To unlock the secrets of the commodity is to unravel the intricate secrets of capitalism itself.
Marx considers the commodity as a material embodiment of use value, exchange value & value.
These concepts are absolutely fundamental to everything that follows.
It is the relations between these concepts that count.
Transformation problem: There seems to be no necessary relation between the values embodied in commodities & the ratios at which the latter exchange.
Exchange value & value are relational categories, & neither of them can be treated as a fixed & immutable building block.
Marx was not seeking to derive exchange values out of values.
Use Values, Exchange Values & Values
- Use Values
Human beings appropriate nature through acts of production & consumption that are separated by exchange. Human wants & needs require nature for satisfaction.Use value has both quality & quantity:
Quality: food satisfies hunger, clothing our need for warmth, housing our need for shelter, etc
Quantity: dozens of watches, yards of linen, tons of iron, etcMarx stresses the qualitative side of use values (whereas exchange value is seen primarily as quantitative)Producers use a certain quantity of inputs – labour power, raw materials & instruments of production – to create a quantity of physical product which is used to satisfy the wants & needs of a certain number of people.The ratio of physical inputs to outputs in the production process provides a physical measure of efficiency.A state of reproduction is one in which the inputs & outputs balance.
A surplus is identified as a surplus product, i.e. an amount of material use values over & above those needed to reproduce the system in a given state.
All societies must physically reproduce themselves if they are to survive.
For production the physical aspect to social reproduction is captured by a description of the labour process:
1. The physical activity of man, i.e. work
2. The subject of this work
3. Its instruments
Marx rejects use values as a universal category & reintroduces it as a relational category.
The commodity is conceived of as an embodiment of both use & exchange values.
Use values are shaped according to the modern relations of production & in turn intervene to modify those relations.
A machine is a use value produced under capitalist relations of production. It embodies exchange value & value.
The producer of commodities must not only produce use values but use values for others, social use values.
Unless the commodity satisfies a social want or need, it can have neither exchange value nor value.
Marx sees the standard of living of labour as something that varies according to the dynamics of capitalist accumulation.
The labourers rely upon capitalist commodity production to meet their needs at the same time as commodity producers rely upon the labourers to spend their money on the commodities the capitalists can produce. The capitalist production system both responds to & creates wants & needs on the part of the labourer.
The production of new consumption can be accomplished in a variety of ways:
1. Quantitative expansion of existing consumption
2. Creation of new needs by propagating existing ones in a wide circle
3. Production & discovery & creation of new use values
- Exchange Value, Money & the Price System
The problem for political economy has ever been to explain why commodities exchange at the prices they do.Marx accepts the importance of supply & demand in equilibrating the market, but he vehemently denies that supply & demand can tell us anything whatsoever about what the equilibrium prices of commodities will be.The exchange value of a commodity cannot be understood without analysing the nature of the ‘money’ that permits exchange value to be expressed unequivocally as a price.He challenges the idea that any commodity can ever be an unbiased numeraire & seeks to show that, on the contrary, money embodies a fundamental contradiction.
The basic task lies not in comprehending that money is a commodity, but in discovering how, why & by what means a commodity becomes money.
The money form is a social creation. Nature does not produce money.
With the proliferation of exchange, one commodity (or set of commodities) will likely emerge as the universal equivalent – a basic money commodity such as gold.
The shift from many different (subjective & often accidental) determinations of exchange value to one standard money measure is produced by a proliferation of exchange relations to the point where the production of goods for exchange becomes a normal social act.
The growth of exchange & the emergence of a money commodity therefore necessarily go hand in hand.
The commodity that assumes the mantle of money becomes distinct from all other commodities.
’the riddle presented by money is but the riddle presented by commodities…in its most glaring form’ (Capital, vol. 1, p.93)
The money commodity, like any other commodity, has a value, exchange value & use value.
Its value is determined by the socially necessary labour time taken up in its production & reflects the specific social & physical conditions of the labour process under which it is produced.
The exchange value of all other commodities are measured against the yardstick formed by these specific conditions of the production of the money commodity.
Money functions as a measure of value, & its exchange value ought presumably to reflect that fact.
The use value is that it facilitates the circulation of all other commodities. It functions as a medium of circulation.
The money commodity acquires a dual exchange value:
1. That dictated by its own conditions of production (its ‘inherent’ exchange value)
2. That dictated by what it will buy (its ‘reflex’ value)
This duality arises because exchange value, which we initially conceived of as being an internalised attribute of all commodities, is now represented by a measuring rod which is external to & quite separate from the commodities themselves.
The problem of how to represent & measure value is thereby solved. But the solution is arrived at only at the expense of internalising the duality of use value & value within the exchange value of money itself.
Money solves the contradictions of direct barter & exchange, only by positing them as general contradictions.
The demand for money = P.Q (where P is a vector of prices & Q the respective quantities of commodities in circulation)
Money supply = M.V (where M is the quantity of money available & V is its velocity of circulation)
In equilibrium MV = PQ
If the quantity of commodities in circulation suddenly increases, while both M & V remain constant, then the reflex value of the money commodity will rise to a level that may be far above its inherent value.
An increase in M or V can rectify this.
But the volume of commodity exchange is perpetually fluctuating, day by day, while the very conditions that led a particular commodity to be selected as the money commodity (scarcity, etc) militate against instant adjustability in its supply.
One way out is to create a reserve fund, a hoard. Another possibility is to use some kind of credit system & then use the money commodity to pay the balance of accounts at the end of a given period (day, month or year). In this way the demand for money can be much reduced & the effects of day to day fluctuations in the volume of commodity exchange neutralised.
Additional functions of money:
Store of value
Means of payment
Money is the social expression of value itself.
Marx, “The individual carries his social power, as well as his bond with society, in his pocket”. (Grundrisse, p. 157)
The commodity form of circulation: C-M-C (an exchange of use values)
M-C-M The only possible motivation for putting money into circulation on a repeated basis is to obtain more of it at the end than was possessed at the beginning.
A quantitative relation replaces the exchange of qualities.
Money is thrown into circulation to make more money – a profit.
This is capital.
[The] boundless greed after riches, this passionate chase after exchange value, is common to the capitalist & the miser; but while the miser is merely a capitalist gone mad, the capitalist is a rational miser. The never-ending augmentation of exchange value, which the miser strives after, by seeking to save his money from circulation, is attained by the more acute capitalist, by constantly throwing it afresh into circulation. (Capital, vol. 1, pp. 152-3)
Where does profit come from?
- The Value Theory
Marx seeks an objective theory of value through a material investigation of how society functions.The opening argument in Capital is strikingly simple. Marx defines the commodity as an embodiment of use & exchange values, abstracts immediately from the former, & proceeds directly to analyse exchange values.
Putting two different use values (which are themselves qualitatively different) equal to each other in exchange implies that both use values have something in common. The only attribute that all commodities have in common is that they are products of human labour.
This is similar to Ricardo’s argument in his Principles of Political Economy & Taxation.
The modification Marx introduces is a distinction between ‘concrete useful labour’ defined as ‘human labour exercised with a definite aim, to produce use values’ & ‘human labour in the abstract’, which ‘creates & forms the value of commodities’ (Capital, vol. 1, pp.41-6)
But the argument is not tautological (the standard of value is that aspect of human labour which creates value).There is a difference between abstract & concrete labour.
All labour is concrete in that it involves the material transformation of nature. But market exchange tends to obliterate individual differences both in the conditions of production & on the part of those doing the labouring.
What happens in effect is that the commensurability of commodities achieved through exchange renders the labour embodied in them equally commensurable.
Abstract labour is defined as ‘socially necessary labour time’ (Capital, vol. 1, p.39)
All that this does is to insert the qualification ‘socially necessary’ into Ricardo’s theory of labour time as the standard of value.
Abstract labour can become the measure of value only to the degree that a specific kind of human labour – wage labour – becomes general.
Marx turns an a-historical universal statement into a theory of value that operates solely under capitalist relations of production.
Value is a social relation.
Socially necessary labour is ‘the labour required to produce an article under the normal conditions of production & with the average degree of skill & intensity prevalent at the time’.
This requires a return to use values.
1. The productivity of labour needs to considered in purely physical terms, it is set ‘by the average amount of skill of the workman, the state of science, & the degree of its practical application, the social organisation of production, the extent & capabilities of the means of production & by the physical conditions’ (Capital, vol. 1 p.40) [Need to explore these in today’s conditions]
2. Labour can create no value unless it creates social use values – use values for others. Value has to be created in production & realised through exchange & consumption if it is to remain value.
”money as a measure of value, is the phenomenal form that must of necessity be assumed by the measure of value which is immanent in the commodities, labour time” (Capital, vol. 1, p.94)
We can see the interconnections between the growth of exchange, the rise of the money form & the emergence of abstract labour as a measure of value.
The way things appear to us in daily life can conceal as much as it can reveal about their social meaning. The fetishism of commodities.
Social relationships are expressed as relationships between things.
The things themselves exchange according to their value, which is measured in terms of abstract labour.
And abstract labour becomes the measure of value through a specific social process.
”It was the common expression of all commodities in money that alone led to the establishment of their character as values. It is, however, just this ultimate money form of the world of commodities that actually conceals, instead of disclosing, the social character of private labour, & the social relations between the individual producers. (Capital vol. 1, pp. 75-6)
The exchange of commodities for money is real enough, yet it conceals our social relationships with others behind a mere thing – the money form itself.
The existence of money – the form of value – conceals the social meaning of value itself.
”Value does not stalk about with a label describing what it is” (Capital, vol 1, p. 74)
The ebb & flow of commodity production for exchange, arising out of the spontaneous decisions of myriad producers, can be accommodated by the price system precisely because prices are free to fluctuate in ways in which a strict measure of values could not.
Values, after all, express an equilibrium point in exchange ratios after supply & demand have been equilibrated in the market.
The flexibility of prices permits that equilibration process to take place & is therefore essential to the definition of values.
Objects that are not products of human labour – land, conscience, honour, etc., “are capable of being offered for sale by their holders & thus acquiring through their price the form of commodities” (Capital, vol. 1 p. 102)
Commodities that are products of human labour must be distinguished from commodity forms, which have a price but no value.
Exchange of commodities presupposes the right of private proprietors to dispose freely of the products of their labour.
This juridical relation is “but the reflex of the real economic relations’ of exchange” (Capital, vol. 1 p. 84)
A legal foundation to exchange must exist, but also the power to sustain private property rights & enforcement of contracts.
This power resides in the state. The state in some form or another is a necessary precondition to the establishment of values.
State regulation is also required to guarantee the quality of money in circulation.
Notions of ‘freedom’, ‘individuality’, ‘equality’, & ‘private property’ take on very specific meanings in the context of market exchange.
The whole rationale for the operation of the price system rests on the principle that “the circulation of commodities requires the exchange of equivalents’ (Capital, vol 1, p. 160)
That is, a dollar equals another dollar in terms of its purchasing power no matter whose pocket it is in.
- The Theory of Surplus Value
Capital is a process not a thing: M – C – M’
That is, capital is a process of expansion of value.
This expansion of value is surplus value.Capital must, in the course of its circulation, assume the forms of money (exchange value) & commodities (use value) at different moments.
”Value…requires some independent form, by means of which its identity may at any time be established. And this form it possesses only in the shape of money. It is under the form of money that value begins & ends, & begins again, every act of its own spontaneous generation…Value therefore now becomes value in process, money in process, &, as such, capital. (Capital, vol 1, pp. 153-5)This definition implies: The functioning capital in society is not equal to the total stock of money.
Nor is it equal to the total stock of use-values (social wealth).
The money that sits in my pocket as a means to purchase the commodities that I need to live on is not being used as capital. Nor are the use-values of the house I live in or the spade I dig the garden with. There is a lot is society that is not directly related to the circulation of capital.
Money capital is part of the total stock of money.
Productive & commodity capital is only a proportion of the total social wealth.
Capital can be formed by converting money & use values & putting them into circulation in order to make money, to produce surplus value.
A capitalist is an economic agent who puts money & use values into circulation in order to make more money.
”personifications of the economic relations that exist between them” (Capital, vol 1, p. 85)
Marx shows that the capitalist form of circulation would have had to come into existence in response to the contradictory pressures exerted on money through the expansion & extension of exchange.
The rise of the capitalist form of circulation & of values as the regulators of exchange go hand in hand because both are the products of extension & expansion of exchange.
The capitalist form of circulation rests upon an inequality because capitalists possess more money (values) at the end of the process than they did at the beginning. But the values are established by an exchange process which rests on the principle of equivalence.
How can capitalists realise an inequality (M’), through an exchange process which presupposes equivalence?
Where does profit come from?
An answer cannot be found in exchange.
By violating the principle of equivalence, e.g. by cheating, by robbery, etc., one individual’s profit is another’s loss.
The answer lies in production.
Labour power as a commodity has a two-fold character: it has a use-value & an exchange value.
The exchange value is set, in accordance with the rules of commodity exchange, by socially necessary labour time required to reproduce that labour power at a certain standard of living & with a certain capacity to engage in the work process.
The labourer gives up the use-value of the labour power in return for its exchange value.
Since capitalists purchase a certain length of time during which they maintain the rights to the use of labour power, they can organise the production process (its intensity, technology, etc) to ensure that the workers produce greater value during that time span than they receive.
The use value of labour power to the capitalists is not simply that it can be put to work to produce commodities, but that it has the special capacity to produce greater value than it itself has – it can produce surplus value.
”the value of labour power, & the value which that labour power creates in the labour process, are two entirely different magnitudes” (Capital, vol. 1 p. 193)
The excess of the value that labourers embody in commodities relative to the value they require for their own reproduction measures the exploitation of labour in production.
Note that the rule of equivalence in exchange is not broken.
There is no exploitation in the sphere of exchange.
This solution to the origin of profit is as simple as it is elegant. It strikes home, as Engels put it, “like a thunderbolt out of a clear sky” (Capital, vol. 2 p. 14)
”Labour is the substance, & the immanent measure of value, but has itself no value”
To suppose otherwise would be to suppose that we could measure the value of value itself.
Furthermore, “if such a thing as the value of labour really existed, & [the capitalist] really paid this value, no capital would exist, his money would not be turned into capital” (Capital, vol. 1, pp. 537-41)
What the labourer sells to the capitalist is not labour (the substance of value) but labour power – the capacity to realise in commodity form a certain quantity of socially necessary labour time.
The contradiction between capital & wage labour is “the ultimate development of the value-relation & of production resting on value” (Grundrisse, p. 704)
Value & the production of surplus value are part & parcel of each other.
Since the production of surplus value can occur only under certain specific relations of production, we have to understand how these first came into being.
We have to understand the origin of wage labour.
”Nature does not produce on the one side owners of money or commodities, & on the other men possessing nothing but their own labour power.” (Grundrisse, p. 169)
Class Relations & the Capitalist Principle of Accumulation
The social relation that lies at the root of the Marxian value theory is the class relation between capital & labour.
Value theory is an expression of this class relation.
Those who seek profit take on the role of capitalist, & those who give up surplus labour to nourish that profit take on the role of labourer.
An explanation of the class concept has to consider both historical & theoretical analysis.
Historical question: how & why did it ever come about that the owner of money finds a labourer freely selling the commodity labour power in the market place?
The rise of the capitalist class proceeds hand in hand with the formation of a proletariat.
Wage labour is not a universal category.
The class relation between capital & labour, & the value theory that it expresses, is an historical creation.
- The Class Role of the Capitalist & the Imperative to Accumulate
Beneath the surface of exchange relations, “entirely different processes go on in which this apparent individuality, equality & liberty disappear” (Grundrisse, p. 248)The compulsion arises from the need to provide a use value for others at a price that is regulated by the average conditions of production of a commodity.And the mechanism that lies behind this compulsion is competition.”free competition brings out the inherent laws of capitalist production, in the shape of external coercive laws having power over every individual capitalist” (Capital, vol. 1, p. 270)Capitalist face a choice over what to do with the surplus they appropriate: to consume it or reinvest it.
A “Faustian conflict between the passion for accumulation & the desire for enjoyment” (Capital, vol. 1, p. 594)In a world of technological innovation & change, the capitalist who reinvests can gain the competitive edge of the capitalist who enjoys the surplus as revenues.
The passion for accumulation drives out the desire for enjoyment.”accumulation for accumulation’s sake, production for production’s sake” (Capital, vol. 1, p. 595)
Capitalists have a common need: to promote the conditions for progressive accumulation.
- The Implications for the Labourer of Accumulation by the Capitalist
Competition among the capitalists pushes each of them towards use of a labour process that is at least as efficient as the social average.Those who accumulate more quickly tend to drive out of business those who accumulate at a slower rate.Hence the perpetual incentive to increase the rate of accumulation through increasing exploitation in the labour process relative to the social average rate of exploitation.The maximum limit of the working day is set by physical & social constraints.
The labourers & capitalists are in battle to determine the length of the working day.The world of equality, freedom & individuality in the arena of exchange conceals a world of class struggle in the realm of production.Marx interprets the early English factory acts as an attempt “made by a state that is ruled by capitalists & landlord…to curb the passion for limitless draining of labour power” (Capital, vol. 1, p. 239)Capitalists can also accumulate by capturing relative surplus value.
Marx identifies two forms:
1. A fall in the value of labour power results when the productivity of labour in the sectors producing wage goods (the commodities the labourer needs) rises.
The absolute standard of living, measured in terms of the quantities of material goods & services that a labourer can command, remain unchanged: only the exchange ratios (the prices) & the values change.
2. Individual capitalists can leverage the gap between socially necessary labour time & their own private costs of production.
Capitalists employing superior production techniques & with a higher than average productivity of labour can gain an excess profit by trading at a price set by the social average when their production costs per unit are well below the social average.
By trying to stay ahead of the field in productivity, individual capitalists can accelerate their own accumulation relative to the social average.
This then explains why the capitalist “whose sole concern is the production of surplus value, continually strives to depress the exchange value of commodities” by driving up the productivity of labour. (Capital, vol. 1, p. 320)
This is the mainspring for organisational & technological change under capitalism.
Competition forces progressive concentration of activities & the progressive tightening of authority structures & control mechanisms within the work place.
Hence the social layer of administrators & overseers who rule, in the name of capital, over the day to day operations in the work place.
(Machinery & the factory system required the harnessing of energy intensity, that coal & later oil offer).
The restless search for relative surplus value raises the productivity of labour at the same time as it devalues & depreciates labour power, to say nothing of the loss of dignity, of sense of control over the work process, of the perpetual harassment by overseers & the necessity to conform to the dictates of the machine.
Workers can develop the power to resist only by class action of some kind.
The fact that daily struggles exist attests to the fact that the quest for relative surplus value is omnipresent & that the necessary violence that that quest implies is bound to provoke some kind of class response on the part of the workers.
- Class, Value & the Contradiction of the Capitalist Law of Accumulation
The capitalist class must reproduce itself.
The working class must also reproduce itself.
And the class relation between capital & labour must also be reproduced.Value thereby loses its simple technological & physical connotation & comes to be seen as a social relation.…the concept of class is embedded in the conception of value itself.The passage from pre-capitalist to capitalist society…
First, the emergence of the money form & the growth of exchange steadily dissolve ties of personal dependency & replaces them with impersonal dependencies via the market system.Only in production does the class character of social relations become clear, e.g. the struggle over the length of the working day.The individual action of capitalists can endanger the basis of accumulation by forcing workers to work too long a day & so threaten their reproduction.The capitalists are forced to constitute themselves as a class – usually through the State.There is a continuous wavering line between the need to preserve freedom, equality & individuality & the need to take often repressive & coercive class action.
We now see socially necessary labour time as the standard of value only in so far as a capitalist mode of circulation & a capitalist mode of production with its distinctive social relations have come into being.
The concept of value cannot be understood independently of class struggle.
Appendix – The Theory of Value
While the idea of value as an accounting tool or as an empirically observable magnitude had to be abandoned, it could still be treated as a real phenomena with concrete effects.
The essence that lies behind appearance.
The value concept is crucial since it helps us understand, in a way that no other theory of value can, the intricate dynamics of class relations (in both production & exchange), of technological change, of accumulation & all its associated features of periodic crises, unemployment, etc.
Value is, in the first place, ‘a definite social mode of existence of human activity’ achieved under capitalist relations of production & exchange.
In the final analysis labour produces & reproduces the conditions of its own domination.
The political project is to liberate labour from the iron discipline of capitalism.
Labour is not & never can be a fixed & invariable standard of value. Marx mocks those bourgeois economists who sought to establish it as such (Theories of Surplus Value, pt 1, p. 150; pt 3, p.134)