubled by an exchange value calculation: the exchange value of the resources used up is recorded as the cost of production while the exchange value of the output (after it has been realised on the market) is recorded as sales receipts. If the latter is greater than the former, then a profit has been made; if it is less, then a loss is recorded. Such profit-and-loss accounting has no place in socialism and would, once again, be quite meaningless.
Calculation-in-kind entails the counting or measurement of physical quantities of different kinds of factors of production. There is no general unit of accounting involved in this process such as money or labour hours or energy units. In fact, every conceivable kind of economic system has to rely on calculation-in-kind, including capitalism. Without it, the physical organisation of production (e.g. maintaining inventories) would be literally impossible. But where capitalism relies on monetary accounting as well as calculation-in-kind, socialism relies solely on the latter. This is one reason why socialism holds a decisive productive advantage over capitalism by eliminating the need to tie up vast quantities of resources and labour implicated in a system of monetary/pricing accounting.
To get a clearer idea of how society can function without money we need a better understanding of money and why it must exist under capitalism. Money – its origins, its nature, and its functions – is a subject laden with superstition and wild theory. Even those who are supposed to know all that is worth knowing about it, the economics experts, frequently find themselves tangled in the intricacies of their explanations. Most economics textbooks more or less try to define money by listing up a number of its functions. For example, “Money is anything that is generally accepted as payment for goods and services and repayment of debts. The main functions of money are distinguished as a medium of exchange, a unit of account, a store of value, and occasionally, a standard of deferred payment.”
True enough, but listing the functions or attributes of something is not equivalent to arriving at an essential or conceptual definition of something. We need to understand the fundamental role of money and its reason for existing. That fundamental role comes down to what might be called the expression of a commodity’s value. That is, money gives tangible shape to the worth of a commodity. Marx in Capital revealed that the value of a commodity is in fact determined by the amount of (average socially necessary) labour expended on its production. Yet there is no way to hold a commodity up to the light to see exactly how much labour it contains. Instead of that “substance” of value being directly expressed, it is expressed in a more roundabout way, with money serving as the material for expressing value. We all know that money is used in this way to express the worth of any commodity. Money then is the universal unit of measurement, the “general equivalent” that allows everything to be compared with everything else under all circumstances but, only in terms of their labour-time cost or the total time needed on average to produce them from start to finish. The power of money and the great mystery surrounding it stems from its role as the material used to express or give concrete shape to value. The strange power of money is not the result of human weakness for shiny metal objects. So long as production is designed for the purpose of sale on the market with a view to profit money will be necessary. Value will have to be estimated in order that the commodities can exchange, one with another. A universal equivalent will also be needed as a standard of price and as a means of payment.
Before money existed people satisfied their everyday concrete needs (meals, clothes, a roof over their head) directly by concrete means, by themselves working or by sharing the fruits of the work of the other members of their community. With money this changes. Because money is a universal equivalent—something that can be spent on anything—the needs of its owners cease to be concrete and limited and become abstract and limitless. A money-owner’s desires are no longer limited to what they can personally consume but only by the amount of money they possess. The more money they possess the greater their “needs” and since there is no theoretical limit to the amount of money they can own, there is also no limit to their needs or, more accurately, to their “desires”. Put another way, people come to desire more than they reasonably need or consume. However, although there are no theoretical limits to the amount of money a person can own there are severe practical limits to what most people can. So, with money, most people are going to be constantly and permanently dissatisfied, and they are generally, without hope of relief. Although money does give people a wider variety of choices, it is only a choice of things that have a price tag on them and so doesn’t—in fact, can’t—include non-monetary considerations such as friendships, relationships, sense of belonging to a community, artistic values and other non-material satisfactions. In fact, the choice of these things, which most people value higher than material things, is diminished since they don’t count in a monetary economy which either makes them disappear or else devalues them by trying to pin a price tag on them. At first, money freed people from all obligations towards other people and was a liberating process: serfs and workers were freed from dependence on feudal and religious hierarchies; women’s dependence on men was reduced. But the process didn’t stop there and continued and still tends to dissolve all non-economic relations between humans not just hierarchical and discriminatory ones, everything coming to have a monetary price and everything being judged in monetary terms. Instead of recoiling in horror from the prospect of all relations between people being reduced to monetary ones, society now positively welcomes this and indeed proclaims and preaches it, arguing that the pursuit of short-term monetary gain by individuals is the most efficient way to organise the production and distribution of wealth. This leads not only to all social relationships being poisoned but to nature being raped.
Given a new and different type of social system, however, money will no longer be required. How can one measure value for exchange when goods are produced for use and not for exchange? The very concept of value will not arise. For what reason is a standard of price required when goods will have no price? Wherein lies the need for a means of payment when all the earth is commonly owned by all mankind instead of – as now – the property of a minority? Money has been an unnecessary, wasteful and divisive way of ordering world communities. Actually, socialists don’t want to “abolish” money. What we want is to see an established system of society where the money would be superfluous, as it would in a society based on the common ownership and democratic control of the means for producing wealth. In such a society the principle “from each according to their ability, to each according to their needs” could apply. People would cooperate to produce what was needed to live and enjoy life and then have free access to this. Socialism will have no need to abolish money. The need for money will have vanished with the abolition of capitalism.
Although money will disappear in socialism this does not mean that there will no longer be any need to make choices, evaluations and calculations. Our argument is that these evaluations and calculations, including those conceding the non-monetary “cost” of objects in terms of the effort and materials used to produce them, will be done directly in kind, without any general unit of account or measurement, neither money nor labour-time. Wealth will be produced and distributed in its natural form of useful things, of objects that can serve to satisfy some human need or other. Not being produced for sale on a market, items of wealth will not acquire an exchange-value in addition to their use-value. In socialism their value, in the normal non-economic sense of the word, will not be their selling price nor the time needed to produce them but their usefulness. It is for this that they will be appreciated, evaluated, wanted and produced. So estimates of what is likely to be needed over a given period will be expressed as physical quantities of definite types and sorts of objects. Decisions apart from purely personal ones of preference will be made after weighing the real advantages and disadvantages and real costs of alternatives in particular circumstances. The belief that without money nothing can work is flawed. The truth is that production is carried out by people, not money. Problems are solved by human beings, not money.
To advocate monetary calculation is to advocate that only one consideration—the total average production time needed to produce goods—should be taken into account when making decisions about which productive methods to employ. This is patently absurd but it is what is imposed by capitalism. Naturally, it leads to all sorts of aberrations from the point of view of human interests. In particular, it rules out a rational, long-term attitude towards conserving resources and it imposes intolerable conditions on the actual producers. Socialists, as opponents of monetary calculation, say that it is not monetary or market values, in the end, total average production time, that is the most important thing about a good but its usefulness in satisfying some human needs; that the real values are use-values, human values. We are saying that these are the factors that should be taken into account when making choices and calculations about production, not simply production time. This presupposes that calculations concerning production can be carried out without money or without some money-substitutes some other general unit such as labour-time. (Such non-monetary calculation of course already happens, on the technical level, under capitalism. Once the choice of productive method has been made according to expected profitability as revealed by monetary calculation then the real calculations in kind of what is needed to produce a specific good commence so many raw materials, so much energy, so much labour.) In socialism, choice will be made in real terms, in terms of the real advantages and disadvantages of alternative methods and in terms of, on the one hand, the utility of some good or some project in a particular circumstance at a particular time and, on the other hand, of the real “costs” in the same circumstances and at the same time of the required materials, energy and productive effort.
Everyone thinks they can control money until it starts to control them. Today, money is an integral part of the capitalist system. Yet a civilised society in which people’s needs are routinely met absolutely does not need money to function: only trade and commerce needs money to function. Human beings do not need money to operate combine harvesters, run power stations, build houses, drive delivery trucks, carry out surgical operations, and do all the other necessary work. We are perfectly capable of working for ourselves and producing goods and services for direct use by whoever requires them without the requirement of handing over money or a bank or credit card. You just take what you need. For those who can get beyond the initial shock of first hearing about moneyless real socialism, by simply comparing what both the present and new system offer the majority of us, it should be obvious that outdated capitalism must be scrapped and replaced with the real socialist alternative.