Karl Marx: Critique of Political Economy

Part II


Gladstone, speaking in a parliamentary debate on Sir Robert Peel’s Bank Act of 1844 and 1845, observed that even love has not turned more men into fools than has meditation upon the nature of money. He spoke of Britons to Britons. The Dutch, on the other hand, who in spite of Petty’s doubts possessed a divine sense for money speculation from time immemorial, have never lost their senses in speculation about money.

The principal difficulty in the analysis of money is surmounted as soon as it is understood that the commodity is the origin of money. After that it is only a question of clearly comprehending the specific form peculiar to it. This is not so easy because all bourgeois relations appear to be gilded, i.e., they appear to be money relations, and the money form, therefore, seems to possess an infinitely varied content, which is quite alien to this form.

During the following analysis it is important to keep in mind that we are only concerned with those forms of money which arise directly from the exchange of commodities, but not with forms of money, such as credit money, which belong to a higher stage of production. For the sake of simplicity gold is assumed throughout to be the money commodity.


The first phase of circulation is, as it were, a theoretical phase preparatory to real circulation. Commodities, which exist as use-values, must first of all assume a form in which they appear to one another nominally as exchange-values, as definite quantities of materialised universal labour-time. The first necessary move in this process is, as we have seen, that the commodities set apart a specific commodity, say, gold, which becomes the direct reification of universal labour-time or the universal equivalent. Let us return for a moment to the form in which gold is converted into money by commodities.

1 ton of iron =2 ounces of gold
1 quarter of wheat =1 ounce of gold
1 hundredweight of Mocha coffee =¼ ounce of gold
1 hundredweight of potash =½ ounce of gold
1 ton of Brazil-timber =1½ ounces of gold
Y commodities =X ounces of gold

In this series of equations iron, wheat, coffee, potash, etc., appear to one another as materialisation of uniform labour, that is labour materialised in gold, in which all distinctive features of the concrete labour represented in the different use-values are entirely obliterated. They are as values identical, i.e., materialisations of the same labour or the same materialisation of labour – gold. Since they are uniform materialisations of the same labour, they differ only in one way, quantitatively: in other words they represent different magnitudes of value, because their use-values contain unequal amounts of labour-time. These individual commodities can be compared with one another as embodiments of universal labour-time, since they have been compared with universal labour-time in the shape of the excluded commodity, i.e., gold. The same dynamic relation, as a result of which commodities become exchange-values for one another, causes the labour-time contained in gold to represent universal labour-time, a given amount of which is expressed in different quantities of iron, wheat, coffee, etc., in short in the use-values of all commodities, or it may be displayed directly in the infinite series of commodity equivalents. Since the exchange-value of all commodities is expressed in gold, the exchange-value of gold is directly expressed in all commodities. Because the commodities themselves assume the form of exchange-value for one another, they turn gold into the universal equivalent or into money.

Gold becomes the measure of value because the exchange-value of all commodities is measured in gold, is expressed in the relation of a definite quantity of gold and a definite quantity of commodity containing equal amounts of labour-time. To begin with, gold becomes the universal equivalent, or money, only because it thus functions as the measure of value and as such its own value is measured directly in all commodity equivalents. The exchange-value of all commodities, on the other hand, is now expressed in gold. One has to distinguish a qualitative and a quantitative aspect in this expression. The exchange-value of the commodity exists as the embodiment of equal uniform labour-time, the value of the commodity is thus fully expressed, for to the extent that commodities are equated with gold they are equated with one another. Their golden equivalent reflects the universal character of the labour-time contained in them on the one hand, and its quantity on the other hand. The exchange-value of commodities thus expressed in the form of universal equivalence and simultaneously as the degree of this equivalence in terms of a specific commodity, that is a single equation in which commodities are compared with a specific commodity, constitutes price. Price is the converted form in which the exchange-value of commodities appears within the circulation process.

Thus as a result of the same process through which the values of commodities are expressed in gold prices, gold is transformed into the measure of value and thence into money. If the values of all commodities were measured in silver or wheat or copper, and accordingly expressed in terms of silver, wheat or copper prices, then silver, wheat or copper would become the measure of value and consequently universal equivalents. Commodities as exchange-values must be antecedent to circulation in order to appear as prices in circulation. Gold becomes the measure of value only because the exchange-value of all commodities is estimated in terms of gold. The universality of this dynamic relation, from which alone springs the capacity of gold to act as a measure, presupposes however that every single commodity is measured in terms of gold in accordance with the labour-time contained in both, so that the real measure of commodity and gold is labour itself, that is commodity and gold are as exchange-values equated by direct exchange. How this equating is carried through in practice cannot be discussed in the context of simple circulation. It is evident, however, that in countries where gold and silver are produced a definite amount of labour-time is directly incorporated in a definite quantity of gold and silver, whereas countries which produce no gold and silver arrive at the same result in a roundabout way, by direct or indirect exchange of their home products, i.e., of a definite portion of their average national labour, for a definite quantity of labour-time embodied in the gold and silver of countries that possess mines. Gold must be in principle a variable value, if it is to serve as a measure of value, because only as reification of labour-time can it become the equivalent of other commodities, but as a result of changes in the productivity of concrete labour, the same amount of labour-time is embodied in unequal volumes of the same type of use-values. The valuation of all commodities in terms of gold – like the expression of the exchange-value of any commodity in terms of the use-value of another commodity – merely presupposes that at a given moment gold represents a definite quantity of labour-time. The law of exchange-value set forth earlier applies to changes occurring in the value of gold. If the exchange-value of commodities remains unchanged, then a general rise of their prices in terms of gold can only take place when the exchange-value of gold falls. If the exchange-value of gold remains unchanged, then a general rise of prices in terms of gold is only possible if the exchange-values of all commodities rise. The reverse takes place in the case of a general decline in the prices of commodities. If the value of an ounce of gold falls or rises in consequence of a change in the labour-time required for its production, then it will fall or rise equally in relation to all other commodities and will thus for all of them continue to represent a definite volume of labour-time. The same exchange-values will now be estimated in quantities of gold which are larger or smaller than before, but they will be estimated in accordance with their values and will therefore maintain the same value relative to one another. The ratio 2:4:8 remains the same whether it becomes 1:2:4 or 4:8:16. The fact that, because of the changing value of gold, exchange-values are represented by varying quantities of gold does not prevent gold from functioning as the measure of value, any more than the fact that the value of silver is one-fifteenth of that of gold prevents silver from taking over this function. Labour-time is the measure of both gold and commodities, and gold becomes the measure of value only because all commodities are measured in terms of gold; it is consequently merely an illusion created by the circulation process to suppose that money makes commodities commensurable. [1] On the contrary, it is only the commensurability of commodities as materialised labour-time which converts gold into money.

The concrete form in which commodities enter the process of exchange is as use-values. The commodities will only become universal equivalents as a result of their alienation. The establishment of their price is merely their nominal conversion into the universal equivalent, an equation with gold which still has to be put into practice. But because prices convert commodities only nominally into gold or only into imaginary gold – i.e., the existence of commodities as money is indeed not yet separated from their real existence – gold has been merely transformed into imaginary money, only into the measure of value, and definite quantities of gold serve in fact simply as names for definite quantities of labour-time. The distinct form in which gold crystallises into money depends in each case on the way in which the exchange-values of commodities are represented with regard to one another.

Commodities now confront one another in a dual form, really as use-values and nominally as exchange-values. They represent now for one another the dual form of labour contained in them, since the particular concrete labour actually exists as their use-value, while universal abstract labour-time assumes an imaginary existence in their price, in which they are all alike embodiments of the same substance of value, differing only quantitatively.

The difference between exchange-value and price is, on the one hand, merely nominal; as Adam Smith says, labour is the real price of commodities and money their nominal price. Instead of saying that one quarter of wheat is worth thirty days’ labour, one now says it is worth one ounce of gold, when one ounce of gold is produced in thirty working days. The difference is on the other hand so far from being simply a nominal difference that all the storms which threaten the commodity in the actual process of circulation centre upon it. A quarter of wheat contains thirty days’ labour, and it therefore does not have to be expressed in terms of labour-time. But gold is a commodity distinct from wheat, and only circulation can show whether the quarter of wheat is actually turned into an ounce of gold as has been anticipated in its price. This depends on whether or not the wheat proves to be a use-value, whether or not the quantity of labour-time contained in it proves to be the quantity of labour-time necessarily required by society for the production of a quarter of wheat. The commodity as such is an exchange-value, the commodity has a price. This difference between exchange-value and price is a reflection of the fact that the particular individual labour contained in the commodity can only through alienation be represented as its opposite, impersonal, abstract, general – and only in this form social – labour, i.e., money. Whether it can be thus represented or not seems a matter of chance. Although, therefore, the price gives exchange-value a form of existence which is only nominally distinct from the commodity, and the two aspects of the labour contained in the commodity appear as yet only as different modes of expression; while, on the other hand, gold, the embodiment of universal labour-time, accordingly confronts concrete commodities merely as an imaginary measure of value; yet the existence of price as an expression of exchange-value, or of gold as a measure of value, entails the necessity for alienation of commodities in exchange for glittering gold and thus the possibility of their non-alienation. In short, there is here contained in latent form the whole contradiction which arises because the product is a commodity, or because the particular labour of an isolated individual can become socially effective only if it is expressed as its direct opposite, i.e., “abstract universal labour. The utopians who wish to retain commodities but not money, production based on private exchange without the essential conditions for this type of production, are therefore quite consistent when they seek to “abolish” money not only in its palpable state but even in the nebulous, chimerical state that it assumes as the measure of value. For beneath the invisible measure of value lurks hard money.

Given the process by which gold has been turned into the measure of value and exchange-value into price, all commodities when expressed in their prices are merely imagined quantities of gold of various magnitudes. Since they are thus various quantities of the same thing, namely gold, they are similar, comparable and commensurable, and thus arises the technical necessity of relating them to a definite quantity of gold as a unit of measure. This unit of measure then develops into a scale of measure by being divided into aliquot parts which are in turn subdivided into aliquot parts. [2] The quantities of gold themselves, however, are measured by weight. The standard weights generally used for metals accordingly provide ready-made standard measures, which originally also served as standard measures of price wherever metallic currency was in use. Since commodities are no longer compared as exchange-values which are measured in terms of labour-time, but as magnitudes of the same denomination measured in terms of gold, gold, the measure of value, becomes the standard of price. The comparison of commodity-prices in terms of different quantities of gold thus becomes crystallised in figures denoting imaginary quantities of gold and representing gold as a standard measure divided into aliquot parts. Gold as measure of value and as standard of price has quite distinct specific functions, and the confusion of the one with the other has led to the most absurd theories. Gold as materialised labour-time is a measure of value, as a piece of metal of definite weight it is the standard of price. Gold becomes the measure of value because as an exchange-value it is compared with the exchange-values of other commodities; in its aspect as a standard of price a definite quantity of gold serves as a unit for other quantities of gold. Gold is the measure of value because its value is variable; it is the standard of price because it has been established as an invariable unit of weight. Here, as in all cases of measuring quantities of the same denomination, stability and exactitude of the proportions is essential. The necessity of establishing a quantity of gold as the unit of measure and its aliquot parts as subdivisions of this unit has given rise to the idea that a fixed ratio of values has been set up between a definite quantity of gold, whose value is of course variable, and the exchange-values of commodities. But such a view simply ignores the fact that the exchange-values of commodities are turned into prices, into quantities of gold, before gold becomes the standard of price. Quite irrespective of any changes in the value of gold, different quantities of gold will always represent the same ratio of values with regard to one another. lf the value of gold should fall by 1,000 per cent, then the value of twelve ounces of gold would still be twelve times bigger than that of one ounce of gold, and so far as prices are concerned what matters is only the proportion of the different quantities of gold to one another. Since, on the other hand, a rise or fall in the value of an ounce of gold does not in any way affect its weight, the weight of its aliquot parts remains likewise unaffected; gold can thus always serve as a stable standard of price, regardless of any changes in its value. [3]

As a result of an historical process, which, as we shall explain later, was determined by the nature of metallic currency, the names of particular weights were retained for constantly changing and diminishing weights of precious metals functioning as the standard of price. Thus the English pound sterling denotes less than one-third of its original weight, the pound Scots before the Union only 1/36, the French livre 1/74, the Spanish maravedi less than 1/1,000 and the Portuguese rei an even smaller proportion. Historical development thus led to a separation of the money names of certain weights of metals from the common names of these weights. [4] Because the designation of the unit of measure, its aliquot parts and their names is, on the one hand, purely conventional, and on the other hand must be accepted as universal and indispensable within the sphere of circulation, it had to be established by legal means. The purely formal enactment thus devolved upon the government. [5] Which particular metal served as the material of money depended on the given social conditions. The standard of price is of course different in different countries. In England, for example, the ounce as a weight of metal is divided into pennyweights, grains and carats troy; but the ounce of gold as the unit of money is divided into 3 7/8 sovereigns, the sovereign into 20 shillings and the shilling into 12 pence, so that 100 pounds of 22-carat gold (1,200 ounces) equal 4,672 sovereigns and 10 shillings. But in the world market, where state frontiers disappear, such national features of the standards of money disappear as well and are replaced by measures of weight generally used for metals.

The price of a commodity, or the quantity of gold into which it is nominally converted, is now expressed therefore in the monetary names of the standard of gold. Thus, instead of saying a quarter of wheat is worth an ounce of gold, one would say in England it is worth £3 17s. 10/2d. All prices are thus expressed in the same denomination. The specific form which the exchange-value of commodities assumes is converted into denominations of money, by which their value is expressed. Money in turn becomes money of account. [6]

The transformation of commodities into money of account in the mind, on paper or in words takes place whenever the aspect of exchange-value becomes fixed in a particular type of wealth. [7] This transformation needs the material of gold, but only in imagination. Not a single atom of real gold is used to estimate the value of a thousand bales of cotton in terms of a certain number of ounces of gold and then to express this number of ounces in £. s. d., the names of account of the ounce. For instance, not a single ounce of gold was in circulation in Scotland before Sir Robert Peel’s Bank Act of 1845, although the ounce of gold, called £3 17s. 10/2d. as the British standard of account, served as the legal standard of price. Similarly, silver serves as the standard of price in exchange of commodities between Siberia and China, although this trade is in fact merely barter. It makes no difference, therefore, to gold as money of account whether or not its standard unit or its subdivisions are actually coined. During the reign of William the Conqueror, one pound sterling, at that time a pound of pure silver, and the shilling,½0 of a pound, existed in England only as money of account, while the penny,½40 of a pound of silver, was the largest silver coin in existence. On the other hand, there are no shillings or pence in England today, although they are legal names of account for definite fractions of an ounce of gold. Money as money of account may exist only nominally, while actually existing money may be coined according to an entirely different standard. Thus in many of the English colonies in North America, the money in circulation consisted of Spanish and Portuguese coins till late in the eighteenth century, whereas the money of account was everywhere the same as in England. [8]

Because as standard of price gold is expressed by the same names of account as the prices of commodities – for example £3 17s. 10½d. may denote an ounce of gold just as well as a ton of iron – these names of account are called the mint-price of gold. Thus the queer notion arose that gold is estimated in its own material and that, unlike all other commodities, its price is fixed by the State. The establishing of names of account for definite weights of gold was mistaken for the establishing of the value of these weights. [9] Gold has neither a fixed price nor any price at all, when it is a factor in the determination of prices and therefore functions as money of account. In order to have a price, in other words to be expressed in terms of a specific commodity functioning as the universal equivalent, this other commodity would have to play the same exclusive role in the process of circulation as gold. But two commodities which exclude all other commodities would exclude each other as well. Consequently, wherever silver and gold exist side by side as legal money, i.e., as measure of value, the vain attempt has always been made to treat them as one and the same substance. If one assumes that a given labour-time is invariably materialised in the same proportion in silver and gold, then one assumes, in fact, that silver and gold are the same substance, and that silver, the less valuable metal, represents a constant fraction of gold. The history of the monetary system in England from the reign of Edward III up to the time of George II consists of a continuous series of disturbances caused by conflict between the legally established ratio between the values of gold and silver and the actual fluctuations in their value. Sometimes the value of gold was too high, sometimes that of silver. The metal whose value was estimated at too low a rate was withdrawn from circulation, melted down and exported. The value-ratio of the two metals was then once again changed by law; but soon the new nominal value in its turn clashed with the actual value-ratio. In our own time, the slight and short-lived fall in the value of gold as compared with silver, brought about by the Indian and Chinese demand for silver, produced the same phenomenon on a large scale in France – the export of silver and the elimination of silver from the sphere of circulation by gold. During the years 1855, 1856 and 1857, the excess of France’s gold imports over her gold exports amounted to £41,580,000, while the excess of her silver exports over silver imports came to £34,704,000. [10] In countries like France, where both metals are legally sanctioned measures of value and both are accepted as legal tender, where moreover every person can pay in the one or the other metal as he pleases, the metal whose value rises is in fact at a premium, and its price like that of any other commodity is measured in terms of the over-rated metal, which thus serves alone as the measure of value. All historical experience in this sphere simply shows that, where two commodities function as legally valid measures of value, it is always one of them only which actually maintains this position. [11]


1. Aristotle does indeed realise that the exchange-value of commodities is antecedent to the prices of commodities: “That exchange took place thus before there was money is plain; for it makes no difference whether it is five beds that exchange for a house, or the money value of five beds.” On the other hand, since it is only in price that commodities possess the form of exchange-value in relation to one another, he makes them commensurable by means of money. “This is why all goods must have a price set on them; for then there will always be exchange, and if so, association of man with man. Money, then, acting as a measure, makes goods commensurate and equates them; for neither would there have been association if there were not exchange, nor exchange if there were not equality, nor equality if there were not commensurability.” Aristotle is aware of the fact that the different things measured by money are entirely incommensurable magnitudes. What he seeks is the oneness of commodities as exchange-values, and since he lived in ancient Greece it was impossible for him to find it. He extricates himself from this predicament by making essentially incommensurable things commensurable – so far as this is necessary for practical needs – by means of money. “Now in truth it is impossible that things differing so much should become commensurate, but with reference to demand they may become so sufficiently” (Aristotle’s Ethica Nicomachea, L. 5, C. 8, edit. Bekkeri, Oxonii, 1837). [The English text is from Aristotle – Ethica Nicomachea. Book V, Chapter 8, translation by W. D. Ross, Oxford, 1925, 1133b.]

2. The strange fact that the ounce of gold as the standard of money in England is not divided into aliquot parts is accounted for as follows: “Our coinage was originally adapted to the employment of silver only – hence an ounce of silver can always be divided into a certain aliquot number of pieces of coin, but, as gold was introduced at a later period into a coinage adapted only to silver an ounce of gold cannot be coined into an aliquot number of pieces” (James Maclaren, A Sketch of the History of the Currency, London, 1858, p. 16).

3. “Money may continually vary in value, and yet be as good a measure of value as if it remained perfectly stationary. Suppose, for example, it is reduced in value.... Before the reduction, a guinea would purchase three bushels of wheat or six days’ labour, subsequently, it would purchase only two bushels of wheat, or four days’ labour. In both these cases, the relations of wheat and labour to money being given, their mutual relations can be inferred; in other words, we can ascertain that a bushel of wheat is worth two days’ labour. This, which is all that measuring value implies, is as readily done after the reduction as before. The excellence of any thing as a measure of value is altogether independent of its own variableness in value” (Samuel Bailey, Money and its Vicissitudes, London, 1837, pp. 9, 10).

4. “The coins whose names are now only imaginary are the oldest coins of every nation; all their names were for a time real” (so generally stated the latter assertion is incorrect) “and precisely because they were real they were used for calculation” (Galiani, Della Moneta, op. cit., p. 153).

5. The romantic A. Müller says: “According to our views every independent sovereign has the right to introduce metallic currency and ascribe to it a social nominal value, order, position and title” (Adam H. Müller, Die Elemente der Staatskunst, Berlin, 1809, Band II, p. 288). The aulic councillor is right as regards the title, but he forgets the content. How confused his “views” are becomes evident, for instance, in the following passage: “Everybody realises how important it is to determine the price of coins correctly, especially in a country like England, where the government with splendid generosity coins money gratuitously” (Mr. Müller apparently assumes that the members of the British government defray the costs of minting out of their own pocket), “where it does not levy seigniorage, etc., and consequently if it were to fix the mint-price of gold considerably above the-market-price, if instead of paying £3 17s. 10½d. for an ounce of gold as at present, it should decide to fix the price of an ounce of gold at £3 19s., all money would flow into the mint and the silver obtained there would be exchanged for the cheaper gold on the market, and then it would again be taken to the mint, thus throwing the monetary system into disorder” (op. cit., pp. 280, 281). Müller throws his ideas into “disorder,” so as to preserve order at the mint in England. Whereas shillings and pence are merely names, that is names of definite fractions of an ounce of gold represented by silver and copper tokens, he imagines that an ounce of gold is estimated in terms of gold, silver and copper and thus confers upon the English a triple standard of value. Silver as the standard of money along with gold was formally abolished only in 1816 by 56 George III, C. 68, although it was in fact legally abolished by 14 George 11, C. 42 in 1734, and in practice even earlier. Two circumstances in particular enabled A. Müller to arrive at a so-called higher conception of political economy: first his extensive ignorance of economic facts and second his purely amateurish infatuation with philosophy.

6. “When Anacharsis was asked what the Hellenes used money for he replied – for calculation” (Athenaeus, Deipnosophistai, L. IV, 49 v. II, [p. 120], ed. Schweighauser, 1802).

7. G. Garnier, one of the first to translate Adam Smith into French, had the odd idea of establishing the proportion between the use of money of account and that of real money. [According to him] this proportion is 10 to 1 (G. Garnier, Histoire de la monnaie depais les temps de la plus haute antiquité, t. I, p. 78).

8. The Act of Maryland of 1723, which made tobacco legal currency but converted its value into English gold money, by declaring a pound of tobacco equal to a penny, recalls the leges barbarorum, which on the contrary equated definite sums of money with oxen, cows, etc. In this case the real material of the money of account was neither gold nor silver, but the ox and the cow.

9. Thus we read, for example, in the Familiar Words of Mr. David Urquhart – “The value of gold is to be measured by itself; how can any substance be the measure of its own worth in other things? The worth of gold is to be established by its own weight, under a false denomination of that weight – and an ounce is to be worth so many ‘pounds’ and fractions of pounds. This is falsifying a measure, not establishing a standard” [pp. 104-05].

10. Earlier editions of A Contribution to the Critique of Political Economy erroneously gave this figure as £14,704,000. – Ed.

11. Money is the measure of commerce...and therefore ought to be kept (as all other measures) as steady and invariable as may be. But this cannot be, if your money be made of two metals, whose proportion ... constantly varies in respect of one another” (John Locke, Some Considerations on the Lowering of Interest, 1691; in his Works, 7th Edition, London, 1768, Vol. II, p.65.


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