| Money and Totality by Fred Moseley | MR Online Money and Totality by Fred Moseley

Review of Money and Totality by Fred Moseley

Originally published: The Internationalists on August 22, 2019 (more by The Internationalists)  | (Posted Aug 28, 2019)

Background to this Book

This is a substantial book which the author admits has been 20 years in the making.(1) It deals primarily with Moseley’s own “Macro-Monetary” interpretation of Marx’s economic writings and takes up and rebuts criticisms of this interpretation. However, the book also looks critically at the major interpretations of Marx’s economic work, by Marxist academic economists, which have emerged in the last 100 years, giving a brief description of them and critically examining their failings. Many people may not realise this, but for the greater part of the twentieth century the accepted view among academic Marxist economists, which was generally known as the Standard Interpretation (SI), was that Marx made a fundamental mistake in his economic analysis which needed to be corrected. The key issue behind this is the so-called “transformation” problem, namely the transformation of values into prices of production. The SI and its offshoots claim that Marx failed to do this correctly and his work needs to be corrected. A number of corrections have been proposed and a further number of variations of these corrections themselves put forward in ever greater complexity. Moseley shows how these criticisms and corrections are founded on a misinterpretation of Marx’s work; and that the corrections each violate some other key aspect of Marx’s work. Moseley argues that Marx did not make a mistake and there is no transformation problem whatsoever.

It is interesting to note that the criticisms of Marx made by academic economists, had most currency during the period following the Second World War when capitalism appeared to be marching from strength to strength. A notable exception was Paul Mattick who argued, throughout the boom of the 50s and 60s, that the post war boom was based on the devaluation of capital which had been brought about by the war, and predicted the return of the crisis.(2) Moseley’s book is dedicated to Mattick whom he recognises as a major influence on his work. With the return of the crisis in the 70s the SI began to be first challenged in academic papers and later in books. The crisis of 2007/8 has added momentum to this process and Moseley’s book is the latest refutation of the SI. The relationship of capitalism’s health to interpretations of Marx’s critique is not accidental. It is an illustration of the link between the infrastructure of capitalist society, its economy, and the superstructural ideology.

Though these disputes may seem somewhat arcane, the conclusions about the SI affect basic concepts of Marxism which are essential for understanding capitalism. In particular, the SI and its variants undermine the centrality of the labour theory of value. The refutation of the labour theory of value is, of course, something bourgeois economists have been trying to do since the 1870s.(3) Marx’s aggregate equalities, namely that, at the level of the global capitalist economy, total value equals total price and total surplus value equals total profit, which he derives in Capital Volume 3 Chapter 10 are also undermined, since as Moseley shows, according to the SI they cannot both be true simultaneously. These remain essential tools for understanding twenty first century capitalism with its inflation of the money supply, falling rates of profit and speculation. Understanding tendencies and developments in contemporary capitalism are, in turn, essential for framing principles and tactics in the class struggle.

The Transformation Problem

The labour theory of value holds that labour is the source of value in capitalism. The products of capitalist production, commodities, take their value from the labour they contain, which can be measured in terms of labour time. The source of profit in capitalism is the unpaid labour which capitalists extract from the working class, the surplus labour, which appears in the form of surplus value. This can also be valued in terms of labour time. Marx makes a provisional and simplifying assumption in Volume 1 of Capital, that commodities exchange at their values. This holds for the aggregate of the whole global economy, but Marx was aware that this is not true for individual commodities, which exchange at their prices of production.(4)

In Capital Volume 3 Marx examines how products of individual industries get their prices and concludes values are transformed into prices by multiplying the capital laid out in the individual industries by an average rate of profit determined across the economy as a whole. This produces an equalisation of the rate of profit throughout the sectors of the economy. Prices were therefore generally not equal to values but dependent on the capital laid out and the average rate of profit. Therfore individual industries do not generally get as profit the surplus value they produce. There is consequently a distribution of the total surplus value produced between the various industries and sectors of the economy. The amount each industry receives depends on the capital they lay out multiplied by the average rate of profit for the total economy. Marx drew up some tables in Capital Volume 3 Chapter 9 which show the division of surplus value between industries with different capitals and different ratios of constant to variable capital. The initial inputs appear in terms of values. Marx argued, however, that for the economy as a total unit (and today this must be the global economy), the sum of all the values must equal the sum of all the prices and the sum of the surplus values must equal the sum of all the profits. Marx’s analysis is a dynamic one starting with the economy as a whole from which an average rate of profit is calculated and then moving to the individual sectors where the capital they lay out is multiplied by an average rate of profit determined from the economy as a whole. This is an analysis with sequential evaluation which considers capitalism as a single system with direct connection between values based on labour time and market prices.

Marx’s analysis is fairly straightforward and easy to understand. However, the proponents of the SI(5) hold that, since the inputs to production are products of other industries, Marx should therefore have transformed the inputs from values to prices of production. They then set about correcting Marx’s ‘mistake’. This resulted in evaluating inputs and outputs simultaneously via a series of simultaneous equations, or by mathematical iteration, or by analysing the production cycle in terms of the physical quantities of the commodities input to production and those produced as output. The rate of profit was also determined simultaneously.

Moseley examines the SI and the various permutations of it in detail. He points out these corrections amount to a static equilibrium theory of capitalism and moreover make the labour theory of value (LTV) redundant because the results of all the clever mathematics reach the same answer whatever the initial inputs. Further they result in two separate systems of evaluation: a value system, which is hypothetical, and a price system, which determines prices of production. These two systems are without connection. There is thus a price rate of profit and a value rate of profit which need not be the same. If this is the case then the key conclusion of the LTV that surplus labour is the source, and only source of profit, is undermined. The sum of the surplus values does not necessarily equal the sum of the profits and some other source of profit must exist. Similarly the sum of the values of globally produced commodities does not necessarily equal their prices. All this, one would have thought, represented metaphorically driving a coach and horses through Marx’s analysis, but it has been considered merely as extending and improving his theory.

As capitalism’s crisis continued further rejections of the SI have been developed. The so-called Temporal Single System Interpretation (TSSI), developed by A Kliman and T McGlone and explained in Kliman’s book Reclaiming Marx’s Capital (2007), presents a refutation of the premises and conclusions of the SI. In particular it argues there is no logical flaw in Marx’s theory, as the SI claims, instead it is a logically consistent system. Moseley is largely in agreement with the TSSI but criticises it for arguing that prices of production are short term prices applying to a single cycle only. Prices of production, he insists, do not change with each cycle of production as the TSSI claims. Moseley argues prices of production are rather than long term centre of gravity prices responding to prices of inputs to production. If prices of the inputs change during the production process prices of the outputs must reflect this.(6) Moseley argues that, although the TSSI satisfies Marx’s aggregate equalities in a single period of production, it will not do so in the long run.

Macro-Monetary Interpretation

Moseley has developed his “Macro-Monetary” interpretation by arguing that Marx’s analysis starts on the macro level analysing capitalism as a single economy, that is analysing the economy as a whole in terms of values. It then proceeds to analysing individual industries, or branches of production. This is at the micro level, and the analysis is a monetary one resulting in prices. He calls these analyses different levels of abstraction. The first, the analysis of capitalism as a whole, can be done in terms of values. This is the level of abstraction which underlies Capital Volumes 1 and 2. For this it is assumed that commodities are exchanged at their values. For the whole economy, the sum of all the values will equal the sum of the prices and the sum of the surplus values will equal the sum of the profits. Thus for the total capital the rate of profit will be the sum of the surplus values divided by the sum of the values of all the capitals.

However, in Volume 3 the level of abstraction is a single industry. Here we find values converted into prices of production via the average rate of profit worked out for the economy as a whole and surplus value determined for the economy as a whole distributed between industries as described above. For an individual industry its original capital is increased, or in Marxist terms valorised, in the following cycle:

M-C …. P …. C’ – (M + ΔM)

A sum of money capital M is transformed into capital, C, representing means of production and labour power. This capital enters the production process P, and is transformed into capital C’, representing commodities produced. The sale of commodities C’ results in recovery of the original money capital M plus an increase ΔM. ΔM, of course, represents the unpaid labour of workers. This circuit starts and ends with money. It starts in the sphere of circulation, moves to the sphere of production, then returns to the sphere of circulation.

Because the original purchase of the means of production and labour power takes place in the sphere of circulation, the exchange of money capital for means of production and labour power is an exchange at prices of production. Hence the inputs to the valorisation cycle are prices of production to start with and their transformation from values to prices of production has already taken place. It follows therefore that the entire argument about the need to transform inputs from values to prices of production is based on a misunderstanding.

However, if the inputs are prices of production they are not generally equal to their values as Moseley admits. The link between value and price of production can only be made by assuming that these actual quantities of money capital used to purchase means of production and means of subsistence do, in the long term average, approximate to values. Marx makes this assumption and so these sums represent a starting point, a point of departure, for the analysis. Using these values, which are the same as those used in Capital Volume 1, the analysis is able to show how a sum of money capital M can be increased to M + ΔM.

Moseley is at pains to prove that his analysis corresponds to that of Marx. He supports this with many textual quotations from Marx’s published works and the more recently available drafts and notebooks accessible in the MEGA.(7) He also deals with sections of Marx’s work quoted by the SI proponents and attempts to show they are taken out of context or that their ambiguity needs to be seen in the context of Marx’s work as a whole. Whether this book will lay the transformation problem to rest or not is, however, doubtful. So much of Marx’s work now available was not edited by him but has been published posthumously. Major texts were compiled by Engels, and now with the MEGA available it is possible to see what Engels left out and what he reordered. In addition the notebooks, which are dated, show how Marx’s analysis developed. Ambiguities, of course, remain and academic Marxists will continue to use them to support their various views.

A more significant question is how precisely Moseley’s analysis helps in understanding the trajectory of twenty first century capitalism.

Relevance to Twenty First Century Capitalism

Moseley’s book clearly affirms the key aspects of Marx’s analysis which continue to underlie contemporary capitalism. The most important is the centrality of the labour theory of value to any true understanding of the present. Labour is the source of value and unpaid labour is the source of surplus value which in turn is the source, and only source, of capitalist profit. As a consequence it follows that the aggregate sum of the surplus value produced globally must equal the sum of the profits which the capitalist class appropriate. There is similarly only one rate of profit or, in other words, the value rate of profit is equal to the price rate of profit. Also, since there is only a single system of values and prices the sum of the values must equal the sum of the prices of production.

Marx’s analysis is based on money being commodity money, (i.e. gold/silver etc. which have intrinsic value in their own right). Does today’s money, known as fiat money, invalidate all this? Moseley thinks it does not. Marx, in the chapter on money in the Grundisse(8) lists three main functions of money. It must serve firstly as a measure of value, secondly as a medium of circulation and thirdly as an abstract representative of wealth. Today’s fiat money is a measure of abstract labour, i.e. value, and is accepted as both a medium of circulation and a representation of wealth. It therefore serves the same function as commodity money previously did. It can be related to labour time by what is known as the Monetary Equivalent of Labour Time (MELT). In a system of commodity money MELT would be determined by dividing the new value produced by labour in currency units (gold) by the labour time required to produce it. Moseley maintains that in a fiat currency system MELT is still related to gold and should be calculated by dividing the amount of paper money in circulation by the quantity of gold required to replace it if prices were gold prices.

The use of fiat money, however, gives states and banks controlling national currencies powers they could not have with commodity money which had to be backed by gold. Banks can inflate the money supply by issuing credit which is not redeemable by gold, while central banks can issue bonds and manipulate their interest rates. This is not a new phenomenon. In the case of the British economy, a standard work explains that: “In 1844 an Act of parliament limited the quantity of currency which the Bank of England could issue to the value of its stock of gold but the Act also allowed the Bank to issue £14 million of notes unbacked by gold, (the so-called ‘fiduciary issue’). After this initial breach, the fiduciary element was consistently increased until the break from gold was completed in 1939 with the transfer of the Bank’s gold holding to the Exchange Equalisation Account, for use only in international payments.” (Guide to the British Economy, Peter Donaldson). What Donaldson omits to mention is that the 1939 devaluation was the tail-end of a round of competitive devaluations by all major states in the world economic crisis preceding the Second World War. The worldwide break from gold had started with the British domestic economy in 1931 followed by the U.S. abandoning the gold standard in 1933. By 1939 the break was ‘completed’ when the whole sterling bloc came off the gold standard.

More recently we have seen central banks directly injecting fictitious money into the banking system by bailouts and quantitative easing. This has created massive inflation. Since the modified gold standard ended in 1971 the inflation of currencies has been staggering. The gold price has risen from $35 per ounce to an average of around $1400 today. This is devaluation of the dollar by a factor of 40 or 39000%. Past devaluations such as that carried out by Roosevelt in 1933, when the dollar was devalued from $20.67 to $35 per ounce of gold, which amounted to a 70% devaluation, pale into insignificance. For the UK inflation since 1971 has been 1470%.(9) The amount of money relative to the size of the economy has been increased by a factor of about 16. This, however, is significantly less than the increase in the gold price. One of the reasons for this is the distribution of this new credit money and the way the official statistics on inflation are calculated. In the UK according to analysis of “Positive Money,” an organisation which campaigns for reform of the banking system, while the UK central bank (BoE) has created £190bn of additional money since 1971, private banks have created £2.02 trillion. The bulk of the new money created by private banking system, £1.28tn or 63% of it, has gone into housing. The second largest amount £460bn or 23% has gone into finance.(10) This has produced massive inflation in UK house prices. In addition there has been a massive increase in debt, both of which are not registered in official inflation statistics. All this exists on a global scale also. Global debt, as we pointed out in Revolutionary Perspectives 12,(11) now amounts to approximately $250 trillion, well in excess of the debt existing before the crisis of 2007/8. This debt attracts interest which can only result in the financial sector appropriating an ever larger share of the available global surplus value. All this, of course, has resulted in the enormous increases in inequality which bourgeois economists, such as Piketty,(12) have exposed and lamented. The use of non-convertible fiat currencies has given the controllers of capitalism the ability to carry out manoeuvres with the monetary system which postpone capitalism’s problems. These problems are being attenuated by spreading them globally and allowing the central countries to appropriate an ever greater share of the global surplus value through their financial sectors. But have these measures been able to fundamentally invalidate Marx’s critique of capitalism? We think not.

One of the issues which Marx is at pains to emphasise at the start of Capital Volume 1 is the fetishism of capitalist production. Nothing is as it appears and this starts with the nature of the commodity itself. Profit appears to come from both constant capital and labour both of which bourgeois economists insist are simply factors in production. The source of surplus value and so capitalist profit is disguised. The distribution of surplus value between industries, commerce, interest and rent, hide where this surplus comes from. Each sector claims it produces the profit it appropriates. Again monopoly capital drains surplus value from rivals to itself making it appear that monopoly itself is a source of profit which it is not. All this makes the system opaque and hence difficult to understand. However, as Marx noted…

… all science would be superfluous if the outward appearance and the essence of things directly coincided(13)

Marxism is, of course, the critique which unveils the essence of capitalism which lies behind its appearance.

Today, as the global economy flounders from crisis to crisis, Marx’s analysis of capitalism is the essential basis for a correct understanding of what is going on. Moseley’s book reaffirms key elements of this analysis. The previous obsession with the transformation problem has resulted in the undermining of these key aspects of Marx’s critique, actually making an understanding of twenty first century capitalism harder. Moseley’s book, though long winded and somewhat repetitive, serves a very useful purpose in exposing this undermining and its implications. For this reason alone it is worth reading.



  1. Money and Totality by Fred Moseley published by Haymarket Books in 2015
  2. See Marx and Keynes Paul Mattick (Merlin 1970)
  3. The theory of marginal utility as opposed to the labour theory of value was proposed by W.S.Jevons in 1871 and taken up by others including A Marshall Principles of Economy in 1890. P Mattick wrote, “Marginal utility is the construction of a value concept which justifies the prevailing class and income differentiations. The existing inequalities based on the exploitation of labour are explained as the undefeatable natural law of diminishing utility.”
  4. This issue was central to Marx’s criticism of Ricardo.
  5. Most important of the theorists of the SI are L Bortkiewicz Value Price in the Marxian System, P Sweezy The Theory of Capitalist Development, P Sraffa Production of Commodities by Means of Commodities, I Steedman Marx after Sraffa.
  6. A Kliman argues Moseley’s criticism amounts to simultaneous valuation of inputs and outputs.
  7. MEGA is Marx Engels Gesamtausgabe–a project to publish all the writings of both Marx and Engels on the internet.
  8. See K Marx Grundrisse p 115
  9. See inflation.iamkate.com
  10. See Positive Money: positivemoney.org
  11. See: leftcom.org
  12. See Piketty, Marx and Capitalism’s Dynamics: leftcom.org
  13. K Marx Capital Volume 3, Chapter 4
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