Part 1

+-------------------------------------------------+ |Transcriber’s note: | | | |Obvious typographic errors have been corrected. | | | +-------------------------------------------------+

TOLSTOY’S INTERPRETATION

OF MONEY AND PROPERTY

MILIVOY S. STANOYEVICH, M.L.

(University of California)

Reprinted from “Liberty”, December, 1916.

Liberty Publishing Co. Oakland, Cal.

TOLSTOY’S INTERPRETATION OF MONEY AND PROPERTY

A. Interpretation of Money.

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. According to him enacted law is violence, private property is evil, and subsequently “money as a centre around which economic science clusters” cannot be anything else, but a medium of oppression. 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”.

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. The founders of classical economics, Smith, Ricardo, Mill, Carey, socialist reformers, Lassalle, and Marx, 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. More acute determination of the nature of money is given by Prof. Kinley in his elaborate study on Money. 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.

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.

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. 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. 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. 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, 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. 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. If people exchanged directly commodity for commodity; if they themselves determined the standards of values by sheep, furs, hides, and shells, 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. The standard value of money is determined by law and government, and these institutions are based chiefly on deceit, or represent the organized force. 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. 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. 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. Wherefore they issue monetary tokens in the different countries. 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. The debts of the present monetary state grow from year to year in a terrifying progression. Even so grow the budgets. 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, and supporting those men who aid in the seizure of the money from the people. So we have the third function of money as the third method of enslavement, by means of tribute and taxes. 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, and upon it all the economic relation of men are based.

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. 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. 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.

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. 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.

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. 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.

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”. 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. 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 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. 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. 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.