1) Supremacy of Russia emerging openly. Hegemony divided 
between Prussia and Austria. The minor states formally secured 
once more thanks to their rivalry, true. But the princes of the minor 
states (e. g. Hesse, Baden) disgraced in the eyes of most Ger- 
mans, and thus the differences between the various houses and 
small townships, which were still being so keenly asserted as re- 
cently as 1848, smashed. Equally, in consequence of the results of 
the 1848 movement, the authority of all existing official powers 
diminished. 

2) Prussia. Although excluded from the government, humiliated, 
sham Constitution, the bourgeoisie achieved everything and more 
than it dared demand in 1847. 

3) Austria—hitherto the peasantry given preference, reaped the 
results of the revolution. 

Protectionism.*" 

4) Trade policy differences between Austria and Prussia. Free trade; in 
Prussia nobility, as in England industrial bourgeoisie. 

Karl Marx 

There is a division of trade into trade between dealers and dealers 
on the one hand, and between dealers and consumers on the other. 
Transfer of capital takes place in the former case, exchange of 
income for capital in the latter; the former has its own money, the 
latter its own coin. This distinction, which was made by Adam Smith, 
is very important and has been emphasised by Tooke, and even 
earlier by the Report of the Bullion Committee.? 41° What is missing 
however is an examination of the relationship between these two 
kinds of trade and of money. 

(1) All crises show in fact that the trade between dealers and 
dealers constantly exceeds the bounds set by the trade between 
dealers and consumers. All propositions advanced by economists to 
prove the impossibility of over-production, or at any rate universal 
over-production, deal only with trade between dealers and dealers, 
as already Sismondi rightly pointed out in his polemic against 
McCulloch.” This becomes even more evident when one considers 
that at least three-quarters of the exchange between dealers and 
consumers consists of exchange between workers on the one hand 
and retail traders and artisans on the other; this exchange however 
depends in turn on the exchange between workers and industrial 
capitalists, which in its turn is determined by the exchange between 
dealer and dealer—cercle vicieux. 

(2) It is true that, as Adam Smith says, the exchange between 
dealers and dealers is bound to be circumscribed by the exchange 

Commons to be printed 8 June 1810.—Ed. 

between dealers and consumers, since the prices at which the com- 
modities are sold to the latter are the final prices, which must 
retrospectively balance the costs of production expended in the 
preceding transactions as well as the profits. However on the basis of 
Adam Smith’s proposition, the whole economy has been inanely 
over-simplified by Proudhon* and others. The matter is not so 
simple. First, the trade between dealers and dealers in England, for 
example, is by no means circumscribed by the trade between dealers 
and consumers in England, but more or less by that between dealers 
and consumers on the world market as a whole. For instance, the 
India Company *” or East India merchants send indigo to the 
London market. There it is auctioned. This is a transaction between 
dealers and dealers. The purchaser of the indigo sells part of it in 
France, Germany, etc., where it is bought by various dealers and 
manufacturers. Whether they will in the end recover the price of the 
indigo, will depend on how the final product is sold to the consumer, 
who lives perhaps on the Ionian Islands or in Afghanistan or in 
Adelaide. It would therefore be wrong to say that the trade between 
dealers and dealers in one country is limited by the trade between 
dealers and consumers in that country. If this trade is universal, it is 
limited by the trade between dealers and consumers on the world 
market, and this is all the more the case when the trade between 
dealers and dealers is conducted on a large scale and the country 
occupies a prominent position on the world market. 

Secondly. Because the working class forms the largest section of 
consumers, one could say the fact that the income of the working 
class decreases— not in one country, as Proudhon thinks, but on the 
world market—leads to an imbalance between production and 
consumption, and hence over-production. This is largely correct. 
But it is modified by the growing extravagance of the propertied 
classes. It would be wrong to put forward this proposition uncon- 
ditionally—as though the trade of the planter were determined 
by the consumption of his Negroes. 

Thirdly. The trade between dealers and dealers largely creates the 
trade between dealers and consumers. For example, when manufac- 
turers receive very large orders from speculators, workers are ful- 
ly employed, their wages rise and so does their consumption. 
Speculative railway construction enterprises actually create large- 
scale consumption, which in the end proves to be entirely “un- 
productive”. We also find that in fact the trade between dealers 

and consumers is in most cases ultimately thwarted by that between 
dealers and dealers. The crisis always begins in the former, often of 
course after the demand of the limited forces of consumption has 
been met, but often simply because supply exceeds ostensible 
estimates (e. g. in the case of speculations in corn). 

Fourthly. Over-production must not be attributed solely to 
disproportionate production, but to the relationship between the 
class of capitalists and that of workers. 

(3) As to the currency which is found in the two distinct forms of 
trade—the currency used in trade properly speaking and the 
currency used in the exchange of income for commodities, i. e. for 
particles of capital—it is insufficient to state that a division exists 
between the two currencies, it is also a question of their connection 
and interaction. The money of private individuals, of the consumers, 
that is in the first place of all political and ideological strata, second- 
ly of those who live on the rent of land, thirdly of so-called 
(non-industrial) capitalists, of the public creditors, etc., even of the 
workers (in the savings-banks), in short the surplus of the receipts 
of the non-trading classes of the population over their everyday 
expenditure and over that part of their money which they 
themselves think they must always have at their disposal, that is 
which they keep (hoard) at home as a reserve—this surplus is the 
chief source of deposits, which in their turn form the main basis of 
commercial money. Transfers, credit operations, in short the entire 
monetary movement within this commercial world,depend on the 
deposits of that part of the population that consists mainly not of 
tradespeople. In [...]* of credit failure the deposits are withdrawn 
from commerce. Capital becomes unproductive, because the means 
enabling the classes that. direct production to use this capital are 
destroyed in their hands. On the other hand, since these classes need 
money for their transactions with one another and the banker no 
longer lends money to the grocer and the manufacturer, the income 
of the consumers diminishes and consequently also the amount of 
money in their hands, thus the complaints about lack of money move 
from the commercial world into the world of the consumers. 

(4) It would be wrong to say that lack of credit is of paramount 
importance in times of crisis, and currency is of no importance. It is 
evident from the reasons mentioned earlier that the amount of 
currency is then at its lowest ebb precisely because on the one hand 
its velocity has decreased and secondly because cash is required in 
numerous transactions where it was not required previously. But it is 

precisely this which accentuates the great difference between the 
amount of money and the value of the operations transacted with a 
relatively smal] quantity of currency. There is therefore in fact a lack 
of currency and not a lack of capital. Capital loses its value and 
cannot be turned to account. But what does cannot be turned to 
account mean in this context? It cannot be transformed into 
currency, and it is precisely its convertibility which constitutes its 
value. But in spite of all that, capital exists. 

The thing shows itself primarily in the refusal to discount bills of 
exchange, even those based on bona fide transactions. And the bill of 
exchange is commercial money, its value represents commercial 
capital. The convertibility of bank-notes into gold is a minor matter, 
the failure of bank-notes merely aggravates the commercial crises. 
The real difficulty is the inconvertibility of commodities, i.e. of the 
actual capital, into gold and bank-notes. It is for this reason that when 
these phenomena appeared in 1793, 1825 and 1847,*' it was 
possible to remedy them where capital actually existed, by issuing 
exchequer bills and bank-notes. Moreover, it cannot be asserted that 
these bills and bank-notes were capital. They were merely currency. 
The crisis did not end, but the currency crisis did. The convertibility 
of bank-notes, therefore, is based on the convertibility of securities, 
and not only in banking but also in commerce. But even securities 
which by their very nature are considered to be convertible, such as 
government securities and short bills, cease to be convertible. It 
seems that this is by no means a question of commodities, but of 
the convertibility of the tokens of value which represent them. 
Commodities cease to be money, they are not convertible into 
money. The blame for this is of course put on the monetary system, 
on a particular form of this system. It is due to the existence of the 
monetary system, just as the latter is based on the present mode of 
production. But the convertibility of bank-notes into gold is in the 
end necessary, because the convertibility of commodities into money 
is necessary, in other words because commodities have exchange 
value, and this requires a special equivalent distinct from the 
commodities, i.e. because in fact the system of private exchange 
prevails. 

Actually the depreciation of money is even in inverse proportion 
to the depreciation of commodities. But bank-notes can depreciate in 
terms of gold only because commodities can depreciate in terms of 
bank-notes. In any case, what does depreciation of bank-notes mean? 
That at any particular moment, commodities, i. e. their value, cannot 
be transformed into gold or silver, and that each intermediate link 
between the commodities and gold, or each substitute remains only a 

substitute and hence without value. The principal question therefore 
always remains the inconvertibility of commodities, of capital itself. It is 
rubbish if some say, there is no lack of currency but lack of capital. 
Currency is of no consequence. For what matters here is precisely the 
difference between capital, i.e. commodities, and currency. What 
matters is the fact that the former does not necessarily entail the 
latter as its representative, that is as its price in the commercial world; 
that capital ceases to be currency, that it can no longer circulate and 
has no longer value. When capital appears to be a secondary matter, it 
is ridiculous to present currency as a secondary matter. However 
there is even more nonsense on the other side. They acknowledge 
the inconvertibility of capital and make fun of the convertibility of 
bank-notes. But they want to offset this by some artifice or other and 
by modifying the monetary system. As if the inconvertibility of capital 
were not already contained in the existence of any monetary system, 
indeed as if it were not contained even in the existence of products in 
the form of capital. Trying to alter this on the existing basis means 
depriving money of its monetary qualities, without conferring on 
capital the quality of always being exchangeable, and moreover at its 
fair price. : 

The existence of a monetary system entails not only the possibility but 
even the reality of this separation, and the fact that this system exists 
proves that the inconvertibility of capital, because it is appropriate to 
money, is already entailed by the existence of capital, and therefore 
by the entire organisation of production. It would be just as wrong 
however to say that the pressure on the money market was simply 
caused by fraudulent credit operations. Money as such implies the 
credit system. Or both are produced by the same cause. The 
Birmingham men,*” who want to do away with the inconveniences of 
money by putting large quantities of money into circulation, or by 
lowering the standard of money, are of course fools. Proudhon, Gray 
and others who want to retain money but in such a way that it should 
no longer have the properties of money, are also fools. Since it is in 
the money market that the entire crisis erupts and all the features of 
bourgeois production recur as symptoms, which, it is true, become 
incidental causes, nothing is simpler to understand than the fact that 
it is money that narrow-minded reformers who stick to the bourgeois 
standpoint want to reform. Because they want to retain value and 
private exchange, they retain the division between the product and 
its exchangeability. But they want to modify the token of this division in 
such a way that it expresses tdentity.* 

(5) The complete simpletons, i. e. the staunch ignorant democrats, 
are familiar only with money as used in the trade between dealers and 
consumers. They therefore do not know the sphere in which the 
collisions take place, the tempests of monetary crises and big 
financial transactions. Thus the problem, just as everything else, ap- 
pears to these simpletons to be as simple and silly as they themselves 
are. They regard the trade between dealers and consumers as a 
straightforward exchange of values, in which the freedom of each 
individual receives its supreme practical confirmation. Class antago- 
nism is in no way involved in this exchange. One trader confronts 
another, one moneyed individual confronts another. The precondi- 
tion that every individual must be moneyed to be able to participate 
in the consumer goods trade, 1.e. to be able to live, this precondi- 
tion is of course automatically given by the fact that every individu- 
al must work and let his talent? act, as Stirner says.” 

First of all it is a historical fact, which no one can deny, thats in all 
hitherto existing social formations which were based on separation 
and contradiction between castes, tribes, social estates, classes, etc., 
money was an essential component of this organisation, and the 
monetary system was always symptomatic of the heyday or decline of 
this organisation. It is therefore not our task to prove that the 
monetary system is based on class contradictions, it is up to the 
simpletons to prove that, in spite of all previous historical ex- 
perience, the monetary system can make sense even where there 
are no class contradictions, and that this particular element present 
in all social formations up to now will be able to survive in a situation 
that negates all hitherto existing social formations. To confront 
complete simpletons with such a task would be too simple. They deal 
with everything in monosyllables and this constitutes their specific 
talent. The monetary system and the entire present system are in 
their opinion as straightforward and as stupid as they themselves are. 

But let us again visualise their beloved trade between consumers 
and dealers. They do not look beyond it, neither sideways nor 

forward and backward. 
What does the free individual use to pay for his purchases at the 

grocer? He uses an equivalent—or token of value—of his income. 
The worker exchanges his wages, the manufacturer his profit, the 

capitalist his interest, the landowner his rent—transformed into gold 
and silver and bank-notes—at the grocer, the cobbler, the butcher, 
the baker, etc. And what does the cobbler, the grocer, and so on, 
exchange for the money which represents wages, rent, profit and 
interest? He exchanges his capital for it. He replaces his capital, 
reproduces it and expands it in this transaction. 

Thus to begin with in this seemingly so simple transaction all class 
relations manifest themselves and are presupposed, [i. e.] the classes 
of workers, of landowners, and of industrial and non-industrial 
capitalists. On the other hand, it first and foremost presupposes the 
existence of these specific social relations, which give wealth the form 
of capital, and separate capital from revenue. The simplicity 
disappears with the transformation into money. 

The fact that the worker receives his wages in money—and 
likewise the landowner his rent and the manufacturer his prof- 
it—and not as provisions in kind, payment in kind or by means of 
barter, merely shows that the monetary system presupposes a high 
level of development and greater differentiation and separation of 
classes than does the absence of a monetary system in the 
pre-monetary stages of society. There is no wage labour without 
money, and therefore also no profit and interest in the latter form, 
and accordingly no rent of land either as this is simply a part of 
profit. . 

It is true that income in the form of money, i. e. in the form of 
gold, silver or bank-notes, no longer shows that it appertains to an 
individual exclusively as a member of a definite class, as a class 
individual, unless someone has obtained it by begging or stealing, 
that is to say by misappropriating an income of this type, and thus 
represents a class individual as a result of rather drastic measures. 
The transformation into gold or silver blurs the class character and © 
veils it. Hence the apparent equality—apart from money—in 
bourgeois society. Hence in a society with a completely developed 
monetary system, there is, on the other hand, actually real civil 
equality of individuals insofar as they have money, irrespective of 
their source of income. In such a society, as distinct from ancient 
society where only the privileged strata could exchange certain 
things, everything is available to any person, any kind of material 
exchange can be carried out by everybody, in accordance with the 
amount of money into which his income can be converted. Whores, 
science, patronage, decorations, rent of land, lickspittles, all these are 
objects of exchange, just as coffee, sugar and herrings are. In the 
case of the estate system, the consumption of the individual, his 
material exchange, depends on the particular division of labour to 

which he is subordinated. In the class system it depends only on the 
universal medium of exchange which he is able to acquire. In the 
first case, he as a socially circumscribed person takes part in 
exchange operations which are circumscribed by his social position. 
In the second case he as an owner of the universal medium of 
exchange is able to obtain everything that society can offer in 
exchange for this token of everything. In the exchange of money for 
commodities, in this trade between dealers and consumers, the 
manufacturer, when he buys at the grocer, is just as much a consumer 
as his worker, and the servant obtains the same commodities for 
the same amount of money as his master. Thus the specific nature of 
the income which has been transformed into money disappears in 
this exchange and the class characteristics of all individuals are 
blurred and merge in the category of buyer, who in this transaction 
faces the seller. Hence the illusion of seeing not an individual 
member of a class in this act of buying and selling, but the 
purchasing individual as such without class characteristics. 

Now let us disregard for the moment the specific nature of the 
income, which is not evident in gold and silver any more than is the 
smell of urine in the tax on brothels, of which the Roman Emperor 
Hadrian said: non olet!* This nature emerges however in the amount 
of money which is at the person’s disposal. The range of the 
purchases is in the main determined by the nature of the income. 
The quantity and the kind of articles bought by the largest class of 
consumers, the workers, is indicated by the nature of their income. 
It is however true that the worker can squander his wages on liquor 
for himself instead of buying meat and bread for his children, a 
thing he cannot do when he is paid in kind. His personal freedom 
has thereby been extended, i. e. more latitude has been allowed to 
the rule of liquor. On the other hand, the money the workers are 
able to spare after paying for the most essential means of subsistence, 
can be used by them to buy books, lecturers and meetings, instead of 
meat and bread. They are in a better position to acquire the universal 
powers of society, such as the intellectual ones. Where the nature of 
the ‘income is still determined by the type of occupation, not only as 
at present by the quantity of the universal medium of exchange, but 
also by the nature of his occupation, the ways in which the individual 
can enter into relations with society and appropriate it are extremely 
limited, and the social organisation for the interchange of the 
material and intellectual products of society is from the outset 

restricted to a definite method and a particular content. Money, 
which is the supreme expression of class contradiction, therefore also 
obscures religious, social, intellectual and individual differences. 
When confronting the bourgeoisie, the feudal barons for example 
made futile attempts, by means of luxury laws, politically to check or 
break this universal levelling power of money. Thus in the 
commercial transactions between consumers and dealers, the 
qualitative class differences are transformed into the quantitative 
difference of a larger or smaller amount of money at the disposal of 
the buyer; and within a single class it is the quantitative difference 
which constitutes the qualitative difference. Hence big bourgeoisie, 
middle bourgeoisie and petty bourgeoisie.