Commodity Production
Marx is renowned for his commitment to what is taken to be the labour theory of value. Many different aspects of his analysis of value and capital(ism) have been subjects of fierce controversy, both amongst those who are for and those who are against Marx and, something that is closely related but distinct, over differing interpretations of what he really meant: commentators disagree about what Marx is saying as well as about whether it is correct or not. As a result, there are various interpretations of the labour theory of value, many of which are foisted upon Marx out of ignorance, a wish to dismiss him or, perversely, in seeking to defend him. Further, it is often possible to trace disputes over Marx’s political economy back to differences over his value theory. Rightly or wrongly, two issues have been fundamental in these continuing debates: has Marx unduly privileged labour in some way by adopting the labour theory of value, and how well does the labour theory of value serve as a theory of prices?
The purpose of this chapter is to embark upon an analytical journey that is carried forward through the remainder of the book. We ask various questions of the labour theory of value, ones that are close to the method and content of Marx’s work. For him, the labour theory of value cannot be proved correct by some conceptual wizardry or through technical or algebraic acrobatics. Rather, Marx’s value theory aims to reproduce in thought – at increasing levels of complexity – the key economic relations, processes and structures prevailing in capitalist society (see Chapter 1). It is against this test that his value theory, and interpretations of it, should be judged. While Marx’s value theory has simple beginnings, which are the focus of this chapter, it becomes richer and more complicated as it gradually unfolds in order to confront, explain and incorporate the complexities of capitalism itself. It will be shown in later chapters that these complexities do not negate Marx’s value theory. Instead, they confirm its internal consistency and explanatory power, but within limits that need to be acknowledged to avoid ‘reductionism’ – the notion that everything can be explained by the theory of value. This is a matter of incorporating more material that is historically specific in order to proceed further.
In analysing a mode of production, such as capitalism, Marx’s starting point is always production – how do capitalist societies produce the material conditions of their own reproduction?
In any society, production creates use values, that is to say useful things such as food, clothing and houses, as well as immaterial products like educational, health and other personal services, all of which are (more or less) necessary for the continuing existence of the society. Thus, the division of labour and the production of use values can be taken for granted as enduring features of human organisation since our origin as a species. But who produces what and how, and with what implications for the economy and society, are crucial questions across the social sciences. Different disciplines and ideologies have given different answers, ranging from natural order and (religious) tradition through the pursuit of self-interest to the idea of necessity as the mother of invention. Mainstream (orthodox or neoclassical) economics, in particular, has taken the need for consumption and the human capacity to make choices as justifying a universal approach or method in which economics is the science concerned with the allocation of scarce resources to meet insatiable needs. From this viewpoint, the economy may be organised through the market, the state, the household or through slavery, for example. These are merely details, as opposed to the fundamental duality between scarcity and need that is the focus of mainstream economics and which provides the yardstick with which to measure the relative efficiency of the alternative ways of organising society and its component parts, such as firms, the family or the government.
By contrast, for Marx, social, especially class, relations are essential in distinguishing one economy from another, as well as revealing differences within an economy. This involves not only the property and distributional relations that define the modes of production, or who owns what and why, but also how ownership is organised and gives rise to forms of control of labour and its products, as well as other aspects of social organisation. Thus, for example, a crucial feature of capitalism is that it is a highly developed system of commodity production – but what is the significance of commodities? Following Adam Smith, Marx distinguishes use value from exchange value within each commodity: their usefulness, which cannot be quantified in general, from the ability to exchange with other commodities, which can be quantified. Every commodity has a use value, or ability to satisfy human needs, without which it could not be sold and, therefore, would not be produced for sale. But not every use value is a commodity; for example, use values that are created naturally, freely available or not exchanged for money on the marketplace have no exchange value (for example sunlight, air, open spaces, wild fruits, production for personal use, production for, or on behalf of, relatives or friends, or ‘public goods’, including access to open roads or to freely available public health and education systems).
Exchange value embodies an equivalence relationship between objects. This relationship has to satisfy certain properties that become familiar to us in daily life, especially in the marketplace and in commercial calculation. For example, if x exchanges for y (which can be represented as x ~ y), then, in general, 2x ~ 2y. If, in addition, u ~ v, then (u and x) ~ (v and y), and so on. But there is an unlimited number of relationships satisfying these properties, for example, weight or volume. The question Marx seeks to answer is what social relationship can provide the basis for systematic (rather than fortuitous) market exchanges and, more generally, for social reproduction under the specific historical circumstances of capitalism? What is it that allows commodities to be equivalents in exchange? In the case of weight or volume, equivalence is due to physical or natural properties (namely mass and size, respectively), properties that exist irrespective of whether and how they are actually measured and which are independent of exchange or mode of production. Further, although every commodity is characterised by its particular physical properties that, in part, give it its use value (the other part being derived from the culture of consumption and use), its exchange value is unrelated to these properties. As mentioned already, the most useful things, air, sunlight and water, often have little or no exchange value.
What creates the relationship of exchange, then, is not a physical relationship between goods, but a historically specific social one, not least the way in which the production of use values is organised – for the market and generally for profit, in the case of commodities produced in capitalist societies. Mainstream economics has begun to take more notice of this recently by accepting that institutions, trust, culture, and so on, influence exchanges, not least because markets are, invariably, ‘imperfect’ in some sense. But this is to get the argument the wrong way round. Before examining institutions as the response to market imperfections, the market itself has to be explained as an ‘institution’, or otherwise. At a deeper level, markets are not simply neutral structures of exchange, but are specific in each case, since they fundamentally reflect the social relations that underpin them; as can be observed, for example, in the differences between the markets for foreign currency, oil, computers and foodstuffs.
This leads Marx to suggest that underlying the equivalence between commodities as use values is a social relationship between the producers of those commodities. This is because, for Marx, it is axiomatic that throughout history people have lived by their labour: if everyone stopped working, no society would survive beyond a few days. Further, in all but the simplest societies, some have always lived without working, that is, they have lived by the labour of others. However, the appropriation of one person’s labour (or its products) by another takes different forms and is justified in different ways. Under feudalism, the products are often distributed by direct appropriation justified by feudal or even divine right. Under capitalism, the products of labour generally take the form of commodities, and they are generally distributed by market exchanges. How this market freedom brings about an appropriation of the labour of one class by another will be discussed in Chapter 3. For the moment, we are only interested in the nature of the exchange relationship. In other words, in a commodity-producing society, what is special about production and labour?
To answer this question, Marx defines commodities as use values produced by labour for exchange. This means that not everything which is exchanged, even through the market, is a commodity. Perhaps this is readily acceptable in the case of bribery, casually marketed second-hand goods or even works of art, although each of these can command a price (i.e. take the form of commodity) in its own way. But, in part to anticipate, for Marx these are incidental phenomena, playing no fundamental roles in economic and social reproduction, and they are causally and analytically to be abstracted from when addressing commodity production in general and under capitalism in particular.
It follows that a fundamental property which all commodities share in common is that they are the products of labour. This property draws upon the fundamental insight that societies cannot live (and profits cannot arise) through exchange alone but, instead, that systematic exchange must be grounded within a specific mode of production in order to sustain itself (and society). By the same token, in commodity society concrete labours (producing specific use values) are not performed casually, but as part of an intricate social division of labour which connects them with one another through the market, that is, through the exchange of their products for money.
This is a qualitative and impersonal social relationship. For example, we generally buy commodities without knowing anything about who has produced them and how. For commodity production requires a division of labour within and across different workplaces, where different labours are contributed, brought together and measured against one another, albeit indirectly, through the market. This social process is the basis of the labour theory of value, and it embodies relationships that can easily be theoretically quantified by analysing exchange from the viewpoint of the labour time socially (rather than individually) necessary to produce commodities: for example, the amount of labour time required to bake a loaf of bread when contrasted with that required to sew a shirt (and, just as importantly, how these labour times are determined and modified through technological and other changes). It follows that, for Marx, the labour theory of value is not a metaphysical notion. Instead, it analytically captures the essential aspects of material life under capitalism, concerning how production is organised and attached to the market, and how the products of social labour are related to one another, appropriated and distributed within society.
Marx realises that in capitalist societies, where products typically take the form of commodities, production is primarily undertaken for exchange for profit rather than for direct or immediate use. Capitalism is a system that aims to produce social use values – use values for others unknown because of the anonymity of the market. The production of social use values, market exchanges and profit making are intimately linked to one another. But just as products embody social use values, so they are created by social labour in the abstract (by wage workers unknown, hired through the labour market and disciplined within competing firms by the profit imperative, and outside them by the credit system and the stock market). In this way, the products of concrete labour count as abstract social labour in capitalist societies, and exchange does not concern quality or type of concrete labour, but only quantity of abstract labour, expressed through commodity prices. In exchange, what matters in how much you have to pay is not the use value you want – whether the labour time was expended by a baker, tailor, bus driver or computer programmer – but what amounts of abstract (socially necessary, rather than individual and concrete) labour time have been expended.
For Marx, the value of a commodity is the labour time socially necessary to produce it, including both direct (living) and indirect (dead, or past) labour inputs – the labour time necessary to produce the required means of production.
This is not to suggest that commodities must exchange at their values. Market prices will be affected by the ratios of indirect to direct labour, scarcities, skills, monopolies, tastes and by more or less accidental variations in supply and demand, in addition to profit equalisation across competing sectors (see Chapter 10). These contingent influences have been the primary objects of study of orthodox economists since the (neoclassical) marginalist revolution of the 1870s, with little advance being made on Adam Smith’s ideas of the 1770s, except through increasing mathematical sophistication. Marx did not ignore these complicating factors, but nor did he put them centre stage, for they are irrelevant for uncovering the social relations of production specific to capitalism. If this cannot be done on the assumption that commodities exchange at their values, it certainly cannot be done in the more complicated cases when they do not. Throughout this book, unless otherwise stated, it will be assumed that commodities exchange at their values. This is not to be interpreted as a fully fledged price theory, but as an attempt to understand the nature of the price system and the essential processes underpinning the economic reproduction of capitalist societies.
Thus capitalism, as generalised commodity production for profit, is characterised by the production of social use values and, therefore, the exchange of the products of concrete labours that exist, and contribute to value, as abstract social labour. Methodologically, this is not an analytical imposition of the notion of value, but simply a reflection of what the market system does – it connects concrete labours with one another and measures them against each other. Marx did not base his concept of value on a mental construct removed from the real world and requiring arbitrary (invented) assumptions in order to suit the theory. Rather, his argument is based upon the fact that the reduction of all types of labour to a common (price) standard is a necessary and spontaneous product of the real world of capitalism itself. Drawing upon the methodological analysis in Chapter 1, Marx’s labour theory of value first and foremost reproduces in thought the way in which capitalism actually organises the production of the goods and services necessary for social reproduction. It recognises that the relationship between commodities as use values (their relative prices) is the outcome of an underlying social relationship between the producers that expresses the equivalence between their own qualitatively different concrete labours as abstract social labour. The important point is that the relationship between exchange, prices and values is not exclusively, or even primarily, quantitative; instead, it reflects definite social relations of production, distribution and exchange. It is these that must be understood.
The previous section has shown that, in capitalist society, the exchange of different types of products of labour takes place through the exchange of commodities. This could occur without capitalism, for example if the members of a hypothetical society of independent artisans exchanged their products directly – what is often termed simple commodity production. However, this is more a logical possibility than a mode of production that has ever been historically dominant. The thought experiment serves to highlight that what characterises capitalism is not the exchange of products, but the purchase and sale of the workers’ capacity to labour and its use in commodity production for profit.
To distinguish the workers themselves from their ability or capacity to work, Marx called the latter labour power, and its performance or application labour. These concepts are very important for the labour theory of value, but they are often misunderstood.
The most important distinguishing feature of capitalism is that labour power becomes a commodity. The capitalist is the purchaser, the worker is the seller, and the price of labour power is the wage. The worker sells labour power to the capitalist, who determines how that labour power should be exercised as labour to produce particular commodities. As a commodity, labour power has a use value, which is the creation of other use values. This human capacity is independent of the type of society in which production takes place. However, in capitalism use values are produced for sale and, as such, embody abstract labour time or value. In these societies, the commodity labour power also has the specific use value that it is the source of value when exercised as labour. In this, labour power is unique: the consumption of all inputs assists in the production of the output, but only the consumption of labour power also adds value as labour time to the output.
In capitalist society the worker is not a slave in the conventional sense of the word and sold like other commodities, but owns and sells labour power. Also, the length of time for which the sale is made or formally contracted is often very short (one week, one month, or sometimes only until a specific task has been completed; for example, in so-called ‘zero-hour contracts’). Yet in many other respects the worker is like a slave. The worker has little or no control over the labour process or its product. There is the freedom to refuse to sell labour power, but this is a partial freedom, the alternative ultimately being starvation or social degradation. One could equally well argue that a slave could flee or refuse to work, although the level and immediacy of retribution are of a different order altogether. For these reasons the workers under capitalism have been described as wage slaves, although the term is an oxymoron. You cannot be both slave and wage worker – by definition, the slave does not have the freedoms that the wage worker enjoys, irrespective of other conditions.
On the other side to the class of workers are the capitalists, who control the workers and the products of their labour through their command of wage payments and ownership of the means of production. This is the key to the property relations specific to capitalism. For the capitalist monopoly of the means of production ties the workers to the wage relation, as explained above. If the workers owned or were entitled to use the means of production independently of the wage contract, there would be no need to sell labour power rather than finished products on the market and, therefore, no need to submit to capitalist control both during production and outside it.
Drawing the distinction between labour and labour power shows that the labour theory of value not only captures the distributional relationships established through the exchange of labour products, but also embodies and expresses the relations of production and exploitation specific to capitalism. The social exchange of labour power for money, like the exchange of the products of labour through the market, presupposes, on the one hand, the monopoly of the means of production by the class of capitalists and, on the other, the existence of a class of wage workers with no direct access to the means of production (see Chapter 6). Not surprisingly, this critically important distinction between labour and labour power is never drawn in mainstream economics, with its ‘neutral’ terminology of factor inputs (including labour) and outputs. The mainstream terminology suggests that the labour and capital inputs contribute in the same way to the production process, so much so that workers are conceptualised as ‘human capital’, and thereby reduced to the status of physical inputs, as is ‘capital’ itself, rather than being seen as arising from historically specific class relations.
Marx perceives that the exchange of produced use values reflects the social organisation of labour that has produced these commodities. But to many of his contemporary economists and to nearly all subsequent ones, the relationship between workers and the products of their labour remains merely a relationship between things, of the type x loaves of bread = 1 shirt, or one worker week is worth so much of a standard of living (the wage bundle). Thus, while capitalism organises production in definite social relationships between capitalists and workers, these relationships are expressed and appear, in part, as relationships between things. These social relations are further mystified when money enters into consideration and everything is analysed in terms of price. Marx calls such a perspective on the capitalist world the fetishism of commodities. It is most apparent in modern economics where, as was shown above, even labour power is treated as an input or factor like any other. Factor rewards are seen first and foremost as being due to the physical properties of the inputs, as if profit, interest or rent were directly produced by machinery, money or land, rather than by people existing together in particular relationships and societies.
Marx draws the brilliant parallel between commodity fetishism and feudal religious devotion; this is hardly surprising given the earlier influence of Feuerbach. God is humanity’s own creation. Under feudalism, human relationships with God conceal and justify the actual relationships to fellow humans, an absurd bond of lordly exploitation as it appears to the bourgeois (capitalist) mind. Capitalism, however, has its own God and Bible. The relationship of exchange between things is also created by people, concealing the true relationship of exploitation and justifying this by the doctrine of freedom of exchange.
But there is a major difference between religious and commodity fetishism. For, whereas God is a creation of religions, commodities do have a real existence, and their exchange represents and, to some extent, conceals the social relationships of production (see Chapter 1). Similarly, the price system does exist and is attached to the broader economic and social system, but without making the nature of that system transparent. In particular, buying and selling commodities does not reveal the circumstances by which they have come to the market, or the exploitation of the direct producers (the wage workers) by the capitalist class. Consequently, Marx’s emphasis is upon prices as a value system, determined by the class relations of production and exploitation. But it is not only class and production relations that are fetishised by their commodity form. For example, it is only by tracing back from the marketplace through to production that we can pierce through the veil of advertising and discover whether products are, for example, environmentally friendly, or ‘organic’, or free from exploitation of child labour, and so on.
In this light, commodity fetishism can become the basis of a theory of alienation or reification. Not only are the workers divorced from the control of the product and the process of producing it, but also their view of this situation is normally distorted or, at most, partial. Further, the capitalists are subject to social control through competition and the need for profitability. For both capitalists and workers, it appears that external powers exert this control, and not the social relations of production and their effects under capitalism. Once again, there is a sense in which this is true. For example, loss of employment or bankruptcy may be blamed on a thing or an impersonal force, as in the unfortunate introduction (or, alternatively, breakdown) of a machine, changes in consumer preferences, international competition, or economic crisis of whatever origin or cause. Most recently, ‘globalisation’ has been understood in generic, almost religious, terms as being able to explain all things good or bad about contemporary capitalism (see Chapters 14 and 15). But to breathe analytical and explanatory life into competition, economic crisis and globalisation, and go beyond mysticism, we must start with a clear understanding of the social relations underpinning capitalist production, rather than fetishise its effects.
The distinction between religious and commodity fetishism is not simply academic. Because of its imaginary origins, religious fetishism can readily be rejected, at least in theory, although in reality it is buttressed by material forces and practices that give it considerable influence over our daily lives and across the range of human history. By contrast, however well it is understood, it is not possible to wish away the price system by an act of will, except in marginal instances and fragile attempts at self-sustainability. As a result, and here again there is a parallel with religious fetishism, it is possible for underlying capitalist realities to be grasped from time to time through the consequences of daily practices and reflection upon them. Just as it can be realised that God does not exist, so it can be seen that capitalism is an exploitative class system that is far from free, whatever the degree of (in)equality before the market. This opens up the terrain for both material and ideological struggle. For the existence of profits, interest and rent indicates that capitalism is exploitative; as a consequence, unemployment, economic crises, inequalities, environmental degradation, and so on, become as transparently visible as the inability of the meek to inherit the earth or eat pie in the sky when they die.
This raises two closely related and hotly debated issues within Marxism and across the social sciences and the political spectrum more generally. The first is the methodological and analytical question of how to order the diverse empirical outcomes associated with capitalism. Can we deal with inequality independently of class, poverty apart from economic and other forms of repression, and growth separately from crisis? Second, to what extent are such conditions endemic to, or reformable within, capitalism? For it is not simply a matter of the logical connections between the different categories of political economy, between value and price for example. One of the strengths of Marx’s Capital, acknowledged by friend and foe alike, is to have pointed to the systemic character of capitalism and to its essential features. By the same token, Marxism’s antipathy to reformism, other than as part of a broader strategy for socialism, is based on reformism’s inevitable limitations within, and accommodation to, the confines imposed by capitalism. Around these issues, there remains much room for dispute over method, theory and the politics of reform, in debate both within and against Marxism.
Such perspectives shed light on Marx’s own intellectual development. For his mature concept of commodity fetishism forges a link with earlier work (in the Economic and Philosophic Manuscripts of 1844). Here, while breaking with Hegelian idealism and adopting a materialist philosophy, he developed a theory of alienation. This concentrated on the individual’s relationship to physical and mental activity and to fellow beings, and on consciousness of these processes. In Capital, after extensive economic study, Marx is able to make explicit the coercive forces exerted by capitalist society on the individual. These can be the compulsion of profitability and wage labour, or the more subtle distortions by which these forces are justified ideologically: abstinence, the work ethic, consumerism, freedom of exchange, and other aspects of commodity fetishism. Unlike other theories of alienation, a Marxist theory places the individual in a class position and examines the perceptions of that position. Each is not seen, in the first instance, as a powerless individual in an unexplained ‘system’ of irrationality, impersonality, inequality, authoritarianism, bureaucracy, or whatever. These phenomena have their own character and function in capitalist society at a particular time. They can only be understood as a whole or in relation to individuals against the perspective of the workings of capitalism, as is explained in the following chapters.
Marx’s value theory is extremely controversial among proponents and opponents alike. An essential starting point in assessing debates is the distinction between the approaches of Ricardo and Marx, with many erroneously identifying the two as holding to the (same) labour theory of value. But Ricardo simply counts labour time to explain price, without investigating why products take the form of commodities. The latter is Marx’s starting point, justifying value as a category in his approach, since society itself, through the capitalist production process and the market, undertakes the qualitative and quantitative comparison of (concrete) labour times. On this, see especially Geoffrey Pilling (1980), and the contributions in Ben Fine (1986), Diane Elson (1979a) and Jesse Schwartz (1977, pt.5).
Marx’s theory of value is discussed extensively throughout his mature works, especially Marx (1976, pt.1, 1987). For a concise overview of the theory and its implications, see Marx (1981a, pt.7, 1998); see also Friedrich Engels (1998, pt.2). The interpretation in this chapter draws upon Ben Fine (1980, ch.6, 2001, 2002, ch.3), Ben Fine, Gong Gimm and Heesang Jeon (2010) and Alfredo Saad-Filho (2003b). For similar views, see Diane Elson (1979b), Duncan Foley (1986, ch.2), David Harvey (1999, ch.1, 2009, 2010), Moishe Postone (1993) and John Weeks (1990, 2010, chs 1–2). Duncan Foley (2000) and Alfredo Saad-Filho (1997a, 2002, ch.2) and the contributions in Simon Mohun (1995) critically explain and review alternative interpretations of Marx’s value theory.