....Money is not an accident but a necessity under capitalism. We are every day reminded that without it we cannot live.
There was a time when money did not exist. In primitive societies, where all production is for the use of the community and none of the products of labor enters into exchange, money is unnecessary and unknown. It came into existence only with the regular exchange of a diverse multitude of commodities and the extensive development of trade relations, when the need arose for a general equivalent through which all other commodities could express their exchange value.
Money originated, not in a form appropriate to its essence, but in a disguised form imposed by the conditions of its birth. Money made its first appearance as one commodity among others, as a money-commodity, just as man first emerged as an ape-man. That commodity which was singled out and elevated to serve as a medium of circulation and a measure of value for other commodities has assumed many different concrete guises in the historical development of commodity producing and exchanging societies, of which capitalism is the supreme expression. Cattle, iron, slaves, furs, wheat, rice and many other material substances have acted as money-commodities.
The commodity passed through three stages to achieve the essence of money and to make its form coincide best with its content. So long as exchange relations were restricted and the market was small, all sorts of commodities could play the role of general equivalent.
The qualitative jump from the commodity to the genuine money form of value occurred when the precious metals took over the money functions. Money-commodities such as cattle maintained their natural uses while serving as general equivalent; their functions in the process of circulation were subsidiary to these other uses. The cattle which were a measure of value could be slaughtered, their meat eaten, and hides dressed for various purposes.
The precious metals had a different status. Once they were stamped as coins by some public authority, their sole use was to serve as general equivalent for the mass of commodities. At this point the general equivalent became a coins and ingots asserted itself in its own right.
The development did not stop there. Ultimately gold became the supreme embodiment of the universal equivalent. It may be asked: Which of these diverse appearances of money is really and truly money in itself? In logical terms, where is the essence of money to be found among all these diverse manifestations of the money-relation? The first answer is that in a certain measure and under certain circumstances of economic development, all of these various material appearances have been and can be money. They have each proved in practice, which is the ultimate test of truth, that they can perform the basic functions of the money-commodity.
This then means that each of these historical incarnations of money contains to some extent its qualitative essence. Money in general is relative to each of its various concrete manifestations. Cattle, shells, furs, precious metals, and so on, must have partaken of the essence of money or else they could not have appeared or functioned as media of circulation. Else they would either be simply the material objects or the particular kind of commodity they happen to be. They could not have served as money without really being in essence the kind of economic relation which money is.
But that is only one side of the matter. It is obvious that, if each and every one of these forms of money contained some part of the essence of that economic relation, no one of them contained the entire essence of money. Each, taken by itself, embodied no more than a share in the essence of money, just as each stockholder holds only a given portion of a corporation's stock. Each individual money-commodity is essentially, of necessity, no better than a defective, superficial, episodic representative of the economic relations and functions exhibited in and through the money form.
On the other hand, since each in its own way and according to its capacity incorporated and carried on some of the essence of money, we must recognize that all the constituent members of this series of money forms have contributed to the realization, the clarification and perfection of the essential money form. They constitute transitional forms in which the essence of money makes its appearance, the accidents which go to make up its necessity.
So we see that essence, instead of being something fixed and simple in nature, is composed of various grades, which constitute a hierarchy of essence. We can proceed, and things in their evolution progress, from the less essential to the more essential. In other terms, the quality of a given essence can become quantitatively greater or smaller. It can grow in extent and in content; it can, step by step, become defined or determine itself into different grades or forms of its being.
The essence of a thing always manifests itself inextricably intermingled with its opposite, which is one or another of its appearances. In general, the more essence, the less appearance; the more appearance, the less essence at hand. These two united determinations of reality and thought appear together - but in inverse ratio to each other.
Money in the shape of cattle, for example, had only begun to differentiate itself from and oppose itself to the mass of other commodities. It is little more than one commodity standing slightly above other commodities. The essence of money makes only a feeble appearance in this embryonic form of money in uncivilized societies. It is not until money assumes the form of coin, and finds a material embodiment in the precious metals, that its essence begins to predominate over its appearance and the general equivalent graduates to a universal equivalent.
How clearly and thoroughly can essence show itself, detach itself from mere appearance? The purity and perfection of the realization of any given essence depends upon the material circumstances governing the development of the thing in question. In the case of money, its essence has succeeded in disclosing itself with great clarity and definition, thanks to the evolution of commodity producing societies into capitalism.
As a result of the development of commodity production and exchange, one particular kind of money has shown itself to be the most essential or necessary embodiment of money. That is gold. This is one of Marx's important discoveries, sneered at as "Hegelianism." Gold has established its superiority over all earlier forms of money in practice, as the outcome of the most severe competition covering hundreds of centuries of commerce and industry. No person and no political power arbitrarily selected gold as best suited to embody and exercise the functions of money. That status was fundamentally determined by an extensive series of economic processes and causes, whose result political authorities had to ratify in their legal codes and everyone else had to recognize in everyday economic relations. Gold has deposed all rival monies because it has proved itself to be a more powerful, more real, more essential physical form of the money relation.
The example of gold demonstrates that, for all its absoluteness, essence remains relative to the less essential, or nonessential, forms of money. Gold, the most essential money form, arose historically out of less essential forms and maintains today definable relations to them as well as to the whole world of commodities. Silver exchanges, for example, in specific amounts with gold.
What is or appears essential at one stage in the development of a relation - and every single thing is either a relation or a constellation of relations - becomes nonessential or less essential at another stage of development.
Earlier in economic evolution it looked as though silver might be the money commodity par excellence and that gold would have to take second place. Silver was then more valuable than gold. But with subsequent changes in technological and economic conditions this relationship be-tween silver and gold became conclusively reversed. During the nineteenth century it was proved that not silver but gold was supreme. Silver turned out to be but a passing and subordinate representative of the money relation and receded into the background with its obsolete predecessors.
Today gold is absolute monarch, not only in respect to money forms, but also in respect to the entire world of commodities under capitalism. Every other commodity is inferior to gold and must bow down before it. Gold is Value Incarnate. Gold will hold this high and mighty position for the historical epoch of the transition from capitalism to socialism.
"In the transitional economy, as also under capitalism, the sole authentic money is that based on gold," wrote Trotsky in The Revolution Betrayed. But this position of absolute economic power held by the money form, which spans so many different organizations of society, is likewise relative and limited. It too will endure for no more than a passing stretch of historical evolution. In socialist society money will begin to lose its magic powers and tend to disappear. "The death blow to money fetishism will be struck only upon that stage when the steady growth of social wealth has made us bipeds forget our miserly attitude toward every excess minute of labor, and our humiliating fear about the size of our ration. Having lost its ability to bring happiness or trample men in the dust, money will turn into mere bookkeeping receipts for the convenience of statisticians and for planning purposes. In the still more distant future, probably these receipts will not be needed. But we can leave this question entirely to posterity, who will be more intelligent than we are," Trotsky observed.
Then, as Sir Thomas More predicted and Lenin hoped, men will use the gold which has been identified with so much happiness and misery in the past as trimming for bathroom fixtures.
The precious metals, and gold par excellence, were especially suited to monopolize the role of money because of their physical properties. They were malleable, ductile, highly divisible, homogeneous, durable, readily portable and easily recognizable. Even more, because of their relative rarity, they represented a large amount of exchange value in a small volume. They incorporated a great deal of labor in highly condensed form.
Many people mistakenly believe that such conspicuous physical properties by themselves make these metals into precious objects with miraculous powers. That is the appearance, not the reality, of the matter. Money is a highly developed form of value which exists only in commodity producing societies. Thus, in the last analysis, money is a thing which represents specific economic relations between people. These relations constitute the essence of money.
And when an economy of abundance and equality will fundamentally transform the relations of men, the need for money will dwindle and disappear, while all the physical properties of gold and silver will endure.
Is essence something abstract or concrete? The example of money shows that it is both. Money always exhibits itself in some one specific form. But no one of these concrete manifestations of money contains its entire essence. The essence of money is therefore both present and not present in any of its particular forms.
Without the serial development of the various concrete forms of money, it would have been impossible to realize in social economy the essence of money in its purest form of gold bullion. It would likewise have been impossible for the economists to have conceived through their scientific investigations a correct understanding of the inner nature of money.
Thus we see that the essence of a thing is an abstraction from its diverse concrete material forms conceptually expressed in a generalization taken from its particular instances. The abstract and the concrete, the general and the particular, the essence and the appearance, are essentially interrelated and interconvertible categories. The one is never found without the other. "In essence," as Hegel says, "all things are relative."
These opposites are continually becoming transformed into each other. This coin, for example, looks extremely concrete and so it is from the standpoint of its material composition. But from the economic standpoint it is not at the moment so concrete. As it now exists, it is only partially and potentially money. It is money in the abstract. It can be used under normal circumstances as a medium of circulation. This coin really and truly becomes money and realizes itself as such when I buy some commodity with it. In that transaction it loses its abstract, i.e., ideal, money character and becomes money in the concrete. When it comes into the hands of the commodity seller, it once again assumes its more abstract character. This transmutation of predominant features goes on perpetually in the process of commodity circulation. It is the same with all other categories in all other domains of existence.
Let us examine the relations between the categories of quantity and quality through this example. Money has as its starting point, not money (it is its destination to become money), but something other than money, its own opposite, commodities. The "ground" of money, as Hegel calls it, is its own opposite, commodities. Without commodities, that is, labor products which are exchanged, money cannot begin to become itself, cannot realize its peculiar essence.
How does a commodity transform itself into money, which is the opposite of the commodity form? A multitude of acts of exchange of goods must take place before the need for a particular commodity to serve as a medium of circulation makes itself felt. This need is satisfied by selecting one commodity to serve as this medium. This is usually, as Marx points out, the most important commodity, such as cattle, grain, or furs.
A specific quantitative development of exchanges is therefore the prerequisite for the qualitative generation of money as a new economic property. The new quality of money appears as the necessary result of the quantitative accumulation of acts of exchange. The production of this new economic quality occurs in a revolutionary way and has revolutionary results. It more and more splits the world of commodities into two opposed poles: into particular commodities on the one hand and the money commodity, which is their universal equivalent, on the other. The ultimate result of this split is exhibited in the crises of capitalism where commodities cannot be exchanged for money on a world scale.
This leap from quantity into quality is no fiction but a true logical expression of what actually occurs in real processes. The germ of the money relation is latent in the existence of commodities. As soon as men begin to say in the market place, "This is worth that," and exchange the products of their labor on equivalent terms, the preconditions for the production of money are generated.
This possibility becomes transformed into necessity with the increasing quantity of such transactions. The social need for an independent measure of value, a standard of price and a means of reckoning brings money into existence.
Given a sufficient quantity of different commodities and number of acts of exchange, it is eventually necessary to find one commodity among the many to serve as money. When men say, "This is worth that," then they soon find that they must have something of which it can be said,
"All things are worth that." This commodity becomes the money commodity. When national paper currencies became valueless during the Second World War, cigarettes temporarily acquired the functions of money.
The dialectical process of development does not end with the transformation of quantity into quality. That is only one of its lawful manifestations. The process continues in the opposite direction and converts the new quality into anew quantity. Once the quality of money makes its appearance in society, it tends to spread indefinitely, to penetrate everywhere, and to transform all other economic relations. This quantification of the money quality reaches its high point under capitalism where every product of labor and, above all, labor power itself, necessarily becomes exchangeable for money.
This quantification in turn leads to the production of a new economic quality. Money transforms itself into capital, which is a higher form of money. This new quality of money, its capital form, also grows and assumes diverse forms: usurious, commercial, manufacturing, industrial and finance capital.
With the socialist revolution this capital form of money will wither away, as will many other forms and functions of money, in the course of time. As Trotsky pointed out, with the establishment of socialist relations, money will become transformed into mere bookkeeping receipts.
Thus we see that there is a ceaseless process, a never-ending round, of the transformation of quantity into quality and quality into quantity, of possibility into inevitability and inevitability into possibility. Money which is inevitable under our economic system was not possible under primitive tribal collectivism which preceded commodity production and will no longer be necessary under the communism of the future. This path of development is extremely contradictory.
Money comes out of commodities and always remains a commodity, just as man came out of the animal species and always remains an animal. Yet money is more than and is other than a commodity, just as man is more than and other than his fellow mammals. Money develops its contradictory characteristics to the point that, under capitalism, money, which is the sole means of unifying and realizing the value of commodities, stands in absolute opposition to the world of commodities. Without money, no commodity can realize itself as a commodity; conversely, without commodities, money cannot realize itself as money.
This contradiction most conspicuously manifests itself in capitalist crises, when the money which originated and functions as the sole medium of circulation becomes the principal and insuperable barrier to the circulation of commodities. This is one of the inherent contradictions of capitalism which will bring about its downfall.
The evolution of money from its origins to its prospective dying away exemplifies the dialectical nature of appearance and essence, quantity and quality, possibility and inevitability, content and form, relative and absolute, accident and necessity, the abstract and the concrete. Such correlative categories make up the content of dialectical logic. They are indispensable conceptual tools for analyzing the contradictory characteristics of reality and its modes of development.
This dialectical and materialist view of appearance and reality clashes with the conceptions of other philosophical schools such as the agnostics and the empiricists. The agnostic theory of knowledge, as put forward by Kant, makes an absolute disjunction between subjective appearances and inner substance, things "for us" and things "in themselves." It asserts that men can experience only phenomena and cannot penetrate to the essence of things. Therefore reality is unknowable through either the senses or reason, though it may be intuited by faith.
Empiricism tends to subordinate essential relations to the sensuous or subjective appearances of things and to take, or mistake, their superficial aspects and immediate manifestations for their fundamental content.
Both theories of knowledge err in divorcing phenomena from essence and disregarding or denying their necessary interconnection as opposing poles of a unified whole.
The divergence and coincidence of appearance and reality are especially important in understanding how knowledge progresses from everyday experience to scientific insight and foresight. Things as they are first manifested to us have contradictory and confusing characteristics which are both leading and misleading. Their immediate presentation can conflict with their real state. At the same time these phenomena provide clues which can expose the deceptiveness of the outward show and open the way to a grasp of their basic content, since essence presents itself in and through diverse appearances.
One familiar instance of this divergence between appearance and reality is the relation of the earth to the solar system. The sun seems to be revolving around the earth whereas we now know that the earth, like the other planets, is orbiting around the sun. The discovery by Copernicus of the rotation of the earth on its axis and its motion around a fixed sun opened the modern epoch in astronomy.
At the same time it is understandable why the other celestial bodies seem to be moving around the observer situated on earth. In the scientific picture of the solar system, both the apparent and the real motions are interconnected inexplicable.
One of the main aims of science is to resolve the conflicts between the outward forms and the inner reality of things by demonstrating their dialectical unity. Knowledge advances by probing beneath, behind and beyond appearances to ever deeper levels of real existence.
From: An Introduction to the Logic of Marxism by George Novack
Lecture VIII. The Categories of Dialectical Logic