Can Gold Ever Be Overproduced?

Reader Julio Huato quotes me as writing, “Gold as money cannot be overproduced.”

“Do you,” Julio writes, “mean that somehow the commodity money abolishes the laws of the relative value form? I think not.”

He continues: “For a given period of time, the demand for gold is the sum of the demand for gold as object of use plus its demand as money — i.e. as a means of circulation, payment, and value storage. And that total is never an infinite figure. Gold has to be ‘purchased’ with other commodities, which are not produced in infinite amount, since the productive force of labor is always finite. You seem to be conflating the qualitative determination of money as universally desirable (vis-a-vis other commodities) and its quantitative determination, which is necessarily bounded.

“Marx’s critique of the view that the inflows of gold into the New World led to price inflation do not imply that an oversupply of gold above and beyond the size of the social stomach for gold will not lead to a fall in the relative value of gold in terms of the other commodities. His view is that, on average, that relative value is determined by the requirements of social labor producing, respectively, gold and the other commodities. But fluctuations around that average are allowed. The aim of Marx’s critique is the misunderstanding that gold makes the commodities valuable, rather than their being products of labor.

“I suggest that you re-check that section on the quantitative determination of relative value in chapter 1. And also this, from Marx:

“‘The expression of the value of a commodity in gold — x commodity A = y money-commodity — is its money-form or price. A single equation, such as 1 ton of iron = 2 ounces of gold, now suffices to express the value of the iron in a socially valid manner. There is no longer any need for this equation to figure as a link in the chain of equations that express the values of all other commodities, because the equivalent commodity, gold, now has the character of money. The general form of relative value has resumed its original shape of simple or isolated relative value. On the other hand, the expanded expression of relative value, the endless series of equations, has now become the form peculiar to the relative value of the money-commodity.'”

Julio is asking, if too much gold is produced relative to other commodities, won’t what Marx calls the expanded relative form of the value of gold—in plain language, price lists read backwards—fall? Or what comes to exactly the same thing, won’t an overproduction of gold cause prices in terms of gold to rise?

And therefore, isn’t it true that in fact gold can be overproduced?

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More on Productive and Unproductive Labor

Reader Mike Treen was not convinced by my argument that “immaterial production” such as the labor of actors or singers giving live performances is labor that is productive of surplus value if they are employed by a for-profit business. Mike indicates that he supports the contrary view of Ernest Mandel.

In his introduction to the Penguin edition of Volume II of “Capital,” Mandel produced two quotes from Marx. Taken at face value, these quotes would seem to indicate that Marx himself expressed contradictory views on the question of the productive character of labor involved in “immaterial production” and in general was evolving towards the view that only workers who produce material objects can be considered productive of surplus value.

Productive workers produce capital

This question is an important one in Marxist value theory, because the workers who produce surplus value also produce capital itself. With few exceptions, new capital is created out of surplus value. A portion of the very product that the productive workers produce is turned against them in the form of the capital that exploits them on an ever-expanding scale.

I unfortunately do not have a copy of Mandel’s introduction to Volume II of “Capital” on hand, nor was I able to find it on the Internet. It appears still to be under copyright. However, from Mike’s quotes and my own personal recollection, I believe that Mandel more or less argued that non-material production—for example, the labor of a singer whose labor power is purchased at its value by a capitalist employer to give live performances—can never produce surplus value.

Mandel’s views on this question—I remember that it also was my opinion many years ago when I first read Mandel’s introduction to Volume II of “Capital”—seemed closer to the views of Adam Smith than those of Marx. According to Adam Smith, only workers who produce material commodities of some durability—material objects—can be considered productive workers

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