‘Money’ in Marx and MMT and Social Implications

For both Marx and MMTers, money is a social relationship. For Marx, the social relationship is fetishized in a commodity for reasons that stem from the nature of commodity production. Money only becomes necessary, for Marx, when it is impossible for a currency to represent social labor time directly, which is the case under commodity production in which concrete labors are converted into abstract labor (i.e. marxian value) only indirectly through the workings of the ‘law’ of value. For MMTers, money is a social relationship that originates in debt. Debt relations can apply whether labor is directly social or only indirectly social (as in commodity production). Money, in MMT, is therefore a broader notion than in Marx. If Marx and MMTers meant the same thing by the word ‘money’, Marx’s view of the origins of money – as arising out of commodity production – would be irreconcilable with MMT. But Marx and MMTers do not mean the same thing by the word ‘money’. In MMT’s use of the term, the currency functions as money under commodity and non-commodity production alike, whereas in Marx’s terminology, the currency is a representative of money under commodity production but simply currency under non-commodity production. So far as economic implications go, these naming differences are not important so long as we keep them in mind.

Commodity production and Marx’s ‘money commodity’

Money in Marx’s theory presupposes commodity production, by which is meant production for market exchange. In his conception, there is no need for money when production is not for market. When production is directly for use, rather than for market, the labors of individuals are directly social so that, outside the sphere of commodity production, currency or labor certificates (basically, currency that is nontransferable once it has been used for consumption) can represent labor time directly. When labor is directly social, and therefore directly representable by a currency, there is no need for money, in Marx’s sense. Money, in Marx’s sense, only becomes necessary in conditions where the concrete labors of individuals cannot be made social in a direct way, but only indirectly. This is the case with commodity production. In commodity production, the concrete properties of the diverse labors of individuals must be abstracted from to facilitate market exchange. By considering labor in the abstract, commodities are made commensurable, as values, by regarding them as the results of abstract labor.

In this way, the concrete labor going into commodity production is made social, but only indirectly, via the workings of Marx’s law of value in which commodities confront each other as the results of abstract labor. A currency cannot represent value (i.e. abstract labor) directly because, at least from the perspective of the currency issuer, the currency is not the result of abstract labor and so, unlike commodities, is not a value. Rather, the currency can only express value indirectly, by representing an amount of a commodity that does have value, which can be designated as the ‘money commodity’. Since the money commodity, like all other commodities, is the result of abstract labor, it has value. And since it has value, it can stand as the equivalent of all other commodities, taken in the right amounts.

In Marx’s day, gold played this role of ‘universal equivalent’. The currency, by representing a particular amount of gold, could express its value. And since gold had the same value as any other commodity, taken in the right amount, the currency by representing an amount of gold could express the value of any commodity.

Under the gold standard, the state converted currency into gold at a specified rate, on demand. Today, there is no commodity standard in operation. Even so, the currency can still be regarded as representing, at any given moment, a particular (though now variable) amount of whatever commodity is taken to be the money commodity.

While any commodity could be adopted as the money commodity, Marx considered some commodities to be more suitable than others. Perhaps influenced by his times, Marx viewed metals as best suited to the role. In my view, his arguments in favor of a metal – that it is easily divisible, a use value close to invariable in quality, and serviceable as both standard of price and standard of value – apply just as much, probably more so, to labor power. A metal is divisible by weight; labor power is divisible by time. An ounce of a metal is quite constant in quality and so always represents roughly the same use value; an hour of simple labor power is absolutely invariant in quality (it always has the same capacity to create value through its expenditure) because, according to Marx, an hour of socially necessary labor (the expenditure of simple labor power for one hour) always creates the same value, irrespective of variations in productivity (Capital, vol. 1, p. 137, Penguin, London). Metals and labor power are equally reliable as standards of price. Labor power will probably be the more stable standard of value for the reason that many sectors contribute directly to the cultural reproduction of workers whereas only one sector contributes directly to the production of a metal. The average productivity of many sectors will be less susceptible to dramatic variations than the productivity of a single sector. Accordingly, the amount of labor time socially necessary to reproduce the money commodity will probably fluctuate less if labor power, rather than a metal, is chosen as the money commodity.

Lower form communism, commodity production, and today’s economies

In Marx’s ‘lower form communism’, labor is directly social. It is therefore possible for a labor certificate to represent labor time without the connection being mediated by a money commodity. Indeed, there would be no money (in Marx’s sense), and no money commodity, in lower form communism. Workers would receive labor certificates in proportion to their directly social labor time, weighted by its intensity (labor complexity). Unlike capitalism, in which prices systematically diverge from values according to composition of capital, in lower form communism, labor-time accounting would reflect the (directly social) labor time weighted by complexity going into the production of each item of consumption. There would be no need for prices to diverge from social labor time as must occur under capitalism because investment, in lower form communism, would be coordinated collectively rather than on the basis of competition for profit.

Lower form communism differs from higher form communism, as Marx defines them. In lower form communism, workers receive according to their labor time (adjusted for skill and intensity). In higher form communism, workers contribute what they can and receive according to need.

Today’s economies are really a mixture of different production modes. They have elements of commodity production, lower form communism and, in a very restricted sense, even higher form communism (for example, much family activity could be characterized as contributing according to ability and receiving according to need). The private, for-profit sector engages in commodity production. Its labor is only indirectly social. The currency cannot directly represent this labor. Instead, the currency expresses value indirectly, mediated through the money commodity. Outside the sphere of commodity production, labor power is not treated as a commodity. The public sector employs directly social labor. The not-for-profit sector also lies outside the sphere of commodity production. In this sector, the currency can represent social labor time directly, without being mediated through a money commodity.

MMT’s job guarantee

The job guarantee, in part, would formalize an arrangement in which government stands ready to convert labor power (that otherwise would need to be sold as a commodity in the private for-profit sector) into currency at a policy-determined rate (the job-guarantee wage), on demand. Since job-guarantee production would entail directly social labor, labor power, so far as it pertained to the job-guarantee sector, would not be treated as a commodity, and the currency would directly represent the sector’s labor time. But in relation to the sphere of commodity production, labor power would be treated as a commodity. From the standpoint of commodity production, the job guarantee would, in effect, institute a ‘labor power standard’ in which labor power functioned as the money commodity and, in Marx’s sense, mediated the connection between the currency and labor time.

The reasoning here is that, even though job-guarantee activity would be directly social labor and so would not, in itself, enable the currency to express (marxian) value, even so, private-sector for-profit firms operating in the sphere of commodity production, in which labor power is treated as a commodity, would have to offer pay and conditions that were competitive with the job-guarantee wage. Because of this, the job-guarantee wage would anchor the nominal wage (and pricing) structure of the commodity-producing sphere and, in particular (and most directly and effectively), it would anchor the average nominal wage paid for simple labor power in the sphere of commodity production. This is one way of viewing the statement of MMTers that the job-guarantee wage would anchor the value of the currency; it is that the job-guarantee wage would influence the average nominal wage paid for an hour of (commodified) simple labor-power in the sphere of commodity production.

Workers either sell their labor power as a commodity in the sphere of commodity production and engage directly in (marxian) value generation or, instead, engage in directly social labor in the public or not-for-profit sectors. From the standpoint of commodity production, the workers in non-commodity production are participating only indirectly in (marxian) value generation. But from the standpoint of the economy as a whole – and from the standpoint of society – the workers in non-commodity production are engaging in directly social labor.

To recapitulate, the job guarantee, in so far as it impacts on commodity production, would essentially function as a ‘labor power standard’ by setting the nominal wage that commodity-producing firms would need to match or better when purchasing simple labor power. In the sphere of commodity production, the relationship between the currency and labor time is only indirect, mediated through the commodity labor power. But in relation to the non-commodified activity of job-guarantee workers, the job guarantee would function as a ‘labor standard’. In that sphere, and in other non-commodified sectors, the relationship between the currency and labor time would be direct, and the labor directly social.

Reconciling Marx and MMT on ‘money’ and drawing social implications

The circumstance that money for Marx is based in commodity production whereas for MMTers it is based in debt does not prevent reconciliation of the two approaches. Whether we say, following Marx, that the currency only functions as money in the case of commodity production, or we say, following MMTers, that the currency functions as money under both commodity and non-commodity production, it seems clear that this is merely a difference in naming convention. If we stand with Marx, then MMT’s ‘money story’, based in debt, is instead a ‘currency story’. If we stand with MMT, then Marx’s ‘money story’, based in commodity production, is instead a ‘commodity money story’, which could be regarded as a special case within MMT’s more general ‘money story’, with ‘commodity money’ being a subcategory of ‘money’, a subcategory that develops later, historically, as a necessity of generalized commodity production.

Whatever the preferred terminology, Marx’s distinction between directly and indirectly social labor provides critical context to his value theory and, especially, clarifies its implications. MMT, for its part, is analytically open on the question of value. It neither precludes nor requires the adoption of a particular value theory. As a macro theory that is not explicit on value, it could in principle accommodate a subjective (e.g. utility) or objective (e.g. labor) theory of value. Integrating Marx’s value theory into MMT brings certain social implications.

A key to identifying these social implications is to keep in mind Marx’s distinction between directly and indirectly social labor, from which it follows that the law of value applies specifically to commodity production and not to other modes of production. Therefore, on Marx’s own logic, a currency is only reduced to an indirect representation of labor time, mediated through a money commodity, when it comes to expressing value within the sphere of commodity production.

The significance of this is evident in Marx’s discussion of labor certificates in lower form communism, certificates that directly represent labor time in a system of directly social labor. In lower form communism, the individual producer

receives a certificate from society that he has furnished such-and-such an amount of labor (after deducting his labor for the common funds); and with this certificate, he draws from the social stock of means of consumption as much as the same amount of labor cost. The same amount of labor which he has given to society in one form, he receives back in another. (Marx, Critique of the Gotha Programme, p. 9)

At first glance, Marx’s discussion of labor certificates in the context of lower form communism may seem difficult to square with his critique of various utopian socialist and anarchist calls for ‘labor money’ or labor certificates. The fact that Marx himself indicates the applicability of labor certificates to lower form communism, however, suggests that his critique of various utopian socialists and anarchists was not due to their advocacy of labor certificates as such but, rather, due to their attempt, in Marx’s estimation, to apply them without modifying the mode of production. Labor certificates, as already discussed, cannot work within the sphere of commodity production because in that sphere labor cannot be made social directly, but only indirectly through the workings of the law of value. For labor certificates or a currency to represent labor time directly, labor must be directly social.

The present system is not lower form communism. Nevertheless, parts of the economy – including public sector and not-for-profit activity – are characterized by directly social labor. MMT’s job guarantee, if introduced, would extend the sphere of directly social labor. If it became the political will, and this will was effectively expressed, society could transition further in the direction of production directly for use. MMT makes clear that a currency-issuing government has the capacity to enable such a social transition. There is no need to overthrow the existing currency system before turning to this task. The technical means for effecting the transition are already in place. For now, it is the political will that is missing.

Although MMT, in itself, is neutral on the relative merits of different modes of production, if Marx’s value theory is accepted as an accurate depiction of the workings and limitations of commodity production, there are strong reasons to desire a move toward a system based on directly social labor. Such a system, something approximating lower form communism, will still be some way from the aspiration of higher form communism in which everyone voluntarily contributes what they can and receives according to need. This is unavoidable until society reaches a level of consciousness in which individuals freely commit to this ideal in actual practice. As Marx emphasizes,

What we have to deal with here is a communist society, not as it has developed on its own foundations, but, on the contrary, just as it emerges from capitalist society; which is thus in every respect, economically, morally, and intellectually, still stamped with the birthmarks of the old society from whose womb it emerges. (Ibid)

An understanding of MMT points to a non-utopian path toward socialism. The path is non-utopian, first, because it entails progressively working toward a change in the dominant mode of production to one of directly social labor and, secondly, because it begins from what is already in place, at least for those of us whose governments are currency issuers. (In the case of eurozone countries, a preliminary step before following this path, rather than some other path, would be either to establish a European-wide, democratically accountable fiscal authority or for national governments to re-establish their own currencies. While various MMTers have their own views on what is the more realistic of the two options, MMT in itself is neutral on the matter.)

The theoretical openness of MMT, as a macro theory, on the relative merits of alternative modes of production means that an MMTer might be situated pretty much anywhere along the political spectrum. It is therefore possible for an MMTer to come to a view that capitalism can be stabilized, unproblematically, through proper use of macroeconomic policy. However, this is unlikely to be the view of an MMTer who accepts Marx’s theory of value. When Marx and MMT are viewed together, there appear to be two broad social paths open to us. One would be a preservation of capitalism in which crises periodically restore profitability while workers are sheltered in the job guarantee program. This might be preferred if an MMTer accepted Marx’s technical analysis but did not share his political aspiration for society to move toward socialism and eventually communism. The other social path open to us is the one we have been considering, in which society transitions to a system increasingly characterized by directly social labor. For an MMTer who not only accepts Marx’s technical analysis but also broadly shares his political aspirations, this will be the preferred path. Moreover, the MMTer will see this path as technically feasible because of a currency-issuing government’s capacity to enable the transition to directly social labor.