Chapter 2.2, Medium of Exchange, a) The Metamorphosis of Commodities - Part 1 of 8

a) The Metamorphosis of Commodities

“Closer examination shows that the circulation process comprises two distinct types of circuit. If commodities are denoted by C and money by M, the two circuits may be represented in the following way:

C – M – C

M – C – M

In this section we are solely concerned with the first circuit, that is the one which directly expresses commodity circulation.” (p 87)

The circuit C – M – C is comprised of two movements, sale and purchase. First there is a sale for money, C – M, say, wine for money. Then there is a purchase, M – C, say, money for linen. So, the only result appears to be, as with barter, C- C, one use-value having simply been exchanged for another, with money acting only as medium of exchange, facilitating this transformation. Money, here, is clearly “ideal” money, insofar as it acts to determine the “ideal” prices of both commodities, at each pole of the trade. But, as medium of exchange, currency, the money cannot act simply as ideal money, as measure of value and unit of account, because, unlike barter, the money, or its representative, itself must be present, and physically take part in the transaction.

It is no longer a question of the money simply establishing an “ideal” price for the wine, but the buyer of wine must also prepared to pay this price, to hand over the required sum of money. As Marx again describes, in Theories of Surplus Value, this distinction money as measure of value/unit of account, as against medium of exchange, is another contradiction inherent in commodity circulation, and leading to crises. As he sets out, the longer the period between the determination of the ideal price and the point at which that ideal price must be realised, by being converted into real money, the greater the risk that the contradiction results in crisis.

With developed commodity production, on the basis of a social division of labour, Ricardo's objection, cited earlier, that no one produces other than with a view to consuming themselves, or else to selling, falls apart. Firstly, under such conditions, as opposed to barter, the independent commodity producer has become a specialised producer of commodities, not a direct producer who merely sells their surplus production. They do not produce to consume their own product, but to sell it. It is not a use value for them, but also, to be a commodity, it must be a use value for others. At any one time, it may or may not be such a use value.

As Marx sets out in Theories of Surplus Value, Chapter 20, its ideal price, having been established as its market value, it may or may not find a buyer, at that price. It may find demand for only part of the supply at that price, or it may find demand for the entire supply, but only at a lower market price than the market value. For the supplier of the commodity, unlike under barter, they cannot simply decide not to exchange. They must sell, because, under such conditions, they must have money to buy the commodities required for their own consumption, to buy the materials required to continue their production, to pay rents and taxes etc. So, they must sell at whatever price they can get.

“The price while on the one hand indicating the amount of labour-time contained in the iron, namely its value, at the same time signifies the pious wish to convert the iron into gold, that is to give the labour-time contained in the iron the form of universal social labour-time. If this transformation fails to take place, then the ton of iron ceases to be not only a commodity but also a product; since it is a commodity only because it is not a use-value for its owner, that is to say his labour is only really labour if it is useful labour for others, and it is useful for him only if it is abstract general labour. It is therefore the task of the iron or of its owner to find that location in the world of commodities where iron attracts gold.” (p 88)

If it does, then the imaginary gold, which determined its ideal price, the universal labour required for its production, is converted into real gold, as the buyer hands over gold to this same amount.

“During the sale C—M, and likewise during the purchase M—C, two commodities, i.e., units of exchange-value and use-value, confront each other; but in the case of the commodity exchange-value exists merely nominally as its price, whereas in the case of gold, although it has real use-value, its use-value merely represents exchange-value and is therefore merely a formal use-value which is not related to any real individual need.” (p 89)

Back To Chapter 2.2

Forward To Part 2