A few years after the Treaty of Paris when the situation permitted the resumption of cash payments,the problem which Lowndes had broached during the reign of William III arose again in practically the same form.A huge national debt and a mass of private debts,fixed obligations,etc.,which had accumulated in the course of over 20years,were incurred in depreciated bank-notes.Should they be repaid in bank-notes ￡4,67210s.of which represented,not in name but in fact,100lbs.of 22-carat gold?T homas Attwood ,a Birmingham banker,acted like a resurrected Lowndes.He advocated that as many shillings should be returned to the creditors as they had nominally lent,but whereas according to the old monetary standard,say,1/78of an ounce of gold was known as a shilling,now perhaps 1/90of an ounce should be called a shilling.Attwood's supporters are known as the Birmingham school of "little shilling men".The quarrel about the ideal standard of money,which began in 1819,was still carried on in 1845by Sir Robert Peel and Attwood,whose wisdom in so far as it concerns the function of money as a measure is fully summarised in the following quotation:
During "the recent discussion between Sir Robert Peel and the Birmingham Chamber of Commerce....The Minister was quite satisfied with asking the question,'What will your pound note represent?'....What is to be understood by the present standard of value?Is ￡317s.
101/2d.an ounce of gold,or is it only of the value of an ounce of gold?
If ￡317s.101/2d.be an ounce of gold,why not call things by their proper names,and,dropping the terms pounds,shillings and pence,say ounces,penny-weights and grains?...If we adopt the terms ounces,pennyweights and grains of gold,as our monetary system,we should pursue a direct system of barter....But if gold be estimated as of the value of ￡317s.
101/2d.per ounce ...how is this ...that much difficulty has been experienced at different periods to check gold from rising to ￡54s.per ounce,and we now notice that gold is quoted at ￡317s.9d.per ounce?...
The expression pound has reference to value,but not a fixed standard value....
The term pound is the ideal unit....Labour is the parent of cost and gives the relative value to gold or iron.Whatever denomination of words are used to express the daily or weekly labour of a man,such words express the cost of the commodity produced."[6]
The hazy notion about the ideal measure of money fades away in the last words and its real mental content becomes clear.Pound,shilling,etc.,the names of account of gold,are said to be names representing definite quantities of labour-time.Since labour-time is the substance and the inherent measure of value,the names thus indeed express the value relations themselves.
In other words it is asserted that labour-time is the real standard of money.Here we leave the Birmingham school and merely note in passing that the doctrine of the ideal measure of money has gained new importance in connection with the controversy over the convertibility or non-convertibility of bank-notes.While the denomination of paper is based on gold or silver,the convertibility of the note,i.e.,its exchangeability for gold or silver,remains an economic law regardless of what juridical law may say.For instance,a Prussian paper thaler,although legally inconvertible,would immediately depreciate if in everyday commerce it were worth less than a silver thaler,that is if it were not convertible in practice.The consistent advocates of inconvertible paper money in Britain,therefore,had recourse to the ideal standard of money.If the denominations of money,pound,shilling and so on,are names for a determinate amount of particles of value,of which sometimes more,sometimes less are either absorbed or lost by a commodity when it is exchanged for other commodities,then the value of an English ￡5note,for instance,is just as little affected by its relation to gold as by its relation to iron and cotton.Since its designation would no longer equate the bank-note in theory to a determinate quantity of gold or of any other commodity,its very concept would preclude the demand for its convertibility,that is for its equation in practice with a determinate quantity of a specific thing.
John Gray was the first to set forth the theory that labour-time is the direct measure of money in a systematic way.[7]He proposes that a national central bank should ascertain through its branches the labour-time expended in the production of various commodities.In exchange for the commodity,the producer would receive an official certificate of its value,i.e.,a receipt for as much labour-time as his commodity contains,[8]and this bank-note of one labour week,one labour day,one labour hour,etc.,would serve at the same time as an order to the bank to hand over an equivalent in any of the other commodities stored in its warehouses.[9]This is the basic principle,which is scrupulously worked out in detail and modelled throughout on existing English institutions.Gray says that under this system "to sell for money may be rendered,at all times,precisely as easy as it now is to buy with money,...production would become the uniform and never-failing cause of demand".
The precious metals would lose their "privileged"position in comparison with other commodities and "take their proper place in the market beside butter and eggs,and cloth and calico,and then the value of the precious metals will concern us just as little ...as the value of the diamond".
"Shall we retain our fictitious standard of value,gold,and thus keep the productive resources of the country in bondage?
