The community’s wealth now has two components: the real goods accumulated through
past real investment and fiduciary or paper ‘goods’ manufactured by the government from
thin air. Of course the nonhuman wealth of such a nation ‘really’ consists only of its
tangible capital. But, as viewed by the inhabitants of the nation individually, wealth
exceeds the tangible capital stock by the size of what we might term the fiduciary issue.
This is an illusion, but only one of the many fallacies of composition which are basic to any
economy or any society. The illusion can be maintained unimpaired so long as society does
not actually try to convert all of its paper wealth into goods (Tobin 1965: 676).
The beauty of this transformation was that there were far fewer limitations on the
amount of money that could be created. But how did this impact the functions of
money? This is the key question that Marx was looking at and he showed that the
useful public good or social illusion was slowly but surely turned into a private
commodity serving the accumulation of ever more financial wealth in any form.
For Marx, this was one of the essential and specific features of a capitalist market
economy in comparison to other forms of market economies. His original use of the
term ‘capital’ expresses the objectification of value in the form of financial ‘products’ that enable people to not only spend money on buying other commodities but
also to apply it, with the sole aim of accumulating more money.
Marx expressed the difference by turning the normal money function around:
C-M-C’ (the purpose of money is to serve a higher input/output goal of creating
something with more use value) becomes M-C-M’ in which the purpose of money
is to make more money. It is applied in any economic transaction that promises
more exchange value and thus more financial return on investment (Marx 1887:
102–108). What is actually done in this process becomes secondary.
Prior to Polanyi’s fictitious commodities, Marx showed how ‘financial capital’
becomes an input factor just like all the goods whose value it should express. The
analogy expressing what he called a socioeconomic ‘craziness’ was the general
genus of “the animal.” Imagine a world in which it would suddenly come to life and
interact with lions, tigers, rabbits and all the other creatures that this term had been
created to subsume (Heinrich 2005, 76). Making money a ‘value object’ destined to
be sold in markets is the incarnation of an abstract idea that turns debt into wealth.
This new commodity, however, is the most desirable of all as long as the
conversion belief holds strongly. It does not rot, it needs little room for storage and
promises to transform itself into any use value at any time. And for those with more
money than their own need satisfaction requires, its application creates even more
money without much actual work being required. In several languages we have the
expression ‘make your money work for you,’ which refers to money invested
purely to generate interest. This became a strong desire in accumulation-seeking
individuals and soon we saw the emergence of private banks and lending
organizations.
This is where the ‘public good’ concept of the way a financial sector should be
set up was very beneficial, although it no longer reflects reality. Public goods serve
all of society, so a financial sector designed from this perspective would have the
role of ensuring that credit could flow where it was needed for use value generation.
As a consequence, the fewer the costs involved in accomplishing this service, the
3.3 How Mainstream Economics Anticipate the Future
109
past real investment and fiduciary or paper ‘goods’ manufactured by the government from
thin air. Of course the nonhuman wealth of such a nation ‘really’ consists only of its
tangible capital. But, as viewed by the inhabitants of the nation individually, wealth
exceeds the tangible capital stock by the size of what we might term the fiduciary issue.
This is an illusion, but only one of the many fallacies of composition which are basic to any
economy or any society. The illusion can be maintained unimpaired so long as society does
not actually try to convert all of its paper wealth into goods (Tobin 1965: 676).
The beauty of this transformation was that there were far fewer limitations on the
amount of money that could be created. But how did this impact the functions of
money? This is the key question that Marx was looking at and he showed that the
useful public good or social illusion was slowly but surely turned into a private
commodity serving the accumulation of ever more financial wealth in any form.
For Marx, this was one of the essential and specific features of a capitalist market
economy in comparison to other forms of market economies. His original use of the
term ‘capital’ expresses the objectification of value in the form of financial ‘products’ that enable people to not only spend money on buying other commodities but
also to apply it, with the sole aim of accumulating more money.
Marx expressed the difference by turning the normal money function around:
C-M-C’ (the purpose of money is to serve a higher input/output goal of creating
something with more use value) becomes M-C-M’ in which the purpose of money
is to make more money. It is applied in any economic transaction that promises
more exchange value and thus more financial return on investment (Marx 1887:
102–108). What is actually done in this process becomes secondary.
Prior to Polanyi’s fictitious commodities, Marx showed how ‘financial capital’
becomes an input factor just like all the goods whose value it should express. The
analogy expressing what he called a socioeconomic ‘craziness’ was the general
genus of “the animal.” Imagine a world in which it would suddenly come to life and
interact with lions, tigers, rabbits and all the other creatures that this term had been
created to subsume (Heinrich 2005, 76). Making money a ‘value object’ destined to
be sold in markets is the incarnation of an abstract idea that turns debt into wealth.
This new commodity, however, is the most desirable of all as long as the
conversion belief holds strongly. It does not rot, it needs little room for storage and
promises to transform itself into any use value at any time. And for those with more
money than their own need satisfaction requires, its application creates even more
money without much actual work being required. In several languages we have the
expression ‘make your money work for you,’ which refers to money invested
purely to generate interest. This became a strong desire in accumulation-seeking
individuals and soon we saw the emergence of private banks and lending
organizations.
This is where the ‘public good’ concept of the way a financial sector should be
set up was very beneficial, although it no longer reflects reality. Public goods serve
all of society, so a financial sector designed from this perspective would have the
role of ensuring that credit could flow where it was needed for use value generation.
As a consequence, the fewer the costs involved in accomplishing this service, the
3.3 How Mainstream Economics Anticipate the Future
109