For Marx, a currency’s representation of the labor performed in commodity production is indirect, mediated through a ‘money commodity’. The reason for this is that labor performed in commodity production is not directly social but only made so, indirectly, according to the ‘law’ of value under which the concrete properties of diverse labors are abstracted from and the amount of labor socially necessary to produce each commodity is determined. Since the currency, at least from the standpoint of the currency issuer, does not require labor for its production, the currency itself is not a commodity and so does not in itself have (marxian) value. Instead, the currency expresses value indirectly by representing a commodity that does have value – the money commodity – which serves as universal equivalent. The indirect determination of social labor time within commodity production contrasts with the direct determination of social labor time when production is not for market. In the latter case, a currency (or labor certificates) can directly represent social labor time, because the labor is directly social.
The currency’s representation of labor time
A footnote in the first volume of Capital clarifies Marx’s reasoning:
The question why money does not itself directly represent labour-time, so that a piece of paper may represent, for instance, x hours’ labour, comes down simply to the question why, on the basis of commodity production, the products of labour must take the form of commodities. This is obvious, because their taking the form of commodities implies their differentiation into commodities [on the one hand] and the money commodity [on the other]. (Penguin, London, 1976, p. 188)
A currency (as implied by the reference to a piece of paper) cannot directly represent labor that is performed “on the basis of commodity production”. That is, the currency cannot directly express the values of commodities (i.e. marxian value).
But this limitation in a currency’s capacity directly to represent labor time does not apply in the case of labor that produces non-commodities. When labor is directly social, the currency can (and does) represent labor time directly. In the case of directly social labor, there is no need for the relationship between the currency and labor time to be mediated through a money commodity.
A clear explanation of the issue is provided by David Adam. In the following passage, he quotes Marx’s ‘Critique of the Gotha Programme’:
[In lower form communism] [t]he labor expended on products does not, in Marx’s words, “appear any more as the value of these products, one of the material properties that they possess, because now in contrast to capitalist society, the labour of individuals will no longer be a constituent part of the total labour in a roundabout way, but will be a part of it directly.”
Adam (endnote 11) also quotes a relevant passage from the Grundrisse (Penguin, London, 1993, p. 171):
Marx writes that under communal production there “would not be an exchange of exchange values but [rather an exchange] of activities,” and that “the exchange of products would in no way be the medium by which the participation of the individual in general production is mediated.”
Relating to MMT
It is worth relating this to MMT, because it helps to make clear why Marx’s notion of a money commodity causes no real difficulty, either for an MMTer wishing to take Marx seriously or for a Marxist wishing to take MMT seriously.
In the sphere of commodity production, workers sell their labor power as a commodity, whereas outside this sphere they engage in directly social labor.
MMT’s proposed job guarantee would, on the one hand, employ directly social labor and, on the other hand, influence the sphere of commodity production by instituting what would, in effect, constitute a ‘commodity standard’ in which labor power functioned as the money commodity. Just as under a gold standard government stood ready to convert gold into currency on demand at a policy-determined rate, under a labor-power standard (the job guarantee) government would stand ready to convert simple labor power into currency on demand at a policy-determined rate (the job-guarantee wage).
It is important, here, to keep in mind the distinction between labor and labor power. From the standpoint of the job guarantee sector, a job guarantee would actually function as a ‘labor standard’ in which the currency directly equated a currency unit to an amount of social labor time. In contrast, from the standpoint of commodity production, the job guarantee would have an effect similar to a ‘labor power standard’, because the program’s wage would set a rate of exchange between labor power and the currency that firms operating under conditions of commodity production would need to match or better to attract and retain staff.
In this way, the job-guarantee wage would strongly influence the average wage paid for simple labor power within the sphere of commodity production, because workers, rather than selling their labor power as a commodity, would always have the option of working in the job guarantee program instead.
Since, in Marx’s theory, wage differentials tend to reflect labor complexity, the job-guarantee wage would influence the entire nominal wage structure. In combination with the policy-determined public sector pay scale and prices government pays for commodities – which the government can discipline, if necessary, through fiscal and monetary policy – the job-guarantee wage would influence all nominal wages and prices (the price level in MMT ultimately being a function of the prices government pays for goods and services).
This is one way of understanding the MMT claim that the job-guarantee wage would anchor the ‘value of the currency’. If MMT’s broad definition of currency value – summed up as “what must be done to obtain it” – is interpreted in terms of labor time, the value of the currency is the amount of labor time represented in a currency unit. This amount of labor time is influenced by government policy, most effectively through introduction of a job guarantee. This influence is due to the impact government policy has (and a job guarantee would have) on nominal wages and prices in the sphere of commodity production.
Society’s choice over how to determine labor time
So long as commodity production remains a part of the economy, labor power remains commodified to that extent, and in that sphere the currency as a representation of the money commodity expresses social labor time only indirectly through the working of the law of value. In other modes of production – including job-guarantee activity, public sector activity, and non-government not-for-profit activity – labor-power is decommodified and the currency’s expression of social labor time is direct.
The capacity of government to undertake or support activity along non-commodity lines will depend on its status with respect to the currency. While a currency-using government will be limited in this capacity by tax revenue, borrowing and/or any assistance it receives from the currency issuer, a currency-issuing government faces no revenue constraint and is limited only by the resources available for sale in its currency and any political constraints. Such a government is impervious to market-based financial pressures so far as operations in its own currency are concerned.
To the extent that a currency-issuing government permits commodity production, it does so on its own terms. Through its authority to tax and require payment in the currency of issue, it can compel currency acceptance at least sufficient to carry out its policy agenda. Firms operating under conditions of commodity production, so long as they wish to remain active in the currency zone, have no choice but to seek profits in the currency of issue, since tax payments must be made in it.
On the question of preferred mode of production, MMT in itself is agnostic. An MMTer who wished to retain capitalism might regard a firm’s threat to exit the currency zone or go on “investment strike” in protest over government policy to be a political constraint on policy, at least if s/he deemed the threat credible (in most instances, it would not be). But for an MMTer who desired socialism or communism, a firm’s threat to cease operation within the currency zone would not be of concern. This would simply free up resources for use along non-commodity lines, which a currency-issuing government always has the capacity to enable.
A currency-issuing government’s capacity to enable production along non-commodity lines is a potential path to socialism and communism – if that is the political will and effectively expressed – and, in my view, it is the most important implication of MMT.