( b) [ Money as a Means of Circulation]
[1-37] If exchange values are notionally transformed into money in prices, then in exchange, in purchase and sale, they are really transformed into money, exchanged for money in order, as money, to be again exchanged for commodities. The particular exchange value must first be exchanged for the general, so as to be again exchanged for particular ones. The commoditv is realised as exchange value only by means of this mediating movement in which money plays the role of mediator. Hence money circulates in the opposite direction from commodities. Money appears as mediator of commodity exchange, as means of exchange. It is the wheel of circulation, the instrument of circulation for the turnover of commodities; but as such it simultaneously has a circulation of its own — the monetary turnover, money circulation. The price of the commodity is only realised in its exchange for real money, or in its real exchange for money.
This much can be concluded from the foregoing. Commodities are exchanged for money in reality, transformed into real money, only after they have been previously transformed into money in idea — i.e. after they have acquired a price determination, as prices. Prices are therefore the prerequisite for money circulation, however much their realisation may appear as the result of that circulation. The circumstances which make the exchange value and hence the prices of commodities rise above or fall below their average value, are to be analysed in the section on exchange value; they precede the process of the actual realisation of the prices in money; consequently appear at first to be completely independent of it. The relations of numbers to one another obviously remain the same when I represent them in decimal fractions; I have merely given them another name.
The actual circulation of commodities requires instruments of transport; it cannot be effected by money. If I have bought 1,000 lbs of iron for the sum of £x, the ownership of this iron has been transferred to me. My £x has done its job as means of exchange and has circulated, just as the title of ownership has done. The seller, on the other hand, has realised the price of the iron, has realised the iron as exchange value. But money does not contribute to bringing the iron from him to me; for that wagon, horses, roads, etc., are needed. Money does not effect the actual circulation of commodities in space and time. It merely realises their price and in that way transfers the title of ownership to the commodities to the purchaser, to the person who has offered the means of exchange. What is circulated by money is not commodities, but the titles of ownership to them; and what is realised in return in this circulation, whether by purchase or sale, is again not the commodities, but their prices. .
Thus, the quantity of money required for circulation is determined, in the first place, by the level of prices of the commodities that are put into circulation. But, the sum total of these prices is determined firstly, by the prices of the individual commodities; secondly, by the volume of commodities which enter into circulation at given prices. For example, twice as much money is needed to circulate a quarter of wheat at the price of 60 s. than at the price of 30 s. And 30,000 s. is necessary to circulate 500 quarters at 60 s. each, while only 12,000 s. is needed for the circulation of 200 quarters at the same price. Thus the amount of money required depends on the level of commodity prices and the volume of commodities to be circulated at given prices.
Secondly, however, the quantity of money required for circulation depends not only on the sum of the prices to be realised, it also depends on the velocity with which the money circulates, with which it accomplishes the business of realisation. If 1 thaler makes 10 purchases in an hour, at the price of 1 thaler each time, i.e. exchanges itself 10 times, it completes QUITE the same business as 10 thaler which effects only 1 purchase in an hour. Velocity of circulation is the negative moment; it offsets quantity; by means of it, a single coin multiplies itself.
The factors determining, on the one hand, the aggregate of commodity prices to be realised, and, on the other hand, the velocity of circulation of money are to be examined later. This much is clear, that prices are not high or low because much or little money is in circulation, but that much or little money is in circulation because prices are high or low; and further, that the velocity of the circulating money does not depend on its quantity; rather, [1-38] the quantity of the circulating medium depends on ils velocity (HEAVY PAYMENTS are not counted but weighed; this saves time).
But as already mentioned,(1) the circulation of money does not begin from one central point, nor does it return to a central point from all the points of the periphery (as is the case with the BANKS OF ISSUE and partly the case with state money); but it begins from and returns to an infinite number of points (this reflux itself, and the time in which it is completed, are fortuitous). The velocity of the means of circulation can therefore offset the quantity of the circulating medium only up to a certain point. (Factory-owners and farmers, e.g., pay the labourer; he pays the shopkeeper, etc.; and from the latter, the money returns to the factory-owners and farmers.) A given quantity of money can only effect a series of payments successively, whatever the velocity with which it effects them. But a certain number of payments must be made simultaneously. Circulation starts from a multitude of different points simultaneously. Hence a definite quantity of money is needed for circulation, a quantity which will always be in circulation, and which is determined by the total sum which sets out from the simultaneous points of departure of circulation and the velocity with which it runs its course (returns). However much this quantity of the circulating medium may be subject to ebbs and flows, there is an average level; for the permanent changes in it are only very gradual, take place only over long periods of time, and, as we shall see, are always counteracted by a mass of secondary circumstances.
In its determination as measure, money is indifferent to its quantity, or the existing quantity of money is a matter of indifference. In its determination as means of exchange, instrument of circulation, its quantity is measured. Whether these two determinations of money can come into contradiction with each other, to be examined later.
(The concept of forced, compulsory circulation (see Steuart(2)) does not belong here yet.[54])
It is an essential feature of circulation that exchange appears as a process, a fluid whole of purchases and sales. Its first premiss is the circulation of the commodities themselves, the circulation of these which continually sets out from a large number of points. The precondition of the circulation of commodities is that they are produced as exchange values, not as immediate use values but as use values mediated by exchange value. Appropriation through and by means of alienation and sale is a basic premiss. Circulation as the realisation of exchange values implies (1) that my product is a product only in so far as it is a product for others, in other words, transcended individuality, generality; (2) that it is a product for me only in so far as it has been alienated, has become a product for others; (3) that it is a product for the other person only in so far as he alienates his own product. This in turn implies (4) that production appears for me not an end in itself but a means.
Circulation is the movement in which general alienation appears as general appropriation and general appropriation as general alienation. Though the whole of this movement may well appear as a social process, and though the individual elements of this movement originate from the conscious will and particular purposes of individuals, nevertheless the totality of the process appears as an objective relationship arising spontaneously; a relationship which results from the interaction of conscious individuals, but which is neither part of their consciousness nor as a whole subsumed under them. Their own collisions give rise to an alien social power standing above them. Their own interaction [appears] as a process and force independent of them. Because circulation is a totality of the social process, it is also the first form in which not only the social relation appears as something independent of individuals as, say, in a coin or an exchange value, but the whole of the social movement itself. The mutual social relationship of individuals as an independent power standing over them, whether it is conceived of as a force of nature, an accident, or in any other form, is a necessary result of the fact that the starting point is not the free social individual. Circulation as the first totality among the economic categories serves well to illustrate this fact.
[1-39] At first sight, circulation appears to be simply a never-ending process.[55] The commodity is exchanged for money; money is exchanged for the commodity, and this is repeated ad infinitum. This constant renewal of an identical process does indeed constitute an essential feature of circulation. But on closer examination, it reveals other phenomena as well: the phenomena of closing the circle or the return of the point of departure into itself. The commodity is exchanged for money; money is exchanged for the commodity. So, commodity is exchanged for commodity, except that this exchange is a mediated one. The buyer becomes a seller again, and the seller again becomes a buyer. So each is placed in a dual and antithetical determination, and so we have the living unity of both determinations.
It is, however, quite incorrect to proceed as do the economists: as soon as the contradictions of the money system emerge suddenly to focus only on the end results, forgetting the process which mediates them, seeing only the unity without the difference, the affirmation without the negation. The commodity is exchanged in circulation for a commodity; but in so far as it is exchanged for money, it is also not exchanged for a commodity. In other words, the acts of purchase and sale appear as two acts, indifferent to each other, separated in place and time. If it is said that a seller is at the same time a buyer, in so far as he buys money, and that a buyer is at the same time a seller, in so far as he sells money, this is to ignore precisely the distinction, the specific distinction between commodity and money.
After the economists have shown us so beautifully that barter, in which sale and purchase coincide, will not suffice for a more developed form of society and mode of production, they suddenly look at barter mediated by money as if it were immediate, and ignore the specific character of this transaction. After having shown us that in distinction to commodities money is needed, they ALL AT ONCE assert that there is no difference between money and commodities. They take refuge in this abstraction because, in the real development of money, contradictions occur which are embarrassing for the apologetics of bourgeois COMMON SENSE and must therefore be covered up. In so far as purchase and sale, the two essential moments of circulation, are indifferent to one another, separate in space and time, they need not coincide at all. Their mutual indifference can go so far as to fortify one against the other and to make them apparently independent of each other. But in so far as they are both essential moments of a single whole, there must come a time when their independent form is violently broken up and their inner unity is outwardly established by a violent explosion. Hence, the quality of money as mediator, the separation of exchange into two acts, already contains the germ of crises, at least their possibility, which cannot be realised except where there exist the basic conditions of classically and fully developed circulation corresponding to its concept.
It has become further apparent that in circulation money only realises prices. Price appears first of all as a notional characteristic of the commodity; but the money exchanged for a commodity is its realised price, its real price. Hence price appears quite as much external to and independent alongside the commodity as attached to it in thought. If the commodity cannot be realised in money, it ceases to be capable of circulating, and its price becomes purely notional; just as originally the product transformed into exchange value ceases to be a product if it is not actually exchanged. (The rise and fall of prices not the question here.)
Considered under (a), price appeared as an attribute of commodities; but considered under (b), money appears as the price outside the commodity. A mere demand for the commodity does not suffice, it must be backed up with cash. If the price of the commodity cannot be realised, if the commodity cannot be converted into money, it appears devalued, depriced. The exchange value expressed in its price must be sacrificed as soon as this specific transformation into money is necessary. Hence, the complaints of Boisguillebert, for instance, that money is the executioner of all things, the Moloch to which everything must be sacrificed, the despot over commodities.(3) At the time of the rise of absolute monarchy, when all taxes were being converted into money taxes, money does indeed appear as the Moloch to which real wealth is sacrificed. So it appears in every MONETARY PANIC, too. Boisguillebert says that money has been transformed from the servant of commerce into its despot. In fact, however, pricing itself already anticipates what is implied in the exchange for money, namely that money no longer represents the commodity, but the commodity represents money. Complaints that trading by means of money was not legitimate trade in some writers of the period of transition from feudal to modern times; as later among socialists.
(a) The more the division of labour develops, the more the product ceases to be a means of exchange. It becomes necessary to have a general means of exchange, independent of the specific production of any particular individual. In production directed towards immediate subsistence, it is not possible to exchange every article for every other, and a particular activity can only [1-40] be exchanged for a particular product. The more specialised, the more manifold, the less independent the products become, the greater becomes the need for a general means of exchange. Initially, the product of labour or labour itself is the general means of exchange. It gradually ceases to be such as it becomes increasingly specialised. It is a prerequisite for a fairly developed division of labour that everyone's needs have become very many-sided and his product very one-sided. The need for exchange and the immediate means of exchange develop in inverse proportion. Hence the need for a general means of exchange, where the particular product and the particular labour must be exchanged for exchangeability. The exchange value of an object is nothing but the quantitatively specified expression of its ability to serve as a means of exchange. In money the means of exchange itself becomes an object, or the exchange value of the object acquires an independent existence outside it. Since the commodity is a means of exchange of only limited power as compared with money, it may cease to be a means of exchange as against money.
(ß) The separation of exchange into purchase and sale makes it possible for me to buy without selling (stockpiling of commodities) or to sell without buying (accumulation of money). It makes speculation possible. It makes exchange into a special business; i.e. it creates the merchant estate. This separation has made possible a multitude of transactions between the definitive exchange of commodities, enabling a large number of persons to exploit this division. It has made possible a multitude of pseudo-transactions. At times it becomes clear that what appeared as an essentially divided act, is something essentially integrated; at other times, that what was thought to be an essentially integrated act is in reality essentially divided. At times in which purchase and sale assert themselves as essentially distinct acts, a general depreciation of all commodities takes place. At those in which money only functions as a means of exchange, a depreciation of money takes place. General fall or rise in prices.
Money makes possible an absolute division of labour, because it renders labour independent of its specific product, independent of the immediate use value of its product for labour.
The general rise in prices at times of speculation cannot be attributed to a general rise in the exchange value of commodities or their production costs; for if the exchange value or the production costs of gold rose to the same extent as those of all other commodities, their exchange values expressed in money, i.e. their prices, would remain the same. Just as little can it be ascribed to a fail in the price of production[56] of gold. (Here we are not dealing with credit yet.) But since money is not only the general commodity but a particular commodity as well, and as a particular commodity is subject to the laws of demand and supply, the general demand for particular commodities relative to money must bring money down [in price].
Hence, we see that it is in the nature of money to resolve the contradictions of both direct barter and exchange value only by making them general. It was a matter of chance whether the particular means of exchange was exchanged for another particular means of exchange or not. But now the commodity must be exchanged for the general means of exchange, to which its particularity stands in still greater contradiction. In order to secure the exchangeability of the commodity, it is confronted with exchangeability itself as an independent commodity. (It turns from a means into an end.) Previously, the question was whether the particular commodity would encounter the particular commodity. But money resolves the act of exchange itself into two acts indifferent to one another.
(Before going further into problems of circulation, its strength, weakness, etc., and especially into the contentious issue of the quantity of money in circulation and prices, money must be considered in its third determination.)
One moment of circulation is that commodity is exchanged for commodity by means of money. But there is the other moment, namely that, just as commodity exchanges for money and money for commodity, so money exchanges for commodity and commodity for money, in other words, that money is mediated with itself by means of the commodity, and appears as the unit which goes together with itself in its circulation. Thus it no longer appears as the means but as the end of circulation (as e.g. for the merchants) (in trade in general). If circulation is considered not merely as a continuous alternation, but in the circular motions which it describes in itself, this circular motion appears as a double one: commodity — money — money — commodity; on the other hand, money — commodity — commodity — money, i.e. if I can sell in order to buy, I can just as well buy in order to sell. In the first case, money is only the means of obtaining the commodity, and the commodity is the end; in the second case, the commodity is only the means of obtaining money, and money is the end. We can recognise this clearly if we consider the moments of circulation together. Considered as mere circulation, it does not matter at which point I break in to make it the point of departure.
Certainly, there is a specific difference between the commodity in circulation and money in circulation. The commodity is ejected from circulation at a certain point and fulfils its ultimate purpose only when it is definitively withdrawn from circulation, consumed, either in the act of production or [1-41] in consumption proper. The purpose of money, on the contrary, is to remain in circulation as the agent which effects it, as a perpetuum mobile ever renewing its circular course.
Nevertheless, that second purpose is present in circulation as much as the first. Now one can say: to exchange commodity for commodity makes sense, for although commodities are equivalents as prices, they are qualitatively different and thus their exchange ultimately satisfies qualitatively different needs. To exchange money for money is senseless, however, unless a quantitative difference occurs through the exchange of less money for more, by selling more dearly than one buys, and we are not yet concerned with the category of profit. Hence the conclusion money — commodity — commodity — money, which we derive from the analysis of circulation, might appear merely as an arbitrary and senseless abstraction, rather as if one were to describe the cycle of life as: death — life — death; though in the latter case, it could not be denied that the constant dissolution of the individual into the elemental is as much an element of the natural process as the constant individualisation of the elemental. Similarly, in circulation: the constant monetarisation of commodities no less than the constant transformation of money into commodities.'(4)
Admittedly, in the real process of buying in order to sell the motive is the profit which is made in that transaction, and the ultimate aim is to exchange by means of the commodity less money for more money, since there is no qualitative difference between money and money. (We are not speaking here either of a particular metallic currency or of particular kinds of coinage.) Yet it cannot be denied that the operation can miscarry, and that, indeed, exchange of money for money without a quantitative difference repeatedly occurs in real life, and therefore can occur. But for this process, upon which trade is based and which therefore by its extent is also an important phenomenon of circulation, to be possible at all, the circuit money — commodity— commodity — money must be recognised as a special form of circulation. This form is specifically distinct from that in which money appears as a mere means of exchange of commodities; as the middle term; as a minor premiss for the conclusion. This circuit has to be distinguished in its purely qualitative form, its specific movement, alongside the quantitative determinateness which it possesses in trade.
Secondly, it already implies that money does not serve only as a measure or only as a means of exchange or only as both, but that it has yet a third determination. It appears here firstly as an end-in-itself, which commodity trade and exchange merely serve to realise. Secondly, since money is the final stage of the circuit here, it leaves the circuit just as the commodity exchanged for its equivalent by means of money is ejected from circulation. It is quite correct that money, in so far as it serves only as the agent of circulation, always remains included in the circuit. But now it becomes evident that money is something more than this instrument of circulation; that it also possesses an independent existence outside circulation, and in this new determination can be withdrawn from it, just as the commodity must always definitively be withdrawn from it. Hence we must consider money in its third determination, in which it includes the previous two, namely the role of serving as measure and that of being the general means of exchange and thus the realisation of commodity prices.
Endnotes
[54] "Compulsory circulation" is Steuart's term for obligatory payments such as the payment of a money debt on a fixed date. In contrast to this, he calls the expenditure of money on purchases "voluntary circulation". J. Steuart, op. cit., Vol. II, p- 389.—131
[55] Marx has "ein schlecht unendlicher Prozess", which may be an allusion to the Hegelian term "schlechte Unendlichkeit" (bad infinity), meaning the infinite repetition of an identical situation according to the pattern: "something" becomes "something else", that "something else" is itself "something" which in turn becomes "something else", and so on ad infinitum.—132
[56] "Price of production" (Produktionspreis) means here the same as "the exchange value or the production costs" in the preceding sentence. As was pointed out above (see Note 29), the term "production costs" means "the immanent production costs of the commodity, which are equal to its value, i.e. to the total amount of labour time required for its production". The term Produktionspreis occurs in Marx's notebooks of excerpts as early as the 1840s. For instance, in one of the Brussels notebooks of 1845, containing excerpts from Louis Say's book Principales causes de la richesse ou de la misère des peuples et des particuliers (Paris, 1818), Marx uses it to render the words "coût de production" (page 32 of Say's book).—135