What is money, anyway?

In the context of all that is happening around us, the question of what money is gains some special importance. I’m seeing the question raised and answered in the media in ways which I think are especially unhelpful, and perhaps even dangerous.

Money is a commodity that represents or “stores” value and, in the sense of our immediate thinking and needs, acts as a means of payment. To the extent that it measures and controls other commodities it has a special relationship to everything that is produced and distributed.

Most Americans probably believe that our money is backed by gold or silver, a hard material with some intrinsic value all of its own. Even if this was the case—and it is not—we have to realize that the widespread use of paper money and coins as we know them today is something quite recent and we have to ask what really gives gold and silver their values and how their values are maintained over years. Dollars replaced gold as the internationally accepted form of value by the end of the Second World War. By 1973 or 1975, when the big recession hit, the links between gold, silver, international trade and value had either faltered or were breaking down.

The peculiar evolution and development of commodity production that we live with rest on the development of forms of value. Barter and money, in this sense, are historic forms of value.
Money clearly has had a historic and determining economic and political role, but its role has shifted from being one form of value among several and an instrument for expanding trade to being a commodity and the pre-eminent form of value with a special determining relationship with all other commodities.

Capitalism could not have developed without money and currency. Only under mature capitalism can a capitalist class hold money in reserve, put it into action, make profits and turn money into capital. Capital, in this sense, is the accumulation of money and depends upon commodity production and distribution. Money that purchases goods and services remains money. Money that is used to buy things for resale at a profit is capital.

Think about this in terms of relationships. Capital and money are kinds of “third parties” that insert themselves between you and others. You can exchange money or capital all day long and be no better off than you were to start with. Capital only begins to yield profits when it is put to work buying someone’s labor power and putting that power to work in production or administration. A product is then produced and sold at its averaged value and at a rate which exceeds what the producers—the workers-- need to live. The surplus produced, the need to work for a living, the buying and selling of labor power and other commodities normally insures a well-functioning, if basically unjust, capitalist system. The push in the system is always towards lowering labor costs and the costs of production while increasing production and finding new markets.

Really, the idea that a thing has or maintains some inherited value is abstract. And what could be more abstract than giving gold and silver a special relationship to value, money and the production and distribution of all commodities? Once started, this abstract process seems to know very few limits and becomes more dangerous. Credit cards, home equity loans and the various “financial instruments” which are such a subject of debate today all rest on this abstraction. They have been globalized out of capitalist necessity.

So long as labor or labor power is a commodity, to be sold by workers in order to live and produce more, there will be a need for money. Money, in fact, helps to express this relationship of need and power. Someone has money because someone else does not. Money regulates production and distribution in exactly this sense, in fact. It allows for certain kinds of innovation and development (what is profitable) while also making other forms of innovation and development impossible (what is not profitable). Production and distribution are limited by money’s role in “what the market can bear” but the casual selling and buying of credit can have the dangerous potential to help turn that theoretical market upside down.