As Marx discusses in Theories of Surplus Value, in previous modes of production, when producers failed, they became slaves, debt slaves, servants, serfs or paupers. But, now, the conditions, in the towns, are created where, instead, they become wage workers. Unlike the slave or serf, they remain free, as does their labour, but, now, they sell, not the product of their labour, but their labour-power itself as a commodity.
So, as soon as commodity production begins, around 7-10,000 years ago, the value of these commodities ceases to be individual value, inextricably combined with their use-value, and instead becomes manifest as exchange-value. The more commodity production and exchange develops, the more value takes this form of exchange-value, and the more this exchange-value is an accurate reflection of relative values. This occurs as products become commodities. And, when a money commodity arises, the value of commodities is no longer manifest as a series of exchange values according to their relations to one another, but is manifest as a single exchange-value against this money commodity, i.e. it is expressed as a money price. This is why money does not arise because it is more convenient, but is an inevitable consequence of the exchange of commodities themselves.
The existence of money means that the more successful commodity producers can hoard it, and, in doing so, can turn it into interest-bearing capital, and merchant capital. In the former, they can lend it out at interest so that we have M – M`, where M` - M = interest. For money used as merchant's capital, the owner of the capital can buy materials in larger quantities, at lower prices, or they may use their market position to be a buyer-up of the output of smaller producers, taking their output to more distant markets, where higher prices can be obtained, M – C` - M`. All of these instances are described by Lenin in his polemics against the Narodniks, in describing the development of capitalism in Russia.
As soon as capitalist production commences, around 600 years ago, a further change in the manifestation of value occurs. The capitalist producer is only interested in investing capital in order to produce profit, and, in particular to produce the highest possible annual rate of profit. As Marx explains in Capital III, there are two determinants of the annual rate of profit, one is the organic composition of capital, the other is the rate of turnover of capital. A capital that turns over more times in a year will produce a higher annual rate of profit than a capital of the same composition that turns over more slowly. Capitals that have a lower organic composition of capital (c:v+s) produce a higher annual rate of profit than capitals with a higher organic composition that turn over at the same rate. This means that capital will tend to accumulate faster in those spheres of production where the organic composition of capital is low and rate of turnover is high.
However, when it came to the primary accumulation of capital, this was not the case, as Engels describes. The primary accumulation of industrial capital, and employment of wage-labour, depended upon the former independent commodity producers having to sell their labour-power. Given that these producers had their own small plots of land, they were all mostly able to reproduce their labour-power. When they failed, it was because they could not reproduce the value of the materials used in production of their commodities. The higher the value of those materials either because a large quantity was consumed (technical composition), or because the materials themselves were of high value (value composition) the harder it was for them to reproduce them.
The first spheres to succumb to capitalist production, therefore, are those that had a high organic composition, or had a low rate of turnover. In these spheres, merchants were able, now, to supply the materials they would previously have sold to the independent producer. They then take the finished product from them, paying the producer only the equivalent of a wage for the labour added. So, now, in addition to their previous merchant's profit, they obtain surplus value directly from production, being the difference between the new value created by the labour of the worker, and the wage paid to them.
As capitalist production spreads from one sphere after another, however, it accumulates faster in those spheres where the organic composition is lower or rate of turnover higher. This is the basis of Marx's Law of the Tendency for the Rate of Profit to Fall, and its significance for political economy in explaining the allocation of capital across the economy, the formation of an average industrial rate of profit, and prices of production. And, the significance of this is also that a new manifestation of value arises. Commodities, then, no longer appear whose value takes the outward form of exchange-value or money price, but which now takes the form of their price of production. As Engels puts it,
“In a word: the Marxian law of value holds generally, as far as economic laws are valid at all, for the whole period of simple commodity production — that is, up to the time when the latter suffers a modification through the appearance of the capitalist form of production. Up to that time, prices gravitate towards the values fixed according to the Marxian law and oscillate around those values, so that the more fully simple commodity production develops, the more the average prices over long periods uninterrupted by external violent disturbances coincide with values within a negligible margin. Thus, the Marxian law of value has general economic validity for a period lasting from the beginning of exchange, which transforms products into commodities, down to the 15th century of the present era.”
(Engels – Supplement To Capital III)
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