John Locke’s Ideas on Money
In his article Some Considerations of the Consequences of the Lowering of Interest and the Raising of Value of Money, John Locke outlines the main theoretical provisions of what later became known as the ‘monetary’ theory of economics. The article’s main ideas can be outlined as follows:
- Money is the instrument of ensuring the efficient exchange of goods and services between two or more parties. As such, money cannot be thought in terms of an objective ‘asset’. The validity of this thesis Locke illustrates by the fact that, unlike what it happened to be the case with material goods, there can be no limit to one’s capacity (and willingness) to possess money.
- Lowering the interest rate will not prove beneficial to the economy’s well-being. According to the author, the implementation of this measure will increase the amount of money in circulation – yet, there can be no guarantee that this money will continue to reflect the value of the material assets in question adequately. As a direct consequence of this, money’s ability to serve as the medium of commercial transactions will be substantially reduced: “The low Rate would be content to have more Money lye dead by them, than now when it is higher: By which means there would be less Money stirring in Trade” (Locke 3). Therefore, the government should think twice before deciding to lower the interest rate.
- The process of designing a monetary policy, on the government’s part, may never cease being observant of what accounts for the ratio between the amount of traded goods, on the one hand, and the amount of money in circulation. Locke goes to substantiate the validity of this suggestion, as such that is being reflective of the fact that the amount of circulated money always equals with the medium’s overall nominal worth. What it means is that the price of a particular material asset is solely concerned with what happened to be its quantity.
- Labor is the source of ‘surplus value.’ In its turn, this means that money is merely the mean of distributing wealth between the commercially active individuals, within the society.
In light of what are the economic realities of a post-industrial living, Locke’s idea that money cannot be thought of, as such that represent the value of a ‘thing in itself,’ appears rather fallacious. The reason for this is quite apparent – as we are well aware of, money has long ago been turned into the commodity of its own. The validity of this suggestion can be easily illustrated, in regards to the influence of Stock Exchanges on how the world’s economy functions. The functioning of the real-estate market confirms the soundness of the above-stated, as well, as it is largely concerned with the circulation of the so-called ‘derivatives’, which are in essence the financial contracts between two parties, backed by the third party’s financial obligations that could be bought and sold in the open market. These ‘derivatives’ continue to spawn the generations of the new ones, backed not by a value of the concerned physical assets, but by the originally issued derivatives. This, of course, creates the situation when money can no longer be considered the economy’s instrument, but rather the economy’s actual ‘fuel.’
Another idea, contained in the article, which appears largely outdated, is that the amount of applied labor positively relates to what happened to be the end-products nominal value. The reason for this is that, as of today, it is specifically the measure of a particular product’s technological advancement, which reflects as much as 90% of its value. What it means is that the process of producing a particular good can no longer be discussed, as such that is being concerned with the mechanical formula – the end-price=the cost of labor + the cost of raw material. The validity of this suggestion can be illustrated, in regards to the fact that, as time goes on, the technologically intense manufacturing processes require the progressively reduced amounts of raw materials.
For example, whereas, as recent as 30 years ago, TV-sets used to weigh 30-40 kilograms, they nowadays rarely weigh more than 10 kilograms. The reason for this is that, as this example suggests, it is one’s intellect (and not labor), out which derives ‘surplus value’ of the manufactured products. In light of the above-provided example, we can even say that one’s intellect is now capable of replacing the growing volume of natural resources, out of which the commercially traded products are made – in the literal sense of this word. It is understood, of course, that this exposes the conceptual erroneousness of the ‘nominalist’ ideas, contained in Locke’s article.
Nevertheless, Locke still needs to be given credit for having criticized the idea that money can be thought of as an ‘asset of its own.’ After all, it was the practical implementation of this idea that caused both: the Great Depression of the thirties and the financial crisis of 2008. Therefore, despite having been written in 1691, Locke’s article still represents a certain discursive value.
Karl Marx’s Ideas on Capitalism
In The Manifesto of the Communist Party (1848), Karl Marx aimed to promote the following set of ideas:
- The course of history is defined by the ongoing struggle between the representatives of the dominant and subservient social classes. According to Marx: “The history of all hitherto existing society is the history of class struggles” (1). This struggle is concerned with how the so-called ‘surplus product’ is being distributed within society.
- The bourgeoisie played an utterly progressive role, within the context of establishing the objective preconditions for the 18th century’s Industrial Revolution to take place. The reason for this is that the representatives of the bourgeoisie were able to endow the notion of ‘trade’ with a qualitatively new meaning – hence, making possible the establishment of the global trade-network.
- It is in the very nature of the bourgeoisie to strive to increase the efficiency of the manufacturing processes. This is being achieved by the mean of speeding up the pace of the technological progress, on the one hand and laying off workers, on the other. Thus, the continuous functioning of the ‘free-market’ economy inevitably results in increasing the acuteness of the social antagonisms within the society: “Constant revolutionising of production, uninterrupted disturbance of all social conditions… distinguish the bourgeois epoch from all earlier ones” (3).
- Capitalism is inhumane because it results in turning proletarians (hired laborers) into nothing short of a commodity. One of the foremost features of Capitalism is the fact that the concerned economic paradigm causes the ever-increased specialization of the manufacturing processes. In its turn, this puts the bourgeoisie in the position of being able to reduce the measure of its dependence upon workers significantly. The most direct consequence of this is that these workers end up being increasingly deprived of their social rights and freedoms.
- The very fact that in the Capitalist society, the number of proletarians increases in the exponential progression, makes it only the matter of time, before the society’s underprivileged members will be able to overthrow the government (controlled by the representatives of the bourgeoisie). According to Marx, the dialectical laws of history have predetermined such an eventual development. Therefore, there can be no doubts, whatsoever, in the eventual victory of Communism.
Even though that, by the end of the 20th century, Marxism sustained an utter fiasco, as a political ideology, it would be inappropriate referring to the Communist Manifesto, as being 100% outdated. The reason for this is that this Manifesto does rightly expose what can be considered the main shortcoming of Capitalism – namely, the fact that, while obsessed with trying to generate as much profit as possible, (within the shortest period of time), the representatives of the bourgeoisie (who control the government) are naturally discouraged from investing in the long-term economic projects. In other words, despite being technologically advanced, Capitalist societies are doomed to collapse eventually.
After all, it is in the very nature of Capitalism (as an economic system that tries to optimize its functioning by the mean of reducing the affiliated operational costs) to seek out the ways to have as few people employed as possible. What it means is that, as time goes on, the socio-economic antagonisms between citizens in the Capitalist society will grow progressively more severe – especially given the exponential growth of the planet’s population. The only possible solution, in this respect, can be the adoption of the Socialist/Communist paradigm of what economy ought to be all about. The reason for this is that the main challenge of Capitalism has always been the overabundance of workers; whereas, the main problem of Socialism has been the permanent shortage of the available workforce.
Nevertheless, there are also many conceptual fallacies in the Communist Manifesto, which nowadays became obvious to just about anyone. The main of them is that, as the Manifesto implies, the pathway towards establishing a fair society, is concerned with satisfying the workers’ material/physiological needs alone. Nevertheless, as history indicates, there is so much more than a working individual can wish for, except for striving to fill its stomach with food.
Another conceptual shortcoming of the Communist Manifesto can be well considered the assumption that, after having been brought up by the Industrial Revolution, the main principle of what causes a particular society to remain stratified (along the line of people’s affiliation with the classes of capitalists, proletarians and peasants), will never undergo any qualitative transformation. The validity of this suggestion can be well shown, in regards to the fact that, as of today, it is specifically the individuals affiliated with the economy’s service-related sectors, who account for the bulk of the economically active citizens in just about any Western country. It goes without saying, of course, that these individuals can neither be referred to as the representatives of the bourgeoisie nor as to the proletarians or peasants.
Thus, just as it happened to be the case with Locke’s article, the Communist Manifesto by Karl Marx can be best regarded as being simultaneously both: the intellectually enlightening and yet somewhat outdated piece of the politically-economic rhetoric.
Works Cited
Locke, John 1961, Some Considerations of the Consequences of the Lowering of Interest and the Raising of Value of Money. Web.
Marx, Karl 1848, The Manifesto of the Communist Party. Web.