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What exactly is money? (Animated explainer video) | Geopolitical Economy Report (www.youtube.com)

submitted 2 weeks ago by [email protected] to c/[email protected]

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I feel like this one is kind of a miss? A bit of revisionism to say that money has no relation at all with value. Marx is clear about this… gold is money because it has value. This is true simultaneously with money as a symbol detaching from its material form and the value relation. This symbolic form can only exist after mediation as value.

It’s like saying: the airplane does not interact with gravity because it does not fall to the ground. No — gravity is essential to the mechanism of flight.

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[–] [email protected] 2 points 2 weeks ago (1 children)

Thanks for the response!

I'm trying to think of how that would work with the limited knowledge I have. I'm trying to piece together all these scattered teachings into something coherent in my brain lol. I don't have an education in political economy so you'll have to bear with me. I preface my response with this because I feel like in online writing everyone defaults to assuming bad intentions or hostility. I'd just like to try to better synthesize everything I'm slowly learning.

Is the following one way of approaching why Stalin's plan worked: So the full job guarantee would allow the available labor of the economy L~total~ to be maximally allocated to production of use values at some volume Q~max~ given the productive capacity of the economy.

Given the equation of exchange, which to my knowledge is a tautology re. how the velocity of money isdefined. So it is (trivially) always true by definition - which may make if a pointless equation lol

M v = P Q

Rearranging for the price level given full employment,

P = v M/Q~max~

So the price level shouldn't increase as long as the maximal allocation of labor can keep up with money production, i.e. increases in M are matched by increases in Q~max~ given static v (which I know in practice is never static though). If Q~max~ can't increase, then the only way to increase if is to improve productivity, L~total~ is already allocated. How does Stalin's dual circuit monetary system break this equation, or overcome it? As it is a tautology I thought it would be true by definition, but is it built on assumptions that the dual circuit can bypass? Thanks!

Going on a tangent regarding the allocation/distribution/division of labor to various sectors, the above just discusses aggregate quantities, like the aggregate labor L or aggregated volume produced Q. This labor myst be reallocated to sectors, and this reallocation would have to be commanded or allocated via a law of value. Soviet textbooks post Stalin do mention that the law of value still regulates the economy, and Stalin in his Economic Problems of the USSR mentions the law of value as operating in the economy, but as a limited regulator, or if not a regulator then an influencer.

It is sometimes asked whether the law of value exists and operates in our country, under the socialist system.

Yes, it does exist and does operate. Wherever commodities and commodity production exist, there the law of value must also exist.

In our country, the sphere of operation of the law of value extends, first of all, to commodity circulation, to the ex-change of commodities through purchase and sale, the ex-change, chiefly, of articles of personal consumption. Here, in this sphere, the law of value preserves, within certain limits, of course, the function of a regulator.

But the operation of the law of value is not confined to the sphere of commodity circulation. It also extends to production. True, the law of value has no regulating function in our socialist production, but it nevertheless influences production, and this fact cannot be ignored when directing production. As a matter of fact, consumer goods, which are needed to compensate the labour power expended in the process of production, are produced and realized in our country as commodities coming under the operation of the law of value. It is precisely here that the law of value exercises its influence on production. In this connection, such things as cost accounting and profitableness, production costs, prices, etc., are of actual importance in our enterprises. Consequently, our enterprises cannot, and must not, function without taking the law of value into account

It appears that for consumption goods the law of value appears and regulates, but in the production of intermediate goods the law of value does not regulate, but since consumption goods are required to reproduce labor, the law of value (in consumption goods) does have an impact, or influence on intermediate goods.

Does the above relate to the dual circuit you were discussing?

Thanks again!

[–] [email protected] 2 points 2 weeks ago* (last edited 2 weeks ago)

How does Stalin's dual circuit monetary system break this equation, or overcome it?

Let’s go over how the price anchor in MMT works first. The key here is that the currency issuer (i.e. the state) also determines the wage (labor-hour), thereby anchoring labor to the price of commodity.

Job Guarantee is one implementation of this principle that is tailored to the present day modern economy, given the dynamics of private-public enterprises, legal and monetary institutions and the various infrastructures already in place.

In short, the Job Guarantee ensures that anyone who is willing to work will be employed in a “Public/State Enterprise”, and by setting the price of the labor-hour (how much the State is paying a publicly employed worker), it also sets a wage floor and thereby anchoring the rate of labor and commodity to this, since price is relative.

Let’s say you’re a nurse working in a private hospital and you’re being paid $50 per hour. You want to demand a wage increase, and wants to do so through collective bargaining. Without Job Guarantee, the private employer can simply tell you no, or proceed to lay off workers demanding higher wages, since the labor can be easily replaced.

However, with a Job Guarantee - say the State guarantees a pay of $45 per hour - you can simply threaten to collectively leave the job and join the State-run hospital that guarantees a minimum wage. This minimum wage may be slightly lower than the pay from private enterprise, but the most important part is that two things happen here:

The loss in output from the private enterprise layoff is now immediately replaced by the same workers being employed in the State enterprise, producing the same output and receiving more or less the same wages. This keeps both productivity and consumption demand intact.
The private enterprise cannot keep a buffer of unemployment to keep its wages low, because the workers it laid off are automatically being funneled to the Job Guarantee program. It therefore has to pay at or higher wage (inclusive of bonus, paid leave and benefits) than what the State offers, otherwise people will simply leave their jobs and join the State enterprise.

Therefore, with the State offering a Job Guarantee and setting the wage floor, this mechanism becomes an automatic stabilizer that controls inflation, since prices are relative to the wage (while output remains constant)!

The Job Guarantee therefore acts as an elastic pool of workers employed by the State - when private enterprises lay off workers, the workers don’t lose their income but instead are taken on by the State, ensuring that both output and demand do not fall off a cliff. Similarly, when the business is booming and the private enterprises pay higher wages, these workers will shift towards private employment and the pool of Job Guarantee workers shrinks.

Now, let’s move on to how the USSR under Stalin’s Five-Year Plans handled the inflation issue. With the 1930-31 Credit Reform, a dual circuit component was introduced to the Soviet monetary system: non-cash and cash rubles. Non-cash ruble circuit allows the settlements between enterprises and long-term financing of capital investment (for the creation of means of production), whereas the cash ruble circuit allows the settlements of the transactions between the citizens and retail trade turnover (this is where ordinary citizens get paid for their labor).

The two circuits are only partially overlapped - where the cash ruble emission is issued and regulated by the State Bank on the basis of the availability of goods and commodities, in the form of wage payment to the workers.

What this means is that it allows the State to run a perpetually large deficit to finance development, without having to worry about inflation since the amount of cash ruble is tightly regulated, and determined by the State.

The loop goes like this: the State runs a large deficit by creating non-cash rubles to finance capital investments -> new production/factories are built -> new goods are created/issued -> cash rubles are then issued on the basis of productivity and availability of goods in the form of wage payment.

As such, demand-side inflation is effectively controlled even though huge sums of non-cash rubles have been emitted by the State Bank to drive large scale development.

So, very different implementation from MMT’s Job Guarantee, but both share the same principles: in both cases, the State sets the wages!

This is very different from price fixing, as an example, since fixing commodities to particular prices does not account for prices becoming lower as production of private enterprises become more efficient than the state enterprises.

I think many Marxists (including Roberts) who don’t like MMT are still stuck to the “fixed exchange rate regime” mindset (e.g. gold standard during Marx’s time and the Bretton Woods afterwards) and do not understand that in a free floating exchange rate system, many of the restrictions no longer apply. Stalin correctly decoupled the ruble from gold in the late 1920s/early 1930s, and the USSR economy took off.