Chapter 2.2 – Medium of Exchange a) The Metamorphosis of Commodities - Part 5 of 8

If we turn from the sale of the commodity, C – M, and move to the second part of its circuit, M – C, this is its second metamorphosis, now becoming a completely different use value! All commodities when considered from the perspective of gold, i.e. from the perspective of their nominal price, are exchangeable for each other in these pre-determined ratios, i.e. the ratios of their values. It is those values that determine their exchange-value one to another, whether under barter or under money economy. Under the latter, this reality is simply obscured by the fact that the exchange-value of each commodity is expressed solely as its price, its exchange-value measured by the money commodity. But, if the value of money falls, so that the prices of all commodities double, their proportional relation to each other is not changed by that.

“The general result of the alienation of commodities is the absolutely alienated commodity. The conversion of gold into commodities has no qualitative limit but only a quantitative limit, the fact that the amount of gold, or the value it represents, is limited.” (p 92)

The money commodity is the absolutely alienated commodity, because, as money, its only function/use value is to be continually alienated, to be given up in exchange for other commodities. The only limit to this alienation is the amount of value/social labour-time for which it acts as universal equivalent. If we take something like linen, there is always a qualitative limit to its exchangeability, i.e. a limit to which it represents use value – for orthodox economics its marginal utility. Its not that Marxists deny the existence of this marginal utility, and diminishing marginal utility. As seen earlier, Marx himself described it in Theories of Surplus Value, Chapter 20, in relation to the demand for knives.

In terms of understanding demand, it certainly has a role to play, precisely because, as Marx describes, demand is a function of use-value/utility. What Marxists deny is that this marginal utility explains value, and consequently supply.

The value of linen, as with any commodity, is determined by the labour-time required for its production, and its exchange-value is determined by the ratio of this value to that of other commodities. Its price is its exchange-value in relation specifically to the money commodity. But all of these exchange-values, including its price are “ideal”, rather than real, because, to become real, each commodity must prove itself to be a use value, at that price, to a potential buyer. This point, is vital to understanding both Marx and Engels Theory of Crises, in relation to the overproduction of commodities, as against the overproduction of capital, and of understanding Marx's criticism of the petty-bourgeois concepts of Bray, Proudhon et al, in relation to the use of labour notes in place of money.

Its only, here, that the question of demand, and so of utility arises. The fact, however, that, at the “ideal” price, there may not be demand for the given commodity, does not change its “ideal” price or value. It does illustrate the existence of contradictions within the commodity between value and use-value, a contradiction that always has the potential to fly apart, and to manifest as crisis. In other words, it is always possible for any commodity to be overproduced – and this applies to non-capitalistically produced commodities – so that units of it are produced for which there is no demand at its ideal price.

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