A Contribution to the Critique of Political Economy
Karl Marx
Translated: S.W. Ryazanskaya
CONTENTS
Preface
Chapter 1: The Commodity
Note A. Historical Notes on the Analysis of Commodities
Chapter 2: Money or Simple Circulation
1. Measure of Value
Note B. Theories of the Standard of Money
2. Medium of Exchange
a) The Metamorphosis of Commodities
b) The Circulation of Money
c) Coins and Tokens of Value
3. Money
a) Hoarding
b) Means of Payment
c) World Money
4. The Precious Metals
Note C. Theories of the the Medium of Circulation and of Money
Appendices
INTRODUCTION by Karl Marx
I. Production, Consumption, Distribution, Exchange (Circulation)
1. Production
2. The General Relations of Production to Distribution, Exhange, and Consumption
a. [Production and Consumption]
b. [Production and Distribution]
c. Lastly, Exchange and Circulation
3. The Method of Political Economy
4. Production
REVIEW by Frederick Engels
II. Karl Marx. "A Contribution to the Critique of Political Economy"
Preface
I examine the system of bourgeois economy in the following order: capital, landed property, wage-labour; the State, foreign trade, world market.
The economic conditions of existence of the three great classes into which modern bourgeois society is divided are analysed under the first three headings; the interconnection of the other three headings is self-evident. The first part of the first book, dealing with Capital, comprises the following chapters: 1. The commodity, 2. Money or simple circulation; 3. Capital in general. The present part consists of the first two chapters. The entire material lies before me in the form of monographs, which were written not for publication but for self-clarification at widely separated periods; their remoulding into an integrated whole according to the plan I have indicated will depend upon circumstances.
A general introduction, which I had drafted, is omitted, since on further consideration it seems to me confusing to anticipate results which still have to be substantiated, and the reader who really wishes to follow me will have to decide to advance from the particular to the general. A few brief remarks regarding the course of my study of political appropriate here.
Although I studied jurisprudence, I pursued it as a subject subordinated to philosophy and history. In the year 1842-43, as editor of the Rheinische Zeitung, I first found myself in the embarrassing position of having to discuss what is known as material interests. The deliberations of the Rhenish Landtag on forest thefts and the division of landed property; the officials polemic started by Herr von Schaper, then Oberprasident of the Rhine Province, against the Rheinische Zeitung about the condition of the Moselle peasantry, and finally the debates on free trade and protective tariffs caused me in the first instance to turn my attention to economic questions. On the other hand, at that time when good intentions "to push forward" often took the place of factual knowledge, an echo of French socialism and communism, slightly tinged by philosophy, was noticeable in the Rheinische Zeitung. I objected to this dilettantism, but at the same time frankly admitted in a controversy with the Allgemeine Augsburger Zeitung that my previous studies did not allow me to express any opinion on the content of the French theories. When the publishers of the Rheinische Zeitung conceived the illusion that by a more compliant policy on the part of the paper it might be possible to secure the abrogation of the death sentence passed upon it, I eagerly grasped the opportunity to withdraw from the public stage to my study.
The first work which I undertook to dispel the doubts assailing me was a critical re-examination of the Hegelian philosophy of law; the introduction to this work being published in the Deutsch-Franzosische Jahrbucher issued in Paris in 1844. My inquiry led me to the conclusion that neither legal relations nor political forms could be comprehended whether by themselves or on the basis of a so-called general development of the human mind, but that on the contrary they originate in the material conditions of life, the totality of which Hegel, following the example of English and French thinkers of the eighteenth century, embraces within the term "civil society"; that the anatomy of this civil society, however, has to be sought in political economy. The study of this, which I began in Paris, I continued in Brussels, where I moved owing to an expulsion order issued by M. Guizot. The general conclusion at which I arrived and which, once reached, became the guiding principle of my studies can be summarised as follows. In the social production of their existence, men inevitably enter Into definite relations, which are independent of their will, namely relations of production appropriate to a given stage in the development of their material forces of production. The totality of these relations of production constitutes the economic structure of society, the real foundation, on which arises a legal and political superstructure and to which correspond definite forms of social consciousness. The mode of production of material life conditions the general process of social, political and intellectual life. It is not the consciousness of men that determines their existence, but their social existence that determines their consciousness. At a certain stage of development, the material productive forces of society come into conflict with the existing relations of production or - this merely expresses the same thing in legal terms - with the property relations within the framework of which they have operated hitherto. From forms of development of the productive forces these relations turn into their fetters. Then begins an era of social revolution. The changes in the economic foundation lead sooner or later to the transformation of the whole immense superstructure. In studying such transformations it is always necessary to distinguish between the material transformation of the economic conditions of production, which can be determined with the precision of natural science, and the legal, political, religious, artistic or philosophic - in short, ideological forms in which men become conscious of this conflict and fight it out. Just as one does not judge an individual by what he thinks about himself, so one cannot judge such a period of transformation by its consciousness, but, on the contrary, this consciousness must be explained from the contradictions of material life, from the conflict existing between the social forces of production and the relations of production. No social order is ever destroyed before all the productive forces for which it is sufficient have been developed, and new superior relations of production never replace older ones before the material conditions for their existence have matured within the framework of the old society. Mankind thus inevitably sets itself only such tasks as it is able to solve, since closer examination will always show that the problem itself arises only when the material conditions for its solution are already present or at least in the course of formation. In broad outline, the Asiatic, ancient,[A] feudal and modern bourgeois modes of production may be designated as epochs marking progress in the economic development of society. The bourgeois mode of production is the last antagonistic form of the social process of production - antagonistic not in the sense of individual antagonism but of an antagonism that emanates from the individuals' social conditions of existence - but the productive forces developing within bourgeois society create also the material conditions for a solution of this antagonism. The prehistory of human society accordingly closes with this social formation.
Frederick Engels, with whom I maintained a constant exchange of ideas by correspondence since the publication of his brilliant essay on the critique of economic categories (printed in the Deutsch-Franzosische Jahrbucher, arrived by another road (compare his Lage der arbeitenden Klasse in England) at the same result as I, and when in the spring of 1845 he too came to live in Brussels, we decided to set forth together our conception as opposed to the ideological one of German philosophy, in fact to settle accounts with our former philosophical conscience. The intention was carried out in the form of a critique of post-Hegelian philosophy. The manuscript [The German Ideology], two large octavo volumes, had long ago reached the publishers in Westphalia when we were informed that owing to changed circumstances it could not be printed. We abandoned the manuscript to the gnawing criticism of the mice all the more willingly since we had achieved our main purpose - self-clarification. Of the scattered works in which at that time we presented one or another aspect of our views to the public, I shall mention only the Manifesto of the Communist Party, jointly written by Engels and myself, and a Discours sur le libre echange, which I myself published. The salient points of our conception were first outlined in an academic, although polemical, form in my Misere de la philosophie..., this book which was aimed at Proudhon appeared in 1847. The publication of an essay on Wage-Labour [Wage-Labor and Capital] written in German in which I combined the lectures I had held on this subject at the German Workers' Association in Brussels, was interrupted by the February Revolution and my forcible removal from Belgium in consequence.
The publication of the Neue Rheinische Zeitung in 1848 and 1849 and subsequent events cut short my economic studies, which I could only resume in London in 1850. The enormous amount of material relating to the history of political economy assembled in the British Museum, the fact that London is a convenient vantage point for the observation of bourgeois society, and finally the new stage of development which this society seemed to have entered with the discovery of gold in California and Australia, induced me to start again from the very beginning and to work carefully through the new material. These studies led partly of their own accord to apparently quite remote subjects on which I had to spend a certain amount of time. But it was in particular the imperative necessity of earning my living which reduced the time at my disposal. My collaboration, continued now for eight years, with the New York Tribune, the leading Anglo-American newspaper, necessitated an excessive fragmentation of my studies, for I wrote only exceptionally newspaper correspondence in the strict sense. Since a considerable part of my contributions consisted of articles dealing with important economic events in Britain and on the continent, I was compelled to become conversant with practical detail which, strictly speaking, lie outside the sphere of political economy.
This sketch of the course of my studies in the domain of political economy is intended merely to show that my views - no matter how they may be judged and how little they conform to the interested prejudices of the ruling classes - are the outcome of conscientious research carried on over many years. At the entrance to science, as at the entrance to hell, the demand must be made:
Qui si convien lasciare ogni sospetto
Ogni vilta convien che qui sia morta.
[From Dante, Divina Commedia:
Here must all distrust be left;
All cowardice must here be dead.]
Karl Marx
London, January 1859
[A] As a second footnote to the Communist Manifesto, Engels wrote in 1888:
In 1847, the pre-history of society, the social organization existing previous to recorded history, [was] all but unknown. Since then, August von Haxthausen (1792-1866) discovered common ownership of land in Russia, Georg Ludwig von Maurer proved it to be the social foundation from which all Teutonic races started in history, and, by and by, village communities were found to be, or to have been, the primitive form of society everywhere from India to Ireland. The inner organization of this primitive communistic society was laid bare, in its typical form, by Lewis Henry Morgan's (1818-1861) crowning discovery of the true nature of the gens and its relation to the tribe. With the dissolution of the primeval communities, society begins to be differentiated into separate and finally antagonistic classes. I have attempted to retrace this dissolution in The Origin of the Family, Private Property, and the State, second edition, Stuttgart, 1886.
Thus, as the science of understanding pre-history progressed (pre-history being that time before written records of human civilization exist), Marx & Engels changed their understanding and descriptions accordingly. In the above text, Marx mentions "Asiatic" modes of production. At the time, they had thought Asian civilization was the first we could speak of humanity (an understanding based on Hegel, see: The Oriental Realm). After 1857, they dropped the idea of a distinct Asiatic mode of production, and kept four basic forms: tribal, ancient, feudal, and capitalist.
Next: I. The Commodity
Part I
THE COMMODITY
The wealth of bourgeois society, at first sight, presents itself as an immense accumulation of commodities, its unit being a single commodity. Every commodity, however, has a twofold aspect - use-value and exchange-value. [1]
To begin with, a commodity, in the language of the English economists, is "any thing necessary, useful or pleasant in life," an object of human wants, a means of existence in the widest sense of the term. Use-value as an aspect of the commodity coincides with the physical palpable existence of the commodity. Wheat, for example, is a distinct use-value differing from the use-values of cotton, glass, paper, etc. A use-value has value only in use, and is realized only in the process of consumption. One and the same use-value can be used in various ways. But the extent of its possible application is limited by its existence as an object with distinct properties. It is, moreover, determined not only qualitatively but also quantitatively. Different use-values have different measures appropriate to their physical characteristics; for example, a bushel of wheat, a quire of paper, a yard of linen.
Whatever its social form may be, wealth always consists of use-values, which in the first instance are not affected by this form. From the taste of wheat it is not possible to tell who produced it, a Russian serf, a French peasant or an English capitalist. Although use-values serve social needs and therefore exist within the social framework, they do not express the social relations of production. For instance, let us take as a use-value a commodity such as a diamond. We cannot tell by looking at it that the diamond is a commodity. Where it serves as an aesthetic or mechanical use-value, on the neck of a courtesan or in the hand of a glass-cutter, it is a diamond and not a commodity. To be a use-value is evidently a necessary prerequisite of the commodity, but it is immaterial to the use-value whether it is a commodity. Use-value as such, since it is independent of the determinate economic form, lies outside the sphere of investigation of political economy. [2] It belongs in this sphere only when it is itself a determinate form. Use-value is the immediate physical entity in which a definite economic relationship - exchange-value - is expressed.
Exchange-value seems at first to be a quantitatve relation, the proportion in which use-values are exchanged for one another. In this relation they constitute equal exchangeable magnitudes. Thus one volume of Propertius and eight ounces of snuff may have the same exchange-value, despite the dissimilar use-values of snuff and elegies. Considered as exchange-value, one use-value is worth just as much as another, provided the two are available in the appropriate proportion. The exchange-value of a palace can be expressed in a definite number of tins of boot polish. London manufacturers of boot polish, on the other hand, have expressed the exchange-value of their numerous tins of polish in terms of palaces. Quite irrespective, therefore, of their natural form of existence, and without regard to the specific character of the needs they satisfy as use-values, commodities in definite quantities are congruent, they take one another's place in the exchange process, are regarded as equivalents, and despite their motley appearance have a common denominator.
Use-values serve directly as means of existence. But, on the other hand, these means of existence are themselves the products of social activity, the result of expended human energy, materialized labour. As objectification of social labour, all commodities are crystallisations of the same substance. The specific character of this substance, i.e., of labour which is embodied in exchange-value, has now to be examined.
Let us suppose that one ounce of gold, one ton of iron, one quarter of wheat and twenty yards of silk are exchange-values of equal magnitude. As exchange-values in which the qualitative difference between their use-values is eliminated, they represent equal amounts of the same kind of labour. The labour which is uniformly materialised in them must be uniform, homogeneous, simple labour; it matters as little whether this is embodied in gold, iron, wheat or silk, as it matters to oxygen whether it is found in rusty iron, in the atmosphere, in the juice of grapes or in human blood. But digging gold, mining iron, cultivating wheat and weaving silk are qualitatively different kinds of labour. In fact, what appears obJectively as diversity of the use-values, appears, when looked at dynamically, as diversity of the activities which produce those use-values. Since the particular material of which the use-values consist is irrelevant to the labour that creates exchange-value, the particular form of this labour is equally irrelevant. Different use-values are, moreover, products of the activity of different individuals and therefore the result of individually different kinds of labour. But as exchange-values they represent the same homogeneous labour, i.e., labour in which the individual characteristics of the workers are obliterated. Labour which creates exchange-value is thus abstract general labour.
If one ounce of gold, one ton of iron, one quarter of wheat and twenty yards of silk are exchange-values of equal magnitude or equivalents, then one ounce of gold, half a ton of iron, three bushels of wheat and five yards of silk are exchange-values which have very different magnitudes, and this quantitative difference is the only difference of which as exchange-values they are at all capable. As exchange-values of different magnitudes they represent larger or smaller portions, larger or smaller amounts of simple, homogeneous, abstract general labour, which is the substance of exchange-value. The question now arises, how can these amounts be measured? Or rather the question arises, what is the quantitative form of existence of this labour, since the quantitative differences of the commodities as exchange-values are merely the quantitative differences of the labour embodied in them. Just as motion is measured by time, so is labour by labour-time. Variations in the duration of labour are the only possible difference that can occur if the quality of labour is assumed to be given. Labour-time is measured in terms of the natural units of time, i.e., hours, days, weeks, etc. Labour-time is the living state of existence of labour, irrespective of its form, its content and its individual features; it is the quantitative aspect of labour as well as its inherent measure. The labour-time materialised in the use-values of commodities is both the substance that turns them into exchange-values and therefore into commodities, and the standard by which the precise magnitude of their value is measured. The corresponding quantities of different use-values containing the same amount of labour-time are equivalents; that is, all use-values are equivalents when taken in proportions which contain the same amount of expended, materialised labour-time. Regarded as exchange-values all commodities are merely definite quantities of congealed labour-time.
The following basic propositions are essential for an understanding of the determination of exchange-value by labour-time. Labour is reduced to simple labour, labour, so to speak, without any qualitative attributes; labour which creates exchange-value, and therefore commodities, is specifically social labour; finally, labour in so far as its results are use-values is distinct from labour in so far as its results are exchange-values.
To measure the exchange-value of commodities by the labour-time they contain, the different kinds of labour have to be reduced to uniform, homogeneous, simple labour, in short to labour of uniform quality, whose only difference, therefore, is quantity.
This reduction appears to be an abstraction, but it is an abstraction which is made every day in the social process of production. The conversion of all commodities into labour-time is no greater an abstraction, and is no less real, than the resolution of all organic bodies into air. Labour, thus measured by time, does not seem, indeed, to be the labour of different persons, but on the contrary the different working individuals seem to be mere organs of this labour. In other words the labour embodied in exchange-values could be called human labour in general. This abstraction, human labour in general, exists in the form of average labour which, in a given society, the average person can perform, productive expenditure of a certain amount of human muscles, nerves, brain, etc. It is simple labour [English economists call it "unskilled labour"] which any average individual can be trained to do and which in one way or another he has to perform. The characteristics of this average labour are different in different countries and different historical epochs, but in any particular society it appears as something given. The greater part of the labour performed in bourgeois society is simple labour as statistical data show. Whether A works 6 hours producing iron and 6 hours producing linen, and B likewise works 6 hours producing iron and 6 hours producing linen, or A works 12 hours producing iron and B 12 hours producing linen is quite evidently merely a different application of the same labour-time. But what is the position with regard to more complicated labour which, being labour of greater intensity and greater specific gravity, rises above the general level? This kind of labour resolves itself into simple labour; it is simple labour raised to a higher power, so that for example one day of skilled labour may equal three days of simple labour. The laws governing this reduction do not concern us here. It is, however, clear that the reduction is made, for, as exchange-value, the product of highly skilled labour is equivalent, in definite proportions, to the product of simple average labour; thus being equated to a certain amount of this simple labour.
The determination of exchange-value by labour-time, moreover, presupposes that the same amount of labour is materialised in a particular commodity, say a ton of iron, irrespective of whether it is the work of A or of B, that is to say, different individuals expend equal amounts of labour-time to produce use-values which are qualitatively and quantitatively equal. In other words, it is assumed that the labour-time contained in a commodity is the labour-time necessary for its production, namely the labour-time required, under the generally prevailing conditions of production, to produce another unit of the same commodity.
From the analysis of exchange-value it follows that the conditions of labour which creates exchange-value are social categories of labour or categories of social labour, social however not in the general sense but in the particular sense, denoting a specific type of society. Uniform simple labour implies first of all that the labour of different individuals is equal and that their labour is treated as equal by being in fact reduced to homogeneous labour. The labour of every individual in so far as it manifests itself in exchange-values possesses this social character of equality, and it manifests itself in exchange-value only in so far as it is equated with the labour of all other individuals.
Furthermore, in exchange-value the labour-time of a particular individual is directly represented as labour-time in general, and this general character of individual labour appears as the social character of this labour. The labour-time expressed in exchange-value is the labour-time of an individual, but of an individual in no way differing from the next individual and from all other individuals in so far as they perform equal labour; the labour-time, therefore, which one person requires for the production of a given commodity is the necessary labour-time which any other person would require to produce the same commodity. It is the labour-time of an individual, his labour-time, but only as labour-time common to all; consequently it is quite immaterial whose individual labour-time this is. This universal labour-time finds its expression in a universal product, a universal equivalent, a definite amount of materialised labour-time, for which the distinct form of the use-value in which it is manifested as the direct product of one person is a matter of complete indifference, and it can be converted at will into any other form of use-value, in which it appears as the product of any other person. Only as such a universal magnitude does it represent a social magnitude. The labour of an individual can produce exchange-value only if it produces universal equivalents, that is to say, if the individual's labour-time represents universal labour-time or if universal labour-time represents individual labour-time. The effect is the same as if the different individuals had amalgamated their labour-time and allocated different portions of the labour-time at their joint disposal to the various use-values. The labour-time of the individual is thus, in fact, the labour-time required by society to produce a particular use-value, that is to satisfy a particular want. But what matters here is only the specific manner in which the social character of labour is established. A certain amount of a spinner's labour-time is materialised, say, in 100 lb. of linen yarn. The same amount of labour-time is assumed to be represented in 100 yards of linen, the product of a weaver. Since these two products represent equal amounts of universal labour-time, and are therefore equivalents of any use-value which contains the same amount of labour-time, they are equal to each other. Only because the labour -time of the spinner and the labour-time of the weaver represent universal labour-time, and their products are thus universal equivalents, is the social aspect of the labour of the two individuals represented for each of them by the labour of the other, that is to say, the labour of the weaver represents it for the spinner, and the labour of the spinner represents it for the weaver. On the other hand, under the rural patriarchal system of production, when spinner and weaver lived under the same roof - the women of the family spinning and the men weaving, say for the requirements of the family - yarn and linen were social products, and spinning and weaving social labour within the framework of the family. But their social character did not appear in the form of yarn becoming a universal equivalent exchanged for linen as a universal equivalent, i.e., of the two products exchanging for each other as equal and equally valid expressions of the same universal labour-time. On the contrary, the product of labour bore the specific social imprint of the family relationship with its naturally evolved division of labour. Or let us take the services and dues in kind of the Middle Ages. It was the distinct labour of the individual in its original form, the particular features of his labour and not its universal aspect that formed the social ties at that time. Or finally let us take communal labour in its spontaneously evolved form as we find it among all civilised nations at the dawn of their history. [3] In this case the social character of labour is evidently not effected by the labour of the individual assuming the abstract form of universal labour or his product assuming the form of a universal equivalent. The communal system on which this mode of production is based prevents the labour of an individual from becoming private labour and his product the private product of a separate individual; it causes individual labour to appear rather as the direct function of a member of the social organisation. Labour which manifests itself in exchange-value appears to be the labour of an isolated individual. It becomes social labour by assuming the form of its direct opposite, of abstract universal labour.
Lastly, it is a characteristic feature of labour which posits exchange-value that it causes the social relations of individuals to appear in the perverted form of a social relation between things. The labour of different persons is equated and treated as universal labour only by bringing one use-value into relation with another one in the guise of exchange-value. Although it is thus correct to say that exchange-value is a relation between persons, [4] it is however necessary to add that it is a relation hidden by a material veil. Just as a pound of iron and a pound of gold have the same weight despite their different physical and chemical properties, so two commodities which have different use-values but contain the same amount of labour-time have the same exchange-value. Exchange-value thus appears to be a social determination of use-values, a determination which is proper to them as things and in consequence of which they are able in definite proportions to take one another's place in the exchange process, i.e., they are equivalents, just as simple chemical elements combined in certain proportions form chemical equivalents. Only the conventions of our everyday life make it appear commonplace and ordinary that social relations of production should assume the shape of things, so that the relations into which people enter in the course of their work appear as the relation of things to one another and of things to people. This mystification is still a very simple one in the case of a commodity. Everybody understands more or less clearly that the relations of commodities as exchange-values are really the relations of people to the productive activities of one another. The semblance of simplicity disappears in more advanced relations of production. All the illusions of the Monetary System arise from the failure to perceive that money, though a physical object with distinct properties, represents a social relation of production. As soon as the modern economists, who sneer at illusions of the Monetary System, deal with the more complex economic categories, such as capital, they display the same illusions. This emerges clearly in their confession of naive astonishment when the phenomenon that they have just ponderously described as a thing reappears as a social relation and, a moment later, having been defined as a social relation, teases them once more as a thing.
Since the exchange-value of commodities is indeed nothing but a mutual relation between various kinds of labour of individuals regarded as equal and universal labour, i.e., nothing but a material expression of a specific social form of labour, it is a tautology to say that labour is the only source of exchange-value and accordingly of wealth in so far as this consists of exchange-value. It is equally a tautology to say that material in its natural state does not have exchange-value [5] since it contains no labour, and that exchange-value as such includes no material in a natural state. It is true that William Petty calls "labour the father and earth the mother of wealth", Bishop Berkeley asks
"whether the four elements, and man's labour therein, be not the true source of wealth", [6]
and the American Thomas Cooper explains in popular form:
"Take away from a piece of bread the labour bestowed by the baker on the flour, by the miller on the grain brought to him, by the farmer in ploughing, sowing, tending, gathering, threshing, cleaning and transporting the seed, and what will remain? A few grains of grass, growing wild in the woods, and unfit for any human purpose." [7]
But all these observations are concerned not with abstract labour, which is the source of exchange-value, but with concrete labour as the source of material wealth, in short with labour in so far as it produces use-values. Since the use-value of the commodity is postulated, the specific utility and the definite usefulness of the labour expended on it is also postulated; but this is the only aspect of labour as useful labour which is relevant to the study of commodities. In considering bread as a use-value, we are concerned with its properties as an article of food and by no means with the labour of the farmer, miller, baker, etc. Even if the labour required were reduced by 95 per cent as a result of some invention, the usefulness of a loaf of bread would remain quite unaffected. It would lose not a single particle of its use-value even if it dropped ready-made from the sky. Whereas labour positing exchange-value manifests itself in the equality of commodities as universal equivalents, labour as useful productive activity manifests itself in the infinite variety of use-values. Whereas labour positing exchange-value is abstrect universal and uniforn labour, labour positing use-value is concrete and distinctive labour, comprising infinitely varying kinds of labour as regards its form and the material to which it is applied.
It would be wrong to say that labour which produces use-values is the only source of the wealth produced by it, that is of material wealth. Since labour is an activity which adapts material for some purpose or other, it needs material as a prerequisite. Different use-values contain very different proportions of labour and natural products, but use-value always comprises a natural element. As useful activity directed to the appropriation of natural factors in one form or another, labour is a natural condition of human existence, a condition of material interchange between man and nature, quite independent of the form of society. On the other hand, the labour which posits exchange-value is a specific social form of labour. For example, tailoring if one considers its physical aspect as a distinct productive activity produces a coat, but not the exchange-value of the coat. The exchange-value is produced by it not as tailoring as such but as abstract universal labour, and this belongs to a social framework not devised by the tailor. Women in ancient domestic industry, for instance, produced coats without producing the exchange-value of coats. Labour as source of material wealth was well known both to Moses, the law-giver, and to Adam Smith, the customs official. [8]
Let us now examine a few propositions which follow from the reduction of exchange-value to labour-time.
A commodity as a use-value has an eminently material function. Wheat for example is used as food. A machine replaces a certain amount of labour. This function, by virtue of which a commodity is a use-value, an article of consumption, may be called its service, the service it renders as a use-value. But the commodity as an exchange-value is always considered solely from the standpoint of the result. What matters is not the service it renders, but the service [9] rendered to it in the course of its production. Thus the exchange-value of a machine, for instance, is determined not by the amount of labour-time which it can replace, but by the amount of labour-time expended in its production and therefore required for the production of a new machine of the same type.
Thus, if the amount of labour required for the production of commodities remained constant, their exchange-value would also remain unchanged. But the facility or difficulty of production varies continually. If the productivity of labour grows, the same use-value will be produced in less time. If~the productivity of labour declines, more time will be needed to produce the same use-value. The amount of labour-time contained in a commodity, and therefore its exchange-value, is consequently a variable quantity, rising or falling in inverse proportion to the rise or fall of the productivity of labour. The level of the productivity of labour, which is predetermined in manufacturing industry, depends in agriculture and extractive industry also upon unpredictable natural conditions. The same quantity of labour will result in a larger or smaller output of various metals - depending on the relative abundance of the deposits of these metals in the earth's crust. The same amount of labour may yield two bushels of wheat in a favourable season, and perhaps only one bushel in an unfavourable season. Scarcity or abundance brought about by natural circumstances seems in this case to determine the exchange-value of commodities, because it determines the productivity of the specific concrete labour which is bound up with the natural conditions.
Equal amounts of labour-time, or equal amounts of exchange-value, are contained in unequal volumes of different use-values. The smaller the volume of a use-value which contains a given amount of labour-time as compared with other use-values of commodities, the greater is the specific exchange-value of that commodity. If we find that in different epochs of civilisation separated by long periods of time, various use-values - for example gold, silver, copper and iron, or wheat, rye, barley and oats - form a series of specific exchange-values which on the whole retain their relative order in relation to one another, though not their exact numerical proportions, it follows that the progressive development of the social productive forces has exerted a uniform or nearly uniform effect on the labour-time required for the production of these commodities.
The exchange-value of a commodity is not expressed in its own use-value. But as materialisation of universal social labour-time, the use-value of one commodity is brought into relation with the use-values of other commodities. The exchange-value of one commodity thus manifests itself in the use-values of other commodities. In fact the exchange-value of one commodity expressed in the use-value of another commodity represents equivalence. If one says, for instance, one yard of linen is worth two pounds of coffee, then the exchange-value of linen is expressed in the use-value of coffee, and it is moreover expressed in a definite quantity of this use-value. Once the proportion is given, the value of any quantity of linen can be expressed in terms of coffee. It is evident that the exchange-value of a commodity, e.g., linen, is not exhaustively expressed by the proportion in which a particular commodity, e.g., coffee, forms its equivalent. The quantity of universal labour-time represented by a yard of linen exists simultaneously in infinitely varied amounts of the use-values of all other commodities. The use-value of any other commodity taken in the proportion which represents the same quantity of labour-time constitutes an equivalent for the yard of linen. The exchange-value of this particular commodity can therefore be exhaustively exprcssed only by the infinite number of equations in which the use-values of all other commodities form its equivalent. The only exhaustive expression for a universal equivalent is the sum of these equations or the totality of the different proportions in which a commodity can be exchanged for any other commodity. For example the series of equations -
1 yard of linen = 1/2 lb. of tea
1 yard of linen = 2 lbs. of coffee
1 yard of linen = 8 lbs. of bread
1 yard of linen = 6 yards of calico
may be put in the following form -
1 yard of linen = t/8 lb. of tea + 1/2 lb. of coffee 2 lbs. Of bread + 1 1/2 yards of calico.
Thus if we had all the equations in which the value of a yard of linen is exhaustively expressed, we could denote its exchange-value in the form of a series. This is in fact an infinite series, for the range of commodities can never be finally circumscribed but expands continuously. Since the exchange-value of one commodity is measured by the use-values of all other commodities, the exchange-values of all other commodities are on the contrary measured in terms of the use-value of the one commodity measured by them. [10] If the exchange-value of one yard of linen is expressed in 1/2 lb. of tea, or 2 lbs. of coffee, or 6 yards of calico, or 8 lbs. Of bread, etc., it follows that coffee, tea, calico, bread, etc., must be equal to one another in the proportion in which they are equal to linen, a third magnitude, linen thus serves as a common measure of their exchange-value. The exchange-value of any commodity considered as materialised universal labour-time, .e., as a definite quantity of universal labour-time, is measured successively in terms of definite quantities of the use-values of all other commodities; and on the other hand the exchange-values of all other commodities are measured in the use-value of this one exclusive commodity. But any commodity considered as exchange-value is both the exclusive commodity which serves as the common measure of the exchange-values of all other commodities and on the other hand it is merely one commodity of the many commodities in the series in which the exchange-value of any other commodity is directly expressed.
The existing number of different types of commodities does not affect the value of a commodity. But whether the series of equations in which its exchange-value can be realised is longer or shorter depends on the greater or smaller variety of different commodities. The series of equations which express, say, the value of coffee shows the range of its exchangeability, the limits within which it functions as an exchange-value. The exchange-value of a commodity as the objective expression of universal social labour-time finds its appropriate expression of equivalence in the infinite variety of use-values.
We have seen that the exchange-value of a commodity varies with the quantity of labour-time directly contained in it. Its realised exchange-value, that is its exchange-value expressed in the use-values of other commodities, must also depend on the degree to which the labour-time expended on the production of all other commodities varies. For example, if the labour-time necessary for the production of a bushel of wheat remained unchanged, while the labour-time needed for the production of all other commodities doubled, the exchange-value of a bushel of wheat in terms of its equivalents would have been halved. The result would actually be the same as if the labour-time required to produce a bushel of wheat had been halved and the labour-time required to produce all other commodities had remained unchanged. The value of commodities is determined by the amount of them which can be produced in a given labour-time. In order to examine what changes are liable to affect this proportion, let us take two commodities, A and B. First The labour-time required for the production of B is assumed to remain unchanged. In this case the exchange-value of A expressed in terms of B falls or rises in direct proportion to the decrease or increase in the labour-time necessary for the production of A. Secondly. The labour-time necessary for the production of commodity A is assumed to remain unchanged. The exchange-value of commodity A in terms of B falls or rises in inverse proportion to the decrease or increase in the labour-time required to produce B. Thirdly. The labour-time required for the production of A and of B is assumed to decrease or increase at the same rate. The equation expressing the value of commodity A in terms of B remains unchanged in this case. If some factor were to cause the productivity of all types of labour to fall in equal degree, thus requiring the same proportion of additional labour for the production of all commodities, then the value of all commodities would rise, the actual expression of their exchange-value remaining unchanged, and the real wealth of society would decrease, since the production of the same quantity of use-values would require a larger amount of labour-time. Fourthly. The labour-time required for the production of both A and B is assumed to increase or decrease but in unequal degree, or else the labour-time required for the production of A is assumed to increase while that required for B decreases, or vice versa. All these cases can be simply reduced to the position where the labour-time required for the production of one commodity remains unchanged, while that required for the production of the other either increases or decreases.
The exchange-value of any commodity is expressed in terms of the use-value of any other commodity, either in whole units or in fractions of that use-value. Every commodity as exchange-value can be just as easily divided as the labour-time contained in it. The equivalence of commodities is just as independent of the physical divisibility of their use-values as the summation of the exchange-values of commodities is unaffected by the changes which the use-values of the commodities may undergo in the course of their transformation into a single new commodity.
So far two aspects of the commodity - use-value and exchange-value - have been examined, but each one separately. The commodity, however, is the direct unity of use-value and exchange-value, and at the same time it is a commodity only in relation to other commodities. The exchange process of commodities is the real relation that exists between them. This is a social process which is carried on by individuals independently of one another, but they take part in it only as commodity-owners; they exist for one another only insofar as their commodities exist; they thus appear to be in fact the conscious representatives of the exchange process.
The commodity is a use-value, wheat, linen, a diamond, machinery, etc., but as a commodity it is simultaneously not a use-value. It would not be a commodity, if it were a use-value for its owner, that is a direct means for the satisfaction of his own needs. For its owner it is on the contrary a non-use-value, that is merely the physical depository of exchange-value, or simply a means of exchange. Use-value as an active carrier of exchange-value becomes a means of exchange. The commodity is a use-value for its owner only so far as it is an exchange-value. [It is in this sense that Aristotle speaks of exchange-value (see the passage quoted at the beginning of this chapter).] The commodity therefore has still to become a use-value, in the first place a use-value for others. Since it is not a use-value to its owner, it must be a use-value to owners of other commodities. If this is not the case, then the labour expended on it was useless; labour and the result accordingly is not a commodity. The commodity must, on the other hand, become a use-value for its owner, since his means of existence exist outside it, in the use-values of other people's commodities. To become a use- value, the commodity must encounter the particular need which it can satisfy. Thus the use-values of commodities become use-values by a mutual exchange of places: they pass from the hands of those for whom they were means of exchange into the hands of those for whom they serve as consumer goods. Only as a result of this universal alienation of commodities does the labour contained in them become useful labour. Commodities do not acquire a new economic form in the course of mutual relations as use-values. On the contrary, the specific form which distinguished them as commodities disappears. Bread, for instance, in passing from the baker to the consumer does not change its character as bread. It is rather that the consumer treats it as a use- value, as a particular foodstuff, whereas so long as it was in the hands of the baker it was simply representative of an economic relation, a concrete and at the same time an abstract thing. The only transformation therefore that commodities experience in the course of becoming use-values is the cessation of their formal existence in which they were non-use-values for their owner, and use-values for their non-owner. To become use-values commodities must be altogether alienated; they must enter into the exchange process; exchange however is concerned merely with their aspect as exchange-values. Hence, only be being realized as exchange-values can they be realized as use-values.
The individual commodity as a use-value was originally regarded as something independent, while as an exchange- value it was from the outset regarded in its relation to all other commodities But this was merely a theoretical, hypothetical, relation. It realises itself only in the process of exchange. On the other hand, a commodity is an exchange- value in so far as a definite amount of labour-time has been expended on its production and it accordingly represents materialised labour-time. Yet the commodity as it comes into being is only materialised individual labour-time of a specific kind, and not universal labour-time. The commodity is thus not immediately exchange-value, but has still to become exchange-value. To begin with, it can be materialisation of universal labour-time only when it represents a particular useful application of labour-time, that is a use- value. This is the material condition under which alone the labour-time contained in commodities is regarded as universal, social labour-time. A commodity can only therefore become a use-value if it is realised as an exchange-value, while it can only be realised as an exchange-value if it is alienated and functions as a use-value. The alienation of a commodity as a use-value is only possible to the person for whom it is a use-value, i.e., an object satisfying particular needs. On the other hand, it can only be alienated in exchange for another commodity, or if we regard the matter from the standpoint of the owner of the other commodity, he too can only alienate, i.e., realise, his commodity by bringing it into contact with the particular need of which it is the object. During the universal alienation of commodities as use-values they are brought into relation with one another as discrete things which are physically different and because of their specific properties satisfy particular needs. But as mere use-values they exist independently of one another or rather without any connection. They can be exchanged as use-values only in connection with particular needs. They are, however, exchangeable only as equivalents, and they are equivalents only as equal quantities of materialised labour-time, when their physical properties as use- values, and hence the relations of these commodities to specific needs, are entirely disregarded. A commodity functions as an exchange-value if it can freely take the place of a definite quantity of any other commodity, irrespective of whether or not it constitutes a use-value for the owner of the other commodity. But for the owner of the other commodity it becomes a commodity only in so far as it constitutes a use-value for him, and for the owner in whose hands it is it becomes an exchange-value only in so far as it is a commodity for the other owner. One and the same relation must therefore be simultaneously a relation of essentially equal commodities which differ only in magnitude, i.e., a relation which expresses their equality as materialisations of universal labour-time, and at the same time it must be their relation as qualitatively different things, as distinct use-values for distinct needs, in short a relation which differentiates them as actual use-values But equality and inequality thus posited are mutually exclusive. The result is not simply a vicious circle of problems, where the solution of one problem presupposes the solution of the other, but a whole complex of contradictory premises, since the fulfillment of one condition depends directly upon the fulfillment of its opposite.
The exchange process must comprise both the evolution and the solution of these contradictions, which cannot however be demonstrated in the process in this simple form We have merely observed how the commodities themselves are related to one another as use-values, i.e., how commodities as use-values function within the exchange process. On the other hand, exchange-value as we have considered it till now has merely existed as our abstraction, or, if one prefers, as the abstraction of the individual commodity- owner, who keeps the commodity as use-value in the ware- house, and has it on his conscience as exchange-value. In the exchange process, however, the commodities must exist for one another not only as use-values but also as exchange- values, and this aspect of their existence must appear as their own mutual relation. The difficulty which confronted us in the first place was that the commodity as a use-value has to be alienated, disposed of, before it can function as an exchange-value, as materialised labour, while on the contrary its alienation as a use-value presupposes its existence as exchange-value. But let us suppose that this difficulty has been overcome, that the commodity has shed its particular use-value and has thereby fulfilled the material condition of being socially useful labour, instead of the particular labour of an individual by himself. In the exchange process, the commodity as exchange-value must then become a universal equivalent, materialised general labour-time for all other commodities; it has thus no longer the limited function of a particular use-value, but is capable of being directly represented in all use-values as its equivalents. Every commodity however is the commodity which, as a result of the alienation of its particular use-value, must appear as the direct materialisation of universal labour- time. But on the other hand, only particular commodities, particular use-values embodying the labour of private individuals, confront one another in the exchange process. Universal labour-time itself is an abstraction which, as such, does not exist for commodities.
Let us consider the series of equations in which the exchange-value of a commodity is expressed in concrete terms, for example -
1 yard of linen = 2 lbs. of coffee
1 yard of linen = 1/2 lb. of tea
1 yard of linen = 8 lbs. of bread, etc.
To be sure, these equations merely denote that equal amounts of universal social labour-time are materialised in 1 yard of linen, 2 lbs. of coffee, 1/2 lb. of tea, etc. But the different kinds of individual labour represented in these particular use-values, in fact, become labour in general, and in this way social labour, only by actually being exchanged for one another in quantities which are proportional to the labour-time contained in them. Social labour-time exists in these commodities in a latent state, so to speak, and becomes evident only in the course of their exchange. The point of departure is not the labour of individuals considered as social labour, but on the contrary the particular kinds of labour of private individuals, i.e., labour which proves that it is universal social labour only by the supersession of its original character in the exchange process. Universal social labour is consequently not a ready-made prerequisite but an emerging result. Thus a new difficulty arises: on the one hand, commodities must enter the exchange process as materialized universal labour-time, on the other hand, the labour-time of individuals becomes materialized universal labour-time only as the result of the exchange process.
It is through the alienation of its use-value, that is of its original form of existence, that every commodity has to acquire its corresponding existence as exchange-value. The commodity must therefore assume a dual form existence in the exchange process. On the other hand, its second form of existence, exchange-value, can only be represented by another commodity, for only commodities confront one another in the exchange process. How is it possible to present a particular commodity directly as materialised universal labour-time, or - which amounts to the same thing - how can the individual labour-time materialised in a particular commodity directly assume a universal character? The concrete expression of the exchange-value of a commodity, i.e., of any commodity considered as universal equivalent, consists of an infinite series of equations such as -
1 yard of linen = 2 lbs. of coffee
1 yard of linen = 1/2 lb. of tea
1 yard of linen = 8 lbs. of bread
1 yard of linen = 6 yards of calico
1 yard of linen = and so on.
This is a theoretical statement since the commodity is merely regarded as a definite quantity of materialised universal labour-time. A particular commodity as a universal equivalent is transformed from a pure abstraction into a social result of the exchange process, if one simply reverses the above series of equations. For example -
2 lbs. of coffee = 1 yard of linen
1/2 lb. of tea =1 yard of linen
8 lbs. of bread =1 yard of linen
6 yards of calico=1 yard of linen.
Just as the labour-time contained in coffee, tea, bread, calico, in short in all commodities, is expressed in terms of linen, so conversely the exchange-value of linen is reflected in all other commodities which act as its equivalents, and the labour-time materialised in linen becomes direct universal labour-time, which is equally embodied in different volumes of all other commodities. Linen thus becomes the universal equivalent in consequence of the universal action of all other commodities in relation to it. Every commodity considered as exchange-value became a measure of the value of all other commodities. In this case, on the contrary, because the exchange-value of all commodities is measured in terms of one particular commodity, the excluded commodity becomes the adequate representation of exchange- value as the universal equivalent. On the other hand, the infinite series or the infinite number of equations in which the exchange-value of each commodity was expressed is now reduced to a single equation consisting of two terms. The equation 2 lbs. of coffee = 1 yard of linen is now a comprehensive expression for the exchange-value of coffee, for in this expression it appears as the direct equivalent to a definite quantity of any other commodity. Commodities within the exchange process accordingly exist for one another, or appear to one another, as exchange-values in the form of linen. The fact that all commodities are related to one another as exchange-values! i.e., simply as different quantities of materialised universal labour-time, now appears in the form that all exchange-values represent merely different quantities of one and the same article, linen. Universal labour-time thus appears as a specific thing, as a commodity in addition to and apart from all other commodities. At the same time, the equation in which one commodity represents the exchange-value of another commodity, e.g., 2 lbs. of coffee = 1 yard of linen, has still to be realised. Only by being alienated as a use-value - an alienation which depends on whether it is able to prove in the exchange process that it is a needed object - is it really converted from the form of coffee into that of linen, thus becoming a universal equivalent and really representing exchange-value for all other commodities. On the other hand, because as a result of their alienation as use-values all commodities are converted into linen, linen becomes the converted form of all other commodities, and only as a result of this transformation of all other commodities into linen does it become the direct reification of universal labour-time, i.e., the product of universal alienation and of the supersession of all individual labour. While commodities thus assume a dual form in order to represent exchange- value for one another, the commodity which has been set apart as universal equivalent acquires a dual use-value. In addition to its particular use-value as an individual commodity it acquires a universal use-value. This latter use- value is itself a determinate form, i.e., it arises from the specific role which this commodity plays as a result of the universal action exerted on it by the other commodities in the exchange process. The use-value of each commodity as an object which satisfies particular needs has a different value in different hands, e.g., it has one value for the person who disposes of it and a different value for the person who acquires it. The commodity which has been set apart as the universal equivalent is now an object which satisfies a universal need arising from the exchange process itself, and has the same use-value for everybody - that of being carrier of exchange-value or a universal medium of exchange. Thus the contradiction inherent in the commodity as such, namely that of being a particular use-value and simultaneously universal equivalent, and hence a use-value for everybody or a universal use-value, has been solved in the case of this one commodity. Whereas now the exchange-value of all other commodities is in the first place presented in the form of an ideal equation with the commodity that has been set apart, an equation which has still to be realised; the use- value of this commodity, though real, seems in the exchange process to have merely a formal existence which has still to be realised by conversion into actual use-values. The commodity originally appeared as commodity in general, as universal labour-time materialised in a partieular use-value. All commodities are compared in the exchange process with the one excluded commodity which is regarded as commodity in general, the commodity, the embodiment of universal labour-time in a particular use-value. They are therefore as particular commodities opposed to one particular commodity considered as being the universal commodity. [The same term is used by Genovesi. (Note in author's copy.)] The fact that commodity-owners treat one another's labour as universal social labour appears in the form of their treating their own commodities as exchange- values; and the interrelation of commodities as exchange- values in the exchange process appears as their universal relation to a particular commodity as the adequate expression of their exchange-value; this in turn appears as the specific relation of this particular commodity to all other commodities and hence as the distinctive, as it were naturally evolved, social character of a thing. The particular commodity which thus represents the exchange-value of all commodities, that is to say, the exchange-value of commodities regarded as a particular, exclusive commodity, constitutes money. It is a crystallization of the exchange-value of commodities and is formed in the exchange process. Thus, while in the exchange process commodities become use- values for one another by discarding all determinate forms and confronting one another in their immediate physical aspect, they must assume a new determinate form they - must evolve money, so as to be able to confront one another as exchange-values. Money is not a symbol, just as the existence of a use-value in the form of a commodity is no symbol. A social relation of production appears as something existing apart from individual human beings, and the distinctive relations into which they enter in the course of production in society appear as the specific properties of a thing - it is this perverted appearance, this prosaically real, and by no means imaginary, mystification that is characteristic of all social forms of labour positing exchange-value. This perverted appearance manifests itself merely in a more striking manner in money than it does in commodities.
The necessary physical properties of the particular commodity, in which the money form of all other commodities is to be crystallised - in so far as they direct]y follow from the nature of exchange-value - are: unlimited divisibility, homogeneity of its parts and uniform quality of all units of the commodity. As the materialisation of universal labour- time it must be homogeneous and capable of expressing only quantitative differences. Another necessary property is durability of its use-value since it must endure through the exchange process. Precious metals possess these qualities in an exceptionally high degree. Since money is not the result of deliberation or of agreement, but has come into being spontaneously in the course of exchange, many different, more or less unsuitable, commodities were at various times used as money. When exchange reaches a certain stage of development, the need arises to polarise the functions of exchange-value and use-value among various commodities - so that one commodity, for example, shall act as means of exchange while another is disposed of as a use-value. The outcome is that one commodity or sometimes several commodities representing the most common use-value come occasionally to serve as money. Even when no immediate need for these use-values exists, the demand for them is bound to be more general than that for other use-values, since they constitute the most substantial physical element in wealth.
Direct barter, the spontaneous form of exchange, signifies the beginning of the transformation of use-values into commodities rather than the transformation of commodities into money. Exchange-value does not acquire an independent form, but is still directly tied to use-value. This is manifested in two ways. Use-value, not exchange-value, is the purpose of the whole system of production, and use- values accordingly cease to be use-values and become means of exchange, or commodities, only when a larger amount of them has been produced than is required for consumption. On the other hand, they become commodities only within the limits set by their immediate use-value, even when this function is polarised so that the commodities to be exchanged by their owners must be use-values for both of them, but each commodity must be a use-value for its non-owner. In fact, the exchange of commodities evolves originally not within primitive communities, [11] but on their margins, on their borders, the few points where they come into contact with other communities. This is where barter begins and moves thence into the interior of the community, exerting a disintegrating influence upon it. The particular use-values which, as a result of barter between different communities, become commodities, e.g., slaves, cattle, metals, usually serve also as the first money within these communities. We have seen that the degree to which the exchange- value of a commodity functions as exchange-value is the higher, the longer the series of its equivalents or the larger the sphere in which the commodity is exchanged. The gradual extension of barter, the growing number of exchange transactions, and the increasing variety of commodities bartered lead, therefore, to the further development of the commodity as exchange-value, stimulates the formation of money and consequently has a disintegrating effect on direct barter. Economists usually reason that the emergence of money is due to external difficulties which the expansion of barter encounters, but they forget that these difficulties arise from the evolution of exchange-value and hence from that of social labour as universal labour. For example commodities as use-values are not divisible at will, a property which as exchange-values they should possess. Or it may happen that the commodity belonging to A may be use-value required by B; whereas B's commodity may not have any use-value for A. Or the commodity-owners may need each other's commodities but these cannot be divided and their relative exchange-values are different. In other words, on the plea of examining simple barter, these economists display certain aspects of the contradiction inherent in the commodity as being the direct unity of use-value and exchange-value. On the other hand, they then persistently regard barter as a form well adapted to commodity exchange, suffering merely from certain technical inconveniences, to overcome which money has been cunningly devised. Proceeding from this quite superficial point of view, an ingenious British economist has rightly maintained that money is merely a material instrument, like a ship or a steam engine, and not an expression of a social relation of production, and hence is not an economic category. It is therefore simply a malpractice to deal with this subject in political economy, which in fact has nothing in common with technology. [12]
The world of commodities presupposes a developed division of labour, or rather the division of labour manifests itself directly in the diversity of use-values which confront one another as particular commodities and which embody just as many diverse kinds of labour. The division of labour as the aggregate of all the different types of productive activity constitutes the totality of the physical aspects of social labour as labour producing use-values. But it exists as such - as regards commodities and the exchange process - only in its results, in the variety of the commodities them- selves.
The exchange of commodities is the process in which the social metabolism, in other words the exchange of particular products of private individuals, simultaneously gives rise to definite social relations of production, into which individuals enter in the course of this metabolism. As they develop, the interrelations of commodities crystallise into distinct aspects of the universal equivalent, and thus the exchange process becomes at the same time the process of formation of money. This process as a whole, which comprises several processes, constitutes circulation.
FOOTNOTES
1. Aristotle, De Republica, L.I, C. "Of everthing which we possess there are two uses:... one is the proper, and the other the improper or secondary use of it. For example, a shoe is used for wear, and is used for exchange; both are uses of the shoe. He who gives a shoe in exchange for money or food to him who wants one, does indeed use the shoe as a shoe, but this is not its proper or primary purpose, for a shoe is not made to be an object of barter. The same may be said of all possessions.... "
2. That is why German compilers write con amore about use-values, calling them "goods". See for example the section on "goods" in I. Stein, System der Staatswissenschaft, Bd. 1. Useful information on "goods" may be found in "manuals dealing with merchandise."
3. At present an absurdly biased view is widely held, namely that primitive communal property is a specifically Slavonic, or even an exclusively Russian, phenomenon. It is an early form which ean be found among Romans, Teutons and Celts, and of which a whole collection of diverse patterns (though sometimes only remnants survive) is still in existence in India. A careful study of Asiatic, particularly Indian, forms of communal property would indicate that the disintegration of different forms of primitive communal ownership gives rise to diverse forms of property. For instance, various prototypes of Roman and Germanic private property can be traced back to certain forms of Indian communal property.
4. "La ricchezza e una ragione tra due persone." Galiani, Della Moneta, p. 221. In Volume III of Custodi's collection of Scrittori classici Italiani di Economia Politica. Parte Moderna, Milano, 1803.
5. "In its natural state, matter ... is always destitute of value." McCulloch, A Discourse on the Rise, Progress, Peculiar Objects, and Importance of Political Economy, Second Edition, Edinburgh, 1825, p. 48. This shows how high even a McCulloch stands above the fetishism of German "thinkers" who assert that "material" and half a dozen similar irrelevancies are elements of value. See, inter alia, L. Stein, op. cit., Bd. 1, p. 170.
6. Berkeley, The Querist, London, 1750
7. Thomas Cooper, Lectures on the Elements of Political Eonomy, London, 1831 (Columbia, 1826), p. 99.
8. Friedrich List has never been able to grasp the difference between labour at a producer of something useful, a use-value, and labour as a producer of exchange-value, a specific social form of wealth (since his mind being occupied with practical matters was not concerned with understanding); he therefore regarded the modern English economists as mere plagiarists of Moses of Egypt.
9. It can easily be seen what "service" the category "service" must render to economists such as J. B. Say and F. Bastiat, whose sagacity, as Malthus has aptly remarked, always abstracts from the specific form of economic conditions.
10. "It is another peculiarity of measures to enter into such a relation with the thing measured, that in a certain way the thing measured becomes the measure of the measuring unit." Montanari, Della Moneta, p. 41 in Custodi's collection, Vol. III, Parte Antica.
11. Aristotle makes a similar observation with regard to the individual family considered as the primitive community. But the primitive form of the family is the tribal family, from the historical dissolution of which the individual family develops. "In the first community, indeed which is the family, this art" (that is, trade) "is obviously of no use" (Aristotle, loc. cit.).
12. "Money is, in fact, only the instrument for carrying on buying and selling" (but could you please explain what you mean by buying and selling?) "and the consideration of it no more forms a part of the science of political economy than the consideration of ships or steam engines, or of any other instruments employed to facilitate the production and distribution of wealth" (Thomas Hodgskin, Popular Political Economy, London, 1827, pp. 178,179).
Next: Historical Notes on the Analysis of Commodities
A. Historical Notes on the Analysis of Commodities
The decisive outcome of the research carried on for over a century and a half by classical political economy, beginning with William Petty in Britain and Boisguillebert [1] in France, and ending with Ricardo in Britain and Sismondi in France, is an analysis of the aspects of the commodity into two forms of labour -- use-value is reduced to concrete labour or purposive productive activity, exchange-value to labour-time or homogeneous social labour.
Petty reduces use-value to labour without deceiving himself about the dependence of its creative power on natural factors. He immediately perceives concrete labour in its entire social aspect as division of labour. [2] This conception of the source of material wealth does not remain more or less sterile as with his contemporary Hobbes, but leads to the political arithmetic, the first form in which political economy is treated as a separate science. But he accepts exchange-value as it appears in the exchange of commodities, i.e., as money, and money itself as an existing commodity, as gold and silver. Caught up in the ideas of the Monetary System, he asserts that the labour which determines exchange-value is the particular kind of concrete labour by which gold and silver is extracted. What he really has in mind is that in bourgeois economy labour does not directly produce use-values but commodities, use-values which, in consequence of their alienation in exchange, are capable of assuming the form of gold and silver, i.e., of money, i.e., of exchange-value, i.e., of materialised universal labour. His case is a striking proof that recognition of labour as the source of material wealth by no means precludes misapprehension of the specific social form in which labour constitutes the source of exchange-value.
Boisguillebert for his part, in fact, although he may not be aware of it, reduces the exchange-value of commodities to labour-time, by determining the "true value" (la juste valeur) according to the correct proportion in which the labour-time of the individual producers is divided between the different branches of industry, and declaring that free competition is the social process by which this correct proportion is established. But simultaneously, and in contrast with Petty, Boisguillebert wages a fanatical struggle against money, whose intervention, he alleges, disturbs the natural equilibrium or the harmony of the exchange of commodities and, like a fantastic Moloch, demands all physical wealth as a sacrifice. This polemic against money is, on the one hand, connected with definite historical conditions, for Boisguillebert fights against the blindly destructive greed for gold which possessed the court of Louis XIV, his tax-farmers and the aristocracy; [3] whereas Petty acclaims the greed for gold as a vigorous force which spurs a nation to industrial progress and to the conquest of the world market; at the same time however it throws into bold relief more profound fundamental differences which recur as a perpetual contrast between typically English and typically French [4] political economy. Boisguillebert, indeed, sees only the material substance of wealth, its use-value, enjoyment of it, [5] and regards the bourgeois form of labour, the production of use-values as commodities and the exchange of commodities, as the appropriate social form in which individual labour accomplishes this object. Where, as in money, he encounters the specific features of bourgeois wealth, he therefore speaks of the intrusion of usurping alien factors, and inveighs against one of the forms of labour in bourgeois society, while simultaneously pronouncing utopian eulogies on it in another form. [6] Boisguillebert's work proves that it is possible to regard labour-time as the measure of the value of commodities, while confusing the labour which is materialised in the exchange-value of commodities and measured in time units with the direct physical activity of individuals.
It is a man of the New World -- where bourgeois relations of production imported together with their representatives sprouted rapidly in a soil in which the superabundance of humus made up for the lack of historical tradition -- who for the first time deliberately and clearly (so clearly as to be almost trite) reduces exchange-value to labour-time. This man was Benjamin Franklin, who formulated the basic law of modern political economy in an early work, which was written in 1729 and published in 1731. [7] He declares it necessary to seek another measure of value than the precious metals, and that this measure is labour.
"By labour may the value of silver be measured as well as other things. As, suppose one man is employed to raise corn, while another is digging and refining silver; at the year's end, or at any other period of time, the complete produce of corn, and that of silver, are the natural price of each other; and if one be twenty bushels, and the other twenty ounces, then an ounce of that silver is worth the labour of raising a bushel of that corn. Now if by the discovery of some nearer, more easy or plentiful mines, a man may get forty ounces of silver as easily as formerly he did twenty, and the same labour is still required to raise twenty bushels of corn, then two ounces of silver will be worth no more than the same labour of raising one bushel of corn, and that bushel of corn will be as cheap at two ounces, as it was before at one, caeteris paribus. Thus the riches of a country are to be valued by the quantity of labour its inhabitants are able to purchase" (op. cit., p. 265).
From the outset Franklin regards labour-time from a restricted economic standpoint as the measure of value. The transformation of actual products into exchange-values is taken for granted, and it is therefore only a question of discovering a measure of their value.
To quote Franklin again: "Trade in general being nothing else but the exchange of labour for labour, the value of all things is, as I have said before, most justly measured by labour" (op. cit., p. 267).
If in this sentence the term labour is replaced by concrete labour, it is at once obvious that labour in one form is being confused with labour in another form. Because trade may, for example, consist in the exchange of the labour of a shoemaker, miner, spinner, painter and so on, is therefore the labour of the painter the best measure of the value of shoes? Franklin, on the contrary, considers that the value of shoes, minerals, yarn, paintings, etc., is determined by abstract labour which has no particular quality and can thus be measured only in terms of quantity. [8] But since he does not explain that the labour contained in exchange value is abstract universal social labour, which is brought about by the universal alienation of individual labour, he is bound to mistake money for the direct embodiment of this alienated labour. He therefore fails to see the intrinsic connection between money and labour which posits exchange-value, but on the contrary regards money as a convenient technical device which has been introduced into the sphere of exchange from outside. [9] Franklin's analysis of exchange-value had no direct influence on the general course of the science, because he dealt only with special problems of political economy for definite practical purposes.
The difference between concrete useful labour and labour which creates exchange-value aroused considerable interest in Europe during the eighteenth century in the following form: what particular kind of concrete labour is the source of bourgeois wealth? It was thus assumed that not every kind of labour which is materialised in use-values or yields products must thereby directly create wealth. But for both the Physiocrats and their opponents the crucial issue was not what kind of labour creates value but what kind of labour creates surplus value. They were thus discussing a complex form of the problem before having solved its elementary form; just as the historical progress of all sciences leads only through a multitude of contradictory moves to the real point of departure. Science, unlike other architects, builds not only castles in the air, but may construct separate habitable storeys of the building before laying the foundation stone. We shall now leave the Physiocrats and disregard a whole series of Italian economists, whose more or less pertinent ideas come close to a correct analysis of the commodity, [10] in order to turn at once to Sir James Steuart, [11] the first Briton to expound a general system of bourgeois economy. The concept of exchange-value like the other abstract categories of political economy are in his work still in process of differentiation from their material content and therefore appear to be blurred and ambiguous. In one passage he determines real value by labour-time ("what a workman can perform in a day"), but beside it he introduces wages and raw material in a rather confusing way. [12] His struggle with the material content is brought out even more strikingly in another passage. He calls the physical element contained in a commodity, e.g., the silver in silver filigree, its "intrinsic worth", and the labour-time contained in it its "useful value".
The first is according to him something "real in itself", whereas "the value of the second must be estimated according to the labour it has cost to produce it.... The labour employed in the modification represents a portion of a man's time." [13]
His clear differentiation between specifically social labour which manifests itself in exchange-value and concrete labour which yields use-values distinguishes Steuart from his predecessors and his successors.
"Labour," he says, "which through its alienation creates a universal equivalent, I call industry."
He distinguishes labour as industry not only from concrete labour but also from other social forms of labour. He sees in it the bourgeois form of labour as distinct from its antique and mediaeval forms. He is particularly interested in the difference between bourgeois and feudal labour, having observed the latter in the stage of its decline both in Scotland and during his extensive journeys on the continent. Steuart knew very well that in pre-bourgeois eras also products assumed the form of commodities and commodities that of money; but he shows in great detail that the commodity as the elementary and primary unit of wealth and alienation as the predominant form of appropriation are characteristic only of the bourgeois period of production, and that accordingly labour which creates exchange-value is a specifically bourgeois feature. [14]
Various kinds of concrete labour, such as agriculture, manufacture, shipping and commerce, had each in turn been claimed to constitute the real source of wealth, before Adam Smith declared that the sole source of material wealth or of use-values is labour in general, that is the entire social aspect of labour as it appears in the division of labour. Whereas in this context he completely overlooks the natural factor, he is pursued by it when he examines the sphere of purely social wealth, exchange-value. Although Adam Smith determines the value of commodities by the labour-time contained in them, he then nevertheless transfers this determination of value in actual fact to pre-Smithian times. In other words, what he regards as true when considering simple commodities becomes confused as soon as he examines the higher and more complex forms of capital, wage-labour, rent, etc. He expresses this in the following way: the value of commodities was measured by labour-time in the paradise lost of the bourgeoisie, where people did not confront one another as capitalists, wage-labourers, landowners, tenant farmers, usurers, and so on, but simply as persons who produced commodities and exchanged them. Adam Smith constantly confuses the determination of the value of commodities by the labour-time contained in them with the determination of their value by the value of labour; he is often inconsistent in the details of his exposition and he mistakes the objective equalisation of unequal quantities of labour forcibly brought about by the social process for the subjective equality of the labours of individuals. [15] He tries to accomplish the transition from concrete labour to labour which produces exchange-value, i.e., the basic form of bourgeois labour, by means of the division of labour. But though it is correct to say that individual exchange presupposes division of labour, it is wrong to maintain that division of labour presupposes individual exchange. For example, division of labour had reached an exceptionally high degree of development among the Peruvians, although no individual exchange, no exchange of products in the form of commodities, took place.
David Ricardo, unlike Adam Smith, neatly sets forth the determination of the value of commodities by labour-time, and demonstrates that this law governs even those bourgeois relations of production which apparently contradict it most decisively. Ricardo's investigations are concerned exclusively with the magnitude of value, and regarding this he is at least aware that the operation of the law depends on definite historical pre-conditions. He says that the determination of value -by labour-time applies to
"such commodities only as can be increased in quantity by the exertion of human industry, and on the production of which competition operates without restraint". [16]
This in fact means that the full development of the law of value presupposes a society in which large-scale industrial I production and free competition obtain, in other words modern bourgeois society. For the rest, the bourgeois form of labour is regarded by Ricardo as the eternal natural form of social labour. Ricardo's primitive fisherman and primitive hunter are from the outset owners of commodities who exchange their fish and game in proportion to the labour-time which is materialised in these exchange-values. On this occasion he slips into the anachronism of allowing the primitive fisherman and hunter to calculate the value of their implements in accordance with the annuity tables used on the London Stock Exchange in 1817. Apart from bourgeois society, the only social system with which Ricardo was acquainted seems to have been the "parallelograms of Mr. Owen". Although encompassed by this bourgeois horizon, Ricardo analyses bourgeois economy, whose deeper layers differ essentially from its surface appearance, with such theoretical acumen that Lord Brougham could say of him:
"Mr. Ricardo seemed as if he had dropped from another planet."
Arguing directly with Ricardo, Sismondi not only emphasises the specifically social character of labour which creates exchange-value, [17] but states also that it is a "characteristic feature of our economic progress" to reduce value to necessary labour-time, to
"the relation between the needs of the whole society and the quantity- of labour which is sufficient to satisfy these needs". [18]
Sismondi is no longer preoccupied with Boisguillebert's notion that labour which creates exchange-value is distorted by money, but just as Boisguillebert denounced money so does Sismondi denounce large industrial capital. Whereas Ricardo's political economy ruthlessly draws its final conclusion and therewith ends, Sismondi supplements this ending by expressing doubt in political economy itself.
Since the determination of exchange-value by labour-time has been formulated and expounded in the clearest manner by Ricardo, who gave to classical political economy its final shape, it is quite natural that the arguments raised by economists should be primarily directed against him. If this polemic is stripped of its mainly trivial [19] form it can be summarised as follows:
One. Labour itself has exchange-value and different types of labour have different exchange-values. If one makes exchange-value the measure of exchange-value, one is caught up in a vicious circle, for the exchange-value used as a measure requires in turn a measure. This objection merges into the following problem: given labour-time as the intrinsic measure of value, how are wages to be determined on this basis. The theory of wage-labour provides the answer to this.
Two. If the exchange-value of a product equals the labour-time contained in the product, then the exchange-value of a working day is equal to the product it yields, in other words, wages must be equal to the product of labour. [20] But in fact the opposite is true. Ergo, this objection amounts to the problem, -- how does production on the basis of exchange-value solely determined by labour-time lead to the result that the exchange-value of labour is less than the exchange-value of its product? This problem is solved in our analysis of capital.
Three. In accordance with the changing conditions of demand and supply, the market-price of commodities falls below or rises above their exchange-value. The exchange-value of commodities is, consequently, determined not by the labour-time contained in them, but by the relation of demand and supply. In fact, this strange conclusion only raises the question how on the basis of exchange-value a market-price differing from this exchange-value comes into being, or rather, how the law of exchange-value asserts itself only in its antithesis. This problem is solved in the theory of competition.
Four. The last and apparently the decisive objection, unless it is advanced -- as commonly happens -- in the form of curious examples, is this: if exchange-value is nothing but the labour-time contained in a commodity, how does it come about that commodities which contain no labour possess exchange-value, in other words, how does the exchange-value of natural forces arise? The problem is solved in the theory of rent.
FOOTNOTES
1. A comparative study of Petty's and Boisguillebert's writings and characters -- apart from illuminating the social divergence between Britain and France at the close of the seventeenth century and the beginning of the eighteenth -- would explain the origins of those national contrasts that exist between British and French political economy. The same contrast reappears in Ricardo and Sismondi.
2. Petty treats the division of labour also as a productive force, and he does so on a much grander scale than Adam Smith. See An Essay Concerning the Multiplicetion of Mankind, Third Edition, 1686, pp. 35-36. In this essay he shows the advantages which division of labour has for production not only with the example of the manufacture of a watch -- as Adam Smith did later with the example of the manufacture of a pin -- but considers also a town and a whole country as large- scale industrial establishments. The Spectator of November 26, 1711,refers to this "illustration of the admirable Sir William Petty". McCulloch's conjecture that the Spectetor confused Petty with a writer forty years his junior is therefore wrong. (See McCulloch, The Literature of Political Economy, a Classified Catalogue, London, 1845, p.102.) Pctty regards himself as the founder of a new science. He says that his method "is not yet very usual", "for instead of using only comparative and superlative Words, and intellectual Arguments", he proposes to speak "in Terms of Number, Weight or Measure; to use only Arguments of Sense, and to consider only such Causes, as have visible Foundations in Nature; leaving those that depend upon the mutable Minds, Opinions, Appetites, and Passions of particular Men, to the Consideration of others" (Political Arithmetick, etc., London, 1699, Preface). His audacious genius becomes evident for instance in his proposal to transport "all the movables and People of Ireland, and of the Highlands of Scotland ... into the rest of Great Britain". This would result in the saving of labour-time, in increasing productivity of labour, and "the King and his Subjects would thereby become more Rich and Strong" (Political Aritlmetick, Chapter 4 [p. 225]). Also in the chapter of his Political Arithmetick in which -- at a time when Holland was still the predominant trading nation and France seemed to be on the way to becoming the principal trading power -- he proves that England is destined to conquer the world market: "That the King of England's Subjects, have Stock competent and convenient, to drive the Trade of the whole Commercial World" (op. cit., Chapter 10 [p. 272]). 'That the Impediments of England's greatness, are but contingent and removable" (p. 247 et seq.). A highly original sense of humour pervades all his writings. Thus he shows for example that the conquest of the world market by Holland, which was then regarded as the model country by English economists just as Britain is now regarded as the model country by continental economists, was brought about by perfectly natural causes "without such Angelical Wits and Judgments, as some attribute to the Hollanders" (op. cit., pp. 175-16). He champions freedom of conscience as a condition of trade, because the poor are diligent and "believe that Labour and Industry is their Duty towards God" so long as they are permitted "to think they have the more Wit and Understanding, especially of the things of God, which they think chiefly belong to the Poor". "From whence it follows that Trade is not fixt to any Species of Religion as such; but rather ... to the Heterodox part of the whole" (op. cit., pp. 183-86). He recommends special public contribution for rogues, since it would be better for the general public to impose a tax on themselves for the benefit of the rogues than to be taxed by them (op. cit., p. 199). On the other hand, he rejects taxes which transfer wealth from industrious people to those who "do nothing at all, but Eat and Drink, Sing, Play, and Dance: nay such as Study the Metaphysicks" [op. cit., p. 198]. Petty's writings have almost become bibliographical curiosities and are only available in old inferior editions. 'This is the more surprising since William Petty is not only the father of English political economy but also an ancestor of Henry Petty, alias Marquis of Lansdowne, the Nestor of the English Whigs. But the Lansdowne family could hardly prepare a complete edition of Petty's works without prefacing it with his biography, and what is true with regard to the origin of most of the big Whig families, applies also in this case -- the less said of it the better. The army surgeon, who was a bold thinker but quite unscrupulous and just as apt to plunder in Ireland under the aegis of Cromwell as to fawn upon Charles II to obtain the title of baronet to embellish his trash, is not a suitablc image of an ancestor for public display. In most of the writings published during his lifetime, moreover, Petty seeks to prove that England's golden age was the reign of Charles II, a rather heterodox view for hereditary exploiters of the "glorious revolution". Return
3. As against the "black art of finance" of his time, Boisguillebert says: "The science of finance consists of nothing but a thorough knowledge of the interests of agriculture and commerce" (Le detail de la France, 1697. In Eugene Dalre's edition of Economistes financiers du XVIII siecle, Paris, 1843, Vol. I, p. 241).
4. But not Romance political economy, since the contrast of English and French economists is repeated by the Italians in their two schools one at Naples and the other at Milan; whereas the Spaniards of the earlier period are either simply Mercantilists and modified Mercantilists like Ustariz, or follow Adam Smith in observing the happy mean like Jovellanos (see his Obras, Barcelona, 1839-40)
5. "True wealth ... is the complete enjoyment not only of the necessaries of life but also of all the superfluities and of everything that can give pleasure to the senses" (Boisguillebert, Dissertation sur la nature de la richesse, etc., p. 403). But whereas Petty was just a frivolous, grasping, unprincipled adventurer, Boisguillebert, although he was one of the intendants of Louis XIV, stood up for the interests of the oppressed classes with both great intellectual force and courage.
6 . French socialism as represented by Proudhon suffers from the same national failing.
7 . Benjamin Franklin, A Modest Inquiry into the Nature and Necessity of a Paper Currency, in The Works of Benjamin Franklin, edit. by J. Sparks, Vol. II, Boston, 1836.
8. Remarks and Facts relative to the American Paper Money, 1764 (l.c.).
9. See Papers on American Politics, and Remarks and Facts relative to the American Paper Money, 1764 (l.c.).
10. See for instance Galiani, Della Moneta, Vol. III, in Scrittori classici Italiani di Economia Politica (published by Custodi), Parte Moderna, Milano, 1803. He says: "It is only toil" (fatica) "which gives value to things", p. 74. The term "fatica" for labour is characteristic of the southerner.
11. Steuart's work An Inquiry into the Principles of Political Economy, Being an Essay on the Science of Domestic Policy in Free Nations was first published in London in 1767, in two quarto volumes, ten years earlier than Adam Smith's Wealth of Nations. I quote from the Dublin edition of 1770.
12 . Steuart, op. cit., Vol. I, pp. 181-83.
13 . Ibid., pp. 361-62.
14. Steuart therefore declares that the patriarchal form of agriculture, whose direct aim is the production of use-values for the owner of the land, is an abuse, although not in Sparta or Rome or even in Athens, but certainly in the industrial countries of the eighteenth century. This "abusive agriculture" is not "trade" but a mere means of subsistence. Just as bourgeois agriculture clears the land of superfluous mouths, so bourgeois manufacture clears the factory of superfluous hands.
15. Adam Smith writes for instance -- "Equal quantities of labour, at all times and places, may be said to be of equal value to the labourer. In his ordinary state of health, strength, and spirits; in the ordinary degree of his skill and dexterity, he must always lay down the same portion of his ease, his liberty, and his happiness. The price which he pays must always be the same, whatever may be the quantity of goods which he receives in return for it. Of these, indeed, it may sometimes purchase a greater and sometimes a smaller nuantity, but it is their value which varies, not that of the labour which purchases them.... Labour alone, therefore, never varying in its own value, is alone the ultimate and real standard by which the value of all commodities can ... be estimated.... It is their real price...." [Wealth of Nations. Book I, Chapter V.]
16 . David Ricardo, On the Principles of Political Economy, and Taxation, Third Edition, London, 1821, p. 3.
17. Sismondi, Etudes sur l'economie politique, tome II, Bruxelles, 1838. "Trade has reduced the whole matter to the antithesis of use-value and exchange-value." P. 162.
18 . Ibid., pp. 163-66 et seq.
19 . It probably assumes the most trivial form in J. B. Say's annotations to the French translation -- prepared by Constancio -- of Ricardo's work, and the most pedantic and presumptuous in Mr. Macleod's recently published Theory of Exchange, London, 1858.
20. This objection, which was advanced against Ricardo by bourgeois economists, was later taken up by socialists. Assuming that the formula was theoretically sound, they alleged that practice stood in conflict with the theory and demanded that bourgeois society should draw the practical conclusions supposedly arising from its theoretical principles. In this way at least English socialists turned Ricardo's formula of exchange-value against political economy. The feat of declaring not only that the basic principle of the old society was to be the principle of the new society, but also that he was the inventor of the formula used by Ricardo to summarise the final result of English classical economics, was reserved to M. Proudhon. It has been shown that the utopian interpretation of Ricardo's formula was already completely forgotten in England, when M. Proudhon "discovered" it on the other side of the Channel. (Cf. the section on la valeur constituee, in my Misere de la philosophie..., Paris, 1847.a) [See Karl Marx, The Poverty of Philosophy, Moscow, 1962, pp. 43-49 -- Ed.]
Part II
MONEY OR SIMPLE CIRCULATION
Gladstone, speaking in a parliamentary debate on Sir Robert Peel's Bank Act of 1844 and 1845, observed that even love has not turned more men into fools than has meditation upon the nature of money. He spoke of Britons to Britons. The Dutch, on the other hand, who in spite of Petty's doubts possessed a divine sense for money speculation from time immemorial, have never lost their senses in speculation about money.
The principal difficulty in the analysis of money is surmounted as soon as it is understood that the commodity is the origin of money. After that it is only a question of clearly comprehending the specific form peculiar to it. This is not so easy because all bourgeois relations appear to be gilded, i.e., they appear to be money relations, and the money form, therefore, seems to possess an infinitely varied content, which is quite alien to this form.
During the following analysis it is important to keep in mind that we are only concerned with those forms of money which arise directly from the exchange of commodities, but not with forms of money, such as credit money, which belong to a higher stage of production. For the sake of simplicity gold is assumed throughout to be the money commodity.
1. MEASURE OF VALUE
The first phase of circulation is, as it were, a theoretical phase preparatory to real circulation. Commodities, which exist as use-values, must first of all assume a form in which they appear to one another nominally as exchange-values, as definite quantities of materialised universal labour-time. The first necessary move in this process is, as we have seen, that the commodities set apart a specific commodity, say, gold, which becomes the direct reification of universal labour-time or the universal equivalent. Let us return for a moment to the form in which gold is converted into money by commodities.
1 ton of iron =2 ounces of gold
1 quarter of wheat =1 ounce of gold
1 hundredweight of
Mocha coffee =1/4 ounce of gold
1 hundredweight of
potash =1/2 ounce of gold
1 ton of Brazil-timber =1 1/2 ounces of gold
Y commodities =X ounces of gold
In this series of equations iron, wheat, coffee, potash, etc., appear to one another as materialisation of uniform labour, that is labour materialised in gold, in which all distinctive features of the concrete labour represented in the different use-values are entirely obliterated. They are as values identical, i.e., materialisations of the same labour or the same materialisation of labour -- gold. Since they are uniform materialisations of the same labour, they differ only in one way, quantitatively: in other words they represent different magnitudes of value, because their use-values contain unequal amounts of labour-time. These individual commodities can be compared with one another as embodiments of universal labour-time, since they have been compared with universal labour-time in the shape of the excluded commodity, i.e., gold. The same dynamic relation, as a result of which commodities become exchange-values for one another, causes the labour-time contained in gold to represent universal labour-time, a given amount of which is expressed in different quantities of iron, wheat, coffee, etc., in short in the use-values of all commodities, or it may be displayed directly in the infinite series of commodity equivalents. Since the exchange-value of all commodities is expressed in gold, the exchange-value of gold is directly expressed in all commodities. Because the commodities themselves assume the form of exchange-value for one another, they turn gold into the universal equivalent or into money.
Gold becomes the measure of value because the exchange-value of all commodities is measured in gold, is expressed in the relation of a definite quantity of gold and a definite quantity of commodity containing equal amounts of labour-time. To begin with, gold becomes the universal equivalent, or money, only because it thus functions as the measure of value and as such its own value is measured directly in all commodity equivalents. The exchange-value of all commodities, on the other hand, is now expressed in gold. One has to distinguish a qualitative and a quantitative aspect in this expression. The exchange-value of the commodity exists as the embodiment of equal uniform labour-time, the value of the commodity is thus fully expressed, for to the extent that commodities are equated with gold they are equated with one another. Their golden equivalent reflects the universal character of the labour-time contained in them on the one hand, and its quantity on the other hand. The exchange-value of commodities thus expressed in the form of universal equivalence and simultaneously as the degree of this equivalence in terms of a specific commodity, that is a single equation in which commodities are compared with a specific commodity, constitutes price. Price is the converted form in which the exchange-value of commodities appears within the circulation process.
Thus as a result of the same process through which the values of commodities are expressed in gold prices, gold is transformed into the measure of value and thence into money. If the values of all commodities were measured in silver or wheat or copper, and accordingly expressed in terms of silver, wheat or copper prices, then silver, wheat or copper would become the measure of value and consequently universal equivalents. Commodities as exchange-values must be antecedent to circulation in order to appear as prices in circulation. Gold becomes the measure of value only because the exchange-value of all commodities is estimated in terms of gold. The universality of this dynamic relation, from which alone springs the capacity of gold to act as a measure, presupposes however that every single commodity is measured in terms of gold in accordance with the labour-time contained in both, so that the real measure of commodity and gold is labour itself, that is commodity and gold are as exchange-values equated by direct exchange. How this equating is carried through in practice cannot be discussed in the context of simple circulation. It is evident, however, that in countries where gold and silver are produced a definite amount of labour-time is directly incorporated in a definite quantity of gold and silver, whereas countries which produce no gold and silver arrive at the same result in a roundabout way, by direct or indirect exchange of their home products, i.e., of a definite portion of their average national labour, for a definite quantity of labour-time embodied in the gold and silver of countries that possess mines. Gold must be in principle a variable value, if it is to serve as a measure of value, because only as reification of labour-time can it become the equivalent of other commodities, but as a result of changes in the productivity of concrete labour, the same amount of labour-time is embodied in unequal volumes of the same type of use-values. The valuation of all commodities in terms of gold -- like the expression of the exchange-value of any commodity in terms of the use-value of another commodity -- merely presupposes that at a given moment gold represents a definite quantity of labour-time. The law of exchange-value set forth earlier applies to changes occurring in the value of gold. If the exchange-value of commodities remains unchanged, then a general rise of their prices in terms of gold can only take place when the exchange-value of gold falls. If the exchange-value of gold remains unchanged, then a general rise of prices in terms of gold is only possible if the exchange-values of all commodities rise. The reverse takes place in the case of a general decline in the prices of commodities. If the value of an ounce of gold falls or rises in consequence of a change in the labour-time required for its production, then it will fall or rise equally in relation to all other commodities and will thus for all of them continue to represent a definite volume of labour-time. The same exchange-values will now be estimated in quantities of gold which are larger or smaller than before, but they will be estimated in accordance with their values and will therefore maintain the same value relative to one another. The ratio 2:4:8 remains the same whether it becomes 1:2:4 or 4:8:16. The fact that, because of the changing value of gold, exchange-values are represented by varying quantities of gold does not prevent gold from functioning as the measure of value, any more than the fact that the value of silver is one-fifteenth of that of gold prevents silver from taking over this function. Labour-time is the measure of both gold and commodities, and gold becomes the measure of value only because all commodities are measured in terms of gold; it is consequently merely an illusion created by the circulation process to suppose that money makes commodities commensurable. [1] On the contrary, it is only the commensurability of commodities as materialised labour-time which converts gold into money.
The concrete form in which commodities enter the process of exchange is as use-values. The commodities will only become universal equivalents as a result of their alienation. The establishment of their price is merely their nominal conversion into the universal equivalent, an equation with gold which still has to be put into practice. But because prices convert commodities only nominally into gold or only into imaginary gold -- i.e., the existence of commodities as money is indeed not yet separated from their real existence -- gold has been merely transformed into imaginary money, only into the measure of value, and definite quantities of gold serve in fact simply as names for definite quantities of labour-time. The distinct form in which gold crystallises into money depends in each case on the way in which the exchange-values of commodities are represented with regard to one another.
Commodities now confront one another in a dual form, really as use-values and nominally as exchange-values. They represent now for one another the dual form of labour contained in them, since the particular concrete labour actually exists as their use-value, while universal abstract labour-time assumes an imaginary existence in their price, in which they are all alike embodiments of the same substance of value, differing only quantitatively.
The difference between exchange-value and price is, on the one hand, merely nominal; as Adam Smith says, labour is the real price of commodities and money their nominal price. Instead of saying that one quarter of wheat is worth thirty days' labour, one now says it is worth one ounce of gold, when one ounce of gold is produced in thirty working days. The difference is on the other hand so far from being simply a nominal difference that all the storms which threaten the commodity in the actual process of circulation centre upon it. A quarter of wheat contains thirty days' labour, and it therefore does not have to be expressed in terms of labour-time. But gold is a commodity distinct *from wheat, and only circulation can show whether the quarter of wheat is actually turned into an ounce of gold as has been anticipated in its price. This depends on whether or not the wheat proves to be a use-value, whether or not the quantity of labour-time contained in it proves to be the quantity of labour-time necessarily required by society for the production of a quarter of wheat. The commodity as such is an exchange-value, the commodity has a price. This difference between exchange-value and price is a reflection of the fact that the particular individual labour contained in the commodity can only through alienation be represented as its opposite, impersonal, abstract, general -- and only in this form social -- labour, i.e., money. Whether it can be thus represented or not seems a matter of chance. Although, therefore, the price gives exchange-value a form of existence which is only nominally distinct from the commodity, and the two aspects of the labour contained in the commodity appear as yet only as different modes of expression; while, on the other hand, gold, the embodiment of universal labour-time, accordingly confronts concrete commodities merely as an imaginary measure of value; yet the existence of price as an expression of exchange-value, or of gold as a measure of value, entails the necessity for alienation of commodities in exchange for glittering gold and thus the possibility of their non-alienation. In short, there is here contained in latent form the whole contradiction which arises because the product is a commodity, or because the particular labour of an isolated individual can become socially effective only if it is expressed as its direct opposite, i.e., "abstract universal labour. The utopians who wish to retain commodities but not money, production based on private exchange without the essential conditions for this type of production, are therefore quite consistent when they seek to "abolish" money not only in its palpable state but even in the nebulous, chimerical state that it assumes as the measure of value. For beneath the invisible measure of value lurks hard money.
Given the process by which gold has been turned into the measure of value and exchange-value into price, all commodities when expressed in their prices are merely imagined quantities of gold of various magnitudes. Since they are thus various quantities of the same thing, namely gold, they are similar, comparable and commensurable, and thus arises the technical necessity of relating them to a definite quantity of gold as a unit of measure. This unit of measure then develops into a scale of measure by being divided into aliquot parts which are in turn subdivided into aliquot parts. [2] The quantities of gold themselves, however, are measured by weight. The standard weights generally used for metals accordingly provide ready-made standard measures, which originally also served as standard measures of price wherever metallic currency was in use. Since commodities are no longer compared as exchange-values which are measured in terms of labour-time, but as magnitudes of the same denomination measured in terms of gold, gold, the measure of value, becomes the standard of price. The comparison of commodity-prices in terms of different quantities of gold thus becomes crystallised in figures denoting imaginary quantities of gold and representing gold as a standard measure divided into aliquot parts. Gold as measure of value and as standard of price has quite distinct specific functions, and the confusion of the one with the other has led to the most absurd theories. Gold as materialised labour-time is a measure of value, as a piece of metal of definite weight it is the standard of price. Gold becomes the measure of value because as an exchange-value it is compared with the exchange-values of other commodities; in its aspect as a standard of price a definite quantity of gold serves as a unit for other quantities of gold. Gold is the measure of value because its value is variable; it is the standard of price because it has been established as an invariable unit of weight. Here, as in all cases of measuring quantities of the same denomination, stability and exactitude of the proportions is essential. The necessity of establishing a quantity of gold as the unit of measure and its aliquot parts as subdivisions of this unit has given rise to the idea that a fixed ratio of values has been set up between a definite quantity of gold, whose value is of course variable, and the exchange-values of commodities. But such a view simply ignores the fact that the exchange-values of commodities are turned into prices, into quantities of gold, before gold becomes the standard of price. Quite irrespective of any changes in the value of gold, different quantities of gold will always represent the same ratio of values with regard to one another. lf the value of gold should fall by 1,000 per cent, then the value of twelve ounces of gold would still be twelve times bigger than that of one ounce of gold, and so far as prices are concerned what matters is only the proportion of the different quantities^ of gold to one another. Since, on the other hand, a rise or fall in the value of an ounce of gold does not in any way affect its weight, the weight of its aliquot parts remains likewise unaffected; gold can thus always serve as a stable standard of price, regardless of any changes in its value. [3]
As a result of an historical process, which, as we shall explain later, was determined by the nature of metallic currency, the names of particular weights were retained for constantly changing and diminishing weights of precious metals functioning as the standard of price. Thus the English pound sterling denotes less than one-third of its original weight, the pound Scots before the Union only 1/36, the French livre 1/74, the Spanish maravedi less than 1/1,000 and the Portuguese rei an even smaller proportion. Historical development thus led to a separation of the money names of certain weights of metals from the common names of these weights. [4] Because the designation of the unit of measure, its aliquot parts and their names is, on the one hand, purely conventional, and on the other hand must be accepted as universal and indispensable within the sphere of circulation, it had to be established by legal means. The purely formal enactment thus devolved upon the government. [5] Which particular metal served as the material of money depended on the given social conditions. The standard of price is of course different in different countries. In England, for example, the ounce as a weight of metal is divided into pennyweights, grains and carats troy; but the ounce of gold as the unit of money is divided into 3 7/8 sovereigns, the sovereign into 20 shillings and the shilling into 12 pence, so that 100 pounds of 22-carat gold (1,200 ounces) equal 4,672 sovereigns and 10 shillings. But in the world market, where state frontiers disappear, such national features of the standards of money disappear as well and are replaced by measures of weight generally used for metals.
The price of a commodity, or the quantity of gold into which it is nominally converted, is now expressed therefore in the monetary names of the standard of gold. Thus, instead of saying a quarter of wheat is worth an ounce of gold, one would say in England it is worth £3 17s. 10/2d. All prices are thus expressed in the same denomination. The specific form which the exchange-value of commodities assumes is converted into denominations of money, by which their value is expressed. Money in turn becomes money of account. [6]
The transformation of commodities into money of account in the mind, on paper or in words takes place whenever the aspect of exchange-value becomes fixed in a particular type of wealth. [7] This transformation needs the material of gold, but only in imagination. Not a single atom of real gold is used to estimate the value of a thousand bales of cotton in terms of a certain number of ounces of gold and then to express this number of ounces in £. s. d., the names of account of the ounce. For instance, not a single ounce of gold was in circulation in Scotland before Sir Robert Peel's Bank Act of 1845, although the ounce of gold, called £3 17s. 10/2d. as the British standard of account, served as the legal standard of price. Similarly, silver serves as the standard of price in exchange of commodities between Siberia and China, although this trade is in fact merely barter. It makes no difference, therefore, to gold as money of account whether or not its standard unit or its subdivisions are actually coined. During the reign of William the Conqueror, one pound sterling, at that time a pound of pure silver, and the shilling, 1/20 of a pound, existed in England only as money of account, while the penny, 1/240 of a pound of silver, was the largest silver coin in existence. On the other hand, there are no shillings or pence in England today, although they are legal names of account for definite fractions of an ounce of gold. Money as money of account may exist only nominally, while actually existing money may be coined according to an entirely different standard. Thus in many of the English colonies in North America, the money in circulation consisted of Spanish and Portuguese coins till late in the eighteenth century, whereas the money of account was everywhere the same as in England. [8]
Because as standard of price gold is expressed by the same names of account as the prices of commodities -- for example £3 17s. 10/2d. may denote an ounce of gold just as well as a ton of iron -- these names of account are called the mint-price of gold. Thus the queer notion arose that gold is estimated in its own material and that, unlike all other commodities, its price is fixed by the State. The establishing of names of account for definite weights of gold was mistaken for the establishing of the value of these weights. [9] Gold has neither a fixed price nor any price at all, when it is a factor in the determination of prices and therefore functions as money of account. In order to have a price, in other words to be expressed in terms of a specific commodity functioning as the universal equivalent, this other commodity would have to play the same exclusive role in the process of circulation as gold. But two commodities which exclude all other commodities would exclude each other as well. Consequently, wherever silver and gold exist side by side as legal money, i.e., as measure of value, the vain attempt has always been made to treat them as one and the same substance. If one assumes hat a given labour-time is invariably materialised in the same proportion in silver and gold, then one assumes, in fact, that silver and gold are the same substance, and that silver, the less valuable metal, represents a constant fraction of gold. The history of the monetary system in England from the reign of Edward III up to the time of George II consists of a continuous series of disturbances caused by conflict between the legally established ratio between the values of gold and silver and the actual fluctuations