Saturday 6 March 2021

Negative Class Consciousness

He's gone to ground. Between Tuesday and Thursday it was all smiles and plaudits for the Chancellor. He unveiled his budget and basked in the adulation of the client media. Dishy Rishi it was, the sharp-suited, big-brained nice guy who wrapped his arms around the nation and made everything pretty and fine. But things were not fine. As noted by those who read the small print, significant gaps remained in the Covid support scheme, and there was no money for education nor the NHS. Eventually it was noticed by enough people in the media that among the pay freezes for public sector workers was a measly one per cent rise for NHS workers. Or, to ditch the spin, a real terms pay cut if OBR projections are right. Sunak split and avoided the cameras all day Friday as defending the move fell to the hapless pairing of Matt Hancock and Nadine Dorries.

There are two lines the government are taking. The first, proferred by Hancock, is this is all "the nation" can afford. The economy is in the toilet, the government have borrowed hundreds of billions to keep it on life support, and so sacrifices are necessary. We know this to be false. As pointed out by the vastly improved Jolyon Maugham, the cost of a two per cent pay rise for nurses would be less than the money gifted to Tory donors for inadequate PPE. And, well, the government isn't in that much debt actually. In a stunning about turn from the BBC, famed for framing public spending in terms of "taxpayers' cash", it acknowledged the reality of the debt. I.e. "borrowing", or 92% of sums lent to the government since the start of the pandemic came from the Bank of England. This "debt" is money that need never be paid back because the BoE is an institution of state. In other words, just like a decade ago the Tories are depending on the general public's ignorance about deficits and debts to carry on running down public services and, above all, the NHS. Never let a crisis go to waste.

The second line of defence is more pernicious and one bound to have more resonance because it speaks to people's experiences: the strategy of pushing negative class consciousness. This was something Dorries raised on Friday's BBC Breakfast, more or less arguing NHS staff should feel thankful they're getting something because the rest of the public sector are making do with frozen wages, and the private sector are laying off workers or are allowing their staff to get by under the reduced circumstances of the Job Retention Scheme. This has subsequently been whipped up by the Tories' online support to try and mitigate the outpouring of disgust the government's derisory offer has provoked.

Negative consciousness has proven a firm friend since the Tories began their assault on the post-war settlement 40 years ago, and it's quite easy to grasp. It speaks to the sacrificial experience of having to work for a living, i.e. renting out our time and capacity to do things for an employer in exchange for the means of life, and valorising it as the most important thing everyone's existence should revolve around. As a common, relatable reference point, it is articulated by party speeches, broadcasts, and their media as a means of cohering a collective against enemies or targets of the Tories, real and imagined. It's typically useful against those subsisting on social security - the idea someone, somewhere is getting free money while I/we have to spend time earning money. Or that (public sector) workers are getting a better deal than us, as this typically stupid Tom Harwood tweet outlining how sharply wages have fallen under the Tories demonstrates. It's trotted out to provide cover for cuts to government spending outside of welfare, along the lines of "we can no longer afford to spend hard earned tax payers' cash on libraries/adult social care/street lighting. And nor is it the property of the Tories alone. For example, when New Labour was prepping the ground for their narrow win on the introduction of top up tuition fees in 2004, John Prescott did the rounds to argue it was outrageous that a dustman whould work hard and pay taxes to put students through university. And you might remember the "alarm clock Britain" phrase of Nick Clegg's, which seamlessly conjoined George Osborne's rhetoric about the "strivers vs the skivers" as the Coalition butchered welfare protections and shoved hundreds of thousands into destitution.

Why is negative consciousness such a potent weapon? There are plenty of other common experiences that aren't wielded to similar effect. It's because of grievance. The forced character of work gives rise to innumerable frustrations and pathologies, even if one professes to enjoying their occupation. This builds up and has to go somewhere. At times it powers collective action, but in the absence of trade unionism and positive class consciousness, it finds an outlet in resentment. And it's not the abstraction of the wage relation it attaches to, but those seen not to share a similar fate and are perceived as avoiding the sacrifice everyone else has to make/has made.

It's also worth noting that as a form of class consciousness, albeit one effectively revelling in its own exploitation and domination, it changes and is weaker or stronger depending on the time. While the present settlement was being struck in the 1980s, the Tories used this as a weapon to cement their two-nation coalition, a trick they have tried repeating ever since with varying success. But in the context of the erly 2020s, it is worth noting the displaced resentment the Tories are manipulating is uneven across the population. For younger cohorts of workers, it's difficult to present the cause of precarity, low pay, private debt, and not enough housing as the faults of undeserving others when the Tories happily front up the policies making their life difficult. It's much easier with the older people and the retired who are the bedrock of their support because they're at a remove from Tory attacks on workers, and because they disproportionately own property this is self-regarded as the fruits of a lifetime of sacrifice. Negative consciousness congeals around their memory of work. Because (they believe) they had it tough, but they're relatively comfortable in retirement, they tend toward a hypersensitive acceptance of government/media scapegoats, especially on matters of social security and "outsiders". As self-styled heroes of capitalist labour, they likewise think those who work, particularly their children and grandchildren, have it easy because of flat screen TVs and mobile phones. In 2021, negative class consciousness is, ironically, strongest among those who no longer work. And the result? A very effective weapon of divide and rule.

How might it be overcome? Class consciousness is always a process and never a condition, and the problem is is a Tory reliance on negative consciousness runs the risk, in some circumstances, of firming class identity if they take a misstep (such as attacking the "deserving poor"), or their blunders or overconfidence allows possibilities for the negative to pass into the positive. To mangle the old phrasing, from a class (turned in) in itself to a class for itself. But just as consciousness is a process, the Tories and the state are not the sole actors. We are not dependent on them making political faux pas. In other words, it depends on us, the labour movement, and the difficult job of organising workplaces, organising communities, and waging the attritional fight against the barrage dropped on our positions every waking moment. Easier said than done, but negative consciousness is never all-powerful, it can never close down class politics fully. Indeed, its mobilisation points to its persistent political salience in advanced capitalist societies. It is a backhanded complement to the possibility of our waging the class struggle successfully.

Image Credit


Boffy said...

"This "debt" is money that need never be paid back because the BoE is an institution of state. In other words, just like a decade ago the Tories are depending on the general public's ignorance about deficits and debts to carry on running down public services and, above all, the NHS. Never let a crisis go to waste."

And just exactly where do you and the BBC think the Bank of England got this "money" from? The real ignorance here is not that of the public, but of those who do not understand what money is, despite Marx explaining it at great length in A Contribution To The Critique of Political Economy, Capital, and Theories of Surplus Value, and so who continue to push forward the nonsense put forward by Jon Law and the Pereire Brothers that rather state can somehow create money - as Marx says the universal equivalent form of value - out of thin air, and so must then also be able to create out of thin air the equivalent form of that money, i.e. the value of goods and services in the economy!!!

If that is true, then here is the policy you should adopt. The state should tell everyone there is no longer any need to work, to create new value, and preserve existing value by their labour. Instead, the state will simply borrow money to hand to them, and will obtain this money from its central bank, which will do away with all the inconvenience by simply printing money and handing it to everyone. After all, so long as there is a central bank able to do this there is no debt, is there?

See how long that lasts before the reality hits you. As Marx put it, explaining the Law of Value,

"Every child knows that any nation that stopped working, not for a year, but let us say, just for a few weeks, would perish."

Every child yes, but apparently not everyone who calls themselves a Marxist!

Unknown said...

Equality of misery

Anonymous said...

"And just exactly where do you and the BBC think the Bank of England got this "money" from?"

So where does Boffy think they got it from? Where does Boffy think any bank gets the money they lend to anyone?

Does Boffy think that "money" is a thing of value in itself, rather than just an IOU based on trust and confidence?

It seems that it's Boffy who does not understand what money is, rather like most of the public and an awful lot of journalists and politicians

Zetetic Elench said...

Money is created out of thin air by governments and banks . This is what is known as "fiat currency". What keeps inflation down are taxes and high interest rates. Of course, in Marx's time everyone used the Gold standard. Money as currently used is entirely worthles; until it is given value by labour

TowerBridge said...

It does appear somewhat odd that Boffy's comment is so out of kilter with what we can see in front of our eyes. Clearly the limit of the way of leanding ourselves money as we and many other states have been doing (and Japan has been doing for years) is one of inflation. In order to curb that, one needs a productive economy, so too much cash chasing too few goods does not arise (a productive economy in our case is crucial because we are dependent on raw materials and stuff from other countries - Brexit truley is folly).

Investing that money is therefore key and why the Tories latest budget is an extra dose of stupid/vindictive. For example, spend money on nurses and they spend it on everything else, from household stuff to entertainment (spend it on rentiers and it does much less). Productive investment might not be enough to curb inflation, so the state can use the assets it has to hand (we should call this "power"). For example it may increase interest rates or taxes.

I have and keep on reading around this subject. The one conclusion which keeps popping up is making sure that the music doesn't stop playing.

Boffy said...

"Does Boffy think that "money" is a thing of value in itself, rather than just an IOU based on trust and confidence?"

Of course, money is a thing of value, as Marx describes in TOSV, A Contribution to the Critique of Political Economy, and in Capital Vol I. As he explains it can only be money because it has value, otherwise it cannot be the universal equivalent form of value. Gold becomes the money commodity precisely because it has value, it is the product of useful labour, and gold itself is a commodity on this basis. It can only become the universal equivalent form of value on that basis.

Money is not an IOU, precisely for this reason that it is itself the equivalent value for the thing for which it is exchanged. An ounce of gold contains 10 hours labour, which is exchanged for a litre of wine which contains 10 hours of labour. Indeed, as Marx says in TOSV, it is precisely for this reason that every commodity is money, and the price of anything can be expressed as a quantity of some other commodity, which represents its equivalent. The difference with the money commodity is that it is universally accepted as such an equivalent in transactions. It represents an indirect measurement of the value of other commodities, a relative measure of the labour they contain.

That is quite different to the money tokens issued to represent that money. The money tokens are indeed merely IOU@s, and have no value of their own. Its such worthless tokens that banks issue, and so do not represent at all the creation of money. As Marx sets out in the Contribution, the more of them they issue as against the actual money they represent, the less the actual value of each token must then be, which is what leads to inflation.

Perhaps if "anonymous" was as confident and knowledgeable as they profess to be here they could use their actual name, and provide some actual argumentation for their claims.

Boffy said...

"Paper money is a token representing gold or money. The relation between it and the values of commodities is this, that the latter are ideally expressed in the same quantities of gold that are symbolically represented by the paper. Only in so far as paper money represents gold, which like all other commodities has value, is it a symbol of value.”

(Capital I, p 128-9)

“How many reams of paper cut into fragments can circulate as money? In this form the question is absurd. Worthless tokens become tokens of value only when they represent gold within the process of circulation, and they can represent it only to the amount of gold which would circulate as coin, an amount which depends on the value of gold if the exchange-value of the commodities and the velocity of their metamorphoses are given…”

(“ A Contribution To A Critique of Political Economy”)

"Once the notes are in circulation it is impossible to drive them out, for the frontiers of the country limit their movement, on the one hand, and on the other hand they lose all value, both use-value and exchange-value, outside the sphere of circulation. Apart from their function they are useless scraps of paper. But this power of the State is mere illusion. It may throw any number of paper notes of any denomination into circulation but its control ceases with this mechanical act. As soon as the token of value or paper money enters the sphere of circulation it is subject to the inherent laws of this sphere…."


In the same ay Bitcoin has no use value other than as an artificial object of speculation, and so is not a commodity, and has no value, and so is not money either

Boffy said...

@Zenetich. No governments do not create money, nor do banks. As Marx describes that is impossible for them to do, because money is the universal equivalent form of value. The issue of the Gold Standard is a red herring. It doesn't matter whether the money commodity is gold, silver, salt or kippers. Its function arises purely because it is a commodity that has value, i.e. it is a use value in its own right produced by labour. As such it acts, as Marx sets out in Capital I, Ch 3, as a proxy for social-labour-time, which is at root what money is.

As Marx says, if the total value of commodities to be circulated is equal to 1 million hours, then it is impossible to put into circulation money with a greater value than 1 million hours as its equivalent. Assuming the velocity of circulation is 1, then whatever the money commodity an amount of it equal in value to 1 million hours of labour is its limit. Anything in excess of that cannot act as money. So, Gold, silver and copper, as Marx shows were driven out of circulation when issued in excess.

This cannot be changed when tokens representing the money commodity are thrown into circulation, except as Marx says, precisely because these tokens - fiat currencies - have no value in themselves (or in the case of precious metal coins not as much value as they represent by their face value) they cannot be withdrawn an used as commodities (as for example gold in jewellery, or melted down to bullion for export) so the actual value of the token itself is depreciated - inflation.

Higher taxes do not reduce inflation, as the high inflation and high taxes of the 1970's demonstrate. High interest rates are a function of the demand and supply of money-capital. High interest rates only act to reduce inflation as a consequence of the restriction of credit, in other words reducing the quantity of money tokens in circulation.

Boffy said...


As Marx said, if what we could see in front of our eyes was enough to understand the world there would be no need for science to look beneath the surface.

But, how many much evidence besides the science of political economy explaining inflation do you need. Time and again, with John Law, the Pereire Brothers and so on the idea that you can just create money by inflating currency or increasing credit has led to inflation. Weimar, Zimbabwe, Argentina examples in the last century of hyperinflation. Nearly every developed economy in the 1970's of high levels of inflation. In the last thirty years hyperinflation of asset prices.

The Dow Jones rose by 1300% between 1980 to 2000. By comparison US GDP rose by just 250%. Since 2000, the Dow has trebled again. All a result of hyperinflation of asset prices due to the depreciation of the currency.

You are quite right that the inflation can be offset by raising the level of productivity, and so the volume of commodities in circulation. But, that is largely a different question, here. The printing of additional tokens is not posited as a means of stimulating technological development and capital accumulation, but of financing unproductive consumption by government and households, i.e. increasing monetary demand, and now, especially with Brexit, at a time when supply is curtailed, leading inevitably to inflation of commodity prices.

In that respect your comment in relation to nurses and rentiers is contrary to the argument you have set out. You are right that nurses, as with other words are likely to use any currency to consume, and so that additional unproductive consumption adds nothing to output or productivity. It will act to increase inflation. A rentier, however, is less likely to consume all of this revenue, an so less likely to cause the increase in monetary demand that would lead to the higher prices.

On the contrary, because they will have a higher marginal propensity to save, and so this saving MAY, I emphasise may, then go into actual capital accumulation so increasing output, it would act to reduce the potential for inflation. I emphasise may, because for the last thirty years all such monetary stimulus has been used not to stimulate real capital accumulation, but to stimulate speculation in assets so as to inflate those asset prices.

Boffy said...


"Money as currently used is entirely worthles; until it is given value by labour."

I have no idea what this is supposed to mean! As the quotes from Marx indicate, money most certainly is not worthless, and could not function as money if it were. It is money precisely because it is the product of purposeful labour in the production of a use value, e.g. gold, silver, copper.

But, even if we abandon the concept of a money commodity, then money itself can only be understood as a claim on a given quantity of social labour-time. If the total value of commodities in circulation is equal to 1 million hours, and assuming the velocity of circulation is 1, what do you think happens if we put into circulation 2 million bits of paper each giving the bearer a claim on 1 hour of social labour-time? The 2 million bits of paper representing 2 million hours of social labour-time, would chase after the commodities that in total represent just 1 million hours of social labour-time. Each scrap of paper is devalued by 50%, and so, now the prices of all the commodities are doubled when measured by these scraps of paper.

The Stalinists thought they could do this in the 1920's, and it led to inflation and disaster.

Trotsky responded,

"The platform of the Opposition (1927) demanded “a guarantee of the unconditional stability of the money unit.” This demand became a leitmotif during the subsequent years. “Stop the process of inflation with an iron hand,” wrote the √©migr√© organ of the Opposition in 1932, “and restore a stable unit of currency,” even at the price of “a bold cutting down of capital investments.” The defenders of the “tortoise tempo” and the superindustrializers had, it seemed, temporarily changed places. In answer to the boast that they would send the market “to the devil”, the Opposition recommended that the State Planning Commission hang up the motto: “Inflation is the syphilis of a planned economy.”"

(The Revolution Betrayed, Ch 4)

TowerBridge said...

So I understand the hyperinflation examples, they always seems to be a) weimar b) zimbabwe and c) Venezuela. Each had their circumstances and reasons. They seem to be outliers to me (I don't know much about Argentina save for the fact they were one of the first to adopt the chicago school of economics' theories). What I'm trying to say is a few extreme examples do not make a good case.

You are saying that the dow jones' increase in size is due to asset inflation. Ok, I don't know myself, but has the global economy grown in that time, such that, say, China has come on the scene and added its resources to those markets? This is not an attempt at sarcasm, I do not know. What I am asking is, is there another way to explain the huge increase you cite in the markets without saying "it's all asset inflation"?

Actually, when you say asset inflation, do you mean buying, say, a house and due to all that extra money around the house goes up in price?

Yes I can see how Brexit will curtail supply and I can therefore also see how that could contribute to inflation. Seems to me to be a good argument for the government to create demand somehow. Given that a government must spend first and tax afterwards (and the BoE must fund this as per the Exchequer and Audit Departments Act 1866) it should be able to do this first by creating some money, then through taxes by destroying it - a kind of loan. Or by, as you say, issuing bonds so that it takes some of those rentier's money out of the system.

In response to other people you have said things I don't quite understand but I think what you are saying is that a bank cannot print money because there's no value in that. Value is not derived from an IOU. If that's the case, what is the value and how does a FIAT currency-country able to survive?

Boffy said...

Only examples? You haven't looked far. Economics textbooks are replete with examples of how states going back to Antiquity debased the currency to pay off debts via inflation.

“Thus the English pound sterling denotes less than one-third of its original weight, the pound Scots before the Union only 1/36, the French Livre 1/74, the Spanish Maravedi less than 1,000th, and the Portuguese Rei an even smaller proportion. Historical development thus led to a separation of the money names of certain weights of metals from the common names of these weights.” (A Contribution etc. p 72)

The inflation in the 1970's resulting from all of the increased liquidity was not hyperinflation, but then the increase in liquidity was not on the scale of Weimar or Zimbabwe. Still at 25% p.a. it indicates the same relation that increased liquidity in excess of what is required for commodity circulation leads, as Marx says, to inflation.
Can the rise in the Dow between 1980 to 2000 be explained by the rise of China? No, because much of that rise occurred before China had the position in the global economy it has, and secondly the rise of China could explain a rise in the price of Chinese companies quoted in Shanghai – which has also seen the same kinds of asset price bubbles and busts due to excess liquidity, not in the US, but even the growth of China, and the world economy, even if that was not detrimental to US corporate profits due to increased competition, has been nothing like the rise in stock markets over the same period. Then there is the rise in bond prices to a level where now yields on many of them are negative. As a comparison, in the post-war boom period, after 1945 up to 1965, the Dow Jones rose by only half the rise in US GDP.

Asset price inflation is exactly what is seen when increased liquidity prompts speculation in relation to property and so on.

If you understand that Brexit reduces supply why on Earth would you then want the government to stimulate further demand? That would cause an even greater disparity between demand and supply causing market prices to rise even faster! Where you get the idea that the Bank of England must fund government spending I don't know, and that is not what the said Act states. On the contrary, the idea of directly monetising the debt has generally been frowned upon. The government's spending is funded via the Treasury out of taxation and other revenues, and via borrowing controlled by the Debt Management Office, which issues bonds for that purpose. Nor does the government have to spend before it taxes, as seen in those years in which it runs a budget surplus.

Governments cannot create money nor destroy it via taxation. At most taxation would take liquidity out of circulation if the government ran a surplus and kept the money in the bank, so reducing the velocity of circulation. Issuing bonds bought by rentiers, so that the government could spend the proceeds on unproductive consumption does not take liquidity out of circulation, and precisely by using this liquidity for such consumption rather than production increases inflation. Fiat currency works so long as those asked to accept the currency are prepared to. There are plenty of instances, as with France and the US in 1971, where excess printing of money tokens leads others to refuse to accept them.

I see the BoE Governor is reported in the FT as also warning of the danger of inflation as soon as the government lockouts end.

Dr Zoltan Jorovic said...

Fascinating discussion. On the one hand "money is the universal equivalent form of value." and "it doesn't matter whether the money commodity is gold, silver, salt or kippers. Its function arises purely because it is a commodity that has value". Then "Money is not an IOU, precisely for this reason that it is itself the equivalent value for the thing for which it is exchanged." and "That is quite different to the money tokens issued to represent that money. The money tokens are indeed merely IOU@s, and have no value of their own. Its such worthless tokens that banks issue, and so do not represent at all the creation of money."

This makes no sense. "Money is not an IOU" but "Money tokens are IOUs"? What? "Money is a commodity that has value" but "money tokens have no value". really? Can you tell me what a money token is as opposed to "money"? Or are you confusing value with money? The point about money at least since 1970) is that it has no value beyond what it represents - i.e. no intrinsic value. I can't go to the BoE and ask them to give me "x hours of labour" or "y ounces of gold" in return for this piece of paper (or this digit in my bank account. All I can have is another exactly similar digit, or another exactly similar piece of paper. Now, it may well represent a value equivalent to x or y, and provided someone is happy to accept this I can use it to purchase something of that value.

It is true that what limits us is the productive capacity of our society which means the labour and resources (for these too can be a limiting factor). but this is precisely the point that is being made. It isn't MONEY that limits anything. Inflation is too much money chasing too FEW goods. The key here is the quantity of goods, NOT the quantity of money. Because the quantity of money is flexible. As an independent sovereign nation we can have as much or little as we choose. What we can't choose is its value because that depends on the quantity of goods (and services).

That said, our economy has been stagnating for a number of years. The underlying problem is productivity, and, linked to this sustainability (by which I mean, production that is sustainable without destroying the world we depend on, or using up all the finite resources available). NOT inflation. If money is created and used to drive, say, a green new deal to create a circular economy and move to zero carbon, then so long as we don't make more money than our creative capacity can absorb, there is no problem.

Zimbabwe, Weimar etc are all places where there was a particular problem with production. The goods were not available, so to try to obscure this, or because there was nothing they could do to change it, they kept producing money. But the essential problem was a shortage of available goods - i.e. demand greatly outstripped supply. There were reasons for this that were particular to that time and place. These are not universal. To solve it, you have to either reduce demand or increase supply. "Money" cannot help. Even if you restrict it, the need won't go away, so people will turn to something else.

TowerBridge said...

@boffy - I think Dr Zoltan Jorovic has pretty much said more succinctly my understanding of matters. I am sorry to say that your arguments have lost me. It would be good if you could explain for the hard of learning over here. In terms of the act I cited, although the language is archaic and hard to follow, ss.13-15 state that the bank must issue credit for things parliament/the crown wants.

BCFG said...

Boffy shows his complete and utter dogma in this thread. He is unable to step outside a text book written 150 years ago and take into account all the history and events and developments that have since occurred. For Boffy Marxism is not a living and developing exploration but a set of truths written down on stone and to be preached to the unconverted.

He points out that if a nation stopped working for a year we would perish, well surely the point of that analogy is to do away with money and exchange forever!

There has never ever been an example of hyperinflation that wasn’t instigated by outside actors.

Since 2008 trillions of dollars have been printed in quantitative easing and yet this has not led to any significant inflation. One reason for this is that the money printing never trickles down to the wage slaves, but is instead used to prop up banks and large corporations. The fiat money system allows for this. Meanwhile we have had austerity imposed, with workers like Nurses shielded from its affects more than the average public sector worker. Before covid council workers were receiving no pay increases while Nurses, Police and teachers were.

Technically speaking capitalism (and more precisely the ruling class) has resolved its unemployment and inflation problem, the EU is a perfect example of this form of technocratic capitalism. The transnational organisations, such as the WTO facilitate this. This is why libertarians rage against this machine (interest rate apartheid as they call it) and why the communist party of China defends it. The globalised system allows the ruling elite to continually reproduce itself and throw enough crumbs out to the workers using technocratic solutions, tweaking interest rates, printing money for the elite.

Boffy repeatedly tell us that the history of the last 30 years is speculation in assets so as to inflate those asset prices at the expense of ‘real’ capital accumulation, yet on the other hand Boffy repeatedly tells us that in the last 30 years more products have been produced and more innovation has taken place than in all previous recorded human history!

The least we can conclude from this is that finance and speculation has not been a barrier to production and more likely a boom!

Anyone looking at the world today cannot possibly say not enough stuff is being produced, what we can say is that we have got all our priorities wrong. And why is that? Because we live in an exchange system.

Anyone who wants to hold onto exchange, like for example the Proudhonists of the 19th century, I have news for them, we are currently living in the exchange system par excellence, it is called capitalism.

If you want an exchange system then my advice would be to shut the fuck up and stop whining and moaning about its inevitable iniquities, foibles and structures. Simply rejoice that you are alive at a time and place where exchange has been taken to its highest form.

Boffy said...

Reply to Zoltan 1,

If I buy from you a litre of wine which has a value of 10 hours labour, and give you in exchange 10 hours labour, by working on your land then this is an exchange of equal values. If I instead give you a piece of paper (an IOU) saying that I will provide you with 10 hours of such labour, does this IOU, this worthless bit of paper have a value of 10 hours labour? Clearly not. Its value is entirely derived from the promised 10 hours of labour, and is not something separate from or in addition to such promised labour. The truth of that is shown by the fact that, if indeed I do not perform the promised 10 hours of labour, the piece of paper in your hand is indeed worthless. It has value only in so far as it can be trusted (the original meaning of credit) to be fulfilled.

In conditions where no such trust exists, then no one is going to exchange commodities other than for other commodities of equal value, or for the immediate performance of an equal amount of labour-service. As Marx describes in “A Contribution” and in Capital I, Chapter 3, this is precisely the way a money commodity arises as a specific form of commodity representing the equivalent form of value. Initially, a range of commodities regularly traded are able to represent such an equivalent form, until certain commodities with the qualities most required of a money commodity are singled out. Gold or silver become such commodities precisely because they have value, are portable, durable and so on. I do not have to trust you to provide an equal amount of labour to the value contained in my wine, if you pay me a quantity of gold or silver with the same value. The gold or silver is not an IOU, but is an equal value. I do not need the gold or silver itself as a commodity/use value, but accept it, precisely because I can, in turn exchange it, for a bible, or a metre of linen of equal value. Therein lies the difference between money a value equal to a given amount of social labour-time, embodied within some commodity whether that commodity be gold, silver copper or kippers, and a money token, which is merely something which promises a claim to a given amount of such commodity, or what amounts to the same a given amount of social labour-time, equal to the value of that commodity.

“The point about money at least since 1970) is that it has no value beyond what it represents - i.e. no intrinsic value.”

But, what you describe is not money, but a money token, or credit money. The proof of that is what you then say, i.e. you cannot take one of these tokens to the Bank and get an ounce of gold, or a quantity of labour for it, only another note, coin, or bank digit of the same amount. In other words, in itself all of these tokens or credit are worthless. So, why does anyone accept them? Only because of a trust that they can actually be exchanged for the value, i.e. the social labour-time they purport to represent. In other words, I can take the £10 note to the supermarket, and buy commodities with a value of £10, or put another way, the money that the banknote represents, has a value of 10 hours labour, and so does the commodities I buy with it. As soon as the money token is no longer trusted then it no longer fulfils this function, but money does.

“Now, it may well represent a value equivalent to x or y, and provided someone is happy to accept this I can use it to purchase something of that value.”

Precisely, its not money, but merely credit, dependent on trust. But, I can always exchange a given value of gold for some other commodity, because no trust is required, as the gold itself represents an equal amount of value, i.e. social labour-time, as the thing being exchanged. Indeed, as Marx says, every commodity can fulfil this function – and does in systems of barter – so long as those with whom the exchange is being undertaken desire the use value of the commodity I give in exchange.

Boffy said...

Reply To Zoltan 2

“Inflation is too much money chasing too FEW goods.”

Not true, as Marx describes in “A Contribution”. The amount of money in circulation depends upon the value of commodities to be circulated, the velocity of circulation, and the value of money, be it gold, silver or whatever. If the value of commodities to be circulated is equal to 1 million hours of labour, and 1 ounce of gold is equal to 1 hour of labour, then assuming the velocity of circulation is 1, 1 million 1 ounce gold coins are required as currency. If 2 million coins are put into circulation, then half of them cannot function as money. Either the velocity of circulation must slow to 0.5, because the coins are hoarded for half the year, or else half the coins are taken out of circulation. As Marx describes that must be the case, because otherwise each coin would have the exchange-value of only half an ounce of gold. It would then become profitable to meltdown the gold in each coin to get the 1 ounce of gold, and then exchange this 1 ounce of gold for 2 coins! Not long ago, when the price of copper rose sharply, it actually became the case that some UK 2p coins contained a greater value of copper than 2p. If you had the facility you could gather a large quantity of such coins, melt them down, and sell the resultant copper for more than the value of the total of the 2p coins.

As Marx describes this is not true with money tokens such as bank notes, because they have no such value. I can't melt down a £10 note, and the value of the paper is insignificant. Unlike money which is driven out of circulation if too much is circulating money tokens remain in circulation and the value of each token becomes thereby devalued.

“As an independent sovereign nation we can have as much or little as we choose. What we can't choose is its value because that depends on the quantity of goods (and services).”

No what you can have is as many money tokens, or credit as you choose. But then, each token becomes devalued. And, being a sovereign nation has its limits. In 1971, even the US found that out when France refused to accept the Dollar in payment for its exports to the US, and demanded payment in gold. Or take the experience of Eastern Europe under Stalinism. If you went to any of those countries people would clamour after you in the street to try to exchange their own worthless currencies for £10 notes, and would offer you four, five and more times the official exchange rate to obtain them, despite the risk of being arrested.

Boffy said...

Reply To Zoltan 3,

You cannot divorce the lack of productivity in the UK – and the same is true in the US – from the fact of the hyperinflation of asset prices caused by QE, and other injections of liquidity over the last thirty years, that has created an incentive for financial and property speculation in search of guaranteed capital gains underpinned by central banks, and a disincentive for real capital accumulation, which has had a depressing and disinflationary effect in the real economy.

“If money is created and used to drive...”
The significant word here is “if”. The point is that all the money tokens and credit created in the last thirty years was not intended to do that, but to promote asset price inflation. The liquidity injected in the last year has been to sustain incomes to fund consumption, not capital accumulation. It has increased money tokens at the same time as reducing the supply of commodities that are the value equivalents, as a result of government lockouts, and that is inflationary. Whenever and wherever lockouts have been lifted that has been seen as prices rise. Where lockout adjusted price indices have been developed they show the prices of those things people have been able to consume rising rapidly, and so on, and that is reflected in rapidly rising global prices for primary products.

“they kept producing money.”

No they kept producing money tokens. If they had kept producing money, they could have exchanged it for the goods and services they required. For example if they had produced gold or silver, they could have exchanged it on global markets for the goods and services required.

“These are not universal.”

That wasn't true in the 1970's in the US and Western Europe. At that time production was booming in those economies, as it had been since the 1950's. In fact, production was exceeding demand for some commodities creating overproduction. But inflation in the 1970's in nearly every country soared, as Mandel sets out in “The Second Slump”. In Britain it went to over 25%, and in all major economies went into or near double digits, as a result of increases in liquidity to cover Keynesian fiscal stimulus.

“To solve it, you have to either reduce demand or increase supply.”

That is the same Keynesian mantra that is always presented, and as in the 1970's, it completely failed, because like all neoclassical economics it fails to understand value, money and interest rates.

Boffy said...


I would suggest that you read Marx's "A Contribution To The Critique of Political Economy" where the nature and historical development of money is set out at length. Follow it up by Capital I, Ch. 3, and TOSV, Ch20, particularly Section 3, and particularly 3d.

Definitions can also be found via the Glossary on my blog.

In relation to the Act, you are confusing the use of the term credit. All it is saying is that the Bank of England, which is the bank at which the governments accounts are kept is not allowed to write bad cheques on behalf of the government. That is different to the US.

But, the government must always fund its account either through taxation and other revenues, or else via borrowing in the bond market. It cannot simply continue to run up an unauthorised overdraft at the Bank of England.

It can have the Bank buy up such bonds - though even this is usually done by buying existing bonds in the secondary market, rather than buying newly issued bonds, but so far, such bonds have always been redeemed on maturity, rather than being directly monetised. The most that has happened is that the interest has been waived. When the bonds mature, the government must reimburse the Bank with a corresponding transfer in the Banks accounts.

In the US, in 2018, when the Fed stopped replacing all of the bonds that matured with the purchase of an equivalent value of bonds, it led to the taper tantrum, and a fall in US stock markets of 20%, which again is an indication of just how much the rise in those markets is due to such inflation resulting from the inflation of the currency.

I have responded to Zoltan separately, so you can see the response to your views also in that.

Boffy said...


A further observation. You say.

“The point about money at least since 1970) is that it has no value beyond what it represents - i.e. no intrinsic value.”

But, then you fail to say what it is that "it represents". Can you enlighten us on what you think it is that the money you describe "represents"? After all, you admit that this representative of this unnamed other, itself has no "intrinsic value". In which case, the "other" that it represents must indeed be the embodiment of that value, which this "money" represents.

What does "represent" mean here other than that this money in acting as mere representative of the other, which is itself the possessor of value, is acting as mere token of this other? Your own explanation has shown that what you consider to be money is nothing other than a worthless token that acts as a mere "representative" of money, and can only fulfil that function so long as there is confidence in its ability to act as such representative, a confidence that is increasingly undermined the more of these tokens are put into circulation relative to the "other" they are acting as representatives of.

Boffy said...

A look at what Marx says in Capital Vol III, Ch 47, and in The Critique of the Gotha Programme illuminates the matter. In the former, marx writes,

"after the abolition of the capitalist mode of production, but still retaining social production, the determination of value continues to prevail in the sense that the regulation of labour-time and the distribution of social labour among the various production groups, ultimately the book-keeping encompassing all this, become more essential than ever."

In other words, all of the benefits of the division of labour are continued and developed. We no longer have an exchange of commodities as exists in all commodity producing economies including capitalism, but exchange is now conducted on the basis of an equal exchange of labour-time. Workers work a given amount of time, and are given a certificate equal to this time, less deductions for various purposes determined by society, such as pensions, care of the sick, children etc., and funds to accumulate means of production etc. They can use such certificates - today it would be probably in the form of a credit card - to take products out of society's store of goods and services.

In the CGP he says,

"Here, obviously, the same principle prevails as that which regulates the exchange of commodities, as far as this is exchange of equal values. Content and form are changed, because under the altered circumstances no one can give anything except his labour, and because, on the other hand, nothing can pass to the ownership of individuals, except individual means of consumption. But as far as the distribution of the latter among the individual producers is concerned, the same principle prevails as in the exchange of commodity equivalents: a given amount of labour in one form is exchanged for an equal amount of labour in another form."

The point is what would happen if certificates were issued whose total claim on labour time was double that of the actual value of products available for distribution? The same as happens when too many money tokens are printed. each token is necessarily depreciated. An example is what happened in the USSR.

BCFG said...

Boffy’s death by unscientific statistical manipulation and irrelevant quotes.

The fact that Boffy thinks you can simply do this off the bag of a fag packet shows what an idiot he is.

Proper modelling of these questions needs to standardise the data, translate into earning per share etc etc etc

You can’t compare a nations stock prices with its GDP for many reasons, one being the fact that most big companies are multinational. Which is why real research into the relation between GDP and Stock prices takes multiple nations into account. Rather than looking at local markets.

Most scientific analyses also look at real prices and not Boffy’s mix of real and nominal prices.

The other issue is that expected growth is part of the stock price!

etc etc etc etc

No wonder this idiot uses hyper inflation so liberally!