Archive for August, 2012

Fiat, Gold and Rent

The unsavory fruitcake being baked

and delivered at the 2012 Republican Party convention in Tampa Bay, Florida contains among others this choice golden nugget: The decision by this party to set up a commission to investigate the return of the US to the gold standard.

For classical Marxism, “money must be a commodity before it can become money”*. Traditionally this was accomplished by the production – for profit of course – of gold for sale as money.  This is the only instance where money appears for sale in a capitalist economy – otherwise money always buys, but is not sold as money.** That is possible because what is purchased by the central bank is the particular use value of gold as money, as is true with any other commodity exchange.*** But specie production is not the only way to accomplish money creation.  Under a capitalist fiat regime, it is not money that is created – what every “printing press” vulgarian thinks when they rail against the central bank – rather, it is capital in its commodity form, interest bearing money capital, that is created by fiat.  True, this is a fictitious capital, a pseudo-commodity, but the interest borne by it is very real in value terms.  That is because capital in commodity form typically enters the world as State debt in the form of a Treasury bond with a claim on the State tax revenues.  Tax revenues are a tributary revenue stream of value into the State Treasury, and a portion of this value stream is redistributed and transformed into interest (“yields”) on State bonds sold as the private property of capitalists.

Nevertheless this is merely an extension of part of the same tributary stream of value.  It is therefore properly classified as a form of rent.  Its structure is remarkably analogous to that of land rent: Its capitalization of rents into the form of a land price is a fictitious capital, but the land rents returned on investment in the land constitute a very real redistribution – a tributary stream – of value in the form of a private tax paid to the private proprietor of the land.  Logically it makes sense that a fictitious capital can find “valuation” only by “non-commodity production” means, by being the bearer of a tributary transformation of value.

Sociologically, it is the synthetic reproduction of the capital relation as a type of value relation, coming into the world attached to the umbilical cord of a nutrient-providing tributary rent transfer.  Historically, the shift from the gold standard to capitalist fiat is also a shift in emphasis from productive capitalism to rentier capitalism, something that should be no small irony for a school of economics whose guru once muttered something about “euthanasia of the rentier”.  Because far from being euthanized, rents have proliferated in the fiat currency era. Or has the epidemic of asset bubbles breaking out seemingly randomly everywhere, the proliferation of “rent trapping” cartels in (here speaking of the US) higher education, telecoms, health care – joining the traditional ones in housing, agriculture and mining – merely a coincidence, together with what goes under the rubric of “financialization”, “Wall Street hegemony” and “privatization”?

Thing is, Marx’s newborn baby not only remains dripping with blood from head to toe, but threatens to strangle itself with the umbilical cord that gives it life – or in an even more gruesome mixed metaphor, hoisted on its own life-giving petard.  But capitalism is a gruesome system, ain’t it.

The amusing thing is, the Republican Party has been the “rentier party” par excellence since the advent of Ronald Reagan.  Advocacy of the gold standard, severing a prime source of rents, shows that this Party has become the primary political sinkhole concentrating the main contradictions of US capitalism, producing the ideological wingnuttery that we find so entertaining.  This is a wing of the US bourgeoisie that, like the swathes of the US working class that it cons into voting for it, cannot recognize its real class interest.

The implications for a practical socialist program based upon the proper understanding of both profit, rent and the relation between the two and their joint contradictory relation to wages, is this:  Touch upon the rent question today, without counterpoising “unproductive” rent as a greater evil to “productive” profits, and watch the whole bourgeoisie – from Austrians to Keynesians – howl in pain as one voice!

*Quoted from “Michael Roberts Blog: blogging from a marxist economist”.  This article is a reply to Roberts.

**For this theory of money, see Makoto Itoh and Costas Lapavitsas, Political Economy of Money and Finance (1999) and Lapavitsas, Social Foundations of Markets, Money and Credit (2003)

***See for starters Marx’s own classical treatment in “The Form of Value or Exchange Value”, pgs 47-70, Capital Vol I (1967), and also the interesting treatment in Itoh and Lapavitsas, ibid.  Itoh’s sensei Kouzo Uno put it quite succinctly when he stated that “The exchange value of a commodity or its value-form does not, as is often misconceived,  mean its exchange ratio with another commodity.  It is a unilateral expression of a commodity’s value by its owner in terms of the use value of another commodity that he wants.  A commodity must express its value in this peculiar fashion.” Uno, Principles of Political Economy,  pg. 5 (1964 English translation by Thomas T. Sekine; emphasis added).  Most peculiar of all, then, under a gold standard regime, must be the exchange-valorization of gold though its purchase by the central bank, whose “relative form of value” on offer is, what exactly?  It might be a convertible central banknote printed by the bank, which must be traded at a risk premium to the money commodity gold since it is, after all, a paper promissory note of the central bank. Or the central bank could exchange out of its stock of State Treasury bonds, with the yield playing the same role as the risk premium, except that it would constitute a rent tribute paid to the gold producing capitalist. In either case, the operation is entirely analogous to the creation of yield bearing fictitious capital in commodity form under a fiat (non-convertible) regime, and is the rational basis for the substitution of gold for fiat as “symbolic gold”.   But the essential point here is that, for the central bank, it is the particular use value of gold as money that is the means by which gold is “monetized”.  Not even gold is immediately money, and the quantity theory of money will find no refuge here, either.