Currency Acceptance, Currency Value, and Transcending Capitalism

While revisiting old files on Marx and Modern Monetary Theory (MMT), I came across an interesting discussion. In it, somebody raised an argument that seems worth addressing:

MMT treats money as a public utility, while Marxism treats it as an expression of value. And I think that no matter the engagement between these two schools of thought, one has to choose either one or another. Either money is an abstract public utility (grounded only in people’s accepting it, through the force of taxation or whatever), which can then be used quite unproblematically for public goods within any context whatsoever … or one realises that money is not an abstract public utility, but is concretely rooted in material processes, i.e. is a concrete expression of value. In which case the one can’t really treat it unproblematically as a public utility to be used by fiscal policy to achieve any ends under any circumstances.

Disregard the references to policy being viable “within any context whatsoever” and “under any circumstances”. MMT emphasizes that policy is constrained by the availability of real resources, as well as political factors. The focus, instead, can be on the substance of the comment, which concerns what I consider to be an insightful distinction between currency as public utility and currency as expression of value.

On this distinction, I think it can be argued that:

  • A currency’s role as public utility hinges on currency acceptance.
  • A currency expresses (Marxist) value in the sphere of commodity production so long as it represents an amount of socially necessary abstract labor.

If so, it is relevant to distinguish two questions: (i) what drives acceptance of the currency? and (ii) what determines the value of the currency?

Currency acceptance and currency value

Acceptance. Government has the authority to impose taxes (and other obligations) on members of the community and specify what will be accepted in payment. In principle, this authority is bestowed upon government by the community and, ideally, will be exercised in a democratically accountable way. Reality, of course, can diverge from the ideal. But, in any case, by nominating its own currency as what is acceptable in payment to it, government can ensure some level of demand for the currency. At least for the purposes of meeting these obligations, people will accept the currency in payment for goods and services. Experience also suggests that so long as taxes are effectively enforced, the community will be inclined to use the currency for other purposes as well, such as for transacting and saving.

Value. In Marx’s theory, ‘value’ (defined as socially necessary labor time) governs commodity production and exchange. A commodity, by definition, is a good or service produced for sale in a market. Not all goods and services are commodities. Public education, for instance, is a service but not a commodity. Modern economies employ a mixture of commodity and non-commodity production. For a currency to facilitate commodity exchange, it must express value. So long as a unit of the currency can be said to be the equivalent of an amount of labor time, the currency will in fact express value in the Marxist sense. As observed in the previous post, currency value can be conceived in two closely related ways, either as the amount of labor a unit of the currency commands or as the amount of labor needed to reproduce a currency-unit’s worth of the commodity labor power; in short, on the basis of either a labor command theory or a commodity theory. A currency-issuing government, through its price-setting capacities, is in a position to exert strong influence over the currency’s value, under either definition.

Acceptance in relation to value. On the basis of the above, currency acceptance, driven by taxes, ensures that a unit of the currency will command at least some real resources, including labor services. This implies, if commodity production is permitted, that the currency will have at least some value in the Marxist sense. But the level of this value will depend on either the difficulty in obtaining a unit of the currency (labor command theory) or the difficulty in reproducing a currency-unit’s worth of labor power (commodity theory). Taking these considerations together, it could be said – somewhat analogously to a commodity – that the currency must first have use value if it is to express value. The currency’s use value, peculiar to it alone, is that it can be used to pay taxes and other obligations denominated in it. Since it has use value, it can also express value, and so represent an amount of labor. (I have seen this same analogy drawn by Hedlund in previous internet discussions but am unable to locate a link.)

The primacy of currency acceptance

The government’s capacity to ensure acceptance of its currency, at least sufficient to transfer available goods and services to the public sector in accordance with its socioeconomic program, will apply irrespective of the particular economic system that is in place. The government’s authority to tax and issue the currency places it in a position to set and enforce the rules of the game. At the level of theory, these rules might or might not permit a role for commodity production, embedded within the economy’s institutional and regulatory structure.

Under present practice, of course, considerable scope is granted for commodity production and exchange. Taxation induces a supply of goods and services for sale in the government’s money of account. In this way, markets are created for commodities exchangeable in the government’s currency (as distinct from some other currency).

These markets depend on government for their existence, and market tendencies can be overruled at the government’s discretion. If a particular good or service would be of social benefit but an adequate market supply fails to eventuate, its production and provision can still take place outside the sphere of commodities (such as occurs with public health care, the public court system, public roads, and so on).

In the sphere of commodities, to which value considerations pertain, production is subject to the ‘law of value’ (the profit motive). To the extent that economic decision-making is delegated to for-profit enterprise, society subjects itself to the law of value. But it is always within society’s power to reassert its authority over production and distribution; in other words, to override the law of value, or even to do away with it completely.

Viability of a monetary economy

Distinguishing currency acceptance from currency value therefore carries a social significance. So long as a sovereign government’s currency is accepted, neither the currency nor society is ultimately beholden to the law of value.

Since a currency can be made viable irrespective of the dominant mode of production, a currency-issuing government can override the law of value whenever this is the political will. This opens the way for an extension of not-for-profit activity and, if desired, a transcending of capitalism.

To reiterate what was stated earlier, however, this does not mean that policy is feasible “within any context whatsoever” or “under any circumstances”. For instance, it might be that certain policy options negatively affect the profitability of capitalist firms. In that case, certain policy options might not be compatible with a preservation of capitalism.

This only means that society, in such instances, will face a choice between reinforcing capitalist social relations or transitioning to socialism. Ultimately, the viability of the capitalist class is contingent on the actions of currency-issuing governments, not the other way round.