Cross-posted from the World Socialist Party of the United States website
We have seen, then, that capitalism is no different from any other form of society insofar as wealth must be produced through the productive activities of human beings. This goes without saying, for without such wealth production no society (or the people living in it) could continue to exist for very long.
The key difference in the case of capitalism, though, is that this indispensable wealth takes the form of commodities, which simply means that the things produced are exchanged on the market.
People today are so accustomed to this capitalist world, where everything has a price, that the word “commodity” itself has become more or less synonymous with “product,” but Marx draws an important distinction between the two terms and the reader of Capital needs to be aware of that specific usage.
A commodity, as a product produced for exchange, thus has two aspects. On the one hand, it is a thing that satisfies some human want or another, while on the other hand, it is a thing with a certain value or worth on the market. In other words, the commodity is a unity of “use-value” and “exchange-value,” as Marx puts it (borrowing the same basic terminology used earlier by Adam Smith and David Ricardo).
Use-value presents little mystery, as it is simply a matter of how the qualities or properties of a thing satisfy “human needs of whatever kind”—such as the usefulness of clothing in keeping us warm or food in satisfying our hunger.
Since the usefulness of things is hardly unique to capitalism, an examination of use-value does not shed much light on this specific mode of production. A tomato for instance would have the useful property of satisfying hunger whether it was a commodity sold in a supermarket or a non-commodity grown in someone’s backyard for personal consumption.
So Marx quickly turns from use-value, to consider the phenomenon of exchange-value, which is the aspect that characterizes the commodity as such. As exchange-value, any two commodities (of a given quantity) can be equivalent to each other. As an example, Marx ponders the significance of the following equation:
1 quarter corn = x cwt of iron
This sort of equation, Marx says, “signifies that a common element of identical magnitude exists in two different things” so that both are “equal to a third thing, which in itself is neither the one nor the other.” The task, therefore, is to uncover the “third thing” that both commodities are reducible to. In other words: What is the common factor that determines or regulates the exchange of commodities?
The stock response to that question, which will earn a student good marks in Economics 101, is that this value depends on the fact of “supply and demand.” It is true that this explanation accounts for the rise and fall of prices, but Marx pointed out in a pamphlet entitled “Wages, Profit and Price” the limitations of this explanation:
“Supply and demand regulate nothing but the temporary fluctuations of market prices. They will explain to you why the market price of a commodity rises above or sinks below its value, but they will never account for that value itself. Suppose supply and demand to equilibrate, or, as the economists call it, to cover each other. Why, the very moment these opposite forces become equal they paralyze each other, and cease to work in the one or the other direction. At the moment when supply and demand equilibrate each other, and therefore cease to act, the market price of a commodity coincides with its real value, with the standard price round which its market prices oscillate. In inquiring into the nature of that value, we have, therefore, nothing at all to do with the temporary effects on market prices of supply and demand.”
Supply and demand, however much it might account for price fluctuations, does not explain why prices fluctuate around a certain level. This means that we need to look elsewhere to find the common factor that fundamentally determines exchange-value.
One thing that commodities in common, as already mentioned, is that they each have some use-value or another. But it is precisely because their use-values are qualitatively different that the commodities are exchanged for each other in the first place. So it is fruitless, Marx argues, to look to some “geometrical, a chemical, or any other natural property of commodities” as the common factor that regulates exchange.
After setting aside use-value as a possible explanation, Marx briefly presents his own conclusion: “If then we leave out of consideration the use-value of commodities, they have only one common property left, that of being products of labor.”
Here Marx seems to be on rather shaky ground, for we know that there are things sold on the market that are the product of little or nearly no labor that still fetch high prices, like the autograph of a celebrity, for example. How can Marx reach this conclusion that labor is the only possible “common property” that can determine exchange-value?
It must seem to many people that Marx is trying to get by with a circular argument, where he limits the discussion to commodities created by human labor and then, lo and behold, discovers that “labor” is the common factor that regulates exchange.
That is how it appeared to the Austrian economist Eugen von Böhm-Bawerk (1851–1914), who created the template for subsequent criticism of this labor theory of value. In Karl Marx and the Close of His System, Böhm-Bawerk described Marx as “one who urgently desiring to bring a white ball out of an urn takes care to secure this result by putting in white balls only.”
Marx of course, like anyone else, was well aware that there are all sorts of “commodities” that are the product of little or no labor. In Chapter 3 of Capital, for instance, he notes that, “things which in and for themselves are not commodities, such as conscience, honor, etc., can be offered for sale by their holders, and thus acquire the form of commodities through their price” (my italics). And later in Capital, particularly in Volume 3, Marx goes on to examine a number of these sorts of formal commodities, such as the price of land or stocks. But Marx draws an important distinction between those commodities in form only (i.e. anything with a price) and the commodity in the fundamental sense that is analyzed in the first chapter of Capital.
We need to return to the opening paragraph, examined earlier, to better grasp this conceptual distinction. There Marx reminds us that material wealth is necessary to sustain any form of society. And it goes without saying that this wealth is created through human labor of some kind or another. Marx pointed out this undisputable fact as follows in a letter to his friend Ludwig Kugelmann: “Every child knows that any nation that stopped working, not for a year, but let us say, just for a few weeks, would perish.” Here we have the great, precondition for any society: human beings must create useful things via labor.
The difference in the case of capitalism, of course, is that the material wealth created via labor takes the form of commodities. The commodity in the most fundamental sense is thus premised on the commodity as product of labor (or as the capitalistic form of material wealth).
At first glance it might seem that Marx is making an arbitrary premise to suit his argument, but in fact he is simply starting from reality as it exists under capitalism, as noted in the opening paragraph—namely, the fact that under capitalism the wealth necessary to sustain any society overwhelmingly takes the form of commodities. It is the commodity as the “elementary form” of wealth that Marx analyzes at the beginning of Capital.
So there is an absolutely crucial distinction between Marx’s key concept of the commodity as the capitalistic form of social wealth and the “commodity” in the superficial sense of anything with a price (whether a product of labor or not). Those who ridicule Marx for limiting his initial analysis of the commodity to products of labor are ignoring, or choosing to overlook, the great social fact that “every child knows” with regard to the need for labor to sustain a society. From this perspective, the conclusion that “labor” is the common factor underlying exchange-value should not seem as arbitrary as it might at first glance.
Marx defines this “labor” more exactly as the “socially necessary labor-time required to produce any use-value under the conditions normal for a given society and with the average degree of skill and intensity of labor prevalent to that society.” This is the labor that “forms the substance of value,” according to Marx.
Marx set out to uncover the common factor underlying the phenomenon of exchange-value and he does so by arriving at the underlying concept of “value,” determined by the quantity of labor expended to produce the given commodity. This concept, specific to commodity production and capitalism, would have no basis to exist in a socialist society, where the whole aim is simply to produce useful things to satisfy human needs, rather than commodities to be exchanged on the market.
But for the analysis of capitalism, the concept of “value” is central, for it is at the very core of an understanding of how things are produced and distributed in that society.