Seventeen Contradictions and the End of Capitalism (5 page)

Similar problems have occurred in rental markets. In New York City, where some 60 per cent of the population are renters, many large rental complexes were bought out at the height of the boom by private equity funds looking to make a killing by raising rents (even in the face of strong regulatory laws). The funds deliberately ran down the current use values to justify their plans for reinvestment, but then themselves went bankrupt in the financial crash, leaving tenants with deteriorated use values and higher rents living in foreclosed properties whose ownership obligations were often unclear (who you call to fix a non-functioning furnace in a housing complex in foreclosure is not at all obvious). Nearly 10 per cent of the rental housing stock has suffered from these sorts of problems. The ruthless pursuit of maximising exchange values has diminished access to housing use values for a large segment of the population. And to top it all, of course, the housing market crash triggered a global crisis from which it has proved very difficult to recover.

Housing provision under capitalism has moved, we can conclude, from a situation in which the pursuit of use values dominated to one where exchange values moved to the fore. In a weird reversal, the use value of housing increasingly became, first, a means of saving and, second, an instrument of speculation for consumers as well as producers, financiers and all the others (real estate brokers, loan officers, lawyers, insurance agents etc.) who stood to gain from boom conditions in housing markets. The provision of adequate housing use values (in the conventional consumption sense) for the mass of the population has increasingly been held hostage to these ever-deepening exchange value considerations. The consequences for the provision of adequate and affordable housing for an increasing segment of the population have been disastrous.

In the background to all this has been the shifting terrain of public opinion and public policy on the proper role of the state in the provision of adequate use values and basic needs to populations. Since
the 1970s, a ‘neoliberal consensus’ has emerged (or been imposed) in which the state withdraws from obligations for public provision in fields as diverse as housing, health care, education, transportation and public utilities (water, energy, even infrastructures). It does so in the interests of opening up these arenas to private capital accumulation and exchange value considerations. Everything that happened in the housing field has been affected by these shifts. Why this shift to privatisation occurred is a particular question we are not at this point concerned to answer. All that I think it is important to record at this point is that shifts of this sort have occurred such that state involvement in housing provision (with its particular implication for how the use value–exchange value contradiction has been managed) has been radically transformed throughout much (though not all) of the capitalist world over the last forty years.

Obviously, I have chosen this case of the use value and exchange value of housing because it is a perfect example of how a simple difference, between the use value and the exchange value of a commodity in the market, can evolve into an opposition and an antagonism before becoming so heightened into an absolute contradiction as to produce a crisis not only in housing but throughout the whole financial and economic system. It did not, presumably, have to evolve that way (or did it? – this is a crucial question we must ultimately answer). But that it did evolve that way in the United States and in Ireland, Spain and to some degree Britain, as well as in various other parts of the world, after 2000 or so to produce the macroeconomic crisis of 2008 (a crisis not yet resolved) is unquestionable. And that it was a crisis in the exchange value side that denied more and more people adequate use values in housing in addition to a decent standard of life is also undeniable.

The same thing happens to health care and education (higher education in particular) as exchange value considerations increasingly dominate the use value aspects of social life. The story we hear everywhere repeated, from our classrooms to throughout virtually all the media, is that the cheapest, best and most efficient way to procure use values is through unleashing the animal spirits
of the entrepreneur hungry for profit to participate in the market system. For this reason, many categories of use values that were hitherto supplied free of charge by the state have been privatised and commodified – housing, education, health care and public utilities have all gone in this direction in many parts of the world. The World Bank insists that this should be the global norm. But it is a system that works for the entrepreneurs, who by and large make hefty profits, and for the affluent, but it penalises almost everyone else to the point of somewhere between 4 and 6 million foreclosures in the case of housing in the USA (and countless more in Spain and many other countries). The political choice is between a commodified system that serves the rich well enough and a system that focuses on the production and democratic provision of use values for all without any mediations of the market.

So let us reflect, then, in a more abstract theoretical way on the nature of this contradiction. Exchange of use values between individuals, organisations (such as businesses and corporations) and social groups is plainly important in any complex social order characterised by intricate divisions of labour and extensive trade networks. Barter in such situations has limited utility because of the problem of the ‘double coincidence of wants and needs’. You have to have a commodity I want and I have to have a commodity you want in order for simple barter to take place. Barter chains can be constructed but they are limited and cumbersome. Therefore some independent measure of the value of all commodities on the market – a single metric of value – becomes not only advantageous but necessary. I can then sell my commodity for some general equivalent of value and use that general equivalent to buy whatever I want or need from elsewhere. The general equivalent is, of course, money. But this takes us on to the field of the second contradiction of capital. What is money?

Exchange value requires a measure of ‘how much’ commodities are worth relative to each other. This measure is called money. So what is this ‘money’ that we so unthinkingly use and reuse on a daily basis? We worry when we do not have enough of it, plot ways (sometimes devious or illegal) to get more of it, even as we find ourselves often struggling to organise our lives to live within the parameters defined by how much of it we possess. It sometimes seems as if money is the supreme God of the commodity world and that we must all bow down before it, submit to its dictates and worship before the altar of its power.

We know very well what the basic technical functions of the capitalist form of money are. It is a means or medium of circulation (facilitating exchanges in a way that solves the problem of the ‘non-coincidence of interests’ that so limits direct barter). It provides a single measuring rod for the economic values of all commodities in the market. And it provides a way to store value. But what does money represent and how does it proliferate in its social and political functions and meanings to make it seem as if it is the lust for money that makes the social and economic world go round?

Money, in the first instance, is a means whereby I can make a claim on the social labour of others: that is, a claim on that labour which is expended on the production of goods and services for others in the marketplace (this is what differentiates a ‘commodity’ from a ‘product’ like the tomatoes I grow in my back yard for my own
consumption). It is a claim that does not have to be exercised instantaneously (because money stores value), but at some point it has to be exercised, otherwise money is not fulfilling its destiny and function.

In a complex society, such as that which capital has constructed, we depend heavily upon the labour of others to provide us with all the use values we need to live. We take the availability of many of these use values for granted. We turn on a switch and the electricity comes on, the gas stove lights up at the press of a button, the windows can be opened and closed, our shoes and shirts fit, the coffee and tea of a morning are always there, the bread and the buses, the cars and the pencils and pens, the notepaper and the books, all are available to us, and there are dentists and doctors and chiropractors and hair-dressers, teachers, researchers, lawyers and bureaucrats producing knowledge and rules – all to be had at a price! But these things and services absorb human labour both directly and indirectly through the labour that accumulates in the steel that goes into the nail that builds the house. Most of us participate to some degree or other, directly or indirectly, in the activity of providing goods and services to others.

It is the social value of all that activity, of all that labouring, that underpins what it is that money represents. ‘Value’ is a social relation established between the labouring activities of millions of people around the world. As a social relation, it is immaterial and invisible (like the relation between me, the writer, and you, the reader of this text). But, like moral and ethical values more generally, this immaterial value has objective consequences for social practices. In the case of social labour, ‘value’ speaks to why shoes cost more than shirts, houses cost more than cars and wine costs more than water. These differences in value between commodities have nothing to do with their character as use values (apart from the simple fact that they must all be useful to someone somewhere) and everything to do with the social labour involved in their production.

Being immaterial and invisible, value requires some material representation. This material representation is money. Money is a tangible form of appearance as well as a symbol and representation of
the immateriality of social value. But, like all forms of representation (maps come to mind), there is a gap between the representation and the social reality it is seeking to represent. The representation does a good job of capturing the relative value of social labour in some respects, but it misses out and even falsifies in others (much as maps are accurate representations of some features of the world around us but misleading about others). This gap between money and the value it represents constitutes the second foundational contradiction of capital.

Money, we can say at the outset, is inseparable but also distinct from the social labour that constitutes value. Money hides the immateriality of social labour (value) behind its material form. It is all too easy to mistake the representation for the reality it seeks to represent, and to the degree that the representation falsifies (as to some degree it always does) we end up believing in and acting upon something that is false. In the same way we cannot see the social labour in any commodity, so we are particularly blinded to the nature of social labour by the money that represents it. We will look at examples shortly. The inseparability of value from its representation is important. It derives from the simple fact that without money and the commodity transactions it facilitates, value could not exist as an immaterial social relation. In other words, value could not form without the aid of the material representation (money) and the social practices of exchange. The relation between money and value is dialectical and co-evolutionary – they both emerge together – rather than causal.

But the relation can also be misleading because the ‘gap’ between social value and its representation is riddled with potential contradictions, depending upon the form the money takes. Commodity moneys (like gold and silver) are rooted in tangible commodities with definite physical qualities. On the other hand, coins, paper and fiat moneys (the former issued by private entities and the latter by the state) and the more recent forms of electronic moneys are symbols merely. ‘Money of account’ dispenses with actual money payments at the moment of sale or purchase in favour of the payment of net
balances at the end of a certain period. For firms that buy and sell, the net balances of multiple money transactions are usually far less than the total transactions because purchases and sales offset each other. Only the residual net balance claims are actually paid. Banks, for example, clear cheques from each other (this is now done electronically but it used to be done manually at clearing houses – five times a day in New York – with each bank sending runners to deposit cheques at the window of the bank the cheque was drawn upon). At the end of the day or clearing period, the net transfers between the banks may be close to zero even though a vast number of transactions have taken place. This can be so because the cheques drawn on one bank are offset by the cheques deposited by many others. Money of account therefore greatly reduces the actual amount of ‘real’ money needed. This kind of money also underpins a vast array of credit instruments and loans used to promote both production and consumption (in housing markets, for example, developers borrow to build speculative housing and consumers use mortgage finance to buy that housing). Credit moneys in themselves constitute a hugely complicated world (that some theorists regard as radically different from other moneys).

From all of this arises a peculiar and seemingly tautological use for money. Money, which supposedly measures value, itself becomes a kind of commodity –
money capital
. Its use value is that it can be used to produce more value (profit or surplus value). Its exchange value is the interest payment, which in effect puts a value on that which measures value (a highly tautological proposition!). This is what makes money as a measure so special and so odd. Whereas other standard measures, like inches and kilos, cannot be bought and sold in themselves (I can only buy kilos of potatoes, not kilos full stop), money can be bought and sold in itself as money capital (I can buy the use of $100 for a certain period of time).

The simplest way to conjure up a material representation for value is to select one commodity as the value representative for all the rest. For a variety of reasons, the precious metals, gold and silver in particular, emerged historically as best suited to fulfil this role. The reasons
they were selected are important. To begin with these metals were relatively scarce and there is a fairly constant accumulated supply. I cannot go into my back yard and dig up some gold or silver whenever I want. The supply of the precious metals is relatively inelastic, so they maintain their relative value against all other commodities over time (though bursts of production activity, like the California gold rush, did create some problems). Most of the world’s gold is already mined and above ground. Second, these metals do not oxidise and deteriorate (as would happen if we chose raspberries or potatoes as our money commodity): this means that they maintain their physical characteristics over the time of a market transaction and, even more importantly, they can function relatively safely as a long-term store of value. Third, the physical properties of these metals are known and their qualities can be assayed accurately so their measure is easily calibrated, unlike, say, the bottles of vodka (where consumer taste could be erratic) that emerged as a form of commodity money in Russia when the monetary system collapsed in the 1990s and trading collapsed into a multilateral bartering system.
¹
The physical and material properties of these elements of the so-called natural world are used to anchor and represent the immateriality of value as social labour.