Does money make the world go round?
Money is a key factor in explaining inequalities in the world today. Rich people can pay for the best healthcare, education and lifestyle. It seems as though "money makes the world go round". For those who want to challenge inequality, money is therefore an obvious target. Would abolishing money address the injustices at the heart of capitalist society? In order to answer this question, we have to understand what money is.
Marx argued money is a commodity, but one that performs a unique function. Money enables direct comparisons between all commodities. He says this makes it a "universal equivalent" - something that facilitates the exchange of other commodities. The type of universal equivalent often reflects the type of society it emerges from. For example in past societies that have traded livestock, types of animal became the "universal equivalent".
A commodity is a thing produced to be sold rather than immediately used. Marx called capitalism a system of "generalised commodity production". All commodities can be compared with one another - one pint of milk equals three apples, for example. This must mean that both milk and apples contain something in common. This "something in common" is expressed as money - but what is money itself actually representing?
Here we have to understand value. Marx used two couplets to explain the value of commodities.
The first was use-value and exchange-value. This is the idea that commodities are something useful and something to be paid for. Although commodities must have a use-value, they are produced to be sold.
The second was value and exchange value. This is the idea that commodities have an essential value that is expressed in a particular form of appearance.
Money expresses value, but also sets a price. This can seem confusing because under capitalism the price of a commodity appears to be the same as its value. In fact, the value of a commodity is determined by the amount of labour time embodied in it. This is the amount of time workers spend producing it. This value is expressed in money - but the money price can, and often does, differ from the value it is meant to represent. This is the difference between the essential value of a commodity and its appearance.
Money fulfils its function as a universal equivalent because society accepts its role as representative of value. History has shown during periods of mass inflation that this acceptance of money as expression of value has been undermined. The function of money as a price is therefore merely an imaginary quantitative measurement. Money simultaneously expresses value (labour time) and obscures it.
The fact that money is double-edged in this way is important. Capitalists have to end up with more money than they invested in order to compete on the market. A capitalist who invests in a factory and hires workers has to sell the product of that process at a higher price than the amount of money invested. This seems to be possible - it appears as though money has the natural ability to grow. The extra money that the capitalists make (profit) is not derived from the money itself. It is based on the exploitation of workers.
The involvement of money obscures this exploitation. Profit, therefore, seems to be appear at the point of exchange rather than at the point of production.
All of this process is even more abstract when we consider the role of interest rates. Money in a bank account seems to grow naturally, without any input of labour at all. In fact this money only grows because the bank invests it in the production process.
Under capitalism it seems as though the circulation of commodities is the result of the exchange of money. However, in reality the exchange of money is merely an expression of the circulation of commodities. Money acquired the role of "universal equivalent" during the emergence of capitalism. The power of money is a consequence, not a cause of generalised commodity production.
To sum up, we have learnt that money does not contain value; it merely expresses it. Under capitalism, it seems as if money, instead of labour, creates value.
The call to abolish money therefore identifies the root of injustice at the wrong point - the point of exchange, rather than the point of production. Marx called the idea of abolishing money while retaining commodity production "kleinbürgerlich" (narrow-minded).
Sarcastically, he compared it to attempts to retain Catholicism without the pope. In order to fight today's injustices, we will have to move beyond appearances and address the real root of inequality - the exploitation of workers.
Value comes from labour - not money
The root of inequality lies at the point of production, not exchange
The power of money is a consequence, not a cause of commodity production
Next month: What causes boom and bust?