Various monetary theories have suffered from the conscious or unconscious supposition that money is a quantity, and moreover that it more or less the same thing as currency, as the actual paper that a state can print (purportedly at no particular risk to itself if printing the global reserve currency). Thus the meme below. It’s not the fact that things aren’t all that easy that provides the source of the acerbic humor. It’s more like lol that’s not what money is.
There have been no few rejoinders to MMT that enter into the what the fuck is money debate. This may involve barking up the wrong money tree: in this thread, Jamie Merchant argues persuasively that “MMT is really a theory of the state” rather than a theory of money. Contra my own habits — I like a clear distinction, as a conceptual move, rather than the endless slippy nuance of certain intellectual traditions — I might this one time suggest that this particular distinction doesn’t quite hold, for the simple reason that it’s pretty much true that “the capitalist state serves as the managing committee of the bourgeoisie.” Thus “the state” is in part something like the practice of capital’s theory of money.
So I want to try a description of that theory, or that practice, or really of the politics of money advanced by state and capital (from this point on, money refers to money in capitalism). This description is not in competition with many of the value-based theories of money that have been advanced: it’s just a way to put things that I find somewhat less abstruse than many accounts, though I have no doubt that someone will complain that it is still abstruse af.
By all accounts money has multiple functions, including, e.g., store and measure of value, and means of circulation. My hope is to draw these all together into a single concept and indeed a single formula:
Money is not a quantity but a ratio: the ratio between value of labor power and price of basic needs — such that enough labor is compelled so as to produce adequate surplus value for capital’s necessary expansion.
This may simply be a way of saying that money is the mediation that allows value to be exchanged for price when they are utterly incompatible kinds of things. But that claim, seemingly simpler or more concise, is entirely abstract. The formula above, however, turns out to be mainly concrete. To say that money is a means of circulation is to say that it allows you to purchase food, housing, care, and so on. To say that it is a measure of value is to say that measures the value of your labor power against the market for such commodities And to say that it is a store of value means that you can take that measured value somewhere else is space or time before using said money to buy shit. Money does all of these things, and they all interdependent: it does one so that, and because, it can do the others.
So why then describe money as a ratio, rather than as the sum of these disparate but entangled functions?
Because none of these functions, individually or as a group, can testify as to the role money plays in accumulation, in the increase to the total store of capitalist value which is for capital “Moses and the prophets.” We could at best say, from the list of functions, that the presence of money is an enabling condition, in that it makes it easy to price that non-economic feature of existence, the capacity to work. But then we are at best left with the idea that accumulation arises from mispricing, from systematic underpayment, and that if laborers were simply paid the “correct amount” corresponding to their labor, all would be well — shazam we’re all Lasalleans. Marx is hilarious in taking apart the idea that “The emancipation of labor demands…a fair distribution of the proceeds of labor.” As he eventually concludes,
Any distribution whatever of the means of consumption is only a consequence of the distribution of the conditions of production themselves. The latter distribution, however, is a feature of the mode of production itself.
The idea that labor’s value could be priced properly while there are still on the one side owners and on the other laborers (along with those who must depend on their wages), and that this supposed equity could be achieved through some legislative justice project, is “ideological nonsense about right and other trash so common among the democrats and French socialists.” By French I assume he means “Philadelphia.”
This all provides a further clue to the underlying function of money. If it is not used simply to (mis)price labor via its function as a measure of value, and if its functions as store of value or means of circulation are not particularly capitalist (they certainly pre-exist capitalist society), what is it up to? This returns us to the matter of the ratio. Money does all these things but it does them within strict limits: it must do these things in a manner such that it forces people to show up for work, and to labor at a certain length and/or intensity.
Such labor is the only source of surplus value and thus the only source of accumulation for capital: it is the main thing that all of capital’s force and wiles are bent toward compelling. This is one way to formulate the law of value: the organization of society toward the compulsory production of surplus value. The laws and the police take their part in this, the politicians and priests their part, and money its own. Money makes people show up for work. And to do so it must be — not represent but be — a given ratio, standing in relation to labor great enough to purchase the necessaries, little enough that labor must appear day after day. Each chunk of currency is a portion of that ratio made flesh.
Phrasing things thus clarifies certain matters. No doubt the ratio can float a bit, creating the divergence between what the classical political economists called “real” and “market” prices — as they also recognized, this float is temporary and must return to equilibrium. For classical economics, this equilibrium is the “market-clearing” price, the highest possible price which still assures that a given commodity will sell through rather than languishing on the shelf. For these gentlemen too, money is a ratio — they simply hold to a bourgeois description of which ratio it is, beginning as they do from the prices of market goods and the perspective of profit, while our ratio understands it to arise from the price of labor power and more broadly from capital’s needs to organize social existence around that labor, it being the source of surplus value. We might also note that “inflation” is a secondary phenomenon that describes not the failure of our ratio but the ratio hard at work, doing what it must: if wages increase, market prices must ascend to preserve the ratio, or adequate surplus value production will no longer be compelled. Inflation and deflation are not thus something that goes wrong with money — they are part of money’s inner nature. They are the ratio in action.
This sheds a particular and skeptical light on currency schemes and money machines. The one thing that they cannot do is break the ratio, break the compulsion, break the law of value. Since that would in effect mean the end of capital — for what is capital without the law of value? — we can be certain that the “political” response to anything that threatens to break the ratio would be absolute. This describes the contemporary political scene in the United States where the two parties engage in a total collaboration to make sure that no such thing happens, to preserve the ratio at all costs. Hence the claim made early on and I hope worth repeating: the state is in part something like the practice of capital’s theory of money.
Of course the ratio, the nature of money, is threatened by something far more powerful than Kansas City economics: the end of growth. You can compel labor all you want — until there are no jobs into which the compelled might be placed, or not enough to keep accumulation churning. At that point, given that we can understand money not simply as a way to buy shit but as a feature (like value and so on) of social organization itself, an integral part of what holds capitalist society in a particular shape, one might expect all manner of disorders: not just money schemes but volatility in all corners and the brutal attempts to quell it, the hysterical reimposition of social hierarchies, the ebbing of democratic legitimacy, the need for hyperincarceration, declining life chances, the rise of fascism, the prospect of civil war…
if you were looking for the stupidest possible take about monetary theory, this is it