David Harvey, Seventeen Contradictions and the end of Capitalism
Chapter 2 – Money
What is this useless stuff in our wallets that allows us to measure the value of everything else?
What value does it in fact measure?
What different forms has it taken historically?
What forms of stability/instability does money bring to our lives
What is the relationship of money to fact and fiction?
David Harvey claims that we need a way to measure the value of commodities relative to eachother. This led to the invention of money. Different types of money have existed historically. From early barter systems that are grounded in the usefulness of particular goods relative to each other emerged commodity monies (gold and silver), then came fiat monies (paper and coins) that were no longer grounded in the value of the object form that the currency took. Finally, we are now entering an era of electronic money, where money takes the form of a computer read-out and transactions are conducted online. Despite this tendency away from material forms the language of weight still informs the ways we talk about value e.g. one pound, two pounds.
But what is money, what value does it actually embody, how does it allow value to circulate and how does it produce value itself?
Harvey says, ‘Money in the first instance a way in which 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.’ So we might argue that money is a measure of human productivity in an abstract quantified form.
The easiest way to quantify such values is to choose a commodity and make quantities of it stand for all the other commodities. Gold historically took on this function in the western world.
But imagine trying to buy coffee with the exact weight of gold. Commodity money is cumbersome. Fiat monies allow us to pay with coins and notes, a much more accurate measure that facilitates the flow of transactions.
But there is also a problem here. Who decides how many bank notes should be printed? If the production of money is not properly controlled prices can also inflate in an uncontrollable way.
Situations can also emerge where money itself can be used to produce value. Harvey describes this as fictitious capital – money loaned against activities that produce no value themselves.
Borrowing on housing values in the run up to the 2007-8 market crash was based on fictitious capital. ‘The bundling together of mortgages into collatoralised debt obligations created a debt instrument that could easily be marketed worldwide. These instrucments of fictitious capital, many of which turned out to be worthless, were marketed to unsuspecting investors around the world as if they were investments certified by ratings agencies to be ‘as safe as houses’. This was fictitious capital run wild. We are still paying for the excess’.