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LIBRARY

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A CONTRIBUTION TO
THE CRITIQUE OF
POLITICAL ECONOMY

KARL MARX

Translated from the Second German EditioB by N. I. Stone

Wt<ban Appendix Containing Marx's Introduction to the Critique
Recently Published among His Posthumous Papers.

CHICAGO ^ yr\

CHARLES H. KERR & COMPANY

LOAN STACK

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TRANSLATOR'S PREFACE,

The present translation has been made from the sec-
ond edition of the "Zur Kritik der Politischen Oekon-
omie," 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 book.

As will be seen from the author's preface, the work
was originally issued as the first instalment of a com-
plete 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"
lie 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
ihe present work was thus abandoned in its formal as-
pects, but not in substance. The subject matter treated
here Avas 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 the-
ory, which until recently was entertained almost exclu-
sively by socialist writers and was hardly heard of out-
side of socialist circles in English speaking countries,
is at last receiving not only due recognition but sym-
pathetic appreciation at the hands of men of science.*
It is rather a significant coincidence that the work

* Cf. Seligman, "The Economic Interpretation of History.
MacMillan, 1902.

which for the first time clearly formulated the law gov-
erning 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
jjrejudices.

The Introduction to the Critique of Political Econ-
omy 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 ex-
plained 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 con-
scious 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

^ 6 —

evidence in the present work rendering translation a
more diBBcult task. Yet for that very reason it seemed
particularly desirable to give to English speaking read-
ers 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
wife slight modifications here and there.

About the only liberty taken with Marx's terminology
has been in the case of the word **biirgerlich." Marx
speaks here of "biirgerliche Produktion'' and "btirger-
licher Eeichthum'' and "biirgerliche 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 *^urgeois" system of
production, etc., the translator considered Marx's own
change of this term within a few years from the publi-
cation of "Zur Kritik" a sufficient justification for ren-
dering the word ''biirgerlich" into "capitalistic" wher-
ever 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 Washingrton, and

the private library of Professor Seligman to whose kind-
ness 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 there-
fore 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 omitted.

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

New York, October, 1903.

AUTHOR'S PREFACE,

I consider the system of bourgeois economy in the fol-
lowing 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 bour-
geois 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 sys-
tematic elaboration on the plan outlined above will de-
pend upon circimastances.

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.

— 10 —

On the other hand, some remarks as te the course of
my own politico-economic studies may be in place here.

The subject of my professional studies was jurispru-
dence, which I pursued, however, in connection with and
as secondary to the studies of philosophy and history.
In 1842-43, as editor of the "Hheinische Zeitung," I
found myself embarrassed at first when I had to take
part in discussions concerning so-called material in-
terests. The proceedings of the Ehine Diet in
connection with forest thefts and the extreme sub-
division 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
"AUgemeine Augsburger Zeitung" that my previous
studies did not allow me to hazard an independent judg-
ment 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 pro-
nounced upon- it, I was glad to grasp that opportunity
to retire to my study room from public life.

The first work imdertaken for the solution of the

— 11 --

question that troubled me, was' a critical revision of
Hegers ''Philosophy of Law*'; the introduction to that
work appeared in the "Deutsch-Franzosische Jahr-
biicher," 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 pow-
ers 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

— 12 —

their consciousness. At a certain stage of their develop-
ment, 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 fet-
ters. Then comes the period of social revolution. With
the change of the economic foundation the entire im-
mense superstructure is more or less rapidly trans-
formed. In considering such transformations the dis-
tinction should alwa^-s be made between the material
transformation of the economic conditions of produc-
tion w hich can be determined with the precision of nat-
uralscience, 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 ex-
plained from the contradictions of material life, from
the existing conflict between the social forces of produc-
tion 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

— 13 —

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 out-
lines we can designate the Asiatic, the ancient, the feudal,
and the modem 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 produc-
tive forces developing in the womb of bourgeois society
create the material conditions for the solution of that
antagonism. This social formation constitutes, there-
fore, the closing chapter of the prehistoric stage of
human society.

Frederick Engels, with whom I was continually cor-
responding and exchanging ideas since the appearance
of his ingenious critical essay on economic categories
(in the "Deutsch-Franzosische Jahrbiicher"), came
by a different road to the same conclusions as my-
self (see his "Condition of the Working Classes in Eng-
land^'). 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 accoimts 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

— 14 —

to the stinging criticism of tiie mice the more readily
eince we had accomplished our main purpose — ^the clear-
ing 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 *'Mani-
festo 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 pre-
sented scientifically, though in a polemic form, in my
**Misere de la Philosophic, etc." directed against Proud-
hon 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 leav-
ing 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 Lon-
don 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

— 15 —

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 *T^ew 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 simpl}'^ 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 vilta convien che qui sia morta.

Eabl Maex.
London, January, 1859.

Vvp.

^^ 4 ,j.^h^-^r^''

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CONTENTS.

PAOE.

Translator's Preface 3

Author'« Preface 9

BOOK I. CAPITAL IN GENERAL.

Chaptci.' I. Commodities 19

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

Chapte* II. Money or Simple Circulation 73

1. The Measure of Value 74

k 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 Dis-

tribution, Exchange, and Consumption 274

3. The Method of Political Economy 292

4. Production, Means of Production, and Con-

ditions of Production 306

Index 313

Capital in General.

BOOK L

CHAPTER I.

COMMODITIES.

At first sight! tlie 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 vdlu$
and exchange value.^

A commodity is first of all, in the language of EngliA

^Aristotle, d. Rep. L. 1, c. 9 (edit. I Bekkeri Oxonii, 1837)'.

CSMTOV '>ap KT^/Htarof ivrrri i^ \pii<ri^ itrTLv...if fLiv oiiceta, 19 J' ovc ouc«t« rmv'
ir/MY^arof^Iov v«-o2i)M.aTO« ij re viroSyjo-t? «cai ij /icto/SAtituc^. 'Afi^oTcp«u y«P »*•-
£iJK<tro9 XprtvtK^'i koX yap o aAAarro^ecof r<Z SfOftiv^ viro£^|i.aTo« afrl t^f^ur^Mtrsc
11 rpo^ffi xPV^^^^V viro^JJ^aTi jj inroS^jfi*, iAA' ou ttji' oiiceiaf ;^p^o-n'' ow yap «AA«-
y^ tytKtv ytycvtv- Tor •vrbf W rpowof ix^'- *** Tepi twi' aAAtar «mf/A«[TiM'.**

(•'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 ex-
change; 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 Aris-
totle, translated into English by B. Jowett, Oxford, 1885^
T. I., p. 16.)

— 20 —

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 com-
modities 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 ex-
tent of its possible applications is circumscribed by its
distinct properties. Furthermore, it is thus limited
not only qualitatively but also quantitatively. Accord-
ing 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, in-
dependent 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 com-
modity. It is the necessary pre-requisite of a commodity
to be a use-value, but it is immaterial to the use-value
whether it is a commodity or noi Use-value in this

— 21 —

indifference to the nature of its economic destination,
i. e. use-value as such Hes outside the sphere of in-
vestigation of political economy/ 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 value.

Exchange-value appears at first sight as a quantita-
tive relation, as a proportion in which use-values are
exchanged for one another. In such a relation they
constitute equal exchangeable quantities. Thus, a vol-
ume of Propercius and eight ounces of snuff may rep-
resent the same exchange value, in spite of the dissim-
ilar use-values of tobacco and elegy. As exchange-val-
ue, 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.

'That is the reason why German compilers are so fond of
dwelling on use-value, calling it a "good." See ©. g. L. Stein,
"System der Staatswissenschaften," v. I., chapter on "goods"
(Glitter). For intelligent information on "goods" one must
turn to treatises on commodities.

Use-values are primarily means of existence. These
means of existence, however, are themselves products
of social life, the result of expended human vital pow-
er, materialised 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 ex-
change values. As equivalents, in which the qualita-
tive difference between their use-values has been elim-
inated, 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. Fur-
thermore, the different use-values are the products of
the work of different individuals, consequently the re-
sult of various kinds of labor differing individually;

from one another. But as exchange values, they rep-
resent the same homogeneous labor, i. c, 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 val-
ues. 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 quan-
titative differences of commodities in their capacity of
exchange values are but quantitative differences of la-
bor 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 la-
bor-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, inde-
pendent 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

— 24 —

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 la-
bor-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 val-
ues, all commodities are but definite measures of con-
gealed labor-time.

To understand how exchange value is determined by
labor^ime, 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., com-
modity 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 commod-
ities 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 de-
fined 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 hu-
man muscles, nerres, 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 char-
acter 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 pro-
duction of iron and six hours on linen, and B also pro-
duces 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 pro-

— 26 —

portion, 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 com-
modity is the labor-time necessary for its production,
i. e., it is the labor-time which is required for the pro-
duction of another specimen of the same commodity
under the same general conditions of production.

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. So-
cial, not in the ordinary, but in a special sense. It is
a specific form of the social process. The homogene-
ous 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 re-
duction 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

— sr —

labar-ttme, and this ttniversal character of individ-
ual labor is the manifestation of its socicU character.
The labor-time represented by exchange value is the
labor-time of an individual, but of an individual undis-
tinguished from other individuals in so far as they per*
form the same labor ; therefore, the time required by
one individual for the production of a certain commod-
ity is the necessary labor-time which any other indi-
vidual 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 indi-
vidual, and may be turned at will into any other form
of use-value to represent the product of any other in-
dividual. 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 uni- i^
versal equivalent, i. e., the labor-time of an indi-
vidual 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 quanti-
ties of labor-time at their common disposal in the form
of different use-values. The labor-time of the indi-
vidual is thus, in fact, the labor time which society re-
quires for the production of a certain use-value, i. e.,

— 28 —

for the satisfaction of a certain want. But the ques-
tion 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 lin-
en, 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 con-
tains 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 uni-
versal equivalents, is the labor of the weaver realized
for the spinner, and that of the spinner, for the weav-
er, the labor of one takes the place of the labor of the
other, i. e., the social character of their labors is real-
ized for both. Quite different it was under the patri-
archal 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 fam-
ily ; 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 it-
self in the fact that yam, 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 la-
bor-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 in-
dividual in its natural form, the particular and not the
universal aspect of labor, that constituted then the so-
cial tie. Or, let us finally take labor carried on in com-
mon in its primitive natural form, as we find it at the
dawn of history of all civilized races.* 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 prod-
uct 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 prod-
uct ; on the contrary, it makes individual labor appear
as the direct function of a member of a social organ-
ism. On the contrary, labor, which is expressed in ex-
change value, at once appears as the labor of a separ-
ate individual. It becomes social labor only by taking

*A ridiculous presumption has gained currency of late to
the effect that common property in its primitive form is spe-
cifically a Slavonian, or even exclusively Russian form. It
is the primitive form which we can prove to have existed
among Eomans, 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 In-
dian 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 origi-
nal types of Roman and Teutonic private property can be
traced back to various forms of Indian communism.

— so-
on the form of its direct opposite, the form of abstract
universal labor.

Labor, which creates exchange value, is, finaliy, char-
acterized 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 be-
ing identical universal labor. Hence, if it be correct to
say that exchange value is a relation between persons,*
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 differ-
ent physical and chemical properties, so do two use-
values, as commodities containing the same quantity
of labor-time, represent the same exchange value. Ex-
change value thus appears as the natural social destina-
tion 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 propor-
tions, 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 com-
monplace, that a social relation of production should
take on the form of a thing, so that the relation of per-
sons in their work appears in the form of a mutual re-

*"La Ricchezza h una ragione tra due persone." (**Value is
a relation l>etween two persons") Galiani, "Delia MIoneta,"
p. 220 in vol. II. of Custodi's collection of "Scrittori classici
Italiani di Eeonomia Politioa. Parte Moderna," Milano, 1803.

— 31 —

lation between things, and between things and persons.

In commodities this mystification is as yet very sim-
ple. It is more or less plain to everybody that a rela-
tion 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 re-
lation of production, but as a product of nature en-
dowed with certain properties. The modern economists
who sneer at the illusions of the monetary system, be-
tray the same illusion as soon as they have to deal with
higher economic forms, as, e. g., capital. It breaks
forth in their confession of naive surprise, when what
they have just thought to have defined with great diffi-
culty as a thing suddenly appears as a social relation
and then reappears to tease them again as a thing, be-
fore 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 individ-
uals — 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 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, Eddnburgh, 1825, p. 48. It is evident how high even a
J^lfCulloch stands above the fetichism of German "thinkers,"

— 32 —

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 ele-
ments and man*s labour therein, be not the true source
of wealth,"' 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 re-
main? A few grains of grass, growing wild in the
woods, and unfit for any human purpose*" — ^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
who declare "matter** and half a dozen other foreign things
to be elements of value. Cf. e. g. L. Stein, 1. c. v. I., p. 110.

^Berkeley, The Querist, (London, 1750.

'Thomas Ck)oper, Lectures on the Elements of Political
Economy, London, 18-31, p. 99.

— 33 —

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 real-
ized 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 w^hich it is applied.

It is wrong to speak of labor in so far as it is ap-
plied 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 OT that purpose, it requires matter as a pre-requi-
site. 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 con-
trary, labor producing exchange value is a specifically
social form of labor. Tailoring, e. g., in its material
manifestation as a distinct productive activity, pro-
duces a coat, btit 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

-« 34 —

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 with-
out 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
official/

Let us consider now some propositions which fol-
low 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 re-
garded as a result ; the question in this case is not as
to the service which it renders, but as to the service*
which it has been rendered in its production. Thus,
the exchange value of a machine is determined not by

*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.

'It can be readily understood what kind of "service" is ren-
dered by the category "service" to economists of the type of
J. B. Say and F. Bastiat, whose pondering sagacity, as Mai-
thus has justly remarked, always abstracts from the spe-
cifically definite forms of economic relations.

— 35 —

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 re-
quired for the production of the same use-value. Thus,
the labor-time contained in a commodity or its ex-
change-\'-alue is a variable quantity, increasing or di-
minishing 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 dep>ends 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 un-
favorable season. In this case, scarcity or abundance,
as natural conditions, seem to determine the exchange
value of commodities, because they determine the pro-
ductivity 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.

— 36 — .

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 quan-
tities, 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 commod-
ities.

The exchange value of a commodity is not revealed
in its own use-value. But, as the embodiment of uni-
versal social labor-time, the use-value of one commod-
ity bears a certain ratio to the use-values of other com-
modities. 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 com-
modity. 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

— 37 —

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 pro-
portion 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 ex-
pressed in the sum total of these equations or of the
different proportions in which one commodity is ex-
changed for every other commodity, does it find an
exhaustive expression as a universal equivalent; e. g.,
the series of equations :

1 yard of linen = 5^ 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 = ^ lb. of tea + /^ lb. of coffee -{-
2 lbs. of bread + 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 ex-
haustively 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/

If the exchange value of one yard of linen is expressed
in Yq. 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 com-
mon measure of the exchange values of all other com-
modities; 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

* "Egli 6 proprio ancora delle misure d'aver si fatta relatione
colle cose misurate, che in certo modo la misurata divien
misura della misurante." Montanari, Delia Moneta, p. 48 in
V. Ill, of Custodies "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.")

— 39 —

of the series of equations in which its exchange value h
realized does depend upon the greater or less varietv
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 equiv-
alence 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 con-
tained in it. Its realized exchange value, i. e., its ex-
change value expressed in the use-values of other com-
modities, must also depend on the proportion in which
the labor-time spent on the production of all other com-
modities is changing. If, e. g., the labor-time required
for the production of a bushel of wheat remained con-
stant, while that required for the production of all
other commodities doubled, the exchange value of a
bushel of wheat expressed in its equivalents would be-
come half as large as before. The result would be prac-
tically the same as if the amount of time necessary for
the production of one bushel of wheat had been re-
duced by one-half, and that required for all other com-
modities had remained unchanged. The value of com-
modities 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 B.

First case. Let the labor-time required for the pro-
duction of commodity B remain unchanofed. In thai

— 40 —

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 pro-
duction 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 pro-
duction 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 uni-
formly, 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 ex-
pression of their exchange values would remain un-
changed, and the actual wealth of society would de-
crease, 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 pro-
duction 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 in-
tegral units or in fractions thereof. As exchange value.

— 41 —

every commodity is capable of subdivision, like the
labor-time embodied in it. The equivalence of commod-
ities is independent of their physical divisibility as use-
values, just as the sum of the exchange values of com-
modities 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 two-
fold point of view, as use-values and exchange values
alternately. But a commodity as such is a direct com-
bination 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 par-
ticipated in by individuals independent of each other
but the part they take in it is that of owners of com-
modities 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 ex-
change; 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.*

^ It is in that sense that Aristotle ( see the passage quoted at
the b^inning of this chapter) conceives exchange value.

— 42 —•

It has yet io hscome 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 commodit3^ On the other hand, the
commodity must become a use-value to the owner him-
self, 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 com-
modities does the labor contained in them become use-
ful labor. In this process of their mutual interchange
as use-values, commodities do not acquire any new eco-
nomic 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 rela-
tion, 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 own-
ers, and use-values to those who do not own them. To
become use-values commodities must be universally

— 43 —

alienated; they must enter the sphere of exchange; but
they are subject to exchange in their capacity of ex-
change values. Hence, in order to be realized as use-
values, they must be realized as exchange values.

While the single commodity appeared from the stand-
point of use-value as something independent, as ex-
change 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 com-
modity is an exchange value in so far as a certain quan-
tity of labor-time has been expended on it, and it con-
sequently represents materialized labor-time. But of
itself it is only materialized individual labor-time of a
particular kind, and not universal labor-time. There-
fore, it is not directly an exchange value, but must first
become such. First of all, it is an embodiment of uni-
versal 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 condi-
tion under which alone labor-time contained in com-
modities 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 sat-
isfying a certain want. On the other hand, it is ex-
changed for another commodity, or, if we put ourselves
on the side of the owner of the other commodity, it, too,

— 44 —

can be alienated, i. e., be realized, only if brought in
contact with that particular want of which it is the ob-
ject. 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 ex-
changed only with reference to certain wants. They
are exchangeable only as equivalents, and they are equiv-
alents 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 com-
modities 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 rela-
tion 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 ob-
jects, of use-values intended for the satisfaction of par-
ticular wants, in short, a relation in which they are dis-
tinguished as actual use-values. But this equivalence
and non-equivalence mutually exclude each other. Thus

— 45 —

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 con-
tradictions, 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 com-
modities, 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 di-
vested 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,

— - 46 — ■

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 jiist 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 pro-
cess 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 commodities.

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

1 yard of linen = 2 lbs. of coffee.

1 yard of linen r= ^ 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 individud labors which are
represented in these particular use-values, become uni-
versal, and, in that form, also social labor, only when
they are actually exchanged for one another in pro-
portion to the labor-time contained in them. Social
labor-time exists in these commodities in a latent state,
»o 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

— 47 —

of private individuals which appears as universal social
labor only b}^ divesting itself of its original character
in the process of exchange. Universal social labor is,
therefore, no ready-made assumption, but a growing re-
sult. And thus we are confronted with a new difficulty,
that on the one hand commodities must enter the pro-
cess 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 di-
vesting itself of its use-value, or of its original nature.
The commodity must therefore assume a double ca-
pacity in the process of exchange. But that second
capacity of exchange value can appear only in the shape
of another commodity, because only commodities con-
front 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 equa-
tions, such as:

1 yard of linen = 2 lbs. of coffee.

1 yard of linen t= y^ \h. of tea.

1 yard of linen = 8 lbs. of bread.

1 yard of linen t= 6 yards of ealico.

1 yard of linen = etc.
The above form is theoretical in so far af commod-

— 48 —

ities are only thought of as definite quantities of mate-
rialized 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.

^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 commod-
ities 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 vol-
umes 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 com-
modities measure their exchange values by means of a
particular commodity, this excluded commodity be-
comes 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 defi-

— 49 —

nite 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. Uni-
versal 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 equa-
tion 2 lbs. of coffee = 1 yard of lineji, 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 ex-
change 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

— 50 —

its special use-value as a particular commodity, it as-
sumes 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 equiv-
alent, 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 depos-
itory 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 par-
ticular use-value and a universal equivalent, and, there-
fore, a use-value for everybody or universal use-value.
Thus, while all other commodities express their ex-
change 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
fts commodity, as universal labor-time embodied in a
particular use-value. In the process of exchange, all
commodities are related to the one excluded commodi
ity as to a simple commodity, one which appears as the

— 51 —

embodiment of universal labor-time in a particular use-
value. Thus, particular commodities become related to
one particular commodity as a universal commodity/
In that manner the mutual relations of possessors of
commodities based on the fact that they regard their
labor as imiversal 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 com-
modity 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 commod-
ities, or the exchange value of commodities as a particu-
lar exclusive commodity, is money. Money is a crystal-
lization 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 sjrmbol, 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 defi-
* This expression is used by Grenovesi.

— se-
nile relations into which individuals enter in the pro-
cess 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, mys-
tification marking all social forms of labor which creates
exchange value. In money this mystification appears
only more strikingly than in commodities.

The necessary physical properties of the particular
commodity in which the money form of all other com-
modities is to be crystallized — ^as far as they are di-
rectly 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 func-
tions of exchange value and use-value among commo-
dities, 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

— 53 —

the part of money. Even if not direct means of satis-
fying 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 commo-
dities 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 be-
come commodities only within the limits of being direct
use-values distributed at opposite poles, so that the com-
modities 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 origin-
ates not within the primitive communities,* 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 in-
terior of the community, decomposing it. The various

* Aristotle makes the same remark with reference to the
private family as the primitive commimity. But the prim-
itive form of family is the tribal family, from the historical
dissolution of which the private family develops, "ip ^x**- oivrji

9fMTf jcotvwi'tqi (toOto B' e<Triv oiKia) ^avtpov on ovSdv iffrtv ep/yoy airrrji (name

ly rij\ iAAay^s) "And in the first community, which is the family,
this art is obviously of no use." Jowett's transl. 1. c.)

— 54 —

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 ex-
change 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 val-
ues, which leads to the formation of money and has
a destructive effect on direct barter. The econ-
omists 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 com-
modities may need each other's indivisible goods in un-
equal proportions. In other words, under the pretence
of analyzing simple barter, economists bring out certain
aspects of the contradiction which is inherent in com-
modities as entities simultaneously embodying both use-
value and exchange value. On the other hand, they con-
sistently cling to the idea that barter is the natural form
of exchange, which suffers only from certain technical

— 55 —

difficulties, for which money is a cunningly devised ex-
pedient. 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 rela-
tion 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/

The world of commodities implies the existence of a
highly developed division of labor ; this division is mani-
fested 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 re-

* "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 con-
sideration of ships, or steam engines, or of any other instru-
ment employed to facilitate the production and distribution of
wealth.** Th. Hodgskin, Popular Political Economy, etc. Lon-
don, 1827, p. 178, 179.

— 56 —

suit of certain social relations of production into which
the individuals enter in this interchange of matter. As
they develop, the mutual relations of commodities crys-
talize 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.

NOTES ON THE HISTORY OF THE THEORY OF
COMMODITIES.

The analysis of commodities according to their two-
fold 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 criti-
cal study by the classical school of political economy
which dates from William Petty in England and Bois-
guillebert in France* 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

*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. T^e same
contrast reasserts itself in Ricardo and Sismondi.

— 57 —

power. As regards concrete labor, he sizes it up in the
magnitude of its social aspect, as the division of labor.^
This view of the source of material wealth does not re-

* 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 multi-
plication 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 hia
junior. See McCulloch, "The Literature of Political Econ-
omy, 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 com-
parative and superlative Words, and intellectual Arguments,**
he has undertaken to speak "in Terms of Number, W^eight 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, Appe-
tites, and Passions of particular Men, to the Consideration ol
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 wonder-
ful 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 in-

~ 58 —

main more or less fruitless as in the case of his con-
temporary, Hobbes, but leads up to his Political Arith-
metic, the first form in which Political Economy is dif-
ferentiated 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 mone-
tary 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 pro-

creased, 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 Eng-
land's Subjects, have Stock competent and convenient, to drive
the Trade of the whole Commercial World" (1. c, ch. 10, p.
311). "That the Impediments of England's greatness are but
contingent and removable" (1. 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 coun-
try with English economists, just as England is with conti-
nental economists to-day — conquered the world market "with-
out such Angelical Wits and Judgments, as some attribute to
the Hollanders" (1. 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

— 59 —

duce 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 ex-
change value.

.In his turn, Boisguillebert, if not consciously,
at any rate actually reduces the exchange value of a com-
modity 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 sev-
eral branches of industry, and defines free competition
as the social process which determines these correct pro-
portions. At the same time, however, and in contrast

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 Re-
ligion as such; but rather ... to the Heterodox part of
the whole" (1. 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 ex-
travagantly, 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 bo
found only in scattered poor old editions, which is the more

— «0 —

with Petty he wages a fanatical war against money
which, by its interference, disturbs the natural equili-
brium or harmony of exchange of commodities and, like
a wanton Moloch, demands all natural wealth as sacri-
fice. It is true that this assault on money was called
forth by certain historic conditions. Since Boisguille-
bert attacked ', 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

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 Eng-
lish Whigs. However, the Lansdowne family could hardly
bring out a complete edition of Petty's works without pre-
facing it ' with his biography, and what can be said of most
origines 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 Ire-
land 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 revolution.*'

»In contrast with the "black art of finance" of his time,
Boisguillebert says: "La science financifere n'est que la con-
naissance approfondie des intfirSts de I'agriculture et du com-
merce." Le Detail de la France, 1697. Eugfene Daire's edition
of Economistes financiers du XVIII. sifecle, Paris, 1843, vol. I.,
p. 241.

— 61 —

of the world-market; still, there asserts itself here a
deeper antagonism of principles which constantly re-
curs between true English and true French* Political
Economy. Boisguillebert sees, in fact, only the material
substance of wealth, its use-value, the enjoyment ' of it,
and considers the capitalistic form of labor, i. e. the
production of use-values as commodities and the ex-
change 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 capi-
talistic 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.^
Boisguillebert furnishes us with proof that one may

* But not Romance Political Economy, since the Italians re-
produce the contrast between the English and French econo-
mists in the two respective schools of Naples and Milan, while
the Spaniards of the earlier period are either pure Mercan-
tilists; modified mercantilists like Ustariz; or, like Jovellanos
(see his Obras, Barcelona, 1839-40), hold to the "golden mean"
with Adam Smith.

'"La veritable richesse . . . jouissance entifere, non
seulement des besoins de la vie, mais m€me de tous les super-
flus et de tout, ce qui peut fair plaisir & la sensualitfi," Bois-
guillebert, "Dissertation sur la nature de la richesse," etc.>
1, 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.

■The French Socialism of the Proudhon type suffers from
the same national hereditary disease.

— en-
treat labor-time as the measure of value of commo-
dities, and at the same time confound labor embodied
in the exchange value of commodities and measured by
time, with the direct natural activity of individuals.

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 mod-
ern political economy* 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
com, while another is digging and refining silver ; at the
year's end, or at any other period of time, the complete
produce of com, 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 com. 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 re-

* "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."

— es-
quired 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 com 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 pur-
chase."^ 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."^ Substi-
tute the word "work" for "labor" in the above statement,
and the confusion of labor in one form and labor in an-
other form becomes at once apparent. Since trade con-
sists 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.^ But since he does not develop the idea
that labor contained in exchange value is abstract uni-

» L. c, p. 265.
» L. c, p. 267.

" L. c, "Remarks and Facts relative to the American Paper
Money," 1764.

— 64 —

versal labor which assumes the form ai social laDor as a
result of the universal alienation of the products of in-
dividual 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 con-
venience.^ 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 bour-
geois 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

*See "Papers on American Politics; Remarks and Facta
relative to the American Paper Money," 1764, I. c.

— 65 —

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 num-
ber of Italian economists who in some more or less in-
genious ideas came close to a correct analysis of the na-
ture of commodity/ we pass at once to the first Briton
who elaborated the general system of bourgeois econ-
omics. Sir James Steuart/ 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 de-
termines real value hy lahor-time ("what a workman can
perform in a day^'), but immediately creates confusion
by introducing the elements of wages and raw material.'*
In another place his struggle with the material sub-
stance of the subject he treats of is revealed even more

*See e. g. Galiani, "Delia Moneta," in vol. 3 of Scrittori
Classici italiani di Economia politica (Published by Custodi).
Parte Modema, Milano, 1803. "La fatica, he says, fe Tunica
ehe da valore alia cosa" ("only effort can give value to any
thing**). The designation of labor as "fatica," strain, eflFort,
is characteristic of the southerner.

* 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 vol-
umes 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 Ix)ndon edi-
tion of 1767, except where otherwise stated. Translator.)

•Steuart, I. c, vol. I., p. 181-183.

— 66 —

strikingly. He cans 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 modi-
fication [of the substance] represents a portion of a
man's time."*

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 equival-
ent, I call industry. Labor as industry he distinguishes
not only from concrete labor, but from all other social
forms of labor.* 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 cap-
italistic 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 com-
modities and commodities, the form of money in pre-
capitalistic epochs as well; but he proves conclusively
that it is only in the capitalistic period of production
that the commodity becomes the elementary and funda-

» Steuart, 1. c, vol. L, p. 361-362.

'Sec chapter I., book II., vol. I. "of the reciprocal conne*»
tions between Trade and Industry" (Translator}.

mental 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/

After different forms of concrete labor, such as agri-
culture, 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 de-
termines 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

*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 eigh-
teenth 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 capital-
istic mode of manufacture clear the factory of superflu-^us
hands.

— 68 —

dealt with each other not as capitalists, wage-workers,
landlords, tenants, usurers, etc., but merely as plain pro-
ducers of commodities which they exchanged. He con-
stantly confuses the determination of the value of com-
modities 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.
The transition from concrete labor to labor creating ex-
change 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 divis-
ion 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.

* 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 al-
ways 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, 1809. Translator.)

— - 69 —

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 gov-
erns also such relations of capitalistic production which
seem to contradict it most. Ricardo confines his inves-
tigations 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 cer-
tain historical conditions. He says, namely, that the de-
termination of value by labor-time holds good for com-
modities "only as can be increased in quantity by the
exertion of human industry, and on the production of
which competition operates without restraint.^'^ What
he really means is that the law of value presupposes for
its full development an industrial society in which pro-
duction 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 cal-
culation relating to their instruments. The "parallelo-
grams of Mr. Owen'* seem to be the only form of society

* David Ricardo, "On the Principles of Political Economy and
Taxation," 3rd edijiion, London, 1821, p. 3.

— 70 —

outside of the bourgeois form with which he was ac-
quainted. Although confined within this bourgeois
horizon, Eicardo analyzes the bourgeois economy — which
looks quite different to deeper insight than it does on
the surface — with such keen power of theoretical pene-
tration 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,^ 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 suf-
ficient to satisfy this demand.^ 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 de-
nounce 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

* Sismondi, "Etudes sur rEconomic Politique," t. II., Brux-
elles, 1837. "C'est Topposition entre la valeur usuelle . . .
et la valeur ^changeable k laquelle le commerce a reduit toute
chose," p. 161. [Paris edition, p. 229, TransL]

'Sismondi 1. c, p. 163-166 seq. [Paris edition, 230 etf.
TransL]

— 71 —

final shape, having formulated and elaborated with the
greatest clearness the law of the determination of ex-
chaQge value by labor-time, it is natural that all the
polemics among economists should center about him.
Stripped of its puerile^ form this controversy comes
down to the following points :

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 meas-
ure 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.2 But the very opposite is actually the case. Ergo.

* 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," Lon-
don, 1858.

'This objection raised against Ricardo by bourgeois econ-
omists 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

— 72 —

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 ex-
change value of commodities is determined by the rela-
tion of supply and demand and not by the labor-time
contained in them. As a matter of fact, this queer con-
clusion merely amounts to the question, how a market
price based on exchange value can deviate from that ex-
change value; or, better still, how does the law of ex-
change 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 ex-
amples : If exchange value is nothing but mere labor-

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
liimself 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 Ri-
cardian formula was about forgotten in England when Mr.
Proudhon "discovered** it on the other side of the Canal. (Cf.
my work: **Mi8fere de la Philosophie." etc., Paris, 1847, para-
graph on la valeur constitu^.)

— 73 —

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.

CHAPTER II.
MONEY OR SIMPLE CIRCULATION.

In a parliamentary debate on Sir Robert PeeFs 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 over-
come 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.

Tn the following investigation only those forms of

— 74 —

money are treated of which directly grow out of the ex-
change 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.

1. THE MEASURE OF VALUE.

The first process of circulation constitutes, so to say,
the theoritical 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 uni-
versal equivalent. Let us go back for a moment to the
form in which commodities turn gold into money.

1 ton of iron = 2 ounces of gold

1 quarter of wheat = 1 ounce of gold

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

1 hundred weight of potash = ^ ounce of gold

1 ton of Brazil timber =13^ 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

— 75 —

identical, they are the incarnation of the same labor, or
the same incarnation of labor, viz., gold. As uniform em-
bodiments of the same labor they display only one differ-
ence, a quantitative one, by appearing as different quan-
tities 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 commodi-
ties 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 ex-
change 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.

Grold becomes the measure of value,, because all com-
modities 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 com-
modities are equated to gold they are equated to one an-
other. 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 b}"^ 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 be-
comes 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

— 77 —

gold 08 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 com-
mon 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 em-
bodied 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 in-
direct 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 pro-
ductive power of concrete labor. In estimating all com-
modities 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 ex-
pressed in terms of the use-value of any other com-
modity. 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 ex-
change value of gold. If the exchange value of gold re-
mains unchanged, a general rise of gold prices is pos-
sible 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 be-
fore, a given quantity of labor-time with regard to all
commodities. The same exchange values are now esti-
mated in greater or smaller quantities of gold than be-
fore, but they are estimated in proportion to the mag-
nitude of their values, and consequently retain the same
proportion to each other. The ratio 2 -r- 4 -f- 8 re-
mains the same when expressed as 1 -r- 2 -f-4 or as
4 -V- 8 -f- 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 commen-
surable, is therefore a mere fiction of the process of
circulation.* It is rather the commensurability of com-

* True, Aristotle sees that the exchange value of commodities
underlies their prices : " 'iri ^ iAAayh ^v vpW rh yifiur^a «Tr«», Sfikw

— 79 —

modities as incorporated labor-time, that turns gold into
money.

Commodities enter the process of exchange in the con-
crete form of use-values. They are yet to be turned
into the real universal equivalent through their aliena-
tion. The determination of their prices merely amounts
to their ideal transformation into the universal equiv-
alent, 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 con-
verted 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

Jto^c'pci yap ovifv ^ ci xAZvai irevrt avri oticta(, ^ ocrov ai irivrt ^Aivai.*" 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 commensur-
able through money. ** Aib 8cr wivra. rtrt.tL^<r6ai' ovn* yap at\ Srrat. iX-
Aayii, ci it tovto, K9iv*>vim.. To jr; vopLUTfia ucnrtp fiirpov <rv;xfieTpa votrjaav iai^et,
ovre yip iv piJj ownit oAXaY^? icotvwvia V. ovr' aWayr} iaonrro? /atj ovrqif our'to-o-

T,^, ^i, .voT,? <rvMM«Tpt'«.'' ("Therefore all has to be appraised.
In that way excfiange may always take place, and, with
it, society can exist. Coin, like measure, makes every-
thing 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

— 80 —

always depends upon the way in which commodities ex-
press 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 con-
crete labor being virtually present as their use-value,
while universal abstract labor-time is ideally represented
in their price in which commodities appear as com-
mensurable embodiments of the same value — substance
differing merely in quantity.

The difference between exchange value and price ap-
pears 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

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, "t^ /*«»' oSk akrj«ti<f iivrarov rk ro-

vovTov ita4»ipovra vvftfterpa ytvetrSat.^ irpo; Si rriv xptiav ivS4\tTtu, iKavut^."

( "In truth it is impossible to make things that are so different,
commensurable, but for practical purposes it is permissible.")
Aristotle, Ethica Nicomacbea, 1. 5, c. 8, edit. Bekkeri, Oxonii,
1837.

— 81 '-'

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 con-
tained 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 in-
dividual 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 two-
fold character of labor contained in the commodity ex-
ists as yet merely as two distinct forms of expression,
and, although in consequence thereof, the embodiment of
universal labor-time, gold, confronts actual commodi-
ties 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 aliena-
tion 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

— 82 —

until it has taken the very opposite form of abstract uni-
versal 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 con-
sistent 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 mag-
nitudes. 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 sub-divided into aliquot parts.'
But quantities of gold as such are measured by weight.

^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. IC, London, 1858.

The standard of measure is thus found ready in the gen-
eral 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 quanti-
ties of gold is thus crystallized in figures which corre-
spond 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 a 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 quan-
tity 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 measur-
ing quantities of the same denomination, the establish-
ment 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 assismed a fixed ratio of value

— 84 —

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, be-
fore 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 quan-
tities 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.*

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

' "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 meas-
uring value implies, is as readily done after the reduction as
Itefore. 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).

retained for a constantly changing and decreasiixg
weight of precious metals in their function of a stand-
ard 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.* 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 hy law. The
purely formal operation thus devolved upon the govem-
ment.2 The metal which was to serve as the money ma-

^ "Le monete lequali oggi sono ideali sono le piu antiche
d'ogni nazione, e tutte furono un tempo reali (the latter aa-
eertion is too sweeping), e perchfe erano reali con esse si eon-
tava." Galiani, "Delia Moneta," 1. e., 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.")

' The romantic A. Miiller 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. Miiller, "Die Elemente der Staatskunst,"
Berlin, 1809). As far as title is concerned the Hon. Hofrath
is right; but he forgets the substance. How confused hia
"ideas" were, may be seen, e. g., from the following passage:
"Everybody understands how much depends upon the right

— 86 —

terial, was found already adopted in the community. In
different countries the legal standard of price is natur-
ally different. In England e. g. the ounce as a weight
of metal is divided into pennyweights, grains and carats
Troy, but the oimce of gold as the unit of money is di-
vided into 3 7-8 sovereigns, the sovereign into 20 shill-
ings, the shilling into 12 pence, so that 100 pounds of 22
carat gold (1200 ounces) = 4672 sovereigns and 10

determination of the mint-price, especially in a country like
England, where the government with magnificent Uberality
coins money gratuitously (Herr Mtiller seems to think that
the members of the English government defray the mint ex-
penses out of their own pockets ) , where it does not charge any
mintage, etc., and thus if the mint-price of gold were set con-
siderably above its market price, if instead of paying as now
£3 17s. lOVgd. 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" (1. c, p. 280-281).
To preserve order in English coinage, Miiller falls back on
"disorder.** While shilling and pence arc mere names of cer-
tain 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. Mtiller capable of a so-called higher conception of
political economy : first, his wide ignorance of economic facta ;
second, his dilettanti-like visionary attitude toward philosophy.

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 ex-
pressed 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 ^d.
All prices are thus expressed in the same denominations.
The peculiar form which commodities lend to their
exchange values is transformed into a money-denomina-
tion by which commodities tell each other how much they
are worth. Money in its turn becomes money of ac-
count.^

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.' 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

el»e npoi to opte^ery." { Athen. Deipn. 1. IV. 49. V. 2, ed. Schweig-
hfiuser, 1802.) (When Anacharsis was asked for what purpose
the Greeks used money, he replied, "For reckoning.")

*G. Gamier, one of the early French translators of Adam
Smith, conceived the queer notion of fixing a proportion between
the use of mcmey of account and that of actual money. His
proportion is 10 to 1. (G. Gamier, "Histoire de la Monnaie
depuis les temps de la plus haute antiquity," etc., t. 1, p. 78.)

— 88 —

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, al-
though the gold ounce, expressed in its English standard
of account, 3£ 17s. lOJ/^d., 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 Wil-
(liam 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 (ex-
istence. 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.^

'The act of Maryland in 1723 by which tobacco was made
the l^al standard, but its value reduced to terms of English
gold money, namely one penny equal to one pound of tobacco.

— 89 —

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, there-
fore, the sum of 3£ 17s. lO^^d. 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 esti-
mated 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 reckon-
ning names to definite weights of gold is the same thing
as fixing the value of those weights.* 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

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 accoimt,

* 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."

— 90 —

role in the process of circulation as gold. But two com-
modities excluding all other commodities mutually ex-
clude each other. Therefore, wherever gold and silver
have by law been made to perform side by side the func-
tion of money or of a measure of value it has always been
tried, but in vain, to treat them as one and the same ma-
terial. 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 his-
tory 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 expul-
sion 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,-

— 91 —

704,000. In fact, in tnose 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 ail
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.^

B. THEORIES OF THE UNIT OF MEASURE OF
MONEY.

The circumstance that commodities are converted
into gold only in ideas as prices and that gold is there-
fore 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.,

* "Money is the measure of Commerce, and of the rate of
everything, and therefore ought to be kept (as all other meas-
ures) 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
Locks: Some Considerations on the Lowering of Interest, etc,
1691 (p. 166, p. 65 in his Works 7 ed., London, 1768, vol. HL

— 92 —

the value of an ounce of silver should rise it would con-
tain 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 Eng-
lish 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 stand-
ard, 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 reckon-
ing 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 mil-
lions were worn out, clipped and debased. A trial dis-
closed 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 stand-
ard, 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

— 93 —

decided upon in consequence of the derangement that had
been produced, LOWNDES, the Secretary of the Treas-
ury, 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 argu-
ment 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 there-
fore declared the 25 to 50 per cent, lighter shillfug 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 bour-
geoisie in all forms, the manufacturers against the
working classes and paupers, the commercial class
against the old fashioned usurers, the financial aris-
tocracy 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

— 94 —

was repaid in guineas of twenty shillings.^ 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

*(Locke says among other things: " . * . call that a
Crown now, which before . . . was but a part of a Grown
... 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 aibating 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 great-
er. .. . But 'tis Silver and not Names that pay Debts
and purchase Commodities" (1. c, p. 135-145 passim). If to
laise the value of money means nothing but to give any de-
sired 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 bul-
lion 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 (1. c, p. 54-116 passim). Locke was
exceedingly careful not to touch upon the burning question
of public deibts, and no less carefully avoided the discussion of

— 95 —

their own value) was not debased.*'* 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 BERKE-
LEY, the representative of a mystical idealism in Eng-
lish philosophy, should have given a theoretical turn to
the doctrine of the ideal unit of measure of money, some-
thing 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 Count-
ers for Reckoning, Recording and Transferring thereof ?
(of the proportion of value). Whether Power to com-
mand 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 ?"2 Here we find a confusion, first of the measure 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.," Lon-
don, 1696, tried in vain to entice Locke to difficult ground.

» Steuart, 1. c, v. IL, p. 154.

* The Querist, 1. c, (p. 5-6-7.) The "Queries on Money" are
generally clever. Among other things Berkeley is perfectly

— 96 —

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 rep-
resent nothing, i. e., only the abstract idea of value.

SIR JAMES STEUAET 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, there-
fore, is quite a different thing from money coin,
which is price* 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.

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."

* Price means here real equivalent in the sense commonly
employed by English economic writers in the seventeenth cen*
tuiy.

— 97 —

, . . 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."*

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,

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

— 98 —

in fact, neither vsr the silver substance, nor for the
name of the shilling when oomparing the magnitudes
of their valuer, 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 expres-^
sion 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 un-
derstand the nature of the transformation of the meas-
ure of value into a standard of price, he naturally be-
lieves 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 com-
modities appear as quantities of the same denomina-
tion 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 1-1 80th part; the right angle would then
be measured by 45 degrees instead of 90, and acute and
obtuse angles would be measured accordingly. Never-
theless, the measure of the angle would remain, then,
as before, first a qualitatively definite mathematical fig-
ure, the circle, and second a quantitatively definite part
of the circle. As for Steuarfs economic illustrations,
he refutes his own argument with one and does not prove
anything with the other. The bank money of Amster-

— 99 — ■

dam was, in fact, merely the reckoning name for Span-
ish doubloons, which retained their full weight by lying
idly in the bank vaults, while the circulating coins be-
came 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/ 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 repre-
sent, 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

* 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 Barhary. 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?

— 100 -^

above its mint price called forth again the doctrine of
the ideal unit of money on the part of some of the ad-
vocates of the Bank. Lord Castlereagh found the clas-
sical confused expression for the confused idea by speak-
ing of the unit of measure of money as "a sense of value
in reference to currency as compared with commodi-
ties." When a few years after the peace of Paris con-
ditions 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 obli-
gations, etc., had been contracted on the basis of de-
preciated bank notes. Were they to be paid back in
bank notes of which £4672, 10s. nominal, actually rep-
resented 100 pounds of 22 carat gold? THOMAS ATT-
WOOD, 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. Att-
wood'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 Kobert 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 con-
troversy with the Birmingham Chamber of Commerce,
he says : "The substance of your queries is . . . in

— 101 —

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 consti-
tutes a standard of value? . . . Is £3 178. lO^^d.
an ounce of gold, or is it only of the value of an ounce
of gold? If £3 17s. 10>^d. be an ounce of gold, why
not call things by their proper names, and, dropping the
terms pounds, shillings and pence, say ounces, penny-
weights and grains? . . . If we adopt the terms
ounces, pennyweights and grains of gold, as our mone-
tary system, we should pursue a direct system of bar-
ter. . . . But if gold be estimated as of the value
of £3 17s. lO^d. per ounce . . . how is this
. . . that much difficulty has been experienced at
different periods to check gold from rising to £5 48.
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 pro-
duced.^^^

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

^The Currency Question, The Gemini Letters, London, 1844,
p. 260-272, passim.

— 102 —

of labor-time. Since labor-time constitutes the sub-
stance 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, al-
though legally inconvertible, would immediately depre-
ciate if it were worth less than a silver thaler in ordi-
nary trade, i. e., if it were not practically convertible.
The consistent advocates of inconvertible paper money
in England, therefore, sought refuge in the ideal meas-
ure 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

103

GRAY.^ He makes a National Central Bank ascertain
through its branches the labor-time consumed in the pro-
duction of various conmiodities. 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 com-
modity contains,^ 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.^ This is
the fundamental principle carefully worked out in de-
tail and based throughout on existing English institu-

* 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 Proudhon.

'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.**

'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 ha
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.

— 104 —

tions. 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 be-
come the uniform and never-failing cause of demand."*
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."* "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 nat-
ural standard of value, labour, and thereby set our pro-
ductive resources free?"*

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 ex-
clusive commodity, which is thus converted into a spe-
cial 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 re-
lated 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 alien-
ation in the process of private exchange, that is to say,

»L. c, p. 16.

■Gray: "Lectures on Money, etc.," p. 182.
• L. c, p. 169.

— 1U5 —

labor basud on the production of commodities becomes
social labor only through universal alienation of indi-
vidual labors. But by assuming that the labor-time con-
tained in commodities is directly social labor-time. Gray
assumes it to be common labor-time or labor-time of di-
rectly associated individuals. Under such conditions a
Fpecific commodity like gold or silver could not con-
front other commodities as the incarnation of universal
labor, and exchange value would not be turned into
r>rice; but, on the other hand, use-value would not be-
come exchange value, products would not become com-
modities and thus the very foundation of the capital-
istic system of production would be removed. But that
is not what Gray has in mind. Products are to be pro-
duced as commodities, hut 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 indepen-
dent 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 capi-
talistic production after another, although he wishes
to "reform" only the money system which results from
the exchange of commodities. Thus he transforms cap-
ital into national capital," land into national property,'

^ "The business of every country ought to be conducted on a
national capital.'* John Gray, "The Social System," etc.,
p. 171.

* "The land to be transformed into national property." L. c.
p. 298.

— 106 —

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 dem-
onstrate that his labor-money is a purely bourgeois re-
form, he gets tangled up in even more glaring contra-
dictions.

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 prac-
tical 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 produc-
tion, was clearly expressed by some English socialists
of whom a few preceded and others followed Gray.^

* 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.

- 107 —

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 misconcep-
tion of the necessary connection between commodity
and money.*

2. THE MEDIUM OF CIKCULATION.

After the commodity has received in the process of
price determination the form in which it becomes capa-
ble of circulation, and after gold has acquired the charac-
ter 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 de-
scribe 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 devel-
oped form of exchange value ; in the same manner, cir-
culation implies a steady stream of exchange transac-
tions which are being continually renewed on all sides.
The second assumption we make is that commodities

* Alfred Darimont's "De la Reforme des banques," Paris,
1856, may be considered as a compendium of this melodramatic
theory of money.

— 108 —

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 who?e show windows are filled with the riches
of the world, Indian shawls, American revolvers, Chi-
nese porcelain, Parisian corsets, Russian furs and trop-
ical spices, but all of these things of Joy bear fatal
white labels marked with Arabian figures with the la-
conic characters £, s., d. Such is the picture of the
commodity appearing in circulation.

a. THE METAMORPHOSIS OF COMMODITIES.

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 :

C— M— C

M--C— M.

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 commodities.

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 com-
modity 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

— 109 —

of commodity for commodity, real interchange of mat-
ter.

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 com-
modity; 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 consimiption. The entire process of circulation
C — M — C thus includes the combined series of meta-
morphoses, 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 consti-
tutes the curriculum vitae of the commodity. But the
process C — ^M — C represents the combined metamor-
phosis 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 two-
fold transformation which takes place at the same
stage of circulation. We must then consider separately

— 110 —

each of the two processes of exchange into which cir*
culation C — ^M — C breaks up.

C — M or sale : commodity C enters the process of cir-
culation not only as a particular use-value, e. g., a ton
of iron, but as a use-value of a certain price, say, £3
178. 10^ d., 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 prod-
uct, 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.
lOJ^d., an ounce of real gold has appeared, but the ton
of iron has cleared that place. Not only does the com-
modity — which in its price had been ideally converted

— Ill —

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* by the same process. Just as gold be-
came the ideal universal equivalent, because all com-
modities 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 aliena-
tion takes place. But gold becomes real money only
through sale, because the exchange values of commod-
ities 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 re-
gards gold, although it is really a use-value, its use-

* "Di due sorte fe la moneta, ideale e reale ; e a dui diversi
usi fe adoperata, a valutare le cose e a comperarle. Per valutare
h buona la moneta ideale, cosi come la reale e forse anche piu.
L'altro use della moneta fe 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,
1. 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 money.'*)

value is confined only to its being the bearer of ex-
change 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 dis-
tributed 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 com-
modity. Only through this duplication of the com-
modity 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 ideal-
ly — in short, only through the appearance of commod-
ities 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 con-
version 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 bu5^er. In describing
the first metamorphosis of the commodity, its conver-
sion into money as a result of the completion of the
first phase of circulation C — M, we assume at the same

— 113 —

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 meta-
morphosis 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 com-
modities. Nothing can, therefore, be more erroneous
than the idea that gold and commodity enter into the
relation of direct barter within the process of circula-
tion 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 di-
rectly exchangeable for it. In so far as the price of a
commodity is realized in gold, it is exchanged for

— 114 —

gold as a commodity, as a particular embodiment of
labor-time; but in so far as it is the price that is re-
alized 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 conmiodity is exchanged in the process of circula-
tion 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/

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 pasing 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 circula-
tion, 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 ap-
pears its golden equivalent. This result may now form
a resting point, since the commodity in this second form

*This, of course, does not prevent the market price of com-
modities to be above or below their value. However, this con-
sideration is foreign to simple circulation and belongs to quite
another sphere to be considered later, when we shall investi-
gate the relation between value and market price.

— 115 —

possesses a lasting existence of its own. The commod-
ity, 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 sep-
aration 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 uni-
versal equivalent, the commodity can be directly repre-
sented 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 ex-
change-values, may enter gold. The universal product
of the alienation of commodities is the absolutely alien-
able 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. "Everjrthing is to be had for
cash." While in the movement C — M, the commodity,
through its alienation as a use-value, realizes its own

— 116 —

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 com-
modity 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 com-
pletes its second metamorphosis and falls out of circu-
lation, while a third commodity enters circulation,
passes through the first phase of its course completing
the first metamorphosis.

— 117 —

Thus, the combined circulation C — M — C, as a com-
plete metamorphosis of a commodity always constitutes
at the same time the end of the complete metamor-
phosis 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, presup-
poses in fact that M is the result of another transac-
tion 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 metamor-
phoses of commodities. Since the complete metamor-
phosis 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 inter-
twined 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 circula-
tion, C — ^M or M — C, as a transformation of one com-

— 118 —

modity into use-value and of another into money, i. e.,
as the first and second phases of circulation respective-
ly forms an independent halting point from either di-
rection; but, on the other hand, all commodities com-
mence their second metamorphosis in the common form
of the universal equivalent, gold, and stop at the start-
ing 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 metamor-
phosis 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, wheat.

The two transactions M — C and C — M appear here
merely as links of one chain, because a commodity ex-
pressed 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 ap-
pears, therefore, in the actual process of circulation as
a jumble of countless accidentally coinciding or suc-
cessively following members of different complete meta-
morphoses. The actual process of circulation thus ap-
pears 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

— 119 —

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 com-
modities 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 con-
stitute 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 com-
modity 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 ex-
change between men who produce their goods in the
form of commodities. They are so far from being pure-
ly individual relations between buyer and seller that
both enter this relation only to the extent that their

120

individual labor is disregarded and is turned into money
as labor of no individual. Just as it is, therefore, child-
ish to consider these economic bourgeois roles of buyer
and seller as eternal social forms of human individu-
ality, so it is on the other hand, preposterous to lament
in them the extinction of individuality/ 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

* How deeply some beautiful souls are wounded by the merely
superficial aspect of the antagonism which asserts itself in buy-
ing and selling, may be seen from the following abstract from
M. Isaac Pereire's: "Legons sur I'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 isolfej, s6par6s 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 necessity
de r^change est deriv6e la necessity de determiner la valeur
relative des objets. Les id6es de la valeur et de I'fichange
sont done intimement li^es, et toutes deux dans leur forme
actuelle exprime Tindividualisme et I'antagonismc . ^ . II
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 society. II n'y a lieu a s'occuper du prix, de
valeur que 19. oH il y avait vente et echat, c'est h dire, ofi chaque
individu 6tait oblige de 1 utter, pour se procurer les object
n^essaires a Pentretien de son existence" (1. c, p. 2, 3 pas-
sim). ("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

— 121 —

of capitalistic production is expressed as yet so super-
ficially 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 commodities.

Now, if we consider the result of C — M — C, it comes
down to mere interchange of matter, C — C. A com-
modity 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 inter-
change 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.^

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 differ-
ently, because there is an antagonism between different mem-
bers 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 ex-
istence." )

' "L'argent n*est que le moyen et I'acheminement, au lieu que
les denr^es utiles H la vie sont la fin et le but." (**Moncy is
but the ways and means, while the things useful in life are
the end and object.") Boisguillebert : "Le Detail de la France,"
1697, in Eugene Daires* "Economistes financiers du XVIII
ieme siecle, vol. I., Paris, 1843. p. 210.

— 122 —

We have seen that the process of circulation of com-
modities 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 iso-
lated 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 crit-
icism 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, prim-
itive, patriarchal and naively genial barriers to inter-
change of matter in society. It is, moreover, the gen-
eral form of the separation of the points of coincidence
and opposition in this interchange, carrying within it
the possibility of commercial crises, because the antag-
onism of commodity and money is the abstract and
general form of all antagonisms with which the capi-
talistic 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 pro-
duction 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

— 123 —

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 de-
mand; 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 there-
fore, impossible that there should ever be in any coun-
try a commodity or commodities in quantity greater
than the demand, without there being, to an equal
amount, some other commodity or commodities in quan-
tity less than the demand."*

*In November, 1807, William Spence published a pamphlet
in England under the title: "Britain Independent of Com-
merce." The principle set forth in this pamphlet was further
elaborated by William C!obbet in his "Political Register" under
the virulent title, "Perish Commerce." To this James Mill re-
plied in 1808 in his "Defence of Commerce" which contains the
passage quoted above from his "Elements of Political Econ-
omy** (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 diflScult 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 mis-
understood his contemporaries, Malthus, Sismondi and Ricardo.

— 124 —

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.
Xhe 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.*

The separation of sale and purchase makes possible

^ The maimer 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 eflTect or
natural consequence of the less saleableness of commodities."
(Th. Oorbet, "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, whereaa other
commodities can not always buy money." (Th. Tooke, "An In-
quiry into the Currency Principle," 2d ed., London, 1844, p. 10.)

— 125 —

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.

b. THE CIKCULATIOX OF MONEY.

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 there-
fore 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 indis-
tinguishable.

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

— 126 —

circulation is also its last step.* Wliether 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 com-
modities 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 trans-
formation into money and its retransformation from
money, i. e., the movement of a complete metamor-
phosis 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

* 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 circula-
tion, of the simple contrast of commodity and money.

— 127 —

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 interlac-
ing 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 fol-
low 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 commod-
ities and money, occur simultaneously separated only in
point of space.

The circulation of commodities C — M — C in its ele-
mentary 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 com-
pletes 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 re-
newed by the same commodity owners. The money which
they have spent as buyers gets back into their hands

— 128 —

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 nimiber of different small cycles starting from
numberless points and returning each to its own start-
ing point, to repeat the same movement over again.

The change of form on the part of commodities ap-
pears 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 circu-
lates 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 capac-
ity of a means of purchase, and in that capacity moves
commodities only by realizing their price, the entire
movement ot circulation appears as a change of place
between money and commodities, the former realiz-
ing 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

— 129 —

of circulation, we witness the same monotonous opera-
tion. After realizing the price of C, M successively re-
alizes 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 cir-
culating, 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 ap-
pears, 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 move-
ment itself appears to the owners of commodities partly
as an outward necessity and partly as a mere formal in-
termediary 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

^ 130 —

from the sphere or circulation, while the nse-value of
money as a medium of circulation is in its Tery circula-
tion. The movement of a commodity in the sphere or
circulation is of a transitory kind, while ceaseless mo-
tion 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 closely.

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 in-
finitely large number of purchases and sales and the in-
dependent separation of the mutually supplementary
phases of metamorphoses of commodities. In the small
cycles described by money, where the starting and re-
turning 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 com-
modity 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
& seller is not a necessary condition. Still less does the

— 131 —

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 transi-
tion 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 man-
ufacturer draws money from his banker on Friday, pays
it out to his workingmen on Saturday, the men im-
mediately pay out the greater part of it to the store-
keepers, 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 commodi-
ties and the interlacing of these metamorphoses, the
same coin realizes the prices of different com-
modities 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

— . 132 —

by two conditions: first, the sum total of the prices; sec-
ond, 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 com-
modities 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 cir-
culation 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 commodi-
ties 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 cir-
culation, 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 cer-
tain quantities of gold. In the determination of the

— 133 —

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 ex-
change 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.* If one quarter of wheat is worth 60
shillings, then twice as much gold is required to circu-
late it or to realize its price as would be the case if it
were worth only 30 shillings. To circulate 500 quar-
ters of wheat at 60 shillings, twice as much gold is neces-
sary 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 circu-

^ The quantity of money is immaterial "pourvu qu'il y en ait
assez pour maintenir les prix contractus par les denr§es" (as
long as it is sufficient to maintain the existing prices of com-
modities). Boisguillebert, 1. c. p. 210.

"If the circulation of commodities of four hundred millions
required a currency of forty millions, and . . . this pro-
portion of one-tenth was the due level, estimating both cur-
rency and commodities in gold ; then, if the value of commodi-
ties 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 Pro-
duced by the Expenditure of Government, etc.,*' London, 1823,
p. 80.)

— 134 —

lating 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 cir-
culation 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 cir-
culation 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 com-
modity having a price of one sovereign, and thus changes
hands ten times, it does as much work as would be ac-
complished by ten sovereigns each performing but a
single act of circulation a day.* Consequently, rapidity

* **E la velocity del giro del danaro, non la quantity dei metal li
cbe fa apparir molto a poco il danaro." (Galiani, 1. c. p. 99.)

— 135 —

of gold circulatioa can make up for its quantity,
or the presence of gold in the sphere of circulation is de-
termined not only by its presence as an equivalent of a
commodity side by side with it, but also by its partici-
pation in the movement of metamorphoses of commodi-
ties. The rapidity of the circulation of money, how-
ever, can ser^e 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 circu-
lating 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 vol-
imie of currency will increase. An increasing volume of
currency combined with a general fall of prices or a di-
minishing volume of currency in connection with a gen-
eral 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 pre-
vailing credit, the rapidity of circulation of money grows

("It is the rapidity of the circulation of money and not the
quantity of metals that causes a jjreater or smaller amount of
money to appear.**)

— 136 -

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 arti-
ficial 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 pur-
chases 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 com-
modities. 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, be-
cause 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-Eicardian English Political Economy.
If experience shows, that the level of metallic circula-
tion or the mass of gold and silver in circulation in a
given country is subject to temporary ebbs and tides

— 137 —

and very violent ones at times/ but on the whole re-
mains stationary for long periods, the deviations form-
ing but small oscillations about the average level, this
is explained by the antagonistic nature of the circum-
stances which determine the quantity of money in circu-
lation. 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 meta-
morphoses 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

* An example of an extraordinary decline of metallic circula-
tion 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 iso-
lated 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.

— 1S8 —

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 re-
quired to keep the same volume of commodities in cir-
culation. 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 re-
quired gold, in order to circulate the same volume of com-
modities, 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 commodi-
ties 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 circula-
tion process itself realizes these conditions, we shall see
later on.

C. COIN AND SYMBOLS OF VALUE.

In its capacity of a medium of circulation, gold ac-
quires a shape of its own, it becomes coin. In order to
prevent any technical difficulties in the way of its circu-
lation, 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

— 139 —

corresponding to the reckoning names of money, £,
8., 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 uni-
forms. The sphere in which money circulates as coin,
is distinguished as an internal sphere of circulation
which is separated from the universal sphere of circula-
tion in the commodity world by national boundaries.

Yet, the only difference between gold bullion and gold
coin is that between coin denomination and weight de-
nomination. What seems to be a difference in name in
the latter case appears as a difference in shape in the
former. Qold 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^ or gold sovereigns at the English
mint ; if these sovereigns be put on one side of the weigh-
ing 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 hav-
ing a shape and stamp of its own. The 4,672 >^
sovereigns are put into circulation at different points,
and once iu its grasp they make a certain number of
moves per day, some sovereigns more, others less. If the

— 140 —

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. Be-
sides the actual importance which a coin possesses by
virtue of its being an individual piece of gold of a def-
inite 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
oUt, 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

— 141 —

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,^ who receives
from the bank to-day a brand new sovereign and pays it
to-morrow 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/ that in the very nature of things, coins must de-
preciate one by one as a result of ordinary and unavoid-
able 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 disap-
peared by 1829, i. e., within a period of twenty years.^
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

* Dodd, "Curiosities of Industry," etc., London, 1854.

'"The Currency Question Reviewed, etc., by a Banker.'*
(Edinburgh, 1845, p. 69.)

"Si UB 6cu un peu us6 etait repute valoir quelque chose de
moins qu'un ^u tout neuf, la circulation se trouverait contin-
uellement arret€e, et il n'y aurait pas un seul payement qui
ne fut matiSre i contestation." (G. Gamier, 1. 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.")

•W. Jacob, "An Inquiry Into the Production and Consump-
tion of the Precious Metals." (London, 1831, vol. II., ch.
XXVL)

— 142 —

metal than it actually contains. The longer a
coin remains in circulation, the rapidity of circu-
lation remaining the same, or the greater its rapid-
ity 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 trans-
formed 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 ex-
ploited 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 noth-
ing but a history of these two-fold and antagonistic adul-
terations, and Custodies voluminous collection of writ-
ings of Italian economists turns mostly about this point.
But the fictitious importance of gold due to its func-
tion, 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

— 143 —

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 sov-
ereign which only stands for a quarter of an ounce, the
full-weight sovereigns are subjected in the hands of un-
scrupulous 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^^ 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

— 144 —

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 men-
tioned above, namely that in the history of all modem
nations the same money-name stands for a constantly
diminishing quantity of metal. The contradiction be-
tween gold as coin and gold as standard of price be-
comes also one between gold as coin and gold as the
imiversal 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 trans-
formation 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 with-
drawal 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

— 145 —

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 circula-
tion 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 sym-
bol of a full-weighted one, just as a lean horse can not
serve as a s3mibol of a fat one. Since gold thus be-
comes 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 cir-

— 146 —

eulation. Their own silver or copper weight is, there-
fore, not determined by the proportions of the respective
values of silver and copper to that of gold, but is ar-
bitrarily 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 denomina-
tions, or for realizing equally small prices of commodi-
ties. 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
£65,239,000, and of silver only £2,434,000. The sup-
ply 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

— 147 —

legal provision of the loes 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*

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 circula-
tion, 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 b^

* David Buchanan, "Observations on the Subjects Treated of
in Dr. Smith's Inquiry on the Wealth of Nations," etc (Edin-
burgh, 1841, p. 3.)

— 148 —

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 sym-
bolic money by another kind would form an endless
process. In all countries with a well developed cir-
culation 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 sym-
bols 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 con-
sequently 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 be-
fore 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 circula-
tion, 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

— 149 —

country by experience. Thus, the originally imper-
ceptible 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 crystal-
lized 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

— 150 —

continually circulates, actually forms only a connect-
ing link between the metamorphoses of commodities
and constitutes but tlteir 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 ex-
change 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 itself.

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 magni-
tude, the gold token represents value. But the mag-
nitude 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 sig-
num 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 circula-
tion in which the token of value discharges its func-
tion — the exchange value of commodities acquires in

— 161 —

price only an ideal expression and in money only an
ima^nary symbolic existence. Exchange value thus
acquires only an imaginary though material expres-
sion, but it has no real existence except in the com-
modities themselves, in so far as a certain quantity
of labor-time is embodied in them. It appears, there-
fore, 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 di-
rectly 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 oi>er-
ates 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 compara-
tively 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 sym-
bol of money is guaranteed by the general acquies-
cence of the owners of commodities, i. e., so long as
Tt enjoys a legally established conventional existence
and compulsory circulation. Paper money issued by
the state and circulating as legal tender is the per-
fected 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 gov-

— 152 —

erned by entirely different laws. Symbolic paper
money does not in fact, differ in the least from sub-
sidiary 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 sep-
aration of national circulation from the world circula-
tion 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 in-
dependent existence only within the sphere of na-
tional circulation.

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 inter-
ference. 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 cir-
culation 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

* Henry Storch, *'Cours d^Eoonomic Politique,*' etc., avec des
notes par J. B Say. Paris, 1823, torn. IV., p. 179. Storch pub-

— 153 —

issued by the state. Ancient writers who could
observe the phenomena of exclusively metallic circu-
lation, already took the view of coin as a symbol or
token of value. That is true both of Plato^ and Aris-
totle* In countries where credit is not developed,

lished his work in French at St. Petersburg. J. B. Say imme-
diately issued a Parisian reprint, supplemented with alleged
**notes," which as a matter of fact contain nothing but com-
monplaces. 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.'*

^Plato de Rep. L. H "vdiitoiAa ^uiaCoXov t^s iXkafnq.'T^onej
symbol of exchange.") Opera omnia, etc., ed. G. Stallbumius,
London, 1850, p. 304. Plato develops money only in two ca-
pacities — as a measure of value and a token of value, but de-
mands, in addition to the token of value serving for home cir-
culation, another one for trade between Greece and foreign
countries. (See also Book V of his Laws.)

'Aristotle, Ethic. Nicom, 1. 5., ch. 8, 1. c: olov 8* 6xAXXcrr{A«
xriq %pe{a<; xb v6txt jpia yiyoy^ xccrd ffuv6TQXT}v* xoA 8t<i touto Touvo^ia Ixei
v6;&ta[jia. Sti o5 yiaet dXXdk vd^itp la-rl, xcd i(f* fiixtv {xeraSaXstv xal «ot-
fidoa dfxPiQ^ov*'* ^"^^ *^^ satisfaction of wants money became
the medium of exchange by agreement. And for that reason
it bears the name v6{xto{xa, because it owes its existence, not to
nature, but to law ( v6ikj> ), and ti 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 be-
tween different communities creates the necessity of as-
signing the character of money to a specific commodity, i. e..
one which has itself an intrinsic value.* 'Sgytxtdtipa? ydp Yevo{xiv»}<;
Tij? PoTjOeta^ t^ tla&ye<sBat &v evSset? xal Ixx^i&xecv &v exXe6va^ov, e?
ivdyxTj? ij to5 yo^iayLCtzQ<^ exoptoOi} xpfi<nq* 8tb «pb? Tdg aXXayck? TOt-
out6v ti ffuveOevTO xpb^ ff9a<; auTo5<; StSovat xal XaqjiSavscv, 8 xQv XM*
(7((A(i>y otOxb 6v tlx8 TT^v xpefav e6[i£xocxe(giaxov... olov cf8T}po? xod 5pYo-
po? x5v ei Tt TotouTov iTepov". (Arist. De Republioa, L 4? *.
9, [sees. 7, 8] 1. c.)

— 154 —

as e. g". in China, legal tender paper money is found
at an early date.*. Early advocates of paper money
expressely point out the fact that metallic coin is
transformed into a token of value in the very process

("When the inhabitants of one country became more de-
pendent on those of another, and they imported what they
needed and exported the sui-plns, money necessarily came into
use . . . and hence men agreed to employ in their deal-
ings 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 Ar-
istotle, Oxford, 1885, p. 16). This passage is quoted by Mdchel
Chevalier, who either has not read Aristotle or did not under-
stand 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 cir-
culation seems to owe its existence to agreement or law, as is
shown by its name v6iJLioi&a) and that in reality it owes its
utility as coin to its function and not to any intrinsic use-
value of its own. X^po^ elvat Soxet xh v6(i.to|i,a xal v6pL0C xorvrdrwaot,
fOffet h' o6Siv Zxi (AETaOe tvuv t« tuv xp(0(jlsvo>v oOScvb^ df^tov o5SI
2jp^at\u»'» Tpbc o68lv x&v dvaYxafwv *ct(* ("Others maintain that
coined money is a mere sham, a thing not natural, but conven-
tional only, which would have no value or use for any of the
purposes of daily life if another commodity were substituted
by the users." (1. c. sec. 11.)

'Mandeville, Sir John, "Voyages and Travels," London,
1705, p. 105: "This Emperor (of Cattay or China) may dis-
pende ols muche as he wile withouten estymacion. For he
despendethe not, nor makethe no money, but of lether em-
predeth, or of papyre. And when that money hathe 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 nouther of Gold nor of Sylver," and "therefore," thinks
Handeville, "be may despende ynew and outrageously."

— 155 —

of circulation. So Benjamin Franklin* and Bishop
Berkeley.'

How many reams of paper cut up into bills can cir-
culate 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 ex-
tent 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 com-
modities 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 shill-
ing 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

^Benjamin Franklin, "Remarks and Facts Relative to the
American Paper Money/* 1764, p. 348, 1. 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 h the difference
between its real weight and its denomination. Great part
of the shillings and sixpences now current are by wearing be-
come 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."

'Berkeley, 1. c, p. 5-6. "Whether the denominations being
retained, although the bullion were gone . . . might not
nevertheless ... a circulation of commerce (be) main*
tained?"

— 156 —

different denominations, e. g. five pound, one pound
and ten shilling bills, then the quantity of these dif-
ferent 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 circu-
lation 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 ithe
same quantity of silver as it represented gold before,
then there would be 210 million one pound bills in cir-
culation instead of the previous fourteen million.
The number of paper bills is thus determined by the
quantity of gold money which they represent in cir-
culation, and since they are tokens of value only in
so far as they represent it, their value is simply deter-
mined by their quantity. Thus, while the quantity of
gold in circulation is determined (by the prices of com-
modities, the value of the paper bills in circulation,
on the contrary, depends exclusively on their own
quantity.

The interference of the state which issues paper

— 157 —

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 il, £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 circula-
tion. 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 circu-
lation 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 in-
trinsic laws.

If fourteen million pounds sterling were the quan-
tity of gold required for the circulation of commod-
ities and if the state were to put into circulation two
hundred and ten million bills each of the denomina-
tion 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

— 158 —

of gold. Nothing would be changed but the nomencla-
ture 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 stand-
ard 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 com-
position was issued, if the exchange values of commodi-
ties were to be estimated in the future in the new coin as
a measure of value and be realized in coins correspond-
ing to this smaller unit of measure. This solves the dif-
ficulty left unsettled in the controversy between Locke
and Lowndes. The ratio which a token of value, whether

— 151) —

made of paper or of debased gold or silver, bears to cer-
tain 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 op-
posite 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 sub-
stance, 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

— 160 —

medium of circulation — is thus nothing but an asser-
tion through the process of circulation of a law me-
chanically 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 ap-
pear 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 ex-
change 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 cur-
rency appears as a necessary law, paper money seems
to enter circulation in any desired amount. While
the sfeite is guilty of debasing gold and silver coin and
of disturtwng their function of a medium of circula-

— 161 --

don, if it turns out a coin, only 1-100 of a grain be-
low its nominal weight; it performs a perfectly
proper operation by issuing absolutely worthless
paper notes which contain nothing of the metal ex-
cept its mint denomination. While gold coin ap-
parently 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 repre-
sent directly the value of commodities. It is, there-
fore, 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 in-
trinsic 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 move-
ment instead of growing directly out of the meta-
morphosis of commodities, springs from the violation
of its proper proportion to gold.

— 162 —

3. MONEY.

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 com-
modity 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 com-
modities, 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 re-
sulting 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

— 163 —

actual interchange of matter. In the form M — C — M
the two extremes are gold and at the same tune gold of
equal value. To exchange gold for a commodity in
order to exchange the commodity for gold, or if we con-
sider the final result M — M, to exchange gold for gold,
geems 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 pre-
vailing fonn of capitalist production. In actual prac-
tice, 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.

Grold, 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 so-
ciety. In England, where silver is neither the measure
of value nor the prevailing medium of circulation, it

— 164 —

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, how-
ever, 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 com-
modities represent in their prices a certain quantity of
gold, that is to say, they are merely imaginary gold of
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 commod-
ities.* Since all commodities are thus but imaginary
money, money is the only real commodity. Contrary to
commodities, which only represent the independently ex-
isting exchange value, i. e., universal social labor, or ab-
stract wealth, gold is the material form of abstract
. ^ , %

* "Non solo i metalli ricchi son segni delle cose . . . ; m»
viccndevolmente le cose . . . sono segni delForo e dell'ar-
gento." (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 oi
gold and silver.")

— 165 —

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 un-
folded in the world of commodities. Thus, while com-
modities represent in their prices the universal equiva-
lent 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" (Bois-
guillebert), 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.* As a medium of circulation it under-
went aU 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.* From a serve

* Petty. "Gold and silver are universal wealth,'* (Political
Arithmetic, 1. c, p. 242.)

'E. Misselden. 'Tree Trade, or the Means to Make Trade
Flourish," etc., London, 1622. "The natural matter of Com-
merce 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

— 166 — -

it becomes a lord. From a mere understrapper it rises
to the position of Lord of commodities.^

a. HOARDING.

Gold separates itself as money from the process of
circulation whenever a commodity interrupts the pro-
cess of its metamorphosis and remains in its form of a
gold chrysalis. This occurs every time a sale is not im-
mediately followed by purchase. The independent is-
olation 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 be-
comes money as soon as its course is interrupted. Tn
the hands of the seller who takes it in exchange for

the chief e." (p. 7.) He compares his own treatment of mer-
chandise 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." (1. c.)
Boisguillebert, "Dissert, sur la Nature Des Richesses," etc.
"Viola done Tesclave du commerce devenu son maltre . . .
La mi84^re des peuples ne vient que de ce qu' 6n a fait un maltre,
ou plutOt un tyran de ce qui 4tait un esclave." ( p. 395, 399, )

^ Boisguillebert, 1. c. "On a fait une idole de ces metaux
(Tor et I'argent) et laissant li, Tobjet et I'intention pour
lesquels ils avaient 6t6 app6l^ dans le commerce, savoir, pour
y servir de gages dans I'echange et la tradition reciproque, on
les a presque quitt^s de ce service pour en former des divinit^s,
aux quelles on a sacrifi^ et sacriSe toujours plus de biens et de
besoins pr^ieux et m6me d'hommes, que jamais I'aveugle an-
tiquity? n'en immola & ces fausses divinit^s," etc. (1. c, p. 395.)

— 167 —

his commodity, it is money and not coin; as soon aa
it passes out of his hands it is again coin. Ef^eryfoody
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 com-
modity, his buying is determined by the continual re-
newal of the wants of life. In order to be able to buy
without having sold anything, he must sell without buy-
ing. In fact, the circulation process C — M — C is a
d3^namic 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 continu-
ously 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 dis-
appears, 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 cer-
tain 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

— 168 —

coin and the separate parts of the circulating mass of
coins appear now in one form, now in another, constant-
ly changing. This first transformation of the medium
of circulation into money represents, therefore, but a
technical aspect of money circulation/

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 pos-
session 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 exchange-
able 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. Commod-
ities can not only be stored up in the form of gold and

silver, i. e., in the substance of money, but gold and

. — . , . . i — I

^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 he "in constant motion,
it can he money only by being mobile, but as soon as it be-
comes motionless all is lost." ("Dans un mouvement con-
tinuel, ce qui ne pent §tre que tant qu'il est meuble, mais
Bitot qu'il devient immeuble tout est perdu." ('TLe Detail 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 itself.

— 169 —

silver are wealth in preBerved form. While every use-
value performs its service as such by being consumedj
i. e., destroyed, the use-value of gold as money con-
sists in its being the bearer of exchange value, in em-
bodying universal labor-time as a shapeless raw material.
As shapeless metal, exchange value posseses an inde-
structible form. Gold or silver thus brought to rest as
money, forms a hoard. Among nations with an exclu-
sively 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 Eome 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 an-
other and the sudden outpour of a part of these hoards
into the general circulation constitute a peculiar feature
of ancient economy.

As the incarnation of labor-time gold is a pledge for
its own value, and since it is the embodiment of univer-
sal labor-time, the process of circulation pledges gold
its constant role of exchange value. Owing to the mere
fact that the owner of commodities can retain his com-
modity in the form of exchange value or retain the ex-
change-value as a commodity, the exchange of commod-
ities for the purpose of retaining them in the trans-
formed shape of gold becomes circulation's ovm motive.
The metamorphosis C — M takes place for the sake of
the metamorphosis, i. e., in order to transform it from

— 170 —

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 ex-
change value becomes its substance. Commodity is pre-
served as wealth, as commodity, only in so far as it
keeps witliin 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 circu-
lation 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 with-
drawal of a commodity from circulation in the form of
gold is therefore the only means oi keeping it con-
stantly within the sphere of circulation.

The owner of commodities can receive money from cir-
culation only in return for a commodity which he gives
to it. Constant selling, continual throwing of com-
modities 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

— 171 —

emacem esee/' 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.' 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 Valla-
dolid in the year 1586 petitioned Your Majesty not to
allow the further importation into the Kingdom of can-
illes, 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, tempo-
rary and transitory enjoyments ia 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 Com-
modities of Forreine Countries, which prove to us discom-

^" . . . The more the stock ... is ... en-
creased in wares., the more it decreaseth in treasure." (E.
Misselden, 1. c, p. 23.)

— 172 —

modities, 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
Khene, of the Levant . . . the Raisins of Spaine,
the Corints of the Levant, the Lawnes and Cambricks of
Hannaults . . . the Silkes of Italic, 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."*

In the form of gold and silver, wealth is indestructi-
ble, both because exchange value is preserved in the
shape of indestructible metal, and, especially, because
gold and silver are prevented from becoming, as me-
diums of circulation, mere vanishing money forms of
the commodity. The destructible substance is thus sa,c-
rificed 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 ; be-
cause 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

*1. c, p. 11-13 passim.

— 173 —

Wealth at all times and everywhere ; whereas other Com-
modities which are perishable, or whose value depends
upon the Fashion ; or which are contingently scarce and
plentiful, are Wealth, but pro hie et nunc."^ The with-
drawal 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 U3
how the merchants, especially the Mohammedan heath-
ens, who control nearly all the trade and all money,
se<;retly bury their money deep in the ground, *^eing
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."^ However, in so far as the as-
ceticism of the hoarder is combined with active in-
dustry, 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 patri-
archs had also bought and sold cattle, wool, grain, but-
ter, milk and other goods. They are gifts of God which
He gives out of the earth and divides among men. But

^ Petty, "Political Arith./' 1. c, p. 196 { 1899 edition, v. I, p.
269. Transl.)

'Francois Bemier, "Voyage contenant la description dea
etats du Grand Mogul." (Paris edition, 1830, t. 1., conf., p.
312314.

— 174 —

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."*

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

^ Dr. Martin Luther, "BUcher vom Kaufhandel und Wucher/'
1524. In the same passage Luther says: "Gott hat uns
Deutsche dahin geschleidert, dass wir unser gold und silber
mtissen in fremde Lander stossen, alle Welt reich machen und
selbst Bettler Bleiben. England sollte wohl weniger Qoldes
haben, wenn Deutschland ihm sein Tuch liesse, und der Konig
von Portugal sollte auch weniger haben, wenn wir ihm die
WUrze liessen. Eechne Du, wie viel eine Messe zu Frank-
furt au8 Deutschen Landen gef iirt wird, ohne Not und Ursache :
so wirst Du Dich wimdern, wie es zugehe, dass noch ein heller
in Deutschen Landen sei. Frankfurt ist das Silber-und Gold-
loch, dadurch aus Deutschem Lande fleisst, was nur guillet
und w&chst, gemUnzt oder geschlagen wird bei uns; w&re das
Loch zuegeetopft, so dUrft man itzt der Klage nicht horen, die
allethalben eitel Schuld und kein Geld, alle Land und Stadte
ausgewuchert sind. Aber lass gehen, es will doch also gehen;
wir Deutsche mtissen Deutsche bleiben ! wir lassen nicht ab, wir
mttssen denn."

In the work quoted above Misselden wishes to retain the gold

175

being saved from the social movement (with the owner
of commodities this bond is the commodity and the ade-
quate 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 re-
main as the burnt ashes of circulation, as its caput
mortuura, 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 quan-
titative limitation of exchange value is in contradiction
with its qualitative universality and the hoarder con-

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 Christen-
dome. There is indeede a fluxus and refluxus, a flood and ebbe
of the monies of Christendome traded within it selfe ; for some-
times there is more in one part of Christendome, sometimes
there is lesse in another, as one Country wanteth and an-
other 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 Chris-
tendome into the parts aforesaid is continually issued out and
never retiimeth againe." (p. 19-20.)

176

ceives in it a barrier which turns, in fact, into a quali-
tative 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 con-
ception 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 in-
herent 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 increased.

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

— 177 —

riches/ The underlying fact of the matter is that ex-
change value as such and with it its increase become
the final aim. Greed holds the hoard fast by not allow-
ing 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 circulation.

To sum up, the activity by which hoards are built up
resolves itself into withdrawal of money from circula-
tion 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 hoard-
ing, 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 accu-
mulation 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 equip-
ment ; the accumulation of sheep makes one a shepherd ;
the accumulation of slaves and land creates relations
of master and servant, etc.; the accumulation of par-
ticular kinds of wealth requires special processes differ-
ent from the simple act of hoarding, and dev elops spe- •^
cial individual traits. Or, wealth in the form of com-

*"A nmnmo prima origo avaritiae . . . haec paulatim
exarsit rabie quadam, non jam avaritia, sed fames auris."
(Plin., Hist. Nat., 1. XXXIII., c. XIV.)

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

— 178 —

modities is hoarded as exchange-value and in that ease
hoarding appears as a commercial or a specific economic
operation. The one who carries on such operations be-
comes 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 sense-
less operation which, if applied to all other commodities,
would deprive them of all value.^

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

^Horace thus understands nothing of the philosophy of
boarding when he says (Satir. 1. II., Satir. Ill) : "Siquis
emat citharas, emptas comportat in unum, Nee studio citharae
nee 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 sacrum V*
"If one buys fiddles, hoards them up when bought,
Though music's study ne'er engaged his thought,
One lasts and awls, unrersed 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.)
Kr. Senior understands the question much better: '*L*:argeiit
paratt etre la seule chose dont le d£sir est universel, et il en

— 179 —

it away from society. He wants to have the commodity
in the form in which it is aJways capable of entering
circulation and therefore he withdraws it from circula-
tion. He dreams of exchange value and therefore does
not exchange. The fluid form of wealth and its petri-
fication, the elixir of life and the stone of wisdom madly
haunt each other in alchemic fashion. In his imagi-
nary 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 produc-
tion's sake, i. e., the development of the productive
forces of social labor beyond the limits of ordinary wants.
The lees the production of commodities is developed,
the more important is the first crystallization of ex-
change value into money, or hoarding, which plays,
therefore, an important part among the ancient nations,

est ainsi parcequc I'argent est une richesse abatraiie et paroquc
les bommes, en la poss^dant peuvent satisfaire 2L toua leur be-
soine de quelque nature quMls soient.** ("Principca Fondamen-
taux de TEconomie Politique, tir^ de legons edites et inedites dc
N. W. Senior, par Comte Jean Arrivabene," Paris, 1836, p. 221.
( The corresponding passage in the English edition of his Politi-
cal Economy, London, 1863, is to be found on p. 27. Trans-
lator.) So does Storch: "Since money represents all other
forms of Tvealth, it is only necessary to accumulate it to pro-
vide for oneself all kinds of wealth existing in the world." (1.
c, V. 2, p. 134.)

— 180 —

in Asia until the present day, and among modern agri-
cultural 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 cir-
culation, 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 con-
verted into commodities. Because gold and silver con-
stitute the material of abstract wealth, the greatest dis-
play 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 commod-
ities as rico homhre whenever he can do so with safety.
He gilds himself and his house.^ In Asia, especially in
India, where, unlike under the capitalist system, the
hoarding of wealth appears not as a subordinate func-
tion 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 in-

^To what extent th§ inner man of the commodity owner re-
mains unchanged, even when he has become civilized and has
developed into a capitalist, is shown by the example of a Lon-
don 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.

— 181 —

creased 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/ while
modem economists have advanced the erroneous prop-
osition that the use of silver and gold articles increases
not in proportion to the growth of wealth, but in pro-
portion 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 corre-
sponding 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.^ It may be stated as a gen-
eral law that the conversion of gold and silver money

* See the passage from Xenophon, quoted below.
' Jacob, 1. c, v. 2, ch, 25 and 26.

laz

into articles of luxury prevails in times of peace, while
their reconversion into bullion or even coin takes place
in stormy periods.* 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 pro-
portion 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 vary-
ing 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 de-

* "In times of great agitation and insecurity, especially dur-
ing 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." (1. c, v. 2, p. 367.)

— 183 —

cline in the rapidity of circulation, the hoards open np
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 circula-
tion is a constantly oscillating movement in which the
prevalence of the one or the other tendency is deter-
mined 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 circu-
lates as coin which is required by the immediate needs
of circulation. If the volume of the entire circula-
tion 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 solidi-
fies into money in large measure, and the treasure reser-
voirs fill up far above their average level. In countries
with an exclusively metallic circulation or where pro-
duction 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

~ 184 —

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/

^ In the following passage Xenophon develops money in its
specific forms of money and hoard : "iv novt^ tovt« &v iyi» olSa Iff

fiav ov5e ^dofetovSet? tois ejritrKevafo/Aei'Ots...apyvprTi? 5e o<r<j> av vXtiittv f^otvif-
Tai, Ktti afyyvpiov irkelov yiyvijrai, toctovtw irAeioves eiri to epyov towto cpxofTat....
Kox yap Srf iirivka fiev eirei&ap txava tc? KT^arjrai rrj oi#cia, ov fA.d\a In wpo<ru-
vovrrai- apyvpioy Si ovSeli irtm ovtu> nokv eKrijo-aro uxrrt ftr) en vpoaQvlvOai^ a\k'
1JV rial yevTjTot TraftTrAijOes, to veptrrevov »caTopvTTOfTe9 ovBeif ^ttoi' rfSovrai ^
XP^f^evoi avT<i- Kal fLijv oray ye ei irparTtoaiv at irokeif t<rxvpws, ot ay0ponroi «p-
yvpiov Seovrai' Oi fiev yap dvSpe^ ajui^i OTrAa re KoXajial iirirovs dya0ovi Koi Oi-
Ktas «cal KaraaKevdi fLeyaXovpeireis ^ovAofrai fiaTrai'aj', ol 5« yvj'atKes et? eo-^Ta
vokvreKi] Kal xpvcrovv Koap-ov rpeirovrai ■ orav Se av voarjaaxri TroAets ^ cuftopw
KapnS>v ^ TToKepiM in Koi ttoAv ftaXAoi' ti}; y^? apyov yiyvofAeiai? KOt ci$ evir^eta
ical eif eiriKovpovc vop.i<rp,aro^ Seovrai." (-A-Cn. Cle VeCtlgaliDUS, 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 devel-
opment 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 opera-
tion . . . 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 pros-
perous 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 orna-
ments of gold. Or when states are sick, either through barren-
ness 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 (profit).

--. 185 —

b. MEANS OF PAYMElfT.

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 meta-
morphosis of a commodity; it represents money as the
result of the alienation of all commodities in contra-
distinction to the medium of circulation as the embodi-
ment of commodities in their always alienable form.
Coin reserves and hoards are money only as non-circulat-
ing mediums and are non-circulating mediums only be-
cause they do not circulate. In the capacity in which
we consider money now, it circulates or enters circula-
tion, 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

— 186 —

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 sim-
ultaneous existence of the two equivalents at opposite
poles and their simultaneous change of places or mu-
tual 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 char-
acter 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 ex-
pressions 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

— 18? —

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 cir-
culation lend the weight of actual seller and buyer
to the buyer and seller who enter it merely as repre-
sentatives 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 ex-
change 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 real-
ization in actual life of this bi-polar contrast, a new
break occurs. The seller actually alienates his com-
modity, 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

— 188 —

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 ex-
change value. Instead of a token of value repre-
senting 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.* 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

'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.

— 189 —

now, we may note that the difference between pur-
chase and sale which appeared but imaginary in the
direct process of circulation, now becomes a real dif-
ference, 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-inspir-
ing, since he no longer identifies himself but his neigh-
bor with a certain sum of money and makes him and
not himself a martyr of exchange value. From a be-
liever he becomes a creditor, for religion he substi-
tutes 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 esti-
mated 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

— 190 ~

of the seller into that of the buyer. As soon as the
term of the contract expires, money enters circula-
tion, 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 circu-
lating medium or as a means of purchase. It per-
formed 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 ca-
pacity of a means of payment money appears as the
absolute commodity, but within the sphere of circu-
lation 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.*

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, en-
tirely apart from his individual wants, the movement
of the circulation process makes selling a social neces-
sity with every owner of commodities. As a former

"The difference between the means of purchase and the
means of payment is emphasized by (Luther.

— 191 —

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 pay-
ment, 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 mo-
tive and essence of sale for the sake of payment be-
comes 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 meta-
morphosis has taken place, i. e., before the com-
modity has been turned into money. The first meta-
morphosis thus takes place after the second in point
of time ; and thereby, money i. e. the form of the com-
modity 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, re-
quires no elaborate proof. In the first place, the de-
velopment of circulation leads to a continual repeti-

— 192 —

tion 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
l^ally 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 pay-
ment still coincide here, since in the first place, com-
modity and money change places simultaneously, and
secondly, the money does not buy the commodity, but
realizes the price of the commodity purchased be-
fore. In the second place, the nature of a great many
use-values makes the simultaneous alienation and de-
livery 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
atfer 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 pur-
chases and sales between the same commodity owners
the two ends of sale fall apart according to the con-
ditions of production of the respective commodities.
Thus arises a relation of creditor and debtor between

— 193 —

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 func-
tion 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 Eng-
land, e. g., money as coin has been almost completely
banished into the sphere of retail and petty trade be-
tween producers and consumers, while it dominates
the sphere of large commercial transactions as a
means of payment.*

As the universal means of payment money becomes
the universal commodity of all contracts, at first only in

*Mr. MacLeod, in spite of his doctrinaire conceit about defi-
nitions, fails so utterly to grasp the most elementary econom-
ic 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 dut 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. L,
ch. L)

194

the sphere of circulation of commodities.' But with the
development of this function of money, all other forms
of payment are gradually converted into money pay-
ments. 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.*

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

^Bailey, 1. 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."

'Says Senior (in his Lectures, published by Comte Arriva-
bene, 1. c, p. 117) : "Since the value of everything changes
within a certain period of time, people select as a means of pay-
ment an article whose value changes least and which retains
longest a given average ability to buy things. Thus, money be-
comes the expression or representative of values." On the con-
trary: just because gold, silver, etc., have become money, i. e.,
the embodiment of independently existing exchange value, they
become the imiversal means of payment. When the considera-
tion as to the stability of the value of money mentioned by Mr.
Senior comes into play, i. e., in periods when money asserts it-
self 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, pul
through an act of parliament which obliged the universities of
Oxford and Cambridge to stipulate the payment of one-third ^
their ground rents in wheat and malt.

^ 195 —

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 pay-
ments 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 commodi-
ties, 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 metamor-
phoses 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 accident-
ally 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 pay-

— 196 --

ment because the different hands have already
clasped each other. The rapidity with which money
circulates as a means of payment thus shows that in-
dividuals have been drawn into the process of circu-
lation 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 pur-
chases 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 sim-
ultaneously, but by the greater or less concentration
of the same and by the magnitude of the balance re-
maining 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 estab-
lished among certain elements in the community, does
not belong here. We may add that the specific in-
fluence which these time settlements exert on the

— 197 —

periodic fluctuations in the quantity of money in cir-
culation, has been scientifically investigated but lately.
In so far as the payments mutually balance as posi-
tive and negative quantities, no money actually ap-
pears on the scene. It figures here only in its ca-
pacity 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 meas-
ure of value. On the other hand, in so far as a pay-
ment has actually to be made, money enters circula-
tion 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. There-
fore, 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 dis-
turbs the mechanism of their settlement. Thus, under
conditions of fully developed capitalist production,
where the commodity owner has long become a capit-
alist, 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

— 198 —

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 cir-
culation is affected shudder before the impenetrable
mystery in which their own economical relations are
involved.^

Payments, in their turn, require the formation of

^Boisguillebert, who would stem the development of bour-
geois relations of production and violently attacks the bour-
geois personally, has a soft heart for those forms ol 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
tbe intervention of money, after "les marchandiseB sont a^-
preciee/' ("Le Detail de la France," I, «, p, S'lO.)

— 199 —

reserve funds, the accumulation of money as a means
of payment The building up of reserve funds ap-
pears 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 hoard-
ing which is directly called for by the process of pro-
duction, 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 re-
serve fund of means of payment. The more de-
veloped the capitalist system of production, the more
these reserve funds are limited to the necessary mini-
mum, Locke, in his work "On the Lowering of In-
terest'" 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 ab-
sorbed in England just at the time when banking be-
gan 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 modifica-
tion 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

^Locke, 1. c, p. 17. 18. "

— 200 —

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,
phis 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 com-
modities 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 dif-
ferent 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

— 201 —

place after the sale of the commodity, or the money
serves in two different capacities at two different pe-
riods; 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 un-
dergoes 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 con-
cluded. 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 produc-
tion. 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.

C. WORLD MONEY.

Gold becomes money as distinguished from coin only
after it is withdrawn from circulation in the shape of

202

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 equiv-
alent 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 re-
verse process takes place now in the world market, and
the reckoning names of money are turned back into cor-
responding 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 preciou?
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 Eussian im-
perials, Mexican dollars, and English sovereigns, do cir-
culate 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 ex^
change of commodities, arose first not within the
various primitive communities, but at their points ol
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.

203

Vie have seen that in the home circulation of a coun-
try, 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 as-
sumes two forms in all its other functions. The transla-
tion 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 money.

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 sil-
ver appear here as a means of purchase when the ex-

— '^04 —

change of matter is but one-sided, and purchase and
sale do not coincide. The frontier trade at Eliachta
e. g. is both actually and according to treaty, one of
barter, in which silver plays only the part of a measure
of Talue. 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 when-
ever 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 pro-
ducing 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 com-
modities between different national spheres of circula-
tion is developed, the more important becomes the func-
tion of world money to serve as a means of payment
for the settlement of international balances.

Like home circulation, international circulation re-
«[uires 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

-~ 205 —

the exchange of commodities.* Besides the special move-
ments which take place between national spheres of
circulation, world-money possesses a universal move-
ment, whose starting points are at the sources of produc-
tion 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 commodi-
ties and are exclianged 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 en-
tirely 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 differ-
ent reservoirs containing hoards of coin, means of pay-
ment and world-money ; partly is turned into articles of

* "II danaro ammasaato supplisce a quella somma, che per
esserc attualmente in circolazione, per Teventuale promiscuita
de' commerci si allontana e sorte delta 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 "Medi-
tazioni sulla Economia Politica," p. 196, t. XV. of Custodi's
1. c.)

206

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 circula-
tion for the free play of their mechanism. The hoard
as such becomes idle wealth, unless it appears as a tem-
porary form of a surplus resulting from a favorable bal-
ance of pajrments or as the result of an interrupted ex-
change of matter, i. e. as the solidification of a com-
modity in its first metamorphosis.

Gold and silver, in their capacity of money, being
by conception imiversal 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 em-
braces increasing parts of the world. They become uni-
versal equivalents to the extent to which the series of par-
ticular equivalents which constitute their spheres of ex-
change, increases. Since in the sphere of world circula-
tion commodities unfold their own exchange value on a
imiversal 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.

— 207 —

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 hunt-
ing for the commodity in its magic form. Gold and sil-
ver 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 neces-
sary outgrowth of the perverse conception which the
representatives of the commodity world have of their
own work in society, is shown by the extraordinary in-
fluence exerted in the middle of the nineteenth century
by the discovery of new gold fields.

Just as money develops into world-money, so the com-
modity owner develops into a cosmopolitan. The cos-
mopolitan relation of men is originally only a relation
of commodity owners. The commodity as such rises
above all religious, political, national, and language bar-
riers. Price is its universal language and money, its
common form. But with the development of world-
money as distinguished from national coin, there de-
velops the cosmopolitanism of the commodity owner as
the faith of practical reason opposed to traditional, re-
ligious, national and other prejudices which hinder the
interchange of matter among mankind. As the iden-
tical gold that lands in England in the form of American
eagles, turns there into sovereigns and three days later

— 208 —

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.^

4. THE PRECIOUS METALS.

The process of capitalist production first of all takes
hold of the metallic circulation as of a ready, trans-
mitted organ which, though undergoing a gradual trans-
formation, always retains tits 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.

'Montanari, "Delia Moneta," 1683, 1. c, p. 40. **E cosi
fattamente diffusa per tutto 11 globo terrestre la communica-
zione de' populi insieme, che puo quasi dirsi esaer 11 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
animal! e Fumana industria altrove producono, puo mediante
11 danaro stando in sua casa provederai e godere. Maravigli-
osa invcnzione." ("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 humc,n
Industry produce elsewhere. Marvelous invention!")

— 209 —

confine ourselves to summing up the most essential
points.

Since universal labor-time admits of quantitative dif-
ferences only, the object which is to serve as its specific
incarnation must be capable of representing purely quan-
titative differences, i. e., it must be homogeneous and uni-
form 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 betwen 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, there-
fore, values of equal magnitude.* The other condition
which a commodity that is to serve as a universal equiva-
lent 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

^ I metalli han questo di proprio c singulare che in essi soli
tutte le ragioni si riducono ad una che ft la loro quantity, non
av€ndo ricevuto delle natura diversa qualitd, nfe neU'interna
loro constituzione ne neU'extema forma e fattura." (Galiani,
I. 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.")

— 210 —

materially as well. Gold and silver possess these prop-
erties to a superior degree.

As mediums of circulation, gold and silver have this
advantage over other commodities, that their high speci-
fic gravity which condenses much weight in little space,
corresponds to their economic specific gravity which con-
denses 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 mobil-
ity which constitutes the sine qua non of the com-
modity that is to serve as the perpetuum mobile of the
process of circulation.

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: "0 felicem monetam, quae suavem
utilemque praebet humano generi potum, et a tartarea
peete avaritiae suos immunes servat possessores, quod
Buffodi aut diu servari nequeat.^' *

* De Orbe Novo. "0, happy coin, which furnishes mankind
with a pleasant and useful beverage and keeps its possessors
immune from the hell-born peat of avarice, since it can not be
either buried or preserved long."

— 211 —

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 com-
pared 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 dis-
pensed with as means of existence, as articles of con-
sumption. 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. Further-
more, gold and silver are not only negatively super-
fluous, 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) .

212

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 con-
stantly 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. Qold 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 circula-
tion, 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 diflLcrence 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. *

We have seen that gold and silver are unable to fulfill

'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 coimtry
was visited by a famine the following year. See M. G. K6mer,
"Abhandlung von dem Alterthum des BChmischen Bergwerks,**
Sehneeberg, 1758.

— 213 —

the requirements which they are expected to meet in
their capaxiity of money, viz. to remain values of unvary-
ing 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 mate-
riaL 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 pre-
Buppoeee the development of mining and a comparatively
high degree of technical skill generally. For that

— 314 —

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 develop-
ment of engineering and of the means of communica-
tion, 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 nine-
teenth 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 Eome had about
the same effect in antiquity, as the discovery of the
American mines in modern Europe. For the period of
the Eoman 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 Eome. The same move-
ment 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

215

of the American mines. The discovery of the Aus-
tralian, Califomian and Columbian gold sources makes
a new fall in the value of gold probable.*

c. THEORIES OF THE MEDITBI OF CIRCULA-
TION AND OF MONEY.

As the universal thirst for gold prompted nations and
princes in the sixteenth and seventeenth centuries, the
period of infancy of modem bourgeois society, to cru-

^ So far the Australian and other discoveries have not af-
fected 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 chang-
ing 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 market.

PRICE OF SILVER PER OUNCE.

Yetu^ March. July. November.

1852 eOVs pence 60^4 pence eiyg pence

1863 61% pence 6iy2 pence 61% pence

1854 eiyg pence 61% pence 61»4 pence

1855 60% pence 61 Vi pence 60% prace

1856 60 pence 6I14 pence 62% pence

1857 61% pence 61% pence 61% pence

1868 61% pence

— 216 —

sades beyond the sea in search of the golden grail/ 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 mis-
sion 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 con-
stitutes a value of the same magnitude as £3 worth of
goldyThe point here is not the magnitude of the ex-
change 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,

'"Gold is a wonderful thing! WTioever possesses it, is mas-
ter 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).

— 217 —

in fact, constitute bourgeois wealth. Money as the end
and object of circulation is exchange value or abstract
wealth* bnt 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 commod-
ities. The proper bourgeois economic sphere of that
period was the sphere of the circulation of commodities.
Hence, they judged the entire complex process of bour-
geois production from the point of view of that ele-
mentary sphere and confounded money with capitaL
The unceasing war of modem 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 some-
where 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 mone-
tary and mercantile system, political economy, by at-
tacking 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 sjrstem
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 ele-

— 218 —

mentary 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 re*
tains its right of citizenship. The Catholic fact that
gold and silver are contrasted with other profane com-
modities 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 dis-
appearing 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 cir-
culation is isolated in its function of coin, it turns, as

— 219 —

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 acordance with the law governing the circula-
tion 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 circula-
tion, 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

— 220 —

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 sem-
blance.

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 nnd 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 sil-
ver of lower value, rise as compared with the prices of
•11 other commodities whose exchange value contiBtoes

— 221 —

to be estimated in gold or silver according to the stand-
ard of their old cost of production. This two-fold ap-
praisement of the exchange values of commodities in
the same c-ountry can naturally be only temporary, and
the gold and silver prices must become equalized in the
proportions determined by the exchange values them-
selves, so that finally the exchange values of all com-
modities come to be estimated according to the new value
of the money material. The development of this pro-
cess, 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 equaliza-
tion 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 in-
crease of cash in circulation, has been strikingly demon-
strated by new critical investigations of the movement
of prices of commodities in the sixteenth century.^ 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 irrele-
vant. The characteristic method of antiquity of sud-
denly transferring hoarded treasures from one country
to another, which was accomplished by violence and thus
brought about a temporary reduction of the cost of

'The slowness of the process was admitted by Hume, al-
though it but little agrees with his principle. See David Hume
"Essays and Treatises on several subjects." London, 1777, v.
1, p. 300.

— 223 —

production of precious metals in a certain country by
the simple process of plunder, aiffects 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 sec-
ond, official and current statistics relating to the expan-
sion and contraction of the circulating medium, the im-
ports and exports of the precious metals, etc. Hume's
theory of circulation may be summed up in the follow-
ing 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.'

'The deamess of everything,'* says Hume, "from
plenty of money, is a disadvantage, which attends an

» Conf. Steuart, 1, c. v. I, p. 394-400.

— 223 —

established commerce, and sets bounds to it in every
country, by enabling the poorer states to undersell the
richer in all foreign markets."^ "Where coin is in great-
er plenty ; as a greater quantity of it is required to repre-
sent 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." ^ In order to prove any-
thing, Hume should have shown that under a given
system of notation the quantity of characters used does
not depend on the magnitude of the nimibers, 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 *'count-
ing" 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 con-
verted 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,

* David Hume, 1. c. p. 300.

• David Hume, 1. c. p. 303.

— 224 —

it is not necessary that either gold or silver should be
"on hand/^ Money of account and the medium of cir-
culation 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 rap-
idity 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 pro-
duction had declined at the same time, Hume could know
from the closing up of the European mines. In the six-
teenth and seventeenth centuries the prices of commodi-
ties increased in Europe with the influx of the mass of
American gold and silver; hence the prices of com-
modities in every land are determined by the mass
of gold and silver to be found there. This was Hume's
first "necessary consequence."^ 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, gen-

* David Hume, 1. c. p. 303.

— 225 —

eralizes indiscriminately from imperfectly observed
facts, prices of commodities or the value of money de-
pend 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
sf absorbed by circulation in the form of coin/ 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, there-
fore, 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 conse-
quence." 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

» David Hume, 1. c. p. 307, 308, 303 : "It is evident, that the
prices do not so much depend on the absolute quantity of com-
modities, 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 anni-
hilated; 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 toith the
neto quantity of specie which is in the kingdom."

— 226 —

value of commodities and of gold, but onfy 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 magni-
tude of their value to a social function.* 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 ether. 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 com-
modities 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 alto-
gether two million ounces of gold, and for twenty

' See Law and Frcmklin about surplus value which gold and
silver are supposed to acquire from their function of money.
Also Forhonnaifi.

227

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/ But the world of commodities
consists of an endless variety of use-values, whose rela-
tive values are by no means determined by their relative
quantities. How, then, does Hume conceive this ex-
change of the volume of commodities for the volume of
V gold ? He contents himself with the meaningless, hollow
idea that every commodity is exchanged as an aliquot
pari; of the entire volume of commodities for a corre-
Bponding aliquot pari; 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 mani-
fests itself in the circulation of money, becoming cry-
etallized in diJfferent 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 com-
modities 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.^ He is really the first to ask
this question: is the quantity of current money deter-

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

' Steuart, 1. c. v. I., p. 394 seq.

— . 228 —

mined 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 remi-
niscences 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 pay-
ment 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 to-
gether 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 pro-
portion of money is required. This proportion may in-
crease 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.* "It is the complicated
operations of demand and competition which determines
ihe standard price of everything" ; the latter "does not
in the least depend on the quantity of gold and silver

'Steuart, 1. c, v. 2, p. 377-379 passim (not found in the
1767 London edition. Translator).

— 229 —

in the country/" What then will become of the gold
and silver that is not required as coin ? They are hoard-
ed 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 sub-
stitutes 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 in-
ternational 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.* Symbolic money or credit

* Steuart, 1. c, p. 379-380 passim (London, 1767 edition, r.
1. p. 400. Transl.).

**'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 com-
petition, and these will constantly depend upon the inclinations
of those who have property or any kind of equivalent whatso-

— 230 —

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

ever to give, but never upon the quantity of coin they are pos-
sessed 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 in-
ventions. ... 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 sud-
den 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."
1. e. 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 in-
dustry 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 wm 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 worldj 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" (1. c. p. 403-408 passim.) "All na-
tions 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." (1. c. v. 2. p. 5).

231

market. Paper notes are therefore ''money of the so-
ciety," while gold and silver are "money of the world." ^
It is characteristic of nations with an "historical" de-
velopment, 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 rela-
tion of prices of commodities to the volume of the
circulating medium has been continually agitating Par-
liament 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 ^*cur-
rency," Maclaren, makes Adam Smith the original au-
thor of Steuart^s theory, and Eicardo of Hume's theory.-

"The richest nation in Europe may be the poorest in circulating
specie." 1, 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].

* Steuart, 1. e., v. 2, p. 370. Louis Blanc translates the ex-
pression "money of the society" which stands for home or na-
tional money, as socialist money, which is perfectly meaning-
less and makes a Socialist of John Law. (See the first voliune
of his History of the French Revolution) ,

'Maclaren, 1. c. p. 43 seq. Patriotism led Gustav Julius, a
German writer who met with very early death, to hold up old
Biish as an authority as against the Ricardian school. Honest

— 232 —

While Eicardo elaborated Hume's theory, Adam Smith
registered the results of Steuart's investigations as
dead facts. Adam Smith applied the Scotch say-
ing 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 quan-
tity of coin in circulation, treating money quite wrongly
as a mere commodity.* His vulgarizer, the dull J. B.

Bilscfa rendered Steuart's elegant English into Hamburg Piatt
and by trying to improve upon the original spoiled it as often
as he could.

* 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

— 233 —

Say, whom the French have proclaimed prince de la
science — like Johann Christoph Gottsched, who pro-
claimed his Schonaich 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/ 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 circula-
tion, 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 atti-
tude toward the biblical tradition of the flood, so there
is concealed behind all the money theories of the eigh-
teenth century a secret struggle with the monetary
system, the ghost which had stood guard over the cradle

view. 'The quantity of coin in every country is regulated by
the value of the commodities which are to hs 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 em-
ployment 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., oh. I.*']

'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 de-
pendence of prices on the extent of the currency had not as yet,
attmcted attention; and Doctor Smith, like Mr. Locke (Locke
undergoes a change in his view), considers metallic money
nothing but a commodity." Maclaren, 1. c. p. 44.

— 234 —

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 banknote
circulation. The former was touched upon only in order
to discover the laws governing the latter. The suspen-
sion 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, espe-
cially since 1809, furnished the direct practical occasion
for a party struggle in parliament and a theoretical
tournament outside of it, both conducted with like pas-
sion. The historical background for the controversy
was furnished by tiie history of paper money during
the eighteenth century: the fiasco of LaVs 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 Independ-
ence ; and finally, the experiment with the French assig-
nats 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

— 335 —

matter of fact, just the opposite way, viz., deduct-
ing 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 EICARDO, 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 cur-
rency 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 ex-
clusively 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.* The singular

* 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. Bosan-
quet*s Practical Observations on the Report of the Bullion Com-
mittee." London, 1811.

— S;36 —

circumstance, that Ricardo and his adherents, who held
money to be merely a token of value, are called bullion-
ists, 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 fur-
ther 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.* By means of
them, as commodities of a given value, the values of all
other commodities are measured.' The volume of the
circulating medium in a country is determined by the
value of the imit of measure of money on the one hand,
and by the sum total of the exchange values of commodi-
ties, on the other. This quantity is modified by economy
in the method of pajrment.* Since the quantity of money,

* David Ricardo : *'0n the Principlea 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.**

"1. c p. 77, 180, 181.

•Ricardo, 1. c. p. 421. "Tlie 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 neces-
eary, if silver were made use of for the same purpose.** See
also Ricardo*s: "Proposals for an Economical and Secure Cur-
rency," London, 1816, p. 89, where he says: "The amount of
notes in circulation depends on the amount required for the

— 237 —

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
quantit}^, 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 repiasent."^ So far Ricardo
determines the volume of the circulating medium by the
prices of commodities, assuming the value of fnoney
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 couimodities as was the case
with Hume.

When Ricardo suddenly get* off the straight path of
his presentation and takes the very opposite view, he
does so to turn his attention to the international circula-
tion of precious metals and thus brings confusion into
the problem by introducing considerations that are for-
eign 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

circulation of the country: which is regulated ... by
the value of the standard [of money], the amount of payments,
and the economy practised in efTecting them."

* Ricardo, "Principles of Political Economy", p. 432.

— 238 ~

as so far developed, is that, the value of gold being
given, the quantity of money in circulation will be de-
termined 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 commod-
ities 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 Eicardo has in
mind), then the quantity of money in circulation will
rise above the normal level, as determined by the ex-
change 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 ease it will remain as a
token of value less than its own, in the latter greater than

— 239 —

its own (again an abstract deduction from legal ten-
der 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 circula-
tion were not replaced by the production of a corre-
sponding quantity of gold in the mines ; the latter, if the
output of the mines exceeded the requirements of cir-
culation. In either case it is assumed that the cost
of production of gold or its value femain 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

— 240 —

right level, leading to a rise of gold above its owit
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 suffi-
cient 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 pleas-
ure), but would be at variance with the cost of produc-
tion of the precious metals and, therefore, with their
relation as commodities to all other commodities. Ac-
cording 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 cir-
culation would disappear, the normal level of the vol-
ume 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 circula-
tion would to the same extent affect gold ir the form of

— 241 —

bullion, because by assumption, all gold that is not util-
ized as an article of luxury, is supposed to be in circula-
tion. Since gold itself may become, both as coin and bul-
lion, a token of value of greater or smaller magnitude
than its bullion value, it is self understood that convert-
ible bank-notes in circulation have to share the same fate.
Although bank-notes are convertible, i. e. their real valm
and nominal value agree, "the aggregate currency con-
sisting of metal and of convertible notes" may appre-
ciate or depreciate according as to whether it rises oi
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. Inconvertib 9
paper money, has, from this point of view, only that
advantage as against convertible paper money, that it
may depreciate in a two-fold manner. It may fall be-
low the value of the metal which it is supposed to repre-
sent, 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 funda-
mental principle of Sir Robert Peelers 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

^y quantity of gold in circulation. V^ The proof consists in

the assumption of what is to be proven, viz. that any

quantity of the precious metal employed as money

— 242 —

must become a medium of circulation or coin, and there-
by 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. V To put it differently, the proof consists in
overlooking all the other functions which money per-
forms besides its function of a medium of circulation.
When hard pressed, as in his controversy with Bosan-
quet, Eicardo, completely under the influence of the
phenomenon of depreciated tokens of value caused by
their quality, takes recourse to dogmatic assurances.^

If Kicardo had built up this theory by abstract reason-
ing, as we have done it here, without introducing con-
crete 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 diminutive.

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 esti-
mated 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

' David Ricardo, "Reply to Mr. Bosanquet*s Practical Obser-
vations, etc." p. 40. "That commodities would rise or fall in
price, in proportion to the increase or diminution of money, /
assume as a fact which is incontrovertible."

243

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.^ That being the case,
"there could be no temptation offered to either for their
importation or exportation."- 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 in-
crease in the quantity of gold in a country brought

* David Ricardo, "The High Price of Bullion," etc. '^Money
would have the same value in all countriee." p. 4. In his
Political Economy Ricardo modified this statement, but not in
a way to affect what has been said here.

' 1. c. p. 3-4.

— 244 —

about by the discovery of new gold mines/ or by an in-
crease 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 conse-
quence of a redundant currency, gold would be de-
preciated, 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, 80 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 com-
modities, or as we shall say now, the international
balance of currencies would be restored. Just as in tlie
former case the production of gold increased or de-
creased 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

M. c, p. 4.

245

commodities or the normal quantity of cnrrency 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." ' "The exportation of the coin
is caused by its cheapness, and is not the effect, but the
cause of an unfavourable balance." ^ 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 correc-
tive,^ since, through the resultant expansion or contrac-
tion of the currency, prices are restored to their true
level : in the former case this level represents the bahmce
between the respective values of gold and of commodi-
ties ; 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

^Ricardo, 1. c, p. 11-12.
'Rieardo, 1. c. p. 14.
M. c, p. 17.

— 246 —

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 ex-
plain them in the sense of his abstract theory, a few
illustrations will suiBfice 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 com 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.' Contrary to this paradoxical in-

* Ricardo, 1. 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 amoimt of circulating medium. The currency
which was before equal to her payments would now become
Buper-abundant and relatively cheap, in proportion. . . of
her diminished production ; the exportation of this sum, there-
fore, 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 im-

— 247 —

terpretation it has been proven statistically that from
1793 to the present time, whenever England had a bad
harvest the available supply of cuj-rency not only did
not become superabundant, but became inadequate and
that, therefore, more money circulated and had to cir-
culate on such occasions.^

In the same manner, Ricardo maintained, with refer-
ence to Napoleon's ContiQental 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 Con-
tinent, 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

favorable harvest, when England has occasion for an unusual
importation of com, another nation is possessed of a super-
abundance 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 toould it export com for money ^ as that is a commodity
which no nation ever wants absolutely, but relatively." 1. 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 com import*
in 1838-1842, but by the entire history of their commerce.

^ Conf. Thomas Tooke, "History of Prices," and James Wil-
son, "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.)

— 248 —

commodities were cheap and money was dear. The trou-
ble, according to an English writer, was "the ruinously
low prices of our manufactures and of our colonial
productions under the operation ... of the 'Con-
tinental 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 Eng-
lish grazier tried experiments upon fattening oxen with
treacle and molasses — of the times when we took pos-
session of the island of Heligoland, in order to fonn
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. . . . Al-
most 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 poimd 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 oimce, and send it

249

to a place where it would be received at £3 178. lO^d.
an ounce: . . . It is too absurd, of course, to say
. . . that the gold was remitted instead of the cof-
fee, as a preferable mercantile operation. . . .
There was not a country in the Wt*.^ !;:> ^hich so
large a quantity of desirable goods could be obtained, m
return for an ounce of geld, 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."^

At the very time when Ricardo first formulated his
theory of money, and the Bullion Committee embodied
it in its parliamentary repon, namely in 1810, a ruin-
ous fall of prices of all English commodities as com-
pared with those of 1808 hnd 1809 took place, while
gold rose in value accordingly. Only agricultural prod-
ucts formed an exception, because their importa-
tion from abroad met with obstacles and their domestic
supply was decimated by unfavorable crop conditions. =
Ricardo so utterly failed to comprehend the role of
precious metals as an international means of pajrment,
that in his testimony before the Committee of the House
of Lords in 1819 he could say "that drains for exporta-
tion would cease altogether so soon as cash payments

* James Deacon Hume : "Letters on the Com Laws." Lon-
don, 1834, p. 29-31. [Letter by H. B. T. on the Corn Laws and
on the Kights of the Working Classes. Transl.]

'Thomas Tooke, '^History of Prices," etc. London, 1848,
p. 110.

250

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 prophesies.

The time when Kicardo 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 Eicardo seems to have utterly
failed to grasp the part which subsidy payments played
at that time in English gold exports.^

Among the contemporaries of Kicardo who formed
the school which adopted his economic principles,
JAMES MILL was the most important one. He at-
tempted to work out Ricardo's theory of money on the
basis of simple metallic circulation, without the irrele-
vant international complications which served Kicardo
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 quan-
tity of the money in any country, which determines
what portion of that quantity shall exchange for a cer-

* Conf. W. Blake's above quoted "Observations etc."

— 251 —

tain 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 to-
morrow. 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 num-
ber 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 coimtry 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 ex-
changes in the year, were ten times as great, and per-
formed 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

— 252 —

each of the minor quantities taken separately. As the
quantity of gooas, against which the money is ail ex-
changed at once, is supposed to be the same, the value
of all the money is no more, after the quantity is aug-
mented, 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 remain-
ing 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 uni-
versally 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
tx) 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 por-
tion of the annual produce which is not exchanged at all,
as what is consumed by the producer; or which it 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. . . . Wlienever the coining of money • . »

— 253 —

is free, its quantity is regulated by the value of the
metal. . . . Gold and silver are in reality com-
modities . . . It is cost of production . . .
which determines the value of these, as of other ordi-
nary productions." *

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 deter-
mined 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 "as-
sumptions." 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

* James Mill : "Elements of Political Economy." [Iiondon,
1821, p. 95-101 passim. TransL]

— 254 —

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 differ-
ent, yet all the gold in a country does circulate. As-
suming 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 mil-
lion 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

— 255 —

means of purchase. Already in the movement of money
as a means of payment, commodity and money ceaae to
appear simultaneously.

The commercial crises of the nineteenth century,
namely, the great crises of 1825 and 1836, did not re-
sult 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 six-
teenth 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 pro-
duction 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 sub-
ject to the same laws the circulation of credit and bank-
note currency.

The most general and most palpable phenomenon in
commercial crises is the ^dden, 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 commodi-
ties, and the general rise of prices as a decline of the

— 256 —

relative value of money. In either expression the phe-
nomenon 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. Eicardo'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 peri-
odic rise and fall of prices is due to their periodic rise
and fall. The problem itself is stated under the as-
sumption 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 tau-
tology 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 state-
ment 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.

— 257 —

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 gen-
eral 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 cur-
rency, 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 commod-
ities 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 fluctua-
tions must take place even with a purely metallic cur-
rency, 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 im-
ported and money is exported. But, since in spite of
these universal fluctuations of prices which are in per-
fect 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

— 258 —

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 efBux, 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 me-
tallic 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 conmiodities 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 cir-
culation in proportion to the export of gold frcm 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.V Ricardo's false as-
cuT^iption that gold is only coin, and that therefore all
iiaported gold swells the currency, causing price? to ri?e,
while a^l exported gold reduces the currency loading to
a fall oC prices, this theoretical assumption is turned
into a practical experiment of putting in every ca?e an
amount of currency in circulation equal to the amoimt
of goV^ in existence. Lord Overstone ( Jie banker Jones
Loyd), Colonel Torrens, Norman, Clay, Arbuthnot ani
a h'^pt of other writers, known in England as the ad-
hercius of the "currency principle," not only preached
this drctiine, but with the aid of Sir Robert Peel suc-
ceeded in 1844 and 1845 in making it the basis of the
present English and Scotch bank legislation. Its ig-
nominous failure, theoretical as well as practical, fol-
lowing upon experiments on the larges-t national scale,

— 259 —

can be treated only after we take up the theory of credit*
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 sys-
tem had never dreamt of. Thus did Ricardo, who pro-
claimed paper currency as the most perfect fonn of
money, become the prophet of the bullionists.
After Hume's theory or the abstract opposition to the

*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 coun-
try, 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 wonder-
ful law of 1844.

— 260 —

monetary system was thus developed^ iC its ultimate con-
clusions, Steuarf s concrete conception of money was fi-
nally restored to its rights by THOMAS TOOKE.»
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 Eicardian the-
ory, 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 con-
clusion 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 pre-
cious metals remains unchanged, is always the effect
but never the cause of price fluctuations ; that the circu-
lation of money is in any event but a secondary move-
ment; and that money assumes quite different forms in
the actual process of production in addition to that of
a circulating medium. His detailed investigations be-
long to a sphere outside of that of simple metallic cir-
culation and can be discussed here as little as the inves-
tigations of WILSON and FULLARTON which belong

* 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.

— 261 — -

to the same class.^ 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 distin-
guished from medium of circulation with capital or
even with commodity, although they are forced else-'
where to differentiate it from both/ 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,

* 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. Wil-
son's book we have already quoted. Finally there is to be men-
tioned John Fullarton's "On the Regulation of Currencies," 2d
edition, London, 1845.

* "We ought to . . . distinguish . . . between gold
. . . as merchandise, i. e. as capital, and gold. . . as cur-
rency" (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 de-
scription of merchandize . . . from the circumstance of
being universally in use as money. . . It is not in tea, coflfee,
sugar or indigo that debts, whether foreign or domestic, are

— 262 —

not from its being capital, but from its specific char-
acter of money. Similarly, when gold, or bank notes in
its place, circulate in the home trade as means of pay-
ment, they constitute capital at the same time. But
they could not be replaced by capital in the form of com-
modities, 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 di-
rectly as capital, as, e. g., when it is done for the pur-
pose 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 con-
sider money in its abstract form, as it is developed with-
in the sphere of simple circulation of commodities, and
as it spontaneously grows out of the relation of the cir-
culating commodities. As a result, they constantly

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." (Fuller-
ton, 1. c. p. 132-133.) "Any other article (except gold or sil-
ver) might in quantity or kind be beyond the usual demand of
the country to which it is sent." (Tooke: "An Inquiry, etc.")

— 263 —

vacillate between the abstract forms of money which dis-
tinguish it from commodity and those forms of it be-
neath which are concealed concrete relations, such as
capital, revenue, etc/

^ The transformation of money into capital we shall consider
tn the third chapter which treats of capital and forms the end
of the first book.

Introduction

to the

Critique of Political Economy*'

1. PRODUCTION IN GENERAL.

The subject of our discussion is first of all material
production by individuals as determined by society, nat-
urally constitutes the starting point. The individual
and isolated hunter or fisher who forms the starting

^This introduction was first published in the Neue Zeit (see
Translator's Preface, p. 5) of March 7, 14 and 21, 1903, by
Karl Kantsky, 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

— 266 —

point with Smith and Ricardo, belongs to the insipid
illusions of the eighteenth century. They are Robin-
sonades which do not by any means represent, as stu-
dents 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 natural-
ism than is Rosseau's "contrat social,'' which makes nat-
urally 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 de-

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 un-
intelligible. . . 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 aw
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 suflSced 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 oJ
view and had given them a wording that would be incontro
vertible. In spite of its fragmentary character it opens before
us a wealth of new points of view."

26'

veiopment since the sixteenth century and made gi-
gantic 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 eigh-
teenth 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 produc-
tion 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 charac-
teristic of every new epoch in the past. Steuart, who, as
an aristocrat, stood more firmly on historical groimd,
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 con- ^/ \
front the individual as a mere means to his private ends,
as an outward necessity. But the period in which this

— 268 —

view of the isolated individual becomes pW/^akat, is the
very one in which the interrelations of bociety (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 politihon, 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 excep-
tion 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 in-
dividuals living together and talking to one another. We
need not dwell on this any longer. It would not be neces-
sary 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 Ba&tiat, Carey, Proud-
hon 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
mjrthology. Adam or Prometheus hit upon the scheme
cut and dried, whereupon it was adopted, etc. Nothing
is more tediously dry than the dreaming locus com-
munis.

Whenever we speak, therefore, of production, we al-
ways 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 de-

— 269 —

velopment through its various phases, or declare at the
outset that we are dealing with a certain historical pe-
riod, as, e. g., with modem 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 abstrac-
tion, in so far as it singles out and fixes the common
features, thereby saving us repetition. Yet these gen-
eral or common features xiiscovered by comparison con-
stitute something very complex, whose constituent ele-
ments have different destinations. Some of these ele-
ments 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 com-
pletely developed languages have laws and conditions in
common with the least developed ones, what is charac-
teristic 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 differeiice"be hot lost
sight of in view of thegeneral uniformity which is due
to the facV 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 modem
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 accumu-

270

lated 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 disre-
gard 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 govern-
ments.

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 connec-
tion 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 pro-
cess 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 "produc-

— 271 —

tion'' (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 im-
possible, i. e., of the most essential conditions of pro-
duction. As a matter of fact, however, it dwindles down,
as we shall see, to a few very simple d afinitions, which
flatten out into shallow tautologies;

2. Of conditions which further production more or
less, as, e. g., Adam Smith's [discussion of] a progres-
sive 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 be-
long here is to be brought out in connection with the
discussion of competition, accumulation, etc. The com-
monly accepted view of the matter gives a general an-
swer 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 sub-
jectively and objectively. As a matter of fact a nation is
at its industrial height so long as its main object is not

272

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 dis-
tribution — see Mill, e. g. — as subject to eternal laws in-
dependent of history, and then to substitute bourgeois
relations, in an underhand way, as immutable natural
laws of society m abstracto. This is the more or less
conscious aim of the entire proceeding. On the con-
trary, when it comes to distribution, mankind is sup^
posed 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 differ-
ent 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,

— 273 —

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 (ap-
propriation) is a condition of production. But it be-
comes 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 op-
posite 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.

3. Protection of property, etc. Reduced to their real
meaning, these commonplaces express more than what
their preachers know, namely, that ever y form of pro-
duction creates its own legal relations, forms of govern-
ment, etc. The crudity and the shortcoming of the
conception lie in the tendency to see but an accidental re-
flective connection in what constitutes an organic union.
The bourgeois economists have a vague notion that it is
better to carry on production under the modem police,
than it was, e. g. under club-law. They forget that
club law is also law, and that the right of the stronger

274

continues to exist in other forms even under their "gov-
ernment of law/^

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

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

2. THE GENERAL RELATION OF PRODUCTION TO DISTRIBU-
TION, EXCHANGE, AND CONSUMPTION.

Before going into a further analysis of production, it
is necessary to look at the various divisions which econ-
omists put side by side with it. The most shallow con-
ception 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 in-
dividual appropriation. Production yields goods adopt-
ed to our needs; distribution distributes them accord-
ing to social laws ; exchange distributes further what has
already been distributed, according to individual wants ;

275

finaUy, in consumption the product drops out of the
social movement, becoming the direct object of the in-
dividual want which it serves and satisfies in use.
Production thus appears as the starting point ; consump-
tion 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 [con-
sumption*] things are embodied in persons ; in distribu-
tion, society assumes the part of go-between of produc-
tion 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 de-
termines the products in which the indi\idual 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 [ac-
cording 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

^ The original reads "person."

— 276 —

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 econo-
mists themselves or not — who reproach them with tear-
ing 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 concep-
tion 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 w^hole. 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 conditions.

a. Production is at the same time also consumption.
Twofold consumption, subjective and objective. The in-
dividual who develops his faculties in production, is also
expending them, consuming them in the act of produc-
tion, just as procreation is in its way a consumption of
vital powers. In the second place, production is con-
sumption of means of production which are used and
used up and partly (as e. g. in burning) reduced ia
their natural elements. The same is true of the con-

— 277 —

sumption 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 ad-
mitted 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 ex-
pression in Spinoza's proposition, Determinatio est nega-
iio. But this definition of productive consumption is re-
sorted to just for the purpose of distinguishing between
consumption as identical with production and consump-
tion proper, which is defined as its destructive counter-
part. Let us then consider consumption proper.

Consumption is directly also production, just as in na-
ture 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 con-
sumption, man produces his own body ; but it is equally
true of every kind of consumption, which goes to pro-
duce 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 trans-
forms 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 pro-
duction coincides with consumption and consumption

278

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. Produc-
tion furthers consumption by creating material for the
latter which otherwise would lack its object. But con-
sumption 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 pro-
/ duction, no consumption; but, on the other hand, with-
out 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 embodi-
ment of axitivity, but also as a mere object for the active
subject.

In the second place, consumption produces produc-
tion by creating the necessity for new production, i. e.

279

by providing the ideal, inward, impelling cause which
constitutes the prerequisite of production. Consump-
tion 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 produc-
tion. But consumption reproduces the want.

In its turn, production

First, furnishes consumption* with its material, its
object. Consumption without an object is no consump-
tion, hence production works in this direction by pro-
ducing 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 con-
sumption gives the product its finishing touch as a
product, production puts the finishing touch on consump-
tion. 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

^ The manuscript reads "production."

280

created by production not only objectively, but also sub-
jectively. PrMuctioJi_iima-.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 fur-
nishing the latter with material; second, by determin-
ing the manner of consumption; third, by creating in
consumers a want for its products as objects of con-
sumption. It thus produces the object, the manner, and
the moving spring of consumption. In the same man-
ner, consumption [creates] the disposition of the pro-
ducer by setting (?) him up as an aim and by stimulat-
ing wants. The identity of consimiption and production
thus appears to be a three fold one.

First, direct identity : production is consumption ; con-
sumption is production. Consumptive production.
Productive consumption. Economists call t)oth productive
consumption, but make one distinction by calling the
former reproduction, and the latter productive consump-
tion. All inquiries into the former deal >ith productive

— 281 —

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 indis-
pensable, yet remaining outside of each other.

Production creates the material as the outward ob-
ject of consumption; consumption creates the want as
the inward object, the purpose of production. With-
out production, no consumption; without consumption,
no production; this maxim figures (?) in political econ-
omy 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 fur-
thering the other, but while it is taking place, creates the
other as such for itself (?). Consmnptign^completes-
the act of production by giving the finishing touch to
the product as such, by destroying the latter, by break-
ing 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

— 282 —

producer. On the other hand, production produces caa*
sumption, 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 dis-
cussed in political economy in connection with the treat-
ment 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
dbstracio — her production is at the same time her con-
sumption. Storch pointed out Say's error by calling
attention to the fact that a nation does not entirely con-
sume her product, but also creates means of produc-
tion, fixed capital, etc. To consider society as a single
individual is moreover a false mode of speculative reason-
ing. 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 as-
pects 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, con-
stitutes an internal factor of productive activity, but
the latter is the starting point of realization and, there-
fore, its predominating factor, the act into which the
entire process resolves itself in the end. The individual

— 283 —

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 im-
mediate possession of it. Nor does the direct appropria-
tion of the product constitute his purpose, when he pro-
duces 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, dis-
tribution steps in between production and consumption.

Does distribution form an independent sphere stand-
ing 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 ever3rthing 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 consequwitly 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

284

an agent of production. They are also forms of repri?-.
dnction of capital.

In the same manner, wages is wage-labor when con^
sidered 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 dis-
tribution^ would not appear as wages, as is the case e. g.
under slavery. Finally, rent — to take at once the most de-
veloped 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 distribu-.
tion appear, therefore, merely as the reverse sides of
the agents of production. An individual who partici-
pates 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 or-
ganization 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 deter-
mines the particular form of distribution, the form undei
which participation in distribution takes place. It is

^The manuscript reads "produoiion/'

— 285 —

quite an illusion to place land under production, rent na-
der distribution, etc.

Economists, like Ricardo, who are accused above alj tti
having paid exclusive attention to production, define dis-
tribution, therefore, as the exclusive subject of political
economy, because they instinctively^ regard the forms of
distribution as the clearest forms in which the agents
of production find expression in a given society.

To the single individual distribution naturally ap-
pears as a law established by society determining his
position in the sphere of production, within which he
produces, and thus antedating production. At the out-
set 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 ex-
istence of capital and landed property as independent
agents of production.

From the point of view of society as a whole, distri-
bution 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 con-
querors 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

^ The German text reads "instruktiv/* which I take to be &
misprint of "instinktiv." Translator.

2SG

production a new character. Or, legislation prepetuates
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 deter-
mined 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 distribu-
tion 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 mem-
bers 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 organiza-
tion 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 mod-
em 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 econo-
mics. We have here another evidence of the insipidity
of the economists who treat production as an eternal

— 287 —

truth, and banish history to the domain of distribution.

What relation to production this distribution, which
has a determining influence on production itself, as-
sumes, 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 cer-
tain distribution of the instruments of production, dis-
tribution in that sense precedes production and con-
stitutes its prerequisite; it may be replied that produc-
tion has in fact its prerequisite conditions, which form
factors of it. These may appear at first to have a nat-
ural 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 produc-
tion, they formed at other periods its historical result.
Within the sphere of production itself they are under-
going a constant change. E. g., the application of ma-
chinery produces a change in the distribution of the in-
struments of production as well as in that of products,
and modern land ownership on a large scale is as much
the result of modem trade and modem 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 con-

' — 288 —

quering people may impose its own methods of produc-
tion 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 re-
sult in something new, a synthesis (which partly resulted
from the Germanic conquests). In all of these con-
quests 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 bar-
barians, 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 in-
troduce the same conditions in the Roman provinces so
much easier since the concentration of landed property
which had taken place there, did 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

— 289 —

production.* And even the method of plunder is deter-
mined by the method of production. A stockjobbing na-
tion^ e. g. can not be robbed in the same manner as a
nation of shepherds.

In the case of the slave the instrument of production
is robbed directly. But then the production of the coun-
try 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 har-
mony 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

* Compare this with foot-note 1, on p. 34 of Capital, Hum-
boldt 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.

•The English expression is used by Marx in his German
original. Transl.

— 290 —

distribution and ns resultant influence on production
are to be determined elsewhere.

c. Exchange mid, Circulation. Circulation is but a
certain aspect of exchange, or it may be defined as ex-
change considered as a whole. Since exchange is an in-
termediary 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 im-
mediate consumption. To that extent exchange consti-
tutes an act included in production. Thirdly, the so-
called exchange between dealers and dealers* is by virtue
of its organization determined by production, and is it-
self a species of productive activity. Exchange appears
to be independent of and indifferent to production only

J. in the last stage when products are exchanged directly
for consumption. But in the first place, there is no ex-

* Marx evidently has in mind here a passage in Adam Smith's
Wealth of Nations (vol. 2, eh. 2) in which he speaks of the cir-
culation of a country as consisting of two distinct parts: cir*
culation between dealers and dealers, and that between dealers
and consumers. The word dealer signifies here not only a mer-
chant or shopkeeper, but also a producer. K. Kautslqr.

>91

change 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 develop-
ment 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, distri-
bution, 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 con-
sumption 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] consump-
tion, distribution, exchange, and also the mutual rela-
tions between these various elements. Of course, produc-
tion in its onS'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

-— 29^ —

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.

3. THE METHOD OF POLITICAL ECONOMY.

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 dif-
ferent branches of production ; then we study its exports
and imports, annual production and consumption, prices
of commodities, etc. It seems to be the correct pro-
cedure to commence with the real and concrete aspect of
conditions as they are; in the case of political econ-
omy, 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. Pop-
ulation 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.
These 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 con-
ception of the whole, and by closer analysis we will grad-
ually arrive at simpler ideas; thus we shall proceed
from the imaginary concrete to less and less complex ab-
stractions, until we get at the simplest conception. This

— 293 —

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 sys-
tems of political economy which start from simple con-
ceptions, such as labor, division of labor, demand, ex-
change value, and conclude with state, international ex-
change 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 defini-
tion; by the latter, the abstract definitions lead to tho
reproduction of the concrete subject in the course of
reasoning. Hegel fell into the error, therefore, of con-
sidering the real as the result of self-coordinating, self-
absorbed, and spontaneously operating thought, while
the method of advancing from the abstract to the con-

294

Crete 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 gen-
erates 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 ex-
istence except as an abstract one-sided relation of an
already given concrete and living aggregate.

As a category, however, exchange value leads an an-
tediluvian existence. And since our philosophic con-
sciousness 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 produc-
tion (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 imagi-
nation. 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, re-
ligious, or practical mind. The concrete subject con-
tinues to lead an independent existence after it has been

— 295 —

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 con-
stantly be kept in mind as the premise from which we
start.

But have these simple categories no independent his-
torical or natural existence antedating the more concrete
ones? Qa 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 rela-
tions of lord and serf, which are a great deal more con-
crete 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 rela-
tion of simple family and clan commimities with respect
to property. In earlier society the category appears as
a simple relation of a developed organism, but the con-
crete substratum from which springs the relation of pos-
session, is always implied. One can imagine an isolated
savage in possession of things. But in that case pos-
session is no legal relation. It is not true that the family
came as the result of the historical evolution of pos-
session. 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 con-
crete entity may have been realized without entering
into the manifold relations and bearings which are

— 296 —

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 exist-
ence. With that in mind, it may be said that the more
simple category can serve as an expression of the pre-
dominant relations of an undeveloped whole or of the
subordinate relations of a more developed whole, [rela-
tions] 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, corre-
spond 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 ex-
change 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 com-
munity. It appears at first more in the mutual relations
between different communities, than in those between
the members of the same community. Furthermore, al-
though money begins to play its part everywhere at an
early stage, it plays in antiquity the part of a pre-
dominant element only in one-sidedly developed nations,

297

VIZ. trading nations, and even in most cultured an-
tiquity, in Greece and Rome, it attains its full develop-
ment, which constitutes the prerequisite of modem bour-
geois 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 dom-
inate 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 com-
plex (?) forms of society, while the more concrete cate-
gory 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 modem category, as the conditions which have
given rise to this simple abstraction. The monetary sys-
tem, e. g. defines wealth quite objectively, as a thing ( ?) *
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 in-

^ Here two words in the manuscript can not be deciphered.
They look like "auaser sich" ("outside pf itself') . K. Kautsky.

— 298 —

dustrial 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. agricul-
ture, 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 diffi-
cult 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 ex-
pression 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 im-
plies the existence of a highly developed aggregate of dif-
ferent species of concrete labor, none of which is any
longer the predominant one. So do the most general ab-
stractions commonly arise only where there is the highest

— 299 —

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 par-
ticular form. On the other hand, this abstraction of
labor is but the result of a concrete aggregate of differ-
ent 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 an-
other, which makes it immaterial to them what particu-
lar kind of work may fall to their share. Labor has be-
come here, not only categorically but really, a means
of creating wealth in general and is no longer grown to-
gether with the individual into one particular destina-
tion. This state of affairs has found its highest develop-
ment 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 abstrac-
tion which modern political economy sets up as its start-
ing point, and which expresses a relation dating back to
antiquity and prevalent under all forms of society, ap-
pears 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 disposi-
tion. 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,

— 300 —

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 influences.

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.
r 'The bourgeois society is the most highly developed and
most highly differentiated historical organization of pro-
duction.j The categories which serve as the expression
of its conditions and the comprehension of its own or-
ganization 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 unsur-
mounted 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. j 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

■— 301 —

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 de-
veloped, or crippled, or caricatured form, but always es-
sentially different. "jThe so-called historical develop-
ment 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 con-
temporaries 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 bour-
geois political economy first came to understand the
feudal, the ancient, and the oriental societies as soon as
the self-criticism of the bourgeois societyhad 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 Christ-

— 302 —

ian criticism of the heathen religions or Protestant criti-
cism 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, mani-
festations of existence, and frequently but one-sided as-
pects 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 ex-
istence, 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 deter-
mines 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 hunt-
ing and fishing tribes are not as yet at the point from
which real development commences). They engage in a
I certain form of agriculture, sporadically. The nature

303

of lajid-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 agricnltnre is carried on by a settled popu-
lation — ^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 charac-
teristic features of the prevailing system of land owner-
ship; [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
cornea to be more and more merely a branch of industry
and ie 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 under-
stood without capital, nor can capital, without ren t Ca|>
ital ii the aU dominating jeconomic power of bourgeois

Boci€^. IT must form the starting point as well as the
en2n^d"15e developed before land-ownership is After

— 304 —

each has been considered separately, their mutual rela-
tion 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 modem bourgeois so-
ciety, and which is the exact opposite of what seems to be
their natural order or the order of their historical de-
velopment. What we are interested in is not the place
which economic relations occupy in the historical suc-
cession 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 an-
tiquity, such as the Phenicians and the Carthagenians,
was due to that very predominance of agriculture. Cap-
ital as trading or money capital appears in that abstrac-
tion, where capital does not constitute as yet the pre-
dominating element of society. The Lombardians and
the Jews occupied the same position among the agricul-
tural nations of the middle ages.

As a further illustration of the fact that the same
category plays different parts at different stages of so-
ciety, 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.

— 305 —

The conception of national wealth which is imper-
ceptibly 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
modem 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 con-
stitute 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 ^^unproduc-
tive" classes ; taxes ; public debts ; public credit ; popula-
tion; colonies; emigration. Fourth, the international
organization of production; international division of
labor; international exchange; import and export; rate
of exchange. Fifths the world market and crises.

— 306 —

4. PRODUCTION^ MEANS OF PRODUCTION, AND CONDITIONS
OF PRODUCTION. THE RELATIONS OF PRODUCTION
AND DISTRIBUTION.' THE CONNECTION BETWEEN
FORM OF STATE AND PROPERTY ON THE ONE HAND
AND RELATIONS OF PRODUCTION AND DISTRIBU-
TION* ON THE OTHER. LEGAL RELATIONS. FAM-
ILY RELATIONS.

Notes on the points to be mentioned here and not to be
omitted :'

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.

'Distribution (Verkehr) is used here in the sense of physi-
cal distribution of goods and not in sense of economic dis-
tribution of the shares of the products between the different
factors of production. Translator.

* 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 interpreta-
tion, 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
4«wn by Marx.

— 307 —

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

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ntffc. ^VBhuUion^t)tvf)dUni^ jtnb Scrfc^rSticrftaUntffe.
<Btatii§' nnb ©gentl^umSfotmen im S^er^oItniS au hen
^robttftt0tt§= ttnb SJcrfc^r^iJcr^artntffcn. 9le<^tSt>eirl^aintiffc.
fjamilicnbcr^aitniffc.

^oiahene in bcgug auf ^un!tc, bie l^icr au crtodl^ncn unli
ntc^t bergcffen tocrbcn biirfcn:

1. S)€r ^r ic g tft friil^er au^gcbilbct, hJtc bcr gricbcn:
[Sluigufiil^rcn tvaxe] btc ?(rt, ttJtc burc^ btn ^ricg unb in
ben §lrmcen 2C. gehjtffc olonomif d^c SSerl^dltniffc icic Sol^n*
arbctt, 3?2a[d^ineric ac. friiT^er enttvideli [hjerbcn] alg im
^nncren ber burgerlid^en ©cfeUfc^aft. Sludf; ha§ ^Scrl^dltnt^
bon ^robu!lib!raft unb SScr!cl^r§ber§aItntffen trirb bcfonbcr^
anfd^aitltd^ in bcr §lrmec.

2. 9Ser!^aItni0 ber bi^l^erigen ibcalen (Sefd^id^tgfd^rctbung
gur realen. VlamtntXi^ bic fogcnannte ^Ihirgefc^td^tc, bie
alle 9^cItgion§* unb ©taatengefc^id^tc.

S3ci ber ©elcgenl^eit !ann aud^ cttvaB gcfogt tocrbcn iiber
bie berfd^icbenen Slrten bcr biSl^ertgen ©cfd^td^tsfd^rctbung.
Sogenannte objeftibc. (Subicftibe. (2)^oralifd^e unb onbcre.)
^]^tIofop]^ifdf;e.

3. (&clunbarc§ unb ^crtiarcS. VUhtt^aupt
abgclcitctc, iibcrtragcnc, nid^t urfpriinglid^c
^robuftionSbcrl^dltniffc. ^ter [ift ha§] Sinfpiclen bcr
tntcrnalionalen 9Serl^dItntf[c [au bel^anbcln].

4. SSortoiirfe iiber 2)?atertali§mu§ btcfcr ^Tuffaffung.
SScrl^aItni§ gum naturali^ifd^en 3WotcriaIi»mu§.

5. SHfllcftif bcr 93cgriffc ^robu!tib!raft (^robu!tion§^

— 308 —

miitcl) iinb ^robuftion^DerljdltniS/ einc SHaleffif. bcrcn
©rcnaen au Bcftimmcn finb unb Me realcn Unteirfc^ieb nic^t
oufl^ebt.

6. S)ag unegale SSerl^dltnig bcr Sntiridlung ber mote^
riellen ^robuftion aum 93eifpiel aur funftlcrtfd^en. Ueber^
l^aupt ift ber 93egriff t>e§ gortfc^rittg nidit in bcr gehjo^n*
Hd^en ^bftraftion au faffen. 53ei bcr ^unft ?c. ift btefe ^v§*
proportion nod^ nirf)t fo toic^tig unb frf)miccig au faffen ali^
innerl^alb praftifcfi^oaialer ^erf)altniffc fetbft. aum 93eifpiel
t>Q§ Silbungguer^dltniiS ber 5Sereinigten Staaten au (Suropa
2)er eigentlid) fc^ioierigc ^unft, ber Ijier au erortern ift
ober ber, mie bie ^^robuftion^Dcv^altniffc al^ 9lecI)t^Derl)dlt'
niffe in unglcid^e (?) (Jntluicflung trcten. ?lIfo aum ^ci-
fpiel ta^ 93ert)dltni^ be«i romifdtjen ^riuatrec^tg (im ^rimi-
nalrcc^t unb offentUdjen ift ha^ JDcniger ber Jafl) iuv
mobernen ^robuftion.

7 2)iefe ^uffaffung erf(^tnt al^ not^meubtge (Sntroicf-
lung. Slbcr ^ered)tigung be^ 3ufnll^. Varia.' (^ie Jrei*
l)eit unb anbcreg nod).) (Ginmirfung ber S^ommunifation^^
mittel.) 28eltgefd)id)te eigentlid)' nid)t immer in ber
OJefdjic^te aU meltgefd)td)t[lic^eg] g^efultat.

8. 2)er ?lu5ganggpunft [ift] nntiirlic^ Don ber "Slatixi-
beftimmt^eit [au ne^men] ; fubjcftiD unb obieftitJ, ©tdmme.
JHaffcn 2C.

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.

* 3in Orioinot ift m Icfrn* Va

* 3ni Ohflinol ift tu Ufra fotl.

— 309 —

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

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 practi-
cal social relations, e. g. the relation between edu-
cation 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 con-
nection 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 objective-
ly in clans, races, 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

— 310 —

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 ot her words,
that in the domain of art certain important forms of

it are possible only at a low stage of its develop -
miefrt. 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
>f the relation of art as a whole to the general de-
velopment 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. Jsthe 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

— 311 —

gains mastery over t he forces of nature. What be-
comes of the Goddess Fame side by side with Print-
ing House Square ?* Greek art presupposes the exis-
tence 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
I originate] in a society which excludes any mytho-
I logical explanation of nature, any mythological at-
1 titude towards it and which requires from the artist
\ an imagination free from mythology.
\ Looking at it from another side : is Achilles pos-
sible 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 ap-
pearance 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 understand-
ing why they still constitute with us a source of
aesthetic enjoyment and in certain respects pre-

» The site of the 'Times" building in London. K. K.

— 312 —

vail 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 repro-
duce its truth on a higher plane ? Is not the charac-
ter of every epoch revived perfectly true to nature
in child nature? Why should the social childhood
of mankind, where it had obtained its most beauti-
ful development, not exert an eternal charm as an
age that will never return? There are ill-bred chil-
dren 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.)

— 313 —
AUTHORS QUOTED IN ZUR KRITIK

Arbuthnot, 258.

Aristotle, 19, 41, 53, 78-70,

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.
Biisch, 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, HI, 134.

Garnier, 87, 141.

Genovesi, 51, 164.

Gladstone, 73.

Gray, 103sq.

Grim, 211.

Hodgskin, 55.

Horace, 178.

Hume, D., 219, 22l8q, 231.

Hume, J. D., 249.

Jakob, 141, 181.

Jovellanos, 61.

Julius, 231.

Korner, 212.

Law, 226, 231.

List, 34.

Locke, 91, 938q., 199, 219, 226,

233.
Lowndes, 94.
Luther, 174-5, 190.
Mac Culloch, 31, 57.
Maclaren, 82, 231, 233.
Macleod, 71, 193.

— 314

Malthus, 34.

Mandeville, Sir J., 154.

Mill, James, 123-4, 250 sqq.

Misselden, 165, 171, 174-5.

Montanari, 38.

Montesquieu, 219, 227.

Miiller, 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, 56sq., 165.

172-3.
Plato, 153.
Pliny, 177.

Proudhon, 61. 72, 103, 107.
Rieardo, 56, 69sq., 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,

231sq.
Spenee, 123.
Stein, 21, 31-2.
Steuart, Sir James, 65sq., 94sq..

222, 227sq., 260.
Storch, 152-3, 179.
Thompson, 106.
Tooke, 124, 247, 249, 260sq.
Torrens, 58.
Urquhart, 89.
Ustariz, 61.
Wilson, 260.
Xenophon, 181, 184.
Young, 231.

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