Assuming that our society may exist without positive laws it could
also exist without money. The Russian reformer, Leo N. Tolstoy, is
consistent with his doctrine of social reform[1]. According to him
enacted law is violence, private property is evil, and subsequently
“money as a centre around which economic science clusters”[2] cannot be
anything else, but a medium of oppression[3]. Describing the economic
nature and offices performed by money, he dissents widely from the
politico-economists and disapproves of their teachings on the same
subject-matter.
At the outset of the seventeenth chapter of his notable work, What
Shall We Do Then, Tolstoy inquires, What is money? And further on
he proceeds: “I have met educated people who asserted that money
represents the labor of him who possesses it. I must confess that
formerly I in some obscure manner shared this opinion. But I had
to go to the bottom of what money was, and so to find this out,
I turned to science. Science says that there is nothing unjust
and prejudicial about money, that money is a natural condition of
social life—necessary: 1. for convenience of exchange; 2. for
the establishment of measures of value; 3. for saving; and 4. for
payments”[4].
Are these theories true? According to the teaching of economics they
are; according to Tolstoy they are not. Many writers even those of
the earliest time argued that money is a medium of exchange[5].
The founders of classical economics, Smith[6], Ricardo[7], Mill[8],
Carey[9], socialist reformers, Lassalle[10], and Marx[11], all agree
in the main that money is an exchangeable commodity by means of which
people measure the value of other commodities. Professor Fisher
shortly and precisely defines money as What is generally acceptable
in exchange for goods[12]. More acute determination of the nature of
money is given by Prof. Kinley in his elaborate study on Money[13].
According to this author no definition of medium of exchange can be
framed on the basis of the material of which it is made but on the
basis of its services, and its essential services are three fold:
First, money is sometimes used to describe all media of exchange—gold,
silver, paper, checks, bank drafts or the deposits which they
represent, commercial bills of exchange, and even corporation stocks.
These things all effect exchanges; in a way they all relieve the
difficulties of barter. But this definition, however, is too inclusive,
Prof. Kinley contends. It is inclusive because all mentioned articles
do not attain the character of media of exchange because there is a
demand for them for that purpose primarily. The medium of exchange
includes money but its content is greater than that of money. All money
can be a medium of exchange but all medium of exchange is not money[14].
Second, at the other extreme is a set of definitions which would
restrict money to what may be called commodity money. Those who hold
this view insist that money is an article of direct utility with
specific value based on its direct services for consumption. They hold
that it must have value due to a demand for other than a monetary
system. The implication is that in the absence of this other demand
the article would not have any value and therefore could not properly
serve as a measure of value. This view of the nature of money is
definite and clear-cut, but it is not correct because the article has
value if there is a demand for it, whatever the reason for that demand.
Third, between these two extremes fluctuates the view that all media of
exchange and payment, whose acceptance the law requires in discharge
of debts, may properly be called money. This definition confines to
standard money, or inconvertible paper, if it were legal tender. Both
kinds of money circulate without reference to the possibility of
recovering their value from the payer if they should fail to pass,
and their value as money depends entirely on the fact that they are
generally acceptable in exchange[15].
Taking now in view these three standpoints of the nature of money, we
could define it in these words: Legal tender, inconvertible paper, and
all commodities which are used as general circulating and paying media,
are properly called money.
This is one of the most typical definitions including nearly all others
supported by current political economy. Tolstoy as always disagrees
with the teaching of economics and he simply says that money is a new
and terrible form of slavery[16]. His full definition is as follows:
Money is a conventional token which gives the right, or more correctly,
the possibility, to exploit the labor of other people[17]. To explain
this inadequate definition of money more appropriately and in its
fuller extent, it is necessary to turn our attention to the functions
of money as they are enunciated by Leo Tolstoy.
One of many other functions which money performes, according to
Tolstoy, is the representation of labor. There exists a common opinion
that money represents wealth, but money is the product of labor, and
so money represents labor[18]. This opinion, says Tolstoy sneeringly,
is as correct as that other opinion that every political organization
is the result of a pact (contrat social). Yes, money represents
labor[19], there is no doubt about that, but whose, labor of the owner
of the money, or of the other people? In that rude stage of society,
Tolstoy goes on, when people voluntarily bartered the fruits of their
products, or exchanged them through the medium of money, substantially
money represented their individual labor. That is incontestably true,
and this was only so long as in society where this exchange took place,
has not appeared the violence of one man over another in any form: war,
slavery, of defence of one’s labor against others. But as soon as any
violence was exerted in society, the money at once lost for the owner
its significance as a representative of labor, and assumed the meaning
of a right which is not based on labor, but on violence[20]. This is
one of the functions of the medium of exchange in the pages of Tolstoy.
The second function of money is the representation of the standard
value. “Catallactics” admits this function of money. Tolstoy himself
should recognize it in an ideal state of society, in a society where
extortion has not made its appearance[21]. If people exchanged directly
commodity for commodity; if they themselves determined the standards
of values by sheep, furs, hides, and shells[22], then one could speak
of money as an instrument of exchange, as an ideal standard of value
in an ideal state of society. But in such a society there would be no
money as such, as a common standard of values, as it has not existed
and cannot exist[23]. The standard value of money is determined by law
and government, and these institutions are based chiefly on deceit[24],
or represent the organized force[25]. What in recent time receives a
value is not what is more convenient for exchange, but what is demanded
by government. If gold is demanded gold will be a common denominator,
if knuckle-bones are demanded, knuckle-bones will have value[26]. If
this were not so why has the issue of this medium of exchange always
been the prerogative of the government? In such a state of society in
which we live, the standard of values ceases to have any significance,
because the standard of value of all articles depends on the arbitrary
will of the oppressor[27]. By this reason we could speak only on
arbitrary and conventional value of money, not of its intrinsic, nor of
its standard value.
Passing now to the third function of money, enumerated by Tolstoy,
we see that he attributes to it a new contingent service which is
not mentioned as such in any political economy. In modern civilised
society, he says, all the governments are in extreme need for money,
and always in insolvable debt[28]. Wherefore they issue monetary
tokens in the different countries[29]. These tokens: legal tender,
inconvertible paper, coin, bills, and other governmental fiats,
are distributed among the people, in order that later they could
be collected as direct, indirect, and land taxes[30]. The debts of
the present monetary state grow from year to year in a terrifying
progression. Even so grow the budgets[31]. A state which should not
levy taxes, for a comparatively short time would go to bankruptcy. The
taxes and imposts required from people may be paid in form of cattle,
corn, furs, skins, and other natural products, but this “natural
economy” never practices in a civilised state. Governments force people
to pay those taxes usually in “hard” or “soft” cash, because this kind
of money best suits the purposes of rewarding the military and civil
officials, of maintaining the clergy, the courts, the construction of
prisons, fortresses, cannon[32], and supporting those men who aid in
the seizure of the money from the people[33]. So we have the third
function of money as the third method of enslavement[34], by means of
tribute and taxes[35]. In modern times, since the discovery of America
and the development of trade and the influx of gold, which is accepted
as the universal money standard, the monetary tribute becomes, with
the enforcement of the political power, the chief instrument of the
enslavement of men[36], and upon it all the economic relation of men
are based[37].
Discussing money, Tolstoy cannot separate the economic question from
the political. To him it appears inevitable that money performes a
social service equivalent to the instrument of extortion. He does not
take into consideration those inumerable utilities which circulating
medium renders to the community and particularly to the commercial
world, facilitating the transfer as well as aggregation of capital.
“Chremmatistics” teaches us that money is the most general form of
capital, capital in the fluid state, so that it can be immediately
turned to new enterprises and transfered for investment to distant
places. On the other hand, capital in the form of money is the most
convenient vehicle of production and distribution of wealth. Tolstoy,
as a medieval canonist, regards capital and wealth to be shameful
and criminal things. He absolutely repudiates the theory that in all
production only three factors take part: land, capital and labor.
His disconcerting controversy in these matters contains nothing
fundamentally new in political economy, but it is an odd manner in
which he couches the notion of money in relation to production.
It seems strange, Tolstoy’s theory runs, that economists do not
recognize the natural objects in production of wealth. The power of
the sun, water, food, air, and social security, are the requisites of
production as much as the land or capital. Education, knowledge, and
ability to speak are certain agents of production. I could fill a
whole volume, says Tolstoy, with such omitted factors, and put them at
the basis of science[38]. The division into three factors of production
is not proper to men. It is improper, arbitrary, and senseless. It does
not lie in the essence of things themselves.
By its division of the factors of production, proceeds our author,
science affirms that the natural condition of the laborer is that
unnatural condition in which he is; just as in the ancient world
they affirmed, in dividing people into citizens and slaves, that
the unnatural condition of the slaves is a natural property of man.
This division, which is accepted by science only in order to justify
the existing evil, which is placed by it at the basis of all its
investigations, has had this effect, that science tries in vain to
give explanations of existing phenomena, and denying the clearest and
simplest answers to questions that present them, it gives answers which
are devoid of content. The question of economic science is as follows:
What is the cause of this, that some men, who have land and capital,
are able to enslave those who have not land, and no capital? The answer
which presents itself to common sense is this, that it is due to the
money, which has the power of enslaving people. This is not due to the
property of money, but because some have land and capital, and others
have not. We ask, why people who have land and capital enslave those
who have none, and we are told: because they have land and capital.
But that is precisely what we want to know. The privation of the land
and of the tools of labor is that very enslavement. The answer is like
this: Facit dormire quia habet virtutem dormitiva. To simple people
it is indubitable that the nearest cause of the enslavement of one
class of men by another is money[39]. They know that it is possible to
cause more trouble with a rouble than with a club; it is only political
economy that does not want to know it[40].
These theories on money respecting production do not appear of such
nature that they could be applied in the other countries besides
Russia. The Russian enlightened feudalism of the nineteenth century
gave Tolstoy excellent material and a good reason to attack it with
all his strength, and he was right. But his assault on political
economy for its “omission” to treat the natural objects in production
of wealth, are not justifiable, and could not be admitted. In the first
place, any better political economy does not consider these objects at
length, because nobody lays claims on them, as Tolstoy himself avowed
this fact[41]. The gifts of nature cannot be appropriated by any one.
They are inexhaustible and unlimited as compared with the wants of men.
Therefore they never have a direct value to be taken as factors of
productions[42].
In modern industrial society the essential factors of production, among
the others, are money and wealth. Wealth is usually regarded as the
object of consumption, and as an agent of production[43]. The idea
of wealth, however, is often confounded with the idea of money. John
S. Mill has justly remarked that most people regard money as wealth,
because by that means they provide almost all their necessities. In
the same sense is the assertion of the French economist Charles Gide,
when he noted that in all times and in all places except among savages,
money has occupied an exceptional place in the thoughts and desires of
men. People regard it, if not as the only wealth, at any rate, as by
far the most important form of wealth. They appear to measure the value
of all other wealth by the quantity of money that can be obtained in
exchange for it. Etre riche, c’est avoir soit de l’argent, soit les
moyens de s’en procurer[44].
Tolstoy of course has no clear distinction either of wealth, or of
money. He also confuses these notions, as many authors before and
after him. To define wealth exactly is verily a difficult task; and to
dwell upon it impartially is perhaps still more difficult. There are
two theories in “Plutology” regarding the definition of wealth: first,
that wealth is all exchangeable and valuable commodities and second,
that it is power. Representatives of the first theory are Henry Fawcet
and John S. Mill, of the second, Hobbes and Carey. Tolstoy is nearer
to those theorizers who teach that wealth is power, than to those
who define it as commodity. Yet, we should err gravely if we assumed
that between Tolstoy’s interpretation of wealth and that of other
economists exists any conformity. For instance Carey defines wealth
as the power to command nature. Tolstoy defines it as the power to
command other people who have neither wealth nor “the signs” of wealth.
“Only in the Pentateuch, wealth is the highest good and reward”[45]. In
everyday life wealth is evil, deception and cause of enslavement. To
be honest and at the same time to work for Mammon, is something quite
impossible[46]. This ethical principle may be true. But our theorist
forgets that questions of what people ought to do, and questions
of what it will profit men and nations to do, belong to different
categories of sciences. He forgets that ethical ideas should not be
read into the conceptions of wealth and money when they are employed in
their everyday sense. Prof. S. Chapman[47] justly says “If our aim is
to indicate what people ought to want instead of what they do want, we
had better speak of ethical wealth and ethical value”.
Tolstoy was very near to those reform writers who taught that political
economy must be regarded as a part of moral philosophy. But he was
not the first social reformer who has introduced the moral elements
into the study of economic phenomena. As it is known Aristotle’s
interpretations of money are written in the Nichomachean Ethics.
The political economy of Plato and Xenophon rests on moral bases[48].
Medieval scholastics and theologians raised many problems which were in
connection with the searching inquire as to what constitutes a just
price, and this inquiry belonged to the ethics of political economy.
Adam Smith and John S. Mill adopted the double role to be economists
and at the same time ethical teachers[49]. French economists Rossi, De
Laveley, and Le Play, introduced ethical principle in the science of
wealth as well.
There are several such examples of “ethical interpretation” of
economics among the most illustrious thinkers. They may be exculpated
for their disagreements only on the ground that they lived in times
when social science was in incumbent stage, when scientific ideas
were intermingled from one sphere of science into another. Good,
gentle Tolstoy, may also be pardoned for his “blunders of expression”
because he made them in his fanatic love of truth, and truth although
it is truth, does not always seem true, says a French proverb. To
treat the delicate and intricate complexity of money and wealth, and
never mislead, one should be a higher-man, a superman. But supermen
are not yet born in this sordid earth as fitly objected a well-known
philosopher.
[1] “If Tolstoy’s teaching is not systematic, two facts may be
urged in extenuation: his doctrines, so far as he expounds them, are
consistent in themselves”—says T. S. Knowlson in his biographical and
critical study on Leo Tolstoy, ch. VII, p. 143. [London, 1904].
[2] See J. W. Harper, Money and Social Problem, ch. V, sec.
I, p. 98.
[3] What Shall We Do Then, ch. XIX, p. 127. [Wiener’s ed.
1904].
[4] Loc. cit., ch. XVII, p. 100.
[5] Cf. for instance, Plato, Laws, ch. XI, and Aristotle’s
Politics, bk. I, ch. 9; Nicomachean Ethics, by Aristotle, bk. V,
ch. 5.—Roman authors defined money as a “just medium and measure
of commutable things” Moneta est justum medium, et mensura rerum
commutabilium, quoted in H. C. Black, Dictionary of Law, p. 785.
[1891].
[6] Wealth of Nations, bk. II, ch. II.
[7] Principles of Political Economy and Taxation, ch. XXI.
[8] Principles of Political Economy, bk. III, ch. VII.
[9] Principles of Social Science, vol. II, ch. XXX, 1.
[10] Die Philosophie Heracleitos des Dunkeln, vol. I, p. 22.
[1845].
[11] Capital, English ed. part I, ch. III.
[12] The Purchasing Power of Money, ch. II, ces. 1. [New
York, 1911].
[13] D. Kinley, Money, a Study of the Theory of the Medium
of Exchange, ch. V, 6. [New York, 1913].
[14] Some excellent hints as to the money-commodity, compare
H. White, Money and Banking, bk. I, ch. I. [New York, 1908].
[15] Valuable suggestions on standard money, see W. A.
Scott, Money and Banking, ch. I, sec. I.—J. L. Laughlin, The
Principles of Money, ch. III.—J. B. Clark, The Ultimate Standard
of Value, in Yale Review, Nov. 1892, vol. 1, p. 258-74.—The same
subject is well treated by C. Manger in an article entitled “Geld”
in the Handwoerterbuch der Staatswissenschaften, bd. IV. [1900],
and L. Nasse, “Das Geld und Muenzwesen” in Schoenberg, Handbuch der
Politischen Oekonomie, bd. I. [1896].
[16] What Shall We Do Then, ch. XXI, p. 164. [Wiener’s ed.]
[17] Id. Ibid. ch. XXII, p. 161.
[18] What Shall We Do Then, ch. XXI, p. 158.
[19] Op. cit., p. 160.
[20] Loc. cit. ch. XXI, p. 159.
[21] Id. Ib. ch. XIX, p. 126.
[22] Op. cit. ch. XVIII, p. 122.
[23] Id. ib. ch. XIX, p. 126.
[24] Patriotism and Government. Complete Works, vol. XXIII,
p. 538. [Wiener’s ed. 1904].
[25] The Slavery of Our Times. Comp. Works, vol. XXIV, p.
128.
[26] What Shall We Do Then, ch. XVIII, p. 122.
[27] Id. Ibid. ch. XIX, p. 127.
[28] Loc. cit. ch. XVIII, p. 121.
[29] Op. cit. ch. XX, p. 145.
[30] Loc. cit. ch. XX, p. 145.
[31] Id. Ibid. ch. XVIII, p. 121.
[32] The Kingdom of God is Within You, ch. IX, p. 237.
[33] The Slavery of Our Times, ch. X, p. 41.
[34] The first method of the enslavement of men is by means
of personal violence, according to Tolstoy, and second is by depriving
people of their land. [Cf. What Shall We Do Then, ch. XX, p. 142-43].
[35] What Shall We Do Then, ch. XX. p. 144.
[36] Id. Ibid. ch. XVIII, p. 111.
[37] For the sound discussion on function of money, which
is avowedly opposite to Tolstoy’s theory, see W. S. Jevons, Money
and the Mechanism of Exchange, ch. III.—J. L. Laughlin, The
Principles of Money, ch. I.—F. A. Walker, Money, ch. I. [1883].—E.
B. Bawerk, Positive Theorie des Capitals, bch. II, abt. II-III.
[1902].—C. Jannet, Capital, ch. II-III. For a different and
sounder interpretation of taxes and taxation, see the excellent book,
Introduction to Public Finance, by Prof. C. C. Plehn. N. York, 1896.
[38] What Shall We Do Then, ch. XVII, p. 102.
[39] Loc. cit. ch. XVII, p. 109.
[40] Id. Ibid. ch. XVIII, p. 124.
[41] Op. cit. ch. XVIII, p. 117.
[42 Cf. W. Roscher, System der Volkswirtschaft, bd. I, kap.
I, 31. [1906]. J. S. Mill, Political Economy, bk. I, ch. I, sec. 1.
[43] Cf. A. Marschal, Principles of Economics, bk. IV, ch.
VII, sec. 1. p. 300. [London, 1898].
[44] Cours d’Economie Politique, p. 310. [Paris, 1911].
[45] Cp. The Complete Works, vol. XIV, p. 109. [Wiener’s ed.
1905].
[46 Id. Ibid. p. 288.
[47] Political Economy, ch. II, p. 60. [London, 1912].
[48] Cf. Histoire de L’Economie Politique en Europe, par J.
A. Blanqui, ch. III.—See also Des Raports de L’Economie Politique et
de la Morale, par M. H. Baudrillard, lec. II. [Paris, 1883].
[49] See J. N. Keynes, The Scope and Method of Political
Economy, ch. II, sec. 1, p. 62. [London, 1897].