The objective conditions of supply determine market value, but this is always a market value for the whole production of a given commodity, which then confronts the question of demand. Demand is always effective demand, i.e. demand at a price, and there is no guarantee of sufficient demand at a price equal to this market value. Depending upon whether demand is greater than or less than supply at the market value, market prices will rise above or fall below the market value, and this will then cause supply to rise or to fall accordingly, and these changed material conditions of supply, will, in turn impact the market value.
“This universal labour-time finds its expression in a universal product, a universal equivalent, a definite amount of materialised labour-time, for which the distinct form of the use-value in which it is manifested as the direct product of one person is a matter of complete indifference, and it can be converted at will into any other form of use-value, in which it appears as the product of any other person.” (p 32)
This universal equivalent is the money commodity. As Marx says in Theories of Surplus Value, Chapter 4, every commodity is money, in the sense that it represents a given amount of this abstract social labour-time. It represents a proportional part of total social labour, and, thereby, a claim to an equivalent amount of social labour in some other form. The price of wine, linen or iron can be expressed as a corn price, for example, i.e. a given amount of iron, wine or linen can be expressed as so much corn. Indeed, its precisely this that enables some single commodity, be it cattle, copper, silver or gold to be singled out to act as the money commodity. What distinguishes it from the other commodities, as money, is that it is in this single commodity that the value of all others is measured, and it is this single commodity that is universally accepted in exchange for any other.
In the commodity, the inextricable connection between value and use-value of the product is severed. The owner of any commodity can alienate its use-value, by exchanging it, but they retain its value, now contained in the commodity obtained in exchange. Exchange-value now exists separated from use-value. Money is exchange-value incarnate. Money does not exist as a use-value like any other commodity. It does not exist to be worn, eaten, and so on, but only to act as a physical representative of social labour-time. And, it is important to remember that this is actually what money really is – it is universal social labour-time – and a money commodity is merely the physical embodiment of it.
From that perspective, it does not matter what this commodity is that acts as money commodity. Different factors affected what best performed the requirements at different times. The use of cattle as the money commodity has been mentioned, because cattle were widely traded and the labour required for their production well known, as Engels describes.
“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. To accomplish this, the value of cattle, its exchange ratio to a large number of other commodities, must already have attained a relatively unusual stabilization, acknowledged without contradiction in the territories of many tribes. And the people of that time were certainly clever enough — both the cattlebreeders and their customers — not to give away the labour-time expended by them without an equivalent in barter.”
(Capital III, Supplement)
But, it is the specific qualities of the precious metals, and particularly gold, that makes them ultimately the money commodity adopted. However, its important to remember that money is simply universal social labour-time, and so gold is not inherently money: it is a money commodity, a physical representative of it. This is crucial in understanding the nature of money tokens, as against money or the money commodity.
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