"Money and Crisis" (Part Three)
Sergio Bologna
[Part Three of five parts. Continued from here.]
Between the end of October and the start of December 1856, Marx wrote four articles in the New Yrok Daily Tribune devoted to the world crisis. In the first, on 27 October, we find ourselves in the midst of a financial panic; once again the crisis was due to a "disproportion between the disposable capital and the vastness of the industrial, commercial and speculative enterprises"; it was not due to a scarcity of the circulating medium, to a crisis of money as a means of payment, but to a crisis in the relation between money and capital, between rates of accumulation and the system of exchange. The raising of interest rates did nothing to stop the outflow of gold; the fact that the capital markets of the various countries were closely connected stood in the way of measures aimed at isolating the crisis; the crisis was general. "The present crisis in Europe is complicated by the fact that a drain of bullion - the common harbinger of commercial disasters - is interwoven with a depreciation of gold." Marx analyses the international monetary system with extreme precision, examining the standards of value present in the various countries (for example, those in which gold was the standard, those where silver was the standard, and those where bimetallism existed) and the ways in which the workings of these standards, far from making crises less communicable, actually multiplied their effects. Between 1848 and 1855, £105 million in gold flowed onto the market, as a result of the development of goldfields in California, Australia, and Russia. Having taken into account that a large part of this was used for international payments, for the replenishment of bank reserves, and for articles of luxury, it was reckoned that this left £53 million, of which only part was used to replace silver in America and in France. In reality the outflows of silver from France and England were much higher, and this was explained by the strong preference of Italian and Levantine traders for silver, as well as by an accumulation of silver reserves by the Arabs. But even this is only a partial explanation. The basic reason was to be sought in trade relations with China and India. "Since the beginning of the seventeenth century, Asia, and especially China and India, have never ceased to exercise an important influence on the bullion markets of Europe and America," as Marx notes in his next article, on 1 November. Prior to the discoveries of gold in California, the flow of metal coming from America was balanced by payments to Asia, but the crisis in the opium trade with India, due to the Chinese rebellion, had produced an impressive drive towards hoarding, which, following on the discovery of gold in California, was principally in silver. At that point India too wanted to be paid in silver, which provoked an outflow of silver from Europe, and at the same time its price rose in relation to gold. This was the framework within which the European commercial crisis developed. It was precisely for this reason that "this Chinese revolution is destined to exercise a far greater influence upon Europe than all the Russian wars, Italian manifestos and secret societies of that Continent."