Prior to capitalism, the vast majority of production is not of commodities. It is merely production of products for direct consumption. Even those products that are produced as commodities, for exchange, are generally produced only in order to exchange them for other products required for direct consumption. As products, i.e. use values created by labour, those products have value, but this value is not stamped on their face as an exchange-value or price, as it is with a commodity. Even the products used in the production of other products are not generally commodities at this stage, but are themselves only products.
“The transformation of products into commodities only occurs in individual cases, is limited only to the surplus of products, etc., or only to individual spheres of production (manufactured products), etc. A whole range of products neither enter into the process as articles to be sold, nor arise from it as such. Nevertheless, the prerequisite, the starting-point, of the formation of capital and of capitalist production is the development of the product into a commodity, commodity circulation and consequently money circulation within certain limits, and consequently trade developed to a certain degree. It is as such a prerequisite that we treat the commodity, since we proceed from it as the simplest element in capitalist production. On the other hand, the product, the result of capitalist production, is the commodity. What appears as its element is later revealed to be its own product. Only on the basis of capitalist production does the commodity become the general form of the product and the more this production develops, the more do the products in the form of commodities enter into the process as ingredients.” (p 112)
Prior to capitalism, commodity production and exchange occurs and develops, but the commodity at this stage is not the same as the commodity that emerges from capitalist production. The commodity, in those pre-capitalist modes of production, is not produced for the purpose of producing and realising profit. It is produced for the purpose of obtaining either some other commodity, via a process of barter, or else to obtain exchange-value, i.e. money, so as to be able to buy other products. It is, in fact, on this basis that commodities, in this phase, exchange at their exchange-values, rather than at prices of production.
But, under capitalism, the commodity becomes not just a means of obtaining exchange value, but of using it as capital, and thereby of gaining control over surplus value. The capitalist does not produce commodities in order to obtain their exchange-value, for the purpose of then simply acquiring other commodities, as symbolised by the circuit C – M – C, but rather produces them so as to produce a profit, so that the circuit here is P … C` - M`. M – C … P. In other words, as Marx sets out in Capital II, the circuit of industrial capital begins with a physical mass of commodities that constitutes their productive-capital, and their goal is to be able to start each new cycle with a physically larger mass of capital, because given any technical composition of capital, it is this physical mass that determines the amount of labour they employ, and it is this labour, which is the source of their surplus value. The capitalist always seeks to expand the physical mass of their capital, because it is that which enables them to produce on a larger, more efficient scale, so as to gain competitive advantage, and to gain market share relative to their competitors. Nothing could be more wrong then than to see the goal of the industrial capitalist as to merely expand the amount of exchange-value, money in their possession. That is rather the goal of the miser. For the capitalist, the aim is always to move this money form of capital on. The industrial capitalist seeks to continually turn money-capital into productive-capital, so as to produce on a larger scale – P...C` - M`. M – C … P; the merchant capitalist always seeks to convert money-capital into a greater quantity of commodity-capital, because it is from selling a greater quantity of commodities that they increase their own profits, and also reduce their own costs, so as to become more competitive – C` - M` - C2`; and as Marx sets out, even for the money-lending capitalist, their loanable money-capital can only act as capital if it continually passes out of their hands, and into the possession of borrowers – M – M` - M2. Money-capital can only ever be a momentary phase in the circuit of capital, an ephemeral form. As Marx puts it in Capital III, Chapter 24,
"“In the reproduction process of capital, the money-form is but transient – a mere point of transit.”
The circuit M – C … P ... C` - M`, is only ever the circuit of the newly invested money-capital, which, as soon as it has occurred, becomes superseded, by the circuit of industrial capital P... C` - M`.M – C ... P. The only other occasion where M – C … P ... C` - M` applies, is where the capital is being liquidated, as the firm closes down.
And, because the capitalist produces commodities in order to realise profit, the equilibrium point around which the market prices of these commodities fluctuate is no longer their exchange-value, but their price of production, i.e. their cost of production plus average profit.
“The commodity, as it emerges in capitalist production, is different from the commodity taken as the element, the starting-point of capitalist production. We are no longer faced with the individual commodity, the individual product. The individual commodity, the individual product, manifests itself not only as a real product but also as a commodity, as a part both really and conceptually of production as a whole. Each individual commodity represents a definite portion of capital and of the surplus-value created by it.” (p 112-3)
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