"Money and Crisis" (Part Five)

Sergio Bologna

[Part Five of five parts. Continued from here.]

Does this highlighting of the Crédit's non-productive and speculative characteristics, contrasting with the revolutionary and innovative view given in the first group of articles in 1858, perhaps show the influence of Proudhon's Manual? In the pages that he dedicates to the Péreire bank, Proudhon, who was more concerned with problems of value than with the political function of the institution, had shown how the Crédit, with a capital of sixty million francs, had issued bonds to the tune of six hundred million francs, guaranteed by an equal sum employed in subscriptions of public bills (treasury bonds, etc) or of company shares. But since shares are subjected to depreciation, they would not provide effective guarantees. Unlike the circulating banks which discount commercial effects of a given value and are guarantees of a transaction - Proudhon concluded - the Crédit Mobilier is not in a position to supply guarantees of value, and thus it "cheats" its clients. Proudhon did not draw the conclusions which Marx had indicated - that the Crédit, by virtue precisely of that structure, was an institution which could prosper only in times of boom, and which would collapse in times of monetary panic. He had not drawn them because he lacked an overall perception of the cycle. His vision of the speculative nature of the Crédit Mobilier was therefore static and moralistic, and to the extent that it influenced Marx, it was in the sense of making possible a further deepening of his analysis.His analysis at this point was entirely focused on the relationship between money and credit, and therefore on the relations between the Bank of France and the Crédit Mobilier, to which he dedicates the third of the articles in question, the one published in the New York Daily Tribune on 20 June 1857. The director of the Bank of France, the Conte d'Argout, had resigned, having been in charge since the times of Louis Philippe (which meant that he had lasted through the revolution of 1848 and the Bonapartist coup d'état. His period of office had been identified with a gradual strengthening of the Bank of France's monopoly as the sole issuing house. If he resigned it meant that the regime's days were numbered; the reason given for his resignation was the new law regulating the Bank of France, which renewed its privilege for a limited period of time and made large concessions to the "bankocracy" - suggesting that the regime no longer had the power to control it, but still needed it.

The conflict between monetary "schools" here becomes openly a conflict of power between private interest and a central command capable of representing it and mediating its interests with those of the social base that supports the regime. It is a crisis in the process of the socialisation of capital, it is a crisis of the state. As he was to say in an article for the New York Daily Tribune, 27 July 1857, it was the symptom of an imminent revolution: "...revolutions must receive their tickets of admission to the official stage from the ruling classes themselves." ... "The name under which a revolution is ushered in is never that borne on the banner on the day of triumph." "The British commercial revulsion seems to have worn throughout its immense development the three distinct forms of a pressure on the money and produce markets of London and Liverpool, a bank panic in Scotland, and an industrial breakdown in the manufacturing districts." This was the start of the article which appeared in the New York Daily Tribune on 30 November 1857. The theoretical problem was how recompose the unity of the process of crisis, probing behind forms and appearances in order to discover the laws of capital's movement. The long analysis which Marx had made of the 1844 Peel Act in his preceding article obviously led into an analysis of the relationship between the world of commodities and money.

He had written in the Grundrisse: "Since the total sum of prices to be realised in circulation changes with the prices of the commodities and with the quantity of them thrown into circulation; and since, on the other side, the velocity of the medium of circulation is determined by circumstances independent of itself, it follows from this that the quantity of media of circulation must be capable of changing, or expanding and contracting - contraction and expansion of circulation." Here we have immediately a refutation of the possibility of a rigid control of liquidity, the uselessness of fixing rigidly percentage relations between gold and bank notes, and here we also see a prefiguration of modern "monetary manoeuvres", in other words, the necessity for capital to ride out cyclical movements by alternately tightening and slackening controls on the expansion of liquidity. The Peel Act had therefore introduced new contradictions while attempting to eliminate others; in fact it had rather aggravated and accentuated contradictions in periods of crisis. Working-class theory in this instance lays bare the fragility of the science of capital. But this is only one aspect. The more important point was to establish correct relationships within the process of production and the process of circulation, the creation and realisation of value, the world of commodities and the world of money. By means of the determination of price, the world of circulation re-finds its subordinateness in relation to that of production. Thus the proper determination of crisis is not an excess of circulating money, but overproduction. However, since the movement of capital passes through phases which are posed as independent, as if each is detached from the one which precedes it, and since the division of labour requires a productive capital, a commercial capital, and a capital for the trading of money (as separate moments of industrial capital), the crisis shows itself in three different guises: in the trading capital of Liverpool, in the centres of the money trade in Scotland and London, and in the productive heartlands of Manchester. Three different figures of one single disproportion which present themselves as three different moments of one single process; but this does not suffice. The different forms which the crisis assumes correspond to the different determinations of money and of the relationship between commodity and money. "Now, in this function, as pure medium of circulation, the specific role of money consists only of this circulation, which it brings about owing to the fact that its quantity, its amount, was fixed beforehand. The number of times in which it is itself contained in the commodities as a unit is determined beforehand by their prices, and as a medium of circulation it appears merely as a multiple of this predetermined unit. [...] Money as medium of circulation is only medium of circulation. The only attribute which is essential to it in order to serve in this capacity is the attribute of quantity, of amount, in which it circulates." However this determination, in which money is entirely bound by commodities, in which money figures as an equivalent, and in which it therefore undergoes the contractions and expansions of the production of commodities, enters into contradiction with other determinations of money - that in which it is one commodity among others, similarly subject to the law of supply and demand, or that in which money, as a world means of circulation, counts only for its material existence, like gold and silver, and is thus subjected to the fortunes of international payments. The analysis of overproduction, of variations in interest rates, of the price of money, of the trade balance and the factors which determine it, are equally key for uncovering the different forms in which the crisis runs through the various determinations of money and its varying relationship with the commodity. The centralisation of capitalist command over the cycle may appear as an archaic constraint, as an institutional violence against society, but Marx identifies its logic in the unity of capital's process. Bonaparte's dictatorship - and Palmerston's too - thus become functional to the workings of capital, but at the same time they are a contradiction, a useless obstacle to the movement of capital. Thus, too, with the Peel Act. In the end the government suspended it: "The effect of the suspension must be one of comparative relief, as we have previously shown. It does away with an artificial stringency, which the Act adds to the natural stringency of the money market in times of commercial revulsion." The article continues: "In the vain hope of checking the rush of current which was sweeping all away, in the progress of the present crisis the Bank has five times raised its interest rate. On the 8th ult. the rate was advanced to 6 per cent, on the 12th to 7, on the 22nd to 8, on the 5th inst. to 9, and on the 9th to 10. The rapidity of this movement offers a remarkable contrast to that which attended the crisis of 1847." A detailed comparative analysis with the preceding decades leads Marx to discover that, while for a long period interest rates had followed fluctuations of trade in a regular manner, being high in periods of crisis and low in periods of prosperity, in the three most recent years considered by him, despite the fact that there had been an abrupt rise, production and exchange had increased regularly. According to Marx this was made possible by the sudden availability of Californian and Australian gold and their transformation into reserve funds at the Bank of England. However, more importantly, this would demonstrate that the the symptoms of crisis had been manifested more than two years previously, and that the crisis had only been artificially postponed and thereby rendered more serious. Now, the pressure on the money market and the simultaneous influx of American commodities had provoked a disastrous collapse of prices; but the Bank of England could have handled the difficulties were it not for the fact that simultaneously a monetary panic had broken out in Scotland. In order to assist banks of Scotland and Ireland, which were grounded principally in the savings of rural populations, the Bank of England transferred huge sums of sterling. But the English banknotes were rejected - the Scots wanted gold, thereby demonstrating the opposite of what the supporters of the Peel Act had maintained: the owners of banknotes were in the same situation as deposit-holders. But the situation is equally dramatic in the field of production. ... "The truth is that the English have largely participated in speculations abroad, both on the Continent of Europe and in America, while at home their surplus capital has been mainly invested in factories, so that, more than ever before, the present convulsion bears the character of an industrial crisis and therefore strikes at the very roots of the national prosperity."

Finally the crisis touches real power, the real base of capitalist domination. But what appeared in theory to be the very roots of crisis - the fact that money had become independent of commodities, as had exchange in relation to production, and money-as-a-commodity in relation to the world of commodities, and means of payment from money, etc - turn out in fact to be further barriers preventing the processes of crisis from going to the heart of the relations of production, from rendering them really explicit, from transforming them into a basis for the subversion of the status quo. Theory as a simple rending of the veil which conceals the links between processes which have apparently become independent of each other is not yet sufficient, in itself, to provide subversion with the legs on which it might walk. Theory is not yet the party. Needless to say. But this is not the main point I am making here, for the moment. The problem is more the limits which the antagonistic movement of living labour is able to pose in relation to capital, the extent to which the working-class is capable of driving the system into crisis simply by means of its movements in the factories. This problematic appears to be a thousand miles distant from Marx in 1857. But perhaps this is not in fact the case: "In a general crisis of overproduction, the contradiction is not between the different kinds of productive capital, but between industrial and loanable capital - between capital as directly involved in the production process and capital as money existing (relatively) outside of it."

Put baldly, this simple phrase would suffice to refute any notion that Marx theorised crisis as being due to a disproportion between the production-goods sector and the consumer-goods sector. The point is quite clear, the contradiction is between the production of surplus value and realisation via the mechanism of circulation, between power relations in the factory and capital's need to conceal them, enlarging enormously the sphere of circulation, creating a contrived system of circulation of capital. A headlong flight of capital which "forgets" the slow pace, the daily struggle for the extortion of surplus labour. "The whole dispute as to whether overproduction is possible and necessary in capitalist production revolves around the point whether the process of the realisation of capital within production directly posits its realisation in circulation; whether its realisation posited in the production process is its real realisation. Or, putting it another way, it is question matter of knowing whether the blocking of surplus labour in the factory - in the real form in which it occurs, as a temporary blockage - is sufficient to arrest the process of realisation as a whole, or, vice versa, if the blockage of circulation due to speculative excesses, to capitalist "disorder", is sufficient to prevent the process of production; whether the working class's ability to organise against surplus labour - a rigidity of necessary labour - is in itself sufficient to bring about crisis in the system, or whether, on the other hand, the contradictions between commodity and money are sufficient to bring about crisis in the relationship, as a real factory relationship. Loan capital, or more in general, the process of realisation of capital, thus presents itself here as an attempt to smash the law of value, and, in this regard - precisely in the pages cited above - Marx underlines forcefully how "Ricardo and with him the whole school has never understood the reality of modern crises," precisely inasmuch as these crises derive not from a disfunctioning of the law of value but from the failed capitalist attempt to break it and to suppress it. So, if we start at the other end of things, the working-class refusal of work confirms the law of value in antagonistic terms and enters into contradiction with capitalist attempts to conceal it, to "forget it". It is capital "recalled to its concept" which enters into crisis. And it responds by imposing new relations on the law of value, and a new organic composition on itself. But the shift to these new equilibria - and this is the conclusion of the section on crisis in the Grundrisse cited above - the victory of capital over its own contradictions, are admissable within a perspective in which the refusal of work was seen as a temporary moment of the working-class struggle, and in which the reduction of surplus labour - in the absolute terms of the length of the working day - was viewed as a slow, centuries-long process. But today, when the working-class struggle against direct exploitation has become a permanent, on-going phenomenon and proceeds at a far faster pace, is it possible and sufficient to continue seeing crisis only as "the symptom" of a "new level of productive forces"? And on the other hand is it possible to regard this long march against direct exploitation as in itself sufficient to bring about a crisis of power without running into the Ricardian error by which the process of production is the process of real realisation?

The materials which Marx used for the writing of these two articles are to be found, somewhat enhanced, in the chapters of the third book of Capital where he deals with the relation between the average rate of profit and the rate of interst. This provides further proof that what Marx was looking for was the laws of the real relationship between factory exploitation and capitalist command over money. Of the two elements, contrary to appearances, he considers the former to be variable and the latter constant - the former being subject to competition between capitals and to class antagonism, and the latter rigidly controlled and governed. Although the rate of interest was a quota of the rate of profit, although it was, in other words, naturally subordinated to profit, "in every country the average rate of interest appears for a rather long period as a constant magnitude, because the general rate of profit (...) changes only after a very long period." "Custom, the juridical tradition etc, intervene precisely as much as competition itself in the determination of the rate of average interest, to the extent to which it exists not only as an average figure, but as a real magnitude." "The rate of interest reaches its maximum level during crises, when in order to pay it is necessary to take out a loan, whatever it may cost."

In denying the existence of a natural rate of interest, and in attributing the rate of interest to capitalist subjective command, to its historical decisions (or at least to the historically-given level of the allocation between productive capital and interest-producing capital Marx reaffirms the entirely political nature of monetary mechanisms. Only crisis succeeds in bringing the average rate close to the market rate of interest; then "the market" opposes itself to the capitalist as a hostile force.

But the difference between productive capital and loan capital lies above all in the following: in productive capital the share between surplus value and profit is determined qualitatively - is the result of a social relation, of a situation of political power; whereas in loan capital the apportioning is purely quantitative, is an administrative act of capitalist command itself, a dictatorship of capital over itself. The first effect of crises is to abolish this specific form of dictatorship, as is proven by the suspension of the Bank Act: money once again becomes a particular commodity, its price again becomes a market price, and its very function, as a general commodity, over and above all commodities, as the "God of commodities", is challenged. Marx repeats several times that the money form of the exchange relation is endangered during crises; he observes more than once that during crises there is a return to barter, to the exchange of commodities for commodities, of surplus value for surplus value without the mediation of money. But an exchange of surplus value against surplus value can as well mean an equilibrium of rates of exploitation, as it can mean a disproportion between rates of exploitation that are different, between different levels of working-class struggle.

"Still the very recurrence of crises despite all the warnings of the past, in regular intervals, forbids the idea of seeking their final causes in the recklessness of single individuals. [...] If speculation towards the close of a given commercial period appears as the immediate forerunner of the crash, it should not be forgotten that speculation itself is a result and an accident instead of the final cause and the substance. [...] The political economists who pretend to explain the regular spasms of industry and commerce by speculation resemble the now-extinct school of natural philosophers who considered fever as the true cause of all maladies." Are we mistaken if we seem to see the Proudhon of the Manual of a Stock Exchange Speculator as the target of Marx's allusive polemic? Certainly Proudhon here stands for a whole vast field of moral apologists of the system who saw speculation as a pathological phenomenon growing on the healthy body of the market. It is a polemic which Marx had been conducting for some time, dating back to his first articles on the crisis, and it is perhaps worth quoting, because this time (15 December 1857) it is expressed rather vehemently. But the main point lies elsewhere. Marx shows how, in England, the first reactions to the American crisis expressed themselves in the form of monetary panic, accompanied by a general depression of the commodity market. He goes on to announce triumphantly that "the industrial crisis now stands at the top and the monetary difficulty at the bottom." The true "focus of conflagration" is no longer London, but Manchester. Overproduction, a cut in working hours and mass sackings. Here the contradiction becomes the fundamental one, between necessary labour and surplus labour. In an industrial country like England, "the fluctuations on the money market are far from indicating either the intensity or the extent of a commercial crisis." But when one examines this contradiction, there is only one background against which it can adequately be measured - that of the world market. The contradiction between money as a world means of circulation, as a means of international payments, and money as an agent of circulation (where, in the former instance its material existence is everything, and in the latter it is indifferent), this is the contradiction which lies at the root of the disproportion arising from the problems of the British balance of payments and the problems of industrial development. When Manchester laughs, London cries, and vice versa; industrial capital and loan capital are in opposition to each other. The two opposing positions are expressed, in theoretical terms, in the two schools, the "monetary" and the "banking" schools, with Colonel Torrens and Lord Overstone on the one hand and Tooke and Fullarton on the other. In his article, Marx fires a well-aimed salvo at Tooke: "Hence, even Mr Tooke, the writer of the History of Prices, well as he handles the phenomena of the London money and colonial markets, has proved unable not only to delineate, but even to comprehend the contractions in the heart of English production." The raising and lowering of interest rates have the precise aim of re-establishing the central bank's gold reserves, in order to meet balance of payments obligations, and more particularly to fulfil obligations to other banks. But, according to Marx, the true element for an understanding of the industrial crisis is trade relations: "The study of the English trade reports affords the only reliable clue to the mystery of the present convulsion in that country." What is important is the exchange of goods, to be read as an exchange of surplus values, as an act of exchange of different levels of exploitation, between magnitudes of relative power. The world market may be defined in real terms as a relationship between surplus values, as a confrontation between capitalist groups, between national bourgeoisies whose capacity to trade is defined by the extent to which they are capable of exploiting, of extorting surplus value; any diminution of their relative power, any refusal of workers to allow themselves to be exploited beyond certain limits, weakens the competitive strength of the capitalist group in question. And money itself, as a world means of circulation, as a given quantity of gold and silver, as solely this concrete materiality, becomes inadequate to express that quality of relationship; it "enters into crisis with its own concept".

In the Grundrisse Marx was to develop only the capitalist side of this discourse, only the extensive effect which the exchange between surplus values produces, only the "civilising power" of capital.

In the final article of 1857, published in the New York Daily Tribune on 22 December, Marx shifts his gaze to Europe. "The centre of the convulsion" is now Hamburg, where the most interesting phenomenon is the attempts recently set in motion by the city's Senate, in other words with the collectivity, to deal with the collapse of credit. The state of Hamburg was undertaking to give advances on "goods of a permanent description", to the tune of fifty and even sixty-six percent. But the system failed in the extent to which prices fell, and the state, in order to keep its promises, was obliged to pay at the prices applying prior to the outbreak of the commercial panic, and to realise the value of bills of exchange which represented nothing more than bankrupts. Thus the money of the community was being used to reimburse the losses of private individuals: "This kind of communism, where the mutuality is all on the one side, seems rather attractive to the European capitalists." But his most important conclusion is the following: "The Hamburg collapse is a conclusive answer to those imaginative minds which presume the present crisis to have originated in prices artificially enhanced by a paper currency." Hamburg, in fact, boasted a purely metallic circulation (silver), but this fact did not prevent it from becoming a major focus of monetary panic, and since the beginning of the trade crises, Hamburg became "their favourite arena". The increased demand for silver on this market once again threatened the stability of the British gold reserves, where fresh outflows of metal were being recorded. Prices were also falling on the London market, and at the same time the price of grain was also falling as a result of the sudden influx of cereals from France.

In his first articles dealing with the Crédit Mobilier, the Bank of England, Napoleon III and Palmerston, Marx had stressed exclusively the centralised character of capitalist command; now, however, in analysing the real movements of the world market, he stresses the competition between capitals. The domestic political instability which the crisis triggers forces the national bourgeoisies, the various regimes of Europe, into increasingly savage competition and conflict, and instead of healing the crisis conditions in the countries concerned, this only makes them worse. From this point onwards, all the independent moments of the process of realisation of world capital become equally focuses of crisis which feed off each other. But Marx's analysis stops here. The year 1857 closes with the "industrial crash", finally arrived at after a long and merry journey via "monetary panic". From money to capital, or, if you like, from money as means of circulation to money as capital, from money as agent of rotation to money as ownership of the labour of others. Having reached this point, having identified the myriad internal threads and having successfully tied them up, Marx in a certain sense stops. The task was to embark on a reconstruction that began not from the movements of capital but from the movement of the working class, but it found itself suddenly on the edge of an abyss, in terms of practice. The two-man "theoretical party" of Marx and Engels is infinitely weak. Being right does not mean having won. From the skies of theory Marx is now obliged to descend to the level of party politics, and the terrain that he finds there is immediately hostile: his theoretical adversaries, who were easy enough to eliminate in print, were still dominant within "the movement". The transition from the "theoretical party" to the "real party" involved huge costs, in the form of compromises which were to set back the level of the struggle by years. But all this is familiar terrain in the history of the origins of the First International and the mass socialist parties. The question that concerns us is rather different. We find ourselves wondering whether Marx's lack of attention to working-class behaviours and the fact of his very long isolation from the real movement, from the spontaneous behaviours of the working class, from the modifications in the class composition, from the everyday sufferings and struggles of the proletariat, had not in turn weakened the theoretical project. Was it perhaps this that led Marx, in the final pages of the Grundrisse, to cherish notions of a "future society", or led him to see within the working class a demand for total power, immediately, in a born-again insurrection, in what would turn out to be an "assault on the heavens" like that of the Commune, which, as Marx himself pointed out in The Civil War in France, had stopped at the gates of that earthly god, the god of all commodities - at the doors of the gold chamber of the Bank of France.

The historiography of working-class autonomy, the reconstruction of the proletariat's creativity of invention and its subversive behaviours - that whole substantive level which Marx had consciously omitted - therefore becomes crucially important - as important as "the movement" is in relation to "the vanguard". Not as a co-optation but as an act of subversion, an attempt to re-read those same mechanisms which Marx described when he took as his starting point not the initiatives and errors of capital, but the resistance of living labour. Torrens, in his time one of the foremost economists in the area of political management of the system, was already stressing that: "The great practical problem of economic science is to balance production so that supply and demand are in equal relation." However he added that "the only limits to the increase of effective demand will be those set upon the increase of production by the scarcity of fertile land, or by a rate of wages which is so high as to deprive the capitalist of the minimum rate of profit necessary to induce him to continue his anticipations."

Where Marx speaks in the Grundrisse of the disproportion between necessary labour and surplus labour, in part he expresses a similar view of crises to that which Torrens, one of the supporters of the Peel Act, had expressed in 1821. However, in Marx the analysis of the disproportions which are produced within capitalist crises is viewed within a perspective of the re-establishment of equilibrium, of establishing the new level of productive forces that capital would use as the base for its next phase of development. It was a function, in other words, of his analysis of the world market, of the fact that unequal surplus values could not be exchanged for long without putting into crisis the system's very foundations, and that thus the history of capital revealed a tendency to equalise surplus values, to establish a uniform level of exploitation.

However, while this is true, the opposite is also true. Phenomena of mass resistance to exploitation - mass rigidity of necessary labour - prolonged over long historical periods, tend to multiply and spread to the whole mass of existing living labour. In order to block this spread, capital is obliged to break the unity of the world market, to establish precise frontiers within which certain monetary conventions are valid and beyond which they are no longer valid. But the immanent tendency to break these unnatural limits and to recompose the exchange of surplus values within a unified framework poses again the problem of how to spread and diffuse the highest levels of resistance of living labour.

The history of the working class since Marx teaches us that it moves on a double terrain - that of the assault on the heavens of the state, and that of the ongoing struggle around the definition of necessary labour.