Historical Notes on the Analysis of Commodities Karl Marx's A CONTRIBUTION TO THE CRITIQUE OF POLITICAL ECONOMYB.Theories of the Standard of Money The fact that commodities are only nominally converted in the form of prices into gold and hence gold is only nominally transformed into money led to the doctrine of the nominal standard of money .Because only imaginary gold or silver,i.e.,gold and silver merely as money of account,is used in the determination of prices,it was asserted that the terms pound,shilling,pence,thaler,franc,etc.,denote ideal particles of value but not weights of gold or silver or any form of materialised labour.If,for example,the value of an ounce of silver were to rise,it would contain more of these particles and would therefore have to be divided or coined into a greater number of shillings.This doctrine,which arose at the close of the seventeenth century,was again advanced during the last commercial crisis in England and was even advocated by Members of Parliament in two special reports appended to the 1858Report of the Select Committee on the Bank Acts.In England at the time of the accession of William III,the mint-price of an ounce of silver was 5s.2d.,that is 1/62of an ounce of silver was called a penny and 12of these pence were called a shilling.
A bar of silver weighing say six ounces would,according to this standard,be coined into 31coins which would be called shillings.But whereas the mint-price of an ounce of silver was 5s.2d.,its market-price rose to 6s.3d.,that is to say in order to buy an ounce of uncoined silver 6s.3d.had to be handed over.How was it possible for the market-price of an ounce of silver to rise above its mint-price,if the mint-price was merely a name of account for fractions of an ounce of silver?
The solution of this riddle was quite simple.Four million of the ?5,600,000of silver money in circulation at that time were worn out or clipped.Atrial showed that ?57,200in silver coins,whose weight ought to have been 220,000ounces,weighed only 141,000ounces.The mint continued to coin silver pieces according to the same standard,but the lighter shillings which were actually in circulation represented smaller fractions of an ounce than their name denoted.A larger quantity of these reduced shillings had consequently to be paid for an ounce of uncoined silver on the market.
When,because of the resulting difficulties,it was decided to recoin all the money,Lowndes ,the Secretary to the Treasury,claimed that the value of an ounce of silver had risen and that in future accordingly 6s.3d.would have to be struck from an ounce instead of 5s.2d.as previously.
He thus in effect asserted that,because the value of an ounce of silver had risen,the value of its aliquot parts had fallen.But his false theory was merely designed to make a correct practical measure more palatable.
The government debts had been contracted in light shillings,were they to be repaid in coins of standard weight?Instead of saying pay back 4ounces of silver for every 5ounces you received nominally but which contained in fact only 4ounces of silver,he said,on the contrary,pay back nominally 5ounces but reduce their metal content to 4ounces and call the amount you hitherto called 4/5of a shilling a shilling.Lowndes's action,therefore,was in reality based on the metal content,whereas in theory he stuck to the name of account.His opponents on the other hand,who simply clung to the name of account and therefore declared that a shilling of standard weight was identical with a shilling which was 25to 50per cent lighter,claimed to be adhering to the metal content.John Locke ,who championed the new bourgeoisie in every way --he took the side of the manufacturers against the working classes and the paupers,the merchants against the old-fashioned usurers,the financial aristocracy against governments that were in debt;he even demonstrated in a separate work that the bourgeois way of thinking is the normal human way of thinking --took up Lowndes's challenge.John Locke won the day and money borrowed in guineas containing 10to 14shillings was repaid in guineas of 20shillings.[1]Sir James Steuart gives the following ironical summary of this operation:
"...the state gained considerably upon the score of taxes,as well as the creditors upon their capitals and interest;and the nation,which was the principal loser,was pleased,because their standard "(the standard of their own value)"was not debased."[2]
Steuart believed that in the course of further development of commerce the nation would become wiser.But he was wrong.Some 120years later the same quid pro quo was repeated.
Very fittingly it was Bishop Berkeley ,the advocate of mystical idealism in English philosophy,who gave the doctrine of the nominal standard of money a theoretical twist,which the practical Secretary to the Treasury had omitted to do.Berkeley asks "Whether the terms Crown,Livre,Pound Sterling,etc.,are not to be considered as Exponents or Denominations of such Proportions ?"(i.e.,proportions of abstract value as such)."And whether Gold,Silver,and Paper are not Tickets or Counters for Reckoning,Recording and Transferring thereof?"(of the proportion of value)."Whether Power to command the Industry"(social labour)"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?"[3]
In this passage,the author,on the one hand,confuses the measure of value with the standard of price,and on the other he confuses gold or silver as measure of value and as means of circulation.Because tokens can be substituted for precious metals in the sphere of circulation,Berkeley concludes that these tokens in their turn represent nothing ,i.e.,the abstract concept of value.
