Capital III, Engels Supplement - Part 6

In the initial exchanges of products between primitive communities, it is not the none existence of value that leads to these products being exchanged in a haphazard manner, but, on the contrary, the inability to accurately compare that value, so as to organise exchange on the basis of it. In other words, it is the low level, and sporadic nature of such exchanges which prevents what today is called “price discovery”, or, in other words, its only when a minimum number of suppliers confront a minimum number of buyers that competition between them causes them to exchange their commodities at these values. That is particularly the case in respect of the first trades between geographically disparate communities, exchanging products that are more or less unique to each.

Engels goes on to describe the exchanges between the peasant direct producers and the urban artisans. These exchanges took place as direct barter, without the mediation of the merchant, and the basis of exchange of equal amounts of value. This again is possible because the artisan is still a peasant, and the peasant is familiar with the production of the artisan.

“People in the Middle Ages were thus able to check up with considerable accuracy on each other's production costs for raw material, auxiliary material, and labour-time — at least in respect of articles of daily general use.” (p 898)

For other types of production, which required long periods for completion, such as cattle raising, things were more complicated, especially amongst peoples whose ability to calculate may have been limited, though Engels' estimation of the extent to which this may have been the case is probably exaggerated. However, Engels' says when we consider that conditions of production remained more or less the same for centuries, and that the main requirement was to ensure that you covered your expenses, this gave considerable scope for arriving at fairly accurate values, on the basis of repeated approximations. In fact, even today, the process of price discovery is not an exact science, but proceeds on exactly this basis.

Watch the launch of an Initial Public Offering, on the New York Stock Exchange, and it proceeds on this basis, whereby widely variant prices for those offering to sell confront those bidding to buy. Over a period that may last several hours, the disparity of sellers to buyers is reduced, and the opening price band for the shares is successively narrowed, whilst the band itself may move higher or lower, until eventually the band is reduced to a single opening price, at which the shares then start actually trading.

“And that it by no means took so long for the relative amount of value of these products to be fixed fairly closely is already proved by the fact that cattle, the commodity for which this appears to be most difficult because of the long time of production of the individual head, became the first rather generally accepted money commodity.” (p 899)

This is impossible unless the value of cattle is well known and widely accepted as accurate by all those who trade on the basis of it.

“Starting with this determination of value by labour-time, the whole of commodity production developed, and with it, the multifarious relations in which the various aspects of the law of value assert themselves, as described in the first part of Vol. I of Capital; that is, in particular, the conditions under which labour alone is value-creating.” (p 899)

Note once again here that Engels insists that the determination of value by labour-time is the precondition even for the development of commodity production and exchange, let alone capitalism. Yet, as Engels himself describes, later, commodity production and exchange itself goes back at least 7,000 years!

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