The Economic Doctrines of Karl Marx (1887/1903)
Written: 1887, revised in 1903. This translation is from the revised edition.
Translated: H.J. Stenning;
Published: N.C.L.C. Publishing Society LTD;
Transcribed: Ted Crawford for marxists.org, July, 2002;
Transcriber’s Note: Despite Lenin’s denunciation of Kautsky this book was considered such an excellent introduction to its subject that it was still being used as a text-book at the Lenin School in Moscow in 1931. This translation is that of 1925 republished by the NCLC in 1936.
PUBLISHER’S NOTE
KARL KAUTSKY, at the height of his powers, was one of the greatest Marxist scholars. The Economic Doctrines of Karl Marx is one of his most useful works and students of economic science will find it of considerable value.
As this edition is intended to be of particular service to students, the Publications Committee of the N.C.L.C. thinks it necessary to offer the following short notes on phrases which, if not explained, might mislead students new to the subjects.
On page 14 (line 20) appears a quotation which suggests that “the value of the world’s commodities” represents “the combined labour-power of the community.” This might be true in a. world in which the capacity of all members of society was fully used for the common benefit. It is, however, work done (labour) rather than capacity to work (labour-power) which imparts value to commodities. Our existing world allows, and indeed compels, vast quantities of labour-power to remain unused, while those who possess it spend their days in undesired unemployment. The commodities at present produced, therefore, are far fewer and less valuable than would be the case if “the combined labour-power of the community” were properly used.
In the nineteenth and twentieth lines of page 153, reference is made to “the value of his (the worker’s) labour-time.” Obviously what is meant is the value of the worker’s labour-power for the given period. The new student needs to bear in mind that what the wage-earner is normally paid for any period of labour always falls short of the value created by him in that time. Towards the end of the book (e.g., on pages 182, 188, 189, and elsewhere) the phrase “price of labour” or “price of labour-time” is used on several occasions on which, if the term “price of labour-power” had been used, it would have been easier for the student to realise the fundamental difference, in Marxian theory, between “labour” and “labour-power.”
Finally, on page 154, at line 3, our author speaks of a machine which “reproduces its value.” This phrase suggests that there is something actually creative in the machine itself, whereas the truth is that the machine can merely have its value transferred piecemeal to the commodities in the production of which it is used. It is vital for the student of Marxian economics constantly to bear in mind that human labour is the sole creator of value.
Readers of this book are recommended to consult our Outline of Economics and our Outline of Finance – see outside back cover.
N.C.L.C. Publishing Society Ltd.,
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Part I.
COMMODITIES, MONEY, CAPITAL
Chapter I. COMMODITIES
(1) The Character of Commodity Production
WHAT Marx designed to investigate in his Capital was the capitalist mode of production, which is the prevailing one to-day. He did not concern himself in his work with the laws of Nature, which form the basis of the process of producing; to investigate them is the business of mechanics and chemistry, not of political economy. On the other hand, he did not propose to investigate the forms of production which are common to all peoples, as such an investigation could, for the most part, only result in commonplaces, such as that man always needs tools, land, and food in order to be able to produce at all. Marx investigated the laws of movement of a definite form of social production which is peculiar to a definite period of time (the last few centuries) and to particular nations (European nations or nations originating from Europe – in recent times our mode of production has taken root among other nations, for example, the Japanese and the Hindoos).
This prevailing mode of production, the capitalist system, with whose peculiarities we shall become more closely acquainted, is strictly distinguished from other modes of production, for example, from the feudal system, as it existed in Europe during the Middle Ages, or from the economy of primitive communism, as it existed on the threshold of the development of all peoples.
If we survey present day society we find that its wealth consists of commodities. A commodity is a product of labour which is not produced for the personal use of the producer or of the men associated with him, but for the purpose of being exchanged with other products. Consequently it is not natural qualities but social qualities that make a product a commodity. An example will make this clear. The yarn which a girl belonging to a peasant family spins from flax, in order that it may be woven into linen to be used by the family itself, is an article of use, but not a commodity. If, however, a spinner spins flax in order to exchange the yarn with a neighbour for wheat, or if a manufacturer causes many hundredweights of flax to be spun day after day, so that he might sell the product, the latter is a commodity. It is also, of course, an article of use, or an article of use which has to perform a special social function, that is, to be exchanged. We cannot detect whether it is a commodity or not from the fact of its being yarn. Its natural form may be the same whether it is spun by a maiden in a peasant’s cottage for her trousseau, or in a factory by a factory girl who will perhaps never use a thread of it herself. It is only from the social rôle, or the social function which the yarn performs, that one can ascertain whether it is a commodity or not.
Now in capitalist society the products of labour assume to an ever increasing extent the form of commodities. If all the products of labour are not yet commodities it is because vestiges of former modes of production still inhere in the present mode. Leaving these survivals, which are quite insignificant, out of account, we may say that all the products of labour now assume the form of commodities. We cannot understand the present mode of production unless we have a clear idea of the character of commodities. We must therefore begin with an examination of the commodity.
In our opinion, this investigation will be facilitated if first of all we exhibit the typical features of commodity production in contrast to other modes of production. We shall thereby most easily reach an understanding of the standpoint from which Marx commenced his investigation of the commodity.
As far back as we can penetrate into the history of the human race, we always find that men have acquired their means of sustenance living in smaller or larger societies, that production has always borne a social character. Before his chief books were written, Marx pointed this out clearly in his articles on Wage, Labour and Capital, which appeared in the Neue Rheinische Zeitung.
“In the work of production men do not stand in relation to Nature alone. They only produce when they work together in a certain way and mutually enter upon certain relations and conditions, and it is only by means of these relations and conditions that their relation to Nature is defined, and production becomes possible.
“These social relations upon which the producers mutually enter, the terms upon which they exchange their energies and take their share in the collective act of production, will of course differ according to the character of the means of production. With the invention of firearms as implements of warfare the whole organization of the army was of necessity altered; and with the alteration in the relations through which individuals form an army, and are enabled to work together as an army, there was a simultaneous alteration in the relation of armies to one another.
“Thus with the change in the social relations by means of which individuals produce; that is, in the social relations of production, the powers of production are also transformed. The relations of production collectively form those social relations which we call a society, and a society with definite degrees of historical development, a society with an appropriate and distinctive character.”
Some examples may serve to illustrate the foregoing. Let us take the case of a primitive people existing at a low level of production, where hunting forms the chief branch of activity for procuring food, such as the Indians. In his book on The Hunting Grounds of the Great West, R.I. Dodge gives the following account of their methods of hunting:–
“As brains are only occasionally called into requisition, while the demands of the stomach are incessant, the tribe is habitually under the control of this ‘third estate.’ The power is composed of all the hunters of the tribe, who form a sort of guild, from the decisions of which, in its own peculiar province, there is no appeal. Among the Cheyennes these men are called ‘dog soldiers.’ The younger and more active chiefs are always enrolled among these ‘dog soldiers,’ but do not necessarily command. The ‘soldiers’ themselves command by viva voce determination on general matters, the details being left to the most renowned and sagacious hunters selected by them. Among these ‘dog soldiers’ are many boys who have not yet passed the initiatory ordeal as warriors. In short, this ‘guild’ comprises the whole working force of the band. It is the power which protects and supplies the women and children.
“Every year ‘the great fall hunt’ is made for the purpose of killing and curing a supply of meat for winter use. The ‘dog soldiers’ are masters now, and woe be to the unfortunate who disobeys even the slightest of their arbitrary or democratic regulations. All being ready, the best hunters are out long before the dawn of day. If several herds of buffalo are discovered, that one is selected for slaughter whose position is such that the preliminary manoeuvres of the surround and the shouts and shots of the conflict are least likely to disturb the others … During all this time the whole masculine portion of the band capable of doing execution in the coming slaughter is congregated on horseback in some adjacent ravine, out of sight of the buffalo, silent and trembling with suppressed excitement. The herd being in proper position, the leading hunters tell off the men and send them under temporary captains to designated positions. Seeing that every man is in his proper place, and all ready, the head hunter rapidly swings in a party to close the gap, gives the signal, and, with a yell that would almost wake the dead, the whole line dashes and closes on the game. In a few moments the slaughter is complete. A few may have broken through the cordon and escaped. These are not pursued if other herds are in the vicinity.
“When bows and arrows alone were used, each warrior, knowing his own arrows, had no difficulty in positively identifying the buffalo killed by him. These were his individual property entirely, except that he was assessed a certain proportion for the benefit of the widows or families which had no warrior to provide for them. If arrows of different men were found in the same dead buffalo, the ownership was decided by their position. If each arrow inflicted a mortal wound, the buffalo was divided, or not infrequently given to some widow with a family. The head hunter decided all these questions, but an appeal could be taken from his decision to the general judgment of the dog-soldiers. Since the general use of firearms has rendered impossible the identification of the dead buffalo, the Indians have become more communistic in their ideas, and the whole of the meat and skins is divided after some rule of apportionment of their own invention.” (Hunting Grounds of the Great West, R.I. Dodge, 266, 353-355.)
Be it observed that among this hunting people production is carried on socially; various types of labour cooperate in order to achieve a collective result.
We can detect here the beginnings of division of labour and systematic co-operation. The hunters perform different kinds of work, according to their differing capacities, but are based on a common plan. The result of the cooperation of the various types of labour – “the exchange of energies,” as Marx puts it in Wage Labour and Capital; the spoils of the chase – is not exchanged, but divided.
It may be pointed out in passing that an alteration in the means of production – the substitution of firearms for bows and arrows – involves a change in the mode of distribution.
Let us now turn to another and higher type of a social mode of production, for example, the Indian village community based on agriculture. Of the primitive communism which once prevailed there only a few scanty traces may now be found in India. But, according to Strabo. xv, 1, 66, Nearchus, Alexander the Great’s admiral, described countries in India where the land was common property, commonly tilled, and after the harvest the produce of the soil was divided among the villagers. According to Elphinstone, these communities were still in existence in some parts of India at the beginning of the last century. In Java village communism continued to exist in the form of a periodical re-distribution of the arable land among the villagers, who did not receive their share as private property, but merely enjoyed the usufruct thereof for a definite period. In India the arable land has mostly become the private property of the village communes. Woods, pasture land, and uncultivated land, however, are in many cases still common property, over which all the members of the community have a right of usage.
What interests us in such a village community, which has not yet succumbed to the disintegrating influence of English rule, especially of the fiscal system, is the character which the division of labour assumes therein. As we have already noted such a division of labour among the American Indians, but a much higher type is presented by the Indian village communities.
Next to the head of the community, who is called the Pateel when he consists of one person, or the Pantsch when this office is filled by a committee of five persons at the most, we find a whole series of officials in the Indian economic community: the bookkeeper, who has to supervise the financial relations of the commune to each of its members and to other communes and to the State; the Talker for the investigation of crimes and encroachments, upon whom also devolves the protection of travellers and their safe conduct over the communal boundary into the next community; the Toti, the fields patrol and surveyor, who has to see that neighbouring communes do not encroach upon the boundaries of the fields, a circumstance that can easily happen in the cultivation of rice; the water-overseer, who distributes the water from the common tanks for irrigation, and sees that they are properly opened and closed, and that every field receives sufficient water, which is of great importance in the cultivation of rice; the Brahmin, who conducts the religious services; the schoolmaster, who teaches the children to read and write; the calendar-Brahmin or astrologer, who ascertains the lucky or unlucky days for sowing, reaping, threshing, and other important labours; the smith, the carpenter, and wheelwright; the potter; the washerman; the barber; the cow herd; the doctor; the Devadaschi (the dance maidens); sometimes even a singer.
All these have to work for the whole community and its members, and are remunerated either by a share in the open fields or by a share in the produce of the harvest. Here also, with this highly developed division of labour, we find the co-operation of various types of labour and the division of the products.
Let us take an example which should be familiar to every body: that of a patriarchal peasant family, which satisfies its own needs, a social structure which has developed out of a mode of production such as we have just described in the Indian communal economy, a mode of production which may be detected on the threshold of the development of all civilised peoples with whom we are familiar.
Such a peasant family likewise does not reveal isolated persons, but is a type of social organism based on the cooperation of various kinds of labour, which vary in accordance with age, sex, and season. Ploughing and sowing are carried on, the cattle are tended and milked, wood is collected, cut up and carpentered, wool is spun, woven, and knitted. The various types of labour co-operate and dovetail into each other; no more than in the previous example are the products here exchanged by the individual workers, but they are divided amongst them in accordance with the conditions.
Let us now [1] assume that the means of production of an agricultural community, such as we have described, are perfected to such an extent that less labour than formerly is devoted to agriculture.
Labour-power is set free, which, provided the technical means are sufficiently developed, will perhaps be devoted to exploiting a deposit of flint situated in the communal territory, and making flint tools and weapons. The productivity of labour is so great that far more tools and weapons are made than the community needs.
A tribe of nomadic shepherds in the course of its wanderings comes into contact with this community. The productivity of labour has also increased so far as this tribe is concerned, which has reached the point of rearing more cattle than it needs. It is obvious that this tribe will gladly exchange its superfluity of cattle for the superfluous tools and weapons of the agricultural community. Through this act of exchange the superfluous cattle and the superfluous tools become commodities.
The exchange of commodities is the natural consequence of the development of the productive forces beyond the limited needs of the primitive communities. The original communism becomes a fetter upon the progress of technical development when the latter has reached a certain level. The mode of production demands a widening of the circle of social labour; as, however, the separate communities are independent of, and even hostile towards, each other, this widening is not possible through the extension of systematic communistic labour, but only through the mutual exchange of the superfluous goods produced by the labour of the communities.
It is no part of our purpose to investigate how the exchange of commodities reacted upon the mode of production within the community, until commodity production became production carried on by private individuals working independently of each other, and owning the means of production and the products of their labour as private property. What we design to make clear is that commodity production is a social type of production; that it is inconceivable without social co-operation; and that it even signifies an extension of social production beyond the limits of the communistic system (embodied in the tribe, the community, or the patriarchal family) which preceded it. But the social character of production was only implicit in the latter system.
Let us take a potter and a cultivator, considering them first as members of an Indian communistic village community, and secondly as two commodity producers. In the first case, they both work in the same manner for the community; one hands over his pots, the other the fruits of his labour in the fields; one receives his share of the fruits of the field, the other his share of pots. In the second case, each carries on private work independently for himself, but each works (perhaps to the same extent as before) not only for himself, but also for others. Then they exchange their products, and it is probable that one receives the same quantity of cereals and the other as many pots as formerly. It seems that nothing has been altered in essentials, and yet the two processes are fundamentally different.
In the first case, it is obvious that society is the force which brings the various types of labour into connection, which causes one to work far the others, and directly assigns to each his share in the product of the labour of others. In the second case, each person apparently works for himself, and the manner in which he obtains the product of others does not seem to be attributable to the social character of their labour, but to the peculiarities of the product itself. It does not now seem that the potter and the cultivator work for each other, and that consequently pottery work and cultivation are necessary for civilisation, but that certain mystical qualities inhere in the pots and the field produce which bring about their exchange in certain proportions. The relation between persons, which determines the social character of labour, assumes the appearance of a relation between things, viz.: products, under the system of commodity production. So long as production was directly socialised, it was subject to the decisions and direction of society, and the relations of producers to each other were manifest.
As soon, however, as various kinds of work were carried on by individuals independently of each other, as soon, therefore, as production became planless, the relations of producers to each other appeared as the relations of products. Henceforth the determination of the relations of producers to each other no longer rested with themselves; these relations developed independently of the wills of men; the social powers grew over their heads. To the simple intelligences of past centuries they seemed to be divine powers, and to later enlightened centuries they seemed to be the powers of Nature.
The natural forms of commodities are now invested with qualities which seem to be mystical, in so far as they cannot be explained from the relations of producers to each other. Just as the fetish worshipper ascribed to his fetish qualities which had no existence in its natural constitution, so to bourgeois economy the community seems a sensuous thing endowed with supersensuous qualities. Marx calls this “the fetishism attaching to labour products when they present themselves as commodities – a fetishism which is inseparable from the mode of production.”
Marx was the first to detect the fetishistic character of commodities, and, as we shall see later on, of capital also. It is this fetishism which makes it difficult to perceive the peculiarities of the commodity, and, until its importance has been properly appreciated, it is impossible to reach a clear understanding of commodity-value. The chapter in Capital entitled The Fetishism of Commodities and the Secret thereof seems to us one of the most important in the book, to which every student ought to pay special attention. It is precisely this chapter which has been most neglected by the opponents, and even by the supporters, of the Marxian doctrines.
(2) Value
Once we are clear about the fetishistic character of the commodity, its investigation will present relatively few difficulties.
As we have seen, the primary object of the commodity is to be exchanged. Its exchangeability, however, depends upon its being able to satisfy a human need, whether it be a real or an imaginary one. Nobody would exchange his product for another product if the latter were useless to him. A commodity must therefore be a useful thing; it must possess use-value. Its use-value is determined by its physical properties. Use-values form the material content of wealth, whatever its social form may be. Moreover, use-value is not a quality which is peculiar to the commodity. There are use-values which are not commodities at all, as, for example, the products of a communistic society, as we have seen above. There are even use-values which are not the products of value, as fruit in the primeval forest or running water. On the other hand, there is no commodity which does not possess use-value.
As soon as use-values become commodities, that is, are exchanged with each other, it is observed that this act of exchange always takes place in certain proportions. The proportion in which a commodity exchanges with another is called its exchange-value. This proportion may vary according to time and place, but it remains a constant magnitude for a definite period and at a particular place. If we exchange 20 yards of linen for one coat, and at the same time 20 yards of linen for 40 lbs. of coffee, we may be sure that one coat would also exchange for 40 lbs. of coffee. The exchange-value of the coat wears quite a different aspect when exchanged for linen than when exchanged for coffee. But however different the exchange-value of a commodity may appear, the same content underlies it at a definite period and in a particular place. An example from physics will serve to elucidate this social phenomenon. If we say that a body weighs 16 kilograms, or 32 lbs., or one Russian pud, we know that these expressions relate to the specific gravity of the body. In the same way, a specific content underlies the various expressions of the exchange-value of the commodity, and this we call its value.
We have now reached the most important fundamental category of political economy, without a knowledge of which the operation of the prevailing mode of production cannot be properly understood.
What constitutes the value of a commodity? This is the question to be answered.
Let us take two commodities, for example, wheat and iron. Whatever their exchange relation may be, it can always be represented by a mathematical equation, for example, 1 bushel of wheat = 2 cwts. of iron. But, as we shall remember from our school days, mathematical operations can only be carried on with equivalent magnitudes. For instance, we can subtract 2 apples from 10 apples, but not 2 nuts. Thorn must consequently be some common property in wheat and iron which renders it possible to equate them, and it is that which is their value.
Now is this common property a natural attribute of the commodities?
As use-values they are only exchanged because they have different, not similar or common, natural qualities. These qualities constitute the motive for the exchange, but they cannot determine the proportions in which it takes place.
If we take away from commodities their use-value, only one quality remains to them, that of being products of labour. But if we abstract from products their use-value, we also abstract the particular kinds of labour which have created them: they are no longer the products of the carpenter’s or the spinner’s labour, etc., but are only products of human labour in general. And as such they are values.
Therefore a commodity possesses value only because homogeneous or general human labour is embodied in it. How then is the magnitude of its value to be measured? By the quantity of value-forming material, or labour, contained in it. Now the quantity of labour is measured by time.
It might seem that if the value of a commodity is determined by the time expended upon its production, the idler and more unskilful a man is the more valuable his commodity would be. But the labour we are concerned with here is not individual, but social, labour.
Let us remember that commodity production represents a system of various kinds of labour which, although independent of each other, are carried on in a social connection. “The combined labour-power of the community, represented by the value of the world’s commodities, counts here as one homogeneous human labour-power, although it consists of the labour-power of innumerable individuals. The labour-power of any of these individuals is the same as that of any other of them, in so much as it bears the character and has the effect of a social average labour-power, and consequently in the production of a commodity only the average labour-time commonly required for that production is consumed. Socially necessary labour-time is the labour-time requisite for the production of a given use-value under existing normal conditions of production, and with the average degree of skill and intensity of labour.” If the productivity of labour changes, it involves an alteration in the socially necessary labour-time, and consequently in value.
The time necessary to produce a curtain product must of course be of interest to man under every mode of production. Even under a communistic mode of production, it must exercise an influence upon the degrees in which the various types of labour co-operate.
Let us again take the example of an Indian communistic village community. It employs two smiths for the manufacture of agricultural implements. An invention raises the productivity of labour to such an extent that only one smith is needed to manufacture the required agricultural implements within a given time. Two smiths are no longer entrusted with this work, but only one; the second smith is perhaps employed in the forging of weapons or the making of ornaments. On the other hand, the productivity of field labour remains the same. As much labour-time as formerly must be expended in order to satisfy the requirements of the community upon the same scale.
Under these circumstances, every member of the community receives the same share of foodstuffs as before, but a distinction now arises. The productivity of the smith’s labour has doubled; only one share of foodstuffs, instead of two, is now assigned for the manufacture of agricultural implements. The change in the relation between the various types of labour is here a very simple and transparent one. It assumes a mystic character as soon as smith’s labour and field labour cease to co-operate directly and are only brought into relation with each other through their products. The change in the productivity of smith’s labour then appears as a change in the exchange-relation of the product of smith’s labour with other products, as an alteration in its value.
Ricardo recognised that the magnitude of the value of a commodity was determined by the quantity of labour expended upon its production. He did not, however, perceive the social character of the value that is concealed in the value-form of the commodity, that is, the fetishism of the commodity. Nor did he distinguish clearly between that side of labour which forms the exchange-value of a commodity, and that side which forms its use-value.
We have already described the fetishistic character of the commodity. Let us now follow Marx in his investigation of the duplex character of the labour embodied in the commodity.
The commodity appears to us both as a use-value and as value. Its material composition is furnished by Nature. Its value is formed by labour, but so is its use-value. Now in what manner does labour form value, and in what manner does it form use-value?
On the one hand, labour appears to us as the productive expenditure of human labour-power in general; on the other hand, as specific human activity for the attainment of a given object. The first aspect of labour forms the common element in all the productive activities carried on by men. The second side varies with the nature of the activity. In the case of smith’s labour and field labour, the element common to both is that they represent the expenditure of human labour-power in general. But each of them differs as regards purpose, mode of operation, subject, instruments, and result.
The specific variety of human activity which aims at a definite end forms the use-value. In its manifold variety, it forms the basis of commodity production. Commodities are only exchanged because they are different. Nobody would exchange wheat for wheat or hemp for hemp, but wheat would be exchanged for hemp. Use-values can only be brought into juxtaposition as commodities when they embody qualitatively different kinds of useful labour.
As values, however, commodities differ not qualitatively, but quantitatively. They are exchanged because they differ from each other as use-values. In the act of exchange they are compared and put in a certain ratio with each other because as values they are equal. Value cannot be formed by labour as a definite and appropriate kind of activity, in its qualitative aspect; it can only be formed by labour of an equal character in all branches of activity, as the expenditure of human labour-power in general. Regarded as expenditures of labour-power, the various kinds of labour differ, not qualitatively, but quantitatively, just as values do. From the standpoint of the formation of value, every kind of labour is regarded as simple, average labour, as the expenditure of mere labour-power, by an average man under normal conditions. In this connection skilled labour only counts as a multiple of simple labour. A small quantity of skilled labour is equated with a larger quantity of simple labour. In accordance with the character of commodity production, this process, which fixes the relations of the various kinds of labour, reducing each of them to simple labour, to each other, is a social, but at the same time an unconscious, process. It seems, however, to those who are under the spell of the fetishism of the world of commodities that it is not social, but natural causes which present the various kinds of skilled labour as multiples of simple labour. A number of academic socialists, who desired to “constitute” value, that is to fix it once for all, have attempted to discover these alleged natural causes, and to fix the quantity of value created by every unit of labour (cf. Rodbertus’ Normal Working Day). In reality these causes are social, and are subject to continuous alteration.
There are few provinces of investigation which reveal so many erroneous conceptions as that of value. A number were indicated by Marx himself, in particular an error which is often made by supporters as well as by opponents of the Marxian doctrines: the confusing of value with wealth. The sentence is very often put into Marx’s mouth that labour is the source of all wealth. Readers who have followed the foregoing exposition will easily perceive that this is in flat contradiction to the basis of the Marxian ideas, and presupposes entanglement in the fetishism of the commodity world. Value is a historical category, which is valid only for the period of commodity production; it is a social relation. Wealth, on the other hand, is something material, and consists of use-values. Wealth is produced under all modes of production; there is a form of wealth which is only supplied by Nature, and in which no labour is contained at all; there is no form of wealth, however, which comes into existence through the agency of human labour alone. “Labour is not the only source of the material wealth resulting from the use-values it produces,” said Marx. “Labour is its father, as William Petty says, and the earth is its mother.”
Other things being equal, an increase in the productivity of labour is accompanied by an increase in the material wealth of a country; and vice verse. The total of the existing values may at the same time remain unchanged, provided the quantity of labour expended be the same. A favourable harvest increases the wealth of a country, but the total of commodity values represented by this harvest would be the same as in the previous year if the amount of socially-necessary labour expended remained unaltered.
If Marx did not say that labour is the source of all wealth; if this sentence is based upon the confusion of exchange-value with commodity-value, then the various conclusions that have been fastened on to Marx in connection with this sentence fall to the ground. It may now be seen with what little justification many of Marx’s opponents have reproached him with overlooking the part played by Nature in production. Indeed, these opponents have overlooked something themselves, namely, the distinction between the body of the commodity and the social relation which it represents:–
“To what extent some economists are misled by the fetishism inherent in commodities, or by the objective appearance of the social characteristics of labour, is shown, amongst other ways, by the dull and tedious quarrel over the part played by Nature in the formation of exchange value. Since exchange value is a definite social manner of expressing the amount of labour bestowed upon an object, Nature has no more to do with it than it has in fixing the course of exchange.”
Marx has not therefore “overlooked” the part of Nature in the production of use-values. If he rules it out of account in the determination of value, it is not out of forgetfulness, but owing to the possession of an insight into the social character of commodity production which is denied those economists who deduce the laws of society from a condition of unsociality, from men considered in isolation.
Another error which is fairly common in connection with the Marxian theory of value consists in confusing the value-forming property of labour with the value of labour-power. These two conceptions must be kept strictly apart from each other. Labour considered as the source of value can no more have a value than gravity can have weight or warmth a temperature. So far we have only been dealing with the value which is formed by simple or skilled labour, and not with the value which labour-power possesses and which finds expression in the wage of the worker who is the embodiment of labour-power.
So far we have been presupposing simple commodity production and simple commodity exchange, and labour-power as a commodity does not yet exist for us.
With respect to human labour-power and its value we shall deal more fully later on. At this stage our purpose is to indicate an error.
Where they do not contradict assertions that Marx never made or merely consist of terms of reproach, such as the favourite one of Marxian dogmatism, most of the objections to the Marxian theory of value are based on such errors.
Such errors can only be guarded against by keeping steadily in mind the character of such a law as the law of value is.
Every natural-scientific or social law is an attempt to explain the processes of Nature or of society. But hardly any one of these processes is determined by a single cause. The most varied and complicated causes underlie the most varied processes, and these processes themselves do not operate independently of each other, but intersect each other in the most various directions.
The investigator of ramifications in society and in Nature has therefore a two-fold task. First of all he must separate the various processes from each other: isolate them. Secondly, he must separate the causes which underlie these processes, the essential from the inessential, the regular from the accidental. Both kinds of investigation are only possible through abstraction. The scientific investigator is assisted in his labours by a series of infinitely perfected instruments and methods of observation and experiment. The investigator of social laws is obliged to forego the latter, and with respect to the former, he must content himself with very imperfect expedients.
By means of abstraction, the investigator is enabled to perceive the law which underlies the phenomena which he designs to explain. Without a knowledge of this law, the phenomena in question cannot be explained; but the knowledge of one law alone never suffices to explain these phenomena fully. One cause may be weakened by another, and even completely neutralised in its effect. It would, however, be wrong to infer from such a case that the cause did not exist at all. The law of gravity is valid, for example, in a vacuum, where a piece of lead and a feather fall with equal rapidity to the ground. In an air-filled space the result is quite different, on account of the resistance of the atmosphere. Yet the law of gravity is not thereby impugned.
So it is with the case of value. When commodity production had become the prevailing mode of production, the persons engaged therein must have been struck by the regular character of commodity prices, and prompted to try to investigate the causes which underlay them. The investigation of commodity prices led to the determination of the magnitude of value.
But the value of a commodity is the sole cause of its price just as little as gravity is the sole determining cause of the phenomena of gravitation. Marx himself points out that there are commodities whose prices may remain below their value, not only temporarily, but constantly. Thus, for example, gold and diamonds are probably never sold at their full value. And, under curtain circumstances, the commodity labour-power may be sold below its value.
Marx has even shown that in the capitalist mode of production the law of value is so affected by the influence of profit that the prices of most commodities are inevitably either above or below their value. Nevertheless, the law of value still remains operative, as these deviations of price from value can only be explained with the assistance of the law of value. At this juncture we can only mention this fact without pausing to discuss it more fully. Its understanding requires a knowledge of the law of capital and of profit, and we shall return to this subject later.
A great number of the objections to the Marxian theory of value are based upon the confusion of value with price. Both conceptions must be kept strictly apart. But, as already pointed out, one must not be blinded by the fetishistic character of the commodity, nor mistake the social relations which find expression in the body of the commodity for its natural qualities.
If the student never loses sight of the fact that commodity production is a type of social production, in which individual businesses produce for each other, although not with each other, and that the value of commodities is not a relation of things, but represents a relation of men to each other concealed in a material shell, he will know how to interpret the sentence that forms the basis of Marx’s analysis of the capitalist system:
“It is thus only the quantity of socially necessary labour, or the socially necessary time of labour for the production of a use-value which regulates the magnitude of its value.”
(3) Exchange Value
The magnitude of value of a commodity is determined by the labour-time socially necessary for its production. But the magnitude of value is not expressed in this manner. Ono does not say: “This coat is worth forty labour-hours,” but: “It is worth as much as 20 yards of linen or 10 grammes of gold.”
So far the coat, regarded by itself, is not even a commodity; it becomes such only if I resolve to exchange it. Consequently, the value of a commodity does not become manifest unless I compare it with that of another commodity, with which I purpose to exchange the former. The magnitude of value of a commodity is indeed determined by the labour socially necessary for its production; but it is expressed through its relation to the magnitudes of value of one or several other commodities, through its exchange relation. Bourgeois political economy often assumes that it is the exchange relation of a commodity which determines its magnitude of value.
An example will expose the absurdity of this notion. Let us take a sugar loaf. Its weight is already given, but I can only express it through comparison with the weight of another body, for example, iron. I place the sugar loaf in a scale, and in the other a corresponding number of pieces of iron, each being of a specific weight, which we will call a pound. The number of pieces of iron apprises us of the weight of the sugar; but it would be stupid to try to make out that the sugar weighed 10 lbs., for instance, because I had placed ten pound-weights in the other scale. I had rather to place ten of such weights in the scale because the sugar weighed 10 lbs.
This clearly shows how the matter stands. But the position is the same with regard to the magnitude of value and the form of value.
The expression for the weight of a body offers many similarities with the value-expression of a commodity, that is, the form in which we express the magnitude of its value. A sugar loaf weighs 10 lbs., which means, strictly speaking, if we carry our example further, that a sugar loaf is as heavy as the ten particular lumps of iron; similarly we may say of a coat that it is worth as much as, for example, 20 yards of linen.
We could not place iron and sugar, as bodies in a certain relation to each other if a natural quality were not common to them both: weight; nor would we be able to bring coat and linen, as commodities, in a relation to each other if they did not possess a common social attribute: that of being the products of general human labour, or values.
In the first equation iron and sugar play two different parts: a sugar loaf is as heavy as 10 lbs. of iron. Here the sugar appears as sugar, the iron does not appear as iron, but as the embodiment of weight, as its phenomenal form. In this equation we do not abstract the specific material qualities of sugar, but we do abstract those of iron.
A similar phenomenon is presented by the equation one coat = 20 yards of linen.
Both the coat and the linen are commodities, and therefore use-values and values. But in the value-form, in the exchange-relation, the coat appears here only as a use-value, while the linen appears as the phenomenal form of value.
I can weigh the sugar not only with iron weights, but also with brass or load weights, etc. And I can express the value of the coat not only in linen, but also in any other commodity. In the equation one coat = 20 yards of linen, I therefore abstract altogether the specific natural form of the linen, which in this relation counts only as value, as the embodiment of general human labour. The linen is the phenomenal form of the value of the coat in contradistinction to the substance of the coat. The contrast between use-value and commodity-value which is inherent in the coat, as in every other commodity, is reflected in the expression of value, within which its bodily form as coat only figures as a type of use-value, while the bodily form of the commodity linen only figures as a type of the commodity world, as the value-form.
Nevertheless, the use-value of the commodity in which the value of the other commodity is expressed – Marx calls it the equivalent – is not a matter of indifference. The two commodities must be different. The equation 1 coat = 1 coat is meaningless.
I can express the value of the coat not only in linen, but in any other commodity of a different nature.
And I can also reverse the equation and express the value of the linen, as well as that of any other commodity, in the coat.
I can formulate the equation
| 1 coat | = | 20 yards of linen, 10 lbs. of tea, 40 lbs. of coffee, 10 cwts. of iron, 2 bushels of corn, etc. |
I may also reverse it and say:
| 20 yards of linen 10 lbs. of tea 40 lbs. of coffee 10 cwts: of iron 2 bushels of corn, etc. | = | 1 coat, |
Both equations seem to say the same thing, but they say the same thing regarded merely as mathematical equations; as different forms of the expression of value, however, they have a logically and historically different signification.
In the beginnings of commodity production, products were exchanged only here and there, occasionally and accidentally.
This period may be designated by an elementary value-equation, in which one commodity is only placed alongside another in a certain ratio, for example, 1 bronze hammer = 20 lbs. of rock-salt; this form Marx calls the elementary or the accidental value form. So soon, however, as a labour product, for example, cattle, is exchanged with other labour products, no longer by way of exception, but as a matter of course, the expression of value assumes the form of the first of the two above-mentioned equations, as, for example:
| 2 mantles, 1 sword, 1 cow 10 sandals, 3 goblets, etc. | = | 1 girdle, |
This form of value, instances of which may be found in Homer, Marx calls the total or expanded form of value.
But commodity production develops still further. The number of labour products which are fabricated for exchange, and therefore as commodities, grows, and the habitual act of exchange embraces an ever greater number of the most varied commodities. Not only cattle, but swords, girdles, goblets, etc., are now exchanged as a normal social act. The most practicable of these commodities, cattle for example, is that in which the values of commodities are most frequently expressed, and eventually it becomes the sole commodity used for this purpose. Then the point is reached at which the second of the above-mentioned formula, the general form of value, comes into operation.
Let us now consider more closely the equivalent form in this equation. As we have already seen, the equivalent form appears as the embodiment of human labour in general. But in the previous form of expression it was only accidentally and temporarily that a commodity played this part. In the equation 1 coat = 20 yards of linen, the linen at any rate figures only as the phenomenal form of value. But if 20 yards of linen is equated with 1 bushel of corn, or again with 1 coat, it is now corn or coat which appears as the embodiment of general human labour, while the linen figures again as use-value. The case is otherwise with the general form of value. Now only a single commodity serves as the equivalent. Like all other commodities, it is use-value and commodity-value both before and after. But all the other commodities now appear to confront it only as use-values, while it itself figures as the general and sole phenomenal form of value, as the general social embodiment of abstract human labour. It is now itself the commodity with which all the other commodities are directly exchangeable, and which therefore everybody accepts. On the other hand, all the other commodities thereby lose the capacity and possibility of being directly exchangeable with each other. Each exchange of a pair of commodities can only be effected through the medium of the general equivalent, in which the values of all other commodities are reflected.
(4) The Exchange of Commodities
In order that an exchange of commodities may be effected, two conditions must be fulfilled: (1) The products to be exchanged must be use-values for those who do not own them, and non-use-values for their owners; (2) The exchangers must mutually recognise each other as the owners of the commodities to be exchanged. The juridical relations of private property are only the reflexion of the relation of the wills of the exchanging persons, which are determined by the economic relations. Men do not begin to exchange commodities because they mutually regard each other as the owners of alienable things, but they began mutually to recognise each other as owners because they chanced to exchange commodities with each other.
The earliest form in which a labour product becomes a non-use-value for its owner, and therefore the first form of the commodity, is that of a superfluity of labour products above the needs of their owner. The products are not yet destined for exchange as a matter of course, but are produced for self-consumption. They only become commodities through exchange.
As regards the second point, the mutual recognition by the owners of alienable things as their private property, this is only possible where independent persons confront each other.
“But such a state of reciprocal independence has no existence in a primitive society based on property in common, whether such a society takes the form of a patriarchal family, an ancient Indian community, or a Peruvian Inca State. The exchange of commodities, therefore, first begins on the boundaries of such communities, at their points of contact with other similar communities or with members of the latter. So soon, however, as products once become commodities, they also, by reaction (in time) become so in its internal intercourse.”
In the beginnings of exchange, the magnitude of value and the form of value are very little developed. The ratio of the magnitudes or quantities in which products exchange is at first an accidental and extremely fluctuating one. But the exchange of products becomes more and more a normal social act. The practice gradually creeps in of not merely exchanging the use-values that are superfluous to the producer’s own needs, but of producing use-values for the sole purpose of exchange. Consequently the ratio in which they are exchanged becomes increasingly dependent upon their conditions of production. The magnitude of value of a commodity begins to be a magnitude which is determined by the labour-time necessary for its production.
So soon, however, as labour products are produced solely for the purpose of being exchanged, the contrast between use-value and value latent in the commodity nature is bound to become manifest.
This contrast which is potential in every commodity finds its expression, as we know, in the form of value. In the expression 20 yards of linen = 1 coat, the linen itself tells us that it is use-value (linen) and value (coat equivalent). But in the elementary form of value, it is still difficult to fix this antagonism, as the commodity which here serves as the embodiment of general human labour assumes this rôle only temporarily. In the expanded form of value the antagonism distinctly reveals itself, as now several commodities serve or are able to serve as the equivalent, because they possess the common property of being labour products or values.
But the more the exchange of commodities develops, the more labour products become commodities, the more necessary a general equivalent becomes. In the beginnings of exchange, each person directly exchanges what he does not need for what he does need. This becomes increasingly difficult in the degree that commodity production becomes the general form of social production.
Let us assume, for instance, that commodity production is already so far developed that tailoring, bakery, butchery, and carpentering, form independent businesses. The tailor alienates a coat to the carpenter. For the tailor the coat is a non-use-value, for the carpenter a use-value. But the tailor does not want any more carpenter’s products, as he has furniture enough. The tables and chairs are non-use-values for the carpenter, and also for the tailor. On the other hand, the tailor needs bread from the baker and meat from the butcher, for the times are past when he baked at home and fattened pigs. The meat and bread which the tailor needs are non-use-values for the butcher and baker, who, however, require no coat at the moment. The tailor is therefore in danger of starving, although he has found a customer for his coat. What he requires is a commodity which serves as general equivalent, which, as the direct embodiment of value, has use-value for every body as a matter of course.
The same development that renders this equivalent necessary also brings it into existence. So soon as the various commodity owners exchange various articles with each other, it is inevitable that several of the latter are compared as values with a common type of commodity, and that therefore they find a common equivalent. At first a commodity serves in this capacity only temporarily and accidentally. So soon, however, as it is advantageous that a particular commodity should assume the general equivalent form, the connection of the equivalent form with this commodity is bound to become ever closer. The type of commodity to which the general equivalent form will cling is determined by various circumstances. Eventually it was the precious metals which achieved the monopoly of serving as the general equivalent form, and which became money. Partly this may have been due to the fact that from the earliest times ornaments and ornamental material were important articles of exchange, but the factor that was decisive in this connection was that the natural properties of gold and silver corresponded to the social functions which a general equivalent has to fulfil. Here we need only refer to the two facts that the precious metals are always of the same quality and deteriorate neither in air nor in water, being therefore practically unalterable, and that they are divisible at will and capable of being re-united. Consequently they are very suitable for the embodiment of indistinguishable, general human labour, for the representation of magnitudes of value which differ in respect of number (quantitatively) and not in respect of qualities (qualitatively).
Gold and silver could only secure the monopoly of serving as general equivalent because they confronted the other commodities as commodities. They could only become money because they wore commodities. Money is neither the invention of one or several men, nor is it a more token of value. The value of money and its specific social functions are not arbitrary creations. The precious metals became the money commodity through the part they played as commodities in the exchange process.
Note
1. A whole series of facts proves that the first stages in the development of commodity production actually proceeded upon similar lines to those we proceed to describe. Of course matters did not proceed so simply as is here indicated, but the object of our exposition is not to write the history of commodity production, but only to indicate its spatial peculiarities, which can be most easily recognised in contrast with other modes of production.
Chapter II.
MONEY
(1) Price
THE first function of money consists in serving as a measure of value, and providing the world of commodities with the material wherein value is expressed.
It is not through the medium of money that commodities become similar and comparable. It is because, as values, they are materialised human labour, and to that extent are similar, that they can be commonly measured in the same specific commodity, which they thereby transform into their common measure of value or into money. Money as the measure of value is the necessary phenomenal form of the measure of value inherent in commodities, viz., labour-time.
The expression of value of a commodity in the money commodity is its money form or its price. For instance 1 coat = 10 grammes of gold.
The price of the commodity is something quite distinct from its natural properties. It cannot be seen or felt in the commodity. The commodity owner must convey this information to the purchaser. But in order to express the value of a commodity in the gold commodity, that is to fix its price, real gold is not necessary. The tailor need have no gold in his pocket to be able to explain that the price of the coat which he offers amounts to 10 grammes of gold. Consequently, in measuring value, only imaginary money is used.
Nevertheless, price depends upon the actual money commodity. Apart from all disturbing incidental circumstances, the tailor may fix the price of his coat at 10 grammes of gold, if as much socially necessary labour is embodied in such a quantity of gold as in the coat. If the tailor expresses the value of his coat, not in gold, but in silver or copper, the price expression will be different.
Where two different commodities function as the measure of value, for example, gold and silver, all commodities possess two different price expressions, gold and silver prices. Every change in the value-relation of gold to silver causes price disturbances. The duplication of the measure of value is in fact an absurdity, a contradiction of the function of money as the measure of value. Whenever efforts have been made legally to fix two commodities as measures of value, it has always been one which has in fact functioned as the measure of value.
In several countries gold and silver have been legally prescribed as co-existing measures of value. But experience has always shown this legislation to be absurd. Like every other commodity, gold and silver are exposed to constant fluctuations in value; if both are placed on an equal footing by the law, if payment may be made in one or the other metal according to choice, payment would be made in the metal whose value was falling, and the metal whose value was rising would be sold where it could be sold advantageously, abroad. In countries where the double currency prevails, the so-called Bimetallism, only one of the money commodities functions in reality as the measure of value, and that is the one whose value is falling. The other, whose value is rising, measures its price, like any other commodity, in the over-estimated metal and functions as a commodity, not as a measure of value. The greater the discrepancies in the value relation between gold and silver, the more clearly the absurdity of Bimetallism comes to light.
For the sake of simplicity, Marx, in Capital, assumes gold to be the only money commodity. As a matter of fact, gold tends to become the money commodity in all capitalist countries. [1]
In the price expression each commodity is imagined as a specific quantity of gold. It is, of course, necessary to measure with each other the various quantities of gold which represent the various prices, to establish a standard of price. The metals possess such a natural standard in their weights. The weight names of the metal, pound, livre (in France), talent (in ancient Greece), ala (among the Romans), etc., consequently form the original names of the units of the standard of price.
By the side of its function as the measure of value, we shall now become acquainted with a second function of money: that of being a standard of price. As a measure of value, money transforms the values of commodities into certain imaginary quantities of gold. As a standard of price it measures the various quantities of gold with a certain quantity of gold which is accepted as a unit, for example a pound of gold.
The distinction between the measure of value and the standard of price is clear, when we observe the effect produced on each by an alteration in value.
Let us assume that the unit of measure of the standard of price is 10 grammes of gold. Whatever the value of gold may now be, 20 grammes of gold will always be worth twice as much as 10 grammes. A rise or fall in the value of gold has therefore no effect upon the standard of price.
Let us, however, assume that gold is the measure of values. But the value of gold fluctuates; one day it may happen that twice as much gold as previously will be produced in the same socially-necessary labour-time. In the productivity of tailoring, however, no alteration has taken place. What happens? The price of a coat now amounts to 20 grammes of gold. The change in the value of gold therefore expresses itself perceptibly in so far as it functions as the measure of value.
The standard of price may be arbitrarily fixed, just like, for example, the measurement of length. On the other hand, this standard requires general validity. In the first place it is conventional and given by the traditional weight divisions. Eventually it is fixed by law. The various aliquot parts of the precious metal receive official baptismal names which differ from their weights. Prices are now not expressed in gold weights, but in the legally valid reckoning names of the gold standard.
Price is the money-name of the magnitude of value of a commodity. But at the same time it is the expression of the exchange-ratio of the commodity with the money-commodity, with gold. The value of a commodity can never become manifest as an isolated phenomenon, for itself alone, but always only in the exchange-ratio with another commodity. This ratio, however, is subject to the influence of other circumstances than the magnitude of value alone, and this fact provides the opportunity for a deviation of price from the magnitude of value.
If the tailor says that the price of his coat is 10 grammes of gold, or 30s., he means that he is prepared at any time to yield up his coat for 10 grammes of gold. But he would be very premature if he intended to convey that everybody was immediately willing to give him 10 grammes of gold for his coat. The transformation of the coat into gold is indeed essential if it is to fulfil its purpose as a Commodity. The commodity pants for money; prices are the ardent love shafts aimed at the glittering cavalier. But the course of love runs differently in the commodity market from what it does in novels. They do not always reciprocate. The wooing gold passes by many commodities, who are obliged to lead a joyless existence in shop windows.
Let us look at the adventure of the commodity in its intercourse with gold somewhat more closely.
(2) Buying and Selling
Let us accompany our old acquaintance the tailor to the market. He exchanges the coat he has made for 30s. With this sum he buys a bottle of wine. Here we have two diametrically opposed transformations: first the conversion of commodity into money; then the re-conversion of money into commodity. But the commodity at the end of the whole process is a different commodity from that at the commencement thereof. The former was a non-use-value for its owner, the latter is a use-value for him. The usefulness of the former to him consisted in its property as a value, as the product of general human labour; in its exchangeability with another product of general human labour, with gold. The usefulness of the other commodity, the wine, consists for him in its material properties, not as the product of general human labour, but of a definite form of labour, of vintage, etc.
The form of the elementary circulation of commodities runs: Commodity–Money–Commodity; that is, to sell in order to buy.
Of the two metamorphoses, Commodity–Money and Money–Commodity, the first is, as we know, the most difficult. It is no trouble to buy when one has money, but it is incomparably more difficult to sell in order to obtain money. And money is necessary to every commodity owner under a system of commodity production. The more the social division of labour is developed, the more one-sided are its operations, the more manifold its needs become.
If the commodity is to effect its salto mortale, its conversion into money, it is above all things necessary that it is a use-value, that it satisfies a need. If this be the case, if it succeeds in converting itself into money, the first question that arises is how much money?
This question does not concern us very much for the moment. Its answer belongs to the analysis of the laws of prices. What interests us here is the metamorphosis Commodity-Money, irrespective of whether a gain or loss in magnitude of value is thereby involved.
The tailor parts with his coat and receives money therefor. Let us assume that he sells it to a countryman. What is a sale on the part of the tailor is a purchase on the part of the countryman. Every sale is a purchase and vice versa. Where, however, does the countryman’s money come from? He received it in exchange for corn. If we follow the track of the money commodity, the gold, from its source of production at the mines, passing from one commodity owner to another, we find that each of its changes of ownership has been the result of a sale.
The metamorphosis Coat–Money, forms, as we have seen, not one but two metamorphoses. The one is: Coat–Money–Wine. The other: Corn–Money–Coat. The beginning of the metamorphosis of one commodity is at the same time the close of the metamorphosis of another commodity, and vice versa.
Let us assume that the vintner buys a kettle and coals with the 30s. which he received for his wine. Then the metamorphosis, Money–Wine, is the last link in the series Coat–Money–Wine, and the first of two other series Wine–Money–Coal and Wine–Money–Kettle. Each of these metamorphoses forms a circuit, Commodity–Money–Commodity. It begins and ends with the commodity form. But every circuit of a commodity intersects the circuits of other commodities. The whole movement of these innumerable intersecting circuits forms the circulation of commodities.
The circulation of commodities is essentially different from the direct exchange of commodities or barter. The latter is brought about by the growth of the productive forces beyond the limits of primitive communism. Through the exchange of products the system of social labour is extended beyond the boundaries of a community, the effect being that various communities and the members of various communities work for each other. But the simple exchange of products on its part formed a further obstacle, as the productive forces were continually developing, and this obstacle was overcome by the circulation of commodities.
The simple exchange of products necessitates that I should take the product of the person who takes my product at the same time. This obstacle is removed in the circulation of commodities. Every sale is indeed at the time a purchase; the coat cannot be sold by the tailor unless it is bought by another, by the countryman. But it is not in the least necessary that the tailor should buy something else immediately. He may put the money in his purse and wait until it suits him to buy something. Nor is he at all obliged now or later to buy something from the countryman who bought the coat from him or to buy in the market where he sold. The time, local, and individual limits of the exchange of products, therefore, vanish with the circulation of commodities.
Yet another distinction between barter and the circulation of commodities must be recorded. The simple exchange of products consists in the alienation of superfluous products, and at first leaves unaffected the forms of production of primitive communism, forms of production which were under the direct control of the participants.
The development of the circulation of commodities, on the other hand, renders the relations of production ever more complicated and more uncontrollable. The simple producers become increasingly independent of each other, but they are more than ever dependent upon social ramifications which they are no longer able to control, as was the case under primitive communism. Consequently the social powers assume the shape of blindly-working natural forces which, if impeded in their activity or disturbed in their equilibrium, assert themselves in catastrophes similar to storms and earthquakes.
And the seeds of such catastrophes are developed with the circulation of commodities. The possibility which it offers of being able to sell without being immediately obliged to buy contains the possibility of congested markets, of crises. But the productive forces must develop beyond the limit of simple commodity production before the possibility becomes a reality.
(3) The Currency of Money
Let us recall the commodity circuits which we followed in the last section: Corn–Money–Coat–Money–Wine–Money–Coal, etc. The progress of these circuits also imparts a movement to the money, but this is not a circuit. The money which came out of the countryman’s pockets moves farther and farther away from him.
The movement imparted to money by the circulation of commodities constantly sends it farther from its starting-point, in order to make it pass without ceasing from one hand to another. This it is which is called the course of money, or its currency.
The currency of money is the consequence of the movements of commodities, not, as is often assumed, their cause. At the stage of the simple circulation of commodities where we are now remaining in our investigation, where as yet there is no mention of ordinary commerce and re-selling, that is to say, at the first stage of its course, the commodity as a use-value soon falls out of circulation, in order to be swallowed up in consumption, and its place in the circuit is taken by a new use-value or an equivalent commodity-value. In the circuit Corn–Money–Coat, corn disappears from circulation after the first metamorphosis Corn–Money, but various use-values return to the seller of corn: Money–Coat. Money as the medium of circulation does not drop out of circulation, but constantly revolves in its sphere.
The question now arises, how much money does the circulation of commodities require?
We know already that every commodity is equivalent to a certain quantity of money, and that, therefore, its price is fixed before it comes into contact with the real money. Consequently, the price to be realised for every single commodity and the total of the prices of all commodities are settled beforehand – assuming the value of gold to remain constant. The total prices of commodities are a definite imaginary amount of gold. If the commodities are to circulate, it must be possible to transform the imaginary sum of gold into a real sum of gold; the quantity of the circulating gold is therefore determined by the total prices of the circulating commodities. (It must be kept in mind that we are still within the sphere of the simple circulation of commodities, where credit money, the adjustments of payments, etc., are as yet unknown.) Assuming that prices do not vary, this sum total of prices fluctuates with the quantity of the circulating commodities; if the quantity of commodities remains constant, it varies with their prices, irrespective of whether such price changes are caused by a fluctuation in market prices, or through a change in the value of gold or of commodities; irrespective of whether all or only a few commodities are affected thereby.
But the sales of commodities are not always partial, nor do they all proceed simultaneously.
Let us revert to our former example. We have the series of metamorphoses: 5 bushels of Corn–30s.–1 Coat–30s.–40 litres of Wine-30s.–2 tons of Coal–30s. The sum total of the prices of these commodities amounts to 120s., but to effect the four sales 30s. alone are sufficient, which change their place four times, and thus execute four moves one after another. If we assume that these sales all take place within one day, this gives us the amount of money functioning during one day as a medium of circulation within a certain sphere of circulation as
120 / 4 = 30s.,
or as commonly expressed
Total Commodity-prices / Times the money changes hands during a definite period = Total money in circulation.
The number of movements made by the various pieces of money in a country is of course a varying one; one coin may lie in a coffer for years, whilst another may execute thirty movements in a day. But its average velocity or movement is a definite magnitude.
The velocity of the movement of money is determined by the velocity of the movements of commodities. The quicker commodities disappear from circulation, in order to be consumed, and the more quickly they are replaced by new commodities, all the more rapid is the movement of money. The slower the movement of commodities, the slower is the movement of money, and the less money there is seen. People whose glance is only fixed on superficialities then believe that too little money is in existence, and that the shortage of money is the cause of the feebleness of circulation. While this contingency is possible, it hardly happens to-day for long periods.
(4) Coins: Paper Money
It was of course a great inconvenience for intercourse when the quality and weight of every piece of money metal which changed hands at every purchase and sale had to be tested. This operation was dispensed with as soon as a generally recognised authority guaranteed the correct weight and the correct quality of every piece of money. Thus metal coins were minted by the State from bars of metal.
The coin-shape of money sprang from its function as a medium of circulation. But once money was minted into coins, the latter were soon invested with an existence in the sphere of the circulation process independent of their quality as coins. The guarantee of the State that a coin contained a certain amount of gold or was equal to it, soon sufficed, under certain circumstances, to cause the coins to function as a means of circulation quite as well as the full and real quantity of gold.
This is brought about by the currency of pieces of money themselves. The longer a coin is in circulation, the more it gets used up, the more its face and intrinsic values deviate from each other. An old coin is lighter than one just come from the Mint – yet, under certain circumstances, both may represent equal values as a medium of circulation.
The distinction between face and real values is shown even more plainly in the coining of inferior metals. Inferior metals, such as copper, very often constitute the first form of money, which is later supplanted by precious metals. Copper and, after the introduction of the gold standard, silver cease to be the measure of value, but the copper and silver coins continue to function as a means of circulation in petty transactions. They now correspond to definite aliquot parts of gold; the value they represent varies in the same ratio as that of gold; it remains unaffected by the fluctuations of the value of silver and copper. It is manifest that under certain circumstances their intrinsic value as metals has no influence upon their function as coins, and that it may be arbitrarily determined by legislation what quantity of gold shall be represented by a silver or copper coin. It needed only a step to substitute a paper token for a metal token, legally to equate a valueless paper chit with a certain quantity of gold.
Thus State paper money arose, which is not to be confused with credit money, which grew out of another function of money.
Paper money may replace gold money only as a means of circulation, not as a measure of value; it can only replace it in so far as it represents certain quantities of gold. Paper money as a means of circulation is subject to the same laws that govern the metallic money into whose place it steps. Paper money can never replace a larger amount of gold than can be absorbed by the circulation of commodities. If the circulation of commodities in a country requires gold amounting to £5,000,000, and the State puts into circulation £10,000,000 in notes, the result would be that I should be able to buy, with two pound notes only as much as with a golden sovereign. In this case, the prices expressed in paper money are twice as high as the gold prices. Paper money is depreciated by its excessive issue.
This took place to a very considerable extent during the world war in all the war-making States, as this method of war finance was more convenient than the imposition of taxes. Eventually, however, the excessive issue of paper money represented nothing less than a particularly brutal form of indirect taxation, as, by continuously throwing fresh quantities of paper money into circulation, the State was constantly forcing up prices, and thereby confiscating for its own benefit a portion of the purchasing power of all income receivers, especially those sections living upon fixed sums of money, such as rentiers, mortgagees and so on, but also the workers and officials, whose incomes exhibit a certain consistency.
At the same time, however, the State destroys its own sources of revenue, as the taxes and duties are paid to it in money that is continuously depreciating. It is therefore never able to cover its expenditure, and is ever and again obliged to resort to the printing press. This can be observed with special distinctness in the States in which the War and the Revolution have administered severe shocks to the national economy.
Most immense was the issue of paper money in Germany. Whereas in the year 1914, the note currency amounted to 2.41 milliards of gold marks, it amounted in January, 1923, to 1280.09 milliards, and in November even to 524,330,557 milliards, to which uncounted milliards of “emergency money” in various kinds must be added. The gold value of these astronomical figures, however, was astonishingly small. It was estimated that all these various kinds of paper money and emergency money together represented a value of 300.3 millions of gold marks, whereas the total value of the various kinds of money (gold, silver, and banknotes) circulating in the year 1913 was valued at 6,070 millions of gold marks. The value of the means of circulation in October, 1923, therefore, represented only 4.95 per cent. of the corresponding figure in the year 1913.
From these comparative figures two things emerge firstly, the fact that the velocity of circulation was enormously accelerated, as everybody endeavoured to get rid of the money whose value was melting away in his hands at the earliest possible moment, so that the smaller amount is compensated for by accelerated circulation, and secondly, that there has been a reduction in the quantity of commodities in circulation, which has considerably diminished the total price of these commodities, reckoned in gold.
The total value of the means of circulation considerably increased immediately the stabilisation of the value of money diminished the velocity of circulation and increased the economic activity, thereby raising the total prices of the commodities in circulation. On the 30th November, 1923, the total means of circulation amounted to 1584.7 millions of gold marks, equal to 26.11 per cent. of the figure for the year 1913, for the 31st December, 1923, the corresponding figures were 2273.6 millions of gold marks and 37.48 per cent.
Compared with this measure of inflation, all the figures from other countries, even from Russia, Poland, and Austria, and from all other periods, such as from the Great French Revolution, seem insignificant; at that time 45,581 millions of francs of so-called “Assignats” were in circulation during seven years (1790 to March, 1797).
The great fluctuations in the value of paper money, which in particularly severe cases lead to its total devaluation and its replacement by a stable foreign currency, seem to render it inexpedient for the State to issue paper money. Almost always after currency catastrophes of this kind, the State is legally prohibited from issuing paper money. In view, however, of the reluctance to forego the economies which the circulation of paper money offers in comparison with the pure gold currency, the issue of paper currency is transferred to a bank infested with special privileges and duties. The most important provision among all the statutes of these banks is the obligation at any time to redeem the money tokens issued by them for gold. This redemption obligation distinguishes the banknote from State paper money, and places it on an equal footing with paper money.
(5) Additional Functions of Money.
We have followed the spread of simple commodity circulation, and seen how it is accompanied by an increase in the functions of money as a measure of value and means of circulation. But money is not limited to these functions.
In the course of the circulation of commodities both the necessity and the desire arise to retain and hoard the money commodity, gold. The peculiarities of money correspond to the peculiarities of commodity production just as the latter is a system wherein social production is carried on by independent private producers, so money is a social power. It is not, however, a power exercised by society, but may be the private property of any individual. The larger the amount of money in a person’s pockets, the greater the social power, the goods and enjoyments, the products of the labour of others, at his command. Gold can do everything. It is the sole commodity which everybody wants and everybody will take. Thus the greed for gold grew and grows with the circulation of commodities.
But in the course of the development of commodity production the accumulation of gold becomes not only a passion, but also a necessity. The more products become commodities, the less a producer creates goods for his own consumption, the more necessary is the possession of money to enable him to live at all. I must buy continually, and I must first of all have sold, in order to be able to buy; but the production of the commodities which I sell requires time, and their sale depends on chance. In order to keep commodity production in full swing, in order to be able to live during the work of producing, I must possess a supply of money. A deposit of money is also necessary to relieve congestions in circulation. We have seen above that the quantity of the circulating money is dependent upon the prices of commodities, their quantity, and the velocity of their movements. Each of these factors is continually changing, and consequently the amount of circulating money is in a state of constant fluctuation. Whence comes the money that is required, and whither goes the money that becomes superfluous?
Hoards of money which accumulate in the most diverse places form conduits which serve now to absorb, now to release money, thus neutralising disturbances in the process of circulation.
In the beginnings of commodity circulation two commodities are always directly exchanged, as in the case of barter, but with this difference, that now one of the commodities is always the general equivalent, the money commodity. With the development of commodity circulation, however, conditions arise by virtue of which the alienation of a commodity becomes separated in point of time from the receipt of the sum of money corresponding to its price. Circumstances now arise which cause a commodity to be paid for before it is received, or, which is oftener the case, to be paid for later. An example may be given to elucidate this point.
Let us take the case of an Italian silk weaver of about the thirteenth century. He obtains the silk which he weaves in his neighbourhood. But the woven product is destined for Germany, and three to four months must elapse before it can arrive at the place where it is to be sold, and before the purchase money can be received in Italy. The silk weaver has finished a piece of silk goods at the same time as his neighbour, the silk spinner, has spun a certain quantity of silk. The silk spinner apparently sells his commodity to the silk weaver, but the latter does not receive the proceeds of his sale until four months later. What happens? The weaver buys the silk, but does not pay for it until four months have elapsed. Buyer and seller now appear in another light. The seller becomes a creditor, the buyer a debtor. Money also is now invested with a new function. In the present case it does not effect the circulation of the commodity; it brings the movement to a close as an independent factor.
In this function it is not a means of circulation, but a means of payment, a means of fulfilling an obligation to supply a certain quantity of values. Such an obligation does not necessarily arise from the process of the circulation of commodities. The more commodity production develops, the greater are the efforts to convert supplies of particular use-values into a supply of money, the form of general money. Dues in kind to the State are converted into money taxes, and dues in kind to officials into money salaries. The function of money as a means of payment now extends beyond the circulation of commodities.
Let us return to our silk weaver. He buys silk from the silk spinner without being able immediately to pay for it. But there is no sentiment in money matters. The silk spinner reflects: What one has in black and white may be safely taken home. He therefore obtains from the silk weaver a document, in which the latter promises to pay a sum of money corresponding to the price of the purchased silk after four months. But the silk spinner, on his side, has payments to meet before the four months have elapsed. As he does not possess cash, he pays with the document of the silk weaver. Therefore this document now functions as money; a new kind of paper money comes into existence: credit money (Bills of Exchange, Cheques, etc.).
Yet another case may arise: The silk weaver bought silk to the amount of 25s. from the silk spinner, but the latter bought from the goldsmith a bangle costing 30s. for his wife. At the same time the goldsmith received from the silk weaver articles of silk to the value of 20s. The payments fall due simultaneously. All three, the spinner, the weaver, and the goldsmith, meet together. The first has to pay the last 30s., and at the same time to demand 25s. from the silk weaver. He pays the goldsmith 5s., and refers him to the silk weaver for the rest. The latter, however, has 24s. to receive from the goldsmith; consequently he pays him only 5s. Thus by means of mutual adjustment, three payments amounting in all to 75s. are effected with no more than 10s.
Of course, transactions are not effected in reality with the simplicity shown in our example. As a matter of fact, the payments of commodity sellers partly adjust themselves, and indeed to an ever-increasing extent with the development of the circulation of commodities. The concentration of payments at a few places and at definite times create proper institutions and methods for this adjustment, for example, the virements in medieval Lyons. The clearing houses which serve the same purpose are well known.
It is only payments which do not adjust each other that have to be made in cash.
The credit system causes hoarding as an independent form of enrichment to disappear. He who wants to retain his wealth need no longer hide his money in the earth or in cases and trunks, once the credit system has developed. He can lend out his money. On the other hand, the credit system necessitates temporary hoarding, the accumulation of sums of money, which serve to pay debts falling due on settlement day.
But it is not always possible to accumulate such a hoard. Let us recall our weaver. He promised to pay after four months because he hoped to have sold his commodities in the meantime. But suppose that he finds no buyers for his commodities, and therefore cannot pay. The silk spinner is counting on the payment, and in reliance thereon he has likewise contracted to make certain payments, perhaps to the goldsmith, and again the latter to another. We see that the incapacity to pay of one involves the incapacity to pay of others, and all this in a greater degree, the more the system of successive and simultaneous payments and their adjustment is developed. Let us now suppose that not one, but several producers are unable to sell their commodities owing to general over-production. Their incapacity to pay involves the incapacity to pay of others who have already sold their commodities. The promises to pay become valueless, as everybody is demanding cash, the general equivalent. A general shortage of money, a money crisis, arises, which at a certain stage in the development of credit becomes the inevitable accompaniment of every production and commercial crisis.
It shows most distinctly that under the system of commodity production money cannot be replaced by mere commodity certificates.
Money has two spheres of circulation: the internal market of the community State in question, and the world market. It is only inside a country that money assumes the form of coins and value tokens, not in the intercourse of one country with another. On the world market, it re-assumes its original shape as bars of precious metal, gold and silver. Hitherto both have served in the world market as a measure of value, whilst in the sphere of internal circulation only one commodity can really function as the measure of value.
Moreover, it may be said that since Marx wrote Capital, gold has shown an unmistakable tendency to become the sole money commodity, even in the world market.
The chief function of universal money is to serve as a means of payment, for the adjustment of international balances.
Further, payments from one country to another take place in consequence of excesses or deficits of imports as compared with exports of commodities, as well as in consequence of payments or revenue in the form of interest on and redemption of foreign loans, of emigration remittances, freight, bank and commercial expenses in international traffic (thus almost every country pays England large annual sums for the transport of their commodities in English ships and for the transaction of banking and commercial business by London banks and so on).
Note
1. The value of the supplies of money (coins and bars) in the countries of the modern mode of production was estimated
| Gold | Silver | |
|---|---|---|
| 1831 | £111,600,000 | £414,000,000 |
| 1880 | £658,500,000 | £420,300,000 |
Between 1880 and 1908, £1,500,000,000 worth of gold coins and £1,000,000,000 worth of silver coins were coined in the various currencies of the world
Between 1911 and 1922, the value of the gold production amounted to £1,026,950,000, whereas the value of the silver production in the same period only amounted to £386,000,000.
In course of time, therefore, the preponderance is being shifted more and more in favour of gold…
Chapter III. THE CONVERSION OF MONEY INTO CAPITAL
(1) What is Capital?
Let us now take a step further. Under the simple circulation of commodities, the commodity owner sells his commodities, in order to purchase others. But in the course of time a new form of movement emerges from this form of the circulation of commodities: to buy in order to sell. As we know, the formula of simple commodity circulation is Commodity–Money–Commodity; the formula of the new form of circulation is Money–Commodity–Money.
Let us compare the two formulae.
The movement Commodity–Money–Commodity has consumption for its object. I sell a commodity, which is a non-use-value for me, in order to be able to obtain others which represent use-values for me. The movement Commodity–Money–Commodity is complete in itself. The money which is the proceeds of the sale is transformed into a commodity which is consumed, and thus falls out of circulation. The money itself is spent once for all, and in its course gets farther and farther away from its former owner. The commodity with which the circuit closed is equal in value to that with which the circuit began, that is, under normal conditions of simple commodity circulation, and only such can be discussed at this stage.
It is otherwise with the movement Money–Commodity–Money. The purpose of this is not consumption, and its final point is not a commodity, but money. The money thrown into circulation at its beginning is not spent, but merely advanced. It returns to its original owner. The movement is not one that is complete in itself; it keeps repeating itself. The money which was advanced returns, in order again to be thrown into circulation and to return. The movement of money which is set in motion by the circuit Money–Commodity–Money is illimitable.
What, however, is the driving -force of this movement? The motive of the circuit Commodity–Money–Commodity is clear; on the other hand, does not the circuit Money–Commodity–Money appear senseless? If I sell a Bible, in order to buy bread with the proceeds, the commodity at the end of the movement is different from that at the beginning, although of the same value. The one stills my spiritual hunger, but it avails me very little if this hunger is stilled, even if I know the Bible by heart, unless I possess the means of satisfying my material hunger. If, however, I buy potatoes for 100s., in order to sell them for 100s., I am no farther advanced at the end than I was at the beginning; the whole procedure has neither object nor advantage. There would only be an advantage if the sum of money at the end of the transaction were different from that at the beginning. But one sum of money is distinguished from another only by its magnitude. The movement Money–Commodity–Money has a purpose then only if the sum of money with which it ends is larger than that with which it began. And this increase in the sum of money is in fact the driving motive of the movement. Whoever buys in order to sell, buys in order to sell dearer. The movement Money–Commodity–Money proceeds no more than normally if the sum of money at the end is larger than that at its beginning. On the other hand, the movement Commodity–Money–Commodity only proceeds normally, as we know, if the value of the commodity with which it closes is equal to that of the commodity with which it begins.
Every purchase is a sale, and vice versa. The movement Money–Commodity–Money seems therefore to run on the same lines as the movement Commodity–Money–Commodity. But we can already see that the two movements are essentially different.
To keep to our example. If I buy potatoes for 100s. in order to sell them again, I do so with the object of selling them dearer, perhaps for 110s., that is 100s. plus 10s., or a sum equivalent to the sum laid out, plus an increment. If we denote the commodity by C, the original sum of money by M, the increment by m, we may represent the complete formula in the following manner:–
M – C – (M + m).
This m, the increment value, which emerges over and above the originally advanced value at the end of this movement, is called by Marx surplus-value. It is not to be confused with its phenomenal forms, profit, interest, etc., any more than value is to be confused with price. So far our exposition has only been concerned with the foundations, not the phenomenal forms, of the economic categories. This is said to avoid misunderstandings.
Surplus value forms the determining peculiarity of the movement M – C – (M + m). The value which runs through the form of the circuit is invested by the surplus-value with a new character, it becomes capital.
In this movement consists the essence of capital. It is value that breeds surplus-value. Those who ignore this movement and try to conceive of capital as an inert thing will constantly involve themselves in contradictions. Hence the confusion in orthodox text-books concerning the idea of capital, and the question as to which things should be regarded as capital. Some define it as tools, which implies that there were capitalists in the Stone Age. Even the ape which cracks nuts with a stone is a capitalist; likewise the tramp’s stick with which he knocks fruit off a tree becomes capital, and the tramp himself a capitalist. Others define capital as stored-up labour, according to which marmots and ants would enjoy the honour of figuring as colleagues of Rothschild, Bleichroeder, and Krupp. Some economists have even reckoned as capital everything which promotes labour and renders it productive, the State, man’s knowledge, and his soul.
It is obvious that such general definitions only lead to commonplaces which are quite elevating to read about in children’s fables, but which do not in the least advance our knowledge of human social forms, their laws and driving-forces. Marx was the first to banish completely from political economy the commonplaces which, prior to him, had reigned almost absolutely in many of its provinces. This applies especially to the branch which purported to describe the peculiarities of capital.
We have seen that capital is value that breeds surplus-value, and its general formula is: M – C – (M + m). The implication of this is that the money form is the form in which every new sum of capital begins its movement. The facts support this assumption. It is also apparent from this formula that the movement which it represents necessarily determines the conversion of capital from the money-form into the variegated forms of the commodity world, as well as the re-conversion of these forms into money.
We discern further from this formula that not every sum of money, and not every commodity are capital, and that they only become capital if they execute a certain movement. But this movement is dependent, for its part, upon certain historical conditions, with which we shall become acquainted. The money that I spend in order to buy an article of consumption, bread or a coat, for myself no more functions as capital than the commodity which I myself have produced and sell functions as capital in this transaction.
Means of production, accumulated labour, etc., certainly constitute the material of capital, but only under certain circumstances. In so far as the latter are ignored, the peculiarities of the modern mode of production are lost sight of and a dark cloak is spread over it, whence it comes about that all the learned and unlearned representatives of capitalism refuse to be taught either by the Marxian theory of capital, or the theory of value on which it is based.
(2) The Source of Surplus-value
We now know the general formula of capital: M – C – (M + m). We do not yet know the origin of m, the surplus-value. The given formula seems to indicate that the act of buying and selling creates the surplus-value, and that consequently the latter springs from the circulation of commodities. This is the current opinion. It is, however, based on a confusion of commodity-value with use-value. This is especially true of the assertion that both parties gain in an exchange, because each gives what he does not need and receives what he needs. This may be expressed: “I give away something which possesses little value for me, and receive therefore something which possesses more value for me.” This view of the origin of surplus-value is only possible where ideas about value are still nebulous. In order to adhere to this view, it is necessary, on the one hand, to forget that, whilst the exchange of commodities is based on the unlikeness of their use-values, it is also based on the equality of their commodity-values. On the other hand, one must be as complaisant as are most of the readers of the vulgar economists and accept all their stories at their face value, really believing that the business operations of a modern merchant, for instance, stand on the same level as barter amongst savages.
We know, however, that a surplus-value originates not at the stage of barter, but at that of commodity circulation, which is effected by money, and that the surplus-value appears in the form of money. “Profit,” in the sense of obtaining something which has use-value for me in exchange for something which has no use-value for me, is quite irrelevant to a transaction which is expressed by the formula: M – C – (M + m).
Here we encounter a manoeuvre of vulgar economy, to which the latter is fond of resorting in order to impede the recognition of modern economic conditions, which is its chief task. It relegates the modern phenomena of production in a remote period of time.
We have to do here not with barter, but with the circulation of commodities. Under normal circumstances, the latter no more than the former can produce surplus-value, if equal commodity-values are always given for equal commodity-values.
Let us assume that the laws of commodity circulation are violated. This would, for example, confer on commodity owners the privilege of selling their commodities at a price increment of 10 per cent, above their original value. The tailor sells his coat for 33s. instead of 30s. But to his chagrin he finds that the cask of wine which he used to buy for 30s. now cost him 33s. He has therefore gained nothing.
We might still make an attempt to explain the origin of surplus-value by the fact that not all, but a number of commodity owners have discovered how to buy commodities below their value and to sell them above their value. For 90s. a merchant buys from a farmer 4 tons of potatoes which are worth 100s., and sells them to the tailor for 110s. At the end of the process the merchant finds in his hands a larger value than was there at the beginning. But the sum total of existing values remains the same. At the beginning we had values of 100s. (the farmer) plus 90s. (the merchant) plus 110s. (the tailor) = 300s. At the end 90s. (the farmer) plus 110s. (the merchant) plus 100s. (the tailor) = 300s.
The greater value in the hands of the merchant is therefore not derived from an increase in values, but from a diminution in the values in the hands of the others. If I call this greater value surplus-value, I might as well call surplus value the value which a thief steals from the pockets of another.
The historical beginning of the appropriation of surplus-value, at any rate, occurred in this manner, in the appropriation of alien values, either by means of the circulation of commodities through merchant’s capital, or quite openly without this intervention, by means of usurer’s capital. But these two types of capital were only possible by violating the laws of commodity circulation, by a manifest and brutal violation of its basic law, that values are only exchanged for equal values. So long as capital assumed the form of merchant’s or usurer’s capital, it occupied a position of antagonism to the economic organisation of its time, and was also in conflict with contemporary moral conceptions. In Antiquity and likewise in the Middle Ages, trade and especially usury were in bad repute; they were denounced by the ancient heathen philosophers as well as by the Fathers of the Church; by Popes and by Reformers.
If we wanted to indicate a type of marsupial we should not put forward the egg-laying duckbill. Similarly, if we want to understand the capital which determines the economic structure of modern society, we should not start out from its, so to speak, antediluvian forms, usurer’s and merchant’s capital. It was not until another and higher type of capital was formed that intermediate types arose which bring the functions of merchant’s capital and interest-bearing capital into harmony with the laws of the prevailing mode of commodity production. Henceforth capital ceased to wear the character of simple extortion and direct robbery. Merchant’s capital and usurer’s capital can only be comprehended after the basic form of modern capital has been investigated.
It is therefore understandable why Mary excluded merchant’s capital and interest-bearing capital from the first two volumes of Capital; these books are devoted to an analysis of the basic laws of capital.
Consequently, we need not concern ourselves any further with the two first-mentioned forms of capital. What is to be remembered as the result of our investigation is the fact that surplus-value cannot arise from the circulation of commodities. Neither buying nor selling creates surplus-value.
But, on the other hand, surplus-value cannot arise outside the sphere of circulation. A commodity-owner may transform a commodity through his labour and thus add new value to it, which is determined by the measure of the socially-necessary labour which would have to be expended, but the value of the original commodity is not thereby augmented; no surplus-value adheres to the latter through this process. If a silk weaver buys silk to the value of 100s. and works it up into silk material, the value of this material will be equal to the value of the silk, increased by the value which the labour of the weaver has created. The value of the silk as such is not augmented by this labour.
Thus we are faced with a peculiar enigma: surplus-value is not created by the circulation of commodities. It is not created outside the sphere of circulation.
(3) Labour Power as a Commodity
Let us consider the general formula of capital more closely. It runs: M – C – (M + m). It consists of two acts: M – C, purchase of commodity, C – (M + m), sale. According to the laws of the circulation of commodities, the value of M must be equal to C, and C equal to M + m. This is only possible if C itself is increased, if C happens to be a commodity which creates during its consumption a greater value than it itself possesses. The enigma of surplus-value is solved as soon as we find a commodity whose use-value possess the peculiar property of being a source of value, whose consumption is the creation of value, so that in relation to it the formula M – C – (M + m) reads M – C … (C + c) = (M + m).
Now we know that commodity values are only created by labour. The above formula can therefore only be realised if labour-power is a commodity.
“Under the name of labour-power,” says Marx, “we include the entire collection of those physical and intellectual faculties which dwell in the human frame and constitute the living personality, and some of which the individual puts into operation whenever he produces any kind of use-value.”
Labour-power has to appear in the market as a commodity. What does this mean? We have seen above that the exchange of commodities is based on the absolute right of commodity owners to dispose of their commodities. The owner of labour-power, the worker, must therefore be a free man, if his labour-power is to become a commodity. His labour-power must remain a commodity; consequently he must not sell it outright, but only for definite periods, else he would become a slave, and be transformed from a commodity owner into a commodity.
Yet another condition must be complied with before labour-power can become a commodity. We have seen that, in order to become a commodity, a use-value must be a non-use-value for its owner. Labour-power must also be a non-use-value for the worker, if it is to appear in the market as a commodity. The use-value of labour-power consists, however, in the creation of other use-values; this process presupposes access to the necessary means of production. If the worker has access to the means of production, he does not sell his labour-power, but employs it himself, and sells his products. If labour-power is to become a commodity, the workers must be divorced from the means of production, above all, from the most important of them, the land.
The worker must be free in every respect, free from any personal dependence, but also bereft of all the necessary means of production. These conditions must exist before the money owner can transform his money into capital. They are not provided by Nature, nor do they characterise, all social forms. They are the result of a protracted historical development, and it is only comparatively lately that they have assumed such dimensions as to exercise a decisive influence upon the formation of society. The modern story of capital begins with the sixteenth century.
Now we know the commodity which creates surplus-value. What is the extent of its own value?
Its value is determined like that of any other commodity by the labour-time socially necessary for its production, and therefore for its re-production.
Labour-power presupposes the existence of the worker. This existence, on its part, needs a certain quantity of the means of life for its maintenance. The labour-time necessary for the production of labour-power is therefore equal to the labour-time which is socially necessary to produce this particular quantity of the means of life. A series of circumstances determines the magnitude of this quantity. The more labour-power the worker expends, the longer and more intensively he works, the more of the means of life he requires in order to replace the energy expended, and to be able to work on the next day in the same way. On the other hand, the needs of the working classes of various countries differ according to the natural and cultural peculiarities of every country. A Norwegian worker requires a larger quantity of the means of life than an Indian; the nourishment, clothing, dwelling, firing, etc., which the former requires to be able to exist necessitates a longer labour-time for their production than the means of life of the Indian worker. Further, in a country where the workers run about barefooted, for example, or read nothing, their needs will be slighter than in those countries where boots are worn and books and newspapers read, even when climatic or other natural differences are absent. “In contrast to other commodities,” says Marx, “a historical and moral element enters into the determination of the value of labour-power.”
Moreover, as everybody knows, the worker is mortal. Capital, however, aspires to be immortal. For this it is necessary that the working class should be immortal, that the worker should propagate his species. The quantity of the means of life necessary for the maintenance of labour-power therefore includes the means of life necessary for the maintenance of the workers’ children and under certain circumstances their wives.
Finally, in the production costs of labour-power are also to be reckoned its educational expenses, the expenses incurred in acquiring a certain dexterity in a particular branch of labour. For the majority of workers these expenses constitute a diminishing quantity.
As a result of all these factors, the value of the labour-power of a particular working class in a particular country and at a particular period is of a particular magnitude.
So far we have not dealt with price, but with value; not with profit, but with surplus-value. Therefore it must be borne in mind here that we are dealing with the value of labour-power, not with wages.
Reference must now be made to a peculiarity which marks the payment for labour-power. In the view of vulgar economy, the capitalist advances wages to the worker, because in most cases the capitalist pays the worker before he has sold the products of the latter’s labour. In reality, it is the worker who credits the capitalist with the work he has performed.
Let us assume that I buy potatoes in order to distil whisky from them. I pay for the potatoes after I have distilled the whisky, but before I have sold it. Would it not sound absurd if I should assert that I advanced to the farmer the price of his potatoes because I paid for them before I had sold the whisky? No, it is rather the farmer who credits me with the price of his potatoes until I have distilled whisky from them. If I say that I pay cash, I only mean that I pay for the commodity as soon as I buy it. Merchants would be very much astonished at the economic wisdom which asserted that those who only pay for their commodities after they have used them not only pay cash, but even pay in advance. But the vulgar economists do not hesitate to parade nonsense of this kind before the workers. If the workers sold their commodity labour-power for cash, they would have to be paid the moment this commodity passed into the hands of the capitalist, and therefore at the beginning, and not at the end, of each week. Under the prevailing system of payment, the workers not only risk their wages, but are also obliged to live upon credit, and therefore have to endure without protest all the adulterations of the means of life practised by the traders. The longer the period of wage payment, the worse the workers fare. A fortnightly or a monthly payment of wages is one of the most oppressive burdens for the wage-workers.
Whatever may be the system of paying wages, the worker and the capitalist always confront each other, under normal conditions, as two commodity owners who mutually exchange equal values. Capital now operates no longer in contradiction to the laws of commodity circulation, but on the basis of these laws. Worker and capitalist confront each other as commodity owners and therefore as free and equal persons, personally independent of each other; as such they belong to the same class, they are brothers. Worker and capitalist exchange equal values with each other; the empire of justice, of freedom, of equality and brotherhood, the thousand years kingdom of happiness and peace, seems therefore to have dawned with the advent of the wage system. The misery of servitude and of tyranny, of exploitation and of club-law, now lies behind us.
So we are told by the representatives of the interests of capital.
