Gold as Money and the Role of the National Question in the Current Crisis

Nikos, a good friend of this blog, has asked two questions—one involving monetary theory and the other regarding the role of the national question in the current crisis.

Nikos’ first question relates to a proposal made last year by the German Council of Economic Experts that the Greek government and other highly indebted European governments put up a portion of their foreign exchange reserves—gold and foreign currency holdings—as collateral for what would amount to loans in the form of euros. The proposal was rejected at the time by the Merkel government but supported by the Social Democratic and Green opposition parties.

Nikos actually has two questions about this proposal. First, does it indicate that gold is still money? And second, does this movement toward using gold as collateral point to a return to the gold standard?

Gold as world money

I would answer yes to the first question and no to the second. Among gold’s basic monetary roles is its role as world money. Traditionally, paper or banknote currencies circulated only within nation states. Insomuch as currencies were made not out of paper and ink but of gold coins—and silver coins in earlier times—these currencies were literally made out of money material. The coins could be converted into bullion—pure money material—by simply melting them down. In this way, gold and or silver bullion would wear the “uniform” of a national currency.

Because gold and silver coins were made of money material and could easily be melted down into bullion, they could circulate internationally. Their role as money did not depend on their being “legal tender” in any particular country.

Origins of the U.S. dollar

Indeed, what became the U.S. dollar had its origins in a Spanish silver coin—called the dollar—that circulated widely in Britain’s North American colonies. Now, because of the U.S. world empire, today’s paper dollar currency enjoys a sphere of circulation far beyond the borders of the U.S. itself. This is true even though the U.S. dollar is legal tender only within the U.S., Panama, Ecuador and the so-called “Commonwealth” of Puerto Rico.

But, in fact, the U.S. dollar has invaded the circulation of many other countries even where it is not officially legal tender. The role of the U.S. dollar as the world currency is shown by the fact that basic commodities and gold itself are priced in terms of dollars. As a result, more Federal Reserve Notes—U.S. currency units—are circulating outside the boundaries of the U.S. than within them.

U.S. world empire

What I call the dollar system—the widespread acceptability of the U.S. dollar as a means of payment well beyond the formal borders of the United States—is inseparable from the U.S. world empire. If the empire were to fall, the U.S. dollar would certainly cease to be the world’s currency. Similarly, any crisis of the U.S. dollar, defined as a sudden sharp loss of gold value, would bring into question the continued existence of the U.S. world empire.

Gold retains its role as world money under the dollar system

Under the dollar standard, gold fully retains its role as world money. The U.S. global empire has existed only since World War II, while gold’s role as world money goes back thousands of years. In addition, as we have explained many times in this blog, the U.S. dollar cannot act as a universal measure of value independently of gold, since the law of value requires that the value of a commodity be measured in the use value of another commodity.

What would be required to demonetize gold?

This doesn’t mean that gold’s role as world money is eternal. Two things would actually demonetize gold. One thing that would not demonetize gold is the rise of a world “managed currency” such as Keynes dreamed of. This is utopia.

What would demonetize gold is the victory of the working class worldwide. This would lead to first the great restriction and then the eventual dying out of commodity production altogether. Once human labor becomes directly social, the products of human labor cease to be commodities—that is, money relationships cease. Under these conditions, gold would no longer be money.

Second, gold would be demonetized if it were to be radically cheapened relative to other commodities—that is, if a way were found to produce a given quantity of gold bullion in terms of weight with radically less human labor. Under these conditions, the non-monetary uses of gold would rapidly increase, while its monetary role would shrink—and if the reduction of labor value were great enough would vanish altogether. Then another commodity, most likely a still more precious metal, would replace gold as the universal measure of the values of commodities. If the alchemists had actually succeeded in finding a cheap way to turn lead into gold, gold’s role as money would have ended centuries ago.

The proposal by some German economists to use gold bullion as collateral for euro loans to the Greek and other highly indebted European governments demonstrates that gold very much remains world money. Indeed, gold bullion is still officially valued as a monetary asset by the U.S. Treasury and International Monetary Fund and other central banks.

Back when the Bretton Woods System was dying in the late 1960s and early 1970s, there was a lot of talk among economists and in the media that gold was going to be “demonetized” and replaced by “managed currencies” along the lines advocated by Keynes. But it is a basic objective economic law that as long as the capitalist mode of production prevails, governments are obliged to recognize gold bullion—or whatever commodity functions as the universal equivalent—as universal or world money.

Contrary to what most bourgeois economists, and unfortunately many Marxists as well, believe, gold is money not because governments treat gold as money. Rather, it is because gold is money that governments are obliged to treat it as money.

Gold standard

However, the continued role of gold as world money is not the same thing as the gold standard. A return to the gold standard would require, first, that currencies such as the U.S. dollar would once again be legally defined in terms of a fixed weight of gold bullion, and second, currencies would have to be at least to some degree actually redeemable by the monetary authorities in fixed quantities of gold.

Such a reform is most certainly not being considered at the present time by leaders of the U.S. empire—and only they under current conditions would have the power to establish a new gold standard—if only because it is incompatible with the promise by the government and central bank never to allow the general price level in terms of currency to fall again.

Also, the U.S. rulers are in no hurry to give up the privilege of paying their debts in their own currency, whose gold value they alone determine. In addition, as I mentioned in last month’s reply, the increasing role of bank-issued credit money in retail trade makes it much more difficult to return to a gold standard in a lasting way now and in the future.

The problem arises not during prosperity—a gold standard would work fine under conditions of prosperity—but during a major crisis of overproduction. The danger would be that in order to maintain the gold value of the currency, it might not be possible to avoid a truly catastrophic credit crisis that would lead to the collapse of the circulation of essential commodities such as food at the level of retail trade. In the days of the gold standard, essential commodities were purchased as a general rule by token money, not credit money. (See last month’s reply for more details.)

Transformation of overproduction crisis into social and political crisis

The second question that Nikos asks is more political in nature. While this blog concentrates on economic questions, the political question that Nikos raises cannot really be separated from the current prolonged crisis as it is transformed from a crisis of overproduction into a social and political crisis. As a result, the currency question inevitably assumes a political and not purely economic character.

“With this in mind,” Nicos writes, “the question about the currency is not something irrelevant.” He continues: “The use of the Euro and the participation in EU (along with the participation in NATO) are key elements of the subjugation of Greece to the imperialist powers. Greece could be subjugated EVEN WITHOUT the Euro; but it cannot be liberated WITH the Euro. Thus, the exit from the Euro and the EU, is a necessary requirement for true independence. It is not enough on its own, but it’s necessary (as it is said in math, it’s not sufficient but it’s necessary). It’s not just an issue of exchange rates; of devaluation; of competitiveness of the tourist industry or exports; etc. It’s mostly an issue of national independence. A state cannot have any control of its economy if it cannot even control the printing press of its currency.”

The right of all nations to self-determination

First, Marxists are in favor of the right of all nations to self-determination—the right to exercise full state sovereignty including the right to issue their own currencies. Without getting into the complex question of what does and does not
constitute a nation, there is no doubt in my mind that the Greeks are a nation.

If the self-determination of all nations could actually be achieved under capitalism, no nation would oppress another nation. The class struggle instead of assuming the disguise of a struggle among nations, as it often does, would then appear openly as a struggle between classes. “Freeman and slave,” Marx and Engels wrote at the very beginning of “The Communist Manifesto,” “patrician and plebeian, lord and serf, guild-master and journeyman, in a word, oppressor and oppressed, stood in constant opposition to one another, carried on an uninterrupted, now hidden, now open fight [emphasis added—SW], a fight that each time ended, either in a revolutionary reconstitution of society at large, or in the common ruin of the contending classes.”

It would be far easier for the working class to achieve class consciousness if the fight between the working class and the capitalist class was an open class struggle. This is why as long as the rule of the working class—what Marx called the “dictatorship of the proletariat”—is not on the immediate agenda, Marxists fight for the greatest possible bourgeois democracy.

As part of the fight for the most complete bourgeois democracy possible, Marxists fight for the right of all nations to self-determination. But for the same reason, the capitalist class always attempts to disguise the class struggle behind the struggles among nations, or even between “races.” The latter found its “highest” expression in the ideology of the German fascists, or Nazis.

Capitalism, especially though not only in its imperialist phase, involves both the oppression of the working class by the capitalist class and the oppression of all nations by a handful of the most economically powerful nations of a given epoch. Today, one nation has risen above all other nations in this complex hierarchy of national oppression—the United States. The United States, however, oppresses different types of nations in different ways.

For example, does the United States oppress Canada? Many English-speaking Canadians feel that they are oppressed by the United States because they clearly lack full state sovereignty in practice. Yet Canadians as a general rule enjoy a high, “first world” standard of living, better social insurance and health care than the residents and citizens of the United States do. That is, they benefit from the super-profits of imperialism.

In addition, the English-speaking Canadians oppress the French-speaking people of Quebec. And the Native peoples of Canada are even more oppressed by the white Canadians as a whole who stole their land and reduced them to a marginal existence.

Hence, we have the U.S. world empire—or what the Cubans refer to as “the Empire”—that to one degree or another oppresses virtually every other nation on earth but in very different ways and degrees. The English Canadians, or for that matter, the nations of the European Union, are oppressed in the sense that they are denied genuine state sovereignty. But these imperialist satellite nations are hardly oppressed in the way Haiti is!

The current European crisis in historical perspective

The current European economic, social and political crisis is the most serious crisis in Europe since capitalism was stabilized in (Western) Europe in the late 1940s. (1) It therefore also the most serious such crisis since the counterrevolutionary overturns in the 1980s and 1990s in the (former) Soviet Union and Eastern Europe reestablished capitalist rule, though this time without the czarist empire. (2)

The prolonged crisis of 1914-1948

The crisis of the late 1940s ended after the U.S. through the so-called Marshall Plan pumped vast sums of money into Western Europe in what was actually the last phase of the great social and political crisis that began in August 1914 with the outbreak of World War I.

Between 1914 and 1948, we saw the two Russian revolutions of 1917, including the Great October Socialist Revolution; the establishment of the Third International; the aborted German revolution of 1918; the German hyper-inflation of 1923; the rise of fascism in Italy in 1922; the super-crisis of 1929-33 and associated Great Depression; the triumph of the Nazis in Germany in 1933; the Spanish Civil War; and finally World War II and the rise of the power of the Soviet Union and the establishment of a bloc of countries building socialism in Eastern Europe—to give only a partial list. All of this within little more than a generation!

The prolonged political and social crisis of capitalism in the years 1914 to 1948 has no precedent in any earlier period in the history of the capitalist system. It is the only time so far that the overthrow of capitalism on a world scale appeared at times to be a realistic short-term possibility.

The stabilization of capitalism that brought this period to an end began with the Marshall Plan at the end the 1940s and coincides with the defeat of the Greek revolution. It was then greatly reinforced by the counterrevolutionary events of the 1980s and 1990s in Eastern Europe and what had been the Soviet Union. While the new crisis in Europe still has a long way to go before it equals the crisis that began in 1914, it is raising once again the possibility of a radical destabilization of the European and world capitalist system as a whole.

What lay behind the crisis of 1914-1948?

The crisis of 1914-48 was caused above all by the decline of Britain and its world hegemony and the rise of the United States, but not until its victory in World War II to a position of world domination—not only in the economic sphere but in the military and political spheres as well.

The relationships between the oppressing imperialist capitalist countries and the oppressed countries, and behind those relationships the relationship between the capitalist class and the working class, was completely shaken up during this historic extended period of crisis. The 1914-1948 crisis ultimately cost tens of millions, maybe a hundred million lives, and ended with the rise and consolidation of the current Yankee world empire. We must never forget that the current U.S. world empire was built on a mountain of corpses.

The economic roots of the 1914-48 crisis

The crisis of 1914-1948 was above all caused by the relative decline of the productivity of labor in British industry as compared to the industry in other more rapidly developing capitalist countries, especially Germany and above all the United States. In examining the current European crisis, we are inevitably reminded of the lessons of the events of the years from 1914 to 1948. At this time, Greece stands at the center of the crisis.

“[O]ne of the most important features of Greek capitalism,” reader Nikos writes, “is that it is in an intermediate and dependent position within the global imperialist system.” He continues: “This feature is determining the course of the current crisis and should also determine the character of the workers’ struggle. Their struggle should be anti-imperialist and anti-monopoly, not simply anti-capitalist as is the case in the US or other centers of the global imperialist system. This is not just an issue that determines the transitional demands. It is an issue that determines the very nature of the struggle in Greece.”

If I understand the point he is making, Nikos is saying that a more independent and democratic development of Greek capitalism leading to a substantial development of Greece’s productive forces is possible. But this cannot be achieved unless Greece is freed from the imperialist control that is being exercised through the European Union and the associated euro currency system. And that the freeing of Greece, actually its national liberation, from imperialist control is impossible without among other things the re-establishment of an independent Greek currency. Therefore, a struggle for a return to a Greek independent currency is a progressive demand with revolutionary implications, though of course not sufficient in and of itself.

I did say in my previous reply that in the event that the Greek workers were to win political power before the workers in the other European countries, such a government would indeed have to among many other things establish its own currency. But this is not the question raised by Nikos.

The question Nikos raises is whether the Greek workers’ movement demands that the Greek capitalist government remove the euro from domestic circulation in favor of a new Greek paper currency. Whether or not this demand should be raised is of course for the Greek workers’ movement to decide. They know the Greek situation better than I.

However, Nikos seems to believe that what he calls the “revolutionary left”—by which I assume he means the left wing of the Greek workers’ movement—does not appreciate the national aspect of the struggle. So his disagreement is not so much with this blog, which makes no pretense of having any special knowledge of Greek politics, but with the left wing of the Greek workers’ movement itself.

“I strongly believe,” Nikos writes, “that the rise of the Nazis [Golden Dawn—SW] is related on the one hand to the violent and rapid economic destruction of a large number of petty-bourgeois elements due to the crisis and the austerity.” He continues: “These elements that found expression through the Golden Dawn Nazi party are backwards, racist, chauvinist, sexist, homophobic, etc. But on the other hand the rise is related to the failure of the revolutionary Left in Greece to appreciate the anti-imperialist character of the struggle of the Greek people; the failure to understand that the austerity measures are not just an attempt of the capitalists to reduce the price of labour power, but also an attempt of the imperialist powers to increase the domination of Greece as a whole. This failure meant that the Nazis were seen as the only real patriotic force.”

Nikos believes that the “revolutionary left” in Greece is failing to attract ruined elements of the petty bourgeoisie and driving them into the arms of the fascists because of their incorrect position on the national question as it applies to Greece.

The fact that almost 7 percent of the Greek population—including one of every two police officers (according to the Greek daily To Vima)—voted for such an overtly Nazi-like party as the Golden Dawn is indeed alarming, though 7 percent is still a modest part of the total vote. Even if Golden Dawn were to establish a full-scale fascist dictatorship in Greece, Greek capitalism is not strong enough by itself to support a modern-day version of Hitler.

However, we shouldn’t take too much comfort from that. Italian capitalism in the 1920s was not strong enough to support a Hitler either, but it did throw up a Mussolini, which helped pave the way for the triumph of Hitler in Germany. A victory for fascism in Greece would be disastrous not only for Greece but for the workers and their allies in every nation.

The results of the June 17 (2012) elections

What is the current consciousness of the Greek people on the currency question? Of course, that is a question that can better be answered by people who live in Greece and speak and read its language. However, bourgeois elections can give us a some idea—though distorted—of the consciousness of the people. So what can be made of the official results of the June 17 elections?

In the June elections, the direct agents of the EU and its master, the American world empire, did all they could to prevent the left Syriza coalition—a group that I described as left-Keynesian for purposes of this blog—from gaining the most number of votes. This was motivated in part because of an undemocratic provision in the Greek constitution that gives the party winning a plurality of the votes an extra 50 seats in parliament.

If Syriza had won the most votes, it would have been impossible to put together what the 1 percent media called a “pro-bailout” government—that is, a government committed to austerity. According to the official returns, New Democracy received 29.6 percent of the votes cast while Syriza received 26.9 percent. The vote for PASOK—the traditional “left” party—continued to tank, but it still managed to get 12.3 percent of the total votes cast.

The KKE saw its vote drop from 8.5 percent in May to only 4.5 percent in June. Presumably, a considerable number of voters who voted for the KKE in the May elections as a radical protest against austerity this time voted for Syriza because they thought that Syriza might win a plurality of the votes and therefore actually would form a government, a government that would end the policy of austerity. Indeed, the combined vote for Syriza and the KKE exceeded the vote for New Democracy.

On the far right, the vote for the fascist Golden Dawn dropped only slightly, remaining at just under 7 percent of the vote. Perhaps there was a slight shift from Golden Dawn back to New Democracy on the part of reactionary voters who feared a victory for Syriza, but this did not come close to matching the shift on the left from the KKE to Syriza.

One of the unfortunate results of the June election was that the party of the extreme left, the KKE, got considerably fewer votes than the fascist Golden Dawn. In the May 6 elections, in contrast, the 8.5 percent of the vote for the KKE exceeded the 7 percent fascist vote.

How the capitalists won the June 17 elections

How did the capitalists manage to elect a pro-austerity government—that is, win the June 17 election? The capitalists knew full well that a majority of the Greek people rejected austerity. So they presented themselves as “pro-bailout” rather than pro-austerity. And even New Democracy claimed that it would re-negotiate the terms of the bailout. Vague hints by the Obama administration that it favored less onerous terms may have encouraged some conservative voters to give New Democracy—and the U.S. empire it represents—another try before leaping into the unknown of more radical policies.

The main issue that New Democracy, PASOK and the other “pro-bailout” parties chose to run on was precisely the currency question. (At least as far as I could gather from the U.S. press; if this is wrong, Nikos should write in with a correction.) Though Syriza itself took a strong stand in favor of retaining the euro, the 1 percent-controlled press claimed that a Syriza victory would make Greece’s departure from the euro inevitable. Basically, they were telling the Greek voters, if you elect Syriza—or a Syriza-dominated coalition—we will kick you out of the eurozone.

Combining a vague promise to re-neogitate the terms of austerity with the threat of being kicked out of the eurozone, New Democracy could still scrape together a bare plurality, and taking advantage of the 50 additional seats cobble together with PASOK and the Democratic Left—a right-wing split from Syriza—a new pro-austerity government.

Obama hails the defeat of the Greek people

It is extremely significant that U.S. President Obama went out of his way to hail the electoral defeat of the Greek people in the June 17 election. It is a reminder from the leader of the Empire, that while the German capitalists are economically powerful, the most powerful enemy of the Greek people and indeed the peoples of the entire world is headquartered not in Berlin but in Washington.

Therefore, at this point it seems that only a minority of Greek voters and presumably the Greek people as a whole see Greece’s exit from the euro as the key to the struggle against austerity. Though I am no fan of the euro, the Greek people do have good reasons to be concerned about what would happen if a Greek capitalist government were to oust the euro from circulation in Greece in favor of a new paper currency.

First, the capitalist media claim—probably correctly in this case—that such a new paper currency would be sharply devalued against the euro. Prices in terms of the new currency would soar, and the real wages of the Greek workers would plunge. The savings, such as they are, of the Greek middle class would be at least partially wiped out—to what degree would depend on the extent of the devaluation.

We shouldn’t forget the role that the destruction of the savings of the middle class in the German hyper-inflation of 1923 and consequently the extreme form the super-crisis of 1929-32 took in Germany played in the Nazis’ rise to power. If something similar happened in Greece today, this would almost certainly strengthen the Greek fascists.

I think that the Greek election indicated that the Greek people are counting on the struggle against austerity in other European countries to defeat the capitalist austerity drive. This is why Syriza has been so successful in the electoral arena.

It has combined an anti-austerity and a “pro-euro” position at the same time. And indeed, haven’t we seen powerful anti-austerity movements in other European countries over the last several years? The Greek people are investing much of their hopes in the success of these movements in Europe and beyond, including the struggles against austerity in the United States.

The problem lies, I believe, not in the internationalism of the Greek people but in the widespread illusions that Keynesian policies can end the current austerity nightmare and prevent even worse crises in the future—all within the framework of capitalist parliamentary rule.

So far as I know, alternative organs of power that would express directly the interests of the workers and their allies in Greece—like the soviets that first appeared in the Russian revolution of 1905 and then even more so in 1917—have not yet emerged. Such representative bodies would bring together workers of different degrees of political consciousness whether or not they belong to trade unions, as well as potential allies such as working peasants and soldiers. If I am wrong, Nikos should inform us about what is happening in this regard in Greece.

The results of the elections seem to confirm that at this time the overwhelming majority of the Greek people are not yet willing to take the road of socialist revolution. If they were, we would have seen a sharp rise, not a fall, in the KKE vote.

I believe that under these circumstances, Greek Marxists just like Marxists around the world have to join wholeheartedly in the struggle against the austerity—despite the “Keynesian” illusions of most of its participants—and this must be done in a spirit of internationalism. It is in this framework that transitional demands have to be developed to bridge the current parliamentary-Keynesian consciousness of the great majority of the workers and their potential allies among the rural population and the lower urban middle classes and the objective need for a worker-led revolution against capitalist rule.

Growing possibilities for internationalism

Today, internationalism is not only more necessary than it was in the 1914-1948 era but also more possible. (3) One of the results of the development of the productive forces that we have seen since the end of the earlier crisis in 1948 has been the computer-driven revolution in communications—laptops, smart-phones, tablets and the “social media” that these devices make possible—which creates a material basis for internationalism that simply did not exist in the 1914-1948 period.

A warning from history

If we study the history of the great crisis of 1914-1948 capitalism, especially in Europe, we see that the spirit of internationalism gave way to nationalism as the crisis progressed. Nothing shows this more than the evolution of Germany, which in many ways was at the center of that crisis.

The role and the future of Germany

“[T]he struggle of the Greek people against the German government,” Nikos writes, “cannot be called ‘scapegoating’.” He continues: “There are efforts of course by elements of the Greek ruling class to accuse Germany so that they’re left off the hook; or by other forces such as the US so that their image amongst the masses is repaired. But the German ruling class, being the strongest imperialist power within the imperialist EU, is indeed one of the main enemies of the Greek people at this present moment.”

Is the German ruling class among the main enemies of the Greek people? Of course it is. It is a basic law of economics that the strongest capitalists exploit the weaker capitalists. And the German capitalists are economically among the strongest capitalists in the world. But since 1945, the U.S. domination of Germany—with the exception of the Soviet zone that became the GDR before 1989—has been the cornerstone of the U.S.’s domination of Europe and through its domination of Europe the world.

Germany key to Europe’s future

German imperialism has an especially infamous history, and this must never be forgotten. In the U.S., Hitler and the Nazis have been transformed into cardboard villains. When U.S. imperialism and its spokespeople denounce such figures as the late Yugoslav President Slobodan Milosevic as a “Hitler,” or Saddam Hussein as a “Hitler,” or maybe soon President Assad of Syria as the “new Hitler,” the effect is not only to demonize these figures. It also has the effect of rehabilitating Hitler himself in the eyes of a generation that has no real knowledge of the Nazis.

As young people come to realize that the U.S. media is lying about leaders whose real crime is to resist the U.S. world empire, they wonder: Was this Hitler’s real crime, too? If Hitler was merely like Slobodan Milosevic or Saddam Hussein, maybe he wasn’t so bad after all. Rehabilitating Hitler in this way, however, is harder to do in countries like Greece that were actually occupied and ruled by the Nazis. (4)

The working of objective economic laws means that it is only a matter of time before the American empire breaks up. Under the capitalist mode of production, the rise and decline of empires is ultimately ruled by the law of uneven and combined development, which in turn is ruled by even more basic laws of capitalism—ultimately the law of value that we have been examining throughout this blog.

Just to briefly review. Before Britain and to a much greater extent the United States were able to establish world empires, they had to build the most powerful industrial economies of their day. The rulers of first Britain and then the United States were thus able to use the power of their industries to produce the most powerful military machines. Britannia ruled the seas because Manchester ruled the markets of the world. Later, the U.S. was able to rule the seas, and the skies as well, because the industries of Pittsburgh, Detroit, Buffalo, and Cleveland had replaced Britain as the masters of the world market.

But once a nation creates an empire, it begins to depend on the exploitation of the labor of the nations it oppresses and less and less on the labor of its own workers. Indeed, one of the key functions of empire is that it enables the ruling class of the ruling nation to bribe the upper section of the working class and create a large “middle class” of hangers-on. (5) Lenin explained this in a pamphlet written during World War I—”Imperialism, the Highest Stage of Capitalism”—and for those who have not read it, or have not read it recently, it is worth a read or reread.

The price the ruling nation must pay is the decay of its own productive forces. The very productive forces that make the empire possible in the first place are progressively undermined by the condition of the empire itself, and the way is created for its eventual fall. Since the beginning of capitalism in the 16th century, we have seen the rise and fall of the Spanish, Dutch and British empires. It is now the turn of the U.S. empire.

The increasingly unstable U.S. dollar standard is a symptom that the productive forces of the world have outgrown the capitalist relations of production. It also reflects the increasing irrationality of the U.S. dollar serving as a world currency while U.S. industry is in decline both relatively and often even absolutely.

There is good reason to suspect that the actual downfall of the U.S. empire will begin with a grave crisis of the U.S. dollar. Recently, the U.S. dollar has been able to stay afloat only because every time a new financial panic threatens, the U.S. dollar soars in value because it is the main means of payment on the world market. This rise in the dollar’s value is expressed in a fall in the dollar price of gold, which leads to drops in the dollar price of oil and other commodities.

But as soon as the threat of panic recedes, if only briefly, the dollar starts to fall again—the dollar price of gold rises. Soon the dollar price of oil rises followed by a rise in the dollar price of gasoline and then the dollar price of food.

What would happen if a run on the dollar were to force the U.S. to withdraw its troops from Europe and end its occupation of Germany? Once U.S. troops are gone from Germany and other European nations, even if NATO continued to exist on paper it would become more and more just a “scrap of paper.”

Under those conditions, how many people in Greece would want to a see a revival of German nationalism—even if it took place under a “democratic” German government as opposed to a revived Nazi party? Not many, I believe. Remember, German nationalists, whether of the “neo-Nazi” type or the “democratic” type, can argue, not without reason, that since Germany also cannot issue its own currency under the euro system, it, too, like Greece is not a truly independent country.

As Germany keeps exporting its way out crises, it inevitably runs into more and more resistance, which is reflected in the current wave of anti-German feeling in Greece and other European countries. In some ways, Germany’s position is not that different than it was in the years leading up to 1914—the principal difference being that there was no U.S. world empire in those days. Let’s look back on the events that led up to the crisis of 1914-1948.

First, we see the discovery of gold in South Africa and Australia in the 1880s and then in Alaska and Canada in the 1890s, combined with the invention of the cyanide process that made it possible to extract gold from very poor ores. As a result, the quantity of gold money measured in terms of weight increased rapidly while its value relative to other commodities declined, leading to a rise in prices—about 3 percent a year—between 1896 and 1913. This resulted, beginning around 1896, in a huge acceleration of the rate of growth of the world market. But by 1914, this period of accelerating expansion was already coming to an end as gold production leveled off.

This marked the beginning of an era of a reduced rate of growth of the world market. The result was a sharp intensification of competition among the capitalists for market share. It is a rule of competition that the slower the growth of the market the more intense is the competition for market share.

The present-day U.S. empire rests on the military and de facto political control of potential rival imperialist powers as well as the political domination of oppressed nations of the “Third World.” (6) In contrast, the British empire did not actually rule over its imperialist rivals in the way that the U.S. empire does now. Instead, Britain directly ruled a huge colonial empire in Asia and Africa and to some extent Latin America. The “jewel in the crown” of this huge colonial empire—which it was said the sun never set on—was India, the second-largest nation of the world in terms of population.

As regards the other “Great Powers,” Britain played them off against one another under its “divide-and-rule” strategy. In 1914, with British relative economic power and military strength fading, there was nothing to prevent increased economic competition from leading to increased political and military competition—that is, to world war.

Even before 1896, German capitalism had been expanding rapidly, partially because of the reparations in gold that France was forced to pay Germany after the Prussian-German victory in the Franco-German war of 1870-71, as well as the fact that a united German home market had been formed around the axis of Prussia.

Britain, whose economic supremacy was in steady decline in the years leading up to 1914, was greatly alarmed by Germany’s economic dynamism. It took steps to “contain” Germany. This led to the events of August 1914 that plunged what had been Germany’s increasingly prosperous and stable capitalist society (7) into a crisis that finally led to Hitler and the Third Reich. Hitler, for all his personal evil, did not come out the blue.

With the U.S. empire in steady and increasingly advanced economic decline—though we can’t know when its terminal agony will begin—a new deep economic and social crisis in Germany, too, is only a matter of time. But when the U.S. empire does start to break up, it will be of crucial importance that working class internationalism prevails in Germany, not a revived German nationalism. If instead, we see a revival of German nationalism—even if not in the form of a Nazi revival—not only the workers of Europe but of the entire world will be in big trouble.


1 Here I am not referring to crises of generalized overproduction that last for at most a few years. The crisis that affected Europe and spread to the entire capitalist system between 1914 and 1948 involved a lot more than a short-term crisis of overproduction. This crisis took on by turns economic, financial, social, political and, not least, military aspects. There were two world wars with tens of millions killed within a single generation. It included what I call the super-crisis of 1929-33, which though it was in some ways a short-term crisis of overproduction—though lasting about twice as long as a normal crisis—it was of such intensity that it needs to be treated in a class itself.

Some Marxists, for example, Ernest Mandel (1923-1995) have identified this period with what they consider to be the downward movement of a cyclical or quasi-cyclical “long wave,” which they believe characterizes capitalist production. While there may be an element of truth in this, the 1914-1948 period was characterized by revolutions, counterrevolutions and other crises of various types that simply have no parallel with any other proposed downturn in the “long wave” in the history of capitalism. (Here is the first of a lengthy series of posts on the long cycle, and here is my summary and conclusion.)

2 While the counterrevolution of 1985-1991 in what had been the Soviet Union wiped out all the socialist gains that began with the October 1917 Russian Revolution, it did not eliminate all the democratic gains of that revolution. The October Revolution was not actually a “pure” socialist revolution but rather combined a democratic revolution that was carried out in the most thoroughgoing way in history—the overthrow of semi-feudal land relationships and the destruction of the czarist empire as a prison house of nations and the entire czarist autocratic apparatus—with the first phase of the socialist revolution.

Following the counterrevolution of 1985-91, we have seen neither a revival of feudal—as opposed to capitalist—relations on the land, still less a revival of the czarist empire nor a restoration of the monarchy. True, the monarchy itself was formally abolished in the February 1917 revolution, but the entire apparatus of czarism remained intact until the October Revolution. Today’s throughly bourgeois Russia is certainly not the Soviet Union, but it is not the czarist empire either.

3 If you study European history between 1914 and 1948, one of the things that hits you is the progressive replacement of internationalism by nationalism, a trend ultimately fostered by the capitalist class. In 1918, as Germany faced defeat, it was covered by soviets—workers’ and soldiers’ councils. Indeed, so popular were the Russian “soviets”—councils in Russian—the Russian word “soviet” was often used in place of the word for “council” in the local language. This usage of the term “soviet” began to die out after the victory of the Nazis in 1933.

In contrast to 1918, when the Soviet army approached Berlin—the Red Army which hardly yet existed was nowhere close to Berlin in 1918—there was no mass uprising against the doomed Nazi regime by the people of Berlin—notwithstanding that Berlin was and is considered a stronghold of the German left both before and after the Nazis. The closest thing there was to an uprising was some anti-Nazi graffiti.

Instead of internationalism and class consciousness in 1945, we had nationalism and national hate. This arose between the Russian and the German peoples because of fascism’s apparent success in transforming the class-divided German nation into a united “racial community” focused on the goal of enslaving, where it didn’t aim at exterminating, the peoples of the Soviet Union. It is not for nothing that both in the Soviet period and the post-Soviet counterrevolutionary period that followed, World War II is known as “The Great Patriotic War,” an expression that has no internationalist implications whatsoever. The triumph of nationalism in Europe played no small role making possible the stabilization of European and world capitalism after 1947-48 in the form of the U.S. world empire.

4 How much the real nature of the Nazis is falsely represented in the U.S. media was bought home to me in an incident that occurred in the city I am now living in that occurred some years ago. A teenage “Nazi” attacked the home of a local judge who the teenage “Nazi” believed was Jewish.

The local newspaper claimed that the judge was not actually Jewish. It turned out that the judge was indeed of Jewish origin but had converted to Roman Catholicism. Therefore, in terms of religion, that judge was not a Jew but a Roman Catholic. The impression was therefore given that the Nazis had killed only those Jews who stuck to the religious tenets of the Jewish religion and that Jews could avoid the holocaust if only they converted to Christianity like the local judge had indeed done.

In reality, the Nazis claimed the Jews were a demonic race that had to be killed because of their “race” and not their religion. Therefore, the Nazis killed not only Jews who still practiced Judaism but also atheistic Jews and Jews who had converted to Christianity, whether Protestant or Catholic. If our judge had been unfortunate enough to be living in the real Nazi Germany, his conversion to Catholicism would have done him no good whatsoever.

The readers of our local bourgeois rag who did not know the real history of German fascism were completely miseducated about its real nature by the way the paper covered this incident.

5 This was true even before the rise of capitalism. In ancient Rome, the imperial government used grain and other wealth that was extracted from Egypt to bribe the population of the ancient city through “bread and circuses.” The population of Rome swelled to a million, if historians are to be believed, when most cities of the time had populations measured in the thousands. Today, the vastly higher productivity of labor enables the capitalist ruling class to use the modern form of bread and circuses—what the Cubans call “the consumer society”—on a scale way beyond what its ancient Roman predecessor was able to do.

6 The U.S. is very much concerned that it does not enjoy the same kind of political and military domination of China, whose industrial production by some measures rivals that of the United States itself. For example, there are no U.S. military bases in China—except for Taiwan, which is still controlled by the Yankee empire. The U.S. has recently announced that it will be shifting the bulk of its navy to the Pacific bastion in the coming years.

Indeed, the U.S. is now engaged in a policy of encircling China in a way that somewhat resembles Britain’s policy of encircling Germany in the years before World War I. This policy threatens to transform the largest ocean on our planet named for “peace” into the cradle of World War III.

7 The period of prosperity and capitalist stability in Germany that preceded the outbreak of World War I played an important role in the political degeneration of the once Marxist Social Democratic Party. For example, a few years of accelerated capitalist prosperity in the late 1890s was enough for Eduard Bernstein, the original revisionist, to discover that crises were becoming milder!

Even the wing of the party that formally held to Marxism gradually lost its revolutionary edge and came to believe that the era of trade union and social gains and the gradual democratization of German society that marked the years
before World War I would continue indefinitely. The true extent of the political decay of the party, however, became apparent only in August 1914.

7 thoughts on “Gold as Money and the Role of the National Question in the Current Crisis

  1. No doubt gold remains a form of money. But the main point is that the value of the gold stock als a fraction of the total stock of money is tiny. It is therefore impossible for gold to back the total stock of monetary instruments by a long shot. For this to happen, the price of gold would have to increase astronomically.

  2. Here are some translations mostly from the Soviet journal “Under the Banner of Marxism,” which I chose articles from, also inspired by this blog. It’s a shame there isn’t more translated, probably because it cuts out the middleman “Marxist” academician! Just beware I’m an amateur translator and not a well read Marxist and sometimes I had to add some corrections below, after the text. To understand every point in these texts, I have to read them several times. I hope you can find that they contain some useful arguments or good thoughts.

    No doubt this Soviet journal can be said to be “interesting,” but I’d like to hear from you or your readers, such as Jurriaan Bendien, what other specific articles should be selected as desirable for translation. Browsing through a 30+ page translated table of contents of a forgotten 1920s Russian journal is not anyone’s favorite summertime occupation and so on, but in time I’d appreciate if you point out some (dealing with particular issues which are still not enough studied by Marxists, etc.). Perhaps it can lighten your burden somewhat or avoid wasting energy in polemics if there exists already a well written rebuttal.

    Feel free to refer to any of the already translated articles and share with others.

    Comradely greetings,

    Noa R.

  3. “But for the same reason, the capitalist class always attempts to disguise the class struggle behind the struggles among nations, or even between “races.” The latter found its “highest” expression in the ideology of the German fascists, or Nazis.”

    I suggest you take off the beer goggles and think things through. All the sins of man throughout history must be attributed to class struggle according to you people. Does that axiom hold true? Hitler wasn’t really a racist nationalist it was all for the monies. Let’s ignore history, shall we? It was fabricated by those nefarious bourgeois historians.

  4. “What would demonetize gold is the victory of the working class worldwide. This would lead to first the great restriction and then the eventual dying out of commodity production altogether. Once human labor becomes directly social, the products of human labor cease to be commodities—that is, money relationships cease. Under these conditions, gold would no longer be money.”

    This ideal is NOT utopian?

  5. So if there can’t be growth without a growth in the supply of gold, and capitalism has so far gotten around that by not only producing more gold but by creating a token currency leveraged on gold, and credit money leveraged on the token money, is there no way for capitalists to leverage credit money somehow and give capitalism a massive new lease of life? If gold has already been leveraged twice, why not three times?

    1. So for instance, perhaps national token money could be created by the national government, leveraged on gold, regional governments could be allowed to create their own regional token currencies which can only be spent in that region (ostensibly to ‘encourage regional development), leveraged on the national token currency, and then the regional currencies (and most probably still the national currency too) could have it’s own credit system leveraged on the token currencies themselves.

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