Conclusions to Marx’s Theory of Money in Capital Vol. 1


This is the closing post of a series which has gone through the topics around money in Capital Vol. 1. As previously noted Marx’s chapter on money can’t be presented as his only take on this subject, but it might be his most mature and acknowledged. It’s also worth mentioning that the chapter around which these installments have gone through, is but a fragment of Capital Vol. 1. Sometimes described as a work presented in layers in which one layer develops the concepts laid down in preceding layers; its display of themes is expansive, not in a circular, but in an elliptical fashion— revealing the internal conceptual dynamic of the dialectical method of presentation.

There are few things as common and, at the same time, when thought about hard enough, as elusive as money. To think about such a pedestrian object shouldn’t be an excruciating ordeal but it usually ends up being so, especially when plowing through the economistic jargon which tends to opaque any chance of understanding the problem of money. Marx’s analysis is not, in any sense, the last word on money; it’s neither free from jargon and it can be dull and disencouraging. Indeed, it’s a dense text, but certainly a committed reading pays off since it pries into the reasons why money, under the capitalist mode of production, ultimately hinders the efficient distribution of wealth.


What chapter 3 of Capital vol. 1 offers is not a history of money or a definition per se of money— although the latter gets elaborated peripherally—, but rather a description of the money dynamic in the process of capitalist production. It offers an analysis of the functions of money, in a market economy backed by the power of the state, as a mediator in the various phases of capitalist production. The most rudimentary of these descriptions, bypasses previous forms of transactions (i.e., barter), and is delivered in the C-M-C equation, which deals with the circulation of commodities. Such a movement is intended to show a process of social metabolism between two actors: seller (Commodity-Money) and buyer (Money-Commodity) [1].

Both actors represent the two complementary phases of the C-M-C equation using money (as a universal commodity) to mediate between particular commodities. Money acts as a means of measuring, through price, the value of commodities, ideally reflecting the socially necessary labor time that such commodities embody. In doing so, money stands as a universal medium; “it is all other commodities divested of their shape, the product of their universal alienation” [2]. Money as price mirrors in a basic form the production capacity through which the commodity came into being, defining the commodity’s limit of convertibility.

Furthermore, we see that money is of little efficacy if it mediates a single transaction. Its full potential is revealed when considered in a continuity of circulations. In such a dynamic, the binary components of the C-M-C equation constitute a circuit dynamic where the metamorphism of commodities gets “inextricably en­twined with the circuits of other commodities” [3]. This mercantile exchange develops, on the one hand, the metabolic process of human labor and, on the other hand, natural linkages free from the control of the actors in these transactions.

Crucially, money is presented as a “radical leveler”: “a commodity, an external object capable of becoming the private property of any individual.” This capability grants its holder “a social power that becomes the private power of private persons” [4] —the private appropriation of money gives way to the possibility of private concentration of power.

This metabolic process grows, expands the relations in the circulation process between people; C-M-C-M-C-M… This expansion and development of transactions allows not only the mediation, through money, of commodities, but most crucially, the begetting, through money of an increased amount of money. Such are the relations that the following complementary equation aims at depicting.

M-C-M illustrates the relations that the hoarding of money creates. When analyzed abstractly, the hoarding of money is motivated by its capacity of measuring value: “independent of all limits, it is representative of material wealth as convertible into any other commodity”— this refers to money’s qualitative lack of limitation. At the same time, it is “limited in amount, having limited efficacy as a means of purchase” —this is money’s quantitative limitation. “This contradiction between qualitative lack of limitation and quantitative limitation of money keeps driving the hoarder back to his Sisyphean task: accumulation” [5].

By now, money hoarders might realize they can lend part of their hoard and become lenders. And since their goal is to increase their hoard, they will lend it to a debtor with an interest over time. Differently to the C-M-C movement, which describes an immediately expended transaction, the feasibility of the M-C-M movement is reached in protracted time lapses. This is thus the moment of crystallization or hatching of capital and capitalist circulation, where money is used to obtain an increased amount of money. Significantly, the hoarding of money that, in a way, lays the conditions for credit relations, provides an important insight. Since money, the universal equivalent, grants its holders with a private power that can be privately concentrated, there arises a possibility for the concentration of private and, eventually, class power in monetary form.

The velocity of circulation of money is a question that is reiterated three times. Initially, at the level of the C-M-C movement, the velocity of circulation of money measures the rate at which money circulates. It depends on the quantity of money in circulation, the movements of prices and the quantity of commodities in circulation. These three factors are inextricably related to one another. The rise of credit relations (through the M-C-M movement), leads to add two more nuances to this question. In a situation where commodities circulate without their monetary equivalent appearing until a future date, credit money arises and works as money in debt certificates (circulating and transferring credit to others). As such, money takes peculiar forms of existence, inhabiting the sphere of large-scale commercial transactions. With a certain degree and level of commodity production, money becomes the universal material of contracts. Therefore, the quantity of the money required for meeting the periodic payments of credit relations is in direct proportion to the length of the periods or, in other words, the longer the period, the more money is needed, and vice versa.

Taken from D. Harvey Reading Capital:
Graziani’s money circuit

This work would seem unproductive if a pragmatic, functional model, where the concepts herein expounded, went absent. An effective way of setting in motion the concepts described in the previous section is through the schema in Graziani (1997). Such analysis offers a macroeconomic overview of capitalism as a system based on the separation between labor and means of production, and, consequently, on an opposition between a class of capitalist owners and a class of dispossessed workers; a definition of a system composed of classes in conflict [6]. Within this framework, money is to be understood in a circuit: a money circuit.

The economic process thus gets underway, in Graziani’s model, in two “moments”: the opening moment and the closure moment. The former refers to when enterprises, through credit relations, obtain financing from the bank sector, purchase labor power and set the productive process in motion. The latter, the closing moment, is when this process is consummated; when enterprises, after having sold the commodities produced, regain possession of the money expended and reimburse the banks for the loan they received at the start [7]. The action of the capitalist is therefore directed toward the development of the entire cycle of capital on an ever expanded scale [8].

Money must be able to function as a transitory, albeit necessary, form of wealth that allows the money circuit to carry on. It has an important role in the aforementioned two “moments”: 1) in the opening moment, money is necessary to start the process of production— for the capital cycle to grind onward, money must be continuously converted into other commodities; 2) in cases of economic uncertainty, when the closing moment is hindered, money as such is desired as a final form of wealth, i.e., hoarding. Money thus enters the money circuit as credit money and, once production is underway, money can only have the nature of credit. Quite sufficient to finance the entire volume of exchanges, the credit mechanism is expedited by the financier to the enterprise. However, a strict consideration of the capitalist class as a unified whole posits that the transactions from enterprise to enterprise cancel each other out since they are within the same sector, while what remains are the payments made by enterprises outside their own sector, which can only be wage payment.

The understanding of the economic process as a money circuit also allows an effective analysis of the phenomenon of crises which are arrests of the circuit. Since there is no compelling necessity that says C-M must immediately be followed by M-C, such asymmetry posits the perpetual possibility not so much for monetary and financial crises but for the emergence of a barrier to the realization of surplus-value through failure to spend. Nevertheless, if there is spending, the moment of closure succeeds and the continuity of the economic process is assured. However, if, for reasons connected to the relatively pessimistic prospects for entrepreneurs or speculators, it becomes more prudent to maintain wealth in liquid form, the circuit stops and a phase of crisis intervenes. Some crises, like those of overproduction, are less troublesome because volume of production, ultimately, adapts to the level of demand and the phenomenon of unsold commodities disappears. On the other hand, the unemployment crisis is more problematic but ebbs when capitalists trust circumstances to be favorable and decide to put an end to it, reinvesting and reinitiating the productive process [9].

The first significant result that emerges is that no exchange that remains purely internal to the capitalist class can contribute to the valorization of the invested capital. In fact, any advantage that an individual capitalist might derive from exchange with other capitalists would be offset by an identical loss suffered by its counterpart, cancelling out both exchanges. The valorization of capital for capitalists as a class comes only from exchanges that capitalists effect outside their own class, and hence in the only external exchange possible, i.e., the acquisition of labor power. While money can be either commodity or credit in the phase of circulation, in the opening moment, in the acquisition of labor power (an exchange between capital and labor), the means of payment used is pure credit, the promise of payment. The profit of capitalists as a class proceeds solely from the relation established between capitalists and workers and, as a consequence, it comes into being as a product of the difference between the total sum of labor employed and the sum of labor that returns to the worker in the form of the real wage [10].

The function of money is thus permitting the initial purchase of labor power: a temporary loan for the duration of the productive cycle. Once the cycle is completed, the money is recovered in liquid form and can be reimbursed to the financier or reused for a new productive cycle [11]. The only exchange relation that involves money therefore is that between money and labor, and the only price that is formed is the wage rate. The problem of the value of money is therefore reduced to the problem of determining wages [12]. Credit money is no longer a representative of commodity money but serves as a means of payment with functions that commodity money could not exercise [13].

The class outlook


The rise of credit money and the use of money as a means of account thus assures continuous circulation. The credit system as an organized relation between creditors and debtors steps into the circulation process to play a vital function. It becomes the main means to cover the demand for liquidity in a way that is internal to capital circulation. To the degree that capitalism continues to expand, the role of the credit system as a central nervous system for directing and controlling the global dynamics of capital accumulation becomes more prominent. The implication is that the control over the means of credit becomes critical for the functioning of capitalism, which renders a prospect where a fusion of state and financial powers appears inevitable. This fusion seems evident in the formation of state-controlled central banks with unlimited reserve powers over the paying out of the means of credit to private entities.

If an effective overview and critique of capital circulation is to be undertaken, a unitary understanding of it is essential. This dynamic is best construed as an ensemble of distinctive moments within the totality of the circulation process of capital. For it to be effective, centering such analysis under a politics of class struggle must be pivotal. Class is the one category that the powers that be do not want anyone to take seriously. Mainstream economic discourse scathingly mocks anything referencing class war as being gratuitously divisive while advocating “unity” to confront its difficulties. Of course, ruling elites won’t ever admit, let alone discuss, the one central thing they’re engaged on: their class strategy for expanding their wealth and power.


[1] The plastic nature of the wants, needs, and desires of people is an undiscussed subject in this series. Nevertheless, it is a key element in the system of circulation of commodities and capital since it requires, through certain political coordinates, the formation of a whole structure and process of daily life that demand the absorption of a certain supply of use-value for sustenance. The creation of needs is indeed a political problem that has become increasingly important over time, where “consumer sentiment” is a key element in perpetuating capital accumulation.

[2] (Marx, 1867: 205)

[3] (Ibid.: 207)

[4] (Ibid.: 229-230)

[5] (Ibid.: 231)

[6] (Graziani, 1997:21)

[7] (Ibid.: 22)

[8] (Ibid.: 30-32)

[9] (Ibid.: 23)

[10] (Ibid.: 47)

[11] (Ibid.: 38)

[12] (Ibid.: 39)

[13] (Ibid.: 48)


Graziani, A., 1997, “Let’s Rehabilitate the Theory of Value”, International Journal of Political Economy, vol. 27, no. 3: pp. 21-25

Graziani, A., 1997, “The Marxist Theory of Money”, International Journal of Political Economy, vol. 27, no. 2: pp. 26-50.

Marx, K., 1867 (1990), “Capital: A Critique of Political Economy. Volume One.” Penguin Books, p. 1136.

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