The international capitalist system is fundamentally undermined by two contradictory forces at work: the over-production of commodities and the money-credit instruments that accompanies it on the one hand, and the economic environment which compels individuals to act as if they are all accumulators of private wealth, on the other. The system at first appeared to have a rationale in that, at least as far as Europe was concerned, all individuals had an apparent equal opportunity to work and enrich themselves. Although this was patently untrue, the worker who in fact produced this wealth and had no equal opportunity to accumulate, was nevertheless overwhelmed by the ideological enthusiasm of the period which the new capitalism, counter-poised with feudalism on the opposite side as it was, unleashed. In this way, the system of production based on private appropriation of wealth by a few capitalist individuals out of the labours of the majority constituted by the working-class was accepted as the only natural and reasonable one.

THE DILEMMA OF THE BOURGEOISIE

But in fact the system was fraught with inner contradictions inherent in this economic arrangement, and this is what explains why the very over-production of commodities and over-expansion of credit should in themselves imply a crisis for the system as a whole which was worsened as the system developed to higher levels. This was because as the capitalist system increased its potentiality to produce ever increasing volumes of commodities, the drive to accumulate wealth in private hands by the few surplus-value appropriators created the necessity that this wealth would be accumulated in the form of money. This was in reality a historical necessity which was imposed on the capitalist system by the material forces of previous society in which money in its latest fully developed form as silver or gold had brought forward a material limit to its unfettered production because of cost. The inheritance of this limitation by capitalism meant that its newly acquired potentiality to increase production, assisted by science and technology to hitherto undreamt levels, would itself be limited by the material conditions of money production and expansion. Although the capitalists tried to overcome this 'metallic' barrier – as David Ricardo came to call it – capitalism has never fully managed to overcome these limitations, precisely because the system of production based on capitalism implied the private appropriation of wealth which was only possible in the form of money. In this way, then, money became a hindrance to the full development of capital, and this is what manifested itself in the recurrent economic crises as the financial crisis. The crisis was in reality a production crisis because it was connected with over-production of commodities which, at certain points within the production cycle, had led to the 'over-production' of money-credit, for in such events all the capitalists holding money-credit instruments or paper money craved that these instruments, which resembled money, would be turned into real cash-money!

The question then which appears to be posed in the understanding of capitalist production and crisis is what is money? The bourgeoisie have attempted to answer the question with little success. It is the purpose of this chapter to reveal the reasons for this failure. Nevertheless, the question is a real one and a problem at that for the bourgeoisie. Laughable definitions of money by bourgeois monetary economists such as 'Money is what money does' give one an idea of the quandary in which bourgeois economic theory has found itself with every complication that capitalist crisis has presented to these ideologues of capitalism. According to John Richard Hicks, even that most eminent of bourgeois monetary economists, John Maynard Keynes, ended up with three definitions of money. Thus whilst the bourgeoisie use money in the production process, they still face the dilemma that they cannot explain the process of production based on money-capital.

The reason for this dilemma lies in the fact that the bourgeoisie have always attempted to obscure the function of money within capitalist production because to reveal its true function would expose the true role of money as the basis upon which the labour of the majority in the form of surplus-value is converted into the private wealth of a few. For this reason attempts have been made to present money as a neutral, technical device which serves the circulation of commodities per se. The fact that money more fundamentally is a means of expropriating wealth from others and then storing it is only momentarily mentioned in the latter aspect but in a manner that is segmented in order to obscure the total process of production and appropriation. In this way, the organic link between money and capital as a social relation between the producers of wealth and its private appropriation is silenced theoretically.

It is for this reason that Joseph Schumpeter points out to us that although debates raged on for years and decades among bourgeois economists as to the true function of money, and hence also on questions of definitions, these discussions and debates 'did not produce very interesting results'. He singles out Georg Friedrich Knapps as having been the exception, although the latter produced a definition of money that obscured its role even more – the so-called state theory of money. But Schumpeter points out nevertheless that the other economists got stuck at the 'neutral' definition of money as 'money is what money does' – a phrase coined by one Francis A. Walker to save them from the embarrassment of having achieved nothing out of the years of talk and writing. The discussion from then onwards was bogged down with drawing distinctions between 'primary money' and 'credit and fiduciary money'. Other bourgeois economists devoted their efforts at examining the four classical functions of money, with one faction within it emphasising the 'separability' of the functions, and another emphasising their combinability.

It was within this theorising that one branch of monetary economists came to try to find the basis for the existence of value in money. Léon Walras and Adam Smith used the concept of 'labour standard value' as the numeraire in which labour quantities of labour-power could be expressed as direct labour-units created by labour. On the whole, however, the majority of the new economists increasingly separated the problem of monetary theory from that of the 'theory of value and distribution'. Prices of goods and services were looked at merely as monetary expressions of the quantities of goods and services which did not affect their production. Money was seen as a unit which facilitated exchange in something which was in the nature of barter since money played a non-influential and non-affecting role. In this way economics came to express the 'real analysis' of production and distribution in which abstract 'neutral' money units were used, while monetary analysis was left outside as a different science which was not related to the main issues of production and the existence of real values.

Monetary theory therefore came to look on itself as concerned with the analysis of exchange-value, and this came increasingly to mean examining the origins, meaning and problems of defining the 'purchasing power of money'. It was with this view that many books came to be written examining 'money and prices', as if these were unrelated to the actual problems of production and distribution of goods. With this development, the monetary economists found they had nothing material to their analysis and since money in this role was 'neutral', efforts were made to find neutral index numbers which were created to express the value of money as a basis for calculating prices of goods and services. The Austrian School added to this de-materialisation of money by advancing marginal utility concepts to explain how value in money was created, and under this new theory any objective basis to the production of money and its value was denied. Instead a 'subjective theory of money' was advanced in which the value of money was said to lie in the subjective wills of individuals and their desires.

The above tracing of the dilemma of the bourgeoisie can then explain to us why the bourgeois economists came to find it impossible to disentangle the role of money and credit in capitalist production, and yet it was fundamental to the system of production. In fact the 'impossibility' became the necessity for obscuring the reality in order to continue to combat other more scientifically based theories which had already emerged to challenge these obscure theories of the bourgeoisie. It is not surprising then that the bourgeois economists came to see money as only an agent of circulation. Keynes tried to overcome this weakness by pointing to the storage function of money and tried to build it into the money-capital market operations, but it never sank into the general analysis.

Most quantitative economists stuck to the separation of money into 'primary money' which later came to be called 'narrow money' – meaning currency notes and demand deposits – and 'fiduciary money' or credit which today is called 'broad money', which meant narrow money plus time deposits. This latter classification has been sub-divided so that there is now broad money one and broad money two – MB1 and MB2 – adding further to the confusion as to what categories of 'money' qualify for final payment. The new explosion of financiering that has struck the global financial markets with the deregulation and de-control of money and financial markets had broadened even further the paper claimants to the 'narrow money'. That has undermined the quality of money which has complicated and worsened the 'liquidity' problem of the financial system. In these circumstances, it cannot be surprising for Noboru Takeshita, the Japanese Prime Minister, to have exclaimed recently: 'If I am asked to give you a projection of how far a certain currency can go down, that is a question that only God can answer, especially in the spirit of the floating rate system!' This was said after the 1987 financial markets crash followed by rapid fluctuations of the US dollar and of the other currencies connected with it globewise. It must be clear from this that the bourgeoisie find themselves at a dead-end in their understanding of the system they are supposed to operate as a ruling class. This then is their dilemma.

MONEY AND CREDIT IN MARX'S THEORY

While the bourgeoisie were struggling in this way to make head and tail of what they were managing, Marx's theory, which was abused and sidetracked, stood the test of time. Even Marxist scholars, who found themselves overwhelmed by this concept of 'neutrality' of money, paid very little specific attention to Marx's theory, except in as much as it concerned capitalist circulation. This is reflected in the writings of Rudolf Hilferding who, despite his major contributions on this matter, still looked at money as an agent. The recent writings of the Trotskyist–Marxist Ernest Mandel also fall into the error of seeing inflation in prices as lying in the over-explosion of credit, which is the same thing as seeing money as a circulation agent of commodities. The writings of 'neo-Marxists' such as Paul Sweezy and Paul Baran also tended to confuse a proper analysis of money and credit in capitalist production, for in their rejection of the law of value in relation to monopoly capitalism, they made it impossible to apply Marx's concepts of value to production.

For Marx, the development of money follows the same path as that of other commodities. Money is a commodity just like all other commodities, except that at a certain stage of its development, it steps aside to act as the sole representative of all other commodities in that it is only through it that all other commodities' values can be expressed.

Marx argues that commodity production does not begin with capitalism. It is, he asserts, prius to capitalism. It existed in the earlier modes of production and social formations. It existed under the slave-owning societies as well as under the feudal societies. Indeed, it was on the basis of this commodity production that merchant capital developed and it was under these conditions that the social and economic pre-conditions for capitalist development were created. Nevertheless, commodity production under these conditions was simple commodity production. Only under capitalism did it develop into complex expanded forms.

Simple commodity production brought about a certain division of labour among the direct producers under which individual producers specialised in producing and making particular products. It also brought about the existence of private property in the means of production in the products of labour. Peasant and craftsman production was based on the personal labour of the commodity producer. But it had something in common with capitalist development in that its foundation was private property in the means of production. This petty commodity production is what served as the base and point of departure for commodity production under capitalism and it is under the latter that commodity production became a universal and dominant mode of production.

It is this evolution of commodity production that enabled the labour process to become identified, leading to the emergence of the social division of labour, without which exchanges are impossible. One form of labour became identified with a particular production and in this way it became a concrete labour. The skill of a tailor and that of a shoe-maker became different, but all produced use-values. What was important was that both these different forms of labour were human labour and as such they were abstract labour. It was only when they were both human labour in this way that exchanges became possible. Different labours and use-values have different measures which are appropriate to their physical characteristics. What expresses this measure of the different concrete labours and use-values is the time it takes to produce them. Hence labour-time became an important element in establishing a relationship which enabled exchange-value to be established. Thus it is the two-fold character of a commodity which makes it possible for money- commodity to emerge and develop.

In a society in which private property in the means of production exists, this two-fold character of the labour embodied in a commodity reflects the contradiction between the private labour of individuals who produce the different use-values, and the social labour which can only be carried on in the generalised abstract labour of the commodity producers as a whole. While each producer acts as an individual and regards his production activity as his private affair, he cannot dispose of his surplus or excess product to himself.

This interconnection between the individual producers is established in the market, where every individual meets to compare, measure, evaluate and exchange his particular product for others. The more labour is divided and separated along these lines, the more varied are the products which are manufactured by the different producers and the more extensive becomes the mutual dependence of all the producers one to the other. Consequently the labour of each producer increasingly becomes essentially social in character and in that way it becomes just one particle of the labour of society as a whole. It is within this set of economic relationships that the interests of individuals are developed, and it is in the course of this development that class struggles emerge and are fought to their conclusion.

Marx points out that he was the first to pin-point and to examine this two-fold nature of the labour process and of the labour contained in commodities, for with this discovery the conception became the 'pivot' upon which a clear comprehension of political economy was possible. The discovery enabled him to bring into analytical focus the qualitative differences in the commodities, because without this their quantitative content could not be established.

The common factor in the exchange relation, or in the exchange-value of the commodity is therefore abstract labour. The magnitude of this value is measured by the quantity of the 'value-forming substance', namely the labour contained in the article. The quantity of labour is in turn measured by its duration, and this labour-time is itself measured on the particular scale of hours, days and weeks. The labour that forms the substance of value is equal human labour. It is the expenditure of identical human labour-power – a social average unit of labour-power, which is socially necessary to produce any use-value under conditions of production normal for a given society, and with an average degree of skill and intensity of labour which prevails in that society. This relation therefore varies with time and space. It is this relation which exclusively determines the magnitude of the value of any article. Commodities which contain equal quantities of labour, or which can be produced in the same time, have therefore the same value.

This time changes as a result of the growth of the productivity of labour. The productivity of labour is expressed in the amount of products created in a given unit of labour-time. It grows as a result of the improvement or fuller utilisation of the instruments of production, the development of science, the increase in the worker's skill, the rationalisation of work and other improvements in the production process and other natural conditions. The higher the productivity of labour, the less the time needed for the production of a unit of the given commodity and the lower the value of this commodity. Intensity of labour, on the other hand, is determined by the amount of labour expended in a unit of time. A growth in the intensity of labour means an increase in the expenditure of labour in one and the same interval of time. More intensive labour embodies a greater quantity of products and creates a greater value in a given unit of time, as compared with the less intensive labour.

The skill of the workers in the production process is either simple or complex. Simple labour is the labour of a worker who has no special training or experience. Complex labour is the labour of a worker with special training and experience. Complex labour creates value of a greater magnitude than is created by simple labour in the same unit of time, to which must be added the labour expended in the worker's training. Complex labour is therefore equivalent to multiplied simple labour: one hour of complex labour is equal to several hours of simple labour. In the actual process of commodity production based on private property, the reduction of various forms of complex labour to simple labour takes place spontaneously. The magnitude of the value of a commodity is determined by the socially-necessary amount of simple labour-time.

Armed with these findings, Marx then embarked on tracing the evolution of the different functions of money. As we know these functions are: the measure of value, medium of exchange and store of value. It turns out that this analysis is also a historical tracing of money's development, which finally resolves the problem of how it comes about that: 'the thing measured becomes the measuring unit'.

In short, how does one commodity become the universal measurement of all other commodities, that is, how does one commodity become money? The singling out of particular commodities at different times leads to one commodity – gold or silver – becoming acceptable universally by different communities as the sole measure of all their commodities' values. This took a very long time and the process of how communities came to accept certain ways of measurement became blurred with the passage of time, as it becomes a habit to accept a certain unit as the basis for measuring. It is this development which expresses the history of price- formation. Gold ultimately becomes the standard of price, with a scale of measurements such as 1 ounce of gold = 35 dollars, which is the price of gold as a commodity, but also a scale in which the prices of other commodities are expressed. In this same process money evolves as the medium of exchange in that gold becomes the only commodity which is acceptable to all commodity producers in the process of circulation of their commodities. It is this also which brings about the emergence of coin, for gold can be divided in this form and again melted into bars, making it a convenient commodity to act as a medium in coin and yet also as a conserver of wealth as a gold bar. This possibility which gold or silver offer to other commodities ensures their evolution into money or gold as a store of value. It also shows that it is only gold acting both as coin, and again as bar, which alone survives the process of circulation. Other commodities disappear into private consumption, but gold, although it disappears in private hoards, can and does reappear to act as money.

It is this development of the different functions of money in this dialectical and historical process that ensures the emergence of money as a means of payment. It is this which enables the appearance of money-credit to develop into the credit system that appears with capitalism. In this function, money enables someone to sell a commodity when another is not yet ready to buy or vice-versa. A seller is able to sell and deliver a commodity to a 'buyer' whose commodity is not yet ready for sale and exchange. In that case, the buyer is able to 'buy' by means of the promise to deliver when his or her own commodity is ready to deliver or sell. The seller becomes a creditor and the purchaser a debtor. This transaction enables a pause which facilitates the development of commerce and trade. Here we can already see the emergence of contract and legal relations in the process of production.

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* Professor Dani Wadada Nabudere is the executive director of the Marcus Garvey Pan-Afrikan Institute (MPAI), Mbale, Uganda.
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