Wednesday, 8 August 2012

Capital I Chapter 3 - Part 2

Section 2

The Medium of Circulation

The Metamorphosis of Commodities

In Chapter 1 Marx identified a contradiction within the Value Form of Commodities. The Relative Form and the Equivalent Form of Value are mutually dependent but exclusive. The separation of commodities into commodities and money does not end this contradiction, but provides a 'modus vivendi' as Marx puts it. It allows the process to continue.

The process of exchange is one in which commodities enter circulation. The sellers of commodities do not view them as Use Values. The only Use Value they have for them is as an embodiment of Exchange Value. As such, rather like a game of pass the parcel, they want to get them out of their hands as soon as possible. Of course, the buyers of these commodities may see them in a similar light. That is they may not wish to consume them, personally either. A merchant might want to buy a commodity to sell themselves in some other market at a higher price (arbitrage). Another producer may want the commodity to use in the production of some other commodity. Though in this case, the producer still wants it for its Use Value in the productive process.

All sorts of commodities have acted as the money
commodity in the past.  Then things like gold are priced
in it rather than vice versa.
A commodity only ceases being an Exchange Value, and becomes just a Use Value, when it stops circulating and is consumed. What confuses many economists, Marx says, is the fact that commodities are exchanged for money i.e. gold. But, he points out, gold, as gold, as a commodity, is not money. It is merely a commodity like any other. A society could have goats as its money commodity, and then gold as a commodity would be priced in goats, rather than goats priced in gold!

When commodities express their prices in gold, this gold is but the money form of those commodities themselves.” (p 106)

The relation of a commodity (Use Value) to money (Exchange Value incarnate) is merely an external reflection of that same contradictory unity of Use Value and Value. This situation of this opposition of money and commodity has developed logically and historically through the stages that Marx has previously described of how commodities come into existence, exchange first against each other, then against some single most traded commodity, and finally against a money commodity – usually gold. But, beneath it all, both sides of this exchange remain commodities, and the only reason the gold can act as money is not because of any inherent property it has, but only because like every other commodity it possesses Value, because it is the product of human labour.

But, in this relation between the commodity and gold (money) there has arisen a transformation. The gold money is Exchange Value, as such it expresses the Value of the commodity against which it is being exchanged. But, its own Use Value has disappeared. As money, the Exchange Value of the gold as Use Value (for example to be used as jewellery) can now not be expressed in money terms. It makes no sense to say that the price of 1 oz. of gold is 1 oz. of gold. Its own price can now only be expressed in terms of that infinite series of Exchange Values in which gold exchanges for all other commodities!

Marx then explores the way in which this exchange takes place. He starts with the weaver who has produced an amount of linen. The weaver takes it to market and obtains the equivalent of its Value in money. He then exchanges the money for a bible. For the weaver the linen have no Use Value, but it contained Exchange Value to the amount of £2. The weaver was, therefore, glad to sell the linen, which was no use to him, and to obtain the £2 instead. But, the £2 itself has no Use Value in and of itself. Its only Use Value to him is in order at some point to exchange it for an item of real utility. He does so by exchanging the £2 for the bible.

So, the weaver has gone from a situation where he owned 20 yards of linen, which had no utility for him, to one where he owns a Bible, which does. Orthodox economics describes an exchange which brings about such a situation a gain in welfare i.e. the weaver has increased his level of utility through the exchange without any equivalent loss of utility for anyone else.

Viewed from the weaver's perspective, he has gone through two separate processes. He has sold his linen, and he has bought a bible. In reality he has sold in order to buy.

The result of the whole transaction, as regards the weaver, is this, that instead of being in possession of the linen, he now has the Bible; instead of his original commodity, he now possesses another of the same value but of different utility. In like manner he procures his other means of subsistence and means of production. From his point of view, the whole process effectuates nothing more than the exchange of the product of his labour for the product of someone else’s, nothing more than an exchange of products.” (p 107)

Marx summarises the process as follows C (Commodity) – M (Money) – C (Commodity). What was once the original form of exchange – one commodity for some other commodity of equal Value, remains the end result, here linen with a Value of £2 exchanged for a Bible with a Value of £2. But, now money has interceded in the process of exchange.

Marx makes a point of separating the fate of the commodity from the fate of the owner.

The leap taken by value from the body of the commodity, into the body of the gold, is, as I have elsewhere called it, the salto mortale of the commodity. If it falls short, then, although the commodity itself is not harmed, its owner decidedly is.” (p 108)

In other words, the value of the commodity is determined by objective laws. Whether the individual owner of the commodity is able to realise that Value is another matter. Marx says the commodity may only fulfil its function of being able to provide for his many wants if its Exchange Value can be realised i.e. if it can be sold. That depends on many things. It must be something somebody wants i.e. it must represent useful labour. Its worth pointing out that at this stage of his analysis, Marx has not just been talking about the logical processes by which money arises, and by which trade develops. He has been describing a particular historical development and the examples he refers to here are still at the stage where production is being carried on by individual producers owning their own means of production.

But, he describes here the problems faced by such producers as the Division of Labour itself develops.

But division of labour is a system of production which has grown up spontaneously and continues to grow behind the backs of the producers. The commodity to be exchanged may possibly be the product of some new kind of labour, that pretends to satisfy newly arisen requirements, or even to give rise itself to new requirements. A particular operation, though yesterday, perhaps, forming one out of the many operations conducted by one producer in creating a given commodity, may to-day separate itself from this connexion, may establish itself as an independent branch of labour and send its incomplete product to market as an independent commodity. The circumstances may or may not be ripe for such a separation. To-day the product satisfies a social want. Tomorrow the article may, either altogether or partially, be superseded by some other appropriate product. Moreover, although our weaver’s labour may be a recognised branch of the social division of labour, yet that fact is by no means sufficient to guarantee the utility of his 20 yards of linen. If the community’s want of linen, and such a want has a limit like every other want, should already be saturated by the products of rival weavers. our friend’s product is superfluous, redundant, and consequently useless.” (pp 108-9)

Abraham Darby discovered how to use coal rather than
charcoal to smelt iron, reducing the labour-time required.
If he does produce a Use Value then its price will be equivalent to its Value. However, if some new technique arises which changes the method of weaving, reducing the time required to produce a given quantity of linen, the weaver will soon be made aware of this by the owners of money and potential buyers of his linen who will point out that his competitors are undercutting him. He will be forced to cut his prices no matter how much labour-time (either of his own or dead labour) have been used in the production of his linen. In fact, he will have an incentive to adopt the same technique himself.

At the height of the tech boom, many telecoms firms
hugely expanded their networks beyond what was
needed.  But, also companies like Cisco massively
overproduced fibre and switiching gear.  The latter was
wasted as it had a limited shelf life.
But, suppose he and all other weavers then adopt this new technique, each then produces with only the minimum labour-time required. It may still be that with this new more efficient method, the increased quantity of linen brought to market is in excess of the demand for it. In other words, the proportion of society's total labour-time devoted to the production of linen was too great. Some of the labour-time was not required, it was not socially necessary, and therefore, does not count as Value creating. If all the linen was produced under the same conditions then, as Marx put it in a later correction to his formulation in Capital,

And, as a matter of fact, the value of each single yard is but the materialised form of a part of the social labour expended on the whole number of yards.” (note * on p 109)

Again emphasising that what he is describing is an historical as well as logical development, Marx describes the way in which the Division of Labour first of all creates independent producers (breaking up communal production), as families begin to develop private property, which is inherited in the way Engels describes in The Origin Of The Family, Private Property and the State. But, then, having created these individual producers, the further development of the Division of Labour brings them once more into a condition of dependence on each other through the products of their labour. The Division of Labour creates the necessity, once more for co-operative labour, in a number of ways. First of all, producers are dependent upon all other producers to produce the range of commodities needed to meet their wants now that they have themselves begun to specialise in a particular line of production. Each meets their needs by exchange/selling their own production/commodities for those of others.

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