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Title: A Contribution to The Critique Of The Political Economy
Author: Marx, Karl, Stone, N. I.
Language: English
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  Translated from the Second German Edition by N. I. Stone

  With an Appendix Containing Marx’s Introduction to the Critique
  Recently Published among His Posthumous Papers


  Copyright, 1904
  By the International Library Publishing Co.


The present translation has been made from the second edition of the
“Zur Kritik der Politischen Oekonomie,” published by Karl Kautsky in
1897 with slight changes from the original edition of 1859; changes
that had been indicated by Marx on the margins of his own copy of the

As will be seen from the author’s preface, the work was originally
issued as the first instalment of a complete treatise of political
economy. As he went on with his work, however, Marx modified his plans
and eight years after the appearance of the “Zur Kritik” he published
the first volume of his Capital, whose scope was intended to cover the
entire field of political economy.

The plan to which Marx alludes in the preface to the present work
was thus abandoned in its formal aspects, but not in substance. The
subject matter treated here was reproduced or rather “summarized,” as
Marx himself puts it, in Capital. But that was done in so far as was
necessary to secure continuity of treatment. On the other hand, many
important matters are treated here more thoroughly than in Capital,
especially the part devoted to the discussion of money. This, as well
as the chapters on the history of the theories of value and of money,
which do not appear in Capital, make “Zur Kritik” a work practically
complete in itself.

The recent silver agitation in this country shows how timely and useful
this work still is, though written nearly half a century ago. That a
great part of the working-men employed in the cities were not carried
away by the Democratic-Populist agitation in 1896 and 1900 is probably
due in a greater measure than is commonly realized to the direct
and indirect influence of Marx, whose economic teachings guided the
socialists in their counter agitation. And since the conditions which
once gave rise to a demand for an inflated currency have by no means
disappeared beyond a possibility of return, this book has a wide field
before it, outside of the library of the college and of the student of
economics, which the author’s name and prestige with the working class
insures for it.

There is another reason, if any need be given why this book should
have been translated into English. Marx’s preface to the present work
contains the classic formulation of his historico-philosophic theory
known as the Materialistic Interpretation of History. This theory,
which until recently was entertained almost exclusively by socialist
writers and was hardly heard of outside of socialist circles in English
speaking countries, is at last receiving not only due recognition but
sympathetic appreciation at the hands of men of science.[1] It is
rather a significant coincidence that the work which for the first
time clearly formulated the law governing social evolution should have
seen the light of day in the same year in which Darwin gave to the
world his theory of organic evolution. And as the latter had to fight
its way to recognition in the teeth of religious prejudices, so has the
recognition of the former been retarded by even more powerful social
and political prejudices.

The Introduction to the Critique of Political Economy which is added
as a supplement to this book is for the first time published in book
form in any language. It was written by Marx in 1857, but for reasons
explained by him in the preface was not published and in fact was never
finished by him, since according to his changed plans it would have
fitted more into the last volume of Capital which was to contain a
history of political economy. The introduction has been published but
lately in the form of a magazine article by Karl Kautsky, editor of the
Neue Zeit and literary executor of Karl Marx.

A few explanations are here in order with reference to the work of
translation. No one is more keenly alive to the shortcomings of the
English rendering of the original than the translator himself. While
fully conscious that the translation might be greatly improved, he
has at times deliberately sacrificed literary finish to closeness to
the original. It will be found that many passages have been rendered
more clear and concise in Capital in which, according to Marx’s own
statement in the preface to that work, they were much simplified and
popularized. The Hegelian phraseology is more in evidence in the
present work rendering translation a more difficult task. Yet for
that very reason it seemed particularly desirable to give to English
speaking readers as close a version of the original as was possible. In
the few cases where certain passages from this work were reproduced by
Marx in Capital, the translation of the latter by Moore and Aveling was
freely drawn upon with slight modifications here and there.

About the only liberty taken with Marx’s terminology has been in
the case of the word “bürgerlich.” Marx speaks here of “bürgerliche
Produktion” and “bürgerlicher Reichthum” and “bürgerliche Arbeit” where
eight years later he used in corresponding passages in Capital the word
“kapitalistische.” As the English speaking reader is more accustomed to
hear of the “capitalist” system of production than of the “bourgeois”
system of production, etc., the translator considered Marx’s own change
of this term within a few years from the publication of “Zur Kritik”
a sufficient justification for rendering the word “bürgerlich” into
“capitalistic” wherever it seemed more likely to carry the meaning home
to the reader.

In view of the fact that the work is likely to be read in wide circles
it was thought desirable to translate the numerous quotations from
Italian, Greek, Latin and French writers, the translation being given
side by side with the original quotation. All English citations given
by Marx in German have been restored from the original sources, which
necessitated the use of four libraries, the Astor and the Columbia
University libraries in New York, the Congressional Library in
Washington, and the private library of Professor Seligman to whose
kindness the translator is indebted for the permission to use rare
works of the seventeenth century quoted by Marx. Several of Marx’s
references to the pages of the books quoted by him have been found to
be wrong and therefore differ here from those given in the original.
In two or three cases where the original English citations could not
be found they were retranslated from German with the quotation marks

This statement would be incomplete if the translator failed to mention
the helpful participation in this work by his wife whose share in the
translation is equal to his own.

New York, October, 1903.


I consider the system of bourgeois economy in the following order:
_Capital_, _landed property_, _wage labor_; _state_, _foreign trade_,
_world market_. Under the first three heads I examine the conditions
of the economic existence of the three great classes, which make up
modern bourgeois society; the connection of the three remaining heads
is self evident. The first part of the first book, treating of capital,
consists of the following chapters: 1. Commodity; 2. Money, or simple
circulation; 3. Capital in general. The first two chapters form the
contents of the present work. The entire material lies before me in the
form of monographs, written at long intervals not for publication, but
for the purpose of clearing up those questions to myself, and their
systematic elaboration on the plan outlined above will depend upon

I omit a general introduction which I had prepared, as on second
thought any anticipation of results that are still to be proven, seemed
to me objectionable, and the reader who wishes to follow me at all,
must make up his mind to pass from the special to the general. On the
other hand, some remarks as to the course of my own politico-economic
studies may be in place here.

The subject of my professional studies was jurisprudence, which I
pursued, however, in connection with and as secondary to the studies
of philosophy and history. In 1842-43, as editor of the “Rheinische
Zeitung,” I found myself embarrassed at first when I had to take part
in discussions concerning so-called material interests. The proceedings
of the Rhine Diet in connection with forest thefts and the extreme
subdivision of landed property; the official controversy about the
condition of the Mosel peasants into which Herr von Schaper, at that
time president of the Rhine Province, entered with the “Rheinische
Zeitung;” finally, the debates on free trade and protection, gave
me the first impulse to take up the study of economic questions. At
the same time a weak, quasi-philosophic echo of French socialism and
communism made itself heard in the “Rheinische Zeitung” in those days
when the good intentions “to go ahead” greatly outweighed knowledge of
facts. I declared myself against such botching, but had to admit at
once in a controversy with the “Allgemeine Augsburger Zeitung” that my
previous studies did not allow me to hazard an independent judgment as
to the merits of the French schools. When, therefore, the publishers
of the “Rheinische Zeitung” conceived the illusion that by a less
aggressive policy the paper could be saved from the death sentence
pronounced upon it, I was glad to grasp that opportunity to retire to
my study room from public life.

The first work undertaken for the solution of the question that
troubled me, was a critical revision of Hegel’s “Philosophy of Law”;
the introduction to that work appeared in the “Deutsch-Französische
Jahrbücher,” published in Paris in 1844. I was led by my studies to
the conclusion that legal relations as well as forms of state could
neither be understood by themselves, nor explained by the so-called
general progress of the human mind, but that they are rooted in the
material conditions of life, which are summed up by Hegel after the
fashion of the English and French of the eighteenth century under
the name “civic society;” the anatomy of that civic society is to
be sought in political economy. The study of the latter which I had
taken up in Paris, I continued at Brussels whither I emigrated on
account of an order of expulsion issued by Mr. Guizot. The general
conclusion at which I arrived and which, once reached, continued to
serve as the leading thread in my studies, may be briefly summed up as
follows: In the social production which men carry on they enter into
definite relations that are indispensable and independent of their
will; these relations of production correspond to a definite stage
of development of their material powers of production. The sum total
of these relations of production constitutes the economic structure
of society―the real foundation, on which rise legal and political
superstructures and to which correspond definite forms of social
consciousness. The mode of production in material life determines the
general character of the social, political and spiritual processes
of life. It is not the consciousness of men that determines their
existence, but, on the contrary, their social existence determines
their consciousness. At a certain stage of their development, the
material forces of production in society come in conflict with the
existing relations of production, or―what is but a legal expression
for the same thing―with the property relations within which they
had been at work before. From forms of development of the forces
of production these relations turn into their fetters. Then comes
the period of social revolution. With the change of the economic
foundation the entire immense superstructure is more or less rapidly
transformed. In considering such transformations the distinction should
always be made between the material transformation of the economic
conditions of production which can be determined with the precision
of natural science, and the legal, political, religious, aesthetic or
philosophic―in short ideological forms in which men become conscious of
this conflict and fight it out. Just as our opinion of an individual
is not based on what he thinks of himself, so can we not judge of such
a period of transformation by its own consciousness; on the contrary,
this consciousness must rather be explained from the contradictions of
material life, from the existing conflict between the social forces
of production and the relations of production. No social order ever
disappears before all the productive forces, for which there is room
in it, have been developed; and new higher relations of production
never appear before the material conditions of their existence have
matured in the womb of the old society. Therefore, mankind always
takes up only such problems as it can solve; since, looking at the
matter more closely, we will always find that the problem itself
arises only when the material conditions necessary for its solution
already exist or are at least in the process of formation. In broad
outlines we can designate the Asiatic, the ancient, the feudal, and
the modern bourgeois methods of production as so many epochs in the
progress of the economic formation of society. The bourgeois relations
of production are the last antagonistic form of the social process of
production―antagonistic not in the sense of individual antagonism, but
of one arising from conditions surrounding the life of individuals in
society; at the same time the productive forces developing in the womb
of bourgeois society create the material conditions for the solution
of that antagonism. This social formation constitutes, therefore, the
closing chapter of the prehistoric stage of human society.

Frederick Engels, with whom I was continually corresponding and
exchanging ideas since the appearance of his ingenious critical essay
on economic categories (in the “Deutsch-Französische Jahrbücher”),
came by a different road to the same conclusions as myself (see his
“Condition of the Working Classes in England”). When he, too, settled
in Brussels in the spring of 1845, we decided to work out together the
contrast between our view and the idealism of the German philosophy, in
fact to settle our accounts with our former philosophic conscience. The
plan was carried out in the form of a criticism of the post-Hegelian
philosophy. The manuscript in two solid octavo volumes had long
reached the publisher in Westphalia, when we received information
that conditions had so changed as not to allow of its publication. We
abandoned the manuscript to the stinging criticism of the mice the
more readily since we had accomplished our main purpose―the clearing
up of the question to ourselves. Of the scattered writings on various
subjects in which we presented our views to the public at that time, I
recall only the “Manifesto of the Communist Party” written by Engels
and myself, and the “Discourse on Free Trade” written by myself. The
leading points of our theory were first presented scientifically,
though in a polemic form, in my “Misère de la Philosophie, etc.”
directed against Proudhon and published in 1847. An essay on “Wage
Labor,” written by me in German, and in which I put together my
lectures on the subject delivered before the German Workmen’s Club at
Brussels, was prevented from leaving the hands of the printer by the
February revolution and my expulsion from Belgium which followed it as
a consequence.

The publication of the “Neue Rheinische Zeitung” in 1848 and 1849, and
the events which took place later on, interrupted my economic studies
which I could not resume before 1850 in London. The enormous material
on the history of political economy which is accumulated in the British
Museum; the favorable view which London offers for the observation of
bourgeois society; finally, the new stage of development upon which the
latter seemed to have entered with the discovery of gold in California
and Australia, led me to the decision to resume my studies from the
very beginning and work up critically the new material. These studies
partly led to what might seem side questions, over which I nevertheless
had to stop for longer or shorter periods of time. Especially was the
time at my disposal cut down by the imperative necessity of working
for a living. My work as contributor on the leading Anglo-American
newspaper, the “New York Tribune,” at which I have now been engaged for
eight years, has caused very great interruption in my studies, since
I engage in newspaper work proper only occasionally. Yet articles on
important economic events in England and on the continent have formed
so large a part of my contributions that I have been obliged to make
myself familiar with practical details which lie outside the proper
sphere of political economy.

This account of the course of my studies in political economy is simply
to prove that my views, whatever one may think of them, and no matter
how little they agree with the interested prejudices of the ruling
classes, are the result of many years of conscientious research. At the
entrance to science, however, the same requirement must be put as at
the entrance to hell:

  Qui si convien lasciare ogni sospetto
  Ogni viltà convien che qui sia morta.

  Karl Marx.

  London, January, 1859.



  Translator’s Preface                                                3

  Author’s Preface                                                    9


  Chapter I. Commodities                                             19

    A. Notes on the History of the Theory of Value                   56

  Chapter II. Money or Simple Circulation                            73

      1. The Measure of Value                                        74

    B. Theories of the Unit of Measure of Money                      91

      2. The Medium of Circulation                                  107

        a. The Metamorphosis of Commodities                         108

        b. The Circulation of Money                                 125

        c. Coin and Symbols of Value                                138

      3. Money                                                      162

        a. Hoarding                                                 166

        b. Means of Payment                                         185

        c. World Money                                              201

      4. The Precious Metals                                        208

    C. Theories of the Medium of Circulation and of
         Money                                                      215

  Appendix. Introduction to the Critique of Political
    Economy                                                         264

      1. Production in General                                      265

      2. The General Relation of Production to Distribution,
           Exchange, and Consumption                                274

      3. The Method of Political Economy                            292

      4. Production, Means of Production, and Conditions
           of Production                                            306

  Index                                                             313





At first sight the wealth of society under the capitalist system
presents itself as an immense accumulation of commodities, its unit
being a single commodity. But every commodity has a twofold aspect,
that of _use value_ and _exchange value_.[2]

A commodity is first of all, in the language of English economists,
“any thing necessary, useful or pleasant in life,” an object of human
wants, a means of existence in the broadest sense of the word. This
property of commodities to serve as use-values coincides with their
natural palpable existence. Wheat e. g. is a distinct use-value
differing from the use-values cotton, glass, paper, etc. Use-value has
a value only in use and is realized only in the process of consumption.
The same use-value may be utilized in various ways. But the extent of
its possible applications is circumscribed by its distinct properties.
Furthermore, it is thus limited not only qualitatively but also
quantitatively. According to their natural properties the various
use-values have different measures, such as a bushel of wheat, a quire
of paper, a yard of linen, etc.

Whatever the social form of wealth may be, use-values always have a
substance of their own, independent of that form. One can not tell by
the taste of wheat whether it has been raised by a Russian serf, a
French peasant, or an English capitalist. Although the object of social
wants and, therefore, mutually connected in society, use-values do
not bear any marks of the relations of social production. Suppose, we
have a commodity whose use-value is that of a diamond. We can not tell
by looking at the diamond that it is a commodity. When it serves as a
use-value, aesthetic or mechanical, on the breast of a harlot, or in
the hand of a glasscutter, it is a diamond and not a commodity. It is
the necessary prerequisite of a commodity to be a use-value, but it is
immaterial to the use-value whether it is a commodity or not. Use-value
in this indifference to the nature of its economic destination, i. e.
use-value as such lies outside the sphere of investigation of political
economy.[3] It falls within the sphere of the latter only in so far
as it forms its own economic destination. It forms the material basis
which directly underlies a definite economic relation called _exchange

Exchange-value appears at first sight as a _quantitative relation_,
as a proportion in which use-values are exchanged for one another. In
such a relation they constitute equal exchangeable quantities. Thus,
a volume of Propercius and eight ounces of snuff may represent the
same exchange value, in spite of the dissimilar use-values of tobacco
and elegy. As exchange-value, one kind of use-value is worth as much
as another kind, if only taken in right proportion. The exchange
value of a palace can be expressed in a certain number of boxes of
shoe-blacking. On the contrary, London manufacturers of shoe-blacking
have expressed the exchange value of their many boxes of blacking,
in palaces. Thus, entirely apart from their natural forms and
without regard to the specific kind of wants for which they serve as
use-values, commodities in certain quantities equal each other, take
each other’s place in exchange, pass as equivalents, and in spite of
their variegated appearance, represent the same entity.

Use-values are primarily means of existence. These means of existence,
however, are themselves products of social life, the result of expended
human vital power, _materialized labor_. As the embodiment of social
labor, all commodities are the crystallization of the same substance.
Let us now consider the nature of this substance, i. e., of labor,
which is expressed in exchange value.

Let one ounce of gold, one ton of iron, one quarter of wheat and
twenty yards of silk represent equal exchange values. As equivalents,
in which the qualitative difference between their use-values has been
eliminated, they represent equal volumes of the same kind of labor.
The labor which is equally embodied in all of them must be uniform,
homogeneous, simple labor. It matters as little in the case of labor
whether it be embodied in gold, iron, wheat, or silk, as it does in
the case of oxygen, whether it appears in the rust of iron, in the
atmosphere, in the juice of a grape, or in the blood of a human being.
But the digging of gold, the extraction of iron from a mine, the
raising of wheat and the weaving of silk are so many kinds of labor,
differing in quality. As a matter of fact, what in reality appears as a
difference in use-values, is in the process of production, a difference
in the work creating those use-values. Just as labor, which creates
exchange value, is indifferent to the material of use-values, so it
is to the special form of labor itself. Furthermore, the different
use-values are the products of the work of different individuals,
consequently the result of various kinds of labor differing
individually from one another. But as exchange values, they represent
the same homogeneous labor, i. e., labor from which the individuality
of the workers is eliminated. Labor creating exchange value is,
therefore, _abstract general labor_.

If one ounce of gold, one ton of iron, one quarter of wheat, and twenty
yards of silk are exchange values of equal magnitude or equivalents;
then one ounce of gold, half a ton of iron, three bushels of wheat
and five yards of silk are exchange values of different magnitudes,
and this quantitative difference is the only difference of which
they are capable as exchange values. As exchange values of different
magnitudes, they represent greater or smaller quantities of that
simple, homogeneous, abstract, general labor, which forms the substance
of exchange value. The question arises, how are these quantities to be
measured? Or, rather what constitutes the substance of labor, which
makes it capable of quantitative measurement, since the quantitative
differences of commodities in their capacity of exchange values are
but quantitative differences of labor embodied in them. Just as motion
is measured by time, so is labor measured by _labor-time_. Given
the quality of labor, the difference in its duration is the only
property by which it can be distinguished. As labor-time, labor has
the same standard of measurement as the natural time measures, viz.,
hours, days, weeks, etc. Labor-time is the vital substance of labor,
independent of its form, composition, individuality; it is its vital
substance quantitatively, having at the same time its own inherent
measure. Labor-time embodied in the use-values of commodities is the
substance which makes exchange values and, therefore, commodities of
them and at the same time serves to measure definite quantities of
their value. Corresponding quantities of different use-values, in which
the same quantity of labor-time is embodied, are equivalents; or, to
put it in another form, all use-values are equivalents when taken in
proportions containing the same quantity of expended, materialized
labor-time. As exchange values, all commodities are but definite
measures of _congealed labor-time_.

To understand how exchange value is determined by labor-time, the
following main points must be kept in mind: The reduction of labor to
simple labor, devoid of any quality, so to speak; the specific ways
and means by which exchange―value-creating, i. e., commodity producing
labor becomes _social labor_; finally, the difference between labor as
the producer of use-values, and labor as the creator of exchange values.

In order to measure commodities by the labor-time contained in them,
the different kinds of labor must be reduced to uniform, homogeneous,
simple labor, in short, to labor which is qualitatively the same, and,
therefore, differs only in quantity.

This reduction appears to be an abstraction; but it is an abstraction
which takes place daily in the social process of production. The
conversion of all commodities into labor-time is no greater abstraction
nor a less real process than the chemical reduction of all organic
bodies to air. Labor, thus measured by time, does not appear in reality
as the labor of different individuals. but on the contrary, the
various working individuals rather appear as mere organs of labor; or,
in so far as labor is represented by exchange values, it may be defined
as human labor in general. This abstraction of human labor in general
virtually exists in the average labor which the average individual
of a given society can perform―a certain productive expenditure of
human muscles, nerves, brain, etc. It is unskilled labor to which the
average individual can be put and which he has to perform in one way
or another. The character of this average labor varies in different
countries and at different stages of civilization, but appears fixed in
a particular society. Unskilled labor constitutes the bulk of all labor
performed in capitalist society, as may be seen from all statistics.

It is obvious that if A spends six hours in the production of iron
and six hours on linen, and B also produces iron during six hours and
linen during another six hours, it is but a different application
of _the same_ labor time that would be expended, if A produced iron
during twelve hours, while B worked twelve hours on linen. But how
about skilled labor which rises above the level of average labor by its
higher intensity, by its greater specific gravity? This kind of labor
resolves itself into unskilled labor composing it; it is simple labor
of a higher intensity, so that one day of skilled labor, e. g., may
equal three days of unskilled labor. This is not the place to consider
the laws regulating this reduction. It is clear, however, that such
reduction does take place, for, as exchange value, the product of the
most skilled labor is, when taken in a certain proportion, equivalent
to the product of unskilled average labor, or equal to a definite
quantity of that unskilled labor.

The determination of exchange-value by means of labor-time implies,
further, the fact that an equal quantity of labor is embodied in any
given commodity, e. g., a ton of iron, no matter whether it is the work
of A or B, that is to say, various individuals expend an equal amount
of labor-time for the production of the same use-value of a given
quality and quantity. It is thus assumed that the labor-time contained
in a commodity is the labor-time _necessary_ for its production, i. e.,
it is the labor-time which is required for the production of another
specimen of the same commodity under the same general conditions of

The conditions of labor, which creates exchange value, as shown by the
analysis of the latter, are _social conditions_ of labor or conditions
of _social labor_. Social, not in the ordinary, but in a special
sense. It is a specific form of the social process. The homogeneous
simplicity of labor means first of all _equality_ of the labors of
various individuals, a reciprocal relation of equality of their labors
determined by the actual reduction of all kinds of labor to uniform
labor. The labor of every individual, as far as it is expressed in
exchange value possesses this social character of equality and finds
expression in exchange value only in so far as it is a relation of
equality with the labor of all other individuals.

Furthermore, the labor-time of a single individual is directly
expressed in exchange value as _universal labor-time_, and this
_universal character_ of individual labor is the manifestation of its
_social character_. The labor-time represented by exchange value is the
labor-time of an individual, but of an individual undistinguished from
other individuals in so far as they perform the same labor; therefore,
the time required by one individual for the production of a certain
commodity is the _necessary_ labor-time which any other individual
would have to spend on the production of the same commodity. It is the
labor-time of an individual, _his_ labor-time, but only as labor-time
common to all, regardless as to which particular individual’s
labor-time it is. As universal labor-time it is represented in a
universal product, in a _universal equivalent_, in a definite quantity
of materialized labor-time: the latter is indifferent as to the
particular form of use-value in which it appears directly as the
product of an individual, and may be turned at will into any other
form of use-value to represent the product of any other individual.
Only as such a _universal_ quantity, is it a _social_ quantity. In
order to result in exchange value, the labor of an individual must
be turned into a _universal equivalent_, i. e., the labor-time of an
individual must be expressed as universal labor-time, or universal
labor-time as that of an individual. It is the same as though different
individuals had put together their labor-time and contributed the
different quantities of labor-time at their common disposal in the form
of different use-values. The labor-time of the individual is thus,
in fact, the labor time which society requires for the production of
a certain use-value, i. e., for the satisfaction of a certain want.
But the question that interests us here is as to the specific form in
which labor acquires a social character. Let us suppose that a certain
quantity of labor-time of a spinner is realized in 100 lbs. of yarn.
Suppose 100 yards of linen, the product of the weaver, represent the
same quantity of labor-time. Inasmuch as these two products represent
equal quantities of universal labor-time and, hence, are equivalents of
_every_ use-value which contains the same amount of labor-time, they
are also equivalent to each other. Only because the labor-time of the
spinner and that of the weaver take the form of universal labor-time
and their products appear as universal equivalents, is the labor of
the weaver realized for the spinner, and that of the spinner, for the
weaver, the labor of one takes the place of the labor of the other, i.
e., the social character of their labors is realized for both. Quite
different it was under the patriarchal system of production, when
spinner and weaver lived under the same roof, when the female members
of the family did the spinning, and the male members did the weaving to
supply the wants of their own family; then yarn and linen were _social_
products, spinning and weaving were _social_ labor within the limits of
the family. But their social character did not manifest itself in the
fact that yarn, as a universal equivalent, could be exchanged for linen
as a universal equivalent, or that one was exchanged for another, as
identical and equivalent expressions of the same universal labor-time.
It was rather the family organization with its natural division of
labor that impressed its peculiar social stamp on the product of
labor. Or, let us take the services and payments in kind of the Middle
Ages. It was the specific kind of labor performed by each individual in
its natural form, the particular and not the universal aspect of labor,
that constituted then the social tie. Or, let us finally take labor
carried on in common in its primitive natural form, as we find it at
the dawn of history of all civilized races.[4] It is clear that in this
case labor does not acquire its social character from the fact that the
labor of the individual takes on the abstract form of universal labor
or that his product assumes the form of a universal equivalent. The
very nature of production under a communal system makes it impossible
for the labor of the individual to be private labor and his product
to be a private product; on the contrary, it makes individual labor
appear as the direct function of a member of a social organism. On the
contrary, labor, which is expressed in exchange value, at once appears
as the labor of a separate individual. It becomes social labor only
by taking on the form of its direct opposite, the form of abstract
universal labor.

Labor, which creates exchange value, is, finally, characterized by the
fact that even the social relations of men appear in the reversed form
of a social relation of things. Only in so far as two use-values are
in a mutual relation of exchange values does the labor of different
persons possess the common property of being identical universal labor.
Hence, if it be correct to say that exchange value is a relation
between persons,[5] it must be added that it is a relation disguised
under a material cover. Just as a pound of iron and a pound of gold
represent the _same_ weight in spite of their different physical and
chemical properties, so do two use-values, as commodities containing
the same quantity of labor-time, represent the _same exchange value_.
Exchange value thus appears as the natural social destination of
use-values, a property which they possess by virtue of being things and
in consequence of which they are exchanged for one another in definite
proportions, or form equivalents, just as chemical elements combine in
certain proportions, forming chemical equivalents. It is only through
the habit of everyday life that we come to think it perfectly plain and
commonplace, that a social relation of production should take on the
form of a thing, so that the relation of persons in their work appears
in the form of a mutual relation between things, and between things
and persons.

In commodities this mystification is as yet very simple. It is more
or less plain to everybody that a relation of commodities as exchange
values is nothing but a mutual relation between persons in their
productive activity. This semblance of simplicity disappears in higher
productive relations. All the illusions in regard to the monetary
system are due to the fact that money is not regarded as something
representing a social relation of production, but as a product of
nature endowed with certain properties. The modern economists who sneer
at the illusions of the monetary system, betray the same illusion
as soon as they have to deal with higher economic forms, as, e. g.,
capital.[6] It breaks forth in their confession of naive surprise, when
what they have just thought to have defined with great difficulty as a
thing suddenly appears as a social relation and then reappears to tease
them again as a thing, before they have barely managed to define it as
a social relation.

Since the exchange value of commodities is, in fact, nothing but a
mutual relation of the labors of individuals―labors which are similar
and universal―nothing but a material expression of a specific social
form of labor, it is a tautology to say that labor is the _only_
source of exchange value and consequently of wealth, in so far as the
latter consists of exchange values. Similarly, it is a tautology to
say that matter in its natural state has no exchange value, because
it does not contain any labor, and that exchange value as such does
not contain matter. But when William Petty calls “labor the father and
earth the mother of wealth,” or when Bishop Berkeley asks “whether
the four elements and man’s labour therein, be not the true source of
wealth,”[7] or when the American, Thomas Cooper puts it popularly:
“Take away from a piece of bread the labour bestowed by the baker on
the flour, by the miller on the grain brought to him, by the farmer
in ploughing, sowing, tending, gathering, threshing, cleaning and
transporting the seed, and what will remain? A few grains of grass,
growing wild in the woods, and unfit for any human purpose”[8]―then all
these views do not refer to abstract labor as the source of exchange
value, but to concrete labor as the source of material wealth; in
short, to labor in so far as it produces use-values. In assuming
that a commodity has use-value we assume the special usefulness
and distinct fitness of the labor absorbed by it, but that is all
there is to the view of labor as useful labor from the standpoint of
commodity. Considering bread as a use-value, we are interested in its
properties as an article of food and not at all in the different kinds
of labor of the farmer, miller, baker, etc. If by some invention
nineteen-twentieths of this labor could be saved, the loaf of bread
would still render the same service as before. If it fell ready-made
from the sky it would not lose a single atom of its use-value. While
labor which creates exchange value is realized in the equality of
commodities as universal equivalents, labor as a productive activity
with a useful purpose is realized in the endless variety of use-values
created by it. While labor which creates exchange values is _abstract_,
_universal_ and _homogeneous_, labor which produces use-values is
concrete and special and is made up of an endless variety of kinds of
labor according to the way in which and the material to which it is

It is wrong to speak of labor in so far as it is applied to the
production of use-values as of _the only_ source of wealth, namely,
the material wealth produced by it. Being an activity intended to
adapt materials to this or that purpose, it requires matter as a
prerequisite. In different use-values the proportion between labor
and raw material varies greatly, but use-value always has a natural
substratum. Labor, as an activity, directed to the adaptation of raw
material in one form or another, is a natural condition of human
existence, a condition of exchange of matter between man and nature,
independent of all social forms. On the contrary, labor producing
exchange value is a specifically social form of labor. Tailoring, e.
g., in its material manifestation as a distinct productive activity,
produces a coat, but not the exchange value of the coat. The latter
is produced not by the labor of the tailor as such, but by abstract
universal labor, and that belongs to a certain organization of society
which has not been brought about by the tailor. Thus, the women under
the ancient system of house industry made coats without producing the
exchange value of the coats. Labor as a source of material wealth was
known to Moses, the legislator, as well as to Adam Smith, the customs

Let us consider now some propositions which follow from the
determination of exchange value by labor-time.

As a use-value, every commodity owes its usefulness to itself. Wheat,
e. g., serves as an article of food. A machine saves labor to a certain
extent. This function of a commodity by virtue of which it serves only
as use-value, as an article of consumption, may be called its service,
the service which it renders as use-value. But as an exchange value,
a commodity is always regarded as a result; the question in this case
is not as to the service which it renders, but as to the service[10]
which it has been rendered in its production. Thus, the exchange value
of a machine is determined not by the quantity of labor-time which it
saves, but by the quantity of labor-time which has been expended on
its own production and which is, therefore, required to produce a new
machine of the same kind.

If, therefore, the quantity of labor-time required for the production
of commodities remained constant, their exchange value would remain
the same. But the ease and the difficulty of production are constantly
changing. If the productivity of labor increases, the same use-value
will be produced in less time. If the productivity of labor declines,
more time will be required for the production of the same use-value.
Thus, the labor-time contained in a commodity or its exchange-value is
a variable quantity, increasing or diminishing in an inverse ratio to
the rise and fall of the productivity of labor. The productive power of
labor which is applied in the manufacturing industry on a predetermined
scale depends in the agricultural and extractive industries also on
natural conditions which are beyond human control. _The same labor_
will yield a greater or less output of various metals, according to
their more or less close occurrence in the earth’s crust. _The same
labor_ may be embodied in two bushels of wheat in a favorable season,
and only in one in an unfavorable season. In this case, scarcity or
abundance, as natural conditions, seem to determine the exchange value
of commodities, because they determine the productivity of certain
kinds of labor which depend upon natural conditions.

Unequal volumes of different use-value contain the same quantity of
labor-time or the same exchange value. The smaller the volume of a
use-value containing a certain quantity of labor-time as compared with
other use-values, the greater its _specific exchange-value_. If we find
that certain use-values, such as, e. g., gold, silver, copper and iron,
or wheat, rye, barley and oats, form a series of specific exchange
values which, though not retaining exactly the same numerical ratio,
still retain through widely remote epochs of civilization the same
rough proportion of relatively larger and smaller quantities, we may
draw the conclusion that the progressive development of the productive
powers of society has equally, or approximately so, affected the
labor-time necessary for the production of the various commodities.

The exchange value of a commodity is not revealed in its own use-value.
But, as the embodiment universal social labor-time, the use-value
of one commodity bears a certain ratio to the use-values of other
commodities. Thus, the exchange value of one commodity is manifested
in the use-values of other commodities. An equivalent is, in fact, the
exchange value of one commodity expressed in the use-value of another
commodity. If I say, e. g., that one yard of linen is worth two pounds
of coffee, then the exchange value of linen is expressed in terms of
the use-value of coffee, viz., in a certain quantity of that use-value.
This ratio being given, I can express the value of any quantity of
linen in coffee. It is clear that the exchange value of one commodity,
say linen, is not confined to the ratio of any one commodity, e. g.
coffee, as its equivalent. The quantity of universal labor-time which
is represented in one yard of linen is at the same time embodied in
an endless variety of volumes of use-values of all other commodities.
The use-value of any other commodity forms the equivalent of one yard
of linen, in the proportion in which it represents the same quantity of
labor-time as that yard of linen. The exchange value of _this single
commodity_ is, therefore, fully expressed in the endless number of
equations in which the use-values of all other commodities form its
equivalents. Not until the exchange value of a commodity is expressed
in the sum total of these equations or of the different proportions in
which one commodity is exchanged for every other commodity, does it
find an exhaustive expression as a _universal equivalent_; e. g., the
series of equations:

  1 yard of linen = 1/2 lb. of tea,
  1 yard of linen = 2 lbs. of coffee,
  1 yard of linen = 8 lbs. of bread,
  1 yard of linen = 6 yards of calico,

may be represented as follows:

1 yard of linen = 1/8 lb. of tea + 1/2 lb. of coffee + 2 lbs. of bread
+ 1-1/2 yards of calico.

Therefore, if we had before us the sum total of the equations, in
which the value of a yard of linen is exhaustively expressed, we could
represent its exchange value in the form of a series. As a matter of
fact, the series is an endless one, since the circle of commodities,
constantly expanding, can never be closed up. But while the exchange
value of one commodity is thus measured by the use-values of all other
commodities, the exchange values of all the other commodities are, in
their turn, measured by the use-value of this one commodity.[11]

If the exchange value of one yard of linen is expressed in 1/2 lb. of
tea, or 2 lbs. of coffee, or 6 yards of calico, or 8 lbs. of bread,
etc., it follows that coffee, tea, calico, bread, etc., are equal to
each other if taken in the same proportion in which they are equal to
the third article, linen; consequently, linen serves as the common
measure of their exchange values. Every commodity, as the embodiment
of universal labor-time, i. e., as a certain quantity of universal
labor-time, expresses in turn its exchange value in definite quantities
of the use-values of all other commodities, and the exchange values
of all the other commodities are, on the other hand, measured by the
use-value of this one exclusive commodity. But as an exchange value,
every commodity is at the same time the one exclusive commodity
that serves as a common measure of the exchange values of all other
commodities; and, on the other hand, it is but one of the many
commodities in the entire series of which every commodity expresses
directly its exchange value.

The value of a commodity is not affected by the number of commodities
of other kinds. But the length of the series of equations in which
its exchange value is realized does depend upon the greater or less
variety of other commodities. The series of equations in which the
value of coffee, e. g., is represented, indicates the extent to which
it is exchangeable, the limits within which it performs the function of
an exchange value. The exchange value of a commodity as an embodiment
of universal social labor-time is expressed in its equivalence to an
endless variety of use-values.

We have seen that the exchange value of a commodity varies with the
quantity of labor-time directly contained in it. Its realized exchange
value, i. e., its exchange value expressed in the use-values of other
commodities, must also depend on the proportion in which the labor-time
spent on the production of all other commodities is changing. If, e.
g., the labor-time required for the production of a bushel of wheat
remained constant, while that required for the production of all other
commodities doubled, the exchange value of a bushel of wheat expressed
in its equivalents would become half as large as before. The result
would be practically the same as if the amount of time necessary for
the production of one bushel of wheat had been reduced by one-half,
and that required for all other commodities had remained unchanged.
The value of commodities is determined by the proportion in which they
can be produced in the same labor-time. In order to see what possible
changes this proportion may undergo, let us take two commodities, A and

_First case._ Let the labor-time required for the production of
commodity B remain unchanged. In that case the exchange value of A,
expressed in terms of B, rises and falls with the rise and fall of the
labor-time required for the production of A.

_Second case._ Let the labor-time required for the production of
commodity A remain constant. Then the exchange value of A, expressed in
terms of B, falls and rises in an inverse ratio with the rise and fall
of the labor-time required for the production of B.

_Third case._ Let the labor-time required for the production of
commodities A and B rise and fall in equal proportion. Then the
expression of equivalence of A and B remains unchanged. If through some
cause the productivity of all kinds of labor were to decline uniformly,
so that the production of all commodities would require an equally
increased quantity of labor-time, then the value of all commodities
would rise, though the expression of their exchange values would remain
unchanged, and the actual wealth of society would decrease, because
it would have to expend more labor-time on the production of the same
stock of use-values.

_Fourth case._ Let the labor-time required for the production of A and
B rise and fall, but not uniformly; that is to say, the labor-time
required for the production of A may rise, while that required for B
may fall, or vice versa. All of which can be reduced to the simple
case where the labor-time required for the production of one commodity
remains unchanged, while that required for the other rises or falls.

The exchange value of any commodity is expressed in the use-value of
any other commodity, be it in integral units or in fractions thereof.
As exchange value, every commodity is capable of subdivision, like
the labor-time embodied in it. The equivalence of commodities is
independent of their physical divisibility as use-values, just as the
sum of the exchange values of commodities is indifferent to the change
of form which use-values have to undergo when converted into a _single_
new commodity.

So far we have considered commodities from a twofold point of view,
as use-values and exchange values alternately. But a commodity as such
is a direct combination of use-value and exchange value; and it is a
commodity only in relation to other commodities. The _actual_ relation
between commodities constitutes the _process of their exchange_. It is
a social process participated in by individuals independent of each
other but the part they take in it is that of owners of commodities
only. Their mutual relations are those of their commodities, and thus
they really appear as conscious factors of the process of exchange.

A commodity _is_ a use-value, wheat, linen, a diamond, a machine,
etc., but as a commodity it is, at the same time, _not_ a use-value.
If it were a use-value for its owner, i. e., a direct means for the
satisfaction of his own wants, then it would not be a commodity. To him
it is rather _a non-use-value_; it is merely the material depository of
exchange-value, or simply a _means of exchange_; as an active bearer of
exchange value, use-value becomes a means of exchange. To the owner it
is a use-value only in so far as it constitutes exchange value.[12]

It has yet _to become_ a use-value, viz., to others. Not being a
use-value to its owner, it is a use-value to the owners of other
commodities. If it is not, then the labor expended on it was useless
labor, and the result of that labor is not a commodity. On the other
hand, the commodity must become a use-value _to the owner himself_,
because his means of existence lie outside of it in the use-values of
commodities not belonging to him. In order to become a use-value, the
commodity must meet the particular want of which it is the means of
satisfaction. Use-values of commodities are thus _realized_ use-values
through a universal change of hands by passing from the hands in which
they were held as means of exchange into those where they become use
values. Only through this universal transfer of commodities does the
labor contained in them become useful labor. In this process of their
mutual interchange as use-values, commodities do not acquire any new
economic forms. On the contrary, even the form which marked them as
commodities disappears. Bread, e. g., by changing hands from the baker
to the consumer does not change its identity as bread. On the contrary,
it is only the consumer that begins to regard it as a use-value, as a
certain article of food, while in the hands of the baker it was only
the bearer of an economic relation, a palpable yet transcendental
object. Thus, the only change of form that commodities undergo while
becoming use-values, consists in the fact that they cease to be, as
a matter of form, non-use-values to their owners, and use-values to
those who do not own them. To become use-values commodities must be
universally alienated; they must enter the sphere of exchange; but
they are subject to exchange in their capacity of exchange values.
Hence, in order to be realized as use-values, they must be realized as
exchange values.

While the single commodity appeared from the standpoint of use-value as
something independent, as exchange value it was regarded first of all
in its relation to all other commodities. This relation was, however,
merely theoretical, imaginary. It becomes real only in the process of
exchange. On the other hand, a commodity _is_ an exchange value in so
far as a certain quantity of labor-time has been expended on it, and
it consequently represents _materialized labor-time_. But of itself it
is only materialized individual labor-time of a particular kind, and
not _universal_ labor-time. Therefore, it _is not_ directly an exchange
value, but must first _become_ such. First of all, it is an embodiment
of universal labor-time only in so far as it represents labor-time
applied to a definite useful purpose, i. e., when it represents a
use-value. This was the material condition under which alone labor-time
contained in commodities was regarded as universal social labor.
Thus, while a commodity can become a use-value only after it has been
realized as an exchange value, it can, on the other hand, be realized
as an exchange value only if it proves to be a use-value in the process
of alienation.

A commodity can be alienated as a use-value only to one whom it
serves as a use-value, i. e., as a means of satisfying a certain
want. On the other hand, it is exchanged for another commodity, or,
if we put ourselves on the side of the owner of the other commodity,
it, too, can be alienated, i. e., be realized, only if brought in
contact with that particular want of which it is the object. In the
universal exchange of commodities as _use-values_ the basis for
their mutual relations is in their material difference as distinct
objects which satisfy different wants by their specific properties.
But as mere use-values, they are indifferent to each other, and
are incommensurable. As use-values they can be exchanged only with
reference to certain wants. They are exchangeable only as equivalents,
and they are equivalents only as equal quantities of materialized
labor-time, so that all regard to their natural properties as
use-values and therefore to the relation of the commodities to
particular wants is eliminated. On the contrary, a commodity is
realized as an exchange value by replacing as an equivalent any
definite quantity of any other commodity, regardless of whether it
is a use-value for the owner of the other commodity or not. But to
the owner of the other commodity it is a commodity only in so far
as it is a use-value to him, and it becomes an exchange value to
its owner only in so far as it is a commodity to that other person.
Thus, the same relation appears as a proportion between commodities
as magnitudes of the same denomination, but differing qualitatively;
or, as an expression of their equivalence as embodiments of universal
labor-time, and, at the same time, as a relation of qualitatively
different objects, of use-values intended for the satisfaction of
particular wants, in short, a relation in which they are distinguished
as actual use-values. But this equivalence and non-equivalence mutually
exclude each other. Thus we have before us not only a vicious circle
of problems in which the solution of one implies that of the other, but
a combination of contradicting claims, since the fulfillment of one is
directly connected with that of its opposite.

The process of exchange of commodities must result both in the
unfolding and in the solution of these contradictions, neither of
which, however, can appear in that process in this simple way. We
have only observed how commodities are mutually related to each other
as use-values, i. e., how they appear as use-values _within_ the
process of exchange. The exchange-value, on the contrary, as we have
considered it so far, appeared as an abstraction formed in our own
minds, or―if we may so put it―in the mind of the individual owner
of commodities, which lie stored in his warehouse as use-values,
and weigh upon his conscience as exchange values. In the process of
exchange, however, commodities must be not only use-values, but also
exchange values to one another, and that should appear as their own
mutual relation. The difficulty which we first encountered was that a
commodity must be first alienated and delivered to its purchasers as
a use-value, in order to appear as an exchange value, as materialized
labor, while on the other hand its alienation as use-value implies
its being an exchange value. But let us assume that this difficulty
has been overcome. Suppose the commodity has divested itself of its
use-value, and has thereby fulfilled the material condition of being
socially useful labor, instead of a particular labor of an individual.
In that case, the commodity must become an exchange value, a universal
equivalent, an embodiment of universal labor-time for all other
commodities in the process of exchange, and thus, leaving behind its
limited role of a particular use-value, acquire the ability to be
directly represented in all use-values as its equivalents. But every
commodity is _just such_ a commodity, appearing as a direct incarnation
of universal labor-time by divesting itself of its particular
use-value. On the other hand, however, commodities confront each other
in the process of exchange as particular commodities, as the labor
of private individuals embodied in particular use-values. Universal
labor-time is itself an abstraction, which, as such, does not exist for

Let us examine the series of equations in which the exchange value of a
commodity finds its concrete expression, e. g.:

  1 yard of linen = 2 lbs. of coffee.
  1 yard of linen = 1/2 lb. of tea.
  1 yard of linen = 8 lbs. of bread, etc.

These equations simply signify that equal quantities of universal
social labor-time are embodied in one yard of linen, two pounds
of coffee, half a pound of tea, etc. But as a matter of fact the
individual labors which are represented in these particular use-values,
become universal, and, in that form, also social labor, only when they
are actually exchanged for one another in proportion to the labor-time
contained in them. Social labor-time exists in these commodities in
a latent state, so to say, and is first revealed in the process of
exchange. We do not proceed from the labor of individuals as social
labor, but, on the contrary, from special labor of private individuals
which appears as universal social labor only by divesting itself of
its original character in the process of exchange. Universal social
labor is, therefore, no ready-made assumption, but a growing result.
And thus we are confronted with a new difficulty, that on the one
hand commodities must enter the process of exchange as embodiments of
universal labor-time, while, on the other hand, this embodiment of the
labor-time of individuals as social labor-time is itself a result of
the process of exchange.

Every commodity becomes an exchange value by divesting itself of its
use-value, or of its original nature. The commodity must therefore
assume a double capacity in the process of exchange. But that second
capacity of exchange value can appear only in the shape of another
commodity, because only commodities confront each other in the process
of exchange. How is a particular commodity to represent directly
_materialized universal_ labor-time, or―to put it differently―how is
individual labor-time, which is embodied in a particular commodity to
be made directly universal in character? The concrete expression of the
exchange value of a commodity, i. e., of every commodity as a universal
equivalent, is represented in an endless series of equations, such as:

  1 yard of linen = 2 lbs. of coffee.
  1 yard of linen = 1/2 lb. of tea.
  1 yard of linen = 8 lbs. of bread.
  1 yard of linen = 6 yards of calico.
  1 yard of linen = etc.

The above form is theoretical in so far as commodities are only
_thought of_ as definite quantities of materialized universal
labor-time. But the capacity of a particular commodity to serve as a
universal equivalent from a mere abstraction becomes a _social_ result
of the process of exchange by a simple inversion of the above series of
equations, viz.:

  2 lbs. of coffee  = 1 yard of linen.
  1/2 lb. of tea    = 1 yard of linen.
  8 lbs. of bread   = 1 yard of linen.
  6 yards of calico = 1 yard of linen.

While coffee, tea, bread, calico, in short, all commodities express
in linen the labor-time contained in them, the exchange value of
linen, on the other hand, unfolds itself in all other commodities as
its equivalents, and the labor-time embodied in it becomes direct
universal labor-time, which is equally expressed in different volumes
of all other commodities. Linen thus becomes the _universal equivalent_
through the _universal action_ of all other commodities upon it.
As exchange value, every commodity served as a measure of value of
all other commodities. Now, on the contrary, since all commodities
measure their exchange values by means of a particular commodity,
this excluded commodity becomes the special expression of exchange
value, as a universal equivalent. At the same time, the endless
series of equations in which the exchange value of every commodity
was expressed, is reduced to one single equation consisting of two
members. The equation 2 lbs. of coffee = 1 yard of linen now fully
expresses the exchange value of coffee, for in this expression a yard
of linen appears as the direct equivalent of a definite quantity
of every other commodity. Thus, within the sphere of exchange all
commodities are or appear to each other as exchange values in the
form of linen. The proposition that commodities, as exchange values,
are to each other as different quantities of materialized universal
labor-time, may now be worded to the effect that commodities, as
exchange values, represent nothing but different quantities of _the
same_ article, linen. Universal labor-time thus assumes the aspect of
a distinct thing, as a commodity existing along with and outside of
all other commodities. At the same time the equation 2 lbs. of coffee
= 1 yard of linen, in which one commodity appears as the exchange
value of another, is yet to be realized. Only by being alienated as
use-value―which depends upon whether it proves to be in the process
of exchange the object of a certain want―does the commodity actually
transform its existence as coffee into the existence as linen and
thus takes on the form of a universal equivalent and becomes, indeed,
an exchange value for all other commodities. Conversely, since all
commodities are turned into linen by being alienated as use-values,
linen becomes the converted form of all other commodities, and only as
a result of this transformation of all other commodities into it, it
becomes the direct _embodiment of universal labor-time_, i. e., the
product of universal exchange and of the elimination of individual
labor. If commodities thus assume a twofold character in order to
appear as exchange values to each other, the commodity which has been
singled out as the universal equivalent becomes, on the other hand, a
use-value in two ways. Besides its special use-value as a particular
commodity, it assumes a universal use-value. This latter kind of
use-value constitutes its special feature, emanating as it does,
from the specific part which the commodity plays as a result of the
universal relation which all other commodities bear toward it in the
process of exchange. The use-value of every commodity as an object of
a particular want, has a different value in different hands, e. g., it
has a different value in the hands of the one who disposes of it, than
in those of the one who acquires it. But the commodity singled out as
the universal equivalent, is now an object of a universal want arising
from the very process of exchange, and it has the same use-value to
everybody, viz., that of serving as the depository of exchange value,
of being a universal means of exchange. Thus we find in one commodity
the solution of the contradiction which is inherent in commodity as
such, namely, of being at one and the same time a particular use-value
and a universal equivalent, and, therefore, a use-value for everybody
or universal use-value. Thus, while all other commodities express their
exchange value in the form of an ideal equation with the excluded
commodity―an equation yet to be realized―the use-value of the special
commodity, although real, appears in the process itself as a mere
form which is yet to be realized through transformation into actual
use-values. Originally the commodity appeared simply as commodity, as
universal labor-time embodied in a particular use-value. In the process
of exchange, all commodities are related to the one excluded commodity
as to a simple commodity, one which appears as the embodiment of
universal labor-time in a particular use-value. Thus, _particular_
commodities become related to one particular commodity as a universal
commodity.[13] In that manner the mutual relations of possessors of
commodities based on the fact that they regard their labor as universal
social labor, takes on the aspect of their relations to commodities as
exchange values; and the mutual relation of commodities as exchange
values appears in the process of exchange as the relation of all of
them to one particular commodity as to a specially adopted means of
expression of their exchange value; again, from the point of view of
that particular commodity the above relation appears as its specific
relation to all other commodities, and, therefore, as its own definite,
spontaneous, social character. The particular commodity which thus
appears as the specially adopted expression of the exchange value
of all other commodities, or the exchange value of commodities as a
particular exclusive commodity, is _money_. Money is a crystallization
of the exchange value of commodities which they themselves form in
the process of exchange. Thus, while commodities become _use-values_
to each other in the process of exchange by casting off all definite
forms and entering into mutual relations in their direct material
shape, they must assume a new form, viz., proceed to the formation of
money in order to appear as _exchange values_ to each other. Money
is not a symbol, no more than the commodity aspect of a use-value
is a symbol. That a social relation of production takes the form of
an object existing outside of individuals, and that the definite
relations into which individuals enter in the process of production
carried on in society, assume the form of specific properties of a
thing, is a perversion and by no means imaginary, but prosaically real,
mystification marking all social forms of labor which creates exchange
value. In money this mystification appears only more strikingly than in

The necessary physical properties of the particular commodity in which
the money form of all other commodities is to be crystallized―as far
as they are directly determined by the nature of exchange value―are:
divisibility to any desired extent, homogeneity of its parts, and
uniformity of all the specimens of the commodity. As an embodiment
of universal labor-time it must be homogeneous in its structure
and capable of representing only quantitative differences. Another
necessary property is durability of its use-value, as it must last
through the process of exchange. The precious metals excel in these
qualities. Money not being a result of a scheme or agreement, but
having been produced instinctively in the process of exchange, a great
variety of more or less unsuited commodities had successively performed
its functions. At a certain stage of development of the process
of exchange, the necessity arises for a polar distribution of the
functions of exchange value and use-value among commodities, so that
one commodity e. g. should act as a medium of exchange, while another
is being alienated as a use-value. This necessity brings it about that
one or even several commodities possessing the most generally accepted
use-value, begin, incidentally at first, to play the part of money.
Even if not direct means of satisfying existing wants, their being the
most considerable material constituent part of wealth, insures to them
a more general character than to the other use-values.

Direct barter, the original natural form of exchange, represents rather
the beginning of the transformation of use-values into commodities,
than that of commodities into money. Exchange value has as yet no
form of its own, but is still directly bound up with use-value. This
is manifested in two ways. Production, in its entire organization,
aims at the creation of use-values and not of exchange values, and
it is only when their supply exceeds the measure of consumption that
use-values cease to be use-values, and become means of exchange,
i. e., commodities. At the same time, they become commodities only
within the limits of being direct use-values distributed at opposite
poles, so that the commodities to be exchanged by their possessors
must be use-values to both,―each commodity to its non-possessor. As a
matter of fact, the exchange of commodities originates not within the
primitive communities,[14] but where they end, on their borders at the
few points, where they come in contact with other communities. That is
where barter begins, and from here it strikes back into the interior
of the community, decomposing it. The various use-values which first
become commodities in the barter between different communities, such
as slaves, cattle, metals, constitute therefore in most cases the
first money within those communities themselves. We have seen how
the exchange value of a commodity is manifested the more perfectly
as exchange value, the longer the series of its equivalents or the
_greater_ the sphere of exchange of that commodity. With the gradual
expansion of barter, the increase in the number of exchanges, and
the growing diversification of the commodities drawn into exchange,
commodities develop into exchange values, which leads to the formation
of money and has a destructive effect on direct barter. The economists
are in the habit of ascribing the origin of money to the difficulties
which are encountered in the way of extensive barter, but they forget
that these difficulties arise from the development of exchange value
and from the fact that social labor becomes universal labor. E. g.,
commodities as use-values can not be subdivided at will, a property
which they should possess as exchange values. Or, a commodity belonging
to A may be a use-value to B, while the commodity belonging to B may
not have any use-value to A. Or the owners of the commodities may
need each other’s indivisible goods in unequal proportions. In other
words, under the pretence of analyzing simple barter, economists
bring out certain aspects of the contradiction which is inherent in
commodities as entities simultaneously embodying both use-value and
exchange value. On the other hand, they consistently cling to the
idea that barter is the natural form of exchange, which suffers only
from certain technical difficulties, for which money is a cunningly
devised expedient. Arguing from this perfectly superficial view, an
ingenious English economist has rightly maintained that money is
merely a material instrument like a ship or a steam-engine, but not
an expression of a social relation in the field of production and
consequently not an economic category; and that it is, therefore, wrong
to treat the subject in political economy, which really has nothing in
common with technology.[15]

The world of commodities implies the existence of a highly developed
division of labor; this division is manifested directly in the great
variety of use-values, which confront each other as particular
commodities and which embody as many different kinds of labor. The
division of labor embracing all the particular kinds of productive
occupations, is the complete expression of social labor in its material
aspect viewed as labor creating use-values. But from the standpoint of
commodities and within the process of exchange, it exists only in its
results, in the variety of the commodities themselves.

The exchange of commodities constitutes the social metabolic process,
i. e. the process in which the exchange of the special products of
private individuals is the result of certain social relations of
production into which the individuals enter in this interchange of
matter. As they develop, the mutual relations of commodities crystalize
into various aspects of the universal equivalent and thus the process
of exchange becomes at the same time the process of the formation of
money. The whole of this process which takes the form of a succession
of processes, constitutes circulation.


The analysis of commodities according to their twofold aspect of
use-value and exchange value by which the former is reduced to work
or deliberate productive activity; and the latter, to labor time or
homogeneous social labor, is the result of a century and a half of
critical study by the classical school of political economy which dates
from William Petty in England and Boisguillebert in France[16] and
closes with Ricardo in the former country and Sismondi in the latter.

Petty reduces use-value to labor, without deceiving himself as to the
natural limitation of its creative power. As regards concrete labor,
he sizes it up in the magnitude of its social aspect, as _the division
of labor_.[17] This view of the source of material wealth does not
remain more or less fruitless as in the case of his contemporary,
Hobbes, but leads up to his _Political Arithmetic_, the first form in
which Political Economy is differentiated as an independent science.

He defines exchange value, however, just as it _appears_ in the process
of exchange of commodities, viz. as money; and money he defines as
an existing commodity, gold and silver. Laboring under the ideas of
the monetary system, he declares the special branch of labor which
is devoted to the production of gold and silver as the labor which
determines exchange value. What he really means is that the labor of
members of society must produce not direct use-values, but commodities
or use-values which by means of exchange are capable of assuming the
form of gold and silver, i. e. of money, i. e. of exchange value, i.
e. of embodiments of universal labor. His example, however, shows
strikingly that the recognition of labor as the source of material
wealth by no means excludes the misconception of the particular social
form in which labor constitutes the source of exchange value.

In his turn, Boisguillebert, if not consciously, at any rate actually
reduces the exchange value of a commodity to labor-time, since he
determines “true value” (la juste valeur) by the right proportion in
which the labor-time of individuals is distributed among the several
branches of industry, and defines free competition as the social
process which determines these correct proportions. At the same time,
however, and in contrast with Petty he wages a fanatical war against
money which, by its interference, disturbs the natural equilibrium or
harmony of exchange of commodities and, like a wanton Moloch, demands
all natural wealth as sacrifice. It is true that this assault on money
was called forth by certain historic conditions. Since Boisguillebert
attacked[18] the blind destructive lust after gold which possessed
the court of Louis XIV, his tax collectors, and his nobility; on the
other hand, Petty extolled in the greed of gold the mighty impulse
which spurred on the nation in her industrial development and in her
conquest of the world-market; still, there asserts itself here a
deeper antagonism of principles which constantly recurs between true
English and true French[19] Political Economy. Boisguillebert sees,
in fact, only the material substance of wealth, its use-value, the
enjoyment[20] of it, and considers the capitalistic form of labor, i.
e. the production of use-values as commodities and the exchange of
those commodities, as the natural social form in which individual labor
attains its end. When he is, therefore, confronted with the specific
character of capitalistic wealth as in the case of money, he sees in it
the usurping interference of extraneous elements and gets into a rage
about the capitalist system of labor in one form while utopian-like
he praises it in another.[21] Boisguillebert furnishes us with proof
that one may treat labor-time as the measure of value of commodities,
and at the same time confound labor embodied in the exchange value of
commodities and measured by time, with the direct natural activity of

The first sensible analysis of exchange value as labor-time, made so
clear as to seem almost commonplace, is to be found in the work of
a man of the New World where the bourgeois relations of production
imported together with their representatives sprouted rapidly in a
soil which made up its lack of historical traditions with a surplus of
humus. That man was Benjamin Franklin, who formulated the fundamental
law of modern political economy[22] in his first work which he wrote
when a mere youth and published in 1721.

He declares it necessary to look for another measure of value than
precious metals. That measure is labor. “By labor may the value of
silver be measured as well as other things. As, suppose one man
employed to raise corn, while another is digging and refining silver;
at the year’s end, or at any other period of time, the complete produce
of corn, and that of silver, are the natural price of each other; and
if one be twenty bushels, and the other twenty ounces, then an ounce
of that silver is worth the labor of raising a bushel of that corn.
Now if by the discovery of some nearer, more easy or plentiful mines,
a man may get forty ounces of silver as easily as formerly he did
twenty, and the same labor is still required to raise twenty bushels
of corn, then two ounces of silver will be worth no more than the same
labor of raising one bushel of corn, and that bushel of corn will be
as cheap at two ounces, as it was before at one, _ceteris paribus_.
Thus the riches of a country are to be valued by the quantity of labor
its inhabitants are able to purchase.”[23] Thus Franklin regards
labor-time from the one-sided economic point of view, as the measure
of value. The transformation of actual products into exchange values
is self-evident with him and the only question is as to finding a
quantitative measure of value. “Trade,” says he, “in general being
nothing else but the exchange of labour for labour, the value of all
things is, as I have said before, most justly measured by labour.”[24]
Substitute the word “work” for “labor” in the above statement, and
the confusion of labor in one form and labor in another form becomes
at once apparent. Since trade consists e. g. in the exchange of the
respective labors of the shoemaker, miner, spinner, painter, etc., does
it follow that the value of shoes is most justly measured by the work
of a painter? On the contrary, Franklin meant that the value of shoes,
mining products, yarn, paintings, etc., is determined by abstract labor
which possesses no particular qualities and can, therefore, be measured
only quantitatively.[25] But since he does not develop the idea
that labor contained in exchange value is abstract universal labor
which assumes the form of social labor as a result of the universal
alienation of the products of individual labor, he necessarily fails to
recognize in money the direct embodiment of this alienated labor. For
that reason he sees no inner connection between money and labor which
creates exchange value, and considers money merely as an instrument
introduced from outside into the sphere of exchange for purposes of
technical convenience.[26] Franklin’s analysis of exchange value did
not exert any direct influence on the general trend of science, because
he discussed only special questions of political economy whenever there
was a definite practical occasion for it.

The contrast between useful work and labor which creates exchange
value agitated all Europe during the eighteenth century in the form of
this question: what particular kind of labor constitutes the source
of bourgeois wealth? It was thus assumed that not every kind of labor
which is realized in use-values or yields certain products does
thereby directly create wealth. With the physiocrats, however, as well
as with their opponents, the burning question was not, what kind of
labor creates _value_, but which is it that creates _surplus value_.
They approached the problem in its complicated form before they had
solved it in its elementary form; such is the historical course of
all sciences leading them by a labyrinth of intersecting paths to the
real starting points. Unlike other builders, science not only erects
castles in the air, but constructs separate stories of the building,
before it has laid the foundation. Without dwelling any longer on the
physiocrats and omitting quite a number of Italian economists who in
some more or less ingenious ideas came close to a correct analysis
of the nature of commodity,[27] we pass at once to the first Briton
who elaborated the general system of bourgeois economics, Sir James
Steuart.[28] His idea of exchange value as well as all the abstract
categories of political economy still seem to be with him in the
process of differentiation from the material elements they represent
and therefore appear quite vague and unsettled. In one place he
determines _real value by labor-time_ (“what a workman can perform in
a day”), but immediately creates confusion by introducing the elements
of wages and raw material.[29] In another place his struggle with the
material substance of the subject he treats of is revealed even more
strikingly. He calls the material of nature contained in a commodity,
such as the silver in a silver plate, its “intrinsic worth,” while the
labor-time contained in it he calls “useful value.” The former, he says
“is ... something real in itself,” while “the value of the second must
be estimated according to the labour it has cost to produce it.... The
labour employed in the modification [of the substance] represents a
portion of a man’s time.”[30]

What distinguishes Steuart from his predecessors and followers is
his keen differentiation between specifically social labor which is
represented in exchange value, and concrete labor which produces
use-values. Labor, he says, which through its alienation creates
a universal equivalent, I call _industry_. Labor as industry he
distinguishes not only from concrete labor, but from all other social
forms of labor.[31] It is to him the capitalistic form of labor
in contrast to its antique and mediaeval forms. He is especially
interested in the difference between capitalistic and feudal labor, of
which he had observed the latter in its decaying forms both in Scotland
and on his extensive travels over the continent. Steuart knew, of
course, very well that products took on the form of commodities and
commodities, the form of money in precapitalistic epochs as well; but
he proves conclusively that it is only in the capitalistic period of
production that the commodity becomes the elementary and fundamental
form of wealth, and alienation [of commodities], the ruling form of
acquisition and that consequently labor creating exchange value is
specifically capitalistic in its character.[32]

After different forms of concrete labor, such as agriculture,
manufacture, navigation, trade, etc., had each in turn been declared
the true source of wealth, Adam Smith proclaimed labor in general,
and namely in its general social form of _division of labor_, to be
the only source of material wealth or use-values. While ignoring in
connection with the latter the part played by nature, he is troubled
by it when he comes to deal with purely social wealth i. e. exchange
value. To be sure, Adam determines the value of a commodity by the
labor-time contained in it, but relegates the actual application of
the principle to pre-Adamic times. In other words, what seems to him
true from the standpoint of simple commodity, ceases to be clear as
soon as the higher and more complex forms of capital, wage-labor,
rent, etc. take its place. This he expresses by saying, that the value
of commodities used to be measured by labor-time in the paradise
lost of bourgeois society, in which men dealt with each other not
as capitalists, wage-workers, landlords, tenants, usurers, etc., but
merely as plain producers of commodities which they exchanged. He
constantly confuses the determination of the value of commodities by
the labor-time contained in them with the determination of their value
by the value of labor. He becomes confused in working out the details
and fails to see the objective equalization of different kinds of labor
which the social process forcibly carries out, mistaking it for the
subjective equality of the labors of individuals.[33] The transition
from concrete labor to labor creating exchange value, i. e. to labor in
its fundamental capitalistic form he tries to derive from the _division
of labor_. Yet, while it is true that private exchange implies the
division of labor, it is false to maintain that division of labor
implies private exchange. Among the Peruvians, e. g., labor was divided
to an extraordinary extent, although there was no private exchange, no
exchange of products, as commodities.

Contrary to Adam Smith, David Ricardo elaborated with great clearness
the determination of the value of a commodity by labor-time and showed
that this law governs also such relations of capitalistic production
which seem to contradict it most. Ricardo confines his investigations
exclusively to the _quantitative determination of value_ and as regards
the latter he is at least conscious of the fact that the realization
of the law depends upon certain historical conditions. He says,
namely, that the determination of value by labor-time holds good for
commodities “only as can be increased in quantity by the exertion of
human industry, and on the production of which competition operates
without restraint.”[34] What he really means is that the law of value
presupposes for its full development an industrial society in which
production is carried on a large scale and free competition prevails,
i. e. the modern capitalist society. In all other respects, Ricardo
considers the capitalist form of labor as the eternal natural form of
social labor. He makes the primitive fisherman and the primitive hunter
straightway exchange their fish and game as owners of commodities, in
proportion to the labor-time embodied in these exchange values. On this
occasion he commits the anachronism of making the primitive fisherman
and primitive hunter consult the annuity tables in current use on the
London Exchange in the year 1817 in the calculation relating to their
instruments. The “parallelograms of Mr. Owen” seem to be the only form
of society outside of the bourgeois form with which he was acquainted.
Although confined within this bourgeois horizon, Ricardo analyzes the
bourgeois economy―which looks quite different to deeper insight than
it does on the surface―with such keen power of theoretical penetration
that Lord Brougham could say of him: “Mr. Ricardo seemed as if he had
dropped from another planet.”

In a direct controversy with Ricardo, Sismondi lays stress upon
the specifically social character of labor which creates exchange
value,[35] and says it is “characteristic of our economic progress” to
reduce the magnitude of value to the _necessary_ labor-time, to the
relation between the demand of society as a whole and the quantity of
labor which is sufficient to satisfy this demand.[36] Sismondi is no
more laboring under Boisguillebert’s idea, that labor which creates
exchange value is adulterated by money; but just as Boisguillebert
denounced money, so does Sismondi denounce large industrial capital.
In Ricardo political economy reached its climax, after recklessly
drawing its ultimate conclusions, while Sismondi supplemented it by
impersonating its doubts.

Since Ricardo gave to classical political economy its final shape,
having formulated and elaborated with the greatest clearness the law of
the determination of exchange value by labor-time, it is natural that
all the polemics among economists should center about him. Stripped
of its puerile[37] form this controversy comes down to the following

_First_: Labor itself has exchange value, and different kinds of labor
have different exchange values. We get into a vicious circle by making
exchange value the measure of exchange value, because the measuring
exchange value needs a measure itself. This objection may be reduced
to the following problem: Given labor-time as the intrinsic measure
of exchange value, develop from that the determination of wages. The
theory of wages gives the answer to that.

_Second_: If the exchange value of a product is equal to the labor-time
contained in it, then the exchange value of one day of labor is equal
to the product of that labor. In other words, wages must be equal to
the product of labor.[38] But the very opposite is actually the case.
Ergo. this objection comes down to the following problem: How does
production, based on the determination of exchange value by labor-time
only, lead to the result that the exchange value of labor is less than
the exchange value of its product? This problem is solved by us in the
discussion of capital.

_Third_: The market price of commodities either falls below or rises
above its exchange value with the changing relations of supply and
demand. _Therefore_, the exchange value of commodities is determined by
the relation of supply and demand and not by the labor-time contained
in them. As a matter of fact, this queer conclusion merely amounts to
the question, how a market price based on exchange value can deviate
from that exchange value; or, better still, how does the law of
exchange value assert itself only in its antithesis? This problem is
solved in the theory of competition.

_Fourth_: The last and apparently the most striking objection, if
not raised in the usual form of queer examples: If exchange value
is nothing but mere labor-time contained in commodities, how can
commodities which contain no labor possess exchange-value, or in other
words, whence the exchange value of mere forces of nature? This problem
is solved in the theory of rent.



In a parliamentary debate on Sir Robert Peel’s Bank Act of 1844 and
1845, Gladstone remarked that not even love has made so many fools of
men as the pondering over the nature of money. He spoke of Britons to
Britons. The Dutch, on the contrary, who, from times of yore, have had,
Petty’s doubts notwithstanding, “angelical wits” for money speculation
have never lost their wits in speculations about money.

The main difficulty in the analysis of money is overcome as soon as
the evolution of money from commodity is understood. This point once
granted, it only remains to comprehend clearly the particular forms
of money, which is to some extent made difficult by the fact that all
bourgeois relations, being gilt or silver plated, have the appearance
of money relations, and money, therefore, seems to possess an endless
variety of forms, which have nothing in common with it.

In the following investigation only those forms of money are treated
of which directly grow out of the exchange of commodities; the forms
which belong to a higher stage of production, as e. g., credit money
will not be discussed here. For the sake of simplicity gold is assumed
throughout as the money commodity.


The first process of circulation constitutes, so to say, the
theoretical preparatory process to actual circulation. To begin
with, commodities which are use-values by nature, acquire a form in
which they _appear_ in idea to each other as exchange values, as
definite quantities of incorporated _universal_ labor-time. The first
necessary step in this process is, as we have seen, the setting apart
by the commodities of a specific commodity, say _gold_, as the direct
incarnation of universal labor-time, or the universal equivalent. Let
us go back for a moment to the form in which commodities turn gold into

  1 ton of iron = 2 ounces of gold

  1 quarter of wheat = 1 ounce of gold

  1 hundred weight of Mocca coffee = 1-1/4 ounce of gold

  1 hundred weight of potash = 1/2 ounce of gold

  1 ton of Brazil timber = 1-1/2 ounces of gold

  Y commodities = X ounces of gold

In the above series of equations iron, wheat, coffee, potash, etc.
appear to each other as embodiments, of homogeneous labor, namely,
as labor materialized in money, from which all the peculiarities of
the different kinds of concrete labor represented in the different
use-values are completely eliminated. As value they are all identical,
they are the incarnation of _the same_ labor, or _the same_ incarnation
of labor, viz., gold. As uniform embodiments of the same labor they
display only _one_ difference, a quantitative one, by appearing
as different quantities of value, because _unequal_ quantities of
labor-time are contained in their use-values. The mutual relation
of these separate commodities is that of embodiments of universal
labor-time, since they are related to universal labor-time as to an
excluded commodity, viz., gold. The same relation the development of
which causes commodities to appear to each other as exchange values,
causes the labor time contained in gold to appear as universal
labor-time, a given quantity of which is expressed in different
quantities of iron, wheat, coffee, etc,―in short, in the use-values
of all commodities, or is directly unfolded in the endless series of
commodity-equivalents. While all commodities express their exchange
values in gold, gold expresses its exchange value directly in all
commodities. While commodities assume the form of exchange value in
relation to each other, they lend to gold the form of the universal
equivalent, or of money.

Gold becomes the _measure of value_, because _all_ commodities measure
their exchange values in gold, in proportion as a certain quantity of
gold and a certain quantity of the commodity contain the same amount
of labor-time; and it is only by virtue of this function of being a
measure of value, in which capacity its own value is measured directly
in the entire series of commodity equivalents, that gold becomes
a universal equivalent or money. On the other hand, the exchange
value of all commodities is expressed in gold. In this expression,
the qualitative aspect is to be distinguished from the quantitative:
there is the exchange value of the commodity as the embodiment of the
same uniform labor-time; while the magnitude of value is exhaustively
expressed, since in the same proportion in which commodities are
equated to gold they are equated to one another. On the one hand the
_universal_ character of the labor-time contained in them is revealed;
on the other, its quantity is expressed in its golden equivalent. The
exchange value of commodities thus expressed in the form of a universal
equivalent and, moreover, as a numerical proportion of this equivalent,
in terms of one specific commodity, or represented in the form of a
series of commodities equated to one specific commodity, is PRICE.
Price is the form into which the exchange value of commodities is
converted when it _appears_ within the sphere of circulation.

By the same process by which commodities express their values in gold
prices, they turn gold into a measure of value i. e. into money. If
all of them were to measure their values in silver, wheat, or copper,
and therefore express them in the form of silver, wheat or copper
prices, then silver, wheat or copper would be measures of value and
consequently universal equivalents. In order to appear as prices in
circulation, commodities must be exchange values before they enter
circulation. Gold becomes the measure of value only because all
commodities estimate their exchange value in it.

The universality of this relation which is the result of evolution
and from which alone springs the function of gold as the measure of
value, implies however, that every single commodity is measured in
gold, in proportion to the labor-time contained in both; that the
actual common measure of the commodity and of gold is labor; or that
commodity and gold are passed for each other in direct barter as
equal exchange values. How this equalization actually takes place,
can not be discussed here when treating of simple circulation. So
much, however, is clear, that in countries producing gold and silver,
certain quantities of labor-time are directly embodied in definite
quantities of gold and silver, while in countries which do not produce
gold and silver the same result is reached in a round-about way, by
direct or indirect exchange of the commodities of those countries;
i. e. a definite portion of average national labor is given for a
definite quantity of labor-time, embodied in the gold and silver of the
mine-owning countries. In order to be able to serve as a measure of
value, gold must be as far as possible a _variable_ value, because it
can become the equivalent of other commodities only as an incarnation
of labor-time, and the same labor-time is realized in unequal volumes
of use-values with the change in the productive power of concrete
labor. In estimating all commodities in gold it is only assumed that
gold represents a given quantity of labor at a given moment, as was
done when the exchange value of any commodity was expressed in terms
of the use-value of any other commodity. As for the variations of the
value of gold, the law of exchange value formulated above holds good
in its case as well. If the exchange value of commodities remains
unchanged, then a general rise in their gold prices is possible only
in the case of a fall in the exchange value of gold. If the exchange
value of gold remains unchanged, a general rise of gold prices is
possible only when the exchange value of all commodities rises. The
reverse is true in case of a general fall in the prices of commodities.
If the value of an ounce of gold falls or rises in consequence of a
change in the labor-time required for its production, then the values
of all other commodities fall or rise to an equal extent. Thus, the
ounce of gold represents after the change, as it did before, a _given_
quantity of labor-time with regard to all commodities. The same
exchange values are now estimated in greater or smaller quantities
of gold than before, but they are estimated in proportion to the
magnitude of their values, and consequently retain the same proportion
to each other. The ratio 2 ÷ 4 ÷ 8 remains the same when expressed
as 1 ÷ 2 ÷ 4 or as 4 ÷ 8 ÷ 16. The change in the quantity of gold in
which exchange values are estimated with a variation in the value of
gold, interferes as little with the function of gold as a measure
of value, as the fifteen times smaller value of silver as compared
with that of gold interferes with the performance of that function
by the latter. Since labor-time is the common measure of gold and
commodities, and since gold figures as the measure of value only in so
far as all commodities are measured by it, the idea that money makes
commodities commensurable, is therefore a mere fiction of the process
of circulation.[39] It is rather the commensurability of commodities
as incorporated labor-time, that turns gold into money.

Commodities enter the process of exchange in the concrete form
of use-values. They are yet to be turned into the real universal
equivalent through their alienation. The determination of their prices
merely amounts to their ideal transformation into the universal
equivalent, a process of equation to gold which is yet to be realized.
But since commodities are, in their prices, transformed into gold only
in imagination, or are converted only into imaginary gold, and since
their money form is not differentiated as yet from their concrete
selves, it follows that gold has also been turned into money only
in imagination; it appears so far but as a measure of value, and in
fact definite quantities of gold serve merely as names for certain
quantities of labor-time. The form in which gold is crystallized in
money always depends upon the way in which commodities express their
own exchange value to each other.

Commodities now confront one another in a double capacity: actually as
use-values, ideally as exchange values. The twofold aspect of labor
contained in them is reflected in their mutual relations; the special
concrete labor being virtually present as their use-value, while
universal abstract labor-time is ideally represented in their price
in which commodities appear as commensurable embodiments of the same
value―substance differing merely in quantity.

The difference between exchange value and price appears to be merely
nominal or, as Adam Smith says, labor is the real price, and money
the nominal price of commodities. Instead of estimating the value of
one quarter of wheat in thirty days of labor, it is estimated in one
ounce of gold if one ounce of gold is the product of thirty days’
labor. However, far from this difference being merely nominal, all the
storms which threaten commodities in the actual process of circulation
center about it. Thirty days of labor are contained in a quarter of
wheat and it need not, therefore, be expressed in terms of labor-time.
But gold is a commodity distinct from wheat, and only in circulation
it can be ascertained, whether the quarter of wheat can be actually
turned into an ounce of gold as is anticipated in its price. That will
depend on whether or not it proves to be a use-value, whether or not
the quantity of labor-time contained in it is the quantity necessarily
required by society for the production of a quarter of wheat. The
commodity as such _is_ an exchange value, it _has_ a price. In this
difference between exchange value and price lies the demonstration of
the fact that the particular individual labor contained in a commodity
has first to be expressed through the process of alienation in terms
of its counterpart, i. e. as impersonal, abstract, universal and, only
in that form, social labor, viz. money. Whether it can be so expressed
seems to be a matter of chance. Thus, although the exchange value
of a commodity finds only ideally a distinct expression in price,
and the twofold character of labor contained in the commodity exists
as yet merely as two distinct forms of expression, and, although in
consequence thereof, the embodiment of universal labor-time, gold,
confronts actual commodities only as an imaginary measure of value, yet
the fact that exchange value exists as price, or that gold exists as a
measure of value implies the necessity of the alienation of commodities
for hard cash and the possibility of their non-alienation. In short,
here lies latent the entire contradiction which is inherent in the
fact that products are commodities or that the particular work of a
private individual can be of no account in society until it has taken
the very opposite form of abstract universal labor. For that reason,
the utopians, who want to have commodities but not money, who want a
system of production based on private exchange without the necessary
conditions underlying such a system, are consistent when they “destroy”
money not in its tangible form but in its nebulous illusory form of a
measure of value. Under the invisible measure of value there lurks the
hard cash.

The process by which gold has become the measure of value and exchange
value has been turned into price, being once assumed, all commodities
express in their prices but imagined quantities of gold of various
magnitudes. As such various quantities of the same thing, gold, they
are equated, compared and measured with each other, and thus arises the
technical necessity of referring them to a definite quantity of gold
as a unit of measure, a unit which develops into a standard measure by
virtue of its divisibility into aliquot parts, which in their turn can
be subdivided into aliquot parts.[40] But quantities of gold as such
are measured by weight.

The standard of measure is thus found ready in the general measures
of weight of metals and, therefore, where-ever metallic circulation
is in vogue, these measures serve originally as standards of price.
Since commodities no more relate to each other as exchange values to
be measured by labor-time, but as magnitudes of the same denomination
measured in gold, the latter is transformed from a _measure of value_
into a _standard of price_. The comparison of prices with each other
as different quantities of gold is thus crystallized in figures which
correspond to an assumed quantity of gold and represent it as a
standard of aliquot parts. Gold as measure of value and as standard of
price has entirely different forms of manifestation and the confusing
of the two has resulted in the wildest of theories. Gold is a measure
of value as incorporated labor-time; it is the standard of price as
certain weight of metal. Gold becomes the measure of value by virtue
of its relation as exchange value to commodities as exchange values;
as standard of price, a definite quantity of gold serves as a unit
for other quantities of gold. Gold is the measure of value, because
its value is variable; it is the standard of price, because it is
fixed as a constant unit of weight. In this case, as in all cases of
measuring quantities of the same denomination, the establishment of a
definite and unvarying unit of measure is all-important. The necessity
of settling upon a quantity of gold as a unit of measure and upon its
aliquot parts as subdivisions of that unit, has given rise to the
notion that a certain quantity of gold which has naturally a variable
value had been assigned a fixed ratio of value to the exchange values
of all commodities; the fact is overlooked that exchange values of
commodities are transformed into prices, i. e. into quantities of gold,
before gold develops as a standard of price. No matter how the value of
gold may vary, the ratios between the values of different quantities of
gold remain constant. Let the fall in the value of gold amount to 1000
per cent., still twelve ounces of gold will have a twelve times greater
value than one ounce of gold; and in prices the only thing considered
is the ratio between different quantities of gold. Since, on the other
hand, no rise or fall in the value of an ounce of gold can alter its
weight, no alteration can take place in the weight of its aliquot
parts. Thus gold always renders the same service as an invariable
standard of price, no matter how much its value may vary.[41]

An historical process which, as we shall explain later, was determined
by the nature of metallic circulation, led to the result that the
same denomination of weight was retained for a constantly changing
and decreasing weight of precious metals in their function of a
standard of price. Thus the English pound sterling denotes less than
one-third of its original weight; the pound Scot, before the Union,
only 1-36; the French livre, 1-74; the Spanish Maravedi, less than
1-1000; the Portuguese Rei, a still smaller fraction. Such was the
historical origin of the discrepancy between the current money names
of various weights of metals and their weight denominations.[42]
Since the determination of the unit of measure, of its aliquot parts,
and of their names is purely conventional, and since they should
possess within the sphere of circulation the character of universality
and compulsion, they had to be settled _by law_. The purely formal
operation thus devolved upon the government.[43] The metal which
was to serve as the money material, was found already adopted in
the community. In different countries the legal standard of price
is naturally different. In England e. g. the ounce as a weight of
metal is divided into pennyweights, grains and carats Troy, but the
ounce of gold as the unit of money is divided into 3 7-8 sovereigns,
the sovereign into 20 shillings, the shilling into 12 pence, so that
100 pounds of 22 carat gold (1200 ounces) = 4672 sovereigns and 10
shillings. In the world market, however, where national boundaries
disappear, these national characteristics of the measure of money also
disappear and give place to the general measures of weight of metals.

The price of a commodity or the quantity of gold into which it is
ideally transformed, is, therefore, now expressed in the names of
coins of the gold standard. Thus, instead of saying: a quarter of
wheat is worth an ounce of gold, it is said in England to be worth 3£
17s. 10-1/2d. All prices are thus expressed in the same denominations.
The peculiar form which commodities lend to their exchange values is
transformed into a _money-denomination_ by which commodities tell each
other how much they are worth. Money in its turn becomes _money of

We transform commodities into money of account, in our mind, on paper,
in conversation, whenever it is a question of expressing any kind of
wealth in terms of exchange value.[45] For that transformation we need
the gold substance, but only in imagination. In order to estimate the
value of a thousand bales of cotton in a certain number of ounces of
gold and then to express this number of ounces in the denominations of
the ounce, £. s. d., not a single atom of gold is required. Thus, not
a single ounce of gold was in circulation in Scotland before Robert
Peel’s Bank Act of 1845, although the gold ounce, expressed in its
English standard of account, 3£ 17s. 10-1/2d., served as the legal
standard of price. In a similar manner silver serves as standard of
price in the trade between Siberia and China, although that trade
virtually amounts to barter. It is, therefore, immaterial to money,
as money of account, whether or not its entire unit of measure or the
fractions thereof are really coined. In England, at the time of William
the Conqueror, 1£, then a pound of pure silver, and the shilling, 1-20
of a pound, existed only as money of account, while the penny, 1-240
of a pound of silver, was the largest silver coin in existence. On
the other hand, there are no shillings and pence in England to-day,
although they are legal denominations for certain parts of an ounce of
gold. Money as money of account may exist exclusively in idea, while
the money in actual existence may be coined according to an entirely
different standard. Thus the money in circulation in many English
colonies of North America consisted until late in the eighteenth
century of Spanish and Portuguese coins, although the money of account
was throughout the same as in England.[46]

Owing to the fact that money, when serving as the standard of price,
appears under the same reckoning names as do the prices of commodities,
and that, therefore, the sum of 3£ 17s. 10-1/2d. may signify, on
the one hand, an ounce weight of gold, and on the other, the value
of a ton of iron, this reckoning name of money has been called its
_mint-price_. Hence, there sprang up the extraordinary notion that
the value of gold is estimated in its own material, and that, in
contradistinction to all other commodities, its price is _fixed_ by
the State. It was erroneously thought that the giving of reckoning
names to definite weights of gold is the same thing as fixing the
value of those weights.[47] In so far as gold serves as one of the
elements in determining price, i. e., where it performs the function
of money of account, it not only has no _fixed_ price, but has _no_
price whatever. In order to have a price, i. e., in order to express
itself in a _specific_ commodity as a _universal_ equivalent that
other commodity would have to play the same exclusive role in the
process of circulation as gold. But two commodities excluding all other
commodities mutually exclude each other. Therefore, wherever gold and
silver have by law been made to perform side by side the function of
money or of a measure of value it has always been tried, but in vain,
to treat them as one and the same material. To assume that there is an
invariable ratio between the quantities of gold and silver in which a
given quantity of labor-time is incorporated, is to assume, in fact,
that gold and silver are of one and the same material, and that a given
mass of the less valuable metal, silver, is a constant fraction of a
given mass of gold. From the reign of Edward III to the time of George
II, the history of money in England consists of one long series of
perturbations caused by the clashing of the legally fixed ratio between
the values of gold and silver, with the fluctuations in their real
values. At one time gold was too high; at another, silver. The metal
that for the time being was estimated below its value was withdrawn
from circulation, melted and exported. The ratio between the two metals
was then again altered by law, but the new nominal ratio soon came into
conflict again with the real one. In our own times, the slight and
transient fall in the value of gold compared with silver, which was a
consequence of the Indo-Chinese demand for silver, produced on a far
more extended scale in France the same phenomena, export of silver,
and its expulsion from circulation by gold. During the years 1855,
1856 and 1857, the excess in France of gold imports over gold exports
amounted to £41,580,000, while the excess of silver exports over silver
imports was £14,704,000. In fact, in those countries in which both
metals are legally measures of value, and therefore both legal tender,
so that every one has the option of paying in either metal, the metal
that rises in value is at a premium, and, like every other commodity,
measures its price in the over-estimated metal which alone serves
in reality as the standard of value. The result of all experience
and history with regard to this question is simply that, where two
commodities perform by law the functions of a measure of value, in
practice one alone maintains that position.[48]


The circumstance that commodities are converted into gold only in ideas
as prices and that gold is therefore turned into money only in idea,
gave rise to the theory of the _ideal unit of measure of money_. Since,
in the determination of prices, gold and silver serve only ideally
as money of account, it was asserted that the names pound, shilling,
pence, thaler, franc, etc., instead of denoting certain weights of
gold and silver or labor incorporated in some way, stood rather for
ideal atoms of value. Thus, if, e. g., the value of an ounce of silver
should rise it would contain more such atoms and would therefore have
to be estimated and coined in a greater number of shillings. This
doctrine, revived again during the last commercial crisis in England
and even voiced in Parliament in two separate reports attached to the
report of the select Committee on the Bank Acts sitting in July, 1858,
dates from the end of the seventeenth century.

At the time of the accession of William III., the English mint-price
of an ounce of silver was 5s. 2d., or 1-62 of an ounce of silver was
equal to a penny; 12 of these pence were called a shilling. According
to that standard, a piece of silver weighing, say, 6 ounces, would be
coined into thirty-one coins, each called a shilling. But the _market
price_ of an ounce of silver rose above its _mint price_, from 5s. 2d.
to 6s. 3d., or, in order to buy an ounce of silver bullion 6s. 3d. had
to be paid. How could the market price of an ounce of silver rise above
its mint price, when the mint price is merely a reckoning name for
aliquot parts of an ounce of silver? The riddle was easily solved. Out
of £5,600,000 of silver money which was in circulation at that time,
four millions were worn out, clipped and debased. A trial disclosed
that £57,000 of silver which were supposed to weigh 220,000 ounces,
weighed only 141,000 ounces. The mint went on coining according to
the same standard, but light-weighted shillings in actual circulation
represented smaller parts of an ounce than their name implied. Hence,
a greater quantity of these light-weighted shillings had to be paid in
the market for an ounce of silver bullion. When a general recoinage
was decided upon in consequence of the derangement that had been
produced, LOWNDES, the Secretary of the Treasury, declared that the
value of an ounce of silver had risen and therefore it must henceforth
be coined into 6s. 3d. instead of into 5s. 2d. as heretofore. His
argument practically amounted to the assertion that the rise in the
value of the ounce caused a fall in the value of its aliquot parts.
His false theory, however, served merely as an embellishment for a
just, practical purpose. The government debts were contracted in light
shillings, were they to be paid in heavy ones? Instead of saying pay
back four ounces of silver, when you had received nominally five ounces
but virtually only four, he said pay back nominally five ounces but
reduce the metallic contents to four ounces and call a shilling what
you had called four-fifths of a shilling heretofore. Thus Lowndes
practically adhered to the metallic weight while theoretically he clung
to the reckoning name. His adversaries who clung only to the name
and therefore declared the 25 to 50 per cent. lighter shilling to be
identical with the full-weight shilling maintained on the contrary that
they adhered to the metallic weight.

JOHN LOCKE, who was an advocate of the new bourgeoisie in all forms,
the manufacturers against the working classes and paupers, the
commercial class against the old fashioned usurers, the financial
aristocracy against the state debtors, and who went so far as to prove
in his own work that the bourgeois reason is the normal human reason,
also took up the challenge against Lowndes. John Locke carried the day
and money borrowed at ten or fourteen shillings to a guinea was repaid
in guineas of twenty shillings.[49] SIR JAMES STEUART sums up the
entire transaction as follows: “ ... the state gained considerably upon
the score of taxes, as well as the creditors upon their capitals and
interest; and the nation, which was the principal loser, was pleased;
because their _standard_ (The standard of their own value) was not
debased.”[50] Steuart thought that the nation would prove more alert
with the further development of commerce. He was mistaken. About 120
years later the same _quid pro quo_ was repeated.

It was just in the order of things that Bishop BERKELEY, the
representative of a mystical idealism in English philosophy, should
have given a theoretical turn to the doctrine of the ideal unit
of measure of money, something which the practical “Secretary to
the Treasury” had failed to do. He asks: “Whether the terms Crown,
Livre, Pound Sterling, etc., are not to be considered as Exponents
or Denominations of such Proportion? [namely proportions of abstract
value as such.] And whether Gold, Silver, and Paper are not Tickets
or Counters for Reckoning, Recording and Transferring thereof? (of
the proportion of value). Whether _Power_ to command the Industry of
others be not real Wealth? And whether Money be not in Truth, Tickets
or Tokens for conveying and recording such Power, and whether it be of
great consequence what Materials the Tickets are made of?”[51] Here
we find a confusion, first of the measure of value and the standard
of price, and secondly of gold and silver as measures on the one hand
and mediums of circulation on the other. Because precious metals can
be replaced by tokens in the process of circulation Berkeley comes to
the conclusion that these tokens represent nothing, i. e., only the
abstract idea of value.

SIR JAMES STEUART had so fully developed the theory of the ideal
unit of measure of money, that his successors―unconscious successors
since they do not know him―have added to it neither a new version
nor even a new example. “Money, which I call of account, is no more
than an arbitrary scale of equal parts, invented for measuring the
respective value of things vendible. Money of account, therefore, is
quite a different thing from money coin, which is price[52] and might
exist, although there was no such thing in the world as any substance
which could become an adequate and proportional equivalent, for every
commodity.... Money of account ... performs the same office with
regard to the value of things, that degrees, minutes, seconds, etc.,
do with regard to angles, or as scales do to geographical maps, or to
plans of any kind. In all these inventions, there is constantly some
denomination taken for the unit. ... The usefulness of all those
inventions being solely confined to the marking of proportion. Just so
the unit in money can have no invariable determinate proportion to any
part of value, that is to say, it cannot be fixed to any particular
quantity of gold, silver, or any other commodity whatsoever. The
unit once fixed, we can, by multiplying it, ascend to the greatest
value.... The value of commodities, therefore, depending upon a
general combination of circumstances relative to themselves and to the
fancies of men, their value ought to be considered as changing only
with respect to one another; consequently, anything which troubles or
perplexes the ascertaining those changes of proportion by the means
of a general, determinate and invariable scale, must be hurtful to
trade.... Money ... is an ideal scale of equal parts. If it be demanded
what ought to be the standard value of one part? I answer by putting
another question: What is the standard length of a degree, a minute, a
second? It has none ... but so soon as one part becomes determined by
the nature of a scale, all the rest must follow in proportion. Of this
kind of money ... we have two examples. The bank of Amsterdam presents
us with the one, the coast of Angola with the other.”[53]

Steuart speaks here simply of the part money plays in circulation
as the _standard of price_ and _money of account_. If different
commodities are marked in the price-list at 15s., 20s., 36s.,
respectively, then I care, in fact, neither for the silver substance,
nor for the name of the shilling when comparing the magnitudes of their
values. The ratios between the numbers 15, 20, 36, tell everything, and
the number 1 has become the only unit of measure. Only the abstract
proportion of numbers can at all serve as a purely abstract expression
of proportion. In order to be consistent, Steuart should have dropped
not only gold and silver, but their legal baptismal names as well.
Since he does not understand the nature of the transformation of the
measure of value into a standard of price, he naturally believes that
the definite quantity of gold which serves as a unit of measure relates
as a measure not to other quantities of gold, but to values as such.
Since commodities appear as quantities of the same denomination through
the conversion of their exchange values into prices, he denies that
property of the measure which reduces them to one denomination; and
since in this comparison of different quantities of gold the quantity
of gold which serves as a unit of measure is conventional, he does not
see the necessity of fixing it at all. Instead of calling 1-360 part
of a circle degree, he might give that name to 1-180th part; the right
angle would then be measured by 45 degrees instead of 90, and acute and
obtuse angles would be measured accordingly. Nevertheless, the measure
of the angle would remain, then, as before, first a qualitatively
definite mathematical figure, the circle, and second a quantitatively
definite part of the circle. As for Steuart’s economic illustrations,
he refutes his own argument with one and does not prove anything with
the other. The bank money of Amsterdam was, in fact, merely the
reckoning name for Spanish doubloons, which retained their full weight
by lying idly in the bank vaults, while the circulating coins became
thinner from hard rubbing against the outer world. And as for the
African idealists we have to abandon them to their fate until critical
travelers will tell us more about them.[54] The French assignat
could be called an almost ideal money in Steuart’s sense: “_National
property. Assignation of 100 francs._” To be sure, the use-value which
the assignation was supposed to represent, namely, the confiscated
land, was indicated here, but the quantitative definition of the unit
of measure was forgotten and “the franc” became a meaningless word.
How much or how little land the assignation franc represented depended
on the results of the public auctions. In practice, however, the
assignation franc circulated as a token of value of silver money and
its depreciation was, therefore, measured by this silver standard.

The period of the suspension of cash payments by the Bank of England
was hardly more fruitful of war-bulletins than of money theories. The
depreciation of bank notes and the rise of the market price of gold
above its mint price called forth again the doctrine of the ideal
unit of money on the part of some of the advocates of the Bank. Lord
Castlereagh found the classical confused expression for the confused
idea by speaking of the unit of measure of money as “a sense of value
in reference to currency as compared with commodities.” When a few
years after the peace of Paris conditions permitted the resumption of
cash payments, the same question which had been stirred up by Lowndes
under William III., came up, hardly changed in form. An enormous
government debt, as well as a mass of private debts, accumulated in
twenty years, fixed obligations, etc., had been contracted on the
basis of depreciated bank notes. Were they to be paid back in bank
notes of which £4672, 10s. nominal, actually represented 100 pounds
of 22 carat gold? THOMAS ATTWOOD, a banker of Birmingham, came forth
as _Lowndes redivivus_. The creditors were to receive nominally as
many shillings as had been nominally borrowed, but if about 1-78 of
an ounce of gold constituted a shilling according to the old standard
of coinage, then say 1-90 of an ounce should now be christened a
shilling. Attwood’s adherents are known as the Birmingham school of
“little shillingmen.” The controversy over the ideal money unit, which
had started in 1819, still went on in 1845 between Sir Robert Peel and
Attwood, whose own wisdom, as far as the function of money as a measure
is concerned, is exhaustively summed up in the following passage, in
which, referring to Sir Robert Peel’s controversy with the Birmingham
Chamber of Commerce, he says: “The substance of your queries is ...
in what sense is the word pound to be used?... To what will the sum
one pound be equivalent?... Before I venture a reply I must enquire
what constitutes a standard of value?... Is £3 17s. 10-1/2d. an _ounce_
of gold, or is it only of the _value_ of an ounce of gold? If £3 17s.
10-1/2d. be an ounce of gold, why not call things by their proper
names, and, dropping the terms pounds, shillings and pence, say ounces,
pennyweights and grains?... If we adopt the terms ounces, pennyweights
and grains of gold, as our monetary system, we should pursue a direct
system of barter.... But if gold be estimated as of the _value_ of
£3 17s. 10-1/2d. per ounce ... how is this ... that much difficulty
has been experienced at different periods to check gold from rising
to £5 4s. per ounce, and we now notice that gold is quoted at £3 17s.
9d. per ounce?... The expression _pound_ has reference to value, but
not a fixed standard value.... The term pound is the _ideal unit_....
Labour is the parent of cost and gives the relative value to gold or
iron. _Whatever denomination of words are used to express the daily or
weekly labour of a man_, such words express the cost of the commodity

In the last words the hazy conception of the ideal money measure melts
away and its real meaning breaks through. The reckoning names of gold,
pound sterling, shilling, etc., should be names for definite quantities
of labor-time. Since labor-time constitutes the substance and the
intrinsic measure of values, these names would then actually represent
definite proportions of value. In other words, labor-time is maintained
to be the true unit of measure of money. With this we leave the
Birmingham school, but should add in passing that the doctrine of the
ideal measure of money acquired new importance in the controversy over
the question of the convertibility or non-convertibility of bank notes.
If paper receives its name from gold or silver, then the convertibility
of a note or its exchangeability for gold or silver remains an economic
law, no matter what the civil law may be. Thus a Prussian paper thaler,
although legally inconvertible, would immediately depreciate if it were
worth less than a silver thaler in ordinary trade, i. e., if it were
not practically convertible. The consistent advocates of inconvertible
paper money in England, therefore, sought refuge in the ideal measure
of money. If the reckoning names of money, £, s., etc., are names of
certain quantities of atoms of value, of which a commodity absorbs or
loses now more, now less in exchange for other commodities, then an
English £5 note, e. g., is just as independent of its relation to gold
as of that to iron and cotton. Since its title would no more imply
its theoretical equality with a certain quantity of gold or any other
commodity, the demand for its convertibility, i. e., for its practical
equality with a definite quantity of a specified thing would be
excluded by the very conception of the note.

The theory of labor-time as the direct measure of money was first
systematically developed by JOHN GRAY.[56] He makes a National Central
Bank ascertain through its branches the labor-time consumed in the
production of various commodities. The producer receives an official
certificate of value in exchange for his commodity. i. e., he gets a
receipt for as much labor-time as his commodity contains,[57] and these
bank notes of one week’s labor, one day’s labor, one hour’s labor,
etc., serve at the same time as a check for an equivalent in all other
commodities stored in the bank warehouses.[58] This is the fundamental
principle carefully worked out in detail and based throughout on
existing English institutions. Under this system, says Gray, “to
sell for money may be rendered, at all times, precisely as easy as it
now is to buy with money; ... production would become the uniform and
never-failing cause of demand.”[59] The precious metals would lose
their “privilege” as against other commodities and “take their proper
place in the market beside butter and eggs, and cloth and calico, and
then the value of the precious metals will concern us just as little
... as the value of the diamond.”[60] “Shall we retain our fictitious
standard of value, gold, and thus keep the productive resources of the
country in bondage? or, shall we resort to the natural standard of
value, labour, and thereby set our productive resources free?”[61]

Labor-time being the intrinsic measure of value, why should there be
another external measure side by side with it? Why does exchange value
develop into price? Why do all commodities estimate their value in one
exclusive commodity, which is thus converted into a special embodiment
of exchange value into money? That was the problem which Gray had
to solve. Instead of solving it, he imagined that commodities could
be related directly to each other as products of social labor. But
they can relate to each other only in their capacity of commodities.
Commodities are the direct products of isolated independent private
labors, which have to be realized as universal social labor through
their alienation in the process of private exchange, that is to say,
labor based on the production of commodities becomes social labor only
through universal alienation of individual labors. But by assuming
that the labor-time contained in commodities is _directly social_
labor-time, Gray assumes it to be common labor-time or labor-time of
directly associated individuals. Under such conditions a specific
commodity like gold or silver could not confront other commodities as
the incarnation of universal labor, and exchange value would not be
turned into price; but, on the other hand, use-value would not become
exchange value, products would not become commodities and thus the
very foundation of the capitalistic system of production would be
removed. But that is not what Gray has in mind. _Products are to be
produced as commodities, but are not to be exchanged as commodities._
He entrusts a national bank with the carrying out of this pious
wish. On the one hand, society, through the bank, makes individuals
independent of the conditions of private exchange, and on the other,
it allows them to go on producing on the basis of private exchange.
The logic of things, however, compels Gray to do away with one
condition of capitalistic production after another, although he wishes
to “reform” only the money system which results from the exchange of
commodities. Thus he transforms capital into national capital,[62]
land into national property,[63] and if his bank is to be watched
closely, it will be found that it not only receives commodities with
one hand and issues certificates for work delivered with the other, but
that it regulates production as well. In his last work, “Lectures on
Money,” in which Gray is anxious to demonstrate that his labor-money
is a purely bourgeois reform, he gets tangled up in even more glaring

Every commodity is directly money. That was Gray’s theory deducted
from his incomplete and, therefore, false analysis of commodities.
The “organic” structure of “labor money,” the “national bank” and the
“ware-docks” are mere fantastic visions in which the dogma is made
by a legerdemain to appear to us as a universal law. The dogma that
a commodity is money or that the isolated labor of the individual
contained in it is direct social labor, will of course not become
true through the mere fact that a bank believes in it and carries on
operations accordingly. It is more likely that bankruptcy would play
in that case the part of the practical critic. What remains concealed
in Gray’s writings and hidden from himself as well, namely, that
labor-money is a well-sounding economic phrase for the pious wish to
get rid of money, and with money, of exchange value, and with exchange
value, of commodities, and with commodities, of the capitalistic mode
of production, was clearly expressed by some English socialists of whom
a few preceded and others followed Gray.[64]

But it remained for Mr. Proudhon and his school to preach in
all earnest the degradation of _money_ and the exaltation of the
_commodity_ as the gist of socialism and thus to reduce socialism to an
elementary misconception of the necessary connection between commodity
and money.[65]


After the commodity has received in the process of price determination
the form in which it becomes capable of circulation, and after gold has
acquired the character of money in the same process, circulation will
both present and solve the contradictions which are inherent in the
process of exchange of commodities. The actual exchange of commodities,
i. e., the social interchange of matter consists of a change of form in
which is unfolded the double character of the commodity as use-value
and exchange value, and at the same time its own change of form is
crystallized in distinct forms of money. To describe this change of
form is to describe circulation. As we have seen, given a world of
commodities and with it a system of division of labor, commodity is but
a developed form of exchange value; in the same manner, circulation
implies a steady stream of exchange transactions which are being
continually renewed on all sides. The second assumption we make is that
commodities enter the process of exchange with a _definite price_ or
that they appear to each other in that process in a double capacity,
really as use-values, ideally―in price―as exchange values.

The liveliest streets of London are crowded with stores whose show
windows are filled with the riches of the world, Indian shawls,
American revolvers, Chinese porcelain, Parisian corsets, Russian furs
and tropical spices, but all of these things of joy bear fatal white
labels marked with Arabian figures with the laconic characters £, s.,
d. Such is the picture of the commodity appearing in circulation.


On close examination the process of circulation is seen to consist of
two distinct cycles. If we denote commodity by the letter C and money
by the letter M we can express these two forms as follows:


In this chapter we are interested exclusively in the first form, i. e.,
in the form which serves as the direct expression of the circulation of

The process C―M―C consists of the movement C―M, the exchange of the
commodity for money, or _selling_; the opposite movement M―C, exchange
of money for a commodity, or _buying_; and of the unity of the two
movements C―M―C, exchange of the commodity for money in order to
exchange the money for a commodity, or _selling_ in order to _buy_.
But the result which marks the end of the process is C―C, exchange of
commodity for commodity, real interchange of matter.

If we look at it from the extreme end of the first commodity, C―M―C
represents its transformation into gold and its retransformation from
gold into a commodity; a movement in which the commodity exists first
as a particular use-value, then divests itself of that character,
acquires the character of exchange value or universal equivalent,
in which capacity it has nothing in common with its natural form,
then throws off the last form as well to remain finally an actual
use-value for the satisfaction of particular wants. In this last form
it falls out of the sphere of circulation into that of consumption.
The entire process of circulation C―M―C thus includes the combined
series of metamorphoses, which every single commodity undergoes
in order to become a direct use-value to its possessor. The first
metamorphosis is accomplished in the first phase of the circulation
process, C―M; the second in the last phase, M―C; and the entire
process constitutes the _curriculum vitae_ of the commodity. But
the process C―M―C represents the combined metamorphosis of a single
commodity and constitutes at the same time the sum of certain one-sided
metamorphoses of other commodities, since every metamorphosis of the
first commodity constitutes its transformation into another commodity
and therefore the transformation of the other commodity into it; hence
it constitutes a twofold transformation which takes place at the same
stage of circulation. We must then consider separately each of the two
processes of exchange into which circulation C―M―C breaks up.

C―M or _sale_: commodity C enters the process of circulation not only
as a particular use-value, e. g., a ton of iron, but as a use-value
of a certain price, say, £3 17s. 10-1/2d., or an ounce of gold.
While this price is on the one hand the exponent of the quantity of
labor-time contained in a ton of iron, i. e., of the magnitude of its
value, it at the same time expresses the pious wish of the iron to
become gold, i. e., to give to the labor-time it contains the aspect
of universal social labor-time. Unless this trans-substantiation takes
place, the ton of iron not only ceases to be a commodity, but even a
product, for it is a commodity only because it is a non-use-value to
its owner; that is to say, his labor counts as actual labor only in so
far as it is labor useful to others, and the thing is useful to him
only as abstract universal labor. It is, therefore, the business of
iron, or of its owner, to find that point in the world of commodities
where iron attracts gold. But this difficulty, the _salto mortale_
of the commodity, is overcome when the sale actually takes place, as
is assumed here on the analysis of simple circulation. When the ton
of iron is realized as a use-value through its alienation, i. e., by
passing from the hands in which it is a non-use-value to hands in which
it is a use-value, it at the same time realizes its price and from mere
imaginary gold it becomes real gold. In place of the name one ounce of
gold or £3 17s. 10-1/2d., an ounce of real gold has appeared, but the
ton of iron has cleared that place. Not only does the commodity―which
in its price had been ideally converted into gold―actually turn into
gold through the sale C―M, but gold, which as a measure of value had
been only ideal money and in fact figured merely as a money name of
commodities―is now turned into actual money[66] by the same process.
Just as gold became the ideal universal equivalent, because all
commodities measured their values by it, so does it now become the
absolutely alienable commodity, real money, because it is the product
of the universal alienation of commodities for it―and the sale C―M is
the process by means of which that universal alienation takes place.
But gold becomes real money only through sale, because the exchange
values of commodities were already ideal gold in their prices.

In the sale C―M, as well as in the purchase M―C, two commodities,
entities of exchange value and use-value, confront each other, but the
exchange value of the commodity exists only ideally as price; while
as regards gold, although it is really a use-value, its use-value
is confined only to its being the bearer of exchange value and is,
therefore, merely a formal use-value, having no relation to a real
individual want. The antithesis of use-value and exchange value is thus
distributed at the two extreme poles of C―M, so that the commodity
confronts gold as a use-value which has yet to realize in gold its
exchange value or its price, while gold confronts the commodity as an
exchange value, whose formal use-value is yet to be realized in the
commodity. Only through this duplication of the commodity as commodity
and gold, and, further, through the twofold and polar relation by
virtue of which each extreme represents but ideally what its opposite
is in reality and is in reality what its opposite is only ideally―in
short, only through the appearance of commodities as two-sided polar
opposites are the contradictions solved that are inherent in the
process of exchange.

So far we have considered C―M as sale, as the conversion of commodity
into money. But if we look at it from the other end, the same process
will assume the form M―C, or purchase, i. e., the conversion of
money into commodity. Sale is necessarily its opposite at the same
time; it is the former if we look at the process from one end, and
the latter if we regard the process from the other end. In practice
this process differs only in that the initiative in C―M originates
at the commodity end or with the seller, while in M―C it comes from
the money end or the buyer. In describing the first metamorphosis
of the commodity, its conversion into money as a result of the
completion of the first phase of circulation C―M, we assume at the
same time that another commodity has been converted into money and
is now in its second phase of circulation, M―C. Thus we get into a
vicious circle of assumptions. Circulation itself constitutes such a
vicious circle. If we did not consider M in M―C as the result of a
metamorphosis of another commodity, we would thereby take exchange out
of the process of circulation. But outside of the latter the form C―M
disappears and only two different Cs confront each other, say iron
and gold, the exchange of which does not constitute a part of the
process of circulation, being direct barter. Gold, at the source of
its production, is a commodity like any other commodity. Its relative
value and that of iron or of any other commodity is expressed here in
quantities in which they are mutually exchanged. But in the process
of circulation this operation is implied, the value of gold being
already given in the prices of commodities. Nothing can, therefore,
be more erroneous than the idea that gold and commodity enter into
the relation of direct barter _within the process of circulation_ and
that their relative values are ascertained through their exchange as
simple commodities. The illusion that gold is bartered as a simple
commodity for other commodities in the process of circulation is due to
the fact that prices represent equations in which certain quantities
of commodities are made equal to certain quantities of gold, i. e.,
that the commodities are made to relate to gold in its capacity
of money, as a universal equivalent, and, therefore, appear to be
directly exchangeable for it. In so far as the price of a commodity
is _realized_ in gold, it is exchanged for gold as a commodity, as a
particular embodiment of labor-time; but in so far as it is the _price_
that is realized in gold, the commodity is exchanged for gold in its
capacity of money and not of a commodity, i. e., it is exchanged for
gold as a universal embodiment of labor-time. But in either case the
quantity of gold for which the commodity is exchanged in the process
of circulation is not determined by exchange, but the exchange is
determined by the price of the commodity, i. e., by its exchange value
estimated in gold.[67]

Within the process of circulation gold appears in everybody’s hands as
the result of sale C―M. But since C―M, sale, is at the same time M―C,
purchase, it is apparent that while C, the commodity from which the
process starts, is passing through its first metamorphosis, another
commodity, which confronts it as the opposite pole M, is completing
its second metamorphosis and is, therefore, passing through the second
phase of circulation, while the first commodity is still in the first
phase of its course.

As a result of the first phase of circulation, the sale, we get
money which is the starting point of the second phase. In place of
the commodity in its first form appears its golden equivalent. This
result may now form a resting point, since the commodity in this
second form possesses a lasting existence of its own. The commodity,
a non-use-value in the hands of its possessor, is now on hand in an
always useful, since always exchangeable, form, and it depends upon
circumstances when and at what point of the surface of the commodity
world it will again enter circulation. Its formation into a gold
chrysalis constitutes an independent period in its life which may last
a greater or less length of time. While in the case of barter the
exchange of one particular use-value is directly bound up with the
exchange of another particular use-value, the universal character of
labor which creates exchange value is manifested in the separation and
lack of coincidence of acts of purchase and sale.

_M―C, purchase_, is the inverted movement of C―M and at the same time
the second or final metamorphosis of the commodity. As gold, i. e., in
the form of the universal equivalent, the commodity can be directly
represented in the use-values of all other commodities; the latter
aspire to gold as their hereafter, but at the same time indicate in
their prices the key in which it must sound in order that their bodies,
their use-values, may take the place of money, while their souls,
their exchange-values, may enter gold. The universal product of the
alienation of commodities is the absolutely alienable commodity. There
is no qualitative and only a quantitative limit to the transformation
of gold into commodity, namely, the limit of its own quantity or
magnitude of its value. “Everything is to be had for cash.” While in
the movement C―M, the commodity, through its alienation as a use-value,
realizes its own price and the use-value of somebody else’s money; it
realizes in the movement M―C, through its alienation as an exchange
value, its own use-value and the price of the other commodity. While
through the realization of its price the commodity transforms gold
into actual money, it turns gold into its merely fleeting money-form,
through its own retransformation. Since the circulation of commodities
implies an extensive division of labor and consequently a diversity of
wants on the part of individuals, a diversity which bears an inverse
ratio to the specialization of their own products, the purchase M―C may
appear as an equation with one commodity equivalent or split up into a
series of commodity-equivalents limited by the variety of the demands
of the purchaser and by the amount of money in his possession. Just as
a sale is a purchase, so is a purchase a sale. M―C is at the same time
C―M, but the initiative belongs in this case to gold or the purchaser.

Coming back now to C―M―C, or to circulation as a whole, it is apparent
that it contains the combined series of metamorphoses through which
a commodity passes. But at the same time as one commodity enters the
first phase of its circulation and completes its first metamorphosis,
another commodity enters the second phase of circulation, completes its
second metamorphosis and falls out of circulation; the first commodity
enters at the same time the second phase of circulation completes
its second metamorphosis and falls out of circulation, while a third
commodity enters circulation, passes through the first phase of its
course completing the first metamorphosis.

Thus, the combined circulation C―M―C, as a complete metamorphosis of a
commodity always constitutes at the same time the end of the complete
metamorphosis of another commodity and the beginning of a complete
metamorphosis of a third commodity, i. e., a series without beginning
or end. To illustrate this let us call C in either extreme C’ and C”
respectively, in order to distinguish the commodities, the series
reading thus: C’―M―C”. The first member, C’―M, presupposes in fact
that M is the result of another transaction C―M, and is thus itself
merely the last member of a series C―M―C’, while the second part M―C”
is merely a result of C”―M, or appears as the first part of C”―M―C’”,
and so on. Furthermore, although M is the result of only _one_ sale,
it appears that the last part M―C, may be represented as M―C’ + M―C”
+ M―C’”, etc., i. e., it may be split up into a number of purchases,
and consequently a number of sales, or into a number of first members
of new complete metamorphoses of commodities. Since the complete
metamorphosis of a single commodity thus appears as a link not only
of one endless chain of metamorphoses, but of many such chains, the
process of circulation in the world of commodities presents a hopeless
confusion of intertwined movements constantly ending and starting anew
at a countless number of points. But every single sale or purchase
stands as an independent isolated act, whose supplemental act may be
separated from it in time and place, and therefore does not need to
follow it directly as its continuation. Every separate process of
circulation, C―M or M―C, as a transformation of one commodity into
use-value and of another into money, i. e., as the first and second
phases of circulation respectively forms an independent halting
point from either direction; but, on the other hand, all commodities
commence their second metamorphosis in the common form of the universal
equivalent, gold, and stop at the starting point of the second phase of
circulation; for that, reason any M―C dovetails in actual circulation
with any C―M; the second chapter in the life-course of one commodity
with the first chapter of that of another commodity. A, e. g., sells
£2 worth of iron. He thus completes the transaction C―M or the first
metamorphosis of commodity iron, but postpones his purchase until some
other time. At the same time B, who sold 2 quarters of wheat for £6 a
fortnight since, buys with the same £6 a coat and trousers of Moses &
Son, thus completing M―C or the second metamorphosis of the commodity,

The two transactions M―C and C―M appear here merely as links of one
chain, because a commodity expressed in gold looks like any other
commodity, and one cannot tell by the looks of the gold whether it is
transformed iron or transformed wheat. C―M―C appears, therefore, in the
actual process of circulation as a jumble of countless accidentally
coinciding or successively following members of different complete
metamorphoses. The actual process of circulation thus appears not as
a complete metamorphosis of a commodity, not as its movement through
opposite phases, but as a mere agglomeration of many accidentally
coinciding or successive purchases and sales. The process thus loses
all clearness of outline which is so much more the case since every
single act of circulation, e. g., sale, is at the same time its
opposite, purchase, and vice versa. On the other hand, the process
of circulation is nothing but the movement of metamorphoses in the
world of commodities and, therefore, must reflect them also in its
movement as a whole. How that reflection takes place we shall consider
in the following chapter. It may be added here that in C―M―C the two
extreme Cs constitute two forms of commodities which do not bear the
same relation to M. The first C relates to money as a commodity of a
special class to a universal commodity, while money relates to the
second C as a universal commodity to an individual commodity. C―M―C
can, therefore, be reduced by abstract logic to the final form S―U―I in
which S, standing for species, forms the first extreme; U, signifying
universality, forms the connecting medium, and I, individuality,
constitutes the last extreme.

The owners of commodities entered the sphere of circulation simply
as guardians of commodities. Within that sphere they confront each
other in the opposite roles of buyer and seller, one as a personified
sugar-loaf, the other as personified gold. As soon as the sugar-loaf
is turned into gold, the seller becomes a buyer. These definite social
functions are no outgrowths of human nature, but are the products
of relations of exchange between men who produce their goods in the
form of commodities. They are so far from being purely individual
relations between buyer and seller that both enter this relation
only to the extent that their individual labor is disregarded and
is turned into money as labor of _no_ individual. Just as it is,
therefore, childish to consider these economic bourgeois roles of
buyer and seller as eternal social forms of human individuality, so it
is on the other hand, preposterous to lament in them the extinction
of individuality.[68] They are the necessary manifestations of
individuality at a certain stage of the social system of production.
Moreover, in the opposition of buyer and seller the antagonistic nature
of capitalistic production is expressed as yet so superficially
and as mere matter of form, that this opposition belongs also to
precapitalistic forms of society, since it merely requires that
the mutual relations of individuals should be those of owners of

Now, if we consider the result of C―M―C, it comes down to mere
interchange of matter, C―C. A commodity has been exchanged for a
commodity, a use-value for a use-value, and the transformation of the
commodity into money, or the commodity in its form of money, serves
merely as a means of effecting this interchange of matter. Money thus
appears merely as a _medium of exchange_ of commodities; not as a
medium of exchange in general, but as a means of exchange in the sphere
of circulation, i. e., a _medium of circulation_.[69]

We have seen that the process of circulation of commodities comes to
a completion in C―C, appearing as mere barter carried on by means of
money; further, that C―M―C represents in general not only two isolated
processes, but their dynamic union as well; but to draw from that the
conclusion that purchase and sale form an indivisible unit, is a mode
of thinking the criticism of which belongs to the domain of logic,
and not to that of economics. The separation of purchase and sale in
the process of exchange destroys all local, primitive, patriarchal
and naively genial barriers to interchange of matter in society. It
is, moreover, the general form of the separation of the points of
coincidence and opposition in this interchange, carrying within it the
possibility of commercial crises, because the antagonism of commodity
and money is the abstract and general form of all antagonisms with
which the capitalistic system of labor is pregnant. Hence, circulation
of money is possible without crises, but crises can not occur without
money circulation. In other words, where labor based on the system of
private exchange has not reached the stage marked by the existence
of money, it is less capable of producing those phenomena which
presuppose the full development of the capitalistic mode of production.
Bearing this in mind we can appreciate the depth of the criticism
which proposes to do away with the “shortcomings” of capitalistic
production by abolishing the “privilege” enjoyed by the precious metals
and introducing a so-called “rational monetary system.” As a sample
of economic defence of an opposite character may serve the following
piece of reasoning which has been proclaimed exceedingly keen. JAMES
MILL, the father of the well-known English economist, John Stuart Mill,
says: “Whatever ... be the amount of the annual produce, it never can
exceed the amount of the annual demand.... Of two men who perform an
exchange, the one does not come with only a supply, the other with only
a demand; each of them comes with both a demand and a supply.... The
supply which he brings is the instrument of his demand; and his demand
and supply are of course exactly equal to one another. It is therefore,
impossible that there should ever be in any country a commodity or
commodities in quantity greater than the demand, without there being,
to an equal amount, some other commodity or commodities in quantity
less than the demand.”[70]

Mill restores the balance by turning the process of circulation into
direct barter and then smuggling into direct barter the character of
buyer and seller borrowed by him from the process of circulation. To
put it in his own confused language, during certain periods when all
commodities are unsaleable there are really more buyers than sellers
of one commodity, _money_, and more sellers than buyers of _all other
money_, commodities; such was, e. g., the case at certain moments
during the commercial crisis of 1857-58 in London and Hamburg. The
metaphysical balance of purchases and sales amounts to this, that
every purchase is a sale and every sale is a purchase, which is a poor
consolation to the guardian of the commodity who can not bring about
its sale and therefore can not buy.[71]

The separation of sale and purchase makes possible a large number of
fictitious transactions side by side with genuine trade before the
final exchange between the producer and the consumer of commodities
takes place. It enables a host of parasites to penetrate the process of
production and exploit the separation. But this, again, means that with
money as the universal form of labor under the capitalist system, there
is _the possibility_ of the development of its contradictions.


Actual circulation appears at first sight as a mass of purchases and
sales accidentally taking place side by side. In buying as in selling,
commodities and money always stand in the same mutual relation: the
seller, on the side of the commodity; the buyer, on that of money.
Money as a medium of circulation always appears therefore as _a means
of purchase_; and in that way the difference in its destinations in
the opposite phases of the metamorphosis of the commodity becomes

Money passes into the hands of the seller in the same transaction in
which the commodity passes into the hands of the buyer. Commodities
and money thus flow in opposite directions and this change of place
in which the commodity passes over to one side and money to the other
side, occurs simultaneously at an indefinitely large number of points
on the entire surface of bourgeois society. But the first step which
the commodity makes in the sphere of circulation is also its last
step.[72] Whether it leaves its place on account of its attraction
for gold (C―M), or on account of its attraction by gold (M―C), with
one move, with one change of place it falls out of the sphere of
circulation into that of consumption. Circulation is a continuous flow
of commodities, but different commodities all the time, since each
commodity makes but one move. Every commodity enters upon the second
phase of its circulation not as the same commodity, but as another
commodity, gold. Hence the movement of a metamorphosed commodity is the
movement of gold. The same piece of gold or the identical gold coin
which changed places with one commodity in the act C―M, reappears from
the opposite end as the starting point for M―C and thus changes places
for the second time with another commodity. Just as it passed from the
hands of buyer B into those of seller A, it now leaves A’s hands who
has become a buyer and passes into C’s hands. The path described by a
commodity in its transformation into money and its retransformation
from money, i. e., the movement of a complete metamorphosis of a
commodity assumes the aspect of an apparent movement of the same coin
that changes places twice with two different commodities. No matter in
how scattered and haphazard fashion purchases and sales may take place
near each other, there is always in actual circulation a seller for
each buyer and the money which moves into the place of the commodity
sold, before it came into the hands of the buyer, must have already
changed places with another commodity. Sooner or later it again leaves
the hands of the seller, who turns buyer, to pass into the hands of
a new seller and this frequently repeated change of place forms the
interlacing of the metamorphoses of commodities. The same coins are
moving, some more, others less frequently, from one place in the
sphere of circulation to another, always in the direction opposite to
that of the commodities moved, thus describing a longer or shorter
circulation-curve. The different movements of the same coin can follow
each other in point of time only, and on the contrary, the many
scattered purchases and sales which appear as so many separate changes
of place between commodities and money, occur simultaneously separated
only in point of space.

The circulation of commodities C―M―C in its elementary form is
completely described in the transition of money from the hands of the
buyer into those of the seller and from the hands of the latter, as
soon as he has turned buyer, into those of a new seller. This completes
the metamorphosis of the commodity and with it the movement of money
in so far as that movement is the expression of the metamorphosis.
But since new use-values are continually produced in the shape of new
commodities and must thus be constantly thrown anew into circulation,
the process C―M―C is repeatedly renewed by the same commodity owners.
The money which they have spent as buyers gets back into their hands
as soon as they appear again as vendors of commodities. The constant
renewal of the circulation of commodities finds its reflection in the
continual circulation over the entire surface of bourgeois society of
a quantity of money which, passing from hand to hand, describes at the
same time a number of different small cycles starting from numberless
points and returning each to its own starting point, to repeat the same
movement over again.

The change of form on the part of commodities appears as a mere change
of place on the part of money and the continuity of the circulation
movement is all on the side of money, since the commodity always makes
but one step in the direction opposite to money, while the latter makes
in each case the second step for the commodity; the entire movement
seems, therefore, to proceed from money, although in the case of a sale
the commodity draws money out of its place, i. e., it circulates money
as much as it is circulated by the latter in the case of a purchase.
Furthermore, owing to the fact that money always confronts commodities
in its capacity of a means of purchase, and in that capacity moves
commodities only by realizing their price, the entire movement of
circulation appears as a change of place between money and commodities,
the former realizing the prices of the latter either by separate acts
of circulation taking place simultaneously and side by side, or by
successive transactions when the same coin realizes the prices of
different commodities one after another. If we consider, e. g., the
series C―M―C’―M―C”―M―C’”, etc., without regard to the qualitative
aspects which become indistinguishable in the process of circulation,
we witness the same monotonous operation. After realizing the price
of C, M successively realizes those of C’, C”, etc., and commodities
C’, C”, C’”, etc., constantly take the place which money has left.
Money thus appears to keep commodities in circulation by realizing
their prices. In discharging this function of realization of prices,
money is itself constantly circulating, now changing its place, now
describing a curve of circulation, now completing a small circuit where
the starting and returning points coincide. As a medium of circulation,
money is subject to a circulation of its own. The change of form of
the circulating commodities appears, therefore, as a movement of money
which furthers the exchange of commodities, motionless in themselves.
The movement of the circulation process of commodities thus takes on
the form of the movement of gold as a medium of circulation, i. e. of
the _circulation of money_.

Since owners of commodities give the products of their individual labor
the appearance of products of social labor by turning one object,
viz. gold, into the direct expression of universal labor-time and
therefore into money, their own movement by which all of them effect
the interchange of the material products of their labor now appears to
them as the direct movement of that one object, as the circulation of
gold. The social movement itself appears to the owners of commodities
partly as an outward necessity and partly as a mere formal intermediary
process which enables every individual who puts any use-value into
circulation to get other use-values out of it of an equal value. The
use-value of commodities comes into play with their disappearance from
the sphere or circulation, while the use-value of money as a medium of
circulation is in its very circulation. The movement of a commodity
in the sphere of circulation is of a transitory kind, while ceaseless
motion in that sphere constitutes the function of money. Through this
special function which it performs within the sphere of circulation
money acquires a new capacity, which we have to consider now more

In the first place, we see that the circulation of money forms an
endlessly split up movement, since it reflects the splitting up of the
process of circulation into an infinitely large number of purchases
and sales and the independent separation of the mutually supplementary
phases of metamorphoses of commodities. In the small cycles described
by money, where the starting and returning points coincide, we do find
a return movement, i. e., an actual circular movement, but the fact
that there are as many starting points as there are commodities and
that the number of these cycles is infinitely large puts them beyond
all control, measurement, or computation. The time between the start
and the return of a commodity is just as indefinite. Moreover, it is
immaterial whether or not such a circuit has been actually described in
a given case. No economic fact is more generally known than that one
can spend money with one hand without getting it back with the other.
Money proceeds from an endless number of points and returns to as many
different points, but the coincidence of the starting and returning
points is a matter of chance, because in the movement C―M―C the turning
of the buyer again into a seller is not a necessary condition. Still
less does the circulation of money resemble a movement radiating
from a common centre to all points of the periphery and back from
the peripheral points to the centre. The so-called cycle described
by money, as it is pictured, amounts simply to this, that at all
points we observe its appearance and disappearance, its never ceasing
transition from place to place. In a higher, more involved form of
money circulation, e. g. bank-note circulation, we shall find that
the conditions of emission of money include those for its return. But
in the simple money circulation it is a matter of chance for the same
buyer to become again a seller. Where we really see constant cycle
motions taking place, they are only reflections of deeper forces in
the sphere of production, e. g., the manufacturer draws money from his
banker on Friday, pays it out to his working-men on Saturday, the men
immediately pay out the greater part of it to the storekeepers, etc.,
and the latter turn it in on Monday back to the banker.

We have seen that money realizes simultaneously a certain number of
prices in the variegated purchases and sales which take place side by
side at the same time. On the other hand, in so far as its movement
represents the movement of the combined metamorphoses of commodities
and the interlacing of these metamorphoses, the same coin realizes
the prices of different commodities and thus makes a larger or
smaller number of moves. If we take the circulation of a country for
a given length of time, say a day, the quantity of gold required for
the realization of prices and, consequently, for the circulation of
commodities, will be determined by two conditions: first, the sum
total of the prices; second, the average number of moves made by one
coin. This number of moves or the rapidity of circulation of money is
in its turn determined by or expresses the average rapidity with which
commodities go through the different phases of their metamorphoses, the
rapidity with which these metamorphoses succeed one another, and with
which those commodities that have gone through their metamorphoses are
replaced by new commodities in the process of circulation. We have seen
that in the process of the determination of prices the exchange value
of all commodities is ideally converted into a certain quantity of gold
of the same value and that the same amount of value is present in a
double form in either of the isolated acts of circulation M―C and C―M,
first embodied in the commodity, and second, in gold; yet gold enjoys
the capacity of a medium of circulation not by virtue of its isolated
relation to separate commodities in a state of rest, but owing to its
active presence in the dynamic world of commodities, viz., its function
of expressing the change of form of commodities by its change of place
and expressing the rapidity of their change of form by the rapidity of
its change of place. The extent to which it is present in the sphere
of circulation, i. e., the actual quantity of gold in circulation, is
thus determined by the extent to which it is discharging its function
throughout the entire process.

The circulation of money implies the circulation of commodities; money
circulates commodities which have prices, i. e., which are beforehand
ideally equated to certain quantities of gold. In the determination
of the prices of commodities, the value of the quantity of gold
which serves as a unit of measure, or the value of gold, is assumed
to be given. Under that assumption the quantity of gold necessary
for circulation is determined first of all by the sum total of the
prices of commodities that are to be realized. But this sum is itself
determined: 1. By the level of prices, the relatively high or low
exchange value of commodities estimated in gold; and 2. By the mass
of commodities circulating at fixed prices, i. e. by the number of
purchases and sales at given prices.[73] If one quarter of wheat is
worth 60 shillings, then twice as much gold is required to circulate it
or to realize its price as would be the case if it were worth only 30
shillings. To circulate 500 quarters of wheat at 60 shillings, twice
as much gold is necessary as for the circulation of 250 quarters at
the same price. Finally, to circulate 10 quarters at 100 shillings
only half as much money is necessary as when circulating 40 quarters
at 50 shillings. It follows that the quantity of gold required for
circulation may fall in spite of a rise in price, if the mass of
commodities in circulation declines in a greater ratio than the
rise of the combined sum of prices; and, inversely, the quantity of
the circulating medium may rise in spite of a decline of the mass
of commodities in circulation, if the sum total of prices rises in
a greater ratio. Thorough and minute English investigations have
demonstrated e. g. that in the early stages of a dearth of grain in
England the quantity of money in circulation increases, because the
total price of the diminished supply of grain is greater than the
former total price of a larger supply of grain, while the circulation
of the other commodities continues undisturbed for some time at their
old prices. At a later stage of the dearth of grain, there is a decline
in the quantity of circulating money, either because less goods are
sold at old prices besides grain, or the same quantity of those goods
is sold at lower prices.

But, as we have seen, the quantity of money in circulation is
determined not only by the sum total of prices of commodities that are
to be realized, but also by the rapidity with which money circulates
or with which it completes this work of realization. If the same
sovereign makes ten purchases a day, each of a commodity having a
price of one sovereign, and thus changes hands ten times, it does as
much work as would be accomplished by ten sovereigns each performing
but a single act of circulation a day.[74] Consequently, rapidity of
gold circulation can make up for its quantity, or the presence of gold
in the sphere of circulation is determined not only by its presence
as an equivalent of a commodity side by side with it, but also by
its participation in the movement of metamorphoses of commodities.
The rapidity of the circulation of money, however, can serve as a
substitute for its quantity only to a limited extent, since at any
given moment an endless number of isolated purchases and sales takes
places in different localities.

If the total price of the commodities in circulation rises, but in
a smaller ratio than the increase in the rapidity of circulation of
money, the volume of the circulating medium will diminish. If on the
contrary the rapidity of circulation decreases in a greater ratio
than the total price of the commodities in circulation, the volume
of currency will increase. An increasing volume of currency combined
with a general fall of prices or a diminishing volume of currency in
connection with a general rise of prices is one of the best known
phenomena in the history of prices. But the consideration of the
causes which bring about a simultaneous rise in the level of prices
and a still greater rise in the rate of velocity of circulation of
money, or the opposite phenomenon, falls outside of the sphere of
simple circulation. By way of illustration, it may be mentioned that
in periods of prevailing credit, the rapidity of circulation of
money grows faster than the prices of commodities, while in times
of declining credit the prices of commodities fall slower than the
rapidity of circulation. The shallow and artificial character of the
simple circulation of money is manifested in the fact that all the
elements which have a determining influence on the volume of currency,
such as the volume of commodities in circulation, prices, the rise or
fall of prices, the number of simultaneous purchases and sales, the
rapidity of the circulation of money,―depend on the metamorphic process
which takes place in the world of commodities, and that again depends
on the general character of the methods of production, the size of
population, the relation between city and country, the development of
the means of transportation, the greater or less division of labor,
credit, etc.; in short, on circumstances all of which lie _outside_ of
the sphere of simple circulation of money and are only reflected in it.

The rapidity of circulation being given, the volume of currency is
simply determined by the prices of commodities. Hence, prices are not
high or low, because there is more or less money in circulation, but
on the contrary, there is more or less money in circulation, because
prices are high or low. This is one of the most important laws, whose
demonstration in detail by means of the history of prices constitutes
perhaps the only merit of the post-Ricardian English Political Economy.
If experience shows, that the level of metallic circulation or the mass
of gold and silver in circulation in a given country is subject to
temporary ebbs and tides and very violent ones at times,[75] but on
the whole remains stationary for long periods, the deviations forming
but small oscillations about the average level, this is explained
by the antagonistic nature of the circumstances which determine the
quantity of money in circulation. Their simultaneous modifications
neutralize their effects and leave everything where it was before.

The law, that with a given rapidity of circulation of money and a given
total sum of prices of commodities the quantity of the circulating
medium is determined, may also be expressed as follows. If the exchange
values of commodities and the average rapidity of their metamorphoses
are given, the quantity of gold in circulation depends on its own
value. If, therefore, the value of gold, i. e. the labor-time necessary
for its production, should rise or fall, the prices of commodities will
rise or fall in inverse ratio, and corresponding to that rise or fall
of prices, the rapidity of circulation remaining the same, a larger or
smaller quantity of gold would be required to keep the same volume of
commodities in circulation. The same change would occur, if the old
standard of value were superseded by a more or less valuable metal.
Thus, Holland required from fourteen to fifteen times as much silver as
it had previously required gold, in order to circulate the same volume
of commodities, when out of tender regard for the government creditors
and out of fear of the effects of the discoveries in California and
Australia it substituted silver for gold money.

From the fact that the quantity of gold in circulation depends on the
variable sum total of prices of commodities and the varying rapidity
of circulation, it follows that the volume of the circulating medium
must be capable of contraction and expansion; in short, that according
to the requirements of circulation, gold must now enter, now leave the
sphere of circulation in its capacity of a medium of circulation. How
the circulation process itself realizes these conditions, we shall see
later on.


In its capacity of a medium of circulation, gold acquires a shape
of its own, it becomes _coin_. In order to prevent any technical
difficulties in the way of its circulation, it is coined according to
the standard of the money of account. Gold pieces whose imprints and
legends show that they contain certain weights of gold corresponding
to the reckoning names of money, £, s., etc., are coins. The
establishment of a mint-price, as well as the technical work of
coining, are the business of the state. Both as money of account and
as coin, money acquires a _local and political character_; it speaks
different languages and wears different national uniforms. The sphere
in which money circulates as coin, is distinguished as an _internal_
sphere of circulation which is separated from the _universal_ sphere of
circulation in the commodity world by national boundaries.

Yet, the only difference between gold bullion and gold coin is that
between coin denomination and weight denomination. What seems to be a
difference in name in the latter case appears as a difference in shape
in the former. Gold coin can be thrown into the melting-pot and thus be
converted again into gold _sans phrase_, just as, on the contrary, gold
bars only have to be sent to the mint to receive the shape of coins.
The conversion and reconversion from one form into another appears to
be a purely technical matter.

For 100 pounds or 1200 ounces troy of 22 carat gold one can get
£4,672-1/2 or gold sovereigns at the English mint; if these sovereigns
be put on one side of the weighing scale and one hundred pounds of
gold bullion on the other, the two will balance each other, which
proves that the sovereign is nothing but a piece of gold of certain
weight bearing this name in English coinage and having a shape and
stamp of its own. The 4,672-1/2 sovereigns are put into circulation
at different points, and once in its grasp they make a certain number
of moves per day, some sovereigns more, others less. If the average
number of moves per day of each ounce be ten, the 1200 ounces of gold
would realize 12,000 ounces or 46,725 sovereigns as the total price
of commodities. You may turn and toss an ounce of gold in any way you
like, and it will never weigh ten ounces. But here in the process of
circulation one ounce practically does weigh ten ounces. The work
performed by a coin in the sphere of circulation is equivalent to the
quantity of gold it contains multiplied by the number of its moves.
Besides the actual importance which a coin possesses by virtue of its
being an individual piece of gold of a definite weight, it acquires
an ideal significance due to its function. But whether the sovereign
circulates once or ten times, in each particular purchase or sale
it acts only as one sovereign. It is like a general who by timely
appearance at ten different points on the battle field does the work
of ten generals, but still remains the same identical general at each
point. The idealization of the means of circulation which is due to the
supplanting of quantity by rapidity in money circulation, affects only
the function of the coin within the sphere of circulation, but not the
nature of the individual coin.

The circulation of money is a movement through the outside world, and
the sovereign, though it _non olet_, keeps rather mixed company. In the
course of its friction against all kinds of hands, pouches, pockets,
purses, money-belts, bags, chests and strong-boxes, the coin rubs off,
loses one gold atom here and another one there and thus, as it wears
off in its wanderings over the world, it loses more and more of its
intrinsic substance. By being used it gets used up. Let us take up a
sovereign at the moment when its natural, inborn character has been
slightly affected. A baker, says Dodd,[76] who receives from the bank
to-day a brand new sovereign and pays it tomorrow to the miller,
does not pay the same veritable sovereign; the latter has become
lighter than it was at the time he received it. It is clear, says an
anonymous writer,[77] that in the very nature of things, coins must
depreciate one by one as a result of ordinary and unavoidable friction.
It is a physical impossibility to entirely exclude light coins from
circulation at any time, even for one day. Jacob estimates that of
the 380 million pounds sterling which were in existence in Europe in
1809, nineteen million pounds sterling entirely disappeared by 1829,
i. e., within a period of twenty years.[78] Thus, while a commodity
at its first step into the sphere of circulation, falls out of it, a
coin, after a couple of steps within that sphere represents more metal
than it actually contains. The longer a coin remains in circulation,
the rapidity of circulation remaining the same, or the greater its
rapidity of circulation within the same period of time, the greater
the discrepancy between its form as coin and its actual gold or silver
substance. What remains is _magni nominis umbra_. The body of the coin
becomes but a shadow. If at first it became heavier through the process
of circulation, it now becomes lighter on account of it, but continues
to represent the original quantity of gold in each single purchase or
sale. The sovereign, as a fictitious sovereign, as fictitious gold,
continues to perform the function of a legitimate coin. While other
beings lose their idealism in contact with the outer world, the coin is
idealized by practice, being gradually transformed into a mere phantom
of its golden or silver body. This second idealization of metal money
springing from the very process of circulation, or from the discrepancy
between its nominal weight and its real weight is exploited in all
kinds of coin counterfeiting practiced partly by governments, partly by
private adventurers. The entire history of coinage from the beginning
of the middle ages until late in the eighteenth century is nothing
but a history of these twofold and antagonistic adulterations, and
Custodi’s voluminous collection of writings of Italian economists turns
mostly about this point.

But the fictitious importance of gold due to its function, comes
in conflict with its real substance. One gold coin has lost more,
another, less of its metal substance in the course of circulation,
and one of them is, as a matter of fact, worth more now than the
other. But since in the discharge of their function of coins they
are taken at the same value, the sovereign weighing a quarter of an
ounce passing for no more than the sovereign which only stands for a
quarter of an ounce, the full-weight sovereigns are subjected in the
hands of unscrupulous owners to surgical operations which produce
artificially what the circulation process has caused in a natural way
to their more light-weighted brothers. They are clipped and reduced
and the superfluous gold fat lands in the melting pot. If 4,672-1/2
gold sovereigns when put on one side of the weighing scale weigh on an
average only 800 ounces instead of 1200, they will buy when brought
to the gold market only 800 ounces of gold; that is, the market price
of gold would rise above its mint price. Every coin, even if of full
weight would pass in its mint form for less than in bullion form. The
full weight sovereigns would be reconverted into bullion, a form in
which a greater quantity of gold is always worth more than a smaller
quantity. As soon as this decline of metallic weight would affect a
sufficiently large number of sovereigns to bring about a permanent
rise of the market price of gold above its mint price, the reckoning
names of the coins, though remaining the same, would begin to denote a
smaller quantity of gold. That is to say, the standard of money would
change and gold would be coined in the future according to this new
standard. By virtue of its idealization as a medium of circulation,
gold would react upon and change the legally determined ratios under
which it acted as the standard of price. The same revolution would
be repeated after a certain length of time and thus gold would be
subject to constant change both as a standard of price and as a
medium of circulation, a change under one of these forms leading to a
change under the other and vice versa. This explains the phenomenon
mentioned above, namely that in the history of all modern nations
the same money-name stands for a constantly diminishing quantity of
metal. The contradiction between gold as coin and gold as standard of
price becomes also one between gold as coin and gold as the universal
equivalent; in the latter capacity it circulates not only within the
limits of national boundaries, but in the world market. As a measure of
value gold was always of full weight, because it served only as ideal
gold. In its capacity of equivalent in the isolated transaction C―M it
passes at once from a state of motion to a state of rest; but in its
capacity of coin its natural substance comes in constant conflict with
its function. The transformation of the gold sovereign into fictitious
gold can not be wholly avoided, but legislation seeks to prevent its
unlimited circulation as coin by prescribing its withdrawal from
circulation as soon as its shortage of metallic substance reaches a
certain degree. According to the English law, e. g., a sovereign which
lacks more than 0.747 grains of its weight ceases to be legal tender.
The Bank of England which weighed forty-eight million gold sovereigns
in the short period between 1844 and 1848, possesses in Mr. Cotton’s
gold weighing scale a machine which not only detects a difference of
1-100 part of a grain between two sovereigns, but like a sensible
being, immediately throws out the light-weight coin on a board where
it lands under another machine which cuts it up with oriental cruelty.

That being the case, gold coins could not circulate at all were not
their circulation confined to definite spheres in which they do not
wear off so rapidly. In so far as a gold coin weighing only one-fifth
of an ounce passes in circulation for a quarter of an ounce of gold,
it is practically merely a sign or a symbol for one-twentieth of an
ounce of gold, and in that way all gold coins are transformed by the
very process of circulation into more or less of a mere sign or symbol
of their substance. But no thing can be its own symbol. Painted grapes
are no symbol of real grapes, they are imaginary grapes. Still less can
a light-weight sovereign be a symbol of a full-weighted one, just as
a lean horse can not serve as a symbol of a fat one. Since gold thus
becomes a symbol of its own self, but at the same time can not serve in
that capacity, it receives a symbolical, silver or copper substitute in
those spheres of circulation in which it is most subject to wear and
tear, namely where purchases and sales are constantly taking place on
the smallest scale. In these spheres, even if not the same identical
coins, still a certain part of the entire supply of gold money would
constantly circulate as coin. To that extent gold is substituted by
silver or copper tokens. Thus, while only a specific commodity can
perform in a given country the function of a measure of value and
therefore of money, different commodities can serve as coin side by
side with gold. These subsidiary mediums of circulation, such as silver
or copper coins, represent definite fractions of a gold coin within
the sphere of circulation. Their own silver or copper weight is,
therefore, not determined by the proportions of the respective values
of silver and copper to that of gold, but is arbitrarily fixed by law.
They may be issued only in such quantities in which the diminutive
fractions of gold coin which they represent would constantly circulate
either for purposes of change for gold coins of higher denominations,
or for realizing equally small prices of commodities. In retail trade
silver and copper tokens belong to distinct spheres of circulation. In
the nature of things, the rapidity of their circulation is in inverse
ratio to the price which they realize in each separate purchase or
sale, or to the size of the fraction of gold coin which they represent.
If we consider how immense the volume of the daily retail trade in a
country like England is, we will understand from the comparatively
insignificant proportions of its combined volume how rapid and steady
the circulation of the subsidiary coin must be. From a parliamentary
report of recent date we see, e. g., that in 1857 the English mint
coined £4,859,000 worth of gold, £733,000 of silver nominal value which
contained metal actually worth £363,000. The total amount of gold
coined in the ten years ending December 31, 1857, was £55,239,000, and
of silver only £2,434,000. The supply of copper coin in 1857 amounted
only to £6,720 nominal value containing £3,492 worth of copper; of this
£3,136 was in pennies, £2,464 in half-pennies, and £1,120 in farthings.
The total value of copper coined in the ten years was £141,477 nominal,
the metallic value being £73,503. Just as gold coin is prevented from
permanently retaining its function of coin by the legal provision of
the loss of weight which demonetizes it, so are the silver and copper
tokens prevented from passing from their spheres of circulation into
that of gold coin and acquiring the character of money by the provision
of the maximum amount for which they are legal tender. In England e.
g. copper is legal tender only to the amount of six pence and silver
up to forty shillings. If silver and copper tokens were to be issued
in greater quantities than the requirements of their spheres of
circulation call for, prices of commodities would not rise as a result,
but the accumulation of these tokens in the hands of retail dealers
would reach such an extent that they would be finally compelled to sell
them as metal. Thus in 1798 English copper coins, issued by private
individuals, accumulated in the hands of small traders to the amount
of £20,350 which they tried in vain to put again in circulation, being
finally compelled to throw them as metal on the copper market.[79]

The silver and copper tokens which represent gold coin in certain
spheres of circulation in the interior of the country, contain a
definite quantity of silver and copper prescribed by law, but after
they get into circulation, they wear off like gold coins and become
even more rapidly mere phantoms, according to the rapidity and
steadiness of their circulation. To draw again a line of demonetization
beyond which silver and copper tokens would lose their character of
coins, they would have to be replaced in turn within certain spheres
of their own circulation by some other symbolic money, say iron and
lead, and such representation of one kind of symbolic money by another
kind would form an endless process. In all countries with a well
developed circulation the very requirements of money circulation make
it necessary that the character of silver and copper tokens as money be
made independent of any loss of weight in those coins. Thus, as it was
in the nature of things, it appears that they serve as symbols of gold
coin not because they are symbols made of silver or copper, not because
they have certain value, but only in so far as they have no value.

Relatively worthless things, such as _paper_, can consequently perform
the function of symbols of gold money. That subsidiary currency
consists of metal tokens, such as silver, copper, etc., is mainly due
to the fact that in most countries the less valuable metals such as
silver in England, copper in ancient Rome, Sweden, Scotland, etc.,
had circulated as money before they were degraded by the process of
circulation to the rank of small change and replaced by a more precious
metal. Besides, it is natural that the money symbol which grows
directly out of metallic circulation, should itself be a metal. Just
as that portion of gold which would always have to circulate as small
change, is replaced by metal tokens; so can the other portion of gold
which is constantly absorbed as coin by circulation in the interior of
the country and, therefore, must continually circulate, be replaced
with worthless tokens. The level below which the mass of circulating
coin never sinks is determined in each country by experience. Thus,
the originally imperceptible difference between the nominal weight and
the metallic weight of a metal coin can grow apace until it reaches the
point of absolute separation. The mint name of money parts company with
its substance and exists outside of it in worthless slips of paper.
Just as the exchange value of commodities is crystallized by their
process of exchange into gold money, so is gold money sublimated in
its currency into its own symbol first in the form of worn coin, then
in the form of subsidiary metal currency, and finally in the form of a
worthless token, paper, mere _sign of value_.

Gold coin has produced its substitutes, first metallic and then paper,
only because in spite of its loss of metallic weight it continued to
perform the function of coin. It did not circulate because of its wear
and tear; on the contrary, it wore out to a symbol because it continued
to circulate. Only in so far as gold money becomes simply a token of
its own value in the process of circulation, can mere tokens of value
take its place.

In so far as the movement C―M―C represents a dynamic unity of two
processes C―M and M―C which pass directly one into the other, or in
so far as a commodity passes through the complete process of its
metamorphosis, it express its exchange value in price and in money
only to discard that form at once and to become again a commodity or,
rather, a use-value. That is to say, it develops _only an apparent
assertion of the independence_ of its exchange value. On the other
hand, we have seen that gold, in so far as it performs the function
of coin or in so far as it continually circulates, actually forms
only a connecting link between the metamorphoses of commodities and
constitutes _but their transitory money form_; furthermore, that it
realizes the price of one set of commodities only in order to realize
that of another, but in no case does it constitute a stable form of
exchange value or appear itself as a commodity in a state of rest. The
reality which the exchange value of commodities acquires in the process
and which is represented by gold in its circulation, is the reality of
an electric spark. Although real gold, it plays the part of fictitious
gold, and can, therefore, be replaced in this function by a token of

The token of value, say paper, which plays the part of coin, is the
token of a quantity of gold expressed in its currency name, i. e., it
is a gold token. Just as a certain quantity of gold does not in itself
express a value ratio, so is that true of the token which takes its
place. In so far as a certain quantity of gold, as embodied labor-time,
has a value of a certain magnitude, the gold token represents value.
But the magnitude of the value which it represents depends all the
time on the value of the quantity of gold for which it stands. As
regards commodities the token of value expresses _the reality of their
price_, it is _signum pretii_ and sign of their value only because
their value is expressed in their price. In the process C―M―C, in so
far as it represents the dynamic unity or direct alternation of the
two metamorphoses―and that is the aspect it assumes in the sphere of
circulation in which the token of value discharges its function―the
exchange value of commodities acquires in price only an ideal
expression and in money only an imaginary symbolic existence. Exchange
value thus acquires _only_ an imaginary though material expression,
but it has no real existence except in the commodities themselves, in
so far as a certain quantity of labor-time is embodied in them. It
_appears_, therefore, that the token of value represents _directly_
the value of commodities, by figuring not as a token of gold but as
a token of the value which exists in the commodity alone and is only
expressed in price. But it is a false appearance. The token of value is
directly only _a token of price_, i. e., a _token of gold_, and only
indirectly a token of value of a commodity. Unlike Peter Shlemihl, gold
has not sold its shadow, but buys with its shadow. The token of value
operates only in so far as it represents the price of one commodity
as against that of another within the sphere of circulation, or in so
far as it _represents gold_ to every owner of commodities. A certain
comparatively worthless object such as a piece of leather, a slip of
paper, etc., becomes by force of custom a token of money material, but
maintains its existence in that capacity only so long as its character
as a symbol of money is guaranteed by the general acquiescence of
the owners of commodities, i. e., so long as it enjoys a legally
established conventional existence and compulsory circulation. Paper
money issued by the state and circulating as legal tender is the
perfected form of the token of value, and the only form of paper money,
which has its immediate origin in metallic circulation or even in the
simple circulation of commodities. _Credit money_ belongs to a higher
sphere of the social process of production and is governed by entirely
different laws. Symbolic paper money does not in fact, differ in the
least from subsidiary metal coin, except that it reaches wider spheres
of circulation. We have seen that the mere technical development of the
standard of price or of the mint price and later the shaping of gold
bullion into coin have called forth the interference of the state; this
circumstance brought about a visible separation of national circulation
from the world circulation of commodities: this separation is completed
by the evolution of coin into a token of value. As a mere medium of
circulation money can assume an independent existence only within the
sphere of national circulation.[80]

Our presentation has shown that the coin form of gold as a token of
value differentiated from the gold substance itself, has its direct
origin in the process of circulation and not in any agreement or state
interference. Russia offers a striking example of the natural origin of
the token of value. At the time when hides and furs played there the
part of money, the conflict between the perishable and bulky nature of
the material and its function as a medium of circulation resulted in
the custom of replacing it by small pieces of stamped leather which
thus became a kind of draft payable in hides and furs. Later on they
became under the name of copecs mere tokens for fractions of the silver
rouble and remained in use in some parts until 1700, when Peter the
Great ordered their withdrawal in exchange for small copper coins
issued by the state. Ancient writers who could observe the phenomena
of exclusively metallic circulation, already took the view of coin
as a symbol or token of value. That is true both of _Plato_[81] and
_Aristotle_.[82] In countries where credit is not developed, as e. g.
in China, legal tender paper money is found at an early date[83]. Early
advocates of paper money expressly point out the fact that metallic
coin is transformed into a token of value in the very process of
circulation. So Benjamin Franklin[84] and Bishop Berkeley.[85]

How many reams of paper cut up into bills can circulate as money? Put
in that way, the question would be absurd. The worthless tokens are
signs of value only in so far as they represent gold within the sphere
of circulation and they represent it only to the extent to which it
would itself be absorbed as coin by the process of circulation; this
quantity is determined by its own value, the exchange values of the
commodities and the rapidity of their metamorphoses being given. Bills
of a denomination of £5 could circulate in a quantity five times
less than those of £1 denomination, and if all payments were made in
shilling bills, then twenty times as many shilling bills would have to
be in circulation as are one pound bills. If the gold currency were
represented by bills of different denominations, e. g. five pound,
one pound and ten shilling bills, then the quantity of these different
tokens of value would be determined not only by the quantity of gold
necessary for circulation as a whole, but also by that required in the
sphere of circulation of each kind of bills. If fourteen million pounds
sterling (this is the provision of the English Bank Law, not for the
entire currency but only for credit money) were the level below which
the circulation of a country never sank, then fourteen million paper
bills, each a token of value of one pound, could circulate. If the
value of gold fell or rose because the labor-time necessary for its
production had fallen or risen, then, the exchange value of the same
volume of commodities remaining the same, the number of one pound bills
in circulation would rise or fall in inverse ratio to the change in the
value of gold. If gold were replaced by silver as a measure of value,
the ratio of the respective values of silver and gold being 1:15, and
if each bill were to represent now the same quantity of silver as it
represented gold before, then there would be 210 million one pound
bills in circulation instead of the previous fourteen million. The
number of paper bills is thus determined by the quantity of gold money
which they represent in circulation, and since they are tokens of value
only in so far as they represent it, their value is simply determined
by their _quantity_. Thus, while the quantity of gold in circulation
is determined by the prices of commodities, the value of the paper
bills in circulation, on the contrary, depends exclusively on their own

The interference of the state which issues paper money as legal
tender―and we are treating of paper money of that kind only―seems to
do away with the economic law. The state which in its mint price gave
a certain name to a piece of gold of certain weight, and in the act of
coinage only impressed its stamp on gold, seems now to turn paper into
gold by the magic of its stamp. Since paper bills are legal tender,
no one can prevent the state from forcing as large a quantity of them
as it desires into circulation and from impressing upon it any coin
denomination, such as £1, £5, £20. The bills which have once gotten
into circulation can not be removed, since on the one hand their course
is hemmed in by the frontier posts of the country and on the other
they lose all value, use-value, as well as exchange-value, outside
of circulation. Take away from them their function and they become
worthless rags of paper. Yet this power of the state is a mere fiction.
It may throw into circulation any desired quantity of paper bills of
whatever denomination, but with this mechanical act its control ceases.
Once in the grip of circulation and the token of value or paper money
becomes subject to its intrinsic laws.

If fourteen million pounds sterling were the quantity of gold
required for the circulation of commodities and if the state were to
put into circulation two hundred and ten million bills each of the
denomination of £1, then these two hundred and ten millions would
become the representatives of gold to the amount of fourteen million
pounds sterling. It would be the same as if the state were to make
the one pound bills represent a fifteen times less valuable metal or
a fifteen times smaller weight of gold. Nothing would be changed but
the nomenclature of the standard of price, which by its very nature is
conventional, no matter whether such change takes place as a direct
result of a change of the mint standard or indirectly owing to an
increase of paper bills to an extent required by a new lower standard.
Since the name £ would stand now for a fifteen times smaller quantity
of gold, the prices of all commodities would increase fifteen times and
two hundred and ten million one pound bills would now be actually as
necessary as fourteen million had been before. To the same extent to
which the combined quantity of tokens of value would increase now, the
quantity of gold which each of them represents would decrease. The rise
of prices would constitute but a reaction on the part of the process of
circulation which forcibly equates the tokens of value to the quantity
of gold which they are supposed to replace.

In the history of the debasement of money in England and France by
their governments, we find repeatedly that prices had not risen in the
same proportion in which the silver coinage had been debased. That was
simply due to the fact that the proportion in which the currency was
increased did not correspond to the proportion in which it had been
debased; that is to say, because an inadequate quantity of coins of
the poorer metallic composition was issued, if the exchange values
of commodities were to be estimated in the future in the new coin as
a measure of value and be realized in coins corresponding to this
smaller unit of measure. This solves the difficulty left unsettled in
the controversy between Locke and Lowndes. The ratio which a token
of value, whether made of paper or of debased gold or silver, bears
to certain weights of gold or silver estimated according to the mint
price, depends not on its own composition but on the quantity in which
it is found in circulation. The difficulty in understanding this is
due to the fact that money in its two functions of a measure of value
and a medium of circulation is subject to two not only opposite but
apparently contradictory laws corresponding to the difference in the
two functions. In the discharge of its function of a measure of value
where money serves merely as money of account and gold only as ideal
gold, everything depends on the natural substance of money. Estimated
in silver or expressed in silver prices exchange values are naturally
estimated quite differently than when measured in gold or as gold
prices. On the contrary, in its function of a medium of circulation,
where gold is not only imagined but is actually present side by side
with other commodities, its substance is immaterial and everything
depends on its quantity. For the unit of measure the determining factor
is whether it consists of a pound of gold, silver or copper; while in
the case of coin, no matter what its own composition is, it will become
the embodiment of each of these units of measure in accordance with its
quantity. But it goes against common sense that in the case of mere
imaginary money everything should depend on its material substance,
while in that of the palpably present coin all should be determined by
an ideal ratio of numbers.

The rise or fall of prices of commodities following a rise or fall
of the quantity of paper notes―the latter only where paper currency
constitutes the exclusive medium of circulation―is thus nothing but
an assertion through the process of circulation of a law mechanically
violated from without; namely, that the quantity of gold in circulation
is determined by the prices of commodities, and the quantity of tokens
of value in circulation is determined by the quantity of gold coin
which it represents. For that reason any desired number of paper notes
will be absorbed and equally digested by the process of circulation,
because the token of value, no matter with what gold title it may enter
circulation, will be compressed within the latter to a token of that
quantity of gold which could actually circulate in its place.

In the case of the circulation of tokens of value all laws pertaining
to the circulation of real money appear to be reversed and standing
on their heads. While gold circulates because it has value, paper has
value because it circulates. While with a given exchange value of
commodities, the quantity of gold in circulation depends on its own
value, the value of paper depends on its own quantity in circulation.
While the quantity of gold in circulation rises or falls with the
rise or fall of prices of commodities, the prices of commodities
seem to rise or fall with the change in the quantity of paper in
circulation. While the circulation of commodities can absorb only a
definite quantity of gold coin and as a result of that the alternating
contraction and expansion of the currency appears as a necessary law,
paper money seems to enter circulation in any desired amount. While
the state is guilty of debasing gold and silver coin and of disturbing
their function of a medium of circulation, if it turns out a coin,
only 1-100 of a grain below its nominal weight; it performs a perfectly
proper operation by issuing absolutely worthless paper notes which
contain nothing of the metal except its mint denomination. While gold
coin apparently represents the value of commodities only in so far as
that value is itself estimated in gold or is expressed in price, the
token of value seems to represent directly the value of commodities.
It is, therefore, clear why students who examined one-sidedly the
phenomena of circulation of money by confining their observations to
the circulation of legal tender paper money, should have failed to
grasp the intrinsic laws governing the circulation of money. As a
matter of fact, these laws appear not only reversed but extinct in the
circulation of tokens of value, since paper currency, if issued in
the right quantity, goes through certain movements which are not in
its nature as a token of value, while its proper movement instead of
growing directly out of the metamorphosis of commodities, springs from
the violation of its proper proportion to gold.


Money as distinguished from coin, the result of the circulation process
C―M―C, forms the starting point of the circulation process M―C―M, i.
e. the exchange of money for commodity in order to exchange commodity
for money. In the form C―M―C, commodity forms the starting and final
points of the movement; in the form M―C―M, money plays that part. In
the former case money is the medium of exchange of commodities, in
the latter the commodity helps money to become money. Money which
appears merely as a means of circulation in the first form becomes
an end in the second form; while commodity which appeared first as
the end, now becomes but a means. Since money is itself the result of
circulation C―M―C, the result of circulation appears at the same time
as its starting point in the form M―C―M. While in the case of C―M―C the
interchange of matter constituted the real import of the process, the
form of the commodity resulting from this first process constitutes the
import of the second process M―C―M.

In the form C―M―C the two extreme members are commodities of the same
value, but qualitatively different use-values. Their mutual exchange
C―C constitutes actual interchange of matter. In the form M―C―M the
two extremes are gold and at the same time gold of equal value. To
exchange gold for a commodity in order to exchange the commodity for
gold, or if we consider the final result M―M, to exchange gold for
gold, seems absurd. But if we translate the formula M―C―M into the
expression: _to buy_ in order _to sell_, which means nothing but to
exchange gold for gold through an intervening movement, we recognize
at once the prevailing form of capitalist production. In actual
practice, however, people do not buy in order to sell, but they buy
cheap in order to sell dear. Money is exchanged for a commodity in
order to exchange the same commodity for a larger amount of money, so
that the extremes M, M are, if not qualitatively, then quantitatively
different. Such a quantitative difference presupposes the _exchange of
non-equivalents_, yet commodity and money as such are only opposite
forms of the same commodity, i. e. they are different forms of the same
magnitude of value. The circuit M―C―M thus conceals under the forms
of money and commodity more highly developed relations of production,
and is but a reflection within the sphere of simple circulation of a
movement of a more advanced character. Money, as distinguished from the
medium of circulation, must therefore be developed from the direct form
of circulation of commodities, C―M―C.

Gold, i. e., the specific commodity which serves as a measure of
value and a medium of circulation, becomes money without any further
assistance on the part of society. In England, where silver is neither
the measure of value nor the prevailing medium of circulation, it
does not become money, just as gold in Holland, as soon as it had been
dethroned as a measure of value, ceased to be money. A commodity thus
becomes money only in its combined capacity of a measure of value
and medium of circulation; or, the unity of the measure of value and
medium of circulation is money. As such a unity, however, gold has a
separate existence independent of its existence in the two functions.
As a measure of value it is only ideal money and ideal gold; as a mere
medium of circulation it is symbolic money and symbolic gold; but in
its plain metallic bodily form gold is money or money is real gold.

Let us now consider for a moment the commodity gold when it is in a
state of rest, and plays the part of money in its relation to other
commodities. All commodities represent in their prices a certain
quantity of gold, that is to say, they are merely imaginary gold or
imaginary money, representatives of gold, just as, on the other hand,
money in the form of a token of value appeared as a mere representative
of prices of commodities.[86] Since all commodities are thus but
imaginary money, money is the only real commodity. Contrary to
commodities, which only represent the independently existing exchange
value, i. e., universal social labor, or abstract wealth, gold is the
_material form of abstract wealth_. Through its use-value, every
commodity, by its relation to some particular want, expresses only one
aspect of material wealth, but one side of wealth. Money, however,
satisfies every want since it can be directly converted into the object
of any want. Its own use-value is realized in the endless series of
use-values which form its equivalents. In its virgin metallic state
it holds locked up all the material wealth which lies unfolded in the
world of commodities. Thus, while commodities represent in their prices
the universal equivalent or abstract wealth, viz., gold, the latter
represents in its use-value the use-values of all commodities. Gold
is, therefore, _the bodily representative of material wealth_. It is
the “precis de toutes les choses” (Boisguillebert), the compendium
of the wealth of society. At one and the same time, it is the direct
incarnation of universal labor in its form, and the aggregate
of all concrete labor in its substance. It is universal wealth
individualized.[87] As a medium of circulation it underwent all kinds
of injury, was clipped, and even reduced to the condition of a mere
symbolic paper rag. As money it is restored to its golden glory.[88]
From a serve it becomes a lord. From a mere understrapper it rises to
the position of Lord of commodities.[89]


Gold separates itself as money from the process of circulation whenever
a commodity interrupts the process of its metamorphosis and remains
in its form of a gold chrysalis. This occurs every time a sale is not
immediately followed by purchase. The independent isolation of gold
as money is, thus, a material expression of the disintegration of the
process of circulation, or of the metamorphosis of commodities, into
two separate acts independent of each other. The coin itself becomes
money as soon as its course is interrupted. In the hands of the seller
who takes it in exchange for his commodity, it is money and not coin;
as soon as it passes out of his hands it is again coin. Everybody is
a seller of the one commodity which he produces, but a buyer of all
other commodities which he needs for his existence in society. While
his selling is determined by the labor-time required for the production
of his commodity, his buying is determined by the continual renewal
of the wants of life. In order to be able to buy without having sold
anything, he must sell without buying. In fact, the circulation process
C―M―C is a dynamic unity of sale and purchase only in so far as it
constitutes at the same time the constant process of its separation.
In order that money should flow continuously as coin, coin must
constantly coagulate as money. The continuous flow of coin depends on
its constant accumulations in the form of reserve-funds of coin which
spring up throughout the sphere of circulation and form sources of
supply; the formation, distribution, disappearance, and reformation of
these reserve funds is constantly changing, their existence constantly
disappears, their disappearance constantly exists. Adam Smith expressed
this never-ceasing transformation of coin into money and of money
into coin by saying that every owner of commodities must always keep
in supply besides the particular commodity which he sells, a certain
quantity of the universal commodity with which he buys. We saw, that
in the process C―M―C the second member M―C splits up into a series of
purchases which do not take place at once, but at intervals of time,
so that one part of M circulates as money while the other rests as
money. Money is in that case only _suspended coin_ and the separate
parts of the circulating mass of coins appear now in one form, now in
another, constantly changing. This first transformation of the medium
of circulation into money represents, therefore, but a technical aspect
of money circulation.[90]

The primitive form of wealth is that of a surplus or superabundance,
i. e., that part of the products which are not immediately required as
use-values, or the possession of such products whose use-value falls
outside the sphere of mere necessaries. When considering the transition
of commodity into money we saw that this surplus or superabundance of
products constitutes the proper sphere of exchange at a low stage of
development of production. Superfluous products become exchangeable
products or commodities. The adequate form of this surplus is gold and
silver, the first form in which wealth as abstract social wealth is
preserved. Commodities can not only be stored up in the form of gold
and silver, i. e., in the substance of money, but gold and silver are
wealth in preserved form. While every use-value performs its service
as such by being consumed, i. e., destroyed, the use-value of gold as
money consists in its being the bearer of exchange value, in embodying
universal labor-time as a shapeless raw material. As shapeless metal,
exchange value possesses an indestructible form. Gold or silver thus
brought to rest as money, forms a _hoard_. Among nations with an
exclusively metallic circulation, such as the ancients were, hoarding
is practiced universally from the individual to the state which guards
its state hoard. In more ancient times, in Asia and Egypt, these
hoards under the protection of kings and priests appear rather as a
mark of their power. In Greece and Rome it was part of public policy
to accumulate state hoards as the safest and most available form of
surplus. The quick transfer of such hoards by conquerors from one
country to another and the sudden outpour of a part of these hoards
into the general circulation constitute a peculiar feature of ancient

As the incarnation of labor-time gold is a pledge for its own value,
and since it is the embodiment of _universal_ labor-time, the process
of circulation pledges gold its constant rôle of exchange value.
Owing to the mere fact that the owner of commodities can retain his
commodity in the form of exchange value or retain the exchange-value as
a commodity, the exchange of commodities for the purpose of retaining
them in the transformed shape of gold becomes circulation’s own motive.
The metamorphosis C―M takes place for the sake of the metamorphosis,
i. e., in order to transform it from particular natural wealth into
universal social wealth. Instead of change of matter, change of form
becomes its own purpose. From a mere form of the movement exchange
value becomes its substance. Commodity is preserved as wealth, as
commodity, only in so far as it keeps within the sphere of circulation,
and it keeps in that fluent state only in so far as it solidifies in
the form of silver and gold. It remains in the stream of circulation as
its crystal. At the same time gold and silver themselves become money
only in so far as they do not play the part of mediums of circulation.
_As non-mediums of circulation they become money._ The withdrawal of a
commodity from circulation in the form of gold is therefore the only
means of keeping it constantly within the sphere of circulation.

The owner of commodities can receive money from circulation only
in return for a commodity which he gives to it. Constant selling,
continual throwing of commodities into circulation is, therefore, the
first condition of hoarding from the standpoint of the circulation
of commodities. On the other hand, money as a medium of circulation
constantly disappears in the very process of circulation by being
realized all the time in use-values and becoming dissolved in fleeting
pleasures. It must, therefore, be taken out of the all-consuming
stream of circulation or the commodity must be kept up in its first
metamorphosis, so that money is prevented from performing its function
of a means of purchase. The commodity owner who has now become a
hoarder, must sell as much as possible and buy as little as possible,
as old Cato had taught: “patrem familias vendacem, non emacem esse.”
While industry constitutes the positive condition of hoarding, saving
forms the negative one. The less the equivalent of a commodity is
withdrawn from circulation in the form of particular commodities
or use-values, the more it is withdrawn in the shape of money or
exchange value.[91] The acquisition of wealth in its universal form
thus requires abstinence from wealth in its material reality. Thus
the stimulating impulse for hoarding is _greed_, the objects of which
are not commodities as use-values, but exchange value as commodity.
In order to get possession of the surplus in its universal form, the
particular wants must be treated as so much luxury and excess. Thus
the Cortes presented a report to Philipp II., in 1593, in which, among
other things, was said: “The Cortes of Valladolid in the year 1586
petitioned Your Majesty not to allow the further importation into the
Kingdom of candles, glassware, jewelry, knives and similar articles;
these things useless to human life come from abroad to be exchanged
for gold, as though the Spaniards were Indians.” The hoarder despises
the worldly, temporary and transitory enjoyments in his hunt after
the eternal treasure, which neither moth nor rust can eat, which is
perfectly celestial and earthly at the same time. “The general remote
cause of our want of money is the great excess of this Kingdom in
consuming the Commodities of Forreine Countries, which prove to us
discommodities, in hindering us of so much treasure, which otherwise
would bee brought in, in lieu of those toyes.... Wee ... consume
amongst us, that great abundance of the Wines of Spaine, of France, of
the Rhene, of the Levant ... the Raisins of Spaine, the Corints of the
Levant, the Lawnes and Cambricks of Hannaults ... the Silkes of Italie,
the Sugers and Tobaco of the West Indies, the Spices of the East
Indies: All which are of no necessetie unto us and yet are bought with
ready mony.”[92]

In the form of gold and silver, wealth is indestructible, both
because exchange value is preserved in the shape of indestructible
metal, and, especially, because gold and silver are prevented from
becoming, as mediums of circulation, mere vanishing money forms of
the commodity. The destructible substance is thus sacrificed for the
indestructible form. “If money be taken (by means of taxation) from
him, who spendeth the same ... upon eating and drinking, or any other
perishing Commodity; and the same transferred to one that bestoweth it
on Cloaths; I say that even in this case the Commonwealth hath some
little advantage; because Cloaths do not altogether perish so soon as
Meats and Drinks. But if the same be spent in Furniture of Houses,
the advantage is yet a little more; if in Building of Houses, yet
more; if in improving of Lands, working of Mines, Fishing, etc., yet
more; but most of all, in bringing Gold and Silver into the Country;
because those things are not only not perishable, but are esteemed
for Wealth at all times and everywhere; whereas other Commodities
which are perishable, or whose value depends upon the Fashion; or
which are contingently scarce and plentiful, are Wealth, but pro hic
et nunc.”[93] The withdrawal of money from the stream of circulation
and the saving of it from the social interchange of matter reaches
its extreme form in the _burying_ of money, so that social wealth is
brought as an underground indestructible treasure into a perfectly
secret private relation with the owner of commodities. Dr. Bernier, who
stayed for some time at the court of Aurenzeb at Delhi, tells us how
the merchants, especially the Mohammedan heathens, who control nearly
all the trade and all money, secretly bury their money deep in the
ground, “being imbued with the faith that the gold and silver which
they put away during their lives will serve them after death in the
next world.”[94] However, in so far as the asceticism of the hoarder is
combined with active industry, he is rather a Protestant by religion
and still more a Puritan. “It can not be denied that buying and selling
are necessary, that one can not get along without them, and that one
can buy like a Christian especially things that serve in need and in
honor; for the patriarchs had also bought and sold cattle, wool, grain,
butter, milk and other goods. They are gifts of God which He gives out
of the earth and divides among men. But foreign trade which brings
over from Calcutta, India and other such places commodities consisting
of costly silks, and gold ware, and spices which only serve for luxury
and are of no use, draining the land and the people of their money,
should not be tolerated if we but had a government of princes. Yet I
do not wish to write of that now, for I believe it will have to stop
of itself, when we have no money any longer; and so will luxury and
gluttony; for no writing or teaching will help until want and poverty
will force us.”[95]

In times of disturbance in the process of the social interchange of
matter, the burying of money takes place even in bourgeois societies
which are at a high stage of development. The social bond in its
compact form is being saved from the social movement (with the owner
of commodities this bond is the commodity and the adequate form of the
commodity is money). The social _nervus rerum_ is buried next to the
body whose nerve it is.

The hoard would now become mere useless metal, its money soul would
depart from it and it would remain as the burnt ashes of circulation,
as its caput mortuum, if it did not constantly tend to get back into
circulation. Money, or crystallized exchange value, is, according to
its nature, the form of abstract wealth; but, on the other hand, any
given sum of money is a quantitatively limited magnitude of value.
The quantitative limitation of exchange value is in contradiction
with its qualitative universality and the hoarder conceives in it a
barrier which turns, in fact, into a qualitative barrier as well and
makes of the hoard merely a limited representative of material wealth.
Money, in its capacity of a universal equivalent, appears, as we have
seen, as a member of an equation, the other member of which consists
of an endless series of commodities. It depends on the magnitude of
the exchange value to what extent money will be realized in such an
endless series, i. e., to what degree it corresponds to the conception
of it as an exchange value. The automatic movement of exchange value
as exchange value can only tend to its passing beyond its quantitative
limits. But by exceeding the quantitative limits of the hoard a new
limit is created which must be removed in its turn. There is no
definite limit which appears as a barrier to further hoarding, every
limit plays that part. Hoard accumulation has, therefore, no inherent
limits, no inherent measure; it is an endless process which finds in
each successive result an impulse for a new beginning. While the hoard
is increased only by being preserved, it is preserved only by being

Money is not only _an_ object of the passion for riches; it is _the_
object of that passion. The latter is essentially _auri sacra fames_.
The passion for riches, contrary to that for special kinds of natural
wealth or use-values, such as clothing, ornaments, herds, etc., is
possible only when universal wealth has been individualized as such
in a particular object and can, therefore, be retained in the form of
a single commodity. Money appears then no less as an object than as
a source of the passion for riches.[96] The underlying fact of the
matter is that exchange value as such and with it its increase become
the final aim. Greed holds the hoard fast by not allowing the money
to become a medium of circulation, but the thirst for gold saves the
money soul of the hoard by keeping up the lasting affinity of gold for

To sum up, the activity by which hoards are built up resolves itself
into withdrawal of money from circulation by continually repeated
sales, and simple hoarding or _accumulation_. In fact, it is only
in the sphere of simple circulation and, especially, in the form of
hoarding, that accumulation of wealth as such takes place, while, as we
shall see later, in the case of other so-called forms of accumulation
it is only a misnomer to call them by that name in mere recollection
of the simple accumulation of money. All other commodities are hoarded
either as use-values, in which case the manner of storing them up is
determined by the peculiarities of their use-value: the storing of
grain, e. g., requires special equipment; the accumulation of sheep
makes one a shepherd; the accumulation of slaves and land creates
relations of master and servant, etc.; the accumulation of particular
kinds of wealth requires special processes different from the simple
act of hoarding, and develops special individual traits. Or, wealth
in the form of commodities is hoarded as exchange-value and in that
case hoarding appears as a commercial or a specific economic operation.
The one who carries on such operations becomes a dealer in corn, in
cattle, etc. Gold and silver are money not through some activity of
the individual who accumulates it, but as crystals of the process of
circulation which goes on without any aid on his part. He has nothing
to do but to put them aside, adding new weights of metal to his
hoard, a perfectly senseless operation which, if applied to all other
commodities, would deprive them of all value.[97]

Our hoarder appears as a martyr of exchange value, a holy ascetic
crowning the metal pillar. He cares for wealth only in its social
form and therefore he buries it away from society. He wants to have
the commodity in the form in which it is always capable of entering
circulation and therefore he withdraws it from circulation. He dreams
of exchange value and therefore does not exchange. The fluid form of
wealth and its petrification, the elixir of life and the stone of
wisdom madly haunt each other in alchemic fashion. In his imaginary
unlimited passion for enjoyment he denies himself all enjoyment.
Because he wishes to satisfy all social wants, he barely satisfies
his elementary natural wants. While holding fast to his wealth in
its metallic bodily form, the latter escapes him as a phantom. As a
matter of fact, however, the hoarding of money for the sake of money
is the barbaric form of production for production’s sake, i. e., the
development of the productive forces of social labor beyond the limits
of ordinary wants. The less the production of commodities is developed,
the more important is the first crystallization of exchange value into
money, or hoarding, which plays, therefore, an important part among
the ancient nations, in Asia until the present day, and among modern
agricultural nations where exchange value has not as yet taken hold of
all the relations of production. Before taking up the consideration
of the specific economic function of hoarding within the sphere of
metallic circulation, let us mention another form of hoarding.

Quite apart from their aesthetic properties, silver and gold
commodities are convertible into money, since the material of which
they are made is a money material; and, inversely, gold money and gold
bullion can be converted into commodities. Because gold and silver
constitute the material of abstract wealth, the greatest display
of wealth consists of the utilization of these metals as concrete
use-values, and if the owner of commodities hides his treasure at
certain stages of production, he is very anxious to appear before
other owners of commodities as _rico hombre_ whenever he can do so
with safety. He gilds himself and his house.[98] In Asia, especially
in India, where, unlike under the capitalist system, the hoarding
of wealth appears not as a subordinate function of the system of
production, but as an end in itself, gold and silver commodities are
practically but aesthetic forms of hoards. In mediaeval England gold
and silver commodities were considered before the law as mere forms of
treasure, since their value was but slightly increased by the crude
labor spent upon them. They were destined to re-enter circulation
and their fineness was therefore prescribed in the same manner as
that of coin. The increasing use of gold and silver as objects of
luxury with the growth of wealth is such a simple matter that it was
perfectly clear to the ancients,[99] while modern economists have
advanced the erroneous proposition that the use of silver and gold
articles increases not in proportion to the growth of wealth, but
in proportion to the fall in value of the precious metals. Their
otherwise accurate references to the use of Californian and Australian
gold are inconclusive, since the increased consumption of gold as a
raw material does not find justification, according to their theory,
in any corresponding decline in its value. From 1810 to 1830, in
consequence of the struggle of the American colonies against Spain and
the interruption of mining caused by revolutions, the annual average
production of precious metals declined by more than one-half. The
decline of coin in circulation in Europe amounted to nearly one-sixth,
comparing the years 1829 and 1809. Although the quantity produced had
thus declined and the cost of production, if it had changed at all,
had increased, yet the consumption of precious metals as objects of
luxury increased to an extraordinary extent in England during the very
war and on the continent after the Peace of Paris. The consumption
increased with the general growth of wealth.[100] It may be stated
as a general law that the conversion of gold and silver money into
articles of luxury prevails in times of peace, while their reconversion
into bullion or even coin takes place in stormy periods.[101] How
considerable the proportion is of the gold and silver treasure in the
form of articles of luxury to the quantity of precious metals serving
as money may be seen from the fact that in 1829 the proportion in
England, according to Jacob, was two to one, and in entire Europe and
America the precious metals in the form of articles of luxury exceeded
those in the form of money by one-fourth.

We have seen that the circulation of money is but the manifestation of
the metamorphoses of commodities, or of the form under which the social
interchange of matter takes place. With the change in the total price
of commodities in circulation or in the volume of their simultaneous
metamorphoses, the rapidity of their change of form in each case being
given, the total quantity of gold in circulation must always expand
or contract. That is possible only under the condition that the total
quantity of money in the country continually bear a varying ratio to
the quantity of money in circulation. This condition is met by the
process of hoarding. With a fall in prices or rise in the rapidity
of circulation, the hoard-reservoirs absorb that part of money which
is thrown out of circulation; with a rise in price or a decline in
the rapidity of circulation, the hoards open up and return a part
of their contents to the stream of circulation. The solidification
of circulating money into hoards and the outpouring of hoards into
circulation is a constantly oscillating movement in which the
prevalence of the one or the other tendency is determined exclusively
by fluctuations in the circulation of commodities. Hoards thus serve as
conduits for the supply and withdrawal of money to or from circulation,
so that every time only that quantity of money circulates as coin which
is required by the immediate needs of circulation. If the volume of the
entire circulation suddenly expands and the fluent unity of sale and
purchase assumes such dimensions that the total sum of prices to be
realized increases more rapidly than the rapidity of the circulation of
money, the hoards decrease perceptibly; but when the combined movement
slackens to an unusual extent, or the movement of buying and selling
steadies itself, the medium of circulation solidifies into money in
large measure, and the treasure reservoirs fill up far above their
average level. In countries with an exclusively metallic circulation
or where production is at a low stage of development, the hoards are
endlessly split up and scattered all over the land, while in countries
where the capitalist system is developed they are concentrated in bank
reservoirs. Hoards are not to be confounded with coin reservoirs, which
form a constituent part of the total supply of money in circulation,
while the interaction between hoards and currency implies the decline
or rise of its total supply. Gold and silver commodities form, as we
have seen, both conduits for the withdrawal of precious metals, as
well as sources of their supply. In ordinary times only their former
function is of importance to the economy of metallic circulation.[102]


The two forms which have so far distinguished money from the
circulating medium are those of _suspended coin_ and of the _hoard_.
The temporary transformation of coin into money in the case of the
former means that the second phase of C―M―C, namely purchase M―C,
must break up within a certain sphere of circulation into a series
of successive purchases. As to hoarding, it is simply based on the
isolation of the act C―M when it does not immediately pass into M―C,
or is but an independent development of the first metamorphosis of
a commodity; it represents money as the result of the alienation of
all commodities in contradistinction to the medium of circulation as
the embodiment of commodities in their always alienable form. Coin
reserves and hoards are money only as non-circulating mediums and
are non-circulating mediums only because they do not circulate. In
the capacity in which we consider money now, it circulates or enters
circulation, but does not perform the function of a circulating medium.
As a medium of circulation money is always a means of purchase, now it
does not act in that capacity.

As soon as money develops through the process of hoarding into the
embodiment of abstract social wealth and the tangible representative
of material wealth, it assumes in that capacity special functions
within the process of circulation. If money circulates merely as a
medium of circulation and therefore as a means of purchase, it is
understood that commodity and money confront each other at the same
time, i. e., that the same value is present in a double form: at one
pole, as a commodity in the hands of the seller; at the other pole as
money in the hands of the buyer. This simultaneous existence of the two
equivalents at opposite poles and their simultaneous change of places
or mutual alienation presupposes in its turn that seller and buyer
enter into relations as owners of equivalents that are on hand. But in
the course of time, the process of the metamorphosis of commodities
which produces the different forms of money, transforms also the owners
of commodities or changes the character in which they appear before
each other in the community. In the process of metamorphosis of the
commodity the guardian of the latter changes his skin as often as
the commodity changes place or as the money assumes new forms. Thus,
the owners of commodities originally confronted each other only as
commodity owners, but later on they became one a buyer, the other a
seller; then each became alternately buyer and seller, then hoarders,
and finally rich men. In that manner, the owners of commodities do not
come out of the process of circulation the same men that they entered.
In fact the different forms which money assumes in the process of
circulation are but crystallized changes of form of the commodities
themselves, which in their turn are but concrete expressions of the
changing social relations in which commodity owners carry on the
interchange of matter with one another. New trade relations spring up
in the process of circulation, and, as representatives of these changed
relations, commodity owners assume new economic roles. Just as gold
becomes idealized within the process of circulation and plain paper,
in its capacity of a representative of gold, performs the function
of money, so does the same process of circulation lend the weight of
actual seller and buyer to the buyer and seller who enter it merely as
representatives of future money and future commodities.

All the forms in which gold develops into money, are but the unfolding
of potentialities which the metamorphosis of commodities bears within
itself. These forms did not become distinctly differentiated in the
process of simple money circulation where money appears as coin and
the movement C―M―C forms a dynamic unity; at most, they appeared
as mere potentialities as, e. g., in the case of the break in the
metamorphosis of a commodity. We have seen that in the process C―M
the relations between the commodity and money were those of an actual
use-value and ideal exchange-value to an actual exchange value and
only ideal use-value. By alienating his commodity as a use-value the
seller realized its own exchange value and the use-value of money. On
the contrary, the buyer, by alienating his money as exchange value,
realized its own use-value and the price of the commodity. Commodity
and money changed places accordingly. When it comes to a realization
in actual life of this bi-polar contrast, a new break occurs. The
seller actually alienates his commodity, but realizes its price only in
idea: he has sold his commodity at its price, which is to be realized,
however, only subsequently, at a time agreed upon. The purchaser buys
as the representative of future money, while the vender sells as the
owner of present goods. On the part of the vender, the commodity as
use-value is actually alienated, without the price being actually
realized; on the part of the purchaser, money is actually realized
in the use-value of the commodity, without being actually alienated
as exchange value. Instead of a token of value representing money
symbolically as was the case before, the purchaser himself performs
that part now. And just as in the former case the symbolic nature of
the token of value called forth the guarantee of the state which has
made it legal tender, so does the personal symbolism of the buyer bring
about legally enforcible private contracts among commodity owners.

The contrary may happen in the process M―C, where the money can be
alienated as a real means of purchase, and in that way the price of the
commodity can be realized before the use-value of the money is realized
and the commodity actually delivered. This occurs constantly under
the everyday form of pre-payments. And it is under this form that the
English government purchases opium from the ryots of India, or, foreign
merchants residing in Russia mostly buy agricultural products. In these
cases, however, the money always acts in its well known role of a means
of purchase and therefore, does not assume any new forms.[103] We need
not dwell, therefore, on this case any longer; but with reference to
the changed form which the two processes M―C and C―M assume now, we
may note that the difference between purchase and sale which appeared
but imaginary in the direct process of circulation, now becomes a real
difference, since in the former case only the money is present and in
the latter only the commodity, and in either case only that extreme is
present from which the initiative comes. Besides, the two forms have
this in common: that in either, one of the equivalents is present only
in the common will of the buyer and seller,―a will that is binding on
both and assumes definite legal forms.

Seller and buyer become creditor and debtor. While the commodity
owner looked comical as the guardian of a treasure, he now becomes
awe-inspiring, since he no longer identifies himself but his neighbor
with a certain sum of money and makes him and not himself a martyr of
exchange value. From a believer he becomes a creditor, for religion he
substitutes law.

  “I stay here on my bond!”

Thus, in the modified form C―M in which the commodity is present and
money is only represented, money plays first of all the part of a
measure of value. The exchange value of the commodity is estimated in
money as its measure; but as exchange value, established by contract,
price exists not only in the mind of the seller, but also as a measure
of obligation on the part of the buyer. Besides serving as a measure of
value, money plays here the part of a means of purchase, although in
that capacity it only casts ahead the shadow of its future existence.
It attracts the commodity from its position in the hand of the seller
into that of the buyer. As soon as the term of the contract expires,
money enters circulation, since it changes its position by passing
from the hands of the former buyer into those of the former seller.
But it does not enter circulation as a circulating medium or as a
means of purchase. It performed those functions before it was present
and it appears after it has ceased to perform them. It now enters
circulation as the only adequate equivalent of the commodity, as the
absolute form of existence of exchange value, as the last word of the
process of exchange, in short as money, and money in its distinct role
of a _universal means of payment_. In this capacity of a means of
payment money appears as the absolute commodity, but within the sphere
of circulation and not without it as was the case with hoards. The
difference between the means of purchase and the means of payment makes
itself unpleasantly felt in periods of commercial crises.[104]

Originally, the conversion of the product into money in the sphere of
circulation appears only as an individual necessity for the commodity
owner in so far as his own product has no use-value to him, but has
to acquire it first by being alienated. But in order to pay at the
expiration of the contract, he must have sold commodities before that.
Thus, entirely apart from his individual wants, the movement of the
circulation process makes selling a social necessity with every owner
of commodities. As a former buyer of a commodity he is compelled to
become a seller of another commodity in order to get money not as a
means of purchase but as a means of payment, as the absolute form of
exchange value. The conversion of commodity into money as a final act,
or the first metamorphosis of a commodity as an end in itself which in
the case of hoarding seemed to be a matter of caprice on the part of
the commodity owner, becomes now an economic function. The motive and
essence of sale for the sake of payment becomes from a mere form of the
process of circulation its self emanating substance.

In this form of sale the commodity completes its change of position;
it circulates while it postpones its first metamorphosis, viz. its
transformation into money. On the contrary, on the part of the buyer
the second metamorphosis is completed, i. e. money is reconverted
into a commodity before the first metamorphosis has taken place,
i. e., before the commodity has been turned into money. The first
metamorphosis thus takes place after the second in point of time;
and thereby, money i. e. the form of the commodity in its first
metamorphosis, acquires a new destination. Money or the spontaneous
development of exchange value, is no longer a mere intermediary form of
the circulation of commodities, but its final result.

That such _time sales_ in which the two poles of the sale are separated
in point of time, have their natural origin in the simple circulation
of commodities, requires no elaborate proof. In the first place, the
development of circulation leads to a continual repetition of the
mutual transactions between the same commodity owners who confront
each other as seller and buyer. The repetition is not accidental; on
the contrary, goods are ordered, let us say, for a certain date in the
future when they are to be delivered and paid for. In that case the
sale is ideal, i. e. it is legally accomplished without the actual
presence of the goods and money. Both forms of money, those of a medium
of circulation and of a means of payment still coincide here, since
in the first place, commodity and money change places simultaneously,
and secondly, the money does not buy the commodity, but realizes the
price of the commodity purchased before. In the second place, the
nature of a great many use-values makes the simultaneous alienation
and delivery of the goods impossible, and delivery has to be postponed
for a certain time; e. g., when the use of a house is sold for one
month, the use-value of the house is delivered only at the expiration
of the month, although it changes hands at the beginning of the month.
Since the actual transfer of the use-value and its virtual alienation
are separated here in point of time, the realization of its price
occurs also after its change of place. Finally, the difference in
the seasons and in the length of time required for the production of
various commodities brings about a situation where one tries to sell
his goods, while the other is not ready to buy; and with the repeated
purchases and sales between the same commodity owners the two ends
of sale fall apart according to the conditions of production of the
respective commodities. Thus arises a relation of creditor and debtor
between the owners of commodities which, though constituting the
natural foundation of the credit system, may be fully developed before
the latter comes into existence. It is clear that with the extension
of the credit system, and, consequently, with the development of the
capitalist system of production in general, the function of money as a
means of payment will extend at the expense of its function as a means
of purchase and, still more, as an element of hoarding. In England, e.
g., money as coin has been almost completely banished into the sphere
of retail and petty trade between producers and consumers, while it
dominates the sphere of large commercial transactions as a means of

As the universal means of payment money becomes the _universal
commodity_ of all contracts, at first only in the sphere of
circulation of commodities.[106] But with the development of this
function of money, all other forms of payment are gradually converted
into money payments. The extent to which money is developed as the
exclusive means of payment indicates the degree to which exchange value
has taken hold of production in its depth and breadth.[107]

The volume of money in circulation, as a means of payment, is
determined in the first place, by the amount of payments, i. e. by the
sum total of the prices of the commodities alienated, but not about to
be alienated, as in the case of the simple circulation of money. The
quantity thus determined is subject, however, to two modifications.
The first modification is due to the rapidity with which the same
piece of money repeats the same function, i. e. with which the several
payments succeed one another. A pays B, whereupon B pays C, and so
forth. The rapidity with which the same coin repeats its function
as a means of payment, depends first, upon the continuity of the
relation of creditor and debtor among the owners of commodities, the
same commodity owner being the creditor of one person and the debtor
of another, etc., and secondly, upon the interval which separates the
times of various payments. This chain of payments or of supplementary
first metamorphoses of commodities is qualitatively different from the
chain of metamorphoses which is formed by the circulation of money as a
circulating medium. The latter not only makes its appearance gradually,
but is even formed in that manner. A commodity is first converted
into money, then again into a commodity, thereby enabling another
commodity to become money, etc.; or, seller becomes buyer, whereby
another commodity owner turns seller. This successive connection is
accidentally formed in the very process of the exchange of commodities.
But when the money which A has paid to B is passed on from B to C,
from C to D, etc., and that, too, at intervals rapidly succeeding one
another, then this external connection reveals but an already existing
social connection. The same money passes through different hands not
because it appears as a means of payment; it passes as a means of
payment because the different hands have already clasped each other.
The rapidity with which money circulates as a means of payment thus
shows that individuals have been drawn into the process of circulation
much deeper than would be indicated by the same rapidity of the
circulation of money as coin or as a means of purchase.

The sum total of prices made up by all the purchases and sales taking
place at the same time, and, therefore, side by side, constitutes the
limit for the substitution of the volume of coin by the rapidity of its
circulation. If the payments that are to be made simultaneously are
concentrated at one place―which naturally arises at first at points
where the circulation of commodities is largest―the payments balance
each other as negative and positive quantities: A is under obligations
to pay B, while he has to be paid by C. etc. The quantity of money
required as a means of payment will, therefore, be determined not by
the total amount of payments which have to be made simultaneously, but
by the greater or less concentration of the same and by the magnitude
of the balance remaining after their mutual neutralization as negative
and positive quantities. Special arrangements are made for settlements
of this kind even where the credit system is not developed at all,
as was the case e. g. in ancient Rome. The consideration of these
arrangements, however, as well as that of the general time limits of
payment, which are everywhere established among certain elements in the
community, does not belong here. We may add that the specific influence
which these time settlements exert on the periodic fluctuations in the
quantity of money in circulation, has been scientifically investigated
but lately.

In so far as the payments mutually balance as positive and negative
quantities, no money actually appears on the scene. It figures here
only in its capacity of a measure of value: first, in the prices of
commodities, and second, in the magnitude of mutual obligations. Aside
from its ideal form, exchange value does not exist here independently,
not even in the form of a token of value; that is to say, money plays
here only the part of ideal money of account. The function of money
as a means of payment thus implies a contradiction. On the one hand,
in so far as payments balance, it serves only ideally as a measure of
value. On the other hand, in so far as a payment has actually to be
made, money enters circulation not as a transient circulating medium,
but as the final resting form of the universal equivalent, as the
absolute commodity, in a word, as money. Therefore, whenever such a
thing as a chain of payments and an artificial system of settling them,
is developed, money suddenly changes its visionary nebulous shape as a
measure of value, turning into hard cash or means of payment, as soon
as some shock causes a violent interruption of the flow of payments and
disturbs the mechanism of their settlement. Thus, under conditions of
fully developed capitalist production, where the commodity owner has
long become a capitalist, knows his Adam Smith, and condescendingly
laughs at the superstition that gold and silver alone constitute money
or that money differs at all from other commodities as the absolute
commodity, money suddenly reappears not as a medium of circulation,
but as the only adequate form of exchange value, as the only form of
wealth, exactly as it is looked upon by the hoarder. In its capacity
of such an exclusive form of wealth, it reveals itself, unlike under
the monetary system, not in mere imaginary, but in actual depreciation
and worthlessness of all material wealth. That is what constitutes
the particular phase of crises of the world market which is known as
a money crisis. The _summum bonum_ for which everybody is crying at
such times as for the only form of wealth, is cash, hard cash; and by
the side of it all other commodities just because they are use-values,
appear useless like so many trifles and toys, or, as our Dr. Martin
Luther says, as mere objects of ornament and gluttony. This sudden
reversion from a system of credit to a system of hard cash heaps
theoretical fright on top of the practical panic; and the dealers by
whose agency circulation is affected shudder before the impenetrable
mystery in which their own economical relations are involved.[108]

Payments, in their turn, require the formation of reserve funds,
the accumulation of money as a means of payment. The building up of
reserve funds appears no longer as a practice carried on outside of
the sphere of circulation, as in the case of hoarding; nor as a mere
technical accumulation of coin, as in the case of coin reserves; on the
contrary, money must now be gradually accumulated to be available on
certain future dates when payments become due. While hoarding, in its
abstract form as a means of enrichment, declines with the development
of the capitalist system of production, that species of hoarding which
is directly called for by the process of production, increases; or, to
put it differently, a part of the treasure which is generally formed
in the sphere of circulation of commodities, is absorbed as a reserve
fund of means of payment. The more developed the capitalist system of
production, the more these reserve funds are limited to the necessary
minimum. Locke, in his work “On the Lowering of Interest”[109]
furnishes interesting data with reference to the size of these reserve
funds in his time. They show what a considerable part of the total
money in circulation the reservoirs for means of payment absorbed in
England just at the time when banking began to develop.

The law as to quantity of money in circulation, as it has been
formulated in the analysis of the simple circulation of money, receives
an essential modification when the circulation of the means of payment
is taken into account. The rapidity of the circulation of money whether
as circulating medium or as means of payment―being given, the total
amount of money in circulation at a given time will be determined by
the sum total of the prices of commodities to be realized, _plus_ the
total amount of payments falling due at the same time, _minus_ the
amount of payments balancing each other. The general law that the
volume of money in circulation depends on the prices of commodities is
not affected by this in the least, since the extent of the payments
is itself determined by the prices stipulated in contracts. What is,
however, strikingly demonstrated, is that even if the rapidity of
circulation and the economy of payments be assumed to remain the same,
the sum total of the prices of the commodities circulating in a given
period of time, say one day, and the volume of money in circulation on
the same day are by no means equal, because there is a large number
of commodities in circulation whose prices have yet to be realized in
money at a future date, and there is a quantity of money in circulation
which constitutes the payment for commodities which have long gone out
of circulation. The latter amount will depend on the sum of payments
falling due on the same day although contracted for at entirely
different periods.

We have seen that a change in the values of gold and silver does not
affect their function as measures of value or money of account. But
this change is of decisive importance for money as a hoard, since
with the rise or fall of value of gold and silver, the total value
of a gold or silver hoard will also rise or fall. Of still greater
importance is the effect of this change on money as a means of payment.
The payment takes place after the sale of the commodity, or the money
serves in two different capacities at two different periods; first, as
a measure of value, then as a means of payment corresponding to the
measurement. If, during this interval, the value of the precious metals
or the labor-time necessary for their production undergoes a change,
the same quantity of gold or silver will be worth more or less when
it appears as a means of payment than what it was when it served as a
measure of value, i. e., when the contract was concluded. The function
of a particular commodity, like gold or silver, to serve as money or
independent exchange value comes here in conflict with the nature of
the particular commodity whose magnitude of value depends on changes in
the cost of its production. The great social revolution which caused
the fall in value of the precious metals in Europe, is as well known as
the revolution of an opposite character which had been brought about
at an early period in the history of the ancient Roman republic by the
rise in value of copper in terms of which the debts of the plebeians
had been contracted. Without attempting here to follow any further
the fluctuations of value of the precious metals and their effect on
the system of bourgeois political economy, it is at once apparent
that a fall in the value of the precious metals favors the debtors at
the expense of the creditors, while a rise in their value favors the
creditors at the expense of the debtors.


Gold becomes money as distinguished from coin only after it is
withdrawn from circulation in the shape of a hoard; it then enters
circulation as a non-medium of circulation, and finally breaks through
the barriers of home circulation to assume the part of a universal
equivalent in the world of commodities. It becomes _world money_.

While the general measures of weight of the precious metals served as
their original measures of value, the reverse process takes place now
in the world market, and the reckoning names of money are turned back
into corresponding weight names. In the same way, while shapeless crude
metal (aes rude) was the original form of the medium of circulation
and the coin form constituted but the official stamp certifying that a
given piece of metal was of a certain weight, now the precious metal
in its capacity of a world coin throws off its stamp and shape and
reassumes the indistinguishable bullion form; and even if national
coins, such as Russian imperials, Mexican dollars, and English
sovereigns, do circulate abroad, their name is of no importance,
and only their contents count. Finally, as international money, the
precious metals come again to perform their original function of
mediums of exchange, which, like the exchange of commodities, arose
first not within the various primitive communities, but at their points
of contact with one another. As world money, money thus reassumes its
primitive form. On leaving the sphere of home circulation, it strips
off the particular forms which it has acquired in the course of the
development of the process of exchange within that particular national
sphere, those local garbs of standard of price, of coin, of auxiliary
coin, and of token of value.

We have seen that in the home circulation of a country, only one
commodity serves as a measure of value. Since, however, that function
is performed by gold in some countries and by silver in others, there
is a double standard of value in the world market and money assumes
two forms in all its other functions. The translation of the values
of commodities from gold prices into silver prices and vice versa
depends in each case upon the relative value of the two metals, which
is constantly changing and, therefore, appears to be constantly in the
process of determination. Commodity owners in every national sphere
of circulation have to use gold and silver alternately for foreign
circulation and thus to exchange the metal which is accepted as money
at home for the metal which they happen to need as money abroad. Every
nation is, therefore, utilizing both metals, gold and silver, as world

In the international circulation of commodities, gold and silver appear
not as mediums of circulation, but as universal mediums of exchange.
The universal medium of exchange performs its function only under its
two developed forms of a means of purchase and of a means of payment,
whose mutual relation in the world market is the very reverse of what
it is at home. In the sphere of home circulation, money in the form of
coin, played exclusively the part of a means of purchase, either as the
intermediary in the dynamic unity C―M―C or as the representative of the
transient form of exchange value in the unceasing change of positions
by commodities. In the world market it is just the contrary. Gold and
silver appear here as a means of purchase when the exchange of matter
is but one-sided, and purchase and sale do not coincide. The frontier
trade at Kiachta e. g. is both actually and according to treaty, one
of barter, in which silver plays only the part of a measure of value.
The war of 1857-58 compelled the Chinese to sell without buying. Silver
suddenly appeared now as a means of purchase. Out of regard to the
letter of the treaty, the Russians made up the French five frank coins
into crude silver commodities, which were made to serve as a means
of exchange. Silver has always served as a means of purchase between
Europe and America on one side and Asia on the other, where it settles
down in the form of hoards. Furthermore, the precious metals serve
as international means of purchase whenever the ordinary balance of
exchange of matter between two nations is suddenly upset, as e. g. when
a failure of crops forces one of them to buy on an extraordinary scale.
Finally, the precious metals are international means of purchase in
the hands of gold and silver producing countries, in which case they
directly constitute a product and commodity and not merely a converted
form of a commodity. The more the exchange of commodities between
different national spheres of circulation is developed, the more
important becomes the function of world money to serve as a _means of
payment_ for the settlement of international balances.

Like home circulation, international circulation requires a constantly
changing quantity of gold and silver. A part of the accumulated hoards
serves therefore, in each country as a reserve fund of world money,
which now declines, now rises, according to the fluctuations of the
exchange of commodities.[110] Besides the special movements which take
place between national spheres of circulation, world-money possesses
a universal movement, whose starting points are at the sources of
production from which gold and silver streams spread out in different
directions all over the world market. Here gold and silver enter the
world circulation as commodities and are exchanged for commodity
equivalents in proportion to the labor-time contained in them, before
they penetrate national spheres of circulation. In the latter, they
appear now with a given magnitude of value. Every fall or rise in the
cost of their production equally affects, therefore, their relative
value throughout the world market; on the other hand, that value is
entirely independent of the extent to which the different national
spheres of circulation absorb gold or silver. The part of the metal
stream which is caught up by every separate sphere in the world of
commodities, partly enters directly the home circulation of money
to make up for worn out coin; partly is dammed up in the different
reservoirs containing hoards of coin, means of payment and world-money;
partly is turned into articles of luxury, while the rest simply forms
a treasure. At an advanced stage of development of the capitalist
system of production the formation of hoards is reduced to the minimum
required by the various processes of circulation for the free play
of their mechanism. The hoard as such becomes idle wealth, unless it
appears as a temporary form of a surplus resulting from a favorable
balance of payments or as the result of an interrupted exchange of
matter, i. e. as the solidification of a commodity in its first

Gold and silver, in their capacity of money, being by conception
universal commodities, assume in their capacity of world money the
form adapted to a universal commodity. To the extent to which all
commodities are exchanged for them, they become the transformed
impersonation of all commodities and, therefore, universally alienable
commodities. Their function of serving as the embodiment of universal
labor-time is realized more and more as the interchange of matter
produced by concrete labor embraces increasing parts of the world.
They become universal equivalents to the extent to which the series
of particular equivalents which constitute their spheres of exchange,
increases. Since in the sphere of world circulation commodities unfold
their own exchange value on a universal scale, they assume the form
of world money when transformed into gold and silver. As commodity
owning nations are thus turning gold into money by their diversified
industry and universal trade, industry and trade appear to them only as
a means of getting money out of the world market in the shape of gold
and silver. Gold and silver, as world money, are, therefore, as much
products of the universal circulation of commodities as they are means
of widening its sphere. Like chemistry which grew up behind the backs
of the alchemists who tried to find a way of making gold, so do the
sources of world industry and world trade spring up behind the backs
of the owners of commodities, while they are hunting for the commodity
in its magic form. Gold and silver help to create the world market by
anticipating its existence in their conception of money. That this
magic effect of the precious metals is by no means confined to the
period of infancy of capitalist society but is a necessary outgrowth
of the perverse conception which the representatives of the commodity
world have of their own work in society, is shown by the extraordinary
influence exerted in the middle of the nineteenth century by the
discovery of new gold fields.

Just as money develops into world-money, so the commodity owner
develops into a cosmopolitan. The cosmopolitan relation of men is
originally only a relation of commodity owners. The commodity as such
rises above all religious, political, national, and language barriers.
Price is its universal language and money, its common form. But with
the development of world-money as distinguished from national coin,
there develops the cosmopolitanism of the commodity owner as the faith
of practical reason opposed to traditional, religious, national and
other prejudices which hinder the interchange of matter among mankind.
As the identical gold that lands in England in the form of American
eagles, turns there into sovereigns and three days later circulates in
Paris in the form of Napoleons, only to emerge in Venice in a few weeks
as so many ducats, retaining all the while the same value, it becomes
clear to the commodity owner that nationality “is but the guinea’s
stamp.” The lofty idea which he conceives of the entire world is that
of a market, the _world market_.[111]


The process of capitalist production first of all takes hold of the
metallic circulation as of a ready, transmitted organ which, though
undergoing a gradual transformation, always retains its fundamental
structure. The question as to why gold and silver and not other
commodities serve as money material falls outside the limits of the
capitalist system. We shall, therefore, confine ourselves to summing
up the most essential points.

Since universal labor-time admits of quantitative differences only,
the object which is to serve as its specific incarnation must be
capable of representing purely quantitative differences, i. e., it
must be homogeneous and uniform in quality throughout. That is the
first condition a commodity must satisfy to perform the function of
a measure of value. If commodities were estimated in oxen, hides,
grain, etc., they would really have to be estimated in an ideal average
ox, or average hide, since there are qualitative differences between
an ox and an ox, grain and grain, hide and hide. On the contrary,
gold and silver, as elementary substances, are always the same,
and equal quantities of them represent, therefore, values of equal
magnitude.[112] The other condition which a commodity that is to serve
as a universal equivalent must satisfy and which follows directly from
its function of representing purely quantitative differences, is that
it must be capable of being divided and re-united at will, so that
money of account may be represented materially as well. Gold and
silver possess these properties to a superior degree.

As mediums of circulation, gold and silver have this advantage over
other commodities, that their high specific gravity which condenses
much weight in little space, corresponds to their economic specific
gravity which condenses relatively much labor-time, i. e. a great
quantity of exchange value in a small volume. This insures facility
of transport, of transition from hand to hand and from one country to
another, the ability to appear as rapidly as to disappear, in short,
that material mobility which constitutes the _sine qua non_ of the
commodity that is to serve as the _perpetuum mobile_ of the process of

The high specific value of the precious metals, their durability,
comparative indestructibility, insusceptibility of oxidation through
the action of the air, in the case of gold insolubility in acids
except in aqua regia,―all these natural properties make the precious
metals the natural material for hoarding. Peter Martyr who seems to
have been a great lover of chocolate, remarks, therefore, of the
cacao-bags which formed a species of Mexican gold: “O felicem monetam,
quae suavem utilemque praebet humano generi potum, et a tartarea peste
avaritiae suos immunes servat possessores, quod suffodi aut diu servari

The great importance of metals in general in the direct process of
production is due to the part they play as instruments of production.
Apart from their scarcity, the great softness of gold and silver as
compared with iron and even copper (in the hardened state in which it
was used by the ancients), makes them unfit for that application and
deprives them, therefore, to a great extent, of that property on which
the use-value of metals is generally based. Useless as they are in the
direct process of production, they are easily dispensed with as means
of existence, as articles of consumption. For that reason any desired
quantity of them may be absorbed by the social process of circulation
without disturbing the processes of direct production and consumption.
Their individual use-value does not come in conflict with their
economic function. Furthermore, gold and silver are not only negatively
superfluous, i. e. dispensable articles, but their aesthetic properties
make them the natural material of luxury, ornamentation, splendor,
festive occasions, in short, the positive form of abundance and wealth.
They appear, in a way, as spontaneous light brought out from the
underground world, since silver reflects all rays of light in their
original combination, and gold only the color of highest intensity,
viz. red light. The sensation of color is, generally speaking, the most
popular form of aesthetic sense. The etymological connection between
the names of the precious metals, and the relations of colors, in the
different Indo-Germanic languages has been established by Jacob Grimm
(see his History of the German Language).

Finally, the susceptibility of gold and silver of being turned from
coin into bullion, from bullion into articles of luxury and vice versa,
i. e. the advantage they possess as against other commodities in not
being tied down to a definite, exclusive form in which they can be
used, makes them the natural material of money, which must constantly
change from one form to another.

Nature no more produces money than it does bankers or discount
rates. But since the capitalist system of production requires the
crystallization of wealth as a fetich in the form of a single article,
gold and silver appear as its appropriate incarnation. Gold and silver
are not money by nature, but money is by nature gold and silver. In the
first place, the silver or gold money crystal is not only the product
of the process of circulation, but in fact its only final product. In
the second place, gold and silver are ready and direct products of
nature, not distinguished by any difference of form. The universal
product of the social process or the social process itself as a product
is a peculiar natural product, a metal hidden in the bowels of the
earth and extracted therefrom.[114]

We have seen that gold and silver are unable to fulfill the
requirements which they are expected to meet in their capacity of
money, viz. to remain values of unvarying magnitude. Still, as
Aristotle had already observed, they possess a more constant value than
the average of other commodities. Apart from the universal effect of an
appreciation or depreciation of the precious metals, the fluctuations
in the ratio between the values of gold and silver has a special
importance, since both serve side by side in the world market as money
material. The purely economic causes of this change of value must be
traced to the change in the labor-time required for the production of
these metals; conquests and other political upheavals which exercised
a great influence on the value of metals in the ancient world, have
nowadays only a local and transitory effect. The labor-time required
for the production of the metals will depend on the degree of their
natural scarcity, as well as on the greater or less difficulty with
which they can be obtained in a purely metallic state. As a matter of
fact, gold is the first metal discovered by man. This is due to the
fact that nature itself furnishes it partly in pure crystalline form,
individualized, free from chemical combination with other substances,
or, as the alchemists used to say, in a virgin state; and so far as
it does not appear in that state, nature does the technical work in
the great gold washeries of rivers. Only the crudest kind of labor is
thus required of man in the extraction of gold, either from rivers or
from alluvial deposits; while the extraction of silver presupposes the
development of mining and a comparatively high degree of technical
skill generally. For that reason the value of silver is originally
greater than that of gold in spite of the lesser absolute scarcity of
the former. Strabo’s assertion that a certain Arabian tribe gave ten
pounds of gold for one pound of iron and two pounds of gold for one
pound of silver, seems by no means incredible. But as the productive
powers of labor in society are developed and the product of unskilled
labor rises in value as compared with the product of skilled labor;
as the earth’s crust is more thoroughly broken up and the original
superficial sources of gold supply give out, the value of silver begins
to fall in proportion to that of gold. At a given stage of development
of engineering and of the means of communication, the discovery of
new gold or silver fields become the decisive factor. In ancient Asia
the ratio of gold to silver was 6 to 1 or 8 to 1; the latter ratio
prevailed in China and Japan as late as the beginning of the nineteenth
century; 10 to 1, the ratio in Xenophon’s time, may be considered as
the average ratio of the middle period of antiquity. The exploitation
of the Spanish silver mines by Carthage and later by Rome had about the
same effect in antiquity, as the discovery of the American mines in
modern Europe. For the period of the Roman empire 15 or 16 to 1 may be
assumed as a rough average, although we frequently find cases of still
greater depreciation of silver in Rome. The same movement beginning
with the relative depreciation of gold and concluding with the fall
in the value of silver, is repeated in the following epoch which has
lasted from the Middle Ages to the present time. As in Xenophon’s times
the average ratio in the Middle Ages was 10 to 1, changing to 16 or
15 to 1 in consequence of the discovery of the American mines. The
discovery of the Australian, Californian and Columbian gold sources
makes a new fall in the value of gold probable.[115]


As the universal thirst for gold prompted nations and princes in the
sixteenth and seventeenth centuries, the period of infancy of modern
bourgeois society, to crusades beyond the sea in search of the golden
grail,[116] the first interpreters of the modern world, the founders
of the monetary system, of which the mercantile system is but a
variation, proclaimed gold and silver, i. e. money, as the only thing
that constitutes wealth. They were quite right when, from the point
of view of the simple circulation of commodities, they declared that
the mission of bourgeois society was to make money, i. e. to build up
everlasting treasures which neither moth nor rust could eat. It is
no argument with the monetary system to say that a ton of iron whose
price is £3 constitutes a value of the same magnitude as £3 worth
of gold. The point here is not the magnitude of the exchange value,
but as to what constitutes its adequate form. If the monetary and
mercantile systems single out international trade and the particular
branches of national industry directly connected with that trade as
the only true sources of wealth or money, it must be borne in mind,
that in that period the greater part of national production was still
carried on under forms of feudalism and was the source from which
producers drew directly their means of subsistence. Products, as a
rule, were not turned into commodities nor, therefore, into money;
they did not enter into the general social interchange of matter; did
not, therefore, appear as embodiments of universal abstract labor;
and did not, in fact, constitute bourgeois wealth. Money as the end
and object of circulation is exchange value or abstract wealth, but
it is no material element of wealth and does not form the directing
goal and impelling motive of production. True to the conditions as
they prevailed in that primitive stage of bourgeois production, those
unrecognized prophets held fast to the pure, tangible, and resplendent
form of exchange value, to its form of a universal commodity as against
all special commodities. The proper bourgeois economic sphere of that
period was the sphere of the circulation of commodities. Hence, they
judged the entire complex process of bourgeois production from the
point of view of that elementary sphere and confounded money with
capital. The unceasing war of modern economists against the monetary
and mercantile system is mostly due to the fact that this system blabs
out in brutally naive fashion, the secret of bourgeois production, viz.
its subjection to the domination of exchange value. Ricardo, though
wrong in the application he makes of it, remarks somewhere that even in
times of famine, grain is imported not because the nation is starving,
but because the grain dealer is making money. In its criticism of the
monetary and mercantile system, political economy, by attacking that
system as a mere illusion and as a false theory, fails to recognize in
it the barbaric form of its own fundamental principles. Furthermore,
this system has not only an historic justification, but within
certain spheres of modern economy retains until now the full rights
of citizenship. At all stages of the bourgeois system of production
in which wealth assumes the elementary form of a commodity, exchange
value assumes the elementary form of money and in all phases of the
process of production wealth reassumes for a moment the universal
elementary commodity form. Even at the most advanced stage of bourgeois
economy, the specific functions of gold and silver to serve as money,
in contradistinction to their function of mediums of circulation―a
function which distinguishes them from all other commodities―is not
done away with, but only limited, hence the monetary and mercantile
system retains its right of citizenship. The Catholic fact that gold
and silver are contrasted with other profane commodities as the direct
incarnation of social labor, that is as the expression of abstract
wealth, naturally offends the Protestant point d’honneur of bourgeois
economy, and out of fear of the prejudices of the monetary system
it had lost for a long time its grasp of the phenomena of money
circulation, as will be shown presently.

It was quite natural that, contrary to the monetary and mercantile
system which knew money only in its form of a crystallized product
of circulation, classical political economy should have conceived
money first of all in its fluent form of exchange value arising and
disappearing within the process of the metamorphosis of commodities.
And since the circulation of commodities is regarded exclusively in the
form of C―M―C and the latter in its turn, exclusively in its aspect of
a dynamic unity of sale and purchase, money comes to be regarded in
its capacity of a medium of circulation as opposed to its capacity of
money. And when that medium of circulation is isolated in its function
of coin, it turns, as we have seen, into a token of value. But since
classical political economy had to deal with metallic circulation as
the prevailing form of circulation, it defined metallic money as coin,
and metallic coin as a mere token of value. In accordance with the
law governing the circulation of tokens of value, the proposition was
advanced that the prices of commodities depend on the quantity of money
in circulation instead of the opposite principle that the quantity of
money in circulation depends on the prices of commodities. We find
this view more or less clearly expressed by the Italian economists of
the seventeenth century; LOCKE now asserts, now denies that principle;
it is clearly elaborated in the “Spectator” (of October 19, 1711)
by MONTESQUIEU AND HUME. Since Hume was by far the most important
representative of this theory in the eighteenth century, we shall
commence our review with him.

Under certain assumptions, an increase or decrease in the quantity
either of the metallic money in circulation, or of the tokens of value
in circulation seems to affect _uniformly_ the prices of commodities.
With each fall or rise of the _value_ of gold or silver in which the
exchange values of commodities are estimated as prices, there is a rise
or fall of prices, because of the change in their measure of value; as
a result of the rise or fall of prices, a greater or smaller quantity
of gold and silver is circulating as coin. But the apparent phenomenon
is the fall in prices―the exchange value of commodities remaining the
same―accompanied by an increased or diminished quantity of the medium
of circulation. On the other hand, if the quantity of tokens of value
rises above or falls below its required level, it is forcibly reduced
to the latter by a fall or rise of prices. In either case the same
effect seems to be brought about by the same cause, and Hume holds fast
to this semblance.

Every scientific inquiry into the relation between the volume of the
circulating medium and the movement of prices must assume the value
of the money material as given. Hume, on the contrary, considers
exclusively periods of revolution in the value of the precious metals,
i. e. revolutions in the measure of value. The rise of prices which
occurred simultaneously with the increase of metallic money after the
discovery of the American mines forms the historical background of his
theory, while his polemic against the monetary and mercantile system
furnishes its practical motive. The importation of precious metals can
naturally increase while their cost of production remains the same.
On the other hand, a decrease in their value, i. e. in the labor-time
required for their production will reveal itself first of all in
their increased imports. Hence, said the later followers of Hume, a
decrease in the value of the precious metals, reveals itself in an
increased volume of the circulating medium, and the increased volume
of the latter is shown in the rise of prices. As a matter of fact,
however, the rise in price affects only exported commodities, which
are exchanged for gold and silver as commodities and not as mediums
of circulation. Thus, the prices of these commodities, which are now
estimated in gold and silver of lower value, rise as compared with
the prices of all other commodities whose exchange value continues
to be estimated in gold or silver according to the standard of their
old cost of production. This twofold appraisement of the exchange
values of commodities in the same country can naturally be only
temporary, and the gold and silver prices must become equalized in
the proportions determined by the exchange values themselves, so that
finally the exchange values of all commodities come to be estimated
according to the new value of the money material. The development of
this process, as well as the ways and means in which the exchange value
of commodities asserts itself within the limits of the fluctuations
of market prices, do not fall within the scope of this work. But that
this equalization takes place but gradually in the early periods of
development of bourgeois production and extends over long periods of
time, never keeping pace with the increase of cash in circulation,
has been strikingly demonstrated by new critical investigations of
the movement of prices of commodities in the sixteenth century.[117]
The favorite references of Hume’s followers to the rise of prices
in ancient Rome in consequence of the conquests of Macedonia, Egypt
and Asia Minor, are quite irrelevant. The characteristic method of
antiquity of suddenly transferring hoarded treasures from one country
to another, which was accomplished by violence and thus brought about
a temporary reduction of the cost of production of precious metals
in a certain country by the simple process of plunder, affects just
as little the intrinsic laws of money circulation, as the gratuitous
distribution of Egyptian and Sicilian grain in Rome affected the
universal law governing the price of grain. Hume, as well as all
other writers of the eighteenth century, was not in possession of the
material necessary for the detailed observation of the circulation
of money. This material, which first becomes available with the full
development of banking, includes in the first place a critical history
of prices of commodities, and in the second, official and current
statistics relating to the expansion and contraction of the circulating
medium, the imports and exports of the precious metals, etc. Hume’s
theory of circulation may be summed up in the following propositions:
1. The prices of commodities in a country are determined by the
quantity of money existing there (real or symbolic money); 2. The
money current in a country represents all the commodities to be found
there. In proportion “as there is more or less of this representation,”
i. e. of money, “there goes a greater or less quantity of the thing
represented to the same quantity of it”; 3. If commodities increase
in quantity, their price falls or the value of money rises. If money
increases in quantity, then, on the contrary, the price of commodities
rises and the value of money declines.[118]

“The dearness of everything,” says Hume, “from plenty of money, is a
disadvantage, which attends an established commerce, and sets bounds
to it in every country, by enabling the poorer states to undersell
the richer in all foreign markets.”[119] “Where coin is in greater
plenty; as a greater quantity of it is required to represent the same
quantity of goods; it can have no effect, either good or bad, taking
a nation within itself; any more than it would make an alteration on
a merchant’s books, if, instead of the Arabian method of notation,
which requires few characters, he should make use of the Roman, which
requires a great many. Nay, the greater quantity of money, like the
Roman characters, is rather inconvenient, and requires greater trouble
both to keep and transport it.”[120] In order to prove anything, Hume
should have shown that under a _given_ system of notation the quantity
of characters used does not depend on the magnitude of the numbers,
but that on the contrary, the magnitude of the numbers depends on
the quantity of the characters used. It is perfectly true that there
is no advantage in estimating or “counting” values of commodities
in depreciated gold and silver, and that is the reason why nations
have always found it more convenient with the growth of the value
of the commodities in circulation to count in silver in preference
to copper, and in gold rather than in silver. In proportion as the
nations became richer, they converted the less valuable metals into
subsidiary coin and the more valuable ones into money. Furthermore,
Hume forgets that in order to count values in gold and silver, it is
not necessary that either gold or silver should be “on hand.” Money of
account and the medium of circulation are identical with him and both
are “coin.” Hume concludes that a rise or fall of prices depends on
the quantity of money in circulation, because a change in the value
of the measure of value, i. e. of the precious metals which serve as
money of account, causes a rise or fall of prices and, consequently,
also a change in the amount of money in circulation, the rapidity of
the latter remaining the same. That not only the quantity of gold and
silver increased in the sixteenth and seventeenth centuries, but that
the cost of their production had declined at the same time, Hume could
know from the closing up of the European mines. In the sixteenth and
seventeenth centuries the prices of commodities increased in Europe
with the influx of the mass of American gold and silver; hence the
prices of commodities in every land are determined by the mass of
gold and silver to be found there. This was Hume’s first “necessary
consequence.”[121] In the sixteenth and seventeenth centuries prices
had not risen uniformly with the increase of the quantity of precious
metals; more than half a century passed before _any_ change in
prices became perceptible, and even then it took a long time before
the exchange values of commodities came to be generally estimated
according to the depreciated value of gold and silver, i. e. before the
revolution affected the general price level. Hence, concludes Hume,
who, quite contrary to the principles of his philosophy, generalizes
indiscriminately from imperfectly observed facts, prices of commodities
or the value of money depend not on the total amount of money to be
found in the country, but rather on the quantity of gold and silver
which is actually in circulation; but in the long run all the gold
and silver in the country must be absorbed by circulation in the
form of coin.[122] It is clear that if gold and silver have a value
of their own, then, apart from all other laws of circulation, only a
definite quantity of gold and silver can circulate as the equivalent
of commodities of a given value. If, therefore, every quantity of gold
and silver which happens to be in a country must enter the sphere of
exchange of commodities as a medium of circulation without regard
to the total value of the commodities, then gold and silver have no
intrinsic value and are in fact no real commodities. That is Hume’s
third “necessary consequence.” He makes commodities enter the process
of circulation without price and gold and silver without value. That
is the reason why he never speaks of the value of commodities and of
gold, but only of their relative quantities. Locke had already said
that gold and silver had merely an imaginary or conventional value; the
first brutal expression of opposition to the assertion of the monetary
“system” that gold and silver alone have true value. That gold and
silver owe their character of money to the function they perform in
the social process of exchange is interpreted to the effect that they
owe their own value and therefore the magnitude of their value to a
social function.[123] Gold and silver are thus worthless things, which,
however, acquire a fictitious value within the sphere of circulation
_as representatives of commodities_. They are converted by the process
of circulation not into money, but into value. This value of theirs is
determined by the proportion between their own volume and that of the
commodities, since the two must balance each other. Thus, Hume makes
gold and silver enter the world of commodities as non-commodities;
but as soon as they appear in the form of coin, he turns them, on
the contrary, into mere commodities, which must be exchanged for
other commodities by simple barter. In that manner, if the world of
commodities consisted of but one commodity, say one million quarters
of grain, the idea would work itself out very simply; viz., one
quarter of grain would be exchanged for two ounces of gold if there
were altogether two million ounces of gold, and for twenty ounces of
gold, if there were a total of twenty million ounces, the price of the
commodity and the value of money rising or falling in inverse ratio to
the quantity of gold in existence.[124] But the world of commodities
consists of an endless variety of use-values, whose relative values are
by no means determined by their relative quantities. How, then, does
Hume conceive this exchange of the volume of commodities for the volume
of gold? He contents himself with the meaningless, hollow idea that
every commodity is exchanged as an aliquot part of the entire volume of
commodities for a corresponding aliquot part of the volume of gold. The
process of the movement of commodities due to the antagonism between
exchange value and use-value which commodities bear within themselves,
and which manifests itself in the circulation of money, becoming
crystallized in different forms of the latter, is thus done away with,
giving place to the imaginary mechanical equalization process between
the quantity of precious metals to be found in a country and the volume
of commodities existing there at the same time.

SIR JAMES STEUART opens his inquiry into the nature of coin and
money with an elaborate criticism of Hume and Montesquieu.[125] He
is really the first to ask this question: is the quantity of current
money determined by the prices of commodities, or are the prices of
commodities determined by the quantity of current money? Although his
analysis is obscured by his fantastic conception of the measure of
value, his vacillating view of exchange value and by reminiscences
of the mercantile system, he discovers the essential forms of money
and the general laws of the circulation of money, because he makes
no attempt at a mechanical separation of commodities from money, but
proceeds to develop its different functions from the different aspects
of the exchange of commodities. Money is used, he says, for two
principal purposes: for the payment of debts and for the purchase of
what one needs; the two together form “ready money demands.” The state
of trade and industry, the mode of living, the customary expenditures
of the people, taken all together regulate and determine the volume
of “ready money demands,” i. e. the number of “alienations.” In order
to effect this multitude of payments, a certain proportion of money
is required. This proportion may increase or decrease according to
circumstances, even while the number of alienations remains the same.
At any rate, the circulation of a country can absorb only a definite
quantity of money.[126] “It is the complicated operations of demand
and competition which determines the standard price of everything”;
the latter “does not in the least depend on the quantity of gold and
silver in the country.”[127] What then will become of the gold and
silver that is not required as coin? They are hoarded or used in the
manufacture of articles of luxury. If the quantity of gold and silver
fall below the level required for circulation, symbolic money or other
substitutes take its place. If a favorable rate of exchange brings
about a surplus of money in the country and cuts off at the same time
the demand for its shipment abroad, it will accumulate in strong-boxes,
where the “riches will remain without producing more effect than if
they had remained in the mine.”

The second law discovered by Steuart is that of the reflux of credit
circulation to its starting point. Finally, he works out the effects
which the disparity of the rates of interest in different countries
produces upon the international export and import of precious
metals. The last two points we mention here only for the sake of
completeness, since they have but a remote bearing on the subject of
our discussion.[128] Symbolic money or credit money―Steuart does not
as yet distinguish between the two forms of money―may take the place
of precious metals as a means of purchase or means of payment in the
sphere of home circulation, but never in the world market. Paper notes
are therefore “money of the society,” while gold and silver are “money
of the world.”[129]

It is characteristic of nations with an “historical” development, in
the sense in which the term is used by the historical school of law,
to keep forgetting their own history. Although the controversy as to
the relation of prices of commodities to the volume of the circulating
medium has been continually agitating Parliament for the last half a
century, and has precipitated in England thousands of pamphlets, large
and small, Steuart has remained even more of a “dead dog” than Spinoza
seemed to be to Moses Mendelson in Lessing’s time. Even the latest
writer on the history of “currency,” Maclaren, makes Adam Smith the
original author of Steuart’s theory, and Ricardo of Hume’s theory.[130]
While Ricardo elaborated Hume’s theory, Adam Smith registered the
results of Steuart’s investigations as dead facts. Adam Smith applied
the Scotch saying that “mony mickles mak a muckle” even to his
spiritual wealth, and therefore concealed with petty care the sources
to which he owed the little out of which he tried to make so much.
More than once he prefers to break off the point of the discussion,
whenever he feels that an attempt on his part clearly to formulate the
question would compel him to settle his accounts with his predecessors.
So in the case of the money theory. He tacitly adopts Steuart’s theory
when he says that the gold and silver existing in a country is partly
utilized as coin; partly accumulated in the form of reserve funds for
merchants in countries without banks, or of bank reserves in countries
with a credit currency; partly serves as a hoard for the settling of
international payments; partly is turned into articles of luxury. He
passes over without remark the question as to the quantity of coin in
circulation, treating money quite wrongly as a mere commodity.[131]
His vulgarizer, the dull J. B. Say, whom the French have proclaimed
_prince de la science_―like Johann Christoph Gottsched, who proclaimed
his Schönaich a Homer and himself a Pietro Aretino to the _terror
principum and lux mundi_―has with great pomp raised this not altogether
innocent oversight of Adam Smith to a dogma.[132] It must be said,
however, that his hostile attitude to the illusions of the mercantile
system prevented Adam Smith from taking an objective view of the
phenomena of metallic circulation, while his views on credit money are
original and deep. As in the eighteenth century petrification theories
there is always felt the presence of an undercurrent which springs from
either a critical or apologetic attitude toward the biblical tradition
of the flood, so there is concealed behind all the money theories of
the eighteenth century a secret struggle with the monetary system, the
ghost which had stood guard over the cradle of bourgeois economy and
continued to throw its shadow over legislation.

In the nineteenth century, inquiries into the nature of money were not
prompted directly by phenomena of metallic circulation, but rather by
those of bank-note circulation. The former was touched upon only in
order to discover the laws governing the latter. The suspension of
specie payments by the Bank of England in 1797, the rise of prices of
many commodities which followed it, the fall of the mint price of gold
below its market price, the depreciation of bank-notes, especially
since 1809, furnished the direct practical occasion for a party
struggle in parliament and a theoretical tournament outside of it,
both conducted with like passion. The historical background for the
controversy was furnished by the history of paper money during the
eighteenth century: the fiasco of Law’s bank; the depreciation of the
provincial bank-notes of the English Colonies in North America from the
beginning to the middle of the eighteenth century which went hand in
hand with the increase in the number of tokens of value; further, the
Continental bills issued as legal tender by the American government
during the War of Independence; and finally, the experiment with the
French _assignats_ carried out on a still larger scale. Most of the
English writers of that period confound the circulation of bank-notes,
which is governed by quite different laws, with the circulation of
tokens of value or government legal tender paper money; and while they
claim to explain the phenomena of this legal tender circulation by the
laws of metallic circulation, they proceed, as a matter of fact, just
the opposite way, viz., deducting laws for the latter from phenomena
observed in connection with the former. We omit all the numerous
writers of the period of 1800-1809 and turn directly to RICARDO, both
because he embodies the views of his predecessors, which he formulates
with greater precision, and because the shape he gave to the theory of
money governs English bank legislation until this moment. Ricardo, like
his predecessors, confounds the circulation of bank-notes, or credit
money, with the circulation of mere tokens of value. The fact which
impresses him most is the depreciation of paper currency accompanied by
the rise of prices of commodities. What the American mines had been to
Hume, the paper-bill presses in Threadneedle street were to Ricardo,
and he himself expressly identifies the two factors at some place in
his works. His first writings, which dealt exclusively with the money
question belong to the time of the most violent controversy between
the Bank of England, which had on its side the ministers and the war
party, and its opponents about whom were centered the parliamentary
opposition, the Whigs and the Peace party. They appeared as immediate
forerunners of the famous Report of the Bullion Committee of 1810, in
which Ricardo’s views were adopted.[133] The singular circumstance,
that Ricardo and his adherents, who held money to be merely a token
of value, are called bullionists, is due not only to the name of that
committee, but also to the nature of their theory. In his work on
political economy, Ricardo repeated and developed further the same
views, but nowhere has he investigated the nature of money as such, as
he had done in the case of exchange value, profit, rent, etc.

To begin with, Ricardo determines the value of gold and silver, like
that of all other commodities, by the quantity of labor-time embodied
in them.[134] By means of them, as commodities of a given value, the
values of all other commodities are measured.[135] The volume of the
circulating medium in a country is determined by the value of the
unit of measure of money on the one hand, and by the sum total of
the exchange values of commodities, on the other. This quantity is
modified by economy in the method of payment.[136] Since the quantity
of money, of a given value, which can be absorbed by circulation,
is thus determined and since the value of money within the sphere of
circulation manifests itself only in its quantity, it follows that
mere tokens of value, if issued in proportions determined by the value
of money, may replace it in circulation, and in fact, “a currency is
in its most perfect state when it consists wholly of paper money, but
of paper money of an equal value with the gold which it professes
to represent.”[137] So far Ricardo determines the volume of the
circulating medium by the prices of commodities, assuming the value of
money to be given; money as a token of value means with him a token of
a definite quantity of gold and not a mere worthless representative of
commodities as was the case with Hume.

When Ricardo suddenly gets off the straight path of his presentation
and takes the very opposite view, he does so to turn his attention
to the international circulation of precious metals and thus brings
confusion into the problem by introducing considerations that are
foreign to the subject. Let us follow his own course of reasoning, and,
in order to remove everything that is artificial and incidental, let
us assume that the gold and silver mines are located in the interior
of the countries in which the precious metals circulate as money.
The only inference which follows from Ricardo’s reasoning as so far
developed, is that, the value of gold being given, the quantity of
money in circulation will be determined by the prices of commodities.
Thus, at a given moment, the quantity of gold in circulation in a
country is simply determined by the exchange value of the commodities
in circulation. Let us suppose now that the sum total of these exchange
values has declined either because there are less commodities produced
at the old exchange values, or because, in consequence of an increased
productivity of labor, the same quantity of commodities has a smaller
value. Or, we may assume on the contrary that the sum total of exchange
values has increased, either because the quantity of commodities
has increased while the cost of their production has remained the
same, or because the value of the same or of a smaller quantity of
commodities has risen in consequence of a diminished productivity of
labor. What becomes in either case of the _given_ quantity of metal
in circulation? If gold is money merely because it is current as a
medium of circulation; if it is compelled to remain in circulation
like government legal tender paper money (and that is what Ricardo has
in mind), then the quantity of money in circulation will rise above
the normal level, as determined by the exchange value of the metal,
in the former case, and fall below that level in the latter. Although
possessing a value of its own, gold will become in the former case
a token of a metal of lower exchange value than its own, and in the
latter, a token of a metal of higher value. In the former case it will
remain as a token of value less than its own, in the latter greater
than its own (again an abstract deduction from legal tender paper
money). In the former case it is the same as though commodities were
estimated in a metal of lower value than gold, in the latter, as though
they were estimated in a metal of higher value. In the former case,
prices of commodities would rise therefore, in the latter they would
fall. In either case the movement of prices, their rise or fall, would
appear as the effect of a relative expansion or contraction of the
volume of gold in circulation above or below the level corresponding
to its own value, i. e. above or below the normal quantity which is
determined by the proportion between its own value and that of the
commodities in circulation.

The same process would take place if the sum total of the prices of
the commodities in circulation remained unchanged, while the volume
of gold in circulation came to be below or above the right level: the
former in case the gold coin worn out in the course of circulation
were not replaced by the production of a corresponding quantity of
gold in the mines; the latter, if the output of the mines exceeded the
requirements of circulation. In either case it is assumed that the cost
of production of gold or its value remain the same.

To sum up: the money in circulation is at its normal level, when its
volume is determined by its own bullion value, the exchange value of
commodities being given. It rises above that level, bringing about a
fall in the value of gold below its own bullion value and a rise of
prices of commodities, whenever the sum total of the exchange values of
commodities declines, or the output of gold from the mines increases.
It sinks below its right level, leading to a rise of gold above its
own bullion value and to a fall of prices of commodities, whenever the
sum total of the exchange values of the commodities or the gold output
of the mines is not sufficient to replace the quantity of outworn
gold. In either case the gold in circulation becomes a token of value
greater or smaller than that it really possesses. It may become an
appreciated or depreciated token of itself. As soon as all commodities
would come to be estimated in gold of this new value and the general
price level would accordingly rise or fall, the quantity of current
gold would again answer the requirements of circulation (a consequence
which Ricardo emphasizes with great pleasure), but would be at variance
with the cost of production of the precious metals and, therefore,
with their relation as commodities to all other commodities. According
to the general Ricardian theory of exchange value, the rise of gold
above its exchange value, i. e., above the value as determined by the
labor-time contained in it, would cause an increase in the production
of gold until the increased output of it would reduce its value to
the proper magnitude. And in the same manner, a fall of gold below
its value would cause a decline in its production until its value
rose again to its proper magnitude. By these opposite movements the
discrepancy between the bullion value of gold and its value as a medium
of circulation would disappear, the normal level of the volume of gold
in circulation would be restored, and the price level would again
correspond to the measure of value. These fluctuations in the value of
gold in circulation would to the same extent affect gold in the form
of bullion, because by assumption, all gold that is not utilized as an
article of luxury, is supposed to be in circulation. Since gold itself
may become, both as coin and bullion, a token of value of greater
or smaller magnitude than its bullion value, it is self understood
that convertible bank-notes in circulation have to share the same
fate. Although bank-notes are convertible, i. e. their real value and
nominal value agree, “the aggregate currency consisting of metal and of
convertible notes” may appreciate or depreciate according as to whether
it rises or falls, for reasons already stated, above or below the level
determined by the exchange value of the commodities in circulation
and the bullion value of gold. Inconvertible paper money, has, from
this point of view, only that advantage as against convertible paper
money, that it may depreciate in a twofold manner. It may fall below
the value of the metal which it is supposed to represent, because it
has been issued in too great quantity, or it may depreciate because
the metal it represents has itself fallen in value. This depreciation,
not of paper as compared with gold, but of gold and paper together,
or of the aggregate currency of a country, is one of the principal
discoveries of Ricardo, which Lord Overstone and Co. pressed into their
service and made a fundamental principle of Sir Robert Peele’s Bank
legislation of 1844 and 1845.

What should have been proven was that the price of commodities or the
value of gold depends on the quantity of gold in circulation. The
proof consists in the assumption of what is to be proven, viz. that
any quantity of the precious metal employed as money must become a
medium of circulation or coin, and thereby a token of value for the
commodities in circulation, no matter in what proportion to its own
intrinsic value and no matter what the total value of those commodities
may be. To put it differently, the proof consists in overlooking all
the other functions which money performs besides its function of a
medium of circulation. When hard pressed, as in his controversy with
Bosanquet, Ricardo, completely under the influence of the phenomenon of
depreciated tokens of value caused by their quality, takes recourse to
dogmatic assurances.[138]

If Ricardo had built up this theory by abstract reasoning, as we
have done it here, without introducing concrete facts and incidental
matters which only distract his attention from the main question, its
hollowness would be striking. But he takes up the entire subject in its
_international_ aspect. It will be easy to prove, however, that the
apparent magnitude of scale does not make his fundamental ideas less

His first proposition was as follows: the volume of metallic currency
is normal when it is determined by the total value of the commodities
in circulation estimated in its bullion value. Expressed so as to
apply to international conditions, it reads thus: in a normal state of
circulation every country possesses a quantity of money “according to
the state of its commerce and wealth.” Money circulates at a value
corresponding to its real value or to its cost of production, i. e.
it has the same value _in all countries_.[139] That being the case,
“there could be no temptation offered to either for their importation
or exportation.”[140] There would thus be established a balance of
currencies between the different countries. The normal level of a
national currency is now expressed in terms of an international
balance of currencies, which practically amounts to the statement that
nationality does not change anything in a universal economic law. We
have reached again the same fatal point as before. How is the normal
level disturbed? Or, speaking in terms of the new terminology, how is
the international balance of currencies disturbed? Or, how does money
cease to have the same value in all countries? Or, finally, how does
it cease to pass at its own value in every country? We have seen that
the normal level was disturbed by an increase or decrease of the volume
of money in circulation while the total value of commodities remained
the same; or, because the quantity of money in circulation remained
the same while the exchange values of commodities rose or fell. In the
same manner, the international level, determined by the value of the
metal itself, is disturbed by an increase in the quantity of gold in a
country brought about by the discovery of new gold mines,[141] or by
an increase or decrease of the total exchange-value of the circulating
commodities in any particular country. Just as in the former case the
output of the precious metals decreased or increased according as
to whether it was necessary to contract or expand the currency and
thereby to lower or raise prices, so are the same effects produced
now by export and import from one country to another. In the country
in which prices would rise or the value of gold would fall below the
bullion value in consequence of a redundant currency, gold would be
depreciated, and the prices of commodities would rise as compared with
other countries. Gold would, therefore, be exported, while commodities
would be imported, and vice versa. Just as in the former case the
output of gold, so now the import or export of gold and, with it, the
rise or fall of prices of commodities would continue until, as we would
have said before, the right value relation would be restored between
the metal and commodities, or as we shall say now, the international
balance of currencies would be restored. Just as in the former case
the production of gold increased or decreased because gold stood
above or below its value, so now the international migration of gold
would take place for the same reason. Just as in the former case,
every change in the production of the circulating metal affected its
quantity and, thereby, prices, so would the same effect be produced
now by international import and export. As soon as the relative values
of gold and commodities or the normal quantity of currency would be
restored, no further production would take place in the former case,
and no further export or import in the latter, except in so far as
would be necessary to replace outworn coin and to meet the demand of
manufacturers of articles of luxury. It follows “that the temptation to
export money in exchange for goods, or what is termed an unfavorable
balance of trade, never arises but from a redundant currency.”[142]
“The exportation of the coin is caused by its cheapness, and is not
the effect, but the cause of an unfavourable balance.”[143] Since the
increase or decrease in the production of gold in the former case and
the importation or exportation of gold in the latter, take place only
whenever its volume rises above or sinks below its normal level, i.
e. whenever gold appreciates or depreciates in comparison with its
bullion value, or whenever prices of commodities are too high or too
low; it follows that every such movement works as a corrective,[144]
since, through the resultant expansion or contraction of the currency,
prices are restored to their true level: in the former case this level
represents the balance between the respective values of gold and of
commodities; in the latter, the international balance of currencies. To
put it in other words: money circulates in different countries only in
so far as it circulates as coin in every country. Money is but coin and
all the gold existing in a country must therefore enter circulation,
i. e. it can rise above or fall below its value as a token of value.
Thus we safely land again, by the round-about way of this international
complication, at the simple dogma which constituted our starting point.

With what violence to actual facts Ricardo has to explain them in
the sense of his abstract theory, a few illustrations will suffice
to show. He maintains, e. g. that in years of poor crops, which
happened frequently in England during 1800-1820, gold is exported not
because corn is needed and gold as money is at all times an effectual
means of purchase in the world market, but because gold is in such
cases depreciated in its value as compared with other commodities
and, therefore, the currency of the country in which there has been
a failure of crops is depreciated with respect to other national
currencies. “In consequence of a bad harvest, a country having been
deprived of a part of its commodities ... the currency which was
before at its just level ... become(s) redundant,” and prices of all
commodities rise in consequence.[145] Contrary to this paradoxical
interpretation it has been proven statistically that from 1793 to
the present time, whenever England had a bad harvest the available
supply of currency not only did not become superabundant, but became
inadequate and that, therefore, more money circulated and had to
circulate on such occasions.[146]

In the same manner, Ricardo maintained, with reference to Napoleon’s
Continental System and the English Blockade Decree, that the English
exported gold instead of commodities to the Continent, because their
money was depreciated with respect to the money on the Continent, that
their commodities were, therefore, more high priced, which made it
a more profitable commercial speculation to export gold than goods.
According to him England was a market in which commodities were dear
and money was cheap, while on the Continent commodities were cheap
and money was dear. The trouble, according to an English writer, was
“the ruinously low prices of our manufactures and of our colonial
productions under the operation ... of the ‘Continental System’ during
the last six years of the war.... The prices of sugar and coffee,
for instance, on the Continent, computed in gold, were four or five
times higher than their prices in England, computed in bank-notes. I
am speaking ... of the times in which the French chemists discovered
sugar in beet-root, and a substitute for coffee in chicory; and when
the English grazier tried experiments upon fattening oxen with treacle
and molasses―of the times when we took possession of the island of
Heligoland, in order to form there a depot of goods to facilitate, if
possible, the smuggling of them into the north of Europe; and when
the lighter descriptions of British manufactures found their way into
Germany through Turkey.... Almost all the merchandise of the world
accumulated in our warehouses, where they became impounded, except when
some small quantity was released by a French License, for which the
merchants at Hamburgh and Amsterdam had, perhaps, given Napoleon such
a sum as forty or fifty thousand pounds. They must have been strange
merchants ... to have paid so large a sum for liberty to carry a cargo
of goods from a dear market to a cheap one. What was the ostensible
alternative the merchant had?... Either to buy coffee at 6d. a pound
in bank-notes, and send it to a place where it would instantly sell at
3s. or 4s. a pound in gold, or to buy gold with bank-notes at £5 an
ounce, and send it to a place where it would be received at £3 17s.
10-1/2d. an ounce.... It is too absurd, of course, to say ... that the
gold was remitted instead of the coffee, as a preferable mercantile
operation.... There was not a country in the world in which so large a
quantity of desirable goods could be obtained, in return for an ounce
of gold, as in England.... Bonaparte ... was constantly examining the
English Price Current.... So long as he saw that gold was dear and
coffee was cheap in England, he was satisfied that his ‘Continental
System’ worked well.”[147]

At the very time when Ricardo first formulated his theory of money,
and the Bullion Committee embodied it in its parliamentary report,
namely in 1810, a ruinous fall of prices of all English commodities
as compared with those of 1808 and 1809 took place, while gold rose
in value accordingly. Only agricultural products formed an exception,
because their importation from abroad met with obstacles and their
domestic supply was decimated by unfavorable crop conditions.[148]
Ricardo so utterly failed to comprehend the rôle of precious metals as
an international means of payment, that in his testimony before the
Committee of the House of Lords in 1819 he could say “that drains for
exportation would cease altogether so soon as cash payments should be
resumed, and the currency be restored to its metallic level.” He died
just in time, on the very eve of the crisis of 1825, which belied his

The time when Ricardo wrote was generally little adapted for the
observation of the function of precious metals as world money. Before
the introduction of the Continental System, the balance of trade
had almost always been in favor of England, and while that system
lasted, the commercial intercourse with the European continent was
too insignificant to affect the English rate of exchange. The money
transmissions were mostly of a political nature and Ricardo seems to
have utterly failed to grasp the part which subsidy payments played at
that time in English gold exports.[149]

Among the contemporaries of Ricardo who formed the school which
adopted his economic principles, JAMES MILL was the most important
one. He attempted to work out Ricardo’s theory of money on the basis
of simple metallic circulation, without the irrelevant international
complications which served Ricardo to hide the inadequacy of his
theory, and without any controversial regard for the operations of the
Bank of England. His main arguments are as follows:

“By value of money, is here to be understood the proportion in which
it exchanges for other commodities, or the quantity of it which
exchanges for a certain quantity of other things.... It is the total
quantity of the money in any country, which determines what portion of
that quantity shall exchange for a certain portion of the goods or
commodities of that country. If we suppose that all the goods of the
country are on one side, all the money on the other, and that they are
exchanged at once against one another, it is evident ... that the value
of money would depend wholly upon the quantity of it. It will appear
that the case is precisely the same in the actual state of the facts.
The whole of the goods of a country are not exchanged at once against
the whole of the money; the goods are exchanged in portions, often
in very small portions, and at different times, during the course of
the whole year. The same piece of money which is paid in one exchange
to-day, may be paid in another exchange tomorrow. Some of the pieces
will be employed in a great many exchanges, some in very few, and
some, which happen to be hoarded, in none at all. There will, amid all
these varieties, be a certain average number of exchanges, the same
which, if all the pieces had performed an equal number, would have been
performed by each; that average we may suppose to be any number we
please; say, for example, ten. If each of the pieces of the money in
the country perform ten purchases, that is exactly the same thing as if
all the pieces were multiplied by ten, and performed only one purchase
each. The value of all the goods in the country is equal to ten times
the value of all the money.... If the quantity of money instead of
performing ten exchanges in the year, were ten times as great, and
performed only one exchange in the year, it is evident that whatever
addition were made to the whole quantity, would produce a proportional
diminution of value, in each of the minor quantities taken separately.
As the quantity of goods, against which the money is all exchanged at
once, is supposed to be the same, the value of all the money is no
more, after the quantity is augmented, than before it was augmented.
If it is supposed to be augmented one-tenth, the value of every part,
that of an ounce for example, must be diminished one-tenth.... In
whatever degree, therefore, the quantity of money is increased or
diminished, other things remaining the same, in that same proportion,
the value of the whole, and of every part, is reciprocally diminished
or increased. This, it is evident, is a proposition universally true.
Whenever the value of money has either risen or fallen (the quantity
of goods against which it is exchanged and the rapidity of circulation
remaining the same), the change must be owing to a corresponding
diminution or increase of the quantity; and can be owing to nothing
else. If the quantity of goods diminish, while the quantity of money
remains the same, it is the same thing as if the quantity of money
had been increased;” and vice versa.... “Similar changes are produced
by any alteration in the rapidity of circulation.... An increase in
the number of these purchases has the same effect as an increase in
the quantity of money; a diminution the reverse.... If there is any
portion of the annual produce which is not exchanged at all, as what
is consumed by the producer; or which is not exchanged for money;
that is not taken into the account, because what is not exchanged for
money is in the same state with respect to the money, as if it did not
exist.... Whenever the coining of money ... is free, its quantity is
regulated by the value of the metal.... Gold and silver are in reality
commodities.... It is cost of production ... which determines the value
of these, as of other ordinary productions.”[150]

The whole wisdom of Mill resolves itself into a series of arbitrary and
absurd assumptions. He wishes to prove that the price of commodities or
the value of money is determined by “the total quantity of the money
in any country.” _Assuming_ that the quantity and the exchange value
of the commodities in circulation remain unchanged and that the same
be true of the rapidity of circulation and of the value of precious
metals as determined by the cost of production, and _assuming_ at
the same time that the quantity of the metallic currency increases
or decreases in proportion to the quantity of money _existing_ in a
country, it becomes really “evident” that what was to have been proven
has been assumed. Mill falls, moreover, into the same error as Hume
by assuming that use-values and not commodities with a given exchange
value are in circulation, and that vitiates his statement, even if we
grant all of his “assumptions.” The rapidity of circulation may remain
the same; this may also be true of the value of the precious metals
and of the _quantity_ of commodities in circulation; and yet a change
in the exchange value of the latter may require now a larger and now
a smaller quantity of money for their circulation. Mill sees that a
part of the money in a country is in circulation, while another is
idle. With the aid of a most absurd average calculation he _assumes_
that, although it really appears to be different, yet all the gold in
a country does circulate. Assuming that ten million silver thalers
circulate in a country twice a year, there could be twenty million such
coins in circulation, if each circulated but once. And if the entire
quantity of silver to be found in a country in any form amounts to
one hundred million thalers, it may be supposed that the entire one
hundred million can enter circulation, if each piece of money should
circulate once in five years. One could as well assume that all the
money of the world circulate in Hempstead, but that each piece of
money instead of being employed three times a year, is employed once
in 3,000,000 years. The one assumption is as relevant as the other for
the purpose of determining the relation between the sum total of prices
of commodities and the volume of currency. Mill feels that it is a
matter of decisive importance to him to bring the commodities in direct
contact not with the money in circulation, but with the entire supply
of money existing in a country. He admits that “the whole of the goods
of a country are not exchanged at once against the whole of the money,”
but that the goods are exchanged in different portions and at different
times of the year for different portions of money. To do away with this
difficulty he _assumes_ that it does not exist. Moreover, this entire
idea of direct contact of commodities and money and direct exchange is
a mere abstraction from the movement of simple purchase and sale or
the function of money as a means of purchase. Already in the movement
of money as a means of payment, commodity and money cease to appear

The commercial crises of the nineteenth century, namely, the great
crises of 1825 and 1836, did not result in any new developments in
the Ricardian theory of money, but they did furnish new applications
for it. They were no longer isolated economic phenomena, such as the
depreciation of the precious metals in the sixteenth and seventeenth
centuries which interested Hume, or the depreciation of paper money
in the eighteenth and early nineteenth centuries which confronted
Ricardo; they were the great storms of the world market in which the
conflict of all the elements of the capitalist process of production
discharge themselves, and whose origin and remedy were sought in the
most superficial and abstract sphere of this process, the sphere of
money circulation. The theoretical assumption from which the school
of economic weather prophets proceeds, comes down in the end to the
illusion that Ricardo discovered the laws governing the circulation of
purely metallic currency. The only thing that remained for them to do
was to subject to the same laws the circulation of credit and bank-note

The most general and most palpable phenomenon in commercial crises is
the sudden, general decline of prices following a prolonged general
rise. The general decline of prices of commodities may be expressed as
a rise in the relative value of money with respect to all commodities,
and the general rise of prices as a decline of the relative value
of money. In either expression the phenomenon is described but not
explained. Whether I put the question thus: explain the general
periodic rise of prices followed by a general decline of the same, or
formulate the same problem by saying: explain the periodic decline and
rise of the relative value of money with respect to commodities; the
different wording leaves the problem as little changed as would its
translation from German into English. Ricardo’s theory of money was
exceedingly convenient, because it lends a tautology the semblance of
a statement of causal connection. Whence comes the periodic general
fall of prices? From the periodic rise of the relative value of
money. Whence the general periodic rise of prices? From the periodic
decline of the relative value of money. It might have been stated
with equal truth that the periodic rise and fall of prices is due
to their periodic rise and fall. The problem itself is stated under
the assumption that the intrinsic value of money, i. e., its value
as determined by the cost of production of precious metals remains
_unchanged_. If it is more than a tautology then it is based on a
misconception of the most elementary principles. If the exchange value
of A measured in terms of B, declines, we know that this may be caused
by a decline of the value of A as much as by a rise of the value of
B; the same being true of the case of a rise of the exchange value of
A measured in terms of B. The tautology once admitted as a statement
of cause, the rest follows easily. A rise of prices of commodities is
caused by a decline of the value of money and a decline of the value
of money is caused, as we know from Ricardo, by a redundant currency,
i. e., by a rise of the volume of currency over the level determined
by its own intrinsic value and the intrinsic value of the commodities.
In the same manner, the general decline of prices of commodities is
explained by the rise of the value of money above its intrinsic value
in consequence of an inadequate currency. Thus, prices rise and fall
periodically, because there is periodically too much or too little
money in circulation. Should a rise of prices happen to coincide
with a contracted currency, and a fall of prices with an expanded
one, it may be asserted in spite of those facts that in consequence
of a contraction or expansion of the volume of commodities in the
market, which can not be proven statistically, the quantity of money
in circulation has, although not absolutely, yet relatively increased
or declined. We have seen that according to Ricardo these universal
fluctuations must take place even with a purely metallic currency, but
that they balance each other through their alternations; thus, e. g.,
an inadequate currency causes a fall of prices, the fall of prices
leads to the export of commodities abroad, this export causes again an
import of gold from abroad, which, in its turn, brings about a rise
of prices; the opposite movement taking place in case of a redundant
currency, when commodities are imported and money is exported. But,
since in spite of these universal fluctuations of prices which are in
perfect accord with Ricardo’s theory of metallic currency, their acute
and violent form, their crisis-form, belongs to the period of advanced
credit, it is perfectly clear that the issue of bank-notes is not
exactly regulated by the laws of metallic currency. Metallic currency
has its remedy in the import and export of precious metals which
immediately enter circulation and thus, by their influx or efflux,
cause the prices of commodities to fall or rise. The same effect on
prices must now be exerted by banks by the artificial imitation of the
laws of metallic currency. If gold is coming in from abroad it proves
that the currency is inadequate, that the value of money is too high
and the prices of commodities too low, and, consequently, that bank
notes must be put in circulation in proportion to the newly imported
gold. On the contrary, notes have to be withdrawn from circulation in
proportion to the export of gold from the country. That is to say,
the issue of bank notes must be regulated by the import and export
of the precious metals or by the rate of exchange. Ricardo’s false
assumption that gold is only coin, and that therefore all imported gold
swells the currency, causing prices to rise, while all exported gold
reduces the currency leading to a fall of prices, this theoretical
assumption is turned into a practical experiment of putting in every
case an amount of currency in circulation equal to the amount of gold
in existence. Lord Overstone (the banker Jones Loyd), Colonel Torrens,
Norman, Clay, Arbuthnot and a host of other writers, known in England
as the adherents of the “currency principle,” not only preached this
doctrine, but with the aid of Sir Robert Peel succeeded in 1844 and
1845 in making it the basis of the present English and Scotch bank
legislation. Its ignominous failure, theoretical as well as practical,
following upon experiments on the largest national scale, can be
treated only after we take up the theory of credit.[151] So much can be
seen, however, that the theory of Ricardo which isolates money in its
fluent form of currency, ends by ascribing to the ebbs and tides in the
supply of precious metals an influence on bourgeois economy such as the
believers in the superstitions of the monetary system had never dreamt
of. Thus did Ricardo, who proclaimed paper currency as the most perfect
form of money, become the prophet of the bullionists.

After Hume’s theory or the abstract opposition to the monetary system
was thus developed to its ultimate conclusions, Steuart’s concrete
conception of money was finally restored to its rights by THOMAS
TOOKE.[152] Tooke arrives at his principles not from any theory, but
by a conscientious analysis of the history of prices of commodities
from 1793 to 1856. In the first edition of his History of Prices which
appeared in 1823, Tooke is still under the complete influence of the
Ricardian theory, and vainly tries to reconcile it with actual facts.
His pamphlet “On the Currency,” which appeared after the crisis of
1825 might even be considered as the first consistent presentation
of the views which were later given the force of law by Overstone.
Continued studies in the history of prices forced him, however, to the
conclusion that the direct connection between prices and the volume of
currency, as it is pictured by the theory, is a mere illusion; that
the expansion and contraction of currency which takes place while the
value of the precious metals remains unchanged, is always the effect
but never the cause of price fluctuations; that the circulation of
money is in any event but a secondary movement; and that money assumes
quite different forms in the actual process of production in addition
to that of a circulating medium. His detailed investigations belong
to a sphere outside of that of simple metallic circulation and can be
discussed here as little as the investigations of WILSON and FULLARTON
which belong to the same class.[153] None of these writers takes a
one-sided view of money, but treat it in its various aspects; the
treatment, however, is mechanical, without an attempt to establish an
organic connection either between these various aspects themselves,
or between them and the combined system of economic categories. They
fall, therefore, into the error of confusing _money_ as distinguished
from _medium of circulation_ with _capital_ or even with commodity,
although they are forced elsewhere to differentiate it from both.[154]
When gold, e. g., is shipped abroad, it practically means that capital
is sent abroad, but the same thing takes place when iron, cotton,
grain, or any other commodity is exported. Both are capital and are
distinguished not as capital, but as money and commodity. The function
of gold as the international medium of exchange springs, therefore,
not from its being capital, but from its specific character of money.
Similarly, when gold, or bank notes in its place, circulate in the home
trade as means of payment, they constitute capital at the same time.
But they could not be replaced by capital in the form of commodities,
as has been demonstrated very palpably by crises, for instance. That
is to say, it is the fact that gold is distinguished from commodities
in its capacity of money and not in that of capital, that makes it the
means of payment. Even when capital is exported directly as capital,
as, e. g., when it is done for the purpose of lending abroad a certain
amount on interest, it depends on circumstances, whether it will be
exported in the form of commodities or in that of gold, and if in the
latter form, it is due to the specific destination of the precious
metals as distinguished from commodities to serve as money. In general,
these writers do not consider money in its abstract form, as it is
developed within the sphere of simple circulation of commodities,
and as it spontaneously grows out of the relation of the circulating
commodities. As a result, they constantly vacillate between the
abstract forms of money which distinguish it from commodity and those
forms of it beneath which are concealed concrete relations, such as
capital, revenue, etc.[155]


to the

Critique of Political Economy.[156]


The subject of our discussion is first of all _material_ production
by individuals as determined by society, naturally constitutes the
starting point. The individual and isolated hunter or fisher who forms
the starting point with Smith and Ricardo, belongs to the insipid
illusions of the eighteenth century. They are Robinsonades which do
not by any means represent, as students of the history of civilization
imagine, a reaction against over-refinement and a return to a
misunderstood natural life. They are no more based on such a naturalism
than is Rosseau’s “contrat social,” which makes naturally independent
individuals come in contact and have mutual intercourse by contract.
They are the fiction and only the aesthetic fiction of the small and
great Robinsonades. They are, moreover, the anticipation of “bourgeois
society,” which had been in course of development since the sixteenth
century and made gigantic strides towards maturity in the eighteenth.
In this society of free competition the individual appears free from
the bonds of nature, etc., which in former epochs of history made him
a part of a definite, limited human conglomeration. To the prophets of
the eighteenth century, on whose shoulders Smith and Ricardo are still
standing, this eighteenth century individual, constituting the joint
product of the dissolution of the feudal form of society and of the new
forces of production which had developed since the sixteenth century,
appears as an ideal whose existence belongs to the past; not as a
result of history, but as its starting point.

Since that individual appeared to be in conformity with nature and
[corresponded] to their conception of human nature, [he was regarded]
not as a product of history, but of nature. This illusion has been
characteristic of every new epoch in the past. Steuart, who, as an
aristocrat, stood more firmly on historical ground, contrary to
the spirit of the eighteenth century, escaped this simplicity of
view. The further back we go into history, the more the individual
and, therefore, the producing individual seems to depend on and
constitute a part of a larger whole: at first it is, quite naturally,
the family and the clan, which is but an enlarged family; later on,
it is the community growing up in its different forms out of the
clash and the amalgamation of clans. It is but in the eighteenth
century, in “bourgeois society,” that the different forms of social
union confront the individual as a mere means to his private ends,
as an outward necessity. But the period in which this view of the
isolated individual becomes prevalent, is the very one in which the
interrelations of society (general from this point of view) have
reached the highest state of development. Man is in the most literal
sense of the word a _zoon politikon_, not only a social animal, but
an animal which can develop into an individual only in society.
Production by isolated individuals outside of society―something which
might happen as an exception to a civilized man who by accident
got into the wilderness and already dynamically possessed within
himself the forces of society―is as great an absurdity as the idea
of the development of language without individuals living together
and talking to one another. We need not dwell on this any longer.
It would not be necessary to touch upon this point at all, were not
the vagary which had its justification and sense with the people of
the eighteenth century transplanted in all earnest into the field of
political economy by Bastiat, Carey, Proudhon and others. Proudhon
and others naturally find it very pleasant, when they do not know the
historical origin of a certain economic phenomenon, to give it a quasi
historico-philosopohical explanation by going into mythology. Adam or
Prometheus hit upon the scheme cut and dried, whereupon it was adopted,
etc. Nothing is more tediously dry than the dreaming _locus communis_.

Whenever we speak, therefore, of production, we always have in mind
production at a certain stage of social development, or production
by social individuals. Hence, it might seem that in order to speak
of production at all, we must either trace the historical process of
development through its various phases, or declare at the outset that
we are dealing with a certain historical period, as, e. g., with modern
capitalistic production which, as a matter of fact, constitutes the
subject proper of this work. But all stages of production have certain
landmarks in common, common purposes. _Production in general_ is an
abstraction, but it is a rational abstraction, in so far as it singles
out and fixes the common features, thereby saving us repetition. Yet
these general or common features discovered by comparison constitute
something very complex, whose constituent elements have different
destinations. Some of these elements belong to all epochs, others are
common to a few. Some of them are common to the most modern as well
as to the most ancient epochs. No production is conceivable without
them; but while even the most completely developed languages have
laws and conditions in common with the least developed ones, what
is characteristic of their development are the points of departure
from the general and common. The conditions which generally govern
production must be differentiated in order that the essential points
of difference be not lost sight of in view of the general uniformity
which is due to the fact that the subject, mankind, and the object,
nature, remain the same. The failure to remember this one fact is the
source of all the wisdom of modern economists who are trying to prove
the eternal nature and harmony of existing social conditions. Thus they
say, e. g., that no production is possible without some instrument of
production, let that instrument be only the hand; that none is possible
without past accumulated labor, even if that labor consist of mere
skill which has been accumulated and concentrated in the hand of the
savage by repeated exercise. Capital is, among other things, also an
instrument of production, also past impersonal labor. Hence capital is
a universal, eternal natural phenomenon; which is true if we disregard
the specific properties which turn an “instrument of production” and
“stored up labor” into capital. The entire history of production
appears to a man like Carey, e. g., as a malicious perversion on the
part of governments.

If there is no production in general, there is also no general
production. Production is always some special branch of production or
an aggregate, as, e. g., agriculture, stock raising, manufactures,
etc. But political economy is not technology. The connection between
the general destinations of production at a given stage of social
development and the particular forms of production, is to be developed
elsewhere (later on).

Finally, production is not only of a special kind. It is always a
certain body politic, a social personality that is engaged on a larger
or smaller aggregate of branches of production. The connection between
the real process and its scientific presentation also falls outside
of the scope of this treatise. [We must thus distinguish between]
production in general, special branches of production and production as
a whole.

It is the fashion with economists to open their works with a general
introduction, which is entitled “production” (see, e. g., John Stuart
Mill) and deals with the general “requisites of production.”

This general introductory part treats or is supposed to treat:

1. Of the conditions without which production is impossible, i. e.,
of the most essential conditions of production. As a matter of fact,
however, it dwindles down, as we shall see, to a few very simple
definitions, which flatten out into shallow tautologies;

2. Of conditions which further production more or less, as, e. g., Adam
Smith’s [discussion of] a progressive and stagnant state of society.

In order to give scientific value to what serves with him as a mere
summary, it would be necessary to study the _degree of productivity_ by
periods in the development of individual nations; such a study falls
outside of the scope of the present subject, and in so far as it does
belong here is to be brought out in connection with the discussion
of competition, accumulation, etc. The commonly accepted view of the
matter gives a general answer to the effect that an industrial nation
is at the height of its production at the moment when it reaches its
historical climax in all respects. Or, that certain races, climates,
natural conditions, such as distance from the sea, fertility of
the soil, etc., are more favorable to production than others. That
again comes down to the tautology that the facility of creating
wealth depends on the extent to which its elements are present both
subjectively and objectively. As a matter of fact a nation is at its
industrial height so long as its main object is not gain, but the
process of gaining. In that respect the Yankees stand above the English.

But all that is not what the economists are really after in the general
introductory part. Their object is rather to represent production
in contradistinction to distribution―see Mill, e. g.―as subject to
eternal laws independent of history, and then to substitute bourgeois
relations, in an underhand way, as immutable natural laws of society
_in abstracto_. This is the more or less conscious aim of the entire
proceeding. On the contrary, when it comes to distribution, mankind
is supposed to have indulged in all sorts of arbitrary action. Quite
apart from the fact that they violently break the ties which bind
production and distribution together, so much must be clear from the
outset: that, no matter how greatly the systems of distribution may
vary at different stages of society, it should be possible here, as
in the case of production, to discover the common features and to
confound and eliminate all historical differences in formulating
_general human_ laws. E. g., the slave, the serf, the wage-worker―all
receive a quantity of food, which enables them to exist as slave,
serf, and wage-worker. The conqueror, the official, the landlord, the
monk, or the levite, who respectively live on tribute, taxes, rent,
alms, and the tithe,―all receive [a part] of the social product which
is determined by laws different from those which determine the part
received by the slave, etc. The two main points which all economists
place under this head, are: first, property; second, the protection
of the latter by the administration of justice, police, etc. The
objections to these two points can be stated very briefly.

1. All production is appropriation of nature by the individual within
and through a definite form of society. In that sense it is a tautology
to say that property (appropriation) is a condition of production. But
it becomes ridiculous, when from that one jumps at once to a definite
form of property, e. g. private property (which implies, besides, as
a prerequisite the existence of an opposite form, viz. absence of
property). History points rather to common property (e. g. among the
Hindoos, Slavs, ancient Celts, etc.) as the primitive form, which still
plays an important part at a much later period as communal property.
The question as to whether wealth grows more rapidly under this or that
form of property, is not even raised here as yet. But that there can
be no such a thing as production, nor, consequently, society, where
property does not exist in any form, is a tautology. Appropriation
which does not appropriate is a _contradictio in subjecto_.

2. Protection of property, etc. Reduced to their real meaning, these
commonplaces express more than what their preachers know, namely, that
every form of production creates its own legal relations, forms of
government, etc. The crudity and the shortcomings of the conception
lie in the tendency to see but an accidental reflective connection in
what constitutes an organic union. The bourgeois economists have a
vague notion that it is better to carry on production under the modern
police, than it was, e. g. under club-law. They forget that club law
is also law, and that the right of the stronger continues to exist in
other forms even under their “government of law.”

When the social conditions corresponding to a certain stage of
production are in a state of formation or disappearance, disturbances
of production naturally arise, although differing in extent and effect.

To sum up: all the stages of production have certain destinations in
common, which we generalize in thought; but the so-called general
conditions of all production are nothing but abstract conceptions which
do not go to make up any real stage in the history of production.


Before going into a further analysis of production, it is necessary
to look at the various divisions which economists put side by side
with it. The most shallow conception is as follows: By production, the
members of society appropriate (produce and shape) the products of
nature to human wants; distribution determines the proportion in which
the individual participates in this production; exchange brings him the
particular products into which he wishes to turn the quantity secured
by him through distribution; finally, through consumption the products
become objects of use and enjoyment, of individual appropriation.
Production yields goods adopted to our needs; distribution distributes
them according to social laws; exchange distributes further what has
already been distributed, according to individual wants; finally, in
consumption the product drops out of the social movement, becoming the
direct object of the individual want which it serves and satisfies in
use. Production thus appears as the starting point; consumption as the
final end; and distribution and exchange as the middle; the latter
has a double aspect, distribution being defined as a process carried
on by society, while exchange, as one proceeding from the individual.
In production the person is embodied in things, in [consumption[157]]
things are embodied in persons; in distribution, society assumes
the part of go-between of production and consumption in the form of
generally prevailing rules; in exchange this is accomplished by the
accidental make-up of the individual.

Distribution determines what proportion (quantity) of the products the
individual is to receive; exchange determines the products in which the
individual desires to receive his share allotted to him by distribution.

Production, distribution, exchange, and consumption thus form a
perfect connection, production standing for the general, distribution
and exchange for the special, and consumption for the individual, in
which all are joined together. To be sure this is a connection, but
it does not go very deep. Production is determined [according to the
economists] by universal natural laws, while distribution depends
on social chance: distribution can, therefore, have a more or less
stimulating effect on production: exchange lies between the two as a
formal (?) social movement, and the final act of consumption which is
considered not only as a final purpose, but also as a final aim, falls,
properly, outside of the scope of economics, except in so far as it
reacts on the starting point and causes the entire process to begin all
over again.

The opponents of the economists―whether economists themselves or
not―who reproach them with tearing apart, like barbarians, what is an
organic whole, either stand on common ground with them or are _below_
them. Nothing is more common than the charge that the economists
have been considering production as an end in itself, too much to
the exclusion of everything else. The same has been said with regard
to distribution. This accusation is itself based on the economic
conception that distribution exists side by side with production as
a self-contained, independent sphere. Or [they are accused] that the
various factors are not treated by them in their connection as a
whole. As though it were the text books that impress this separation
upon life and not life upon the text books; and the subject at issue
were a dialectic balancing of conceptions and not an analysis of real

_a. Production is at the same time also consumption._ Twofold
consumption, subjective and objective. The individual who develops his
faculties in production, is also expending them, consuming them in the
act of production, just as procreation is in its way a consumption
of vital powers. In the second place, production is consumption of
means of production which are used and used up and partly (as e. g. in
burning) reduced to their natural elements. The same is true of the
consumption of raw materials which do not remain in their natural form
and state, being greatly absorbed in the process. The act of production
is, therefore, in all its aspects an act of consumption as well. But
this is admitted by economists. Production as directly identical with
consumption, consumption as directly coincident with production,
they call productive consumption. This identity of production
and consumption finds its expression in Spinoza’s proposition,
_Determinatio est negatio_. But this definition of productive
consumption is resorted to just for the purpose of distinguishing
between consumption as identical with production and consumption
proper, which is defined as its destructive counterpart. Let us then
consider consumption proper.

Consumption is directly also production, just as in nature the
consumption of the elements and of chemical matter constitutes
production of plants. It is clear, that in nutrition, e. g., which
is but one form of consumption, man produces his own body; but it is
equally true of every kind of consumption, which goes to produce the
human being in one way or another. [It is] consumptive production.
But, say the economists, this production which is identical with
consumption, is a second production resulting from the destruction
of the product of the first. In the first, the producer transforms
himself into things; in the second, things are transformed into human
beings. Consequently, this consumptive production―although constituting
a direct unity of production and consumption―differs essentially from
production proper. The direct unity in which production coincides with
consumption and consumption with production, does not interfere with
their direct duality.

Production is thus at the same time consumption, and consumption is at
the same time production. Each is directly its own counterpart. But
at the same time an intermediary movement goes on between the two.
Production furthers consumption by creating material for the latter
which otherwise would lack its object. But consumption in its turn
furthers production, by providing for the products the individual
for whom they are products. The product receives its last finishing
touches in consumption. A railroad on which no one rides, which is,
consequently not used up, not consumed, is but a potential railroad,
and not a real one. Without production, no consumption; but, on the
other hand, without consumption, no production; since production would
then be without a purpose. Consumption produces production in two ways.

In the first place, in that the product first becomes a real product
in consumption; e. g., a garment becomes a real garment only through
the act of being worn; a dwelling which is not inhabited, is really no
dwelling; consequently, a product as distinguished from a mere natural
object, proves to be such, first _becomes_ a product in consumption.
Consumption gives the product the finishing touch by annihilating it,
since a product is the [result] of production not only as the material
embodiment of activity, but also as a mere object for the active

In the second place, consumption produces production by creating the
necessity for new production, i. e. by providing the ideal, inward,
impelling cause which constitutes the prerequisite of production.
Consumption furnishes the impulse for production as well as its object,
which plays in production the part of its guiding aim. It is clear
that while production furnishes the material object of consumption,
consumption provides the ideal object of production, as its image,
its want, its impulse and its purpose. It furnishes the object of
production in its subjective form. No wants, no production. But
consumption reproduces the want.

In its turn, production:

First, furnishes consumption[158] with its material, its object.
Consumption without an object is no consumption, hence production works
in this direction by producing consumption.

Second. But it is not only the object that production provides for
consumption. It gives consumption its definite outline, its character,
its finish. Just as consumption gives the product its finishing touch
as a product, production puts the finishing touch on consumption. For
the object is not simply an object in general, but a definite object,
which is consumed in a certain definite manner prescribed in its turn
by production. Hunger is hunger; but the hunger that is satisfied with
cooked meat eaten with fork and knife is a different kind of hunger
from the one that devours raw meat with the aid of hands, nails, and
teeth. Not only the object of consumption, but also the manner of
consumption is produced by production; that is to say, consumption is
created by production not only objectively, but also subjectively.
Production thus creates the consumers.

Third. Production not only supplies the want with material, but
supplies the material with a want. When consumption emerges from its
first stage of natural crudeness and directness―and its continuation
in that state would in itself be the result of a production still
remaining in a state of natural crudeness―it is itself furthered by its
object as a moving spring. The want of it which consumption experiences
is created by its appreciation of the product. The object of art, as
well as any other product, creates an artistic and beauty-enjoying
public. Production thus produces not only an object for the individual,
but also an individual for the object.

Production thus produces consumption: first, by furnishing the latter
with material; second, by determining the manner of consumption;
third, by creating in consumers a want for its products as objects of
consumption. It thus produces the object, the manner, and the moving
spring of consumption. In the same manner, consumption [creates] the
_disposition_ of the producer by setting (?) him up as an aim and by
stimulating wants. The identity of consumption and production thus
appears to be a three fold one.

First, direct identity: production is consumption; consumption is
production. Consumptive production. Productive consumption. Economists
call both productive consumption, but make one distinction by calling
the former reproduction, and the latter productive consumption. All
inquiries into the former deal with productive and unproductive labor;
those into the latter treat of productive and unproductive consumption.

Second. Each appears as the means of the other and as being brought
about by the other, which is expressed as their mutual interdependence;
a relation, by virtue of which they appear as mutually connected and
indispensable, yet remaining outside of each other.

Production creates the material as the outward object of consumption;
consumption creates the want as the inward object, the purpose of
production. Without production, no consumption; without consumption, no
production; this maxim figures (?) in political economy in many forms.

Third. Production is not only directly consumption and consumption
directly production; nor is production merely a means of consumption
and consumption the purpose of production. In other words, not only
does each furnish the other with its object; production, the material
object of consumption; consumption, the ideal object of production. On
the contrary, either one is not only directly the other, not (?) only
a means of furthering the other, but while it is taking place, creates
the other as such for itself (?). Consumption completes the act of
production by giving the finishing touch to the product as such, by
destroying the latter, by breaking up its independent material form; by
bringing to a state of readiness, through the necessity of repetition,
the disposition to produce developed in the first act of production;
that is to say, it is not only the concluding act through which the
product becomes a product, but also [the one] through which the
producer becomes a producer. On the other hand, production produces
consumption, by determining the manner of consumption, and further, by
creating the incentive for consumption, the very ability to consume, in
the form of want. This latter identity mentioned under point 3, is much
discussed in political economy in connection with the treatment of the
relations of demand and supply, of objects and wants, of natural wants
and those created by society.

Hence, it is the simplest matter with a Hegelian to treat production
and consumption as identical. And this has been done not only by
socialist writers of fiction but even by economists, e. g. Say; the
latter maintained that if we consider a nation as a whole, or mankind
_in abstracto_―her production is at the same time her consumption.
Storch pointed out Say’s error by calling attention to the fact that
a nation does not entirely consume her product, but also creates
means of production, fixed capital, etc. To consider society as a
single individual is moreover a false mode of speculative reasoning.
With an individual, production and consumption appear as different
aspects of one act. The important point to be emphasized here is that
if production and consumption be considered as activities of one
individual or of separate individuals, they appear at any rate as
aspects of one process in which production forms the actual starting
point and is, therefore, the predominating factor. Consumption,
as a natural necessity, as a want, constitutes an internal factor
of productive activity, but the latter is the starting point of
realization and, therefore, its predominating factor, the act into
which the entire process resolves itself in the end. The individual
produces a certain article and turns again into himself by consuming
it; but he returns as a productive and a self-reproducing individual.
Consumption thus appears as a factor of production.

In society, however, the relation of the producer to his product,
as soon as it is completed, is an outward one, and the return of
the product to the individual depends on his relations to other
individuals. He does not take immediate possession of it. Nor does the
direct appropriation of the product constitute his purpose, when he
produces in society. Between the producer and the product distribution
steps in, which determines by social laws his share in the world of
products; that is to say, distribution steps in between production and

Does distribution form an independent sphere standing side by side with
and outside of production?

_b. Production and Distribution._ In perusing the common treatises on
economics one can not help being struck with the fact that everything
is treated there twice; e. g., under distribution, there figure rent,
wages, interest, and profit; while under production we find land,
labor, and capital as agents of production. As regards capital, it
is at once clear that it is counted twice: first, as an agent of
production; second, as a source of income; as determining factors and
definite forms of distribution, interest and profit figure as such also
in production, since they are forms, in which capital increases and
grows, and are consequently factors of its own production. Interest and
profit, as forms of distribution, imply the existence of capital as
an agent of production. They are forms of distribution which have for
their prerequisite capital as an agent of production. They are also
forms of reproduction of capital.

In the same manner, wages is wage-labor when considered under another
head; the definite character which labor has in one case as an agent
of production, appears in the other as a form of distribution. If
labor were not fixed as wage-labor, its manner of participation in
distribution[159] would not appear as wages, as is the case e. g. under
slavery. Finally, rent―to take at once the most developed form of
distribution―by means of which landed property receives its share of
the products, implies the existence of large landed property (properly
speaking, agriculture on a large scale) as an agent of production,
and not simply land, no more than wages represents simply labor.
The relations and methods of distribution appear, therefore, merely
as the reverse sides of the agents of production. An individual who
participates in production as a wage laborer, receives his share of the
products, i. e. of the results of production, in the form of wages. The
subdivisions and organization of distribution are determined by the
subdivisions and organization of production. Distribution is itself a
product of production, not only in so far as the material goods are
concerned, since only the results of production can be distributed; but
also as regards its form, since the definite manner of participation
in production determines the particular form of distribution, the form
under which participation in distribution takes place. It is quite an
illusion to place land under production, rent under distribution, etc.

Economists, like Ricardo, who are accused above all of having paid
exclusive attention to production, define distribution, therefore,
as the exclusive subject of political economy, because they
instinctively[160] regard the forms of distribution as the clearest
forms in which the agents of production find expression in a given

To the single individual distribution naturally appears as a law
established by society determining his position in the sphere of
production, within which he produces, and thus antedating production.
At the outset the individual has no capital, no landed property.
From his birth he is assigned to wage-labor by the social process of
distribution. But this very condition of being assigned to wage-labor
is the result of the existence of capital and landed property as
independent agents of production.

From the point of view of society as a whole, distribution seems to
antedate and to determine production in another way as well, as a
pre-economic fact, so to say. A conquering people divides the land
among the conquerors establishing thereby a certain division and
form of landed property and determining the character of production;
or, it turns the conquered people into slaves and thus makes slave
labor the basis of production. Or, a nation, by revolution, breaks up
large estates into small parcels of land and by this new distribution
imparts to production a new character. Or, legislation perpetuates
land ownership in large families or distributes labor as an hereditary
privilege and thus fixes it in castes.

In all of these cases, and they are all historic, it is not
distribution that seems to be organized and determined by production,
but on the contrary, production by distribution.

In the most shallow conception of distribution, the latter appears as
a distribution of products and to that extent as further removed from
and quasi-independent of production. But before distribution means
distribution of products, it is first, a distribution of the means of
production, and second, what is practically another wording of the
same fact, it is a distribution of the members of society among the
various kinds of production (the subjection of individuals to certain
conditions of production). The distribution of products is manifestly
a result of this distribution, which is bound up with the process of
production and determines the very organization of the latter. To
treat of production apart from the distribution which is comprised in
it, is plainly an idle abstraction. Conversely, we know the character
of the distribution of products the moment we are given the nature of
that other distribution which forms originally a factor of production.
Ricardo, who was concerned with the analysis of production as it is
organized in modern society and who was the economist of production
_par excellence_, for that very reason declares _not_ production
but distribution as the subject proper of modern economics. We have
here another evidence of the insipidity of the economists who treat
production as an eternal truth, and banish history to the domain of

What relation to production this distribution, which has a determining
influence on production itself, assumes, is plainly a question which
falls within the province of production. Should it be maintained
that at least to the extent that production depends on a certain
distribution of the instruments of production, distribution in that
sense precedes production and constitutes its prerequisite; it may
be replied that production has in fact its prerequisite conditions,
which form factors of it. These may appear at first to have a natural
origin. By the very process of production they are changed from natural
to historical, and if they appear during one period as a natural
prerequisite of production, they formed at other periods its historical
result. Within the sphere of production itself they are undergoing a
constant change. E. g., the application of machinery produces a change
in the distribution of the instruments of production as well as in that
of products, and modern land ownership on a large scale is as much the
result of modern trade and modern industry, as that of the application
of the latter to agriculture.

All of these questions resolve themselves in the last instance to this:
How do general historical conditions affect production and what part
does it play at all in the course of history? It is evident that this
question can be taken up only in connection with the discussion and
analysis of production.

Yet in the trivial form in which these questions are raised above,
they can be answered just as briefly. In the case of all conquests
three ways lie open. The conquering people may impose its own methods
of production upon the conquered (e. g. the English in Ireland in the
nineteenth century, partly also in India); or, it may allow everything
to remain as it was contenting itself with tribute (e. g. the Turks
and the Romans); or, the two systems by mutually modifying each other
may result in something new, a synthesis (which partly resulted
from the Germanic conquests). In all of these conquests the method
of production, be it of the conquerors, the conquered, or the one
resulting from a combination of both, determines the nature of the new
distribution which comes into play. Although the latter appears now
as the prerequisite condition of the new period of production, it is
in itself but a product of production, not of production belonging to
history in general, but of production relating to a definite historical
period. The Mongols with their devastations in Russia e. g. acted
in accordance with their system of production, for which sufficient
pastures on large uninhabited stretches of country are the main
prerequisite. The Germanic barbarians, with whom agriculture carried
on with the aid of serfs was the traditional system of production and
who were accustomed to lonely life in the country, could introduce
the same conditions in the Roman provinces so much easier since the
concentration of landed property which had taken place there, died away
completely with the older systems of agriculture. There is a prevalent
tradition that in certain periods robbery constituted the only source
of living. But in order to be able to plunder, there must be something
to plunder, i. e. there must be production.[161] And even the method
of plunder is determined by the method of production. A stockjobbing
nation[162] e. g. can not be robbed in the same manner as a nation of

In the case of the slave the instrument of production is robbed
directly. But then the production of the country in whose interest he
is robbed, must be so organized as to admit of slave labor, or (as in
South America, etc.) a system of production must be introduced adapted
to slavery.

Laws may perpetuate an instrument of production, e. g. land, in certain
families. These laws assume an economic importance if large landed
property is in harmony with the system of production prevailing in
society, as is the case e. g. in England. In France agriculture had
been carried on on a small scale in spite of the large estates, and
the latter were, therefore, broken up by the Revolution. But how about
the legislative attempt to perpetuate the minute subdivision of the
land? In spite of these laws land ownership is concentrating again. The
effect of legislation on the maintenance of a system of distribution
and its resultant influence on production are to be determined

_c. Exchange and Circulation._ Circulation is but a certain aspect
of exchange, or it may be defined as exchange considered as a whole.
Since _exchange_ is an intermediary factor between production and its
dependent, distribution, on the one hand, and consumption, on the
other; and since the latter appears but as a constituent of production,
exchange is manifestly also a constituent part of production.

In the first place, it is clear that the exchange of activities and
abilities which takes place in the sphere of production falls directly
within the latter and constitutes one of its essential elements. In
the second place, the same is true of the exchange of products, in
so far as it is a means of completing a certain product, designed
for immediate consumption. To that extent exchange constitutes an
act included in production. Thirdly, the so-called exchange between
dealers and dealers[163] is by virtue of its organization determined by
production, and is itself a species of productive activity. Exchange
appears to be independent of and indifferent to production only in the
last stage when products are exchanged directly for consumption. But
in the first place, there is no exchange without a division of labor,
whether natural or as a result of historical development; secondly,
private exchange implies the existence of private production; thirdly,
the intensity of exchange, as well as its extent and character are
determined by the degree of development and organization of production,
as e. g. exchange between city and country, exchange in the country, in
the city, etc. Exchange thus appears in all its aspects to be directly
included in or determined by production.

The result we arrive at is not that production, distribution, exchange,
and consumption are identical, but that they are all members of one
entity, different sides of one unit. Production predominates not only
over production itself in the opposite sense of that term, but over
the other elements as well. With it the process constantly starts over
again. That exchange and consumption can not be the predominating
elements is self evident. The same is true of distribution in the
narrow sense of distribution of products; as for distribution in the
sense of distribution of the agents of production, it is itself but a
factor of production. A definite [form of] production thus determines
the [forms of] consumption, distribution, exchange, and _also the
mutual relations between these various elements_. Of course, production
_in its one-sided form_ is in its turn influenced by other elements; e.
g. with the expansion of the market, i. e. of the sphere of exchange,
production grows in volume and is subdivided to a greater extent.

With a change in distribution, production undergoes a change; as
e. g. in the case of concentration of capital, of a change in the
distribution of population in city and country, etc. Finally, the
demands of consumption also influence production. A mutual interaction
takes place between the various elements. Such is the case with every
organic body.


When we consider a given country from a politico-economic standpoint,
we begin with its population, then analyze the latter according to
its subdivision into classes, location in city, country, or by the
sea, occupation in different branches of production; then we study
its exports and imports, annual production and consumption, prices of
commodities, etc. It seems to be the correct procedure to commence
with the real and concrete aspect of conditions as they are; in the
case of political economy, to commence with population which is the
basis and the author of the entire productive activity of society.
Yet, on closer consideration it proves to be wrong. Population is an
abstraction, if we leave out e. g. the classes of which it consists.
These classes, again, are but an empty word, unless we know what are
the elements on which they are based, such as wage-labor, capital,
etc. Those imply, in their turn, exchange, division of labor, prices,
etc. Capital, e. g. does not mean anything without wage-labor, value,
money, price, etc. If we start out, therefore, with population, we do
so with a chaotic conception of the whole, and by closer analysis we
will gradually arrive at simpler ideas; thus we shall proceed from the
imaginary concrete to loss and less complex abstractions, until we
get at the simplest conception. This once attained, we might start
on our return journey until we would finally come back to population,
but this time not as a chaotic notion of an integral whole, but as a
rich aggregate of many conceptions and relations. The former method
is the one which political economy had adopted in the past at its
inception. The economists of the seventeenth century, e. g., always
started out with the living aggregate: population, nation, state,
several states, etc., but in the end they invariably arrived, by means
of analysis, at certain leading, abstract general principles, such
as division of labor, money, value, etc. As soon as these separate
elements had been more or less established by abstract reasoning,
there arose the systems of political economy which start from simple
conceptions, such as labor, division of labor, demand, exchange value,
and conclude with state, international exchange and world market. The
latter is manifestly the scientifically correct method. The concrete is
concrete, because it is a combination of many objects with different
destinations, i. e. a unity of diverse elements. In our thought, it
therefore appears as a process of synthesis, as a result, and not as a
starting point, although it is the real starting point and, therefore,
also the starting point of observation and conception. By the former
method the complete conception passes into an abstract definition; by
the latter, the abstract definitions lead to the reproduction of the
concrete subject in the course of reasoning. Hegel fell into the error,
therefore, of considering the real as the result of self-coordinating,
self-absorbed, and spontaneously operating thought, while the method of
advancing from the abstract to the concrete is but a way of thinking
by which the concrete is grasped and is reproduced in our mind as
a concrete. It is by no means, however, the process which itself
generates the concrete. The simplest economic category, say, exchange
value, implies the existence of population, population that is engaged
in production under certain conditions; it also implies the existence
of certain types of family, clan, or state, etc. It can have no other
existence except as an abstract one-sided relation of an already given
concrete and living aggregate.

As a category, however, exchange value leads an antediluvian existence.
And since our philosophic consciousness is so arranged that only the
image of the man that it conceives appears to it as the real man
and the world as it conceives it, as the real world; it mistakes
the movement of categories for the real act of production (which
unfortunately (?) receives only its impetus from outside) whose
result is the world; that is true―here we have, however, again a
tautology―in so far as the concrete aggregate is a thought aggregate,
in so far as the concrete subject of our thought is in fact a product
of thought, of comprehension; not, however, in the sense of a product
of a self-emanating conception which works outside of and stands
above observation and imagination, but of a mental consummation of
observation and imagination. The whole, as it appears in our heads as
a thought-aggregate, is the product of a thinking mind which grasps
the world in the only way open to it, a way which differs from the one
employed by the artistic, religious, or practical mind. The concrete
subject continues to lead an independent existence after it has been
grasped, as it did before, outside of the head, so long as the head
contemplates it only speculatively, theoretically. So that in the
employment of the theoretical method [in political economy], the
subject, society, must constantly be kept in mind as the premise from
which we start.

But have these simple categories no independent historical or natural
existence antedating the more concrete ones? _Ça depend._ For instance,
in his Philosophy of Law Hegel rightly starts out with possession,
as the simplest legal relation of individuals. But there is no such
thing as possession before the family or the relations of lord and
serf, which are a great deal more concrete relations, have come into
existence. On the other hand, one would be right in saying that there
are families and clans which only _possess_, but do not _own_ things.
The simpler category thus appears as a relation of simple family and
clan communities with respect to property. In earlier society the
category appears as a simple relation of a developed organism, but the
concrete substratum from which springs the relation of possession, is
always implied. One can imagine an isolated savage in possession of
things. But in that case possession is no legal relation. It is not
true that the family came as the result of the historical evolution of
possession. On the contrary, the latter always implies the existence
of this “more concrete category of law.” Yet so much may be said, that
the simple categories are the expression of relations in which the
less developed concrete entity may have been realized without entering
into the manifold relations and bearings which are mentally expressed
in the concrete category; but when the concrete entity attains fuller
development it will retain the same category as a subordinate relation.

Money may exist and actually had existed in history before capital, or
banks, or wage-labor came into existence. With that in mind, it may be
said that the more simple category can serve as an expression of the
predominant relations of an undeveloped whole or of the subordinate
relations of a more developed whole, [relations] which had historically
existed before the whole developed in the direction expressed in the
more concrete category. In so far, the laws of abstract reasoning which
ascends from the most simple to the complex, correspond to the actual
process of history.

On the other hand, it may be said that there are highly developed but
historically unripe forms of society in which the highest economic
forms are to be found, such as co-operation, advanced division of
labor, etc., and yet there is no money in existence, e. g. Peru.

In Slavic communities also, money, as well as exchange to which it
owes its existence, does not appear at all or very little within the
separate communities, but it appears on their boundaries in their
inter-communal traffic; in general, it is erroneous to consider
exchange as a constituent element originating within the community.
It appears at first more in the mutual relations between different
communities, than in those between the members of the same community.
Furthermore, although money begins to play its part everywhere at an
early stage, it plays in antiquity the part of a predominant element
only in one-sidedly developed nations, viz. trading nations, and even
in most cultured antiquity, in Greece and Rome, it attains its full
development, which constitutes the prerequisite of modern bourgeois
society, only in the period of their decay. Thus, this quite simple
category attained its culmination in the past only at the most advanced
stages of society. Even then it did not pervade (?) all economic
relations; in Rome e. g. at the time of its highest development taxes
and payments in kind remained the basis. As a matter of fact, the money
system was fully developed there only so far as the army was concerned;
it never came to dominate the entire system of labor.

Thus, although the simple category may have existed historically before
the more concrete one, it can attain its complete internal and external
development only in complex (?) forms of society, while the more
concrete category has reached its full development in a less advanced
form of society.

Labor is quite a simple category. The idea of labor in that sense, as
labor in general, is also very old. Yet, “labor” thus simply defined
by political economy is as much a modern category, as the conditions
which have given rise to this simple abstraction. The monetary system,
e. g. defines wealth quite objectively, as a thing (?)[164] in money.
Compared with this point of view, it was a great step forward, when
the industrial or commercial system came to see the source of wealth
not in the object but in the activity of persons, viz. in commercial
and industrial labor. But even the latter was thus considered only
in the limited sense of a money producing activity. The physiocratic
system [marks still further progress] in that it considers a certain
form of labor, viz. agriculture, as the source of wealth, and wealth
itself not in the disguise of money, but as a product in general, as
the general result of labor. But corresponding to the limitations of
the activity, this product is still only a natural product. Agriculture
is productive, land is the source of production _par excellence_. It
was a tremendous advance on the part of Adam Smith to throw aside all
limitations which mark wealth-producing activity and [to define it] as
labor in general, neither industrial, nor commercial, nor agricultural,
or one as much as the other. Along with the universal character of
wealth-creating activity we have now the universal character of the
object defined as wealth, viz. product in general, or labor in general,
but as past incorporated labor. How difficult and great was the
transition, is evident from the way Adam Smith himself falls back from
time to time into the physiocratic system. Now, it might seem as though
this amounted simply to finding an abstract expression for the simplest
relation into which men have been mutually entering as producers from
times of yore, no matter under what form of society. In one sense this
is true. In another it is not.

The indifference as to the particular kind of labor implies the
existence of a highly developed aggregate of different species of
concrete labor, none of which is any longer the predominant one. So
do the most general abstractions commonly arise only where there is
the highest concrete development, where one feature appears to be
jointly possessed by many, and to be common to all. Then it can not
be thought of any longer in one particular form. On the other hand,
this abstraction of labor is but the result of a concrete aggregate of
different kinds of labor. The indifference to the particular kind of
labor corresponds to a form of society in which individuals pass with
ease from one kind of work to another, which makes it immaterial to
them what particular kind of work may fall to their share. Labor has
become here, not only categorically but really, a means of creating
wealth in general and is no longer grown together with the individual
into one particular destination. This state of affairs has found its
highest development in the most modern of bourgeois societies, the
United States. It is only here that the abstraction of the category
“labor,” “labor in general,” labor _sans phrase_, the starting point
of modern political economy, becomes realized in practice. Thus,
the simplest abstraction which modern political economy sets up as
its starting point, and which expresses a relation dating back to
antiquity and prevalent under all forms of society, appears in this
abstraction truly realized only as a category of the most modern
society. It might be said that what appears in the United States as an
historical product,―viz. the indifference as to the particular kind of
labor―appears among the Russians e. g. as a natural disposition. But it
makes all the difference in the world whether barbarians have a natural
predisposition which makes them applicable alike to everything, or
whether civilized people apply themselves to everything. And, besides,
this indifference of the Russians as to the kind of work they do,
corresponds to their traditional practice of remaining in the rut of a
quite definite occupation until they are thrown out of it by external

This example of labor strikingly shows how even the most abstract
categories, in spite of their applicability to all epochs―just because
of their abstract character―are by the very definiteness of the
abstraction a product of historical conditions as well, and are fully
applicable only to and under those conditions.

The bourgeois society is the most highly developed and most highly
differentiated historical organization of production. The categories
which serve as the expression of its conditions and the comprehension
of its own organization enable it at the same time to gain an insight
into the organization and the conditions of production which had
prevailed under all the past forms of society, on the ruins and
constituent elements of which it has arisen, and of which it still
drags along some unsurmounted remnants, while what had formerly been
mere intimation has now developed to complete significance. The anatomy
of the human being is the key to the anatomy of the ape. But the
intimations of a higher animal in lower ones can be understood only if
the animal of the higher order is already known. The bourgeois economy
furnishes a key to ancient economy, etc. This is, however, by no means
true of the method of those economists who blot out all historical
differences and see the bourgeois form in all forms of society. One can
understand the nature of tribute, tithes, etc., after one has learned
the nature of rent. But they must not be considered identical.

Since, furthermore, bourgeois society is but a form resulting from
the development of antagonistic elements, some relations belonging
to earlier forms of society are frequently to be found in it but in
a crippled state or as a travesty of their former self, as e. g.
communal property. While it may be said, therefore, that the categories
of bourgeois economy contain what is true of all other forms of
society, the statement is to be taken _cum grano salis_. They may
contain these in a developed, or crippled, or caricatured form, but
always essentially different. The so-called historical development
amounts in the last analysis to this, that the last form considers its
predecessors as stages leading up to itself and perceives them always
one-sidedly, since it is very seldom and only under certain conditions
that it is capable of self-criticism; of course, we do not speak here
of such historical periods which appear to their own contemporaries as
periods of decay. The Christian religion became capable to assist us
to an objective view of past mythologies as soon as it was ready for
self-criticism to a certain extent, _dynamei_ so-to-say. In the same
way bourgeois political economy first came to understand the feudal,
the ancient, and the oriental societies as soon as the self-criticism
of the bourgeois society had commenced. So far as bourgeois political
economy has not gone into the mythology of purely (?) identifying the
bourgeois system with the past, its criticism of the feudal system
against which it still had to wage war resembled Christian criticism
of the heathen religions or Protestant criticism of Catholicism.

In the study of economic categories, as in the case of every historical
and social science, it must be borne in mind that as in reality so
in our mind the subject, in this case modern bourgeois society, is
given and that the categories are therefore but forms of expression,
manifestations of existence, and frequently but one-sided aspects of
this subject, this definite society; and that, therefore, the origin of
[political economy] _as a science_ does not by any means date from the
time to which it is referred _as such_. This is to be firmly held in
mind because it has an immediate and important bearing on the matter of
the subdivisions of the science.

For instance, nothing seems more natural than to start with rent, with
landed property, since it is bound up with land, the source of all
production and all existence, and with the first form of production in
all more or less settled communities, viz. agriculture. But nothing
would be more erroneous. Under all forms of society there is a certain
industry which predominates over all the rest and whose condition
therefore determines the rank and influence of all the rest.

It is the universal light with which all the other colors are tinged
and are modified through its peculiarity. It is a special ether which
determines the specific gravity of everything that appears in it.

Let us take for example pastoral nations (mere hunting and fishing
tribes are not as yet at the point from which real development
commences). They engage in a certain form of agriculture, sporadically.
The nature of land-ownership is determined thereby. It is held in
common and retains this form more or less according to the extent to
which these nations hold on to traditions; such e. g. is land-ownership
among the Slavs. Among nations whose agriculture is carried on by a
settled population―the settled state constituting a great advance―where
agriculture is the predominant industry, such as in ancient and feudal
societies, even the manufacturing industry and its organization, as
well as the forms of property which pertain to it, have more or less
the characteristic features of the prevailing system of land ownership;
[society] is then either entirely dependent upon agriculture, as in the
case of ancient Rome, or, as in the middle ages, it imitates in its
city relations the forms of organization prevailing in the country.
Even capital, with the exception of pure money capital, has, in the
form of the traditional working tool, the characteristics of land
ownership in the Middle Ages.

The reverse is true of bourgeois society. Agriculture comes to be more
and more merely a branch of industry and is completely dominated by
capital. The same is true of rent. In all the forms of society in which
land ownership is the prevalent form, the influence of the natural
element is the predominant one. In those where capital predominates the
prevailing element is the one historically created by society. Rent
can not be understood without capital, nor can capital, without rent.
Capital is the all dominating economic power of bourgeois society. It
must form the starting point as well as the end and be developed before
land-ownership is. After each has been considered separately, their
mutual relation must be analyzed.

It would thus be impractical and wrong to arrange the economic
categories in the order in which they were the determining factors in
the course of history. Their order of sequence is rather determined
by the relation which they bear to one another in modern bourgeois
society, and which is the exact opposite of what seems to be their
natural order or the order of their historical development. What we are
interested in is not the place which economic relations occupy in the
historical succession of different forms of society. Still less are we
interested in the order of their succession “in idea” (_Proudhon_),
which is but a hazy (?) conception of the course of history. We are
interested in their organic connection within modern bourgeois society.

The sharp line of demarkation (abstract precision) which so clearly
distinguished the trading nations of antiquity, such as the
Phenicians and the Carthagenians, was due to that very predominance
of agriculture. Capital as trading or money capital appears in that
abstraction, where capital does not constitute as yet the predominating
element of society. The Lombardians and the Jews occupied the same
position among the agricultural nations of the middle ages.

As a further illustration of the fact that the same category plays
different parts at different stages of society, we may mention the
following: one of the latest forms of bourgeois society, viz. stock
companies, appear also at its beginning in the form of the great
chartered monopolistic trading companies. The conception of national
wealth which is imperceptibly formed in the minds of the economists of
the seventeenth century, and which partly continues to be entertained
by those of the eighteenth century, is that wealth is produced solely
for the state, but that the power of the latter is proportional to that
wealth. It was as yet an unconsciously hypocritical way in which wealth
announced itself and its own production as the aim of modern states
considering the latter merely as a means to the production of wealth.

The order of treatment must manifestly be as follows: first, the
general abstract definitions which are more or less applicable to
all forms of society, but in the sense indicated above. Second, the
categories which go to make up the inner organization of bourgeois
society and constitute the foundations of the principal classes;
capital, wage-labor, landed property; their mutual relations; city and
country; the three great social classes, the exchange between them;
circulation, credit (private). Third, the organization of bourgeois
society in the form of a state, considered in relation to itself; the
“unproductive” classes; taxes; public debts; public credit; population;
colonies; emigration. Fourth, the international organization of
production; international division of labor; international exchange;
import and export; rate of exchange. Fifth, the world market and


Notes on the points to be mentioned here and not to be omitted:[166]

1. _War_ attains complete development before peace; how certain
economic phenomena, such as wage-labor, machinery, etc., are developed
at an earlier date through war and in armies than within bourgeois
society. The connection between productive force and the means of
communication is made especially plain in the case of the army.

2. The relation between the idealistic and realistic methods of writing
history; namely, the so-called history of civilization which is all a
history of religion and states.

In this connection something may be said of the different methods
hitherto employed in writing history. The so-called objective [method].
The subjective. (The moral and others). The philosophic.

3. _Secondary and tertiary._ Conditions of production which have been
taken over or transplanted; in general, those that are not original.
Here [is to be treated] the effect of international relations.

4. Objections to the materialistic character of this view. Its relation
to naturalistic materialism.

5. The dialectics of the conceptions productive force (means of
production) and relation of production, dialectics whose limits are to
be determined and which does not do away with the concrete difference.

6. The unequal relation between the development of material production
and art, for instance. In general, the conception of progress is not
to be taken in the sense of the usual abstraction. In the case of
art, etc., it is not so important and difficult to understand this
disproportion as in that of practical social relations, e. g. the
relation between education in the United States and Europe. The really
difficult point, however, that is to be discussed here is that of the
unequal (?) development of relations of production as legal relations.
As, e. g., the connection between Roman civil law (this is less true of
criminal and public law) and modern production.

7. This conception of development appears to imply necessity. On the
other hand, justification of accident. Varia. (Freedom and other
points). (The effect of means of communication). World history does not
always appear in history as the result of world history.

8. The starting point [is to be found] in certain facts of nature
embodied subjectively and objectively in clans, races, etc.

+4. Produktion, Produktions-mittel und Produktionsverhältnisse.
Produktionsverhältnis und Verkehrsverhältnisse. Staats- und
Eigenthumsformen im Verhältnis zu den Produktions- und
Verkehrsverhältnissen. Rechtsverhältnisse. Familienverhältnisse.+

Notabene in bezug auf Punkte, die hier zu erwähnen und nicht vergessen
werden dürfen:

‖1. Der =Krieg= ist früher ausgebildet, wie der Frieden:
[Auszuführen wäre] die Art, wie durch den Krieg und in den Armeen
etc. gewisse ökonomische Verhältnisse wie Lohnarbeit, Maschinerie
etc. früher entwickelt [werden] als im Inneren der bürgerlichen
Gesellschaft. Auch das Verhältnis von Produktivkraft und
Verkehrsverhältnissen wird besonders anschaulich in der Armee.

2. Verhältnis der bisherigen idealen Geschichtsschreibung zur realen.
Namentlich die sogenannte Kulturgeschichte, die alle Religions-und

Bei der Gelegenheit kann auch etwas gesagt werden über die
verschiedenen Arten der bisherigen Geschichtsschreibung. Sogenannte
objektive. Subjektive. (Moralische und andere.) Philosophische.

3. =Sekundäres und Tertiäres.= Ueberhaupt =abgeleitete,
übertragene,= nicht ursprüngliche Produktionsverhältnisse. Hier
[ist das] Einspielen der internationalen Verhältnisse [zu behandeln].

4. Vorwürfe über Materialismus dieser Auffassung. Verhältnis zum
naturalistischen Materialismus.

5. Dialektik der Begriffe Produktivkraft (Produktions-mittel) und
Produktionsverhältnis, eine Dialektik, deren Grenzen zu bestimmen sind
und den realen Unterschied nicht aufhebt.

6. Das unegale Verhältnis der Entwicklung der materiellen Produktion
zum Beispiel zur künstlerischen. Ueberhaupt ist der Begriff des
Fortschritts nicht in der gewöhnlichen Abstraktion zu fassen. Bei der
Kunst etc. ist diese Disproportion noch nicht so wichtig und schwierig
zu fassen als innerhalb praktisch-sozialer Verhältnisse selbst, zum
Beispiel das Bildungsverhältnis der Vereinigten Staaten zu Europa. Der
eigentlich schwierige Punkt, der hier zu erörtern ist aber der, wie
die Produktionsverhältnisse als Rechtsverhältnisse in ungleiche (?)
Entwicklung treten. Also zum Beispiel das Verhältnis des römischen
Privatrechts (im Kriminalrecht und öffentlichen ist das wenige der
Fall) zur modernen Produktion.

7. Diese Auffassung erscheint als nothwendige Entwicklung. Aber
Berechtigung des Zufalls. Varia.[167] (Die Freiheit und
anderes noch.) (Einwirkung der Kommunikationsmittel.) Weltgeschichte
eigentlich[168] nicht immer in der Geschichte als weltgeschicht[liches]

8. Der Ausgangspunkt [ist] natürlich von der Naturbestimmtheit [zu
nehmen]; subjektiv und objektiv, Stämme, Rassen etc.‖

It is well known that certain periods of highest development of art
stand in no direct connection with the general development of society,
nor with the material basis and the skeleton structure of its
organization. Witness the example of the Greeks as compared with the
modern nations or even Shakespeare. As regards certain forms of art, as
e. g. the epos, it is admitted that they can never be produced in the
world-epoch making form as soon as art as such comes into existence; in
other words, that in the domain of art certain important forms of it
are possible only at a low stage of its development. If that be true of
the mutual relations of different forms of art within the domain of art
itself, it is far less surprising that the same is true of the relation
of art as a whole to the general development of society. The difficulty
lies only in the general formulation of these contradictions. No sooner
are they specified than they are explained. Let us take for instance
the relation of Greek art and of that of Shakespeare’s time to our own.
It is a well known fact that Greek mythology was not only the arsenal
of Greek art, but also the very ground from which it had sprung. Is the
view of nature and of social relations which shaped Greek imagination
and Greek [art] possible in the age of automatic machinery, and
railways, and locomotives, and electric telegraphs? Where does Vulcan
come in as against Roberts & Co.; Jupiter, as against the lightning
rod; and Hermes, as against the Credit Mobilier? All mythology masters
and dominates and shapes the forces of nature in and through the
imagination; hence it disappears as soon as man gains mastery over
the forces of nature. What becomes of the Goddess Fame side by side
with Printing House Square?[169] Greek art presupposes the existence
of Greek mythology, i. e. that nature and even the form of society are
wrought up in popular fancy in an unconsciously artistic fashion. That
is its material. Not, however, any mythology taken at random, nor any
accidental unconsciously artistic elaboration of nature (including
under the latter all objects, hence [also] society). Egyptian mythology
could never be the soil or womb which would give birth to Greek art.
But in any event [there had to be] _a_ mythology. In no event [could
Greek art originate] in a society which excludes any mythological
explanation of nature, any mythological attitude towards it and which
requires from the artist an imagination free from mythology.

Looking at it from another side: is Achilles possible side by side with
powder and lead? Or is the Iliad at all compatible with the printing
press and steam press? Does not singing and reciting and the muses
necessarily go out of existence with the appearance of the printer’s
bar, and do not, therefore, disappear the prerequisites of epic poetry?

But the difficulty is not in grasping the idea that Greek art and
epos are bound up with certain forms of social development. It rather
lies in understanding why they still constitute with us a source of
aesthetic enjoyment and in certain respects prevail as the standard
and model beyond attainment.

A man can not become a child again unless he becomes childish. But does
he not enjoy the artless ways of the child and must he not strive to
reproduce its truth on a higher plane? Is not the character of every
epoch revived perfectly true to nature in child nature? Why should the
social childhood of mankind, where it had obtained its most beautiful
development, not exert an eternal charm as an age that will never
return? There are ill-bred children and precocious children. Many of
the ancient nations belong to the latter class. The Greeks were normal
children. The charm their art has for us does not conflict with the
primitive character of the social order from which it had sprung. It is
rather the product of the latter, and is rather due to the fact that
the unripe social conditions under which the art arose and under which
alone it could appear can never return.

(End of Manuscript.)


[1] Cf. Seligman, “The Economic Interpretation of History.” MacMillan.

[2] Aristotle, d. Rep. L. l, c. 9 (edit. I Bekkeri Oxonii, 1837)

“ἑκάστου γὰρ κτήματος διττὴ ἡ χρῆσίς ἐστιν ... ἡ μὲν οἰκεία, ἡ δ’ οὐκ
οἰκεία τοῦ πράγματος, οἷον ὑποδήματος ἥ τε ὑπόδησις καὶ ἡ μεταβλητική.
Ἀμφότεραι γὰρ ὑποδήματος χρήσεις· καὶ γὰρ ὁ ἀλλαττόμενος τῷ δεομένῳ
ὑποδήματος ἀντὶ νομίσματος ἢ τροφῆς χρῆται τῷ ὑποδήματι ᾗ ὑπόδημα,
ἀλλ’ οὐ τὴν οἰκείαν χρῆσιν· οὐ γὰρ ἀλλαγῆς ἕνεκεν γέγονεν. Τὸν αὐτὸν δὲ
τρόπον ἔχει καὶ περὶ τῶν ἄλλων κτημάτων.”

(“Of everything which we possess there are two uses:―one is the proper,
and the other the improper or secondary use of it. For example, a shoe
is used for wear, and is used for exchange; both are uses of the shoe.
He who gives a shoe in exchange for money or food to him who wants
one, does indeed use the shoe as a shoe, but this is not its proper
or primary purpose, for a shoe is not made to be an object of barter.
The same may be said of all possessions.” The Politics of Aristotle,
translated into English by B. Jowett, Oxford, 1885, v. I., p. 15.)

[3] That is the reason why German compilers are so fond of dwelling
on use-value, calling it a “good.” See e. g. L. Stein, “System der
Staatswissenschaften,” v. I., chapter on “goods” (Gütter). For
intelligent information on “goods” one must turn to treatises on

[4] A ridiculous presumption has gained currency of late to the effect
that common property in its primitive form is specifically a Slavonian,
or even exclusively Russian form. It is the primitive form which we
can prove to have existed among Romans, Teutons, and Celts; and of
which numerous examples are still to be found in India, though in a
partly ruined state. A closer study of the Asiatic, especially of
Indian forms of communal ownership would show how from the different
forms of primitive communism different forms of its dissolution have
been developed. Thus e. g. the various original types of Roman and
Teutonic private property can be traced back to various forms of Indian

[5] “La Ricchezza è una ragione tra due persone.” (“Value is a relation
between two persons”) Galiani, “Della Moneta,” p. 220 in vol. II.
of Custodi’s collection of “Scrittori classici Italiani di Economia
Politica. Parte Moderna,” Milano, 1803.

[6] “In its natural state, matter ... is always destitute of value.”
McCulloch, “A Discourse on the Rise, Progress, Peculiar Objects, and
Importance of Political Economy,” 2nd edition, Edinburgh, 1825, pg. 48.
It is evident how even a McCulloch stands above the fetishism of German
“thinkers”, who declare “matter” and half a dozen other foreign things
to be elements of value. Cf. e. g. L. Stein, l. c. v. I., p. 110.

[7] Berkeley, _The Querist_, London, 1750.

[8] Thomas Cooper, Lectures on the Elements of Political Economy,
London, 1831, p. 99.

[9] F. List could never grasp the difference between labor as a source
of use-value and labor as the creator of certain social form of wealth
or exchange value, because comprehension was altogether foreign to his
practical mind; he therefore saw in the modern English economists mere
plagiarists of Moses, the Egyptian.

[10] It can be readily understood what kind of “service” is rendered
by the category “service” to economists of the type of J. B. Say and
F. Bastiat, whose pondering sagacity, as Malthus has justly remarked,
always abstracts from the specially definite forms of economic

[11] “Egli è proprio ancora delle misure d’aver si fatta relazione
colle cose misurate, che in certo modo la misurata divien misura della
misurante.” Montanari, Della Moneta, p. 48 in v. III of Custodi’s
“Scrittori classici Italiani di Economia Politica. Parte Antica.” (“It
is the property of measure to be in such a relation to the things
measured, that in a certain way the thing measured becomes the measure
of the measuring thing.”)

[12] It is in that sense that Aristotle (see the passage quoted at the
beginning of this chapter) conceives exchange value.

[13] This expression is used by Genovesi.

[14] Aristotle makes the same remark with reference to the private
family as the primitive community. But the primitive form of family is
the tribal family, from the historical dissolution of which the private
family develops. ἐν μὲν οὔν τῃ πρώτο κοινωνίᾳ (τοῦτο δ’ ἐστὶν οἰκίἀ)
φανερὸν ὅτι οὐδέν ἐστιν ἔργον αὐτῆς (namely της ἀλλαγῆς) “And in the
first community, which is the family, this art is obviously of no use.”
Jowett’s transl. l. c.

[15] “Money is, in fact, only the instrument for carrying on buying
and selling (but, if you please, what do you understand by buying and
selling?) and the consideration of it no more forms a part of the
science of political economy, than the consideration of ships, or
steam engines, or of any other instrument employed to facilitate the
production and distribution of wealth.” Th. Hodgskin, Popular Political
Economy, etc. London, 1827, p. 178, 179.

[16] A comparative study of the writings and characters of Petty and
Boisguillebert, outside of the light which it would throw upon the
difference of French and English society at the end of the seventeenth
and the beginning of the eighteenth centuries, would disclose the
origin of the national contrast between English and French Political
Economy. The same contrast reasserts itself in Ricardo and Sismondi.

[17] Petty had illustrated the productive power inherent in the
division of labor on a much grander scale than that was done later by
Adam Smith. See his “Essay concerning the multiplication of mankind,
etc.,” 3rd edition, 1686, p. 35-36. He not only brings out the
advantages of the division of labor on the example of the manufacture
of a watch, as Adam Smith did later on that of a needle, but considers
also a city and an entire country from the point of view of a large
manufacturing establishment. The Spectator, of November 26, 1711,
refers to this “illustration of the admirable Sir William Petty.”
McCulloch is, therefore, mistaken when he supposes that the Spectator
confounded Petty with a writer forty years his junior. See McCulloch,
“The Literature of Political Economy, a classified catalogue,” London,
1845, p. 105. Petty is conscious of being the founder of a new science.
His method, he says, “is not yet very usual, for instead of using
only comparative and superlative Words, and intellectual Arguments,”
he has undertaken to speak “in Terms of Number, Weight or Measure;
to use only Arguments of Sense, and to consider only such Causes, as
have visible Foundations in Nature; leaving those that depend upon
the mutable Minds, Opinions, Appetites, and Passions of particular
Men, to the Consideration of others.” (Political Arithmetick, etc.,
London, 1699. Preface.) (A new edition of “The Economic Writings of Sir
William Petty,” edited by Chas. Henry Hull, has been published by the
University Press at Cambridge, 1899. The above passage will be found
in vol. I., p. 244. The further references are given to this new, more
accessible edition. Translator.) His wonderful keenness shows itself
e. g. in the proposal to transport “all the moveables and people of
Ireland, and of the Highlands of Scotland ... into the rest of Great
Britain.” Thereby much labor-time would be saved, the productivity of
labor increased, and “the King and his Subjects would thereby become
more Rich and Strong.” (Political Arithmetick, ch. 4, p. 285.) Or
in the chapter of his Political Arithmetic in which he proves that
England’s mission is the conquest of the world’s market at a time when
Holland still played the leading part as a trading nation and France
seemed to be on the way of becoming the ruling trading Power: “That the
King of England’s Subjects, have Stock competent and convenient, to
drive the Trade of the whole Commercial World” (l. c., ch. 10, p. 311).
“That the Impediments of England’s greatness are but contingent and
removable” (l. c., ch. 5, p. 298). A singular humor pervades all his
writings. Thus, he shows that it was by material means that Holland―at
that time the model country with English economists, just as England
is with continental economists to-day―conquered the world market
“without such Angelical Wits and Judgments, as some attribute to the
Hollanders” (l. c., p. 258). He advocates “Liberty of Conscience” as a
condition of trade, because “Dissenters ... are ... patient Men, and
such as believe that Labour and Industry is their Duty towards God,”
and “They believe that ... for those who have less Wealth, to think
they have the more Wit and Understanding, especially of the things
of God which they think chiefly belong to the Poor.” “From whence it
follows that Trade is not fixt to any species of Religion as such; but
rather ... to the Heterodox part of the whole” (l. c., p. 262-264). He
advocates an “allowance by Publick Tax” for those “who live by begging,
cheating, stealing, gaming, borrowing without intention of restoring,”
because “it were more for the publick profit” to tax the country for
such persons “than to suffer them to spend extravagantly, at the only
charge of careless, credulous, and good natured People” (p. 269-270).
But he is opposed to taxes which transfer the wealth from industrious
people “to such as do nothing at all, but eat and drink, sing, play,
and dance; nay such as study the Metaphysicks” (ibid.). Petty’s
writings are rarities of the bookseller’s trade and are to be found
only in scattered poor old editions, which is the more surprising since
William Petty was not only the father of English Political Economy,
but also the ancestor of Henry Petty, alias Marquis of Lansdowne, the
nestor of the English Whigs. However, the Lansdowne family could hardly
bring out a complete edition of Petty’s works without prefacing it
with his biography, and what can be said of most origins of the great
Whig families holds good also in this case, viz., “the less said of
them the better.” The keen-witted but cynical army surgeon who was as
ready to plunder in Ireland under the shield of Cromwell as to crawl
before Charles II. to get the title of baron which he needed for his
plunderings, is a model hardly fit for public exhibition. Besides that,
Petty seeks to prove in most of his writings which he published in his
lifetime, that England’s prosperity reached its climax under Charles
II., a heterodox view for the hereditary exploiters of the “glorious

[18] In contrast with the “black art of finance” of his time,
Boisguillebert says: “La science financière n’est que la connaissance
approfondie des intérêts de l’agriculture et du commerce.” Le Détail de
la France, 1697. Eugène Daire’s edition of Economistes financiers du
XVIII. siècle, Paris, 1843, vol. I., p. 241.

[19] But not _Romance_ Political Economy, since the Italians reproduce
the contrast between the English and French economists in the two
respective schools of Naples and Milan, while the Spaniards of the
earlier period are either pure Mercantilists; modified mercantilists
like Ustariz; or, like Jovellanos (see his Obras, Barcelona, 1839-40),
hold to the “golden mean” with Adam Smith.

[20] “La véritable richesse ... jouissance entière, non seulement des
besoins de la vie, mais même de tous les superflus et de tout, ce qui
peut fair plaisir à la sensualité,” Boisguillebert, “Dissertation sur
la nature de la richesse,” etc., l. c., p. 403. But while Petty was
a frivolous, rapacious and unprincipled adventurer, Boisguillebert,
though an intendant under Louis XIV, championed the interests of the
oppressed classes with a daring that was equal to his keenness of mind.

[21] The French Socialism of the Proudhon type suffers from the same
national hereditary disease.

[22] “Benjamin Franklin, The Works of, etc.,” ed. by I. Sparks, vol.
II., Boston, 1836. “A Modest Inquiry into the Nature and Necessity of a
Paper Currency.”

[23] L. c., p. 265.

[24] L. c., p. 267.

[25] L. c., “Remarks and Facts relative to the American Paper Money,”

[26] See “Papers on American Politics; Remarks and Facts relative to
the American Paper Money,” 1764, l. c.

[27] See e. g. Galiani, “Della Moneta,” in vol. 3 of Scrittori Classici
italiani di Economia politica (Published by Custodi). Parte Moderna,
Milano, 1803. “La fatica, he says, è l’unica che dà valore alla cosa”
(“only effort can give value to any thing”). The designation of labor
as “fatica,” strain, effort, is characteristic of the southerner.

[28] Steuart’s work, “An Inquiry into the Principles of Political
Economy, being an Essay on the Science of Domestic Policy in Free
Nations,” appeared first in London in two quarto volumes in the year
1767, ten years before Adam Smith’s “Wealth of Nations.” I quote from
the Dublin edition of 1770. (The references to pages are the same for
the standard London edition of 1767, except where otherwise stated.

[29] Steuart, l. c., vol. I., p. 181-183.

[30] Steuart, l. c., vol. I., p. 361-362.

[31] See chapter I., book II., vol. I. “of the reciprocal connections
between Trade and Industry” (Translator).

[32] He declares, therefore, the patriarchal form of agriculture which
is devoted to the direct production of use-values for the owner of the
land, to be an “abuse,” not in Sparta, or Rome, or even in Athens, but
in the industrial countries of the eighteenth century. This “abusive
agriculture” is not “trade,” but a “direct means of subsisting.” Just
as capitalistic agriculture clears the country of superfluous mouths,
so does the capitalistic mode of manufacture clear the factory of
superfluous hands.

[33] Thus e. g., Adam Smith says: “Equal quantities of labour, at all
times and places, may be said to be of equal value to the labourer. In
his ordinary state of health, strength and spirits, in the ordinary
degree of his skill and dexterity, he must always lay down the same
portion of his ease, his liberty, and his happiness. The price which
he pays must always be the same, whatever may be the quantity of goods
which he receives in return for it. Of these, indeed, it may sometimes
purchase a greater and sometimes a smaller quantity; but it is their
value which varies, not that of the labour which purchases them....
Labour alone, therefore, never varying in its own value ... is their
[commodities’] real price, etc. Adam Smith (Book I., ch. V., p. 34,
Oxford, 1869. Translator.)

[34] David Ricardo, “On the Principles of Political Economy and
Taxation,” 3rd edition, London, 1821, p. 3.

[35] Sismondi, “Etudes sur l’Economie Politique,” t. II., Bruxelles,
1837. “C’est l’opposition entre la valeur usuelle ... et la valeur
échangeable à laquelle le commerce a reduit toute chose,” p. 161.
[Paris edition, p. 229, Transl.]

[36] Sismondi l. c., p. 163-166 seq. [Paris edition, 230 etf. Transl.]

[37] Perhaps the silliest to be found are the annotations of J. B.
Say to the French translation of Ricardo, made by Constancio, and the
most pedantically arrogant are the remarks of Mr. MacLeod in his newly
published “Theory of Exchange,” London, 1858.

[38] This objection raised against Ricardo by bourgeois economists was
taken up later by the socialists. Having assumed the correctness of the
formula, they charged the practice with contradiction to the theory and
appealed to bourgeois society to realize in practice the conclusions
which were supposed to follow from its theoretical principles. That
was at least the way in which the English socialists turned Ricardo’s
formula of exchange value against political economy. It remained for
Mr. Proudhon not only to proclaim the fundamental principle of old
society as the principle of the new, but also to declare himself the
discoverer of the formula in which Ricardo summed up the combined
results of classical English political economy. It has been proven that
the utopian interpretation of the Ricardian formula was about forgotten
in England when Mr. Proudhon “discovered” it on the other side of the
Canal. (Cf. my work: “Misère de la Philosophie,” etc., Paris, 1847,
paragraph on la valeur constituée.)

[39] True, Aristotle sees that the exchange value of commodities
underlies their prices: “ὅτι ὴ ἀλλαγη ἥν πρὶν τὸ νόμισμα ἔιναι, ὁῆλον·
διαφέρει γὰρ οὐδὲν ἡ εί κλίναι πέντε ἀντι οἰκίας, ἣ ὅσου αὶ πέντε
κλῖναι.” (“It is clear that exchange existed before coin. For it does not
make any difference whether you give five beds for a house, or as much
money as five beds are worth”). On the other hand, since commodities
acquire only in price the form of exchange value with respect to one
another, he makes them commensurable through money. “Διὸ δεῖ πάντα
τετιμῆσθαι· οὕτω γὰρ ἀεὶ ἔσται ἀλλαγὴ, εἰ δὲ τοῦτο, κοινωνία. Τὸ δὴ
νόμισμα ὥσπερ μέτρον σύμμετρα ποιῆσαν ἰσάζει, οὔτε γὰρ ἃν μὴ οὔσης
ἀλλαγῆς κοινωνία ἡν, ὄυτ’ ἀλλαγὴ ἰσότητος μὴ οὔτ’ἰσότης, μὴ οὔσης
συμμετρίας.” (“Therefore all has to be appraised. In that way exchange
may always take place, and, with it, society can exist. Coin, like
measure, makes everything commensurable and equal, for without exchange
there would be no society, without equality there would be no exchange,
and without commensurability, no equality.”) He does not conceal from
himself that these different objects measured by money are entirely
incommensurable quantities. What he is after is the common unit of
commodities as exchange values, which as an ancient Greek he was unable
to find. He gets out of the difficulty by making commensurable through
money what is in itself incommensurable, so far as it is necessary for
practical purposes. “Τῇ μὲν οὔν ἀληθείᾳ ἀδύνατον τὰ τοσοῦτον διαφέροντα
σύμμετρα γενέσθαι, πρὸς δὲ τὴν χρείαν ἐνδέχεται ἰκανῶς.” (“In truth
it is impossible to make things that are so different, commensurable,
but for practical purposes it is permissible.”) Aristotle, Ethica
Nicomachea. l. 5, c. 8, edit. Bekkeri. Oxonii, 1837.

[40] The peculiar circumstance that, while the ounce of gold serves
in England as the unit of the standard of money, it is not divided
into aliquot parts has been explained as follows: “Our coinage was
originally adapted to the employment of silver only―hence an ounce of
silver can always be divided into a certain adequate number of pieces
of coin; but as gold was introduced at a later period into a coinage
adapted only to silver, an ounce of gold cannot be coined into an
adequate number of pieces.” Maclaren: “A Sketch of the History of the
Currency,” p. 16, London, 1858.

[41] “Money may continually vary in value and yet be as good a
measure of value as if it remained perfectly stationary. Suppose, for
instance, it is reduced in value.... Before the reduction, a guinea
would purchase three bushels of wheat or 6 days’ labour; subsequently
it would purchase only 2 bushels of wheat, or 4 days’ labour. In both
cases, the relations of wheat and labour to money being given, their
mutual relations can be inferred; in other words, we can ascertain that
a bushel of wheat is worth 2 days’ labour. This, which is all that
measuring value implies, is as readily done after the reduction as
before. The excellence of a thing as a measure of value is altogether
independent of its own variableness in value” (p. 11, Bailey, “Money
and its Vicissitudes.” London, 1837).

[42] “Le monete lequali oggi sono ideali sono le piu antiche d’ogni
nazione, e tutte furono un tempo reali (the latter assertion is too
sweeping), e perchè erano reali con esse si contava.” Galiani, “Della
Moneta,” l. c., p. 153 (“Coins which are ideal to-day [i. e., whose
names no longer correspond to their value] are among the more ancient
with every nation; at one time they were all real, and for that reason
served for the purpose of counting.”)

[43] The romantic A. Müller says: “According to our idea every
independent sovereign has the right to name the metal money, and to
give it a nominal social value, rank, standing and title (p. 276, v.
II., A. H. Müller, “Die Elemente der Staatskunst,” Berlin, 1809). As
far as title is concerned the Hon. Hofrath is right; but he forgets
the _substance_. How confused his “ideas” were, may be seen, e. g.,
from the following passage: “Everybody understands how much depends
upon the right determination of the mint-price, especially in a country
like England, where the government with _magnificent liberality_
coins money gratuitously (Herr Müller seems to think that the members
of the English government defray the mint expenses out of their own
pockets), where it does not charge any mintage, etc., and thus if the
mint-price of gold were set considerably above its market price, if
instead of paying as now £3 17s. 10-1/2d. per 1 oz. of gold, it would
set the price of an ounce of gold at £3 19s., all money would flow
into the mint and exchanging for the silver contained there bring
it into the market to be exchanged there for the cheaper gold; the
latter would in the same manner be brought again to the mint and the
entire coinage system would be upset” (l. c., p. 280-281). To preserve
order in English coinage, Müller falls back on “disorder.” While
shilling and pence are mere names of certain parts of an ounce of gold
represented by signs of silver and copper, he imagines that an ounce
of gold is estimated in gold, silver and copper and thus confers upon
the Englishmen the blessing of a triple standard of value. Silver as a
measure of money, next to gold, was formally abolished only in 1816 by
56 George III., c. 68. As a matter of fact, it was legally abolished
as early as 1734 by 14 George II., c. 42, and still earlier by actual
practice. There were two circumstances that made A. Müller capable of
a so-called higher conception of political economy: first, his wide
ignorance of economic facts; second, his dilettanti-like visionary
attitude toward philosophy.

[44] “Ἀνάχαρσις, πυνθανομένου τινὸς, πρὸς τί οί Ἕλληνες χρῶνται τῷ
ἀργυρίῳ ἕιπε πρὸς τὸ ἀριθμεῖν.” (Athen. Deipn. l. IV. 49. v. 2, ed.
Schweighäuser, 1802.) (When Anacharsis was asked for what purpose the
Greeks used money, he replied, “For reckoning.―‘’“”)

[45] G. Garnier, one of the early French translators of Adam Smith,
conceived the queer notion of fixing a proportion between the use of
money of account and that of actual money. His proportion is 10 to 1.
(G. Garnier, “Histoire de la Monnaie depuis les temps de la plus haute
antiquité,” etc., t. 1, p. 78.)

[46] The act of Maryland in 1723 by which tobacco was made the legal
standard, but its value reduced to terms of English gold money,
namely one penny equal to one pound of tobacco, reminds of the “leges
barbarorum,” in which, inversely, certain sums of money were expressed
in terms of oxen, cows, etc. In that case neither gold nor silver, but
the ox and the cow were the actual material of the money of account.

[47] Thus, we read, e. g., in the “Familiar Words” of Mr. David
Urquhart: “The value of gold is to be measured by itself; how can
any substance be the measure of its own worth in other things? The
worth of gold is to be established by its own weight, under a false
denomination of that weight―and an ounce is to be worth so many pounds
and fractions of pounds. This is falsifying a measure, not establishing
a standard.―‘’“”

[48] “Money is the measure of Commerce, and of the rate of everything,
and therefore ought to be kept (as all other measures) as steady and
invariable as may be. But this cannot be, if your money be made of
two Metals, whose proportion ... constantly varies in respect of one
another.” John Locke: Some Considerations on the Lowering of Interest,
etc., 1691 (p. 166, p. 65 in his Works 7 ed., London, 1768, vol. III.)

[49] Locke says among other things: “ ... call that a Crown now, which
before ... was but a part of a Crown.... An equal quantity of Silver is
always the same Value with an equal quantity of Silver.... For if the
abating 1-20 of the quantity of Silver of any Coin does not lessen its
Value, the abating 19-20 of the quantity of the Silver of any Coin will
not abate its Value. And so a single Penny, being called a Crown, will
buy as much Spice, or Silk, or any other Commodity, as a Crown-Piece,
which contains 20 times as much Silver.... Now [all that may be done]
is giving a less quantity of Silver the Stamp and Denomination of a
greater.... But ’tis Silver and not Names that pay Debts and purchase
Commodities” (l. c., p. 135-145 passim). If to raise the value of
money means nothing but to give any desired name to an aliquot part
of a silver coin, e. g., to call an eighth part of an ounce of silver
a penny, then money may really be rated as high as you please. At the
same time, Locke answered Lowndes that the rise of the market price
above the mint price was due not to the rise of the value of silver,
but to the lighter silver coins. Seventy-seven clipped shillings do not
weigh a particle more than 62 full-weighted ones. Finally he pointed
out with perfect right that, aside from the loss of weight in the
circulating coin, the market price of silver bullion in England could
rise to some extent above its mint price, since the export of silver
bullion was allowed while that of silver coin was prohibited (l. c.,
p. 54-116 passim). Locke was exceedingly careful not to touch upon the
burning question of public debts, and no less carefully avoided the
discussion of the delicate economic question, viz., the depreciation of
the currency out of proportion to its real loss of silver, as was shown
by the rate of exchange and the ratio of silver bullion to silver coin.
We shall return to this question in its general form in the chapter on
the Medium of Circulation. Nicholas Barbon in “A Discourse Concerning
Coining the New Money Lighter, in Answer to Mr. Locke’s Considerations,
etc.,” London, 1696, tried in vain to entice Locke to difficult ground.

[50] Steuart, l. c., v. II., p. 154.

[51] The Querist, l. c., (p. 5-6-7.) The “Queries on Money” are
generally clever. Among other things Berkeley is perfectly right in
saying that by their progress the North American colonies “make it
plain as daylight, that gold and silver are not so necessary for the
wealth of a nation, as the vulgar of all ranks imagine.―‘’“”

[52] Price means here real equivalent in the sense commonly employed by
English economic writers in the seventeenth century.

[53] Steuart, l. c., v. II., p. 154, 299 [1st London edition, of 1767,
v. I., p. 526-531. Transl.].

[54] On the occasion of the last commercial crisis the ideal African
money received loud praise from certain English quarters, after its
seat was this time moved from the coast to the heart of Barbary. The
freedom of the Berbers from commercial and industrial crises was
ascribed to the ideal unit of measure of their bars. Would it not have
been simpler to say that trade and industry are the _conditio sine qua
non_ of commercial and industrial crises?

[55] The Currency Question, The Gemini Letters, London, 1844, p.
260-272, passim.

[56] John Gray: “The Social System. A Treatise on the Principle of
Exchange, Edinburgh, 1831.” Compare with “Lectures on the Nature and
Use of Money, Edinburgh, 1848,” by the same author. After the February
revolution Gray sent a memorial to the provisional French government,
in which he instructs the latter that France is not in need of an
“organization of labour,” but of an “organization of exchange” of which
the plan is fully worked out in his money system. Honest John did not
suspect that sixteen years after the appearance of his “Social System”
a patent for the same discovery would be taken out by the ingenious

[57] Gray, “The Social System,” etc., p. 63: “Money should be merely
a receipt, an evidence that the holder of it has either contributed
certain value to the national stock of wealth or that he has acquired a
right to the same value from some one who has contributed to it.―‘’“”

[58] An estimated value being previously put upon produce, let it be
lodged in a bank, and drawn out again, whenever it is required, merely
stipulating, by common consent, that he who lodges any kind of property
in the proposed National Bank, may take out of it an equal value of
whatever it may contain, instead of being obliged to draw out the
self-same thing that he put in.” L. c., p. 68.

[59] L. c., p. 16.

[60] Gray: “Lectures on Money, etc.,” p. 182.

[61] L. c., p. 169.

[62] “The business of every country ought to be conducted on a national
capital.” John Gray, “The Social System,” etc., p. 171.

[63] “The land to be transformed into national property.” L. c., p. 298.

[64] See e. g. W. Thompson: “An Inquiry into the Distribution of
Wealth, etc.,” London, 1827. Bray, “Labour’s Wrongs and Labour’s
Remedy,” Leeds, 1839.

[65] Alfred Darimont’s “De la Reforme des banques,” Paris, 1856, may be
considered as a compendium of this melodramatic theory of money.

[66] “Di due sorte è la moneta, ideale e reale; e a dui diversi usi
è adoperata, a valutare le cose e a comperarle. Per valutare è buona
la moneta ideale, cosi come la reale e forse anche più. L’altro uso
della moneta è di comperare quelle cose istesse, ch’ella apprezza ...
i prezzi e i contratti si valutano in moneta ideale e si eseguiscono
in moneta reale.” Galiani, l. c., p. 112 sq. (“Money is of two kinds,
ideal and real; and is adapted to two different uses: to determine
the value of things and to buy them. For the purpose of valuation
ideal money is as good as real and perhaps even better. The other
use of money is to buy the same things which it appraises ... prices
and contracts are determined in ideal money and are executed in real

[67] This, of course, does not prevent the market price of commodities
to be above or below their value. However, this consideration is
foreign to simple circulation and belongs to quite another sphere to be
considered later, when we shall investigate the relation between value
and market price.

[68] How deeply some beautiful souls are wounded by the merely
superficial aspect of the antagonism which asserts itself in buying
and selling, may be seen from the following abstract from M. Isaac
Pereire’s: “Leçons sur l’industrie et les finances,” Paris, 1832. The
fact that the same Isaac in his capacity of inventor and dictator
of the “Credit mobilier” has acquired the reputation of the wolf of
the Paris Bourse shows what lurks behind the sentimental criticism
of economics. Says Mr. Pereire at the time an apostle of St. Simons:
“C’est parceque tous les individus sont isolés, séparés les uns des
autres, soit dans leur travaux, soit pour la consommation, qu’il y a
echange entre eux des produits de leur industrie respective. De la
nécessité de l’échange est derivée la nécessité de determiner la valeur
relative des objets. Les idées de la valeur et de l’échange sont donc
intimement liées, et toutes deux dans leur forme actuelle exprime
l’individualisme et l’antagonisme.... Il n’y a lieu a fixer la valeur
des produits que parcequ’il y a vente at achat, en d’autres termes,
antagonisme entre les divers membres de la societé. Il n’y a lieu à
s’occuper du prix, de valeur que là où il y avait vente et echat, c’est
à dire, où chaque individu était obligé de lutter, pour se procurer
les object nécessaires a l’entretien de son existence” (l. c., p. 2,
3 passim). (“Since individuals are isolated and separated from one
another both in their labors and in consumption, exchange takes place
between them in the products of their respective industries. From the
necessity of exchange arises the necessity of determining the relative
value of things. The ideas of value and exchange are thus intimately
connected and both express in their actual form individualism and
antagonism.... The determination of values of products takes place
only because there are sales and purchases, or, to put it differently,
because there is an antagonism between different members of society.
One has to occupy himself with price and value only where there is
sale and purchase, that is to say, where every individual is obliged
to struggle to procure for himself the objects necessary for the
maintenance of his existence.”)

[69] “L’argent n’est que le moyen et l’acheminement, au lieu que les
denrées utiles à la vie sont la fin et le but.” (“Money is but the ways
and means, while the things useful in life are the end and object.”)
Boisguillebert: “Le Détail de la France,” 1697, in Eugene Daires’
“Economistes financiers du XVIIIieme siècle, vol. I., Paris, 1843, p.

[70] In November, 1807, William Spence published a pamphlet in England
under the title: “Britain Independent of Commerce.” The principle set
forth in this pamphlet was further elaborated by William Cobbet in
his “Political Register” under the virulent title, “Perish Commerce.”
To this James Mill replied in 1808 in his “Defence of Commerce” which
contains the passage quoted above from his “Elements of Political
Economy” (p. 190-193, Transl.). In his controversy with Sismondi and
Malthus on commercial crises, J. B. Say appropriated this clever
device, and as it would be difficult to point out with what new idea
this comical “prince de la science” had enriched political economy, his
continental admirers have trumpeted him as the man who had unearthed
the treasure of the metaphysical balance of purchases and sales; as a
matter of fact, his merits consisted rather of the impartiality with
which he equally misunderstood his contemporaries, Malthus, Sismondi
and Ricardo.

[71] The manner in which economists explain the different aspects of
the commodity may be seen from the following examples:

“With money in possession, we have but one exchange to make in order
to secure the object of desire, while with other surplus products
we have two, the first of which (procuring the money) is infinitely
more difficult than the second.” (G. Opdyke, “A Treatise on Political
Economy,” New York, 1851, p. 277-278.)

“The superior saleableness of money is the exact effect or natural
consequence of the less saleableness of commodities.” (Th. Corbet, “An
Inquiry into the Causes and Modes of the Wealth of Individuals.” etc.,
London, 1841, p. 117.)

“Money has the quality of being always exchangeable for what it
measures.” (Bosanquet, “Metallic, Paper and Credit Currency,” etc.,
London, 1842, p. 100.)

“Money can always buy other commodities, whereas other commodities
can not always buy money.” (Th. Tooke, “An Inquiry into the Currency
Principle,” 2d ed., London, 1844, p. 10.)

[72] The same commodity can be bought and resold many times. It
circulates, then, not merely as a commodity, but in a capacity which
does not exist from the point of view of simple circulation, of the
simple contrast of commodity and money.

[73] The quantity of money is immaterial “pourvu qu’il y en ait
assez pour maintenir les prix contractés par les denrées” (as long
as it is sufficient to maintain the existing prices of commodities).
Boisguillebert, l. c. p. 210.

“If the circulation of commodities of four hundred millions required a
currency of forty millions, and ... this proportion of one-tenth was
the due level, estimating both currency and commodities in gold; then,
if the value of commodities to be circulated increased to four hundred
and fifty millions, from natural causes ... I should say the currency,
in order to continue at its level, must be increased to forty-five
millions.” (William Blake, “Observations on the Effects Produced by the
Expenditure of Government, etc.,” London, 1823, p. 80.)

[74] “E la velocità del giro del danaro, non la quantità dei metalli
che fa apparir molto a poco il danaro.” (Galiani, l. c. p. 99.) (“It is
the rapidity of the circulation of money and not the quantity of metals
that causes a greater or smaller amount of money to appear.”)

[75] An example of an extraordinary decline of metallic circulation
from its average level was furnished by England in 1858, as may be
seen from the following extract from the London Economist: “From the
nature of the case (namely, the isolated nature of simple circulation)
very exact data cannot be procured as to the amount of cash that is
fluctuating in the market, and in the hands of the not banking classes.
But, perhaps, the activity or the inactivity of the mints of the
great commercial nations is one of the most likely indications in the
variations of that amount. Much will be manufactured when it is wanted;
and little when little is wanted.... At the English mint the coinage
was in 1855 £9,245,000; 1856, £6,476,000; 1857, £5,293,855. During 1858
the mint had scarcely anything to do.” (Economist, July 10, 1858.) But
at the same time about eighteen million pounds sterling were lying in
the bank vaults.

[76] Dodd, “Curiosities of Industry,” etc., London, 1854.

[77] “The Currency Question Reviewed, etc., by a Banker.” (Edinburgh,
1845, p. 69.)

“Si un écu un peu usé était reputé valoir quelque chose de moins qu’un
écu tout neuf, la circulation se trouverait continuellement arrêtée, et
il n’y aurait pas un seul payement qui ne fut matière à contestation.”
(G. Garnier, l. c. t. I., p. 24.) (“If an ecu slightly used would
pass for a little less than an entirely new ecu, circulation would be
continually interfered with, and not a payment would take place that
would not give rise to controversy.”)

[78] W. Jacob, “An Inquiry Into the Production and Consumption of the
Precious Metals.” (London, 1831, vol. II., ch. XXVI.)

[79] David Buchanan, “Observations on the Subjects Treated of in Dr.
Smith’s Inquiry on the Wealth of Nations,” etc. (Edinburgh, 1841, p. 3.)

[80] Henry Storch, “Cours d’Economic Politique.” etc., avec des notes
par J. B Say. Paris, 1823, tom. IV., p. 179. Storch published his work
in French at St. Petersburg. J. B. Say immediately issued a Parisian
reprint, supplemented with alleged “notes,” which as a matter of fact
contain nothing but commonplaces. Storch (see his “Considerations sur
la Nature du Revenue National,” Paris, 1824) took by no means kindly to
this annexation of his work by the “prince de la science.”

[81] Plato de Rep. L. II “νόμισμα ξύμβολον τῆς ἀλλαγῆς.” (“Money symbol
of exchange.”) Opera omnia, etc., ed. G. Stallbumius, London, 1850, p.
304. Plato develops money only in two capacities―as a measure of value
and a token of value, but demands, in addition to the token of value
serving for home circulation, another one for trade between Greece and
foreign countries. (See also Book V of his Laws.)

[82] Aristotle, Ethic. Nicom, l. 5., ch. 8, l. c.: οἶον δ’ ὑπάλλαγμα
τῆς χρείας τὸ νόμισμα γέγονου κατὰ συνθήκην καὶ διὰ τοὔτο τοὔνομα ἔχει
νόμισμα. ὅτι οὐ φὐσει ἀλλὰ νόμῳ, καὶ ἐφ’ ἡμῖν μεταβαλεῖν καὶ ποιῆσαι
ἄχρηστον.” (“In the satisfaction of wants money became the medium of
exchange by agreement. And for that reason it bears the name νόμισμα,
because it owes its existence, not to nature, but to law (νόμω), and it
is in our power to change it and make it void.”) Aristotle had a far
more comprehensive and deep view of money than Plato. In the following
passage he beautifully shows how barter between different communities
creates the necessity of assigning the character of money to a specific
commodity, i. e., one which has itself an intrinsic value. “Ξενικωτέρας
γὰρ γενομένης τῆς βοηθείας τῷ εἰσάγεσθαι hὦν ἐνδεεῖς καὶ ἔκπεμπειν ὥν
ἐπλέοναζον, ἐξ ἀνάγκης ἡ τοῦ νομίσματος ἐπορίσθη χρῆσις· διὸ πρὸς τὰς
ἀλλαγας τοιοῦτόν τι συνέθεντο πρὸς σφᾶς αὐτοὺς διδόναι καὶ λαμβάνειν,
δ’ τῶν χρησίμων αὐτὸ ὂν εἶχε τὴν χρείαν εὐμεταχείριστον ... οἶον
σίδηρος καὶ ἄργυρος κἂν εἴ τι τοιοῦτον ἕτερον”. (Arist. De Republica,
l. i. p. 9, [secs. 7, 8] l. c.)

(“When the inhabitants of one country became more dependent on those of
another, and they imported what they needed and exported the surplus,
money necessarily came into use ... and hence men agreed to employ in
their dealings with each other something which was intrinsically useful
and easily applicable to the purposes of life, for example, iron,
silver and the like.” Trans, by B. Jowett, “The Politics of Aristotle,
Oxford, 1885, p. 16). This passage is quoted by Michel Chevalier, who
either has not read Aristotle or did not understand him, to prove that
in Aristotle’s opinion currency must consist of a substance having
intrinsic value. On the contrary, Aristotle says expressly that money
as a mere medium of circulation seems to owe its existence to agreement
or law, as is shown by its name νόμισμα, and that in reality it owes
its utility as coin to its function and not to any intrinsic use-value
of its own. λῆρος εἶναι δοκεῖ τὸ νόμισμα καὶ νόμος παντάπασι, φύσει δ’
οὐδὲν ὅτι μεταθε ενων τε τῶν χρωμένων οὐδενὸς ἄξιον οὐδὲ χρήσιμον πρὸς
οὐδὲν τῶν ἀναγκαίων ἑοτί’ (“Others maintain that coined money is a mere
sham, a thing not natural, but conventional only, which would have no
value or use for any of the purposes of daily life if another commodity
were substituted by the users.”) (l. c. sec. 11.)

[83] Mandeville, Sir John, “Voyages and Travels,” London, 1705, p. 105:
“This Emperor (of Cattay or China) may dispende ols muche as he wile
withouten estymacion. For he despendethe not, nor makethe no money, but
of lether empredeth, or of papyre. And when that money bathe ronne so
longe that it begynethe to waste, than men beren it to the Emperoure
Tresorye, and then they taken newe Money for the old. And that money
gothe thorghe out all the contree, and thorge out all his Provynces....
They make no money neither of Gold nor of Sylver,” and “therefore,”
thinks Mandeville, “he may despende ynew and outrageously.”

[84] Benjamin Franklin, “Remarks and Facts Relative to the American
Paper Money,” 1764, p. 348, l. c. “At this very time, even the silver
money in England is obliged to the legal tender for part of its value;
that part which is the difference between its real weight and its
denomination. Great part of the shillings and sixpences now current
are by wearing become 5, 10, 20, and some of the sixpences even 50
per cent., too light. For this difference between the _real_ and the
_nominal_ you have no intrinsic value. You have not so much as paper,
you have nothing. It is the legal tender, with the knowledge that it
can easily be repassed for the same value, that makes three-pennyworth
of silver pass for a sixpence.”

[85] Berkeley, l. c., p. 5-6. “Whether the denominations being
retained, although the bullion were gone ... might not nevertheless ...
a circulation of commerce (be) maintained?”

[86] “Non solo i metalli ricchi son segni delle cose ...; ma
vicendevolmente le cose ... sono segni dell’oro e dell’argento.” (A.
Genovesi, “Lezioni di Economia Civile,” 1765. p. 281 in Custodi, Parte
Mod. 1. VIII.) (“Not only are precious metals tokens of things, but
vice versa, things are tokens of gold and silver.”)

[87] Petty. “Gold and silver are universal wealth.” (Political
Arithmetic, l. c., p. 242.)

[88] E. Misselden. “Free Trade, or the Means to Make Trade Flourish,”
etc., London, 1622. “The natural matter of Commerce is Merchandise,
which Merchants from the end of Trade have stiled Commodities. The
Artificiall matter of Commerce is Money, which hath obtained the title
of sinewes of warre and of State.... Money, though it be in nature
and time after Merchandise, yet forasmuch as it is now in use become
the chiefe.” (p. 7.) He compares his own treatment of merchandise and
money with the manner of “Old Jacob, who, blessing his Grandchildren,
crost his hands, and laide his right hand on the yonger, and his left
hand on the elder.” (l. c.) Boisguillebert, “Dissert. sur la Nature
Des Richesses,” etc. “Voilà donc l’esclave du commerce devenu son
maître.... La misère des peuples ne vient que de ce qu’on a fait un
maître, ou plutôt un tyran de ce qui était un esclave.” (p. 395, 399.)

[89] Boisguillebert, l. c. “On a fait une idole de ces métaux (l’or
et l’argent) et laissant là, l’objet et l’intention pour lesquels ils
avaient été appelés dans le commerce, savoir, pour y servir de gages
dans l’échange et la tradition réciproque, on les a presque quittés
de ce service pour en former des divinités, aux quelles on a sacrifié
et sacrifie toujours plus de biens et de besoins précieux et même
d’hommes, que jamais l’aveugle antiquité n’en immola à ces fausses
divinités,” etc. (l. c., p. 395.)

[90] In the first halt of the perpetuum mobile, _i. e._, in the
suspension of the function of money as a medium of circulation,
Boisguillebert at once suspects its independent existence from
commodities. Money, he says, must be “in constant motion, it can be
money only by being mobile, but as soon as it becomes motionless all
is lost.” (“Dans un mouvement continuel, ce qui ne peut être que tant
qu’il est meuble, mais sitôt qu’il devient immeuble tout est perdu.”
“Le Détail de la France,” p. 231.) What he overlooks is that this halt
constitutes the condition of its movement. What he really wants is that
the value form of commodities should appear merely in the transitory
form of their change of matter, but should never become an end in

[91] “ ... The more the stock ... is ... encreased in wares, the more
it decreaseth in treasure.” (E. Misselden, l. c., p. 23.)

[92] l. c., p. 11-13 passim.

[93] Petty, “Political Arith.,” l. c., p. 196 (1899 edition, v. I, p.
269. Transl.)

[94] Francois Bernier, “Voyage contenant la description des états du
Grand Mogul.” (Paris edition, 1830, t. l., conf., p. 312-314.)

[95] Dr. Martin Luther, “Bücher vom Kaufhandel und Wucher,” 1524.
In the same passage Luther says: “Gott hat uns Deutsche dahin
geschleidert, dass wir unser gold und silber müssen in fremde Länder
stossen, alle Welt reich machen und selbst Bettler Bleiben. England
sollte wohl weniger Goldes haben, wenn Deutschland ihm sein Tuch
liesse, und der König von Portugal sollte auch weniger haben, wenn wir
ihm die Würze liessen. Rechne Du, wie viel eine Messe zu Frankfurt
aus Deutschen Landen gefürt wird, ohne Not und Ursache: so wirst Du
Dich wundern, wie es zugehe, dass noch ein heller in Deutschen Landen
sei. Frankfurt ist das Silber-und Goldloch, dadurch aus Deutschem
Lande fleisst, was nur guillet und wächst, gemünzt oder geschlagen
wird bei uns; wäre das Loch zuegestopft, so dürft man itzt der Klage
nicht hören, die allethalben eitel Schuld und kein Geld, alle Land und
Städte ausgewuchert sind. Aber lass gehen, es will doch also gehen; wir
Deutsche müssen Deutsche bleiben! wir lassen nicht ab, wir müssen denn.”

In the work quoted above Misselden wishes to retain the gold and silver
at least within the confines of Christendom: “The other forreine
remote causes of the want of money, are the Trades maintained out of
Christendome to Turky, Persia and the East Indies, which trades are
maintained for the most part with ready money, yet in a different
manner from the trades of Christendome within itselfe. For although
the trades within Christendome are driven with ready monies, yet
those monies are still contained and continued within the bounds of
Christendome. There is indeede a fluxus and refluxus, a flood and ebbe
of the monies of Christendome traded within it selfe; for sometimes
there is more in one part of Christendome, sometimes there is lesse
in another, as one Country wanteth and another aboundeth: It cometh
and goeth, and whirleth about the Circle of Christendome, but is still
contained within the compasse thereof. But the money that is traded out
of Christendome into the parts aforesaid is continually issued out and
never returneth againe.” (p. 19-20.)

[96] “A nummo prima origo avaritiae ... haec paulatim exarsit rabie
quadam, non jam avaritia, sed fames auris.” (Plin., Hist. Nat., l.

(“From money first springs avarice ... the latter gradually grows into
a kind of madness, which is no more avarice, but a thirst for gold.”)

[97] Horace thus understands nothing of the philosophy of hoarding when
he says (Satir. l. II., Satir. III): “Siquis emat citharas, emptas
comportat in unum, Nec studio citharae nec musae deditus ulli; Si
scalpra et formas non sutor; nautica vela Aversus mercaturis; delirus
et amens, Undique dicatur merito. Qui discrepat istis, Qui nummos
aurunque recondit nescius uti Compositis metuensque velut contingere

  “If one buys fiddles, hoards them up when bought,
  Though music’s study ne’er engaged his thought,
  One lasts and awls, unversed in cobbler’s craft,
  One sails for ships, not knowing fore from aft,
  You’d call them mad: but tell me, if you please,
  How that man’s case is different from these,
  Who as he gets it, stows away his gain,
  And thinks to touch a farthing were profane?”

  (Transl. by John Covington, London, 1874, p. 60.)

Mr. Senior understands the question much better: “L’argent paraît être
la seule chose dont le désir est universel, et il en est ainsi parceque
l’argent est _une richesse abstraite_ et parceque les hommes, en la
possédant peuvent satisfaire à tous leur besoins de quelque nature
qu’ils soient.” (“Principes Fondamentaux de l’Economie Politique,
tirés de leçons edites et inedites de N. W. Senior, par Comte Jean
Arrivabene,” Paris, 1836, p. 221. The corresponding passage in the
English edition of his Political Economy, London, 1863, is to be found
on p. 27. Translator.) So does Storch: “Since money represents all
other forms of wealth, it is only necessary to accumulate it to provide
for oneself all kinds of wealth existing in the world.” (l. c., v. 2,
p. 134.)

[98] To what extent the inner man of the commodity owner remains
unchanged, even when he has become civilized and has developed into a
capitalist, is shown by the example of a London representative of a
cosmopolitan banking house who adopted as a fitting coat of arms for
his family a £100,000 bank note, which he had hung up in a glass frame.
The point here is in the mocking contempt of the note for circulation.

[99] See the passage from Xenophon, quoted below.

[100] Jacob, l. c., v. 2, ch. 25 and 26.

[101] “In times of great agitation and insecurity, especially during
internal commotions or invasions, gold and silver articles are rapidly
converted into money; whilst during periods of tranquility and
prosperity, money is converted into plate and jewelry.” (l. c., v. 2,
p. 357.)

[102] In the following passage Xenophon develops money in its specific
forms of money and hoard: “ἐν μόνω τούτῳ ὦν ἐγω οἴδα ἔργων οὐδὲ φθονεῖ
οὐδεις τοῖς ἐπισκευαζομένοις ... ἀργυρῖτις δὲ ὅσω ἄν πλείων φαίνηται,
καὶ ἀργύριον πλεῖον γίγνηται, τοσούτῳ πλείονες ἐπί τὸ ἔργον τοῦτο
ἔρχονται ... καὶ γὰρ δὴ ἔπιπλα μὲν ἐπειδὰν ἰκανά τις κτήσηται τῇ οἰκίᾳ,
οὐ μάλα ἔἱτι προσωνοῦνται· ἀργύριον δὲ οὐδείς πω οὔτω πολὺ ἐκτήσατο
ὥστε μὴ ἔτι προσθεῖσθαι, ἀλλ’ ἤν τισι γένηται παμπληθὲς, τὸ περιττεῦον
κατορύττοντες οὐδὲν ἥττον ἥδονται ἥ χρώμενοι αὐτᾠ· καὶ μὲν ὅταν γε εὗ
πράττωσιν αἰ πόλεις ἰσχυρῶς, οἰ ἄνθρωποι ἀργυρίου δέονται. Οἰ μὲν γὰρ
ἄνδρες ἀμφι ὅπλα τε καλὰ καὶ ἵππους ἀγαρθοὺς καὶ οἰκίας καὶ κατασκευὰς
μεγαλοπρεπεῖς βοὐλονται δαπανᾶν, αἰδὲ γυναῖκες εἰς ἐσθῆτα πολυτελῆ καὶ
χρυσοῦν κόσμον τρέπονται· ὅταν δε αὔ νοσήσωσι πόλεις ἠ ἀφορίαις καρπῶν ῆ
πολέμω ἔτι καὶ πολὺ μἄλλον τῆς γῆς ἀρυοῦ γιγνομενης καὶ εἰς ἐπιτήδεια
καὶ εἰς ἐπικουροὺς νομίσματος δέονται.” (Xen. de Vectigalibus, c. IV.)
(“Of all operations with which I am acquainted, this is the only one
in which no sort of jealousy is felt at a further development of the
industry ... the larger the quantity of ore discovered and the greater
the amount of silver extracted, the greater the number of persons
ready to engage in the operation.... No one when he has got sufficient
furniture for his house dreams of making further purchases on this
head, but of silver no one ever yet possessed so much that he was
forced to cry “Enough.” On the contrary, if ever anybody does become
possessed of an immoderate amount he finds as much pleasure in digging
a hole in the ground and hoarding it as an actual employment of it....
When a state is prosperous there is nothing which people so much desire
as silver. The men want money to expend on beautiful armor and fine
horses, and houses and sumptuous paraphernalia of all sorts. The women
betake themselves to expensive apparel and ornaments of gold. Or when
states are sick, either through barrenness of corn and other fruits,
or through war, the demand for current coin is even more imperative
(whilst the ground lies unproductive), to pay for necessaries or
military aid.” Transl. by H. G. Dakyns, London, 1892, v. 2, Revenues,
p. 335-336.) Aristotle develops in Book I., ch. 9 of his Politics
the two opposite movements of circulation. C-M-C and M-C-M, calling
them “economics” and “chrematistics” respectively. The two forms are
represented by the Greek tragedian Euripides as Sikn (right) and Keodos

[103] Of course, capital also is advanced in the shape of money, and
the money thus advanced may be advanced capital, but this point of view
does not fall within the horizon of simple circulation.

[104] “The difference between the means of purchase and the means of
payment” is emphasized by Luther.

[105] Mr. MacLeod, in spite of his doctrinaire conceit about
definitions, fails so utterly to grasp the most elementary economic
relations that he tries to deduce the very origin of money from its
crowning form, viz., that of a means of payment. He says among other
things that since people do not always need each other’s services at
the same time, and not to the same extent, “there would remain over
a certain difference or amount of service due from the first to the
second―debt.” The owner of this debt needs the services of a third
person, who does not directly need those of the second, and “transfers
to the third the debt due to him from the first. Evidence of debts
changes so hands―currency.... When a person received an obligation
expressed by metallic currency, he is able to command the services
not only of the original debtor, but of the whole of the industrious
community.” (MacLeod, “Theory and Practice of Banking,” etc., London,
1855, v. I., ch. I.)

[106] Bailey, l. c., p. 3. “Money is the general commodity of
contracts, or that in which the majority of bargains about property, to
be completed at a future time, are made.”

[107] Says Senior (in his Lectures, published by Comte Arrivabene, l.
c., p. 117): “Since the value of everything changes within a certain
period of time, people select as a means of payment an article whose
value changes least and which retains longest a given average ability
to buy things. Thus, money becomes the expression or representative of
values.” On the contrary: just because gold, silver, etc., have become
money, i. e., the embodiment of independently existing exchange value,
they become the universal means of payment. When the consideration as
to the stability of the value of money mentioned by Mr. Senior comes
into play, i. e., in periods when money asserts itself as the universal
means of payment through the force of circumstances, then is just the
time when fluctuations in the value of money are discovered. Such was
the time of Elizabeth in England, when Lord Burleigh and Sir Thomas
Smith, in view of the manifest depreciation of the precious metals, put
through an act of parliament which obliged the universities of Oxford
and Cambridge to stipulate the payment of one-third of their ground
rents in wheat and malt.

[108] Boisguillebert, who would stem the development of bourgeois
relations of production and violently attacks the bourgeois personally,
has a soft heart for those forms of money in which it appears only
ideally or transiently. Thus he speaks first of the medium of
circulation and next of the means of payment. What he does not see is
the direct transition of money from its ideal to the material form,
since the hard cash is latently present in the ideal measure of value.
That money is but another form of commodities, he says, is shown by
wholesale trade, in which exchange takes place without the intervention
of money, after “les marchandises sont appreciés.” (“Le Detail de la
France,” l. c. p. 210.)

[109] Locke, l. c., p. 17, 18.

[110] “Il danaro ammassato supplisce a quella somma, che per essere
attualmente in circolazione, per l’eventuale promiscuità de’ commerci
si allontana _e sorte della sfera della circolazione medesima_.”
(“The accumulated money supplements that amount which, in order to
be actually in circulation and to meet all possible perturbations of
trade, retires from that sphere of circulation.” G. R. Carli, note
to Berri’s “Meditazioni sulla Economia Politica,” p. 196, t. XV. of
Custodi’s l. c.)

[111] Montanari, “Della Moneta,” 1683, l. c., p. 40. “È cosi fattamente
diffusa per tutto il globo terrestre la communicazione de’ populi
insieme, che puo quasi dirsi esser il mondo tutto divinuto una sola
citta in cui si fa perpetua fiera d’ogni mercanzia, e dove ogni uomo
di tutto cio che la terra, gli animali e l’umana industria altrove
producono, puo mediante il danaro stando in sua casa provedersi e
godere. Maravigliosa invenzione.” (“The communication of nations
among themselves is so widely extended all over the globe that it may
be almost said that the entire world has become one city in which a
perpetual fair of merchandise is held and where every man may by means
of money acquire and enjoy, while staying at home, all that the earth,
the animals and human industry produce elsewhere. Marvelous invention.”)

[112] I metalli han questo di proprio e singulare che in essi soli
tutte le ragioni si riducono ad una che è la loro quantità, non
avendo ricevuto delle natura diversa qualità nè nell’interna loro
constituzione nè nell’externa forma e fattura.” (Galiani, l. c., p.
130.) (“Metals have this singular property, that everything in them is
reduced to one consideration, viz., that of quantity, since they are
not endowed by nature with any differences in quality either in their
internal structure or in their external form and shape.”)

[113] De Orbe Novo. “O, happy coin, which furnishes mankind with a
pleasant and useful beverage and keeps its possessors immune from
the hell-born pest of avarice, since it can not be either buried or
preserved long.”

[114] In 760 a multitude of poor people emigrated to the south of
Prague to wash the gold sand found there, and three men were able to
extract three marks of gold a day. As a result of that the run on
the “diggings” and the number of hands taken away from agriculture
became so great that the country was visited by a famine the following
year. See M. G. Körner, “Abhandlung von dem Alterthum des Böhmischen
Bergwerks,” Schneeberg, 1758.

[115] So far the Australian and other discoveries have not affected the
ratio of the values of gold and silver. The assertions to the contrary
of Michel Chevalier are worth as much as the Socialism of this ex-St.
Simonist. The quotations of silver on the London market prove, however,
that the average gold price of silver during 1850-1858 is not quite
3 per cent. higher than the price during 1830-1850. But this rise in
price is accounted for simply by the Asiatic demand for silver. In
the course of the years 1852-1858 the price of silver was changing in
certain years and months only with a change in this demand, and in no
case with the importation of gold from the newly discovered sources.
The following is a summary of the gold prices of silver on the London


 _Year―_      _March._       _July._       _November._
  1852      60-1/8 pence   60-1/4 pence   61-7/8 pence
  1853      61-3/8 pence   61-1/2 pence   61-7/8 pence
  1854      61-7/8 pence   61-3/4 pence   61-1/2 pence
  1855      60-7/8 pence   61-1/2 pence   60-7/8 pence
  1856      60     pence   61-1/4 pence   62-1/8 pence
  1857      61-3/4 pence   61-5/8 pence   61-1/2 pence
  1858      61-5/8 pence

[116] “Gold is a wonderful thing! Whoever possesses it, is master of
all that he desires. By means of gold even admission to Heaven may be
gained for souls.” (Columbus in a letter from Jamaica in 1503).

[117] The slowness of the process was admitted by Hume, although it but
little agrees with his principle. See David Hume “Essays and Treatises
on several subjects.” London, 1777, v. I, p. 300.

[118] Conf. Steuart, l. c. v. I, p. 394-400.

[119] David Hume, l. c. p. 300.

[120] David Hume, l. c. p. 303.

[121] David Hume, l. c. p. 303.

[122] David Hume, l. c. p. 307, 308, 303: “It is evident, that the
prices do not so much depend on the absolute quantity of commodities,
and that of money, which are in a nation, as on that of the
commodities, which can or may come to market, and of the money which
circulates. If the coin be locked up in chests, it is the same thing
with regard to prices, as if it were annihilated; if the commodities be
hoarded in magazines and granaries, a like effect follows. As the money
and commodities in these cases, never meet, they cannot affect each
other. The whole (of prices) at last reaches _a just proportion with
the new quantity of specie which is in the kingdom_.”

[123] See _Law_ and _Franklin_ about surplus value which gold and
silver are supposed to acquire from their function of money. Also

[124] This fiction is literally advanced by Montesquieu. [The passage
from Montesquieu is quoted by Marx in his Capital, v. I. Part 1, Ch.
III, section 2, b, foot-note. Note by K. Kautsky to 2nd German edition].

[125] Steuart, l. c. v. I., p. 394 seq.

[126] Steuart, l. c., v. 2. p. 377-379 passim (not found in the 1767
London edition. Translator).

[127] Steuart, l. c., p. 379-380 passim (London, 1767 edition, v. l. p.
400. Transl.).

[128] “The additional coin will be locked up, or converted into
plate.... As for the paper money, so soon as it has served the first
purpose of supplying the demand of him who borrowed it, it will
return upon the debtor in it and become realized.... Let the specie
of a country, therefore, be augmented or diminished in ever so great
a proportion, commodities will still rise and fall according to the
principles of demand and competition, and these will constantly
depend upon the inclinations of those who have property or any kind
of equivalent whatsoever to give, but never upon the quantity of coin
they are possessed of.... Let it (namely, the quantity of specie
in a country) be ever so low, while there is real property of any
denomination in the country, a competition to consume in those who
possess it, prices will be high, by the means of barter, symbolical
money, mutual prestations and a thousand other inventions.... If
this country has a communication with other nations, there must
be a proportion between the prices of many kinds of merchandize
there and elsewhere, and a sudden augmentation or diminution of the
specie, supposing it could of itself operate the effects of raising
or sinking prices, would be restrained in its operation by foreign
competition.” l. c. v. 1, p. 400-402. “The circulation of every country
must be in proportion to the industry of the inhabitants producing
the commodities which come to market.... If the coin of a country,
therefore, falls below the proportion of the price of industry offered
to sale, inventions, like symbolical money, will be fallen upon, to
provide for an equivalent for it. But if the specie be found above the
proportion of industry, it will have no effect in raising prices, nor
will it enter into circulation: it will be hoarded up in treasures....
Whatsoever be the quantity of money in a nation, in correspondence with
the rest of the world, there never can remain in circulation, but the
quantity nearly proportional to the consumption of the rich and to the
labour and industry of the poor inhabitants,” and this proportion is
not determined “by the quantity of money actually in the country” (l.
c. p. 403-408 passim.) “All nations will endeavor to throw their ready
money, not necessary for their own circulation, into that country where
the interest of money is high with respect to their own.” (l. c. v. 2.
p. 5). “The richest nation in Europe may be the poorest in circulating
specie.” l. c., v. 2, p. 6. For the polemics against Steuart see Arthur
Young. [In his foot-note in Capital, v. 1, Part 1, ch. III., section
2, b. p. 62, Humboldt ed., Marx says: The theory of Hume was defended
against the attacks of J. Steuart and others, by A. Young, in his
“Political Arithmetic,” London, 1774, in which work there is a special
chapter entitled “Prices depend on quantity of money.” Note by K.
Kautsky to 2nd German edition].

[129] Steuart, l. e., v. 2, p. 370. Louis Blanc translates the
expression “money of the society” which stands for home or national
money, as socialist money, which is perfectly meaningless and makes
a Socialist of John Law. (See the first volume of his History of the
French Revolution).

[130] Maclaren, l. c. p. 43 seq. Patriotism led Gustav Julius, a
German writer who met with very early death, to hold up old Büsch as
an authority as against the Ricardian school. Honest Büsch rendered
Steuart’s elegant English into Hamburg Platt and by trying to improve
upon the original spoiled it as often as he could.

[131] Note to the 2nd edition: This is not an exact statement. Adam
Smith expresses the law correctly on many occasions. [See Capital,
Humboldt edition, p. 62, ft-note 1, where writing seven years later,
Marx makes the following qualification: “This statement applies only
in so far as Adam Smith, _ex officio_, treats of money. Now and then,
however, as in his criticism of the earlier systems of political
economy, he takes the right view. ‘The quantity of coin in every
country is regulated by the value of the commodities which are to be
circulated by it.... The value of the goods annually bought and sold
in any country requires a certain quantity of money to circulate and
distribute them to their proper consumers, and can give employment to
no more. The channel of circulation necessarily draws to itself a sum
sufficient to fill it, and never admits any more.’ Wealth of Nations,
Book iv., ch. I.”]

[132] The distinction between currency and money is therefore
not found in “Wealth of Nations.” Deceived by the apparent impartiality
of Adam Smith, who knew his Hume and Steuart very well, honest Maclaren
remarks: “The theory of the dependence of prices on the extent of the
currency had not as yet, attracted attention; and Doctor Smith, like
Mr. Locke (Locke undergoes a change in his view), considers metallic
money nothing but a commodity.” Maclaren, l. c. p. 44.

[133] David Ricardo, “The High Price of Bullion, a Proof of
the Depreciation of Bank-notes.” 4th edition, London, 1811. (The first
edition appeared in 1809). Further, “Reply to Mr. Bosanquet’s Practical
Observations on the Report of the Bullion Committee.” London, 1811.

[134] David Ricardo: “On the Principles of Political Economy,
etc.” p. 77. “Their value [of metals] [like that of all other
commodities], depends on the total quantity of labour necessary to
obtain the metal, and to bring it to market.”

[135] 1 p. 77, 180, 181.

[136] Ricardo, l. c. p. 421. “The quantity of money that can be
employed in a country must depend on its value: if gold alone were
employed for the circulation of commodities, a quantity would be
required, one fifteenth only of what would be necessary, if silver were
made use of for the same purpose.” See also Ricardo’s: “Proposals for
an Economical and Secure Currency,” London, 1816, p. 89, where he says:
“The amount of notes in circulation depends on the amount required for
the circulation of the country; which is regulated ... by the value
of the standard [of money], the amount of payments, and the economy
practised in effecting them.”

[137] Ricardo, “Principles of Political Economy”, p. 432.

[138] David Ricardo, “Reply to Mr. Bosanquet’s Practical Observations,
etc.” p. 49. “That commodities would rise or fall in price, in
proportion to the increase or diminution of money, _I assume as a fact
which is incontrovertible_.”

[139] David Ricardo, “The High Price of Bullion,” etc. “Money would
have the same value in all countries.” p. 4. In his Political Economy
Ricardo modified this statement, but not in a way to affect what has
been said here.

[140] l. c. p. 3-4.

[141] l. c., p. 4.

[142] Ricardo, l. c., p. 11-12.

[143] Ricardo, l. c., p. 14.

[144] l. c., p. 17.

[145] Ricardo, l. c., p. 74-75. “England, in consequence of a bad
harvest, would come under the case of a country having been deprived
of a part of its commodities, and, therefore, requiring a diminished
amount of circulating medium. The currency which was before equal to
her payments would now become superabundant and relatively cheap,
in proportion ... of her diminished production; the exportation of
this sum, therefore, would restore the value of her currency to the
value of the currencies of other countries.” His confusion of money
and commodity, and of money and coin borders on the ludicrous in
the following passage: “If we can suppose that after an unfavorable
harvest, when England has occasion for an unusual importation of corn,
another nation is possessed of a superabundance of that article, but
has no wants for any commodity whatever, it would unquestionably follow
that such nation would not export its corn in exchange for commodities:
_but neither would it export corn for money_, as that is a commodity
which no nation ever wants absolutely, but relatively.” l. c., p.
75. Pushkin in his hero poem makes the father of his hero incapable
of comprehending that commodities are money. But that money is a
commodity, the Russians have understood from times of yore as is proven
not only by the English corn imports in 1838-1842, but by the entire
history of their commerce.

[146] Conf. Thomas Tooke, “History of Prices,” and James Wilson,
“Capital, Currency and Banking.” (The latter work is a reprint of a
series of articles which appeared in the London Economist in 1844, 1845
and 1847.)

[147] James Deacon Hume: “Letters on the Corn Laws.” London, 1834, p.
29-31. [Letter by H. B. T. on the Corn Laws and on the Rights of the
Working Classes. Transl.]

[148] Thomas Tooke, “History of Prices,” etc. London, 1848, p. 110.

[149] Conf. W. Blake’s above quoted “Observations etc.”

[150] James Mill: “Elements of Political Economy.” [London, 1821, p.
95-101 passim. Transl.]

[151] A few months before the outbreak of the commercial crisis of
1857, a committee of the House of Commons was in session to inquire
into the effect of the bank-laws of 1844 and 1845. Lord Overstone, the
theoretical father of these laws, delivered himself of this boast in
his testimony before the committee: “By strict and prompt adherence
to the principles of the act of 1844, everything has passed off with
regularity and ease; the monetary system is safe and unshaken, the
prosperity of the country is undisputed, the public confidence in
the wisdom of the act of 1844 is daily gaining strength; and if the
committee wish for further practical illustration of the soundness of
the principles on which it rests, or of the beneficial results which it
has assured, the true and sufficient answer to the committee is, look
around you; look at the present state of trade of the country, look
at the contentment of the people; look at the wealth and prosperity
which pervades every class of the community; and then, having done so,
the committee may be fairly called upon to decide whether they will
interfere with the continuance of an act under which these results have
been developed.” Thus did Overstone blow his own horn on the fourteenth
of July, 1857; on the twelfth of November of the same year the Ministry
had to suspend on its own responsibility the wonderful law of 1844.

[152] Tooke was entirely ignorant of Steuart’s work, as may be seen
from his “History of Prices for 1839-1847,” London, 1848. where he
reviews the history of the theories of money.

[153] Tooke’s most important work besides the “History of Prices” which
his co-worker Newmarch published in six volumes, is “An Inquiry into
the Currency Principle, the Connection of the Currency with Prices”
etc., 2nd edition, London, 1844. Wilson’s book we have already quoted.
Finally there is to be mentioned John Fullarton’s “On the Regulation of
Currencies,” 2d edition, London, 1845.

[154] “We ought to ... distinguish ... between gold ... as merchandise,
_i. e._ as capital, and gold ... as currency” (Tooke, “An Inquiry into
the Currency Principle, etc.” p. 10). “Gold and silver may be counted
upon to realize on their arrival nearly the exact sum required to be
provided ... gold and silver possess an infinite advantage over all
other description of merchandize ... from the circumstance of being
universally in use as money.... It is not in tea, coffee, sugar or
indigo that debts, whether foreign or domestic, are usually contracted
to be paid, but in coin; and the remittance, therefore, either in the
identical coin designated, or in bullion which can be promptly turned
into that coin through the mint or market of the country to which
it is sent, must always afford to the remitter, the most certain,
immediate, and accurate means of affecting this object, without risk
of disappointment from the failure of demand or fluctuation of price.”
(Fullerton, l. c. p. 132-133.) “Any other article (except gold or
silver) might in quantity or kind be beyond the usual demand of the
country to which it is sent.” (Tooke: “An Inquiry, etc.”)

[155] The transformation of money into capital we shall consider in the
third chapter which treats of capital and forms the end of the first

[156] This introduction was first published in the Neue Zeit (see
Translator’s Preface, p. 5) of March 7, 14 and 21, 1903, by Karl
Kautsky, with the following explanation:

“This article has been found among the posthumous papers of Karl Marx.
It is a fragmentary sketch of a treatise that was to have served as an
introduction to his main work, which he had been writing for many years
and whose outline was clearly formed in his mind. The manuscript is
dated August 23, 1857.... As the idea is very often indicated only in
fragmentary sentences, I have taken the liberty of introducing here and
there changes in style, insertions of words, etc.... A mere reprint of
the original would have made it unintelligible.... Not all the words in
the manuscript are legible....

“Wherever there could be no doubt as to the necessity of corrections,
I did so without indicating them in the text; in other cases I put all
insertions in brackets. Wherever I am not certain as to whether I have
deciphered a word correctly, I have put an interrogation point after
it; other changes are specially noted. In all other respects this is
an exact reprint of the original, whose fragmentary and incomplete
passages serve to remind us only too painfully of the many treasures
of thought which went down to the grave with Marx, treasures which
would have sufficed for generations if Marx had not so anxiously
avoided giving to the world any of his ideas until he had tested them
repeatedly from every conceivable point of view and had given them a
wording that would be incontrovertible. In spite of its fragmentary
character it opens before us a wealth of new points of view.”

[157] The original reads “person.”

[158] The manuscript reads “production.”

[159] The manuscript reads “production.”

[160] The German text reads “instruktiv,” which I take to be a misprint
of “instinktiv.” Translator.

[161] Compare this with foot-note 1, on p. 34 of Capital, Humboldt
edition, New York:

“Truly comical is M. Bastiat, who imagines that the ancient Greeks and
Romans lived by plunder alone. But when people plunder for centuries,
there must always be something at hand for them to seize; the objects
of plunder must be continually reproduced.” K. Kautsky.

[162] The English expression is used by Marx in his German original.

[163] Marx evidently has in mind here a passage in Adam Smith’s Wealth
of Nations (vol. 2, ch. 2) in which he speaks of the circulation of
a country as consisting of two distinct parts: circulation between
dealers and dealers, and that between dealers and consumers. The word
dealer signifies here not only a merchant or shopkeeper, but also a
producer. K. Kautsky.

[164] Here two words in the manuscript can not be deciphered. They look
like “ausser sich” (“outside of itself”). K. Kautsky.

[165] Distribution (Verkehr) is used here in the sense of physical
distribution of goods and not in sense of economic distribution of the
shares of the products between the different factors of production.

[166] As the “notes” written down by Marx in the following eight
paragraphs are extremely fragmentary, making translation in some cases
impossible without a certain degree of interpretation, and as the
original is not accessible in book-form, they are reproduced here in
German for the benefit of the student who may feel interested in the
original wording as it had been jotted down by Marx.

[167] Im Original ist zu lesen Va

[168] Im Original ist zu lesen egtl.

[169] The site of the “Times” building in London. K. K.


  Arbuthnot, 258.

  Aristotle, 19, 41, 53, 78-79, 153, 154, 184.

  Athenaeus, 87.

  Attwood, 100.

  Bailey, 84.

  Barbon, 95.

  Bastiat, 34.

  Berkeley, Bischop, 32, 95-96, 155.

  Bernier, 173.

  Blake, 133, 250.

  Blanc, Louis, 231.

  Boisguillebert, 56, 59, 121, 133, 166, 168, 198.

  Bosanquet, 124, 235, 242.

  Bray, 106.

  Brougham, 70.

  Buchanan, 147.

  Büsch, 231.

  Carli, 205.

  Castlereagh, Lord, 100.

  Cato, 170.

  Chevalier, 154, 215.

  Clay, 258.

  Cobbet, 123.

  Cooper, 32.

  Corbet, 124.

  Darimont, 107.

  Dodd, 141.

  Forbonnais, 226.

  Franklin, 62-3, 155, 226.

  Fullarton, 260.

  Galiani, 30, 65, 85, 111, 134.

  Garnier, 87, 141.

  Genovesi, 51, 164.

  Gladstone, 73.

  Gray, 103 sq.

  Grim, 211.

  Hodgskin, 55.

  Horace, 178.

  Hume, D., 219, 221 sq, 231.

  Hume, J. D., 249.

  Jakob, 141, 181.

  Jovellanos, 61.

  Julius, 231.

  Körner, 212.

  Law, 226, 231.

  List, 34.

  Locke, 91, 93 sq., 199, 219, 226, 233.

  Lowndes, 94.

  Luther, 174-5, 190.

  McCulloch, 31, 57.

  Maclaren, 82, 231, 233.

  Macleod, 71, 193.

  Malthus, 34.

  Mandeville, Sir J., 154.

  Mill, James, 123-4, 250 sqq.

  Misselden, 165, 171, 174-5.

  Montanari, 38.

  Montesquieu, 219, 227.

  Müller, 85.

  Norman, 258.

  Opdyke, 124.

  Overstone, Lord, 241, 258.

  Peel, Sir R., 73, 100, 241, 258.

  Pereire, 120.

  Peter Martyr, 210.

  Petty, Sir W., 32, 56 sq., 165, 172-3.

  Plato, 153.

  Pliny, 177.

  Proudhon, 61, 72, 103, 107.

  Ricardo, 56, 69 sq., 71, 217, 231, 235, 250, 259.

  Say, 34, 71, 123, 153, 233.

  Senior, 178, 194.

  Sismondi, 56, 77.

  Smith, 34, 57, 61, 67-68, 80, 231 sq.

  Spence, 123.

  Stein, 21, 31-2.

  Steuart, Sir James, 65 sq., 94 sq., 222, 227 sq., 260.

  Storch, 152-3, 179.

  Thompson, 106.

  Tooke, 124, 247, 249, 260 sq.

  Torrens, 58.

  Urquhart, 89.

  Ustariz, 61.

  Wilson, 260.

  Xenophon, 181, 184.

  Young, 231.

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