"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."As I noted above, the whole analysis of the imperialist wars in Persia, India and China - the other main topic of the articles for the NYDT - was related back to the crisis in Europe, to revolution in the metropolis. What constituted the interlocking fabric of capitalist relations between America, Asia and Europe was the monetary system; it not only represented the surface appearance of underlying production relations, but was also the basic unifying factor of the system. Far from being a fetish, the monetary system was an extremely concrete and rigid fact of life. Its unity integrated countries with very different levels of capitalist development, and thus the system's sensitivity to the shock waves of crises was far greater. The rates of expansion of the monetary system were faster than those of the spread of the factory system. As a result, the pace of capitalism was accelerated. The monetary system was the world market in its concrete materiality. Without the monetary system it would have been unthinkable for the Chinese insurrection to have had such immediate knock-on effects in the English factories. Seen within the perspective of the revolution from above, the monetary system is the vector, the communicating medium of proletarian internationalism.

Thus the group of articles on financial crisis and the group on colonial undertakings no longer appear as separate entities, but as complementary. Imperialism is the false name under which the concept of world market is hidden. Anti-colonial insurrections aggravate the crisis and further undermine the stability of the capitalist system. Marx's low opinion of the European conspiratorial groups derives from their inability to have any effect at the real levels, on the effective mechanisms of the world market, on the power of capitalism. Marx had already concluded his preceding article with a forecast that there would be a government crisis in France in the near future as a result of the financial crisis. It was precisely the days of uncertainty following Orsini's attentat that led him to understand that, given the inadequacy of the conspiratorial groups, the mere spontaneity of the masses, even in a situation already rendered precarious by the crisis, was not sufficient to produce subversive results. The power of the regime, the power of capital, despite the individualist subjectivism of the conspirators, was too strong, stable and militarily organised to be able to be shaken by a simple movement of popular indignation. The spontaneity of the Parisian masses needed a party that was equally organised, and, more particularly, furnished with a theory which understood fundamentally that "revolution from above" which the new capitalist institutions were bringing about. Only one thing was certain: "Not only France, but all Europe, is fully convinced that the fate of what is called the Bonapartist dynasty, as well as the present state of European society, is suspended on the issue of the commercial crisis (of which Paris seems now to be witnessing the beginning)."

In the third of this group of articles, published in the NYDT on 22 November 1856, Marx thus returns doggedly to his analysis of the French crisis. "The stringent measures taken by the Bank of France, with a view to prevent, or at least to delay, the suspension of cash payments, have begun to tell severely on the industrial and commercial classes. Indeed, there is now raging a regular war between the bona fide commerce and industry, the speculative joint-stock companies already at work, and the newly-hatched schemes about to be established, all of them struggling to carry off the floating capital of the country. The inevitable result of such a struggle must be the rise of interest, the fall of profits in all departments of industry and the depreciation of all sorts of securities, even if there existed no Bank of France, nor any drain of bullion. That, apart from all foreign influences, this pressure on the disposable capital of France must go on increasing, a glance at the development of the French railway system sufficiently demonstrates."

Was it the case that in this ruthless competition to acquire capital Marx had perhaps perceived one of the basic reasons for the conflict between the Rothschilds and the Péreires, without actually saying as much? Adopting an opposite viewpoint to that of his earlier articles, Marx analyses the destructive function of the Crédit Mobilier. Not only, in this very difficult conjuncture, was the Crédit going to enormous lengths to open new initiatives abroad (with, we might add, the consensus of the Rothschilds) but what was becoming increasingly apparent was "its tendency to fix capital, not to mobilise it. What it mobilises is only the titles of property. The shares of the companies started by it are, indeed, of a purely floating nature, but the capital which they represent is sunk. The whole mystery of the Crédit Mobilier is to allure capital into industrial enterprises, where it is sunk, in order to speculate on the sale of the shares created to represent that capital."

Here, in a nutshell, is a whole vision of the excess of immobile capital, of excess of investment, of which speculation is the form but not the substance, and to this vision we should add the view which Marx was to develop in the Grundrisse and in Towards a Critique, regarding the function of money within crises. Within general crises, money is no longer required as a means of payment or as a measure; it is required as a materialisation of abstract wealth, in its material substance as a precious metal. This return to hoarding, this re-emergence of economic primitivism, highlights brusquely the contradictory nature of the system founded on exchange values. What appears is precisely a halt to circulation, the disappearance of fluid capital, the temporary disappearance of money as an agent of exchange. Fixed capital, the immobile part of capital, then presents itself as a synonym of crisis, of paralysis and of disaggregation of the process. In fact capital no longer appears as a process, because the moments of which that process are composed are violently isolated from each other and separated. The stages of development in which the organic composition of capital increases, in which capital becomes disproportionately "fixed", are the periods that are forerunners of crisis, of paralysis of the process, of a halt to circulation. Contrary to the name which it carried, the Crédit Mobilier was the greatest source of capital "fixation", of increase in the organic composition of capital; this, therefore - and not speculation - was its decisive function in relation to crisis; speculation is only the form in which the split between the process of production and circulation presents itself.

However, Marx does not stop here; the list of the forms in which crisis presents itself needs to be fleshed out, because these forms condition the phenomena of popular reaction to the crisis. The textile industries in Lyons and the South of France were being put on short time, or even closing, as a result of the rising prices of raw materials: "The consequences are increased suffering and discontent among the workers - especially at Lyons and in the south of France - where a degree of exasperation prevails, only to be compared with that which attended the crisis of 1847.

Here one should also add the very bad harvest, as a result of floods, which obliged France, a traditional exporter of grain, to import. However, the root cause of the crisis was the backwardness of French agriculture, which was now overburdened with taxation, and was also suffering shortages of labour-power: "What the Crédit Mobilier offered to the middle and higher classes, the Imperial subscription loans did for the peasantry." These moneys tossed into the maw of speculation capital which could have served to bring about improvements in the agricultural sector. Bonaparte now no longer appeared as the candidate of the peasantry in the eyes of the masses of the French countryside.

The article ends with a series of observations on popular discontent in Paris over the shortage of housing, increased prices, the crisis of small traders, etc.

On 6 December, the final article of the four pieces on crisis appeared: "...indeed, the chronic character assumed by the existing financial crisis only forebodes for it a more violent and destructive end. The longer the crisis lasts, the worse the ultimate reckoning. Europe is now like a man on the verge of bankruptcy, forced to continue at once all the enterprises which have ruined him, and all the desperate expedients by which he hopes to put off and to prevent the last dread crash."

The suggestions by both the English and the Bonapartist official press, claiming that the most acute phase of the crisis was now over, were seen by Marx as pure government propaganda, as false information designed to check the panic: the company which was building the big central railway line through France was obliged to sack 500 white collar workers and 15,000 labourers on the Mulhouse section; there were an enormous number of bankruptcies in France: "It is evident that the French differ in this respect from the Roman Empire - since the one feared death from the advance of the barbarians while the other fears it from the retreat of the stockjobbers."

The "chronic" character of the crisis had been the subject of observations by Engels in a letter to Marx on 17 November 1856. In particular he highlighted the importance of the fixing of floating capitals. And he concluded: "Never again, perhaps, will the revolution find such a fine tabula rasa as now. All socialist dodges exhausted, the compulsory employment of labour anticipated and exploded six years since, no opportunity for new experiments or slogans." We find this same optimism, together with an identical assessment of the political situation and an identical evaluation of tendencies, in Marx's articles for the NYDT.

These articles brought to a close a year which had been very difficult, but also extremely important in Marx's life. A few days before Christmas he again wrote to Engels: "You would oblige me greatly if you could send me the money before the week is out... If I'm late with the first payment to my landlord, I shall be entirely discrédité." His everday problems were still unresolved, but he had re-found the overall meaning of his practice as a militant and of his anger as a theoretician. In the lost 1851 manuscript of Das vollendete Geldsystem, Marx had written:

"What every single individual possesses in money is a generic possibility of exchange, through which he can establish, at his pleasure and in his full rights, his participation in social products. Each individual possesses social power in his pocket in the form of a thing. Rob the thing of this social power and you must give it to persons to exercise over persons. Thus, without money, there is no possibility of industrial development. The links must be organised on a political basis, or a religious basis, etc, until the point when the power of money becomes the nexus rerum et hominum."

Money thus becomes the incarnation of the capitalist mode of production, and embodies a break with bourgeois social structures based on tradition, caste, religion, clan and feuds between conflicting interests. And for as long as conflictual elements such as these continue to have the upper hand (in other words for as long as capitalist society is weighed down by superstructural elements of pre-capitalist society, or of a capitalist society which is not yet fully developed - in short, for as long as the unity of the bourgeoisie is not yet fully realised), there is no possibility of a transition to large-scale industry. Money represents a universal terrain within which all subjects are reduced to subjects of exchange, and is also the terrain in which the unity of the bourgeois class and its total availability for the historic mission of capital is grounded. However, all this clashed with Proudhon's idea that even within a society that was regulated by exchange values, "right" could be established. As production relations could be established on an alternative basis once certain rights had been sanctioned. Money, for Marx, is the abolition of "right" as a social norm. By destroying all political ties and by making them secondary and accessory, money has a power which no right, no positive norm, can touch. This unifying function of money is the theme that Marx takes up again in 1856, when he examines the role of the financial bourgeoisie under the Bonaparte regime; no longer the conflicts of the various fractions and factions of the bourgeoisie, as in The Class Struggle in France etc, but the unity of the bourgeois class around money and the elimination of all artifical party subdivisions on the part of Napoleon's despotism. Marx sheds no tears for the abolition of rights of association; the French parties of the pre-Bonapartist epoch were not, for him, emblematic of capital's democracy, but represented rather the web of divisions founded on tradition. Only the United States represent for Marx a fully developed society, the democracy of which he speaks in the Grundrisse, particularly in the pages devoted to Cary. "In money relations, in the system of developed exchange - and this appearance corrupts democracy - the links of personal dependence, differences of blood, of education etc, are in effect blown aside, swept away... and individuals seem to enter into a free and independent reciprocal contact."

However, highlighting this aspect in 1856 would have been mere apologetics for capital (albeit with the weapons of the critique of political economy), a mere description of the given level of things, if, at the same time as his identification of the new industrial society, Marx had not defined capital as everlasting contradiction and as crisis - and thus as a limitation on itself, and an obstacle to the very roots of its existence. When it comes to specific details too, Marx's point of reference is his critique of socialism: as we know, he was interested in precious metals, because, as he was to say in the Grundrisse, "The study of precious metals as subjects of the money relations, as incarnations of the latter, is therefore by no means a matter lying outside the realm of political economy, as Proudhon believes."

We now arrive at 1857, the crucial year in which the theoretical programme of revolutionary workers was finally to take shape. Certainly the crisis of that year was not, for Marx, purely a terrain for experimenting with hypotheses; he lived it in the conviction of an imminent and generalised resurgence of the revolutionary process. In 1848 it had been The Communist Manifesto; in 1857 the Grundrisse. But since things turned out differently and this expectation was promptly undermined, nowadays we tend to read these materials as preparatory soundings for a more systematic work in the future.

The year opens with a letter to Engels, on 10 January 1857: "Proudhon is in the process of bringing out an 'economic bible' in Paris. Destruam et aedificabo. The first part, or so he says, was set forth in the Philosophie de la misère. The second he is about to 'reveal'. I have seen a recent piece by one of Proudhon's disciples: De la Réforme des banques by Alfred Darimon, 1856."

Destruam et aedificabo - I shall destroy in order to rebuild. But in the event there would be little to destroy. What Marx refers to here as an "economic bible" was none other than the pamphlet The Manual of a Stock Exchange Speculator which Proudhon published in order to document, with all his polemical qualities as a moralist, the bad habits of the world of French finance. A pamphlet, precisely, and a success within its own terms, although its lack of theoretical ambitions made it an unsuitable target for a reconstructional critique. In the event, Marx found it more logical to set his sights on the modest Darimon. However, the fact that Proudhon laid such emphasis on the evils of speculation led Marx, in the articles on crisis which we shall be examining, to frame them as a critique of the critics of speculation - in other words he aimed to show that speculation was a superficial, marginal and formal aspect, compared to the real mechanisms of crisis. It also led him to compete with Proudhon in providing technical explanations of Stock Exchange matters, and of the world of finance in general.

In the introduction to the third edition of his pamphlet in December 1856 (the first two had been published anonymously), Proudhon had written that speculation represented the fourth among the general principles of wealth - after labour, capital and trade; it "creates from nothing", it "is the essential faculty of economy"; it "makes laws", while labour, capital and trade "carry them out". "Politics," Proudhon adds, "is a variety of speculation, and as such a variety of production." But while speculation has this power of inventiveness, it is at the same time also a gamble and a search for the "easy life"; as such it "is the art of getting rich without work, without capital, without trade, and without genius, the secret of appropriating to oneself public funds or private funds without giving anything equivalent in exchange; it is the cancer of production, the plague of society and of states." The Stock Exchange is portrayed as the temple of speculation: "It comes before education, the academy, the theatre, political assemblies, congress, before the army, before justice and the church... It is there that our modern reformers are going to have to go in order to instruct themselves, and to learn their trade as revolutionaries..." This was not simply a question of literary emphasis; Proudhon was here mistaking the form for the substance, even if his analysis of Stock Exchange techniques and of the modus operandi of the financial principles (particularly the Bank of France and the Crédit Mobilier) was pursued with technical skill and penetrating lucidity.

The year that had just begun brought with it the usual difficulties, but now Marx's problems were even more acute. On 20 January 1857 he wrote to Engels: "Dear Engels, I am thoroughly down on my luck. For approximately three weeks now, Dana is sending me the daily Tribune, obviously with the intention of only showing me that they no longer print anything of mine. The Tribune, in exceedingly poor and insipid leaders, is moreover adopting a view almost diametrically opposed to all that I write [...] So I am completely stuck in the sand, in a house on which I have used my small amounts of money and wherein it is impossible to piss through from day to day, as in Dean Street, without prospects and with a growing family. I absolutely don't know where to begin, and am in fact in a more desperate situation than I was five years ago. I believed I had already swallowed the quintessence of shit. Mais non. Moreover, the worst of it is that the crisis is not temporary. I don't know how I can disentangle myself from it." This bitter letter arrived "like a bolt from the blue" for Engels. The main problem was Marx's relations with the NYDT. It looked as if they were wanting to force Marx to take the initiative of breaking off relations. Engels advised caution, and at the same time sent him five pounds. ("I only wish you had told me about the business a fortnight earlier. For my Christmas present my old man gave me the money to buy a horse, and, as there was a good one going, I bought it last week.") In his reply, on 23 January 1857, Marx writes: "The Tribune probably imagines that, now they have turned me out, I shall resign myself to abandoning the American camp altogether. The prospect of their 'military' and 'financial' monopoly going over to another paper is hardly likely to please them. Accordingly I have today sent them a 'financial' piece [...] I shall postpone any outright rupture until I find out whether I can fix anything up elsewhere in New York. If I cannot, and the Tribune, for its part, does not change its attitude, then the break will have to be made, of course. But in a sordid contest like this I believe that it is important to gain time."

On more than one occasion in his letters during these months Marx formulates the suspicion that the behaviour of the editors of the New York Daily Tribune was influenced by the hand of the Russian embassy in Washington, and that Russian agents had directly contributed to his being forced out. However these suspicions, instead of leading him to give up, drove him to persevere. Finally, in a letter of 24 March 1857, he announces that he has arrived at an agreement with the Tribune: he will be paid for one article per week, whether or not it is published; he might send a second article at his own risk, but would be paid for it only in the event of publication: "Thus they are in effect cutting me down by one half. However, I shall agree to it, and must agree to it. Also, if things in England take the course I think they will, it won't be long before my income reaches its former level again."

What were the new facts of the English political scene? Prime Minister Palmerston was preparing to carry out a Bonaparte-style operation; in practice, a coalition cabinet within which his personal dictatorship would be assured.

Marx's attention shifts from France to England, and this was not solely because of the similarity in the political conditions of the two countries - the gradual undermining of parliamentary representation and the party system, and the shift from a period of transition to the phase of heavy industry, of the unified and centralised despotism of capitalism. His shift of focus was particularly due to the fact that the English situation allowed him to view the crisis from a different perspective, from within a different system of productive forces. The fact that Palmerston's government no longer enjoyed a majority in Parliament, and the decision to hold elections, gave Marx a chance to examine the possibilities of a working-class response which might produce revolutionary results.

On more than one occasion in his letters to Engels he had stated that the big difference with the crisis of 1847-48 would be that England would also be drawn into the revolutionary upheaval, that the English would "no longer be able to stand at the window", that the "balanced English production" would itself be hit by a crisis of overproduction. The closeness of his relationship with Engels becomes crucial; what Marx wants to follow in precise detail is the development of the crisis in the cotton districts, of which Manchester was the capital, in the heart of the great capitalist factory. And it is with a theoretician's eagerness and curiosity that he follows the battle between the candidates supporting Palmerston and those of the old free trade league for the abolition of grain tariffs. In appearance it was a struggle between, on the one hand, the entrepreneurial class which had initiated the industrial lift-off and which had been instrumental in the historical break with the agrarian bourgeoisie, and, on the other, the government of social capital, the forces representing the despotism of big industry. The defeat of the old free-traders precisely in the cotton districts which had been their stronghold was certainly not seen by Marx as a return to reaction; rather, he saw it as a confirmation of the leap forward that had been achieved by capital as a whole. Once again, the capitalism which he confronts in the year in which he writes the Grundrisse is not that of free-trade competition, of the Ricardian bourgeoisie and of the value of labour, but capital as an all-embracing social entity, as synthesis and governing of its own internal contradictions - the capital of relative surplus value, of big machinery, of urban ghettoes and of stagnation. Engels' letters on the electoral defeat of the likes of Cobden are enthusiastic:

"This time 'Philistia' was tremendously divided. The vast majority of the bourgeoisie, a small majority of the lower-middle class, against Bright and Gibson. Quakers and Catholics for Bright to a man; the Greeks likewise; the established Germans against him. A drunken anti-Bright man shouted: 'We won't have home policy, we want foreign policy.' What the rationale of the local elections more or less amounts to is: To hell with all questions of reform and class matters. After all, we philistines form the majority of voters, and that's that. The clamour against the aristocracy etc is tedious and produces no tangible result... We've got Free Trade and as much bourgeois social reform as we require. We're flourishing like mad, especially since Pam reduced war income tax. So let's all foregather on territory where we are all equal, and let's be Englishmen, John Bull, under the leadership of the Truly British Minister Pam. Such is the present mood of the majority of philistines."

Marx pursues the same arguments in his three articles on the English situation, published on 9, 25 and 31 March in the NYDT.

Palmerston's interventionist policy in China, in Persia, and with the Naples expedition, was carrying the country to disaster. The consumption of tea, sugar and other foodstuffs had dropped dramatically, while the consumption of alcohol had increased over the recent period and thousands of the unemployed were seeking refuge in the hospices. The big bourgeoisie and the aristocracy, weighed down by the war tax on income, were leaving the battle against taxes to be conducted by the petty bourgeoisie, which was particularly badly affected by the increase in prices. Spurred by a vote of no confidence in the government's policies in China, Palmerston dissolved Parliament and called elections. He was counting on the direct support of the big opium and tea merchants, but his electoral tactic was to follow Napoleon's model in building a political consensus with himself as the figurehead. In his article of 17 April 1857, Marx gives an exemplary interpretation of the conduct of the election. First, who were the contending parties? Palmerston, the diplomatic viscount, "the trumpet of national glory... concentrates in his person all the usurpations of the British oligarchy... he deriving his strength from the decay of parties." Bright and Cobden, the parvenu demagogues, "the organ of industrial interests, representing all the vitality of the British middle classes... they owing their strength to the class struggle". The problem, thus, is to analyse the relationship between the industrial bourgeoisie and those who, at first sight, would have been its proper representatives. Why was it that they didn't vote for them, why was it that they preferred to throw themselves into the arms of an old Tory? Because what emerges - within the industrial bourgeoisie - is above all a fear of the workers; the defeat of Bright and Cobden functioned as an exorcism of the Jacobin spectre. The elections therefore expressed a class content, precisely in what had been left unstated. However, they had not defeated the working class; in fact, according to Marx, they had eliminated the main obstruction which stood in the way of the construction of a new working-class political party, or rather of a new revolutionary movement.

This judgement by Marx, apparently so paradoxical, has to be related back to the relations between the movement for parliamentary reform - in which the old leaders of the League had been active - and the last remaining exponents of the declining chartist movement. Both in Glasgow and in Leeds, both in the working-class areas of Scotland and in the old textile centres, the alliance between the old radicals and the old Chartists had been under way now for some time. Their common interests included universal suffrage, parliamentary reform, the revision of the Poor Laws, the abolition of the death penalty, and also solidarity with the Italian and Polish independence movements. Thus the times of the clashes between O'Connor and Cobden were long distant; bourgeois radicals had extended their hegemony over what remained of the political movement of the British workers. This may have been entirely insufficient to guarantee them a working-class representativity, but it was sufficient to frighten the bourgeoisie. Marx's judgement has to be read within the framework of his long-standing polemic on the absence of a party for the English working class: the elimination of Bright and Cobden and their Chartist allies removed any possible misunderstanding, any further possible mortgage on the development of the political movement of the English workers. It was not a question only of a proposed programme, a reformist line, to be fought against, but rather of an institutional alternative. How was one to explain the vote of no confidence which had brought down the Palmerston government and forced it to call new elections? It was due to the rebellion of the old parties - of which Cobden had made himself a spokesman - for the fact that Parliament had been shut out of all the major decisions on foreign policy (intervention in Persia and in China) taken by Palmerston. Thus if there was a positive side to Palmerston's victory it was the defeat of the representativity of the old political system, which had expressed divisions internal to the bourgeoisie which now no longer existed, partly because the interests of rentiers and industrialists were no longer in conflict, but more particularly because the big financial bourgeoisie, integrated with the old oligarchies, had unified the command of the social stratum which could lay claim to the work of others. This is why, in his article of 6 April, Marx went to some lengths to draw a parallel, at times forced, between Pam and Bonaparte ("One saved France from a social crisis; the other wants to save England from a continental crisis.")

[This essay continues here.]