How does this occur in practice? Marx discusses it at greater length in Capital II, where he moves from the discussion of many capitals, in Volume I, to the circulation of commodities, and capital between them.
“It is evident, however, that in countries where gold and silver are produced a definite amount of labour-time is directly incorporated in a definite quantity of gold and silver, whereas countries which produce no gold and silver arrive at the same result in a roundabout way, by direct or indirect exchange of their home products, i.e., of a definite portion of their average national labour, for a definite quantity of labour-time embodied in the gold and silver of countries that possess mines.” (p 66-7)
And, indeed, involved in this process then enters the question of universal labour at an international level, and so differential rates of labour productivity in different countries. These issues are dealt with in Capital II and III, where Marx and Engels deal with capital in general, and the issues of foreign trade, world money, and currency exchange rates. Had Marx had more time, his plan was to go way beyond that, encompassing analysis of competition, and the world market, and the state.
Marx sets out the ideas also contained in Theories of Surplus Value, Chapter 20, that, whereas value is absolute and measured directly by labour-time, exchange value is relative, and measured indirectly by a quantity of some other use value. So, the search for some absolute measure of exchange-value is a fool's errand, because exchange-value can only be measured in terms of some given commodity, and the value of this commodity, as with all others, must constantly change, as a result of constant changes in social productivity.
“Gold must be in principle a variable value, if it is to serve as a measure of value, because only as reification of labour-time can it become the equivalent of other commodities, but as a result of changes in the productivity of concrete labour, the same amount of labour-time is embodied in unequal volumes of the same type of use-values. The valuation of all commodities in terms of gold – like the expression of the exchange-value of any commodity in terms of the use-value of another commodity – merely presupposes that at a given moment gold represents a definite quantity of labour-time.” (p 67)
And, again, here, is manifest Marx's analysis of inflation as a monetary phenomenon. If the value of gold remains constant, then the price of a metre of linen can still rise if the value of linen itself rises, because the exchange-value of linen is determined by the proportional relation between its value and the value of other commodities, and similarly, its price is determined by the proportional relation to the value of the money commodity. If the value of a metre of linen is 10 hours of labour, and of a gram of gold is 10 hours of labour the price of the linen is 1 gram per metre. If the value of linen rises to 20 hours, its price rises to 2 grams per metre. This is not inflation, a rise in the general level of prices, but merely an increase in the value of linen.
Assuming no change in the value of iron, the price of iron, and likewise other commodities, is not changed by it, and so, too, with the general level of prices. If, however, the value of gold falls, then, even though the value of all other commodities remains the same, all of their prices will rise, because their proportional relation to the money commodity has changed – inflation. If the value of all commodities rises, then, this represents a fall in social productivity, in general. But, then, that would also affect the value of gold too. For example, if the value of energy rises that is transferred into the energy required for mining, if steel rises in value that passes into the value of pit props, rails and so on, into mining machines, etc.
So, if the value of linen doubles from 10 hours to 20 hours, as does the value of all other commodities, then the value of gold would be expected to double too. In that case, where the price of a metre of linen was 1 gram of gold, both being equal to 10 hours of labour, the price, now, would still be 1 gram of gold, because both now are equal to 20 hours of labour. This could only vary if the proportional change in the value of gold was different to that for all other commodities, again illustrating the point that inflation is a monetary phenomenon, and one that becomes all the more apparent when money tokens take the place of the money commodity.
“The law of exchange-value set forth earlier applies to changes occurring in the value of gold. If the exchange-value of commodities remains unchanged, then a general rise of their prices in terms of gold can only take place when the exchange-value of gold falls. If the exchange-value of gold remains unchanged, then a general rise of prices in terms of gold is only possible if the exchange-values of all commodities rise. The reverse takes place in the case of a general decline in the prices of commodities.” (p 67)
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