Chapter 4: Commodity Production. Commodities and Money

Commodity Production – the Point of Departure for the Rise of Capitalism and a General Feature of Capitalism

The capitalist mode of production, which arose as successor to the feudal mode of production, is based upon exploitation of the class of wage-workers by the class of capitalists. To understand the essence of the capitalist mode of production one must bear in mind, first and foremost, that the capitalist system has commodity production as its foundation: under capitalism everything takes the form of a commodity and the principle of buying and selling prevails everywhere.

Commodity production is older than capitalist production. It existed in slave-owning society and under feudalism. In the period when feudalism was breaking down, simple commodity production served as the basis for the rise of capitalist production.

Simple commodity production presupposes, first, the social division of labor, under which individual producers specialize in making particular products, and, second, the existence of private property in the means of production and in the products of labor.

The simple commodity production of craftsmen and peasants is distinguished from capitalist commodity production by the fact that it is based upon the personal labor of the commodity producer. Yet fundamentally it is similar in kind to capitalist production, insofar as its foundation is private property in the means of production. Private ownership inevitably gives rise to competition between the commodity producers, which leads to the enrichment of a minority and the ruin of the majority. Thus, petty commodity production serves as the point of departure for the rise and development of capitalist relations.

Under capitalism, commodity production becomes dominant and universal. The exchange of commodities appears as “the simplest, most ordinary, fundamental, most common and everyday relation of bourgeois (commodity) society, a relation that is encountered thousands of millions of times.”[1]

The Commodity and its Characteristics Dual Nature of the Labor embodied in a Commodity

A commodity is a thing which, first, satisfies some human demand and, second, is produced not for personal consumption but for exchange.

The utility of a thing, the characteristics thanks to which it is able to satisfy some human demand, makes the thing a use-value. A use-value can either directly satisfy an individual human demand or else serve as a means of production of material wealth. For instance, bread satisfies a demand as food and cloth as clothing, while the use-value of a loom consists in the fact that cloth is made with its help. In the course of historical development, man continually discovers fresh, useful characteristics in things and fresh ways of using them.

Use-value is possessed by many things which have not in any way been created by human labor, such as, spring-water or the fruits of wild trees. But not everything which has use-value is a commodity. For a thing to become a commodity it must be a product of labor produced for sale. Use-value forms the material substance of wealth, whatever its social form may be. In a commodity economy, use-value is the depository of the exchange-value of a commodity. Exchange-value appears first of all as the quantitative relationship in which use-values of one kind are exchanged for use-values of another kind. For example, one axe is exchanged for 20 kilograms of grain. In this quantitative relationship between the commodities exchanged is expressed also their exchange-value. Commodities are treated as equivalent to each other in definite quantities, consequently they must have a common basis. This basis cannot be any of the natural properties of commodities—their weight, size, shape, etc. The natural properties of commodities determine their utility and their use-value, a necessary condition for exchange is difference between the use-values of the commodities to be exchanged. No one will exchange commodities which are identical, such as wheat for wheat, or sugar for sugar. The use-values of different commodities, being different qualitatively, are incommensurable quantitatively.

Commodities of different kinds have only one characteristic in common which makes it possible to compare them for purposes of exchange, and it is that they are all products of labor. Underlying the equivalence of two commodities which are exchanged against each other is the social labor expended in producing them. When a commodity producer brings an axe to market in order to exchange it, he finds that for his axe he can get 20 kilograms of grain. This means that the axe is worth the same amount of social labor as 20 kilograms of grain are worth. Value is the social labor of commodity producers embodied in a commodity.

That the value of commodities embodies the social labor expended in producing them is borne out by some generally known facts. Material wealth, which is useful in itself, but requires no expenditure of labor for its production, has no value—e.g., the air. Material wealth, which requires a large expenditure of labor has a high value—e.g., gold, diamonds. Many commodities which at one time were costly have become cheaper as the development of technique has reduced the amount of labor needed to produce them. Changes in the amount of labor expended in producing commodities are usually reflected in the quantitative relationship between these commodities when exchanged, i.e., in their exchange-value. It follows from all this that the exchange-value of a commodity is the form in which its value manifests itself.

Hidden behind the exchange of commodities is the social division of labor between the persons who are the owners of these commodities. When commodity producers compare different commodities, one with another, in doing so they are comparing their different kinds of labor. Thus, value expresses the production-relations between commodity producers. These relations manifest themselves in the exchange of commodities.

A commodity has a two-fold character: in one aspect it is a use-value and in another it is a value. The two-fold character of the commodity is caused by the two-fold nature of the labor embodied in the commodity. The kinds of labor are just as various as the use-values which are produced. The labor of a joiner is qualitatively different from that of a tailor, a shoemaker, etc. The different kinds of labor are distinguished from one another by their aims, methods, tools and, finally, their results. The joiner does his work with an axe, a saw and a plane and makes wooden articles: tables, chairs, cupboards; the tailor makes clothes, using a sewing machine, scissors and a needle. Thus, in each use-value a definite kind of labor is embodied: in a table—the joiner’s labor, in a suit—the tailor’s labor, in a pair of shoes—the shoemaker’s labor, etc. Labor expended in a definite form is concrete labor. Concrete labor creates the use-value of a commodity.

In the course of exchange, commodities of the most various kinds, created by different kinds of concrete labor, are compared together and measured on a common footing. Consequently, behind the different concrete forms of labor there is hidden something common, something inherent in every form of labor. Both the joiner’s labor and the tailor’s, despite the qualitative difference between these forms of labor, constitute a productive expenditure of human brains, nerves, muscles, etc., and in this sense are homogeneous human labor, labor in general. The labor of commodity producers, considered as expenditure of human labor-power generally, without regard to its concrete form, is abstract labor. Abstract labor forms the value of a commodity.

Abstract and concrete labor are two aspects of the labor embodied in a commodity.

“On the one hand, all labor is, speaking physiologically, an expenditure of human labor-power and in its character of identical abstract human labor, it creates and forms the value of commodities. On the other hand, all labor is the expenditure of human labor-power in a special form and with a definite aim, and in this, its character of concrete useful labor, it produces use-values.”[2]

In a society in which private property in the means of production prevails, the two-fold character of the labor embodied in a commodity reflects the contradiction between the private and social labor of the commodity producers. Private ownership of the means of production separates people, makes the labor of the individual commodity producer his own private affair. Each commodity producer conducts his enterprise separately from the rest. The labor of the separate workers is not concerted or coordinated on the scale of society as a whole. But, from another angle, the social division of labor means that all-round connections exist between the producers, who are working for each other. The more labor is divided in society and the more varied are the products manufactured by the separate producers, the more extensive is the mutual dependence of the latter. Consequently, the labor of each separate commodity producer is essentially social labor and forms a particle of the labor of society as a whole. Commodities, which are products of various kinds of particular, concrete labor, are at the same time also products of human labor in general, abstract labor.

It follows that the contradiction of commodity production consists in the labor of commodity producers, which is directly the private affair of each one of them, having at the same time a social character. Owing to the isolation of the commodity products one from another, the social character of their labor in the process of production remains hidden. It finds expression only in the process of exchange, when the commodity comes on to the market and is exchanged against another commodity. Only in the process of exchange is it revealed whether the labor of a particular commodity producer is needed by society and whether it will receive social recognition.

Abstract labor, which forms the value of a commodity, is a historical category, a specific form of social labor belonging to commodity economy only. In natural economy men produce their products not for exchange but for personal consumption, so that the social character of their labor appears directly in concrete form. For example, when a feudal lord extracted surplus product from serf-peasants in the form of labor-rent or rent in kind, he appropriated their labor directly in the form of labor services or definite products. In these circumstances social labor did not assume the form of abstract labor. In commodity production, products are produced not for personal consumption but for sale. The social character of labor is here expressed by means of the comparison of one commodity with another, and this comparison takes place through the reducing of concrete forms of labor to the abstract labor which forms the value of a commodity. This process takes place spontaneously, without any sort of common plan, behind the backs of the commodity producers.

Socially-Necessary Labor-Time. Simple and Complex Labor

The magnitude of the value of a commodity is determined by labor-time. The more labor-time is needed to produce a given commodity, the higher is its value. Of course, the individual commodity producers work in varying conditions and expend varying amounts of labor-time in the production of one and the same kind of commodity. Does this mean that the more idle the worker, or the less favorable the conditions in which he is working, the higher the value of the commodity produced by him? No, it does not mean that. The magnitude of the value of a commodity is determined not by the individual labor-time expended by a particular commodity producer in producing a commodity, but by the socially-necessary labor-time.

Socially-necessary labor-time is the time needed for the making of any commodity under average social conditions of production, i.e., with the average level of technique and average skill and intensity of labor. It corresponds to the conditions of production under which the greatest bulk of goods of a particular kind are produced. Socially-necessary labor-time changes as a result of the growth of the productivity of labor.

The productivity of labor is expressed in the amount of products created in a given unit of labor-time. The productivity of labor grows as a result of the improvement or fuller utilization of the instruments of production, the development of science, the increase in the worker’s skill, the rationalization of work, and other improvements in the production process. To a greater or less extent it is also dependent on natural conditions. The higher the productivity of labor, the less the time needed for the production of a unit of the given commodity and the lower the value of this commodity.

The intensity of labor must be distinguished from the productivity of labor. The intensity of labor is determined by the amount of labor expended in a unit of time. A growth in the intensity of labor means an increase in the expenditure of labor in one and the same interval of time. More intensive labor embodies itself in a greater quantity of products and creates a greater value in a given unit of time, as compared with less intensive labor.

Workers of varying skill take part in the production of commodities. The labor of a worker who has had no special training is simple labor. Labor which requires special training is complex or skilled labor.

Complex labor creates value of greater magnitude than is created by simple labor in the same unit of time. Into the value of a commodity created by complex labor there enters also part of the labor expended on the worker’s training, on raising his degree of skill. Complex labor is equivalent to multiplied simple labor; one hour of complex labor is equal to several hours of simple labor. The reduction of various forms of complex labor to simple labor takes place spontaneously under commodity production based on private property. The magnitude of the value of a commodity is determined by the socially-necessary amount of simple labor.

Development of the Forms of Value. Nature of Money

The value of a commodity is created by labor in the process of production, but it can manifest itself only through the comparison of one commodity with another in the process of exchange, i.e., through exchange-value.

The simplest form of value is the expression of the value of one commodity in terms of another commodity: e.g., one axe = 20 kilograms of grain. Let us examine this form.

In this case, the value of the axe is expressed in terms of grain. The grain serves as a means of expressing the value of the axe. It is possible to express the value of the axe in the use-value of grain only because labor is expended both in the production of the grain and in that of the axe. Behind the equality of these commodities is concealed the equal expenditure of labor in producing them. A commodity which expresses its value in another commodity (in our example, the axe), has a relative form of value. A commodity, the use-value of which serves as the means of expressing the value of another commodity (in our example, the grain), has an equivalent form. The grain is the equivalent to (is worth) the other commodity, viz., the axe.

The use-value of one commodity, grain, thus becomes the form in which the value of another commodity, the axe, is expressed.

In the beginning, exchange, which originated already in primitive society, was of a casual nature and took place in the form of direct exchange of one product for another. To this stage in the development of exchange corresponds the elementary or accidental form of value:

1 axe = 20 kilograms of grain

Under the elementary form of value, the value of an axe can be expressed only in the use-value of a single commodity; in the given example, grain.

With the rise of the first major social division of labor—the separation of pastoral tribes from the general mass of tribes—exchange becomes more regular. Certain tribes, e.g., the cattle-raising ones, begin to produce a surplus of cattle products, which they exchange for products of agriculture or handicraft which they lack. To this level of the development of exchange corresponds the total or expanded form of value. There now take part in exchange not two but a whole series of commodities:

Under the money form of value, the value of every commodity is expressed in the use-value of a single commodity, which has become the universal equivalent.

Money thus arose as a result of a long process of development of exchange and of forms of value. With the rise of money, a polarization took place in the world of commodities; at one pole remained the ordinary commodities, while to the other pole went the commodity which played the role of money. Now all commodities begin to express their value in the money commodity. Consequently, money appears, in contradiction to all other commodities, as the general embodiment of value the universal equivalent. Money possesses the property of being directly exchangeable for any commodity and so serves as the means of satisfying all the requirements of the commodity owners, whereas all other commodities can satisfy only one or other of their requirements—e.g., bread, clothing, etc.

Consequently, money is the commodity which is the universal equivalent of all commodities; it embodies social labor and expresses the production relations between the commodity producers.

…

The Law of Value—an Economic Law of Commodity Production

In commodity production based on private property, the production of commodities is carried out by separate private commodity producers. A competitive struggle goes on between these commodity producers. Each one tries to push the others aside and to maintain and extend his own position in the market. Production proceeds without any sort of general plan. Each one produces on his own account, regardless of the others; nobody knows what the demand is for the commodity which he is producing or how many other commodity producers are engaged in producing the same commodity, whether he will be able to find a market for his commodity or whether he will be reimbursed for the labor he has expended. With the development of commodity production the power exercised by the market over the commodity producers becomes ever greater.

This means that in commodity production based on private ownership of the means of production there operates the economic law of competition and anarchy of production. This law expresses the spontaneous nature of production and exchange, the struggle between private commodity producers for more advantageous conditions of production and sale of goods.

Under the conditions of anarchy of production, which reign in commodity production based on private property, the law of value appears as the spontaneous regulator of production, acting through market-competition.

The law of value is an economic law of commodity production, by which the exchange of commodities is effected in accordance with the amount of socially-necessary labor expended on their production.

The law of value regulates the distribution of social labor and means of production among different branches of commodity economy spontaneously, through the price mechanism. Under the influence of fluctuations in the relationship of supply and demand the prices of commodities continually diverge either above or below their value. Divergences of prices from values are not a result of some defect in the operation of the law of value, but, on the contrary, are the only possible way in which it can become effective. In a society in which production is in the hands of private owners, working blindly, only the spontaneous fluctuations of prices on the market inform the commodity producers whether they have produced goods in excess of the effective demand by the population or have not produced sufficient to meet it. Only the spontaneous fluctuations of prices around values oblige commodity producers to extend or restrict the production of particular commodities. Under the influence of price-fluctuations, commodity producers rush into those branches which appear most profitable at the given moment because the prices of commodities are higher than their values, and quit those branches where the prices of commodities are lower than their values.

The operation of the law of value conditions the development of the productive forces of commodity economy. As we have seen, the magnitude of the value of a commodity is determined by socially-necessary labor-time. The commodity producers who are the first to introduce a higher technique produce their commodities at reduced cost, in comparison with that which is socially-necessary, but sell these commodities at the prices which correspond to the socially-necessary labor. When they sell their commodities, they receive a surplus of money and grow rich. This impels the remaining commodity producers to make technical improvements in their own enterprises. Thus, as a result of the separate actions of separate commodity producers, each striving for his own private advantages, progress takes place in technique and the productive forces of society are developed.

As a result of competition and anarchy of production, the distribution of labor and means of production between the various branches of economy and the development of the forces of production are accomplished in a commodity economy at the price of great waste of social labor, and lead to the contradictions of this economy becoming more and more acute.

In conditions of commodity production based on private property, the operation of the law of value leads to the rise and development of capitalist relations. Spontaneous fluctuations of market prices around values, and divergences of individual labor costs from the socially-necessary labor which determines the magnitude of the value of a commodity, intensify the economic inequality of the commodity producers and the struggle among them. This competitive struggle leads to some commodity producers being ruined and transformed into proletarians while others are enriched and become capitalists. The operation of the law of value thus brings about a differentiation among the commodity producers.

“Small production engenders capitalism and the bourgeoisie continuously, daily, hourly, spontaneously and on a mass scale.”[3]

Commodity Fetishism

In conditions of commodity production based on private ownership of the means of production, the social link between people which exists in the production process makes its appearance only through the medium of exchange of commodities. The fate of the commodity producers is found to be closely connected with the fate of the commodities which they create. The prices of commodities continually change, independently of people’s will or consciousness, and yet the level of prices is often a matter of life and death for the commodity producers.

Relations between things conceal the social relations between people. Thus, though the value of a commodity expresses the social relationship between commodity producers, it appears as a kind of natural property of the commodity, like, say, its color or its weight.

Marx wrote:

“It is a definite social relation between men that assumes, in their eyes, the fantastic form of a relation between things.”[4]

In this way, in a commodity economy based on private property, the production-relations between people inevitably appear as relations between things (commodities). In this transmutation of production-relations between persons into relations between things is inherent also the commodity fetishism which is characteristic of commodity production.[5]

Commodity fetishism is displayed with special clarity in money. In commodity economy, money is a tremendous force, giving power over men. Everything can be bought for money. It comes to seem that this capacity to buy anything and everything is a natural property of gold, whereas in reality it is a result of definite social relations.

Commodity fetishism has deep roots in commodity production, in which the labor of a commodity producer appears directly as private labor, and its social character is revealed only in the exchange of commodities. Only when private property in the means of production is abolished does commodity fetishism disappear.

Brief Conclusions

1. The point of departure for the rise of capitalism was the simple commodity production of craftsmen and peasants. Simple commodity production differs from capitalism in that it is based upon the individual labor of the commodity producer. At the same time it belongs fundamentally to the same type as capitalist production, in as much as its foundation is private ownership of the means of production. Under capitalism, when not only the products of labor, but labor-power too becomes a commodity, commodity production acquires a dominant, universal character.

2. A commodity is a product which is made for exchange, it appears from one angle as a use-value and from the other as a value. The labor which creates a commodity possesses a dual character. Concrete labor is labor expended in a definite form—it creates the use-value of a commodity. Abstract labor is the expenditure of human labor-power in general—it creates the value of a commodity.

3. Value is the social labor of the commodity producers embodied in a commodity. Value is a historical category which belongs only to commodity economy. The magnitude of the value of a commodity is determined by the labor which is socially-necessary for its production. The contradiction in simple commodity economy consists in the fact that the commodity producers’ labor, which is directly their own private affair, bears at the same time a social character.

4. …

5. …

6. In a commodity economy based on private property in the means of production, the law of value is the spontaneous regulator of the distribution of social labor between branches of production. The operation of the law of value causes a differentiation among the petty commodity producers and the development of capitalist relations.

[1] Lenin, “On Dialectics”, Marx, Engels, Marxism, p. 334.

[2] Marx, Capital, Kerr edition, Vol. I, p. 54.

[3] Lenin, “‘Left-wing’ Communism, an Infantile Disorder”, Selected Works, Vol. II, p. 344.

[4] Marx, Capital, Kerr edition, Vol. I, p. 83.

[5] The transmutation of production-relations between persons into relations between things, characteristic of commodity production, is called "commodity fetishism" because of its resemblance to the religious fetishism which is involved in the deification by primitive men of objects which they themselves have made.