What we are dealing with, here, is the way in which a natural law, The Law of Value, becomes manifest in specific historical forms. As Marx sets out in his Letter To Kugelmann, its not that The Law of Value, itself, changes, but only that its form of manifestation changes in different modes of production. In fact, as Engels sets out, in his Supplement to Capital III, it is not under capitalism that The Law of Value assumes the classic form in which commodities exchange on the basis of their values, but under the generalized commodity production that precedes capitalist production.
“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. But the exchange of commodities dates from a time before all written history — which in Egypt goes back to at least 2500 B.C., and perhaps 5000 B.C., and in Babylon to 4000 B.C., perhaps to 6000 B.C.; thus, the law of value has prevailed during a period of from five to seven thousand years.”
From the time that capitalist production begins, in the 15th century, this particular manifestation of The Law of Value, of commodities exchanging at their values, ceases, because the driving force of capital is the maximization of the annual rate of profit. Because capital, then, is drawn towards those spheres where the annual rate of profit is highest, it increases the supply of those commodities relative to the demand, and, consequently, reduces their market prices below their exchange-value. The opposite occurs in relation to those commodities where the annual rate of profit is lowest. That does not mean that The Law of Value itself ceases to exist, but simply that its form of manifestation, under capitalism, is transformed, just as it took a different form under commodity production and exchange as against direct production.
And, although competition between commodity producers, to gain market share, is what leads, itself, to the development of capitalism, the competition which, then, arises, under capitalism, has different laws and dynamic to those existing under simple commodity production and exchange, as Marx sets out in Capital III, Chapter 10.
"The exchange of commodities at their values, or approximately at their values, thus requires a much lower stage than their exchange at their prices of production, which requires a definite level of capitalist development.... Apart from the domination of prices and price movement by the law of value, it is quite appropriate to regard the values of commodities as not only theoretically but also historically antecedent (prius) to the prices of production. This applies to conditions in which the labourer owns his own means of production, and this is the condition of the land-owning working farmer and the craftsman, in the ancient as well as in the modern world. This agrees also with the view we expressed previously, that the evolution of products into commodities arises through exchange between different communities, not between the members of the same community. It holds not only for this primitive condition, but also for subsequent conditions, based on slavery and serfdom, and for the guild organization of handicrafts, so long as the means of production involved in each branch of production can be transferred from one sphere to another only with difficulty and therefore the various spheres of production are related to one another, within certain limits, as foreign countries or communist communities."
Under capitalism, it is the drive to maximize profit that creates the specific dynamic of capitalist competition.
“therefore a scientific analysis of competition is only possible when the inner nature of capital is understood, just as the apparent motions of the heavenly bodies are not intelligible to any but him who is acquainted with their real motions, which are not directly perceptible by the senses; and then Marx gives an example to show how in a definite case, a definite law, the law of value, manifests itself and exercises its motive power in competition. Herr Dühring might see from this alone that competition plays a leading part in the distribution of surplus-value, and with some reflection the indications given in the first volume are in fact enough to make clear the transformation of surplus-value into its subforms, at least in its main features.” (p 274)
As Marx sets out, in Capital III, and Theories of Surplus Value, this specific form, of capitalist competition, also, then, provides an objective, scientific basis for an explanation of rent and interest, and commercial profit. The last has been described earlier, but Marx, also, explains why it is the average industrial rate of profit, which also, determines the allocation of capital between productive and commercial capital. If capital engaged in the latter sphere is making more than the average industrial rate of profit, more capital will be drawn towards it. That will increase competition in that sphere, meaning that productive-capital will be able to raise the prices it charges the commercial capitals, and, consequently increasing its own rate of profit, while reducing that of commercial capital. The opposite would apply where commercial capital was making less than the average industrial rate of profit.
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