Lyotard on the Merchantilism of the Gold Standard

[Lyotard initially quotes the following letter from Colbert to Louis XIVwhich he takes as representative of the ‘merchantilism’ of the gold standard (Libidinal Economy, pp. 188-9). Paragraph breaks have been added.]

…The good state of Your Majesty’s finances and the augmentation of his revenues consists in increasing by all available means the amount of silver converted into money which is continually circulating in the realm, and in keeping in the provinces the exact proportion of this money that they require…augmenting the silver in public commerce by drawing it from the countries from whence it comes, retaining it within the realm by preventing it from leaving, and by giving men the means to draw a profit from it.

Since the greatness and strength of the State and the Magnificence of the King are composed from these three points, the expenditures for which great revenues provide the opportunity render State and King all the greater, because they deplete the revenues of all neighbouring States at the same time. In view of the fact of having just one constant quantity of silver circulating in all Europe, augmented from time to time by that which comes from the West Indies, it is certain and demonstrable that if there are only 150 million pounds of silver in public circulation, one can only succeed in augmenting it by 20, 30, and 50 millions at the same time as one removes the same quantity from neighbouring States….

I entreat Your Majesty to permit me to tell him that since he took on the administration of finances, he has undertaken a war of silver against all the States of Europe. He has already conquered Spain, Germany, Italy, and England, which he has thrown into very great poverty and destitution, and has grown rich from their spoils, which have given him the means to perform such great things as he has done in the past and still does every day. Only Holland still remains fighting with great forces: her northern trade…and that in the East Indies…that in the Levant…that in the West Indies…her factories, her trade in Cadiz, Guinea and an infinity of others in which all her strength consists and resides. Your Majesty has formed companies which, like armies, attack them on all fronts….

The factories, the canal for the transnavigation of seas and so many other new developments as Your Majesty has created, are so many reserve corps which Your Majesty created and drew out of nothing in order better to perform their duty in this war…. The sensible fruit of the success of all these things would be that by drawing, by means of trade, a very great quantity of silver into his realm, not only would he soon manage to reestablish those proportions which must exist between the silver in currency in trade, and the taxations which are paid by the people, but he could even augment each of them, in such a way that his revenues would increase and he would put his peoples in a powerful position to assist him more considerably in the event of war or some other necessity….

[Lyotard later comments (pp. 191-2):]

“[T]he quantity of metallic money which is ‘circulating in all Europe’ being constant, and this gold being wealth itself, in order that the king grow richer he must seize the maximum of this gold. This is to condemn the partner to die, in the long or short term. It is to count the time of trade not up to infinity, but by limiting it to the moment when all the gold in Europe is in Versailles. And it is to identify gold with the traditional form of wealth, which the earth. To draw gold into the frontiers of the realm is the same thing as to extend the frontiers up to the sources of gold. The earth being round, the conquest must in principle close up on itself, the armies progressing eastward establishing the empire of the world. Locking gold up within the limits of the realm is for Colbert the same operation relativized: it is the earth-gold or the golden earth which must come to complete its movement in the king’s coffers. In the first case, the realm is displaced over the earth, envelops it and becomes its coffer, in the second the gold which was displaced will become incarcerated in the realm.”

 [Later (p. 196) Lyotard also quotes Keynes’ General Theory (Ch. 23, §3):]

‘Never in history’, writes Keynes, ‘was there a method devised of such efficacy for setting each country’s advantage at variance with its neighbours’ as the international gold standard.’

[The moral of the story? The gold standard structures the process of acquiring wealth into a zero-sum game, where one nation’s gain is another nation’s loss. To endorse the gold standard, therefore, is to endorse imperialism, returning to merchantilism. I find it odd that these implications of the gold standard are not talked about (i.e. denounced) by the mainstream, despite the unanimity among orthodox economists that the gold standard is an awful idea.]

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About Graham Joncas

We are a way for capital to know itself.

Posted on May 10, 2012, in Economics, Politics, Quotation and tagged , , , , , , , . Bookmark the permalink. Leave a comment.

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