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Karl Marx’s Capital is an undeniable masterpiece of political economy. Marx's magnum opus, however, remains a dense and difficult book to penetrate and absorb. To help guide readers through the pages of Capital we are publishing a series of articles that give a chapter by chapter analysis of this great Marxist classic. We begin with Volume One, Chapter One, in which Marx discusses the concept of the commodity and the question of value.

Karl Marx’s Capital is an undeniable masterpiece of political economy; a work that is even more relevant today than at the time it was written. Through his writings in the three volumes of this magnum opus, Marx revolutionised our understanding of the capitalist system, uncovering and explaining its inner processes, emergent laws, and inherent contradictions.

Capital, however, remains a dense and difficult book to penetrate and absorb, particularly for those who are new to Marxist ideas and the dialectical method of Marxism. To help guide readers through the pages of Capital, and to bring out the main themes and ideas contained within, we are publishing a series of articles that give a chapter by chapter analysis of this great Marxist classic. We begin with Volume One, Chapter One, in which Marx discusses the concept of the commodity and the question of value.

[Socialist Appeal supporters are running a Capital reading group, taking place fortnightly on Thursday evenings. The first session is tonight (Thursday 8th May) in UCL, London. Contact This email address is being protected from spambots. You need JavaScript enabled to view it. if you are interested in joining in, either in person or via Skype.]

The commodity

Capitalism is a complex and chaotic system, composed of a great multitude of interacting processes, agents, and factors. Like all previously unexplained phenomena in nature and society, therefore, the capitalist system initially confronts us as something mysterious and unfathomable; as an omnipotent force, somehow existing above society, which imposes its laws upon us regardless of our will.

The role of political economy, however, is to approach the capitalist system in a scientific manner – to make sense of capitalism by studying its historical development and thus outlining its general motion, tendencies, and dynamics. This task of providing a materialist explanation to the inner workings of capitalism was started by the classical economists Adam Smith, David Ricardo, and others; and it is upon the work of these giants that Marx built his own analysis. There is no great barrier that separates Marxist economics from the economic analysis of those preceding Marx; instead Marx, using the method of dialectical materialism, simply pointed out the limitations of the theories of the classical economists whilst providing a revolutionary explanation for the source of profit – the driving force behind capitalism.

The difficult question facing Marx was: where does one begin in trying to analyse the seemingly chaotic capitalist system? After a number of different draft proposals for the structure of Capital, Marx eventually decided to begin by analysing the idea of the commodity, the production and exchange of which forms one of the main bases of the capitalist mode of production.

What, then, defines a commodity? In simple terms, a commodity is the product of labour – a good or service – that is produced, made, or conducted for the purpose of exchange – that is, for use by someone else. The production of goods and services has always existed in every society throughout history. What differentiates products as commodities, however, is the question of production for exchange.

In early tribal societies, where production was socially owned and managed, the work of various individuals was for the common social good, whilst individual needs were fulfilled by taking from this social wealth. Exchange between individuals, therefore, was not necessary. Related to this, Marx discusses the necessary role that the division of labour within society plays in the formation of commodity production and exchange: without the social division of labour – that is, without different individuals, groups of individuals, or companies performing different socially necessary tasks – there would be no need for the exchange of products, and thus no concept of commodities:

“The totality of heterogeneous use-value or physical commodities reflects a totality of similarly heterogeneous forms of useful labour...in short, a social division of labour. This division of labour is a necessary condition for commodity production...Only the products of mutually independent acts of labour, performed in isolation, can confront each other as commodities.” (p132)

In earlier class societies, where the division of labour did exist, such as under slavery or feudalism, the concept of producing commodities – i.e. producing for exchange – most certainty also existed, but this accounted for a minority of the wealth produced in society; the vast majority of production involved products that were not exchanged, but that were simply appropriated by the ruling class of slave-owners or feudal lords. As Engels comments in a passage in parentheses:

“The mediaeval peasant produced a corn-rent for the feudal lord and corn-tithe for the priest; but neither the corn-rent nor the corn-tithe became commodities simply by being produced for others. In order to become a commodity, the product must be transferred to the other person...through the medium of exchange.” (Capital Volume One, Penguin Classics edition, p131)

Alongside the products in earlier class societies that were simply appropriated – i.e. taken without anything given in return – there existed also an enormous quantity of products that were neither exchanged nor appropriated, but were instead simply consumed by the producer themselves. For example, peasants farming on their own land would predominantly produce for their own consumption, with only a small fraction of their produce being exchanged for the products of others. As Marx emphasises, therefore:

“A thing can be useful, and a product of human labour, without being a commodity. He who satisfies his own need with the product of his own labour admittedly creates use-values, but not commodities. In order to produce the latter, he must not only produce use-values, but use-values for others, social use-values.” (p131)

Whilst the production and exchange of commodities existed in earlier societies, therefore, it is only under capitalism where commodity production accounts for the dominant proportion of the wealth created in society. It is only under the capitalist mode of production, therefore, that the laws and inner logic of commodity production and exchange become the dominant laws within society. It is the understanding of these laws with which Marx seeks to begin his analysis.

Use-value

What is wealth? Wealth is represented by what Marx refers to as “use-values” – things with utility that satisfy human needs. Such useful things include both the products of human labour – whether they be for personal consumption or for exchange – and also those things that society obtains for free from nature – the natural wealth of the Earth.

As Marx states in the opening sentence of Capital, “The wealth of societies in which the capitalist mode of production prevails appears as an ‘immense collection of commodities’.” (p125) In other words, where production is predominantly not for individual consumption, but for the consumption of others via exchange, we identify wealth through the use-value of the commodities produced.

A defining feature of commodities, therefore, is their possession of “use-value”; of possessing properties that are useful to society in general; of fulfilling a social need. Marx, however, is keen to point out that, “The nature of these needs, whether they arise, for example, from the stomach, or the imagination, makes no difference. Nor does it matter here how the thing satisfies man’s need, whether directly as a means of subsistence, i.e. an object of consumption, or indirectly as a means of production.” (p125)

This clarification by Marx puts to rest all those claims made by the critics of Marxism about its lack of relevance today. How many times has it been said that, “Marxist economics isn’t relevant in modern times now that we are all consumers buying consumer goods that we don’t need.” This myth about Marxism assumes that Marx’s analysis was uniquely applicable to the 19th Century, with a working class that existed in a state of pauperism, and with wages that were only just at subsistence levels. Now that we are all supposedly “middle class”, buying TVs and iPhones, going on holidays abroad, and filling our wardrobes with different designer brands, the conclusion is that a Marxist economic analysis no longer applies.

Marx, however, makes no such assumptions about the nature of the commodities in society. These may be goods such as food, shelter, and clothing that fulfil basic human needs; they may be “luxury” or “consumer” goods; they may be services rendered; or they may be technologies and machines developed for others to employ in production. As Marx emphasises, use-values constitute both material needs and desires of the mind. The development of “consumerism”, with a vast advertising industry that seeks to create desires and artificial “needs”, therefore, changes nothing about the fundamental nature of the commodities produced and exchanged in society, nor about the laws and dynamics that govern the capitalist mode of production.

Exchange-value

All commodities, as Marx explains, however, contain a dual nature. Not only are they use-values, but they have also an exchange-value. The use-value of a commodity marks its quality as being a useful thing; the exchange-value, in contrast marks “the quantitative relation, the proportion, in which use-values of one kind exchange for use-values of another kind.”(p126) In other words, the exchange-value expresses a ratio of how much of one commodity is worth in relation to another.

How then does one determine this exchange-value? What aspect of a commodity exists that is both universal and comparable? The answer is labour: “If then we disregard the use-value of commodities, only one property remains, that of being products of labour.” (p128) The exchange-value (or simple “value”), Marx explains, is expressed by the relative quantity of labour contained within different commodities.

Marx, however, was not the first to assert that labour was the source of value. Such an idea had been raised by the classical economists (and even by those in ancient times). Marx developed this “labour theory of value”, however, by looking at the question not from the standpoint of the individual labourer, but of labour in the abstract – of society’s labour in general:

“With the disappearance of the useful character of the products of labour, the useful character of the kinds of labour embodied in them also disappears; this in turn entails the disappearance of the different concrete forms of labour. They can no longer be distinguished, but are all together reduced to the same kind of labour, human labour in the abstract.” (p128)

The question of value, according to Marx, is not about the labour expended by the individual producer. Under capitalism, where commodity production and exchange is dominant and universal, commodities are not simply exchanged between individuals, but are bought and sold on the market. The producers and consumers frequently never – and, in fact, rarely ever – meet. As such, the individual character of any commodity is lost; instead, it simply becomes one example of a multitude of similar use-values.

In turn, the individual character of the labour contained within each commodity is lost. Buyers in the market do not care about the labour expended to produce any individual commodity, but only about the quantity of labour that is needed to produce such-and-such a commodity in general. In this sense, we no longer talk about commodities as the product of individual labour, but as products of abstract human labour; “they are merely congealed quantities of homogenous human labour...[and] this quantity is measured by its duration, and the labour-time is itself measured on the scale of hours, days, etc.” (p128-129)

“The total labour-power of society, which is manifested in the values of the world of commodities, counts here as one homogenous mass of human labour-power, although composed of innumerable individual units of labour-power.” (p129)

Socially necessary labour-time

The value of commodities, therefore, is not determined by examining the labour expended within an individual commodity, but only by looking at the labour required to produce a given, relatively homogenous, commodity in general. In this sense, Marx explained that the value of a commodity was not simply due to “labour”, as the classical economists had concluded, but due to “socially necessary labour-time” – “the labour-time required to produce any use-value under the conditions of production normal for a given society and with the average degree of skill and intensity of labour prevalent in that society.” (p129)

Value, therefore, is not an objective and timeless property of any commodity, but is a “relation [that] changes constantly with time and place,” (p126) depending on historical and social conditions – at root, due to the productivity of labour:

“This [the productivity of labour] is determined by a wide range of circumstances; it is determined amongst other things by the workers’ average degree of skill, the level of development of science and its technological application, the social organisation of the process of production, the extent and effectiveness of the means of production, and the conditions found in the natural environment.” (p130)

Buyers in the market do not care about the time spent concretely in any particular case, but only the labour-time required on average. Sellers in the market – a truly global market today – must, therefore, compete against the average level of skill, technology, and organisation, found in their industry. “In general, the greater the productivity of labour, the less the labour-time required to produce an article, the less the mass of labour crystallised in that article, and the less its value.” (p131) Those producers with the higher productivity, therefore, are the ones that will produce commodities with a lower value. It is this fact that forces companies to compete by investing in new machinery and methods in order to increase productivity and thus sell their products below the general average of their competitors.

In this respect, Marx explained that, through the qualitative development of the means of production – i.e. through the development of science, industry, technology, and technique and the resultant increasing productivity of labour – society would see an increasing amount of use-values produced with an ever decreasing amount of labour; “an increase in the amount of material wealth may correspond to a simultaneous fall in the magnitude of its value.” (p137) Thus we see the distinction between use-value (wealth) and value (socially necessary labour-time): a person or society may be wealthy (i.e. in possession of many use-values), but a product is valuable (e.g. by requiring a larger quantity of socially necessary labour time).

With these lines, one can also clearly see the important factors Marx outlined that determine value. Modern day economists in the “marginal utility” school of micro-economics – who know the price of everything and the value of nothing – frequently lambast the labour theory of value by citing the “example of the mud pie”. “If labour is the source of value,” the common criticism goes, “then surely if I make a mud pie, it will automatically be valuable. Furthermore, if my friend takes longer to make a mud pie than me, his mud pie will be even more valuable.”

Such an argument, which is ignorantly trotted out so often by the critics of Marx, is fundamentally flawed on two accounts. Firstly, as Marx asserts, for a commodity to have an exchange-value, it must first have a use-value – that is, there must be social need for the commodity. If there was no such need, the commodity would not and could not be exchanged at all, and hence all meaning of value would disappear.

Secondly, as Marx explains, in contrast to his predecessors, we are not simply concerned with labour-time, but with socially necessary labour-time. What buyer cares if producer A takes longer to make a given commodity than producer B (or producers C, D, E, etc.)? In a system of commodity production, buyers and sellers confront one-another in the market and all that matters is the average labour-time required. If producer A takes longer than the average, that is their tough luck; they cannot charge more simply by virtue of their inefficiency and they will thus soon find themselves outcompeted and out of business.

On a related note, Marx makes an important clarification regarding the different levels of skill employed in the production of any commodity. The idea behind value and labour-time is always that of average, homogeneous labour – labour in general. But all labour is concrete and particular, involving a variety of complexity and skill. For this reason, Marx talks only about “simple average labour”, which “varies in character in different countries and at different cultural epochs, but in a particular society it is given.” Again, we see something that is not timeless, but relative and changing under historical and social conditions. “More complex labour counts only as intensified, or rather multiplied simple labour, so that a smaller quantity of complex labour is considered equal to a larger quantity of simple labour.” (p135)

With such examples, we see the dialectical method of Marx in action: constantly abstracting from the infinite variety of particulars in order to examine the general tendencies and patterns in society; seeing properties such as value, not as intrinsic properties of commodities, but as relationships between things; but also, meanwhile, understanding that such abstractions – of value, socially necessary labour-time, and simple average labour – are themselves constantly changing under social and historical conditions.

The law of value

Marx then dedicates a large number of pages to analysing the development of exchange-value, from the case of simple, isolated acts of exchange, where the value – i.e. the ratio of use-values exchanged – seems accidental, to the general form of value, whereby – through the great multitude of acts of exchange within society – the value of any one commodity can be expressed in relation to many others.

In a simple barter economy, there may be a degree of flexibility over the amount of one commodity exchanged for another in any individual, isolated act of exchange. The different quantities of labour-time congealed within the particular commodities are seemingly random, and in this sense, as indicated above, the value of a commodity appears accidental. As commodity exchange becomes generalised, however, each act of exchange loses its individual character, and the various “accidental” values – i.e. labour-times – seen in these concrete acts average out and a general, objective value – i.e. “socially necessary labour-time” – arises.

The general form of value arrives, therefore, historically at the point when the process of commodity production and exchange has become so universal that the relative values – that is, congealed labour-times – of commodities now present themselves, not as accidents, but as objective facts to buyers and sellers on the market.

“...in the midst of the accidental and ever-fluctuating exchange relations between the products, the labour-time socially necessary to produce them asserts itself as a regulative law of nature. In the same way, the law of gravity asserts itself when a person’s house collapses on top of him. The determination of the magnitude of value by labour-time is therefore a secret hidden under the apparent movements in the relative values of commodities. Its discovery destroys the semblance of the merely accidental determination of the magnitude of the value of the products of labour, but by no means abolished that determination’s material form.” (p168)

We see, therefore, how the law of value – like any law in nature, history, and society – is not something timeless that is imposed from without, but something dialectical that emerges from the interactions within. Necessity expresses itself through accident. In the case of the law of value, this law only arises and asserts itself at the historical point where commodity production and exchange is universal and dominant.

In this respect, whilst others in pre-capitalist societies had searched for an explanation to the source of value, none were able to arrive at a complete understanding of labour as the source of value, for none lived in an historical period where the commodity exchange, and thus the law of value, was dominant. As Marx discusses, Aristotle, the great Greek philosopher, arrived at an incomplete labour theory of value, but was limited, not by his lack of genius, but by the historical conditions of slave society in which he lived:

“...Greek society was founded on the labour of slaves, hence had as its natural basis the inequality of men and of their labour-powers. The secret of the expression of value, namely the equality and equivalence of all kinds of labour because and in so far as they are human labour in general, could not be deciphered until the concept of human equality had already acquired the permanence of a fixed popular opinion. This however becomes possible only in a society where the commodity-form is the universal form of the product of labour, hence the dominant social relation is the relation between men as possessors of commodities. Aristotle’s genius is displayed precisely by his discovery of a relation of equality in the value-expression of commodities. Only the historical limitation inherent in the society in which he lived prevented him from finding out what ‘in reality’ this relation of equality consisted of.” (p152)

Finally, Marx arrives at the money form of value, in which a single commodity – originally exchanged as a commodity in its own right – becomes a universal equivalent, i.e. a universal yard stick against which the value of all other commodities can be expressed. Historically, precious metals such as gold – itself extremely valuable because of the difficulty in producing and obtaining it – have played this role. This is due to concrete material reasons: metals such as gold were convenient universal forms of exchange as small, easily carried quantities of the metal were able to express a large amount of value. Rather than carrying around baskets of food, rolls of cloth, or herds of cattle, therefore, one could simply carry small bags of gold or silver.

Marx develops his analysis of money in Chapter Three, but simply notes at this point that the money form of value is the logical conclusion of commodity production and exchange: “The simple commodity form is therefore the germ of the money-form.” (p163)

Value and commodity exchange

The important point that Marx’s emphasises, is that value is ultimately a social relation – a relation between the labour of different individuals that, under a system of universal commodity production and exchange, expresses itself as a relationship between things. It is through these act of exchange, therefore, that private, individual labour acquires a social character.

“The equality of the kinds of human labour takes on a physical form in the equal objectivity of the products of labour as values... “...It is nothing but the definite social relation between men themselves which assumes here, for them, the fantastic form of a relation between things... “Objects of utility become commodities only because they are the products of the labour of private individuals who work independently of each other...In other words, the labour of the private individual manifests itself as an element of the total labour of society only through the relations which the act of exchange established between the products, and, through their mediation, between the producers... “It is only by being exchanged that the products of labour acquire a socially uniform objectivity as values, which is distinct from their sensuously varied objectivity as articles of utility.”(p165-166)

In this respect, Marx ridicules the simplistic notion of the connection between labour and value presented by his predecessors, who saw value not as a relation between things, but as something absolute, determined from the actions of an ideal rational agent, as frequently represented by the example of Robinson Crusoe. The Crusoe thought experiment proposed that an isolated individual, such as Robinson Crusoe on his island, could determine the value of products by simply noting the various amounts of time he expended in producing these things.

As Marx highlights, however, the property of value – and the nature of products as commodities – is expresses a relative quantity that can only acquire an objective character through a process of social interaction – that is, through a general and universal process of exchange within society. In this respect, Crusoe’s products – “exclusively the result of his own personal labour” – are not commodities with values, but simply “directly objects of utility for him personally.” (p171)

This analysis and explanation of the law of value leads to an important conclusion in Marx’s argument regarding value and commodities: the fact that such forms and laws are not timeless, but are historically determined and conditioned. Just as commodity production has arisen to become universal, so one day it will disappear, and with it the law of value also.

“The value-form of the product of labour is the most abstract, but also the most universal form of the bourgeois mode of production; by that fact it stamps the bourgeois mode of production as a particular kind of social production of a historical and transitory character. If then we make the mistake of treating it as the eternal natural form of social production, we necessarily overlook the specificity of the value-form, and consequently of the commodity-form together with its further developments, the money form, the capital form, etc... “...Apart from this, the vulgar economists confine themselves to systematising in a pedantic way, and proclaiming for everlasting truths, the banal and complacent notions held by the bourgeois agents of production about their own world, which is to them the best possible one.” (Chapter One, footnote 34)

It is only with the socialist transformation of society, when the means of production are commonly owned as part of a rational and democratic plan of production, that the social character of society’s labour will finally correspond to a social form of ownership. To the degree that common ownership of the means of production increases, so the dominance of commodity production and exchange will decrease. Rather than acts of exchange between separate individuals, society will instead be composed of men and women contributing to society “according to their ability” and taking from the communal wealth “according to their need”.

The products of labour will no longer confront society as commodities, but simply as useful objects; thus the contradiction between use-value and exchange-value will dissolve also. For the first time, the relationship between things will be replaced by genuine relationships between people and men and women will confront one-another as real human beings. The economy – previously a mysterious force, whose laws seemed to be imposed upon society – will no longer dominate over us; instead, we will be masters of our own destiny.

“With the seizing of the means of production by society, production of commodities is done away with, and, simultaneously, the mastery of the product over the producer. Anarchy in social production is replaced by systematic, definite organization. The struggle for individual existence disappears. Then, for the first time, man, in a certain sense, is finally marked off from the rest of the animal kingdom, and emerges from mere animal conditions of existence into really human ones. The whole sphere of the conditions of life which environ man, and which have hitherto ruled man, now comes under the dominion and control of man, who for the first time becomes the real, conscious lord of nature, because he has now become master of his own social organisation. The laws of his own social action, hitherto standing face-to-face with man as laws of Nature foreign to, and dominating him, will then be used with full understanding, and so mastered by him. Man's own social organisation, hitherto confronting him as a necessity imposed by Nature and history, now becomes the result of his own free action. The extraneous objective forces that have, hitherto, governed history, pass under the control of man himself. Only from that time will man himself, more and more consciously, make his own history — only from that time will the social causes set in movement by him have, in the main and in a constantly growing measure, the results intended by him. It is the ascent of man from the kingdom of necessity to the kingdom of freedom.” (Socialism: Utopian and Scientific, Frederick Engels)

Part two -->>