Is Marx out of date?

The insatiable drive for profits, which is fundamental to capitalist society, damages health and destroys lives. Though the capitalist system is inexorably doomed to perish as other systems have perished, its longevity is considerably aided by the ignorance and gullibility of the working class. The capitalist class, naturally enough, are only too ready to seize upon the undiscerning working-class brain and to chloroform and cloud it with hype worked up by the media. The main object of the worker should be to achieve his or her emancipation. Defenders of the capitalist status quo tell people that socialism is not workable. They think that workers are not intelligent enough to run a system of production for use, one where there are no followers and leaders but a system where everyone co-operates in decision making. They forget that workers are intelligent enough to perform the tasks necessary to run capitalist society. It is workers who design, build and operate computer systems. When the working class, want socialism they will have it.

  So many things have happened, they say, that Marx could not know about; capitalism has undergone such unforeseen changes. Unaccountably the questioners forget to put it to themselves. If Marxian theories have long been disproved and discredited why do the opponents of socialism go on, year after year, making new attempts to disprove and discredit them? The answer is that capitalism has not changed in its essentials: it is still a system of society in which the means of production and distribution are class owned, in which commodities are produced for sale and profit by a non-owning working class which lives by selling mental and physical energies to employers. When we come to economic theory, Marx’s analysis of capitalism in operation, value, prices, unemployment, banking, crises and so on is more valuable in depth and scope than anything done by his detractors. One sphere in which Marxian theories hold their own is in the explanation of price changes, including the prices of individual commodities, the price of labour-power (wages), the general upward movement in booms and the downward movement in slumps, the general movements related to changes in the value of gold and finally the general movements related to the volume of currency.

Leaving aside the day to day fluctuations of price caused by market fluctuations of supply and demand and the fact that some commodities normally exchange above or below their value, Marx postulated that the basic element in the exchange of all commodities in capitalist society is value, measured by the amount of socially necessary labour in all the operations required in the production of a given commodity. From which it follows, firstly, that if one commodity requires twice as much socially necessary labour as another, its value will be twice as great, and secondly, that in gold all other commodities find their “universal equivalent”, again related to value. This explains what is behind the value of gold coinage; the coin is a weight of gold representing the value of gold. In concrete terms the Pound or sovereign which circulated in Britain in the nineteenth and into the present century was, by law, a fixed weight (about one quarter of an ounce) of gold.

The next proposition is that in order to carry on the sales and purchases of commodities and other payments a certain amount of gold coin (and subsidiary silver, copper etc., coinage) would be needed. A number of factors enter into the determination of what volume of currency will actually be needed; the volume of transactions, the prices of commodities and the rapidity of circulation etc., for a description of which the reader is referred to Marx’s Capital Vol. 1. Chapter 3. “Money, or the Circulation of Commodities”.

The next stage in Marx’s explanation is that a circulating gold coinage can, without any alteration of the proposition, be replaced by a convertible paper currency, that is freely convertible into a legally fixed and unchanging weight of gold. In 19th century Britain, Bank of England notes, which circulated alongside the gold coins, were by law convertible on demand into gold.

Then comes a completely different situation, the replacement of gold coin and convertible bank notes by an inconvertible paper currency—the situation in Britain today. The Marxian proposition, still based firmly on the concept of value, is that if the inconvertible paper currency exceeds in amount the amount of gold coinage that would be needed, the general price level will correspondingly rise.

 If the quantity of paper money issued is, for example, double what it ought to be, then, in actual fact, the pound, has become the money name of one-eighth of an ounce of gold instead of about one-quarter of an ounce. The effect is the same as if an alteration had taken place in the function of gold as a standard of price. The values previously expressed by the price of £1 will then be expressed by the price £2. (Capital Vol. 1 page 144 Kerr edition).

But the proof of the pudding is in the eating. The economists who reject Marx have to explain why events are explicable on the lines of Marx’s proposition about the effects of an excess issue of currency, but quite inexplicable on their theory that the amount of currency can be disregarded.