A Cart, A Horse and Money
By Edger Kasunsu, Uganda:
“As measure of value and as standard of price, money has two entirely distinct functions to perform. It is the measure of value inasmuch as it is the socially recognized incarnation of human labor…” – Karl Marx in Capital (Volume I)
The main motivation for this piece is the latter function of money as a socially recognized incarnation of human labor. What I understand by this statement is that the value of any article that is used as money in any country is dependent on the quantity and quality of the human labor performed in that country. This human labor can either be performed with the aid of machines or just plain human brains and hands with the main aim of producing the commodities or conveniences of life such as food, clothing, shoes, etc.
Money is the socially recognized representation of human labor because we, as a society, allow it to be so. This implies that money as we know it has no intrinsic value on its own. If there was nothing to buy in a society, then paper money would be as good as toilet paper and metallic coins as good as scrap metal. Germany after World War 2 is a good example of this.
Karl Marx related money to human labor because all the things that money can buy come (or came) into existence after application of human labor. All commodities on sale in every market had to go through the hands of a human before they could become useful enough to be brought to the market. Cars are made in factories which are run by human beings. Food comes from a garden, and the garden needs a human being to be able to produce the food. Even if the food grew on its own in the wild, it will still need a human to go fetch it.
According to the history of economics, commodities came first and money came much later. This is why barter trade was the first method of exchanging goods between people. In barter trade, both parties involved in the exchange own goods that have their own intrinsic value. Karl Marx called it “use value”. Then, because of its properties of being able to be separated with minimal losses, its ability to resist rust for an extremely long period of time hence durability and because it was easier to carry and also rare, gold was made to act as money to circulate these commodities as the economy shifted from barter trade to something slightly similar to what we have now. Gold became the ‘middle man’ and people did not have to carry whole goats or sheep to the market to buy what they did not have.
After a certain period of time, people forgot that gold actually had no intrinsic value and that actual value was in the commodity. This caused them to look at gold as some sort of god that could give them whatever they desired whenever they wanted it. So, they stopped working to produce tangible usable commodities and turned to mining for gold and silver forgetting that a man cannot digest or dress in gold and silver. Consequently, since there were fewer people working to produce the much needed commodities, the economy became a sort of monopoly. The few people with the commodities hiked the prices of the commodities because of the increased demand.
This price hike then caused the value of the gold to drop (read inflation). This meant that they needed a greater amount of gold to purchase the commodities that they would have gotten with a smaller quantity of gold before the price hike. But humans take a really long time to learn; they prefer illusions to reality and generally hate work. They refused to let that golden illusion in their heads to melt away and then they convinced themselves that if they kept mining for more gold, their purchasing power would keep increasing. They were right in thinking that way, their purchasing power would increase, but so would the prices of the commodities they desired.
In our so-called “Pearl of Africa”, the story runs along the same ancient lines. The only difference is that paper money has replaced the gold and silver. The corporate world has replaced the mines. We are not taught in school that money on its own does not bring wealth. We are not taught that true wealth comes from the soil; from mining minerals, felling trees, growing crops, building houses and factories to produce goods, etc. If we are taught these things in school, then they really never sink down into our heads. As a result, we have attached wealth to paper money. We see money as a god that can deliver to us everything we desire. Instead of creating real tangible products that can be consumed by human beings, we are instead chasing after money. We do not realise that if there is nothing to buy in an economy, paper money becomes useless or loses value.
It seems like most of us have put the cart in front of the horse, a very unnatural thing to do.