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Lapavitsas, Costas - Money as Money and Money as Capital in a Capitalist Economy

Lapavitsas, Costas - Money as Money and Money as Capital in a Capitalist Economy

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Published by Angel Martorell
Chapter 3 in Saad-Filho, Alberto (ed) Anti-Capitalism. A Marxist Introduction (2012).
Chapter 3 in Saad-Filho, Alberto (ed) Anti-Capitalism. A Marxist Introduction (2012).

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Published by: Angel Martorell on Feb 10, 2014
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05/24/2014

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3Money as Money and Moneyas Capital in a CapitalistEconomy
Costas Lapavitsas
Money permeates economic activity in capitalism, from themundane to the vital. Money also permeates social life, making orbreaking personal relations, attaching meaning to human action andproviding a measure of human qualities. But despite its prominencein capitalism, there is no consensus in social theory on what moneyis and how it functions. This chapter considers the social relationsthat give rise to money and those that rest on it, from the perspec-tive of Marxist political economy. The first section (Money asMoney) focuses on money as plain money, that is, money as aphenomenon of simple commodity exchange. By consideringmoney purely in the context of market trading, it is possible tospecify what money is as well as its functions and forms in relationto markets. The second section (Money as Capital) turns to moneyas capital, that is, money as a phenomenon of capitalist productionand circulation. Money’s specifically capitalist functioning is thusspecified, including its role in relation to credit.MONEY AS MONEY
Money and markets
Capitalism is a social system that incorporates an extremely widenetwork of markets. There are markets in which the traded com-modities are produced by capitalist enterprises employing wagelabour, such as those for consumer and investment goods. There aremarkets in which the traded commodities are not produced by usingcapitalist methods, typical examples being the markets for land andlabour (see Chapters 1 and 4). There are also markets in which theobjects of trading are not produced commodities at all, but financialobligations, claims on others, cover for risk and other promisesamong people. Finally, there are even ‘markets’ in which the tradedobjects can only be imputed by analogy with commodity markets,such as the ‘markets’ for bribes, for gangster protection, for hired
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murderers, for fines, for libel compensation, and so on. All thesedisparate markets, however, have one thing in common: money. The functions of money in these capitalist markets are ubiquitous.Money is the means of rendering disparate objects and activitiescommensurate with each other (the unit of account or measure of value). It is the mediating instrument in transactions (the means of exchange). It is, further, the medium that enables settlement of promises and obligations between market participants at a timeother than that of the actual transaction itself (the means of payment). It is also the medium that allows one country to settle itsobligations with, or transfer wealth to, another (world money).Finally, money is the medium for forming hoards, which arepossessed by individuals or enterprises and held with banks or otherfinancial institutions (means of hoarding). Financial institutions alsohold their own vast hoards of money (reserves). Money also has broader social functions in a capitalist society,most clearly seen in relation to power and hierarchy. Money affordssocial power, since it can impel others to comply with its owner’swill, for example, by placating opponents, mobilising supporters, orhiring professional expertise. Money also affords political power, asis clearly seen in the influence exercised on political parties by thosethat finance them. Money, moreover, determines rank and socialhierarchy, since it opens the doors of ‘good’ society and securesmembership of exclusive clubs and associations. In capitalist society,which typically shuns hereditary distinctions and privileges, moneyis uniquely able to sustain rank and hierarchy across the generations,since it can place one’s children in the ‘right’ schools and purchasehusbands and wives.
1
Finally, money’s power is also global as itallows countries to acquire military weapons produced by others,and since countries that can make gifts of money can also persuadeothers to do their bidding. Thecomplexeconomicandsocialfunctionsofmoneyarematchedbyabewilderingarrayofitsforms.Thereisgold,whichliesmostlyinprivateandpublichoards.Therearecheapmetalliccoinsandbanknotesusedheavilyinthepettytransactionsoeverydaylife.Therearemanydifferenttypesofbankdepositsthatcanbeusedtoeffectpayments,ortransferwealth,amongindividualandlargecorporations.Therearebankandotheraccountsthatcanbechargedthroughtheuseofcreditcards.Therearealsodepositsheldbyfinancialinstitutionsotherthanbanksthatcanbeusedforpayment.Thereare,moreover,severalcreditinstrumentsthatcanbe
60Anti-Capitalism
 
usedinlieuofpaymentwithcash,suchascommercialbills.Despitemoneysproteanaspect,however,thevastbulkofitsformsinadevelopedcapitalisteconomyhaveonethingincommon:theyarerelatedtothecreditsystem.Thebulkofmoderncapitalistmoneyiscreditmoney.
 The social relations captured by money in commodityexchange
These simple observations about capitalist markets and moneyappear unobjectionable, what economists call ‘stylised facts’. Con-sequently, it comes as a surprise to find that mainstream economictheory leaves little room for money in its analysis of markets. To besure, there are standard references to money’s functions ineconomics textbooks, but they sit very uneasily with the underlyinganalytical approach of mainstream theory. The theoretical model of ‘general equilibrium’, which underpins mainstream economicthinking, is fundamentally a model of direct commodity exchangebetween market participants (Hahn 1982). Mainstream economicanalysis, which prides itself in being the most advanced socialscience, at bottom sees capitalism as a social system in which thingsexchange directly for other things (barter), rather than for money. Inshort, mainstream economic theory analyses capitalist marketswithout adequately explaining money’s role.
2
Marxist political economy is vastly different on this score: moneyis shown to emerge spontaneously and necessarily whenever regularcommodity exchange is undertaken. It is deeply misleading toassume, as mainstream economics does, that widespread commodityexchange could take place under barter conditions. There is noevidence (historical, anthropological or sociological) that a durablesystem of entirely money-free commodity transactions has everexisted. Indeed, research into exchange systems in whichcommodity owners regularly and frequently meet each other showsthat money is present and touches all transactions, directly orindirectly.
3
Economic interactions between owners of particularcommodities inevitably lead to the emergence of money as theuniversal commodity, the ‘independent form of value’ or ‘universalequivalent’. Money and markets are inseparable. In the first volume of
Capital
, Marx (1867, ch. 1) provided thebuilding blocs for a theoretical explanation of money’s emergence aspart of his discussion of the ‘form of value’. Money is shown toemerge spontaneously and inevitably whenever commodity owners
Money as Money and Money as Capital in a Capitalist Economy61

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