hidden hand of the market would produce a result that was beneficial to all. In such a world, Smith thought, the intentions and motivations of individuals (varying from greed to social mission) did not matter, because the hidden hand of the market would do the work.
This chapter poses a conundrum. On the one hand, Marx devotes a footnote to condemning Proudhon’s acceptance of bourgeois notions of rights and legality as providing absolutely no leverage in the construction of a revolutionary alternative. Yet in the main text of the chapter, Marx has seemingly accepted the liberal theory of property ownership, the reciprocity and equivalence of noncoercive market exchange between juridical individuals and even the hidden hand of the market as proposed by Adam Smith. How are we to reconcile this seeming contradiction? I think the answer is simple enough, but the answer does have important ramifications for how we read the rest of Capital.
Marx is engaged in a critique of classical liberal political economy. He therefore finds it necessary to accept the theses of liberalism (and, by extension to our own times, neoliberalism) in order to show that the classical political economists were profoundly wrong even in their own terms. So rather than saying that perfectly functioning markets and the hidden hand can never be constructed and that the marketplace is always distorted by political power, he accepts the liberal utopian vision of perfect markets and the hidden hand in order to show that these would not produce a result beneficial to all, but would instead make the capitalist class incredibly wealthy while relatively impoverishing the workers and everyone else.
This translates into a hypothesis about actually existing capitalism: that the more it is structured and organized according to this utopian liberal or neoliberal vision, the greater the class inequalities. And there is, it goes without saying, plenty of evidence to support the view that the rhetoric of free markets and free trade and their supposed universal benefits to which we have been subjected these past thirty years have produced exactly the result that Marx would expect: a massive concentration of wealth and power at one end of the social scale opposite the proliferating impoverishment of everyone else. But in order to prove that point, Marx has to accept the institutional foundations of liberal utopianism, and that is precisely what he does in this chapter.
This raises an important caveat into how we have to read Capital. We have to be careful to distinguish between when Marx is talking about and critiquing the liberal utopian vision in its perfected state, and when he is attempting to dissect actually existing capitalism with all of its market imperfections, power imbalances and institutional flaws. As we will see, these two missions sometimes confound each other. Some of the muddles of interpretation come from this confounding. So I will try in what follows to indicate when he is doing what and to pinpoint those moments of confusion that occasionally arise, including those in Marx’s own analysis, when his desire to accomplish one objective—the critique of classical political economy—gets in the way of the additional task of understanding the actual dynamics of a capitalist mode of production.
For the most part, though, Marx has an ingenious way of using the theoretical critique of liberal utopianism in its various political-economic guises to shed devastating critical light on the actually existing capitalism of his own day. And this is fortunate for us, living in a world where the theses of neoliberalism echo and, in some respects, deepen those of liberalism, because Marx’s critique of free markets and free trade can shed as much devastating light on our own actually existing capitalism as it did for the capitalism of Marx’s own time and place.
CHAPTER 3: MONEY, OR THE CIRCULATION OF COMMODITIES
By now it’s clear that a particular notion of money has been crystallizing out of Marx’s account of commodity exchange. It was implicit in the opposition between the relative and equivalent forms of value and this, with the proliferation of exchange into a general social act, led on to the emergence of a universal equivalent that took the form of a tangible money commodity that represented value even as it disguised the origins of value in socially necessary labor-time. We now inspect this money-form more closely.
Chapter 3 is long and quite intricate. It tells a simple story, though, in what by now should be a familiar fashion. Money is a unitary concept, but it internalizes dual functions that mirror the duality of use- and exchange-value within the commodity. On the one hand, money operates as a measure of value, as a golden representative, as it were, of socially necessary labor-time. In this role it must possess distinctive qualities so as to provide, as far as possible, an accurate and efficient standard measure of value. On the other hand, money also has to lubricate the proliferation of exchange and do so with the minimum of fuss and difficulty. In this way it functions as a mere medium and means for moving an increasingly vast array of commodities around.
There is a tension, a contradiction, between these two functions. As a measure of value, for example, gold looks very good. It is permanent and can be stored forever; one can assay its qualities; one can know and control its concrete conditions of production and circulation. So gold is great as a measure of value. But imagine if every time you went for coffee, you had to use a grain of gold to purchase it. This is a very inefficient form of money from the standpoint of the circulation of myriad small quantities of commodities. Imagine everyone with a little pouch with grains of gold in it—what if somebody sneezed while counting out the grains? Gold is an inefficient means of circulation, even as it is excellent as a measure of value.
So Marx contrasts money as a measure of value (section 1) and money as a means or medium of circulation (section 2). At the end of the day, though, there is only one kind of money (section 3). And the resolution of that tension between money as an effective measure of value and money as an efficient means of circulation is partially given by the possibility, or—and this is controversial—the necessity, of another form of circulation, which is the existence of credit moneys. The consequent relation between debtors and creditors opens up not only the possibility but also the necessity for another form of circulation, that of capital. In other words, what emerges in this chapter is the possibility for the concept, as well as the fact, of capital. In the same way that the possibility of money crystallized out of processes of exchange, so the possibility of capital crystallizes out of the contradiction between money as the measure of value and money as the means of circulation. This is the big story in this long chapter. If you keep it steadily in mind, a lot of the intricate and sometimes confusing details fall more easily into place.
Section 1: The Measure of Values
There is a distinction between “money” and “the money commodity.” To consolidate his earlier argument—namely, that value is not in itself materially measurable but needs, rather, a representation to regulate exchanges—Marx begins by assuming gold to be the singular money commodity. This is “the necessary form of appearance of the measure of value which is immanent in commodities, namely labour-time” (188). Value gets expressed (or perhaps we should say “resides”) in the relationship between the money commodity as “a form of appearance” of value and all the commodities that exchange with it. The value of commodities is unrecognizable and unknowable without its form of appearance.
This poses, however, some complications—and reveals some contradictions—that require close scrutiny. Marx focuses first on how prices get attached to commodities. Prices are, he says, imaginary, or ideal (meaning a product of thought or logical principle, as opposed to “real” or empirically derived conclusions) (189–90). He’s referring to the fact that when I make a commodity, I have no idea what its value is before I take it to market. I go to the market with some imaginary, ideal notion of its value. So I hang a price tag on it. This tells the potential purchaser what I think the value of my commodity should be. I have no idea whether I’ll get that price for it, though, because I
