The Theory of Money and Credit

Chapter 6. The Enemies of Money

Money_101-200.indd 9 6/17/08 9:26:41 AM CHAPTER 6 The Enemies of Money 1 Money in the Socialist Community It has been shown that under certain conditions, which occur the more frequently as division of labor and the differentiation of wants are extended, indirect exchange becomes inevitable; and that the evolution of indirect exchange gradually leads to the employment of a few particular commodities, or even one commodity only, as a common medium of exchange. When there is no exchange of any sort, and hence no indirect exchange, the use of media of exchange naturally remains unknown. This was the situation when the isolated household was the typical economic unit, and this, according to socialist aspirations, is what it will be again one day in that purely socialistic order where production and distribution are to be systematically regulated by a central body. This vision of the future socialistic system has not been described in detail by its prophets; and, in fact, it is not the same vision which they all see. There are some among them who allow a certain scope for exchange of economic goods and services, and so far as this is the case the continued use of money remains possible. On the other hand, the certificates or orders that the organized society would distribute to its members cannot be regarded as 109 Money_101-200.indd 10 6/17/08 9:26:41 AM 110 The Nature of Money money. Supposing that a receipt was given, say, to each laborer for each hour's labor, and that the social income, so far as it was not employed for the satisfaction of collective needs or the support of those not able to work, was distributed in proportion to the number of receipts in the possession of each individual, so that each receipt represented a claim to an aliquot part of the total amount of goods to be distributed. Then the significance of any particular receipt as a means of satisfying the wants of an individual, in other words its value, would vary in proportion to the size of the total dividend. If, with the same number of hours of labor, the income of the society in a given year was only half as big as in the previous year, then the value of each receipt would likewise be halved. The case of money is different. A decrease of fifty percent in the real social income would certainly involve a reduction in the purchasing power of money. But this reduction in the value of money need not bear any direct relation to the decrease in the size of the income. It might accidentally happen that the purchasing power of money was exactly halved also; but it need not happen so. This difference is of fundamental importance. In fact, the exchange value of money is determined in a totally different way from that of a certificate or warrant. Titles like these are not susceptible of an independent process of valuation at all. If it is certain that a warrant or order will always be honored on demand , then its value will be equal to that of the goods to which it refers. If this certainty is not absolute, the value of the warrant will be correspondingly less. If we suppose that a system of exchange might be developed even in a socialist society-not merely the exchange of labor certificates but, say, the exchange of consumption goods between individualsthen we may conceive of a place for the function of money even within the framework of such a society. This money would not be so frequently and variously employed as in an economic order based on private ownership of the means of production, but its use would be governed by the same fundamental principles. These considerations dictate the attitude toward money that must be assumed by any attempt to construct an imaginary social order, if self-contradiction is to be avoided. So long as such a scheme completely excludes the free exchange of goods and services, then Money_101-200.indd 11 6/17/08 9:26:41 AM The Enemies of MoneJJ 111 it follows logically that it has no need for money; but so far as any sort of exchange at all is allowed, it seems that indirect exchange achieved by means of a common medium of exchange must be permitted also. 2 Money Cranks...