Revisiting Karl
Marx’s and Georg Simmel’s Perspectives on Money and Society
Yanu Prasetyo
There
are various ways to approach the history of money. Generally, some scholars
would start with primitive money, then the first use of coinage, banking,
credit and gold or silver standards, and finally on to inconvertible money and
plastic money (Furnham & Michael Argyle, 1998:13). In the psychoanalytic
literature, they begin with the premise that money has emotional meaning that
varies from person to person according of life experience. The meaning of money
is in dynamic flux and evolving over time (Hallowell & Grace, 1991:15). Unlike
psychology, anthropology has long been interested and concerned in the economic
aspects of social relations, including barter, the market, distribution of
goods and wealth, ownership, and property. Anthropologists look at money which
is used in reciprocal and redistributive transactions regarding personal roles
and social context of what occurs.
Sociologist
are also interested in monetary and economic ideologies. Karl Marx, for
instance, claimed that money transformed real human and natural faculties into
more abstract representations. Thus, money appeared as disruptive power for
individual and for social bonds. Money has capabilities to changed fidelity
into infidelity, love into hate, hate into love, virtue into vice, vice into
virtue, servant into master, stupidity into intelligence and intelligence into
stupidity (Furnham & Michael Argyle, 1998:21). He regards money as
destructive or corrosive of the sacred (Walsh and Lynch, 2008:145). In fact,
money is also different from other social goods because its more fungible, remarkably
mobile, and highly transferable, connecting people over great distance and
multiple time zones. For this reason, it is more difficult to personalize money
than other objects (Zelizer, 1994:214)
Karl Marx: Commodity and The
Circulation of Money
What
does Marx mean by money? This is the primary question of this section. Marx
accorded money a relatively simple and neutral role in the valuation process.
The value of money, according to Marx, is determined by precisely the same factors
which set the normal exchange value of all other commodities. A value of
something was determined by the amount of labor required to produce it. Price,
then, is the monetary expression of exchange value. The monetization of
economic process not only masks the true social character of production but
obscures the fact that labor alone creates economic value (Balinky, 1970:65).
Marx
follows Adam Smith in regarding value as the property of exchangeability of
commodities. In a society where exchange is common, products come to have a
dual character as use values and as values. They have two powers: first, to satisfy human needs and wants;
and second, to exchange for other
products. This second power can be thought of quantitatively, as an amount of
exchangeability or command over other commodities (Foley, 1983). Marx’s theory
of money is therefore in the first place a commodity theory of money. A
given commodity can play the role of universal medium of exchange, as well as
fulfil all the other functions of money, precisely because it is a commodity.
It follows that strong upheavals in the ‘intrinsic’ value of the
money-commodity will cause strong upheavals in the general price level.
In
Marx’s theory of money, (market) prices are nothing but the expression of the
value of commodities in the value of the money commodity chosen as a monetary
standard. If £1 sterling = 1/10 ounce of gold, the formula ‘the price
of 10 quarters of wheat is £1’ means that 10 quarters of wheat have been produced
in the same socially necessary labor times as 1/10 ounce of gold. A strong
decrease in the average productivity of labor in gold mining will lead to a
general depression of the average price level, all other things remaining
equal. Likewise, a sudden and radical increase in the average productivity of labor
in gold mining, through the discovery of new rich gold fields or through the
application of new revolutionary technology, will lead to a general increase in
the price level of all other commodities.
The
general price level will move in medium and long-term periods according to
the relation between the fluctuations of the productivity of labor in
agriculture and industry on the one hand, and the fluctuations of the
productivity of labor on the other. Marx therefore criticized as inconsistent
Ricardo’s quantity theory. But for exactly the same reason of a consistent
application of the labor theory of value, the quantity of money in circulation
enters Marx’s economic analysis when he deals with the phenomenon of paper money.
As
gold has an intrinsic value, like all other commodities, there can be no ‘gold
inflation’, as little as there can be a ‘steel inflation’. An abstraction made
of short-term price fluctuations caused by fluctuations between supply and
demand, a persistent decline of the value of gold can only be the result of a
persistent increase in the average productivity of labor in gold mining and not
of an ‘excess’ of circulation in gold. If the demand for gold falls
consistently, this can only indirectly trigger a decline in the value of gold
through causing the closure of the least productive old mines. But in the case
of the money-commodity, such overproduction can hardly occur, given the special
function of gold of serving as a universal reserve fund, nationally and
internationally. For this reason, the concept of the ‘price of gold’ is
meaningless.
Paper
money, banks notes, are a money sign representing a given quantity of
the money-commodity. Starting from the above-mentioned example, a banknote of
£1 represents 1/10 ounce of gold. This is an objective ‘fact of life’,
which no government or monetary authority can arbitrarily alter. It follows
that any emission of paper money in excess of that given proportion will
automatically lead to an increase in the general price level, always other
things remaining equal. If £1 suddenly represents only 1/20 ounce of gold,
because paper money circulation has doubled without a significant increase in
the total labor time spent in the economy, then the price level will tend to
double too. This does not mean that in the case of paper money, Marx himself
has become an advocate of a quantity theory of money. While there are obvious
analogies between his theory of paper money and the quantity theory, the main
difference is the rejection by Marx of any mechanical
automatism between the quantity of paper money emitted on the one hand,
and the general dynamic of the economy (including on the price level) on the
other.
In
Marx’s explanation of the movement of the capitalist economy in its totality,
the formula ceteris paribus is meaningless. Insufficient emission of
paper money never occurs in a vacuum. It always occurs at a given stage of the
business cycle, and in a given phase of the longer-term historical evolution of
capitalism. It is thereby always combined with given ups and downs of the rate
of profit, of productivity of labor, of output, of market conditions
(overproduction or insufficient production). Only in connection with these
other fluctuations can the effect of paper money ‘inflation’ or ‘deflation’ be
judged, including the effect on the general price level.
Thus
we can see that Marx’s theory provides an endogenous theory of money in these
three senses: (1) the necessity of
money is derived from the necessity to represent the abstract labor contained
in commodities objectively; (2) the exchange-value of money is derived from the
labor-time required to produce the money commodity and other commodities (as a
specific case of the labor theory of value); and (3) the quantity of money in
circulation is derived from the sum of prices. It has been shown, on the basis
of consistent textual evidence, that Marx explicitly maintained the concept of
money as a commodity in the analysis of capitalism in the most advanced stage
of its development (Germer, 2005:33).
Georg Simmel: The Philosophy of Money
Georg
Simmel published The Philosophy of Money in 1900. In looking at money as a
metaphor for modern human social existence, Simmel seems overwhelmed by the
power and meaning of money in our society. The Philosophy of Money is a
hybrid work of philosophy and sociology. He focuses on the psychological and
sociological effects of money as a cultural determinant. He is fascinated by
the implications of the introduction of a universally measure of value that has
no intrinsic value of its own. The main themes of his books are the following:
[1] Money as a structural metaphor for human existence, [2] The dual nature of
the word “value,” moral and monetary, [3] The physicalization,
universalization, and commodification of value (through money or otherwise),
[4] The effects of valuation and commensurability on human relations.
Simmel’s
treatment of “value” as crucial cognitive category in life, despite being
something that each of us has comparatively little control over. Money is
simply; “a material or an example for the
presentation of relations that exist between the most superficial, ‘realistic’
and fortuitous phenomena and the most idealized powers of existence, the most
profound currents of individual life and history. The significance and purpose
of the whole undertaking is simply to derive from the surface level of economic
affairs a guideline that leads to the ultimate values and things of importance
in all that is human” (Simmel, 1990). Money is something that we all know.
We
assign value to a human life, an animal, a romantic relationship, a friendship,
to food, to sex–but by instinct and by the initial circumstances of human
culture. Quantifying the values and exchanging between
them is something that either rarely comes up. Value is not given to us by
nature. It is human-generated in the messiest manner imaginable. For Simmel, it
is only with the introduction of neutral, intrinsically valueless currency that
allows such negotiations to be made. Money is the mediating force that makes
incommensurate systems of value commensurable. Since money is free of the bias
and specificity of one or another system of value, we simply translate our
values into quantified monetary figures and we have now built an exchange
between the two value systems.
Since
the basic characteristic of all knowable existence, the interdependence and
interaction of everything, the essential quality of money now becomes
comprehensible. For the value of things, interpreted as their economic
interaction, has its purest expression and embodiment in money. Only money, in
terms of its pure concept, has attained this final stage as the pure form of
exchangeability. It embodies that element or function of things, by virtue of
which they are economic. It does not comprehend their totality, but it does
comprehend the totality of money. Unlike Marx, Simmel does not see the benefits
and deficiencies of modern economies to be separable from each other or from
modern life itself. Everything in life is part of a great system that
participates in both sides of every extreme.
The
approach that Simmel takes to the study of society in the Philosophy of Money
is one that many economists will find congenial (Laidler & Rowe, 1980). In
the Preface to his study on money, Simmel claims that he wants to adjust
historical materialism by looking at economic processes as the result of deeper
presuppositions, while preserving the explanatory model of the influence of
economic life upon culture. He rejects Karl Marx's version of the Labor Theory
of Value in favor of a not always clearly formulated Marginal Utility approach
and a central feature of his analysis of society is a conception of human as a
rational agent who carefully matches means to ends (individualistic approach).
The important point of Simmel's theory is that he analyzes a complex of social
phenomena that are of interest to economists and in a way that they should find
stimulating.
The
Philosophy of Money is concerned not just with the means of exchange, store of
value, and unit of account of the money and banking textbook but more generally
with the market economy of which the monetary system forms an integral part,
and the relationship between the institutions of that market economy and such
matters as justice, liberty, and the nature of human as a social being. Simmel
begins with exchange as one of the most primitive forms of human socialization.
Exchange ". . . is a sociological
phenomenon sui generis, an original form and function of social life" (Simmel,
1990). Exchange by barter is so inconvenient that out of it there naturally
develops "a class of merchants" (specialists in exchange) and the
institution of money.
Immediately,
when money enters the picture, exchange ceases to be a simple relationship
between two individuals. In Simmel's view, the monetary system is the
unintended product of social evolution. The development of money as a social
institution resembles the growth of a moral code or a legal system. Although,
as a matter of historical fact, money may have its origin in the use of
intrinsically valuable material as a means of exchange, it does not derive its
value from any physical property of the material that might be used to
represent it at any specific time and place. Simmel notes that in practice money
is likely to consist of some intrinsically valuable commodity with that
convertibility carrying a government guarantee, but he argues that this is
incidental to its nature.
In
Simmel’s theory, the economic power and trust are concepts that point to a purely
sociological explanation of money. Money plays the role of a social nexus
between strangers, but it also epitomizes alienated social relations (Bryan and
Michael Rafferty, 2007). The relations between people appearing as the
relations between things. Here the emphasis is on two issues: the social power
that attaches to money and the trust that lies implicit within financial
relations. The more "trust" members of society have in its
institutions in general and money in particular, the more the extension of the
money using market economy is promoted, with profound and largely beneficial
consequences for human.
Hence
it is a human quality that becomes more highly developed as the money-using
market economy grows. Justice and individual freedom are also inextricably
bound up with the development of the monetary economy. Simmel's analysis of the
relationship between the development of the money using market economy and the
growth of freedom is in many respects similar to much that is to be found in
the writings of modern neo-conservatives. Moreover, Simmel leaves his readers
under no illusion that economic freedom is in any way sufficient to guarantee
political freedom.
Simmel
regards market mechanisms underpinned by a monetary system as a desirable way
of organizing economic and social life, but he points to two interlinked
consequences of this form of social organization, which threaten its survival. The
receipt of wages in money exposes the worker to "uncertainty and
irregularity. At the same time the growth of rationalism that goes along with
the growth of the money economy, in combination with the complete heartlessness
of money which is reflected in our social culture. Though Simmel stopped far
short of predicting that the uncertainty inherent in the market economy and the
attractiveness of socialist ideas would inevitably combine to destroy the
individualistic social order based on markets and money, he undoubtedly regarded
that social order as a fragile one whose survival was far from assured. Hence
his fear of price level fluctuations in general and of inflation in particular:
uncertainty about the price level undermines trust in the monetary order.
Discussion
In
the Economic and Philosophical Manuscripts of 1844, Marx (1978) devotes a
chapter to ‘The Power of Money in Bourgeois Society’. He argues that money
represents the abstract relationships of private property that have become
detached from human relations of exchange. Money is the epitome of man’s
alienation. Money is the ultimate good, since it can buy all other goods, but
it transforms the real powers of man and nature into alien abstractions reified
in relations of exchange. In ‘On the Jewish Question’, the alienating force of
money, Marx attributes particularly to the (Jewish) culture of materialism: ‘Money is the jealous god of Israel, beside
which no other god may exist’ (1978: 50).
Money
is also considered in connection to capital labor relations. The accumulation
of the means of production and the transformation of money into capital cause
it to become an independent force that determines the mode of production. Marx
argues, money becomes increasingly detached from the social relations that
paradoxically have initially given rise to the formation of those relationships;
‘The capitalist, it seems, therefore,
buys their [the workers’] labor with money. They sell him their labor for
money’ (1978: 204). Thus, money reflects and reifies social relations, and
these relations become external to, and independent from, the people that
engage in them.
In
the chapter on ‘Commodities and Money’ (1978: 302–29), Marx argues that to
become a commodity, a good must be transferable into any other one, and money
is the medium that enables this transfer of commodities. The next chapter
discusses the importance of the transformation of money into capital through
the transformation of money into commodities and back into money. The change
from money to capital, however, does not occur in money itself. Instead, a
special commodity must exist whose consumption is an embodiment of labor and a
creation of value. Marx’s theory unveiled that a commodity has exchange-value
only because it stands in a relation to human labor and production.
Similar
to Marx’s theory of value, money is intimately tied up with labor and a concept
of value based on labor and the labor products. According to Marx, money is
itself a commodity but one that in abstract form also represents the value of
other commodities. Money is not just a medium of exchange, but also a means of
domination. As a universal measure for value, money symbolizes the capitalist
mode of production and its social relations of exploitation. This is the basis
of Marx’s labor-theory of value, the creation of surplus value, and the
expropriation of the worker. Marx explains that the contradictions of
capitalism is clear where the division of labor, the accumulation of capital,
the opposition between bourgeoisie and proletariat, and the inherently
contradictory mode of capitalist production are the central elements that
account for industrialized society. The study of money to Marx makes more sense
of his analysis on capitalism.
For
Simmel, money is the reification of the pure relationship between things as
expressed in their economic motion (Laidler
and Rowe, 1980). Money creates an objectivity that stands over against
individuals as a natural entity. Since money itself is an omnipresent means,
the various elements of our existence are thus placed in an all-embracing
teleological nexus in which no element is either the first or the last.
Furthermore, since money measures all objects with merciless objectivity, and
since its standard of value so measured determines their relationship, a web of
objective and personal aspects of life emerges which is similar to the natural
cosmos with its continuous cohesion and strict causality. This web is held
together by the all-pervasive money-value, just as nature is held together by
energy that gives life to everything (Simmel 1990: 453).
This
objectivity of human interaction finds its highest or lowest expression in
purely monetary economic interests. It is also manifested in the intellectualization
and functionalization of relationships. After drawing a series of parallels
between intellectualization, rationalization, the law, and that calculating
exactness of modern life. Simmel offers us a critique: “the calculating intellectuality embodied in these forms may in its turn
derive from them some of its energy through which intellectuality controls
modern life. All these relationships are brought into focus by the negative
example of those type of thinkers who are most strongly opposed to the economic
interpretation of human affairs: Goethe, Carlyle and Nietzsche on the one hand
are fundamentally anti-intellectual and on the other completely reject that mathematically
exact interpretation of nature which we recognize as the theoretical
counterpart to the institution of money” (Simmel 1990:446)
For
this reason, Simmel’s view of the role of money in society is identical to Marx’s.
For Marx money infinitely intensifies labor’s dependency on capital and
“mystifies” all economic relationships. In contrast, Simmel’s goal in The
Philosophy of Money is precisely to explain this mystification. Simmel’s
relation to Marx in the study of money thus comprises both similarities and
differences in approach. However, there are some of the themes in Marx’s work
reappear in some form in Simmel’s study. First,
there is the evolutionary sketch of money from simple barter to the more
complex and more complete existence of money as paper money. In addition, both
Simmel and Marx use religious analogies to denote the impersonal nature of
money, and this theme of impersonalization through money is apparent in the
writings of both authors. Although Marx’s Grundrisse were not yet discovered
during Simmel’s life, he unwittingly reconstructed some of the classical
Marxist themes of objectification and alienation (Turner, 1986: 101–3). Second, Money is seen by both Simmel and
Marx as the purest form of reification; it is the technically most perfected
medium of modern economic exchange that transforms all quality into quantity,
alienates people from their true existence, and fragments their personalities
into formal properties. On the other hand, Simmel’s approach is in several
respects antagonistic to Marx’s throughout The Philosophy of Money.
The
main difference in their respective approaches is that Marx holds the
capitalist mode of production responsible for the contradictions of modern society,
while for Simmel it is the money economy as such that is the cause of the
impersonalization of social relations. Marx’s theory is primarily concerned
with the capitalist sphere of production and the relation between money, labor
and capital, while Simmel concentrates on the distribution and circulation of
goods, which are held to constitute a value-creating sphere of exchange.
Seeking to move deeper than historical materialism to reach at the
psychological and metaphysical meanings of the concrete historical
manifestations of economic forms, Simmel’s Philosophy of Money is a fundamental
critique of Marx’s political economy. While in Marx’s work money has different
functions (as a measure of value, a medium of exchange and a means of
accumulating wealth), it was always of central concern to Marx that money
embodied abstract labor and that the value of money was determined by the
conditions of production’ (Turner, 1986: 109).
Opposing
most critically this economization of money, Simmel locates money resolutely in
the broad realm of human experience. In Simmel, money is only loosely tied to
its material basis and instead represents a sociological phenomenon, a form of
human interaction. Therefore, also, exchange is for him a crucial form of
sociation, whereas the economy is only one special form of exchange (Frisby,
1985: 59–60). Whereas Marx’s theory of value is based on the productive
relations of the human subject with nature through labor, Simmel presents a
relativist theory of value that posits that the value of things rests on a
subjective judgment, on valuation. Therefore, those goods that are difficult to
obtain for the individual who wants them – within certain limits of feasibility
– will be the most valuable (Sassatelli, 2000).
The
differences between Simmel’s and Marx’s are manifested in their respective
value theories. Marx’s analysis is more optimistic, since capitalism will one
day undermine itself. Simmel’s analysis instead points to the role of money as
a world of its own, driven by the nature of human life, which cannot just be
overthrown. Conversely, along with the growth of money as a pure symbol, Simmel
defines freedom in relation to the possession of money as providing the means
to engage in social interactions. For Marx, this potential of increased freedom
and individualization is far more problematic (the freedom of some can only be
maintained by the unfreedom of many others). Underlying these differences in
approach, Simmel’s discontent with socialist ideology can be discerned. To Simmel,
socialism cannot eradicate all distinctions between people, at least not
without destroying their freedom (Deflem, 2003)
References:
Balinky, Alexander. (1970). Marx’s
Economics: Origin and Development. Health Lexington Books: Massachusetts
Bose, Arun. (1980). Marx on Exploitation
and Inequality: An Essay in Marxian Analytical Economics. Oxford University
Press: Delhi
Bryan, Dick and Michael Rafferty. (2007). Financial
derivatives and the theory of money Economy and Society Volume 36 Number 1: 134-158
Deflem, Mathieu. (2003). The Sociology of
the Sociology of Money Simmel and the Contemporary Battle of the Classics.
Journal of Classical Sociology, Vol 3(1): 67–96
Frisby, David P. (1985). Georg Simmel:
First Sociologist of Modernity. Theory, Culture and Society 2(3): 49–67
Furnham, Adrian & Michael Argyle.
(1998). The Psychology of Money. Routledge: London & New York
Foley, Duncan K. (1983). On Marx's Theory
of Money, Social Concept 1(1), 5-19
Hallowell, Edward M, MD & William J.
Grace. (1991). Money Styles (chapter 2 on Money and Mind, edited by Sheila
Klebanow and Eugene L. Lowenkopf). Plenum Press: New York & London
Laidler, David & Nicholas Rowe.
(1980). George Simmel's Philosophy of Money: A Review Article for Economists. Journal
of Economic Literature Vol. XVIII (March 1980), pp. 97-105
Sassatelli, Roberta. (2000). From Value to
Consumption. A Social-Theoretical Perspective on Simmel’s Philosophie des
Geldes. Acta Sociologica 43(3):207–18
Simmel, Georg. (1990). The Philosophy of
Money. Routledge: London & New York
Stoknes, Per Espen. (2009). Money &
Soul: The Psychology of Money and the Transformation of Capitalism. Green Books
Turner, Bryan S. (1986). Simmel,
Rationalization and the Sociology of Money. Sociological Review 34(1): 93–114
Walsh, Adrian & Tony Lynch. (2008).
The Morality of Money: An Exploration in Analytic Philosophy. Palgrave
MacMillan
Zelizer, Viviana. (1994). The Social
Meaning of Money. Basic Books: New York
No comments:
Post a Comment