Frustrated and embarrassed by my apparent inability to understand even the basics of economics (but it all connects up, and every piece of polished marble floor, offered as solid ground, is a trapdoor into a whole other area of the discipline, the floor of which is in turn all trapdoors. I feel like Indiana Jones, only without the charm, or the unreconstructed colonialism) – frustrated and embarrassed, let me spew out a few thoughts. I’ve been reading Hume on the balance of trade.
“Suppose four-fifths of all the money in GREAT BRITAIN to be annihilated in one night… what would be the consequences? Must not the price of all labour and commodities sink in proportion…? What nation could then dispute with us in any foreign market, or pretend to navigate or to sell manufactures at the same price, which to us would afford sufficient profit? In how little time, therefore, must this bring back the money which we had lost, and raise us to the level of all the neighbouring nations? Where, after we have owned, we immediately lose the advantage of the cheapness of labour and commodities; and the farther flowing in of money is stopped by our fulness and repletion. [kudos for 'fulness and repletion'; this phrase should be used more as a technical term in economics]
Again, suppose that all the money of GREAT BRITAIN were multiplied fivefold in a night, must not the contrary effect follow? Must not all labour and commodities rise to such an exorbitant height, that no neighbouring nations could afford to buy from us; while their commodities, on the other hand, become comparatively so cheap, that, in spite of all the laws which could be formed, they would run in upon us, and our money flow out; till we fall to a level with foreigners, and lose that great superiority of riches, which had laid us under such disadvantages?
Now, it is evident, that the same causes, which would correct these exorbitant inequalities, were they to happen miraculously, must prevent their happening in the common course of nature, and must for ever, in all neighbouring nations, preserve money nearly proportional to the art and industry of each nation.”
The logic of Hume’s argument, I think, would imply that the world economy moves towards an exact, or almost exact, equivalence of value. A bagel in Connecticut will eventually be worth a bagel in Baghdad, all else being equal. The argument itself seems reasonably convincing, from where I’m standing. But since there are in fact large inequalities of value across the world (equivalent goods are not exchangeable for equivalent or nearly equivalent amounts of money worldwide; not nearly), and since there doesn’t seem to be much of a movement towards the equilibrium of value-equivalence either, there must be something wrong or missing here, one would think.
I don’t understand; I know nothing. But -
First thing: Hume seems to assume a single currency; or the equivalent of a single currency – fixed exchange rates. That’s to say, he ignores monetary sovereignty, which is surely an important, though I guess perhaps not a necessary, feature of the system of distinct nation-states that his consideration of the problem in terms of national wealth presupposes.
Second thing: Hume’s argument would seem to imply that there are equivalent and opposite movements of commodities and money in the world economy. At one level, this must be true. But I would be inclined to believe – based on, like, New Statesman articles or something – that historically, by and large, both money and commodities have tended to move in the same direction: from the weak to the strong; from the militarily powerless to the militarily powerful; from the third world to the first – and that this is part of the hegemony that has made global free trade possible. I’ll try to find some books that will tell me about this without drowning me in rhetoric (like the rhetoric, but want to understand). But I would imagine one could argue that the structure of international debt, for instance, might be at least in part a way of draining developing economies of money, which in turn cheapens those economies’ products on the world market, which in turn allows the purchase, or appropriation, of those commodities for a steal. (Is this true? I don’t know! I know nothing!!) In short, and to put things more generally: the movement of money and of commodities need not cancel each other out, as Hume implies, in the movement towards value-equivalence. They might, on the contrary, supplement each other, as the movement of money from country A to country B (or from person A to person B) enables the movement of commodities in the same direction, which was the purpose of the original money transfer.
The point, I guess, is that money is not in the first place a means of exchange or of valuation, but is either itself a commodity, which obeys the same laws of appropriation as any other commodity, or is alternatively a kind of contract – and contracts, as we know, always favour the most powerful party. Or both – a commodity that is a contract; the contract as commodity.
I’ll stress again how little I know and understand. So let me end by point you to a post that does know what it’s talking about – Limited Inc’s latest post links up with some of what N. Pepperell was saying the other day about Derrida’s take on Marx – specifically Marx’s use of the metaphor of the head. Sample:
“Marx was a man who wanted to seize society and make it stand on its feet – on its own two feet – and in that ambition he was serious – an avatar of seriousness. But since that seriousness was realized in images of standing on one’s head and inversion, his seriousness would slip away into ilinx as he analyzed the upside down society, as he corrected the reigning ideology, as, indeed, he spoke for revolution. For even though revolution was on the side of play, was the realization of the society of seriousness, it was entangled from beginning to end in ilinx – the irrepressible euphoria of the revolutionary act.”
All this post written at speed; apologies if nothing useful said.