Marx's use of "stock exchange", "speculative", "gamble"

Charles Brown CharlesB at
Fri Mar 23 08:18:33 MST 2001

We just had a thread on Wallstreet, in which there was a question about the Marxist
status of the term "speculation" , and the casino metaphor. Below, is a sample of
Marx's discussion of these terms and concepts. All though it is not directly a
discussion of speculation on the stock exchange, it should make clear that Marx uses
the concept in a way that make it extendable to speculation on the stock market or
anywhere.  I have put "stock exchange", "speculative" and "gamble" in caps.



Money-Capital and Real Capital.

The only difficult questions, which we are now approaching in connection with the
credit system, are the following:

First: The accumulation of the actual money-capital. To what extent is it, and to what
extent is it not, an indication of an actual accumulation of capital, i.e., of
reproduction on an extended scale? Is the so-called plethora of capital -- an
expression used only with reference to the interest-bearing capital, i.e., moneyed
capital -- only a special way of expressing industrial over-production, or does it
constitute a separate phenomenon alongside of it? Does this plethora, or excessive
supply of money-capital, coincide with the existence of stagnating masses of money
(bullion, gold coin and bank-notes), so that this superabundance of actual money is
the expression and external form of that plethora of loan capital?

Secondly: To what extent does a scarcity of money, i.e., a shortage of loan capital,
express a shortage of real capital (commodity-capital and productive capital)? To what
extent does it coincide, on the other hand, with a shortage of money as such, a
shortage of the medium of circulation?

In so far as we have hitherto considered the peculiar form of accumulation of
money-capital and of money wealth in general, it has resolved itself into an
accumulation of claims of ownership upon labour. The accumulation of the capital of
the national debt has been revealed to mean merely an increase in a class of state
creditors, who have the privilege of a firm claim upon a certain portion of the tax
revenue.[6] By means of these facts, whereby even an accumulation of debts may appear
as an accumulation of capital, the height of distortion taking place in the credit
system becomes apparent. These promissory notes, which are issued for the originally
loaned capital long since spent, these paper duplicates of consumed capital, serve for
their owners as capital to the extent that they are saleable commodities and may,
therefore, be reconverted into capital.

Titles of ownership to public works, railways, mines, etc;, are indeed, as we have
also seen, titles to real capital. But they do not place this capital at one's
disposal. It is not subject to withdrawal. They merely convey legal claims to a
portion of the surplus-value to be produced by it. But these titles likewise become
paper duplicates of the real capital; it is as though a bill of lading were to acquire
a value separate from the cargo, both concomitantly and simultaneously with it. They
come to nominally represent non-existent capital. For the real capital exists side by
side with them and does not change hands as a result of the transfer of these
duplicates from one person to another. They assume the form of interest-bearing
capital, not only because they guarantee a certain income, but also because, through
their sale, their repayment as capital-values can be obtained. To the extent that the
accumulation of this paper expresses the accumulation of railways, mines, stea!
mships, etc., to that extent does it express the extension of the actual reproduction
process -- just as the extension of, for example, a tax list on movable property
indicates the expansion of this property. But as duplicates which are themselves
objects of transactions as commodities, and thus able to circulate as capital-values,
they are illusory, and their value may fall or rise quite independently of the
movement of value of the real capital for which they are titles. Their value, that is,
their quotation on the STOCK EXCHANGE, necessarily has a tendency to rise with a fall
in the rate of interest -- in so far as this fall, independent of the characteristic
movements of money-capital, is due merely to the tendency for the rate of profit to
fall; therefore, this imaginary wealth expands, if for this reason alone, in the
course of capitalist production in accordance with the expressed value for each of its
aliquot parts of specific original nominal value.[7]

Gain and loss through fluctuations in the price of these titles of ownership, and
their centralisation in the hands of railway kings, etc., become, by their very
nature, more and more a matter of GAMBLE, which appears to take the place of labour as
the original method of acquiring capital wealth and also replaces naked force. This
type of imaginary money wealth not only constitutes a very considerable part of the
money wealth of private people, but also of banker's capital, as we have already

In order to quickly settle this question, let us point out that one could also mean by
the accumulation of money-capital the accumulation of wealth in the hands of bankers
(money-lenders by profession), acting as middlemen between private money-capitalists
on the one hand, and the state, communities, and reproducing borrowers on the other.
For the entire vast extension of the credit system, and all credit in general, is
exploited by them as their private capital. These fellows always possess capital and
incomes in money-form or in direct claims on money. The accumulation of the wealth of
this class may take place completely differently than actual accumulation, but it
proves at any rate that this class pockets a good deal of the real accumulation.

Let us reduce the scope of the problem before us. Government securities, like stocks
and other securities of all kinds, are spheres of investment for loanable capital --
capital intended for bearing interest. They are forms of loaning such capital. But
they themselves are not the loan capital, which is invested in them. On the other
hand, in so far as credit plays a direct role in the reproduction process, what the
industrialist or merchant needs when he wishes to have a bill discounted or a loan
granted is neither stocks nor government securities. What he needs is money. He,
therefore, pledges or sells those Securities if he cannot secure money in any other
way. It is the accumulation of this loan capital with which we have to deal here, and
more particularly accumulation of loanable money-capital. We are not concerned here
with loans of houses, machines, or other fixed capital. Nor are we concerned with the
advances industrialists and merchants make to one another in commodi!
ties and within the compass of the reproduction process; although we must also
investigate this point beforehand in more detail. We are concerned exclusively with
money loans, which are made by bankers, as middlemen, to industrialists and merchants.


Let us then, to begin with, analyse commercial credit, that is, the credit which the
capitalists engaged in reproduction give to one another. It forms the basis of the
credit system. It is represented by the bill of exchange, a promissory note with a
definite term of payment, i.e., a document of deferred payment. Everyone gives credit
with one hand and receives credit with the other. Let us completely disregard, for the
present, banker's credit, which constitutes an entirely different sphere. To the
extent that these bills of exchange circulate among the merchants themselves as means
of payment again, by endorsement from one to another -- without, however, the
mediation of discounting -- it is merely a transfer of the claim from A to B and does
not change the picture in the least. It merely replaces one person by another. And
even in this case, the liquidation can take place without the intervention of money.
Spinner A, for example, has to pay a bill to cotton broker B, and th!
e latter to importer C. Now, if C also exports yarn, which happens often enough, he
may buy yarn from A on a bill of exchange and the spinner A may pay the broker B with
the broker's own bill which was received in payment from C. At most, a balance will
have to be paid in money. The entire transaction then consists merely in the exchange
of cotton and yarn. The exporter represents only the spinner, and the cotton broker,
the cotton planter.

Two things are now to be noted in the circuit of this purely commercial credit.

First: The settlement of these mutual claims depends upon the return flow of capital,
that is, on C -- M, which is merely deferred. If the spinner has received a bill of
exchange from a cotton goods manufacturer, then manufacturer can pay if the cotton
goods which he has on the market have been sold in the interim. If the corn speculator
has a bill of exchange drawn upon his agent, the agent can pay the money if the corn
has been sold in the interim at the expected price. These payments, therefore, depend
on the fluidity of reproduction, that is, the production and consumption processes.
But since the credits are mutual, the solvency of one depends upon the solvency of
another; for in drawing his bill of exchange, one may have counted either on the
return flow of the capital in his own business or on the return flow of the capital in
a third party's business whose bill of exchange is due in the meantime. Aside from the
prospect of return flow of capital, payment can only be po!
ssible by means of reserve capital at the disposal of the person drawing the bill of
exchange, in order to meet his obligations in case the return flow of capital should
be delayed.

Secondly: This credit system does not do away with the necessity for cash payments.
For one thing, a large portion of expenses must always be paid in cash, e.g., wages,
taxes, etc. Furthermore, capitalist B, who has received from C a bill of exchange in
place of cash payment, may have to pay a bill of his own which has fallen due to D
before C's bill becomes due, and so he must have ready cash. A complete circuit of
reproduction as that assumed above, i.e., from cotton planter to cotton spinner and
back again, can only constitute an exception; it will be constantly interrupted at
many points. We have seen in the discussion of the reproduction process (Vol II, Part
III) that the producers of constant capital exchange, in part, constant capital among
themselves. As a result, the bills of exchange can, more or less, balance each other
out. Similarly, in the ascending line of production, where the cotton broker draws on
the cotton spinner, the spinner on the manufacturer of cotton!
 goods, the manufacturer on the exporter, the exporter on the importer (perhaps of
cotton again). But the circuit of transactions, and, therefore, the turn about of the
series of claims, does not take place at the same time. For example, the claim of the
spinner on the weaver is not settled by the claim of the coal-dealer on the
machine-builder. The spinner never has any counter-claims on the machine-builder, in
his business, because his product, yarn, never enters as an element in the
machine-builder's reproduction process. Such claims must, therefore, be settled by

The limits of this commercial credit, considered by themselves, are 1) the wealth of
the industrialists and merchants, that is, their command of reserve capital in case of
delayed returns; 2) these returns themselves. These returns may be delayed, or the
prices of commodities may fall in the meantime or the commodities may become
momentarily unsaleable due to a stagnant market. The longer the bills of exchange run,
the larger must be the reserve capital, and the greater the possibility of a
diminution or delay of the returns through a fall in prices or a glut on the market.
And, furthermore, the returns are so much less secure, the more the original
transaction was conditioned upon speculation on the rise or fall of commodity-prices.
But it is evident that with the development of the productive power of labour, and
thus of production on a large scale: 1) the markets expand and become more distant
from the place of production; 2) credits must, therefore, be prolonged; 3) the SP!
ECULATIVE element must thus more and more dominate the transactions. Production on a
large scale and for distant markets throws the total product into the hands of
commerce; but it is impossible that the capital of a nation should double itself in
such a manner that commerce should itself be able to buy up the entire national
product with its own capital and to sell it again. Credit is, therefore, indispensable
here; credit, whose volume grows with the growing volume of value of production and
whose time duration grows with the increasing distance of the markets. A mutual
interaction takes place here. The development of the production process extends the
credit, and credit leads to an extension of industrial and commercial operations.

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