As Marx developed a critique of idealism, came into contact with the experiences of the French socialist movement, and studied descriptions and analysis of the conditions of life in industrial Britain, he found a political economic approach useful in further developing his own analysis. He studied the writings of British and French political economists and by 1857, Marx outlined his economic thought in a series of notes, called the the Grundrisse – Foundations of a Critique of Political Economy. Mandel, in "Introduction" to the Penguin edition of Capital, states that "the initial plan of Capital was drawn up in 1857; the final plan dates from 1865-6." (Marx, 1976, p. 27) While the initial manuscripts were not widely available in English until the 1970s, the Grundrisse formed the basis for Capital, the first volume of which was published in 1867. Volume 2 was published in 1885 and Volume 3 in 1894 (completed by Engels after Marx's death). In addition, Marx wrote extensive notes on the study of political economy, published as Theories of Surplus Value in the early part of this century. Again, these were not available in English until the 1960s and 1970s. These latter volumes are sometimes referred to as volume 4 of Capital.

While the subtitle of Capital is "a critique of political economy," Marx did much more than provide a critique. In the three volumes, Marx develops his model of capitalist econoomic development – in Mandel’s words "Marx’s fundamental aim was to lay bare the laws of motion which govern the origins, the rise, the development, the decline and the disappearance of a given form of economic organization: the capitalist mode of production" (Marx, 1976, p. 12) This is primarily an economic work, with a theory of value and surplus value, but Capital also continues various strands of thought from the earlier writings of Marx. Parts Seven and Eight of Volume 1 provide a broad historical view of the development of capitalism. Volume 2 tends to be more technically economic, and Volume 3 provides a more detailed analysis of specific features of capitalist development. It is the first part of Volume 1, Marx presents and analysis of the commodity and exchange, the labour theory of value and surplus value, the development of money, and a theory of a fully developed capitalist economy.

Note on Penguin edition – 1976. The original translation into English of Capital was completed in 1886, with Friedrich Engels as editor. The first North American edition was published in 1906. The Penguin edition comes from 1976, at a time when Marxist studies were being developed within the social sciences. This is a British translation. The "Introduction" was written by Ernest Mandel (1923-1995), probably the foremost Marxist economist of his era. Mandel was a Belgian marxist, active in the resistance in the second world war and later leader of the Fourth International, an international organization of socialist political groupings and parties in the marxist-trotskyist tradition. Mandel wrote several books such as The Formation of the Economic Thought of Karl Marx, the two-volume Marxist Economic Theory, and Late Capitalism.

Before examining Marx's labour theory of value, some ideas of Adam Smith and David Ricardo, the two major political economists who wrote before Marx, and strongly influenced him, are briefly examined.

a. Adam Smith

Adam Smith (1723-1790) was a Scottish philosopher and political economist who wrote The Wealth of Nations, published in 1776. He is regarded as the father of political economy and is most famous for his analysis of the division of labour and the concept of "the invisible hand." In his writings, Smith argued that the wealth of societies is increased with the division of labour and markets – any blocks to markets caused by feudal or monopolistic privileges should be removed so trade, commodity exchange, and markets could be allowed to develop freely. In Smith’s view, this would allow new forms of specialization to appear in the division of labour, thereby increasing productivity of labour, production of commodities, trades and wealth. Smith’s writings are often considered to provide an ideology and justification for actions of the emerging bourgeoisie, helping them to destroy feudal forms of social, political, and economic organization and establish a capitalist, market society. While Marx was very critical of much of the analysis of Adam Smith, he also found several important ideas in Smith’s writings. In my view, Smith was much more than an ideologue, since he had a good understanding of the society and economy of his time, and saw capitalism as a progressive force in history. Today, many of Smith’s insights are still useful – for example, he took a strong position against monopolies of all forms – and ideologues who consider the market approach universally applicable, without considering the context of such applications and limitations to and problems with markets, misrepresent Smith.

Some ideas that Marx appears to have taken or developed from the writings of Smith were:

i. Surplus comes from production. Smith argued that a surplus emerges from production, not from exchange. Earlier writers had often been confused concerning this issue. For example, French physiocrats had argued that agricultural production alone creates wealth, whereas Smith argued that wealth is created in both agriculture and industry. In Capital, Marx argues that wealth cannot emerge from trade or money, but is created by human labour in agriculture and industry.

ii. Social labour creates wealth. This wealth is the "necessaries and conveniences of life" that are produced, that is, the commodities made available in production. (Marx may have used this idea to help develop the notion of the importance of the commodity). But this wealth is produced by the annual labour of the nation. This can be interpreted as social labour in the sense that it is useful labour, with skill and dexterity, applied in agriculture and industry. It is not isolated, but is exercised within the division of labour. For Smith, wealth is not produced by trade or amassing gold and silver, but by social labour.

iii. Division of Labour. For Smith, the development and expansion of the division of labour is key to the creation and accumulation of wealth. The level of wealth is increased by expanding the division of labour within society as a whole, and within specific industries. Society's labour as a whole is exercised within this division of labour, and each worker's claim on society's wealth is in proportion to that worker's position within the division of labour. The view that the division of labour is a cooperative aspect of the structure and development of society may also have inspired Durkheim, whose first major work was The Division of Labour; as we will see, Durkheim developed a sociological approach to the division of labour, arguing that exchange, contracts, and market institutions are all set within a social framework of trust, mutual obligation, and social solidarity.

Smith did not adopt what Marx considered to be a systematic labour theory of value that would explain exchange in modern capitalism. For earlier societies, Smith claimed that products exchanged more or less in proportion to the amount of labour embodied in them. However, in capitalism, each of land, capital and labour had a return to them, so that the labour theory of value no longer explained prices.

While Marx was critical of Smith, he adopted some of his ideas, although he changed or developed them differently than Smith. The claim that value emerged in production, from human labour, became a key aspect of Marx's model of society, and the concept of the division of labour was important for Marx and other sociologists. Marx considered Smith too uncritical in his acceptance of the division of labour. While Marx recognized that there is a cooperative character to the division of labour under capitalism, he also looked on private property and labour as commodity in capitalism as a source of alienation. He argued that a social system eliminating the division of labour would be more human oriented and would ultimately develop. Marx was also critical of Smith's invisible hand, the unseen force that Smith claims guides individual self interest to promote the general good of society.

b. Ricardo

David Ricardo (1772-1823) was an English stockbroker who made a fortune in the stock market as a young man, and then became a political economist. His book, Principles of Political Economy and Taxation, was published in 1817, and it became the model for much of the abstract economic theorizing which has followed. While Ricardo was interested in current economic issues, his main contribution was his incisive analytical ability.

Ricardo developed a more complete labour theory of value than did Smith, and some writers consider Marx's political economic writings as merely a minor development of Ricardo's ideas. In his economic analysis, Ricardo was not too concerned with the use value or usefulness of a commodity – that was taken for granted if goods were being exchanged. Rather, Ricardo attempted to understand the exchange value of commodities, expecially those produced in large numbers in agriculture or industry (reproducible commodities – as opposed to unique or scarce commodities such as works of art or specialized talents) For Ricardo, the value of these reproducible commodities, when they are exchanged, was the amount of labour embodied in them. This was the current labour required to produce them, plus the past labour embodied in tools, building, implements, and equipment (i.e. in the capital stock required to produce the commodity).

For Ricardo, profit emerged based on the amount of capital employed. While Smith also had this view, Ricardo stated this more clearly, and removed any confusion concerning where profit came from, that is, in production, by employing (living) labour along with capital (past labour).

Ricardo had a dismal view of the future, looking on the supply of land as limited, with few prospects for technical improvements to expand employment. Ricardo argued that there was a declining rate of profit, and he predicted future declines. Some have called economics "the dismal science" because of his grim outlook.

Ricardo's labour theory of value began to be used by trade unionists and early socialists, the so-called "Ricardian socialists," such as Francis Bray and Thomas Hodgskin. They argued that value comes from labour, some labour is productive and some unproductive, and looked on labour as producing surplus value. For these writers, workers deserved all the product of their labour and in capitalism "the wages paid to the worker are always less than the value of the product which the worker has produced and the capitalist has appropriated" (Roll, p. 246). Marx adopted Ricardo's labour theory of value, solving some of the problems raised by Ricardo, but putting the theory to new uses as well. Perhaps because of these radical implications, political economy generally abandoned the labour theory of value after Ricardo, preferring to adopt some cost of production theory.

Marx's method is both historical and theoretical – Capital is not a work of pure social theory but is also an historical account of the development of capitalism. He begins by focussing on the commodity as an historical and theoretical concept that leads to an understanding of the nature of the concepts of value, surplus value, exploitation, and capital, building a model of the workings of capitalism. Mandel notes:

That is, Marx's analysis is historical in that certain institutional prerequisites are required for a full-blown capitalism and market exchange to emerge and function. That is, for exchange-value to exist, markets and exchange must reach the stage whereby the exchange is relatively common and continued, so that the rate at which two commodities exchange is not haphazard or accidental (Marx, Chapter I, Section 3), but has some regularity across time and place. Another characteristic of such a stage is that it appears as if there are only two economic actors meeting, that is, it appears to be an economic exchange not a social relationship. Hadden notes that at this stage "it appears as though exchange-value might be a natural property of the commodity" (p. 62), even though this emerges only with particular historical conditions (p. 61). In fact, there are social relationships which stand behind this, but may not be apparent. Such a system has been called simple commodity production, and need not have capitalists, but could be a barter system where each person or family has a position within the division of labour and enters the market to sell their produce and purchase what they need. But a certain development of the division of labour and regular market exchange would have to develop in order for this to occur. As a result, Capital is not just historical though, but the history of the development and expansion of capitalism organized around the concepts and models of Marx’s theory of value.

Mandel notes two other aspects of Marx’s method. First, it is the "materialist dialectic" method (Marx, p. 17), meaning that the concepts and analysis of Marx are analyzed in the context of the whole theory of value and "the laws of motion" (p. 18) of capitalism. The concepts (value, exploitation, money) and the relations among these concepts are not isolated abstractions but have theoretical meaning within the model of the capital-labour relations and commodity exchange. In the dialectical method, there is contradiction among these concepts and their relationships with each other, so there is a dynamic aspect to capitalism, with class struggle resolving itself in new stages for capitalism. This process is continued throughout the history of capitalism. Mandel notes that the laws of motion of capitalism are "the unfolding of the inner contradictions of that structure, which defines its very nature. The given economic structure is seen to be characterized at one and the same time by the unity of these contradictions and by their struggle, both of which determines the constant changes which it undergoes." (p. 18) This includes both quantitative and qualitative change.

A second aspect of Marx’s method is the Hegelian distinction between "‘essence’ and ‘appearance’" (p. 20). What is apparent to social actors in the social and economic world is not the only reality, that is, Marx considers there to be an essence underlying this. Appearance could be the price of a product, what someone has to pay, and the fact that this is a purely economic relationship. But Marx also considers there to be an essence to this, a value that underlies the price of a product in the market, and a social relationship that stands behind the apparent economic relationship. Marx’s concern is to investigate this essence by discovering the source of value and the true nature of the apparent economic relationship – for example, the latter might be two producers meeting more or less equally in the labour market or it might be an unequal social relationship that produces unequal exchange or exploitation. Mandel notes that Marx is simultaneously concerned with both appearance and essence, and this explains his choice of the "commodity" as the starting point of his analysis. The commodity is something concrete and material, something that can be observed. But as concept the commodity is more than appearance, it has an essence with contradictory aspects contained in it. Capital is an explanation of how these contradictory aspects unfold and what are their implications – "from the commodity and its inner contradictions to the accumulation of capital and its breakdown." (p. 21). This is both an historical and theoretical explanation, but an explanation constructed in a particular manner, using history, materialism, dialectics, deduction, and observation of social, political, and economic realities of capitalism.

The plan of volume 1 is to begin with the commodity, the contradiction between use and exchange value, the development of exchange and money, the source of value in labour power, exploitation, and the transformation of money into capital. Marx continues with an analysis of the different ways in which this develops, through absolute and relative surplus value, simple reproduction, and primitive and capitalist accumulation. Most of volume 1 is concerned with "simple commodity production" but Mandel shows how this contains the essence of much of the reality of capitalism. Volumes 2 and 3 analyze extended reproduction and a full-blown capitalist system.

Marx begins Capital by analyzing the commodity, the relationship of commodities with each other, and the implications of this for social relationships. From and analysis of the contradictions inherent in the commodity, Marx builds a labour theory of value which he uses to explain not only exchange relationships in capitalism, but the economic and social structures of capitalism, and their development.

A commodity is an object or service that is exchanged (for other commodities or money) and which has a use-value or utility – note that "the nature of these needs … makes no difference" (p. 125). That is, anything that satisfies human needs or desires can be a commodity – tangible, intangible, necessary or frivolous, for consumption or production. They are external in that "people produce things which satisfy their wants and needs" but these things are "not commodities unless they get exchanged" (Hadden, p. 55). That is, the commodity is something that has some usefulness for the individual who purchases it, either utility for oneself for what we would call consumption purposes, or utility within the production process, e.g. a tool, machine, building, or structure. But these become commodities only once they are exchanged. In the first paragraph, Marx notes "the wealth of societies … appears as an ‘immense collection of commodities’" (p. 125), an idea that may have come from Smith. At the end of section 1 of chapter 1 (p. 131), Marx notes that objects can be use-values without having an exchange-value and "to become a commodity, the product must be transferred to the other person, for whom it serves as a use-value, through the medium of exchange" (p. 131)

Marx also notes that everything has a dual character, of "quality and quantity" (p. 125) and from these derive the contradictory aspects of use-value and exchange-value.

a. Use-Value. If an object is a commodity, then it has the quality of being a use value and has importance as (i) the basis of the wealth of society; (ii) the material depository of exchange value; and (iii) becomes real only when consumed by individuals or in the process of production – ie. in individual or productive consumption. Marx is not concerned with analysis of the use value of the commodity, but examines the source of the exchange value of the commodity.

b. Exchange-Value. The other part of the dual aspect of a commodity is its exchange-value, how many other commodities or money it takes the buyer to obtain the commodity, or what other commodities or money the seller obtains in exchange for the commodity. In order for a commodity to have exchange value, the object or service must be exchanged for another commodity in a market.

Marx’s historical-theoretical method is apparent in Chapter I. For exchange-value to become established on a consistent and ongoing basis, there must be some form of regular, well established market exchange. Such exchange is not natural, it is not just haphazard or irregular, nor is it distribution or redistribution of objects in a cooperative society or family – the latter may be exchanged but they are not exchanged on a regular or equivalent basis. Marx argues that political economists looked on exchange value as either inherent in the commodity, or arising in the very early stages of a barter economy. For Marx, for exchange values to be established, there has to be a reasonably well developed division of labour, along with regular market exchange, so that people are not self sufficient and need to obtain use values or commodities from others. A further stage for exchange-values, and their transformation into market prices, takes place as capitalism becomes a well developed mode of production. Marx does not analyze this stage until Volume III of Capital.

c. Critique. A feminist critique of Marx could begin from this point. Marx analyzes exchange-value and ignores use-value, other than to note that to become a commodity (with exchange-value), a product must have use-value. But use-values that do not find their way into exchange are ignored in any further analysis. Marx's explanation of surplus value and exploitation are built on the the concepts of the commodity, exchange-value, and labour power becoming a commodity. His analysis of social class is built on the relationship of people to the means of production (used for and in exchange), and the labour process associated with markets and exchange. All use-values that are produced in the household, but not exchanged on the market, are ignored in this analysis. Since these latter use-values have been disproportionately produced by women, at least over the last several hundred years as commodity markets have expanded, this analysis ignores many of the contributions of women.

The exchange value of a commodity is not necessarily its price on any given day, but constitutes the average rate at which commodities exchange for each other in reasonably well developed market exchange. For example, if 10 bushels of wheat exchange for one pair of shoes, this is an expression of something equal. Marx asks what constitutes this common value, for if two different commodities are equal in value, there must be some common measure of this value. At the minimum, there must be a unit of measure that allows the two commodities to be compared in quantitative terms. This common measure cannot be a quality, since qualities and use-values of the commodities differ. Rather the equality among commodities must be something quantitative, since equal exchange signifies an equal quantity of something.

Marx concludes that the common element is that all commodities are produced by labour. "If then we disregard the use-value of commodities, only one property remains, that of being products of labour." (Marx, p. 128). Now this exchange value is not based on just any labour, but is some form of labour that can be used to equate the value of different commodities. Marx states that the value of commodities "are all together reduced to the same kind of labour, human labour in the abstract. ... they are merely congealed quantities of homogeneous human labour, i.e. of human labour-power expended without regard to the form of its expenditure. ... As crystals of this social substance, which is common to them all, they are values – commodity values." (Marx, p. 128). While it is concrete labour of different types – that of the farmer, baker, or shoemaker – that is used to produce the respective goods, what is equal here is not the concrete labour, but the labour time involved in producing the goods.

Thus the value of a commodity is the amount of homogeneous human labour or socially necessary labour embodied in the commodity. Marx refers to this as abstract labour, a theoretical concept, but one that exists in a particular historical setting whereby the products of concrete labour have exchange-values. By entering into exchange, this abstract labour loses its character as the particular form of labour that produced the object, and becomes simply human labour. This is the portion of society's total labour required to produce the object. It is the labour that is socially necessary, representing the amount of labour time required to produce the object under normal conditions of production, and with an average degree of skill and intensity of work, that is "with the average degree of skill and intensity of labour prevalent in that society" (Marx, p. 129). Marx notes the historical conditions for this to emerge, "of course, human labour-power must have attained a certain level of development before it can be expended in this or that form." (Marx, p. 135). The historical conditions that created wage-labourers and the labour market are discussed by Marx later in Volume I.

If the conditions of production develop, so that less labour is required to produce a given quantity of the commodity (i.e. the productivity of labour increases), the value of the commodity declines. This occurs because less socially necessary labour is embodied in the commodity, and the commodity cannot command other commodities with the same labour content. Over time, skills, technology, the state and application of science, and physical conditions vary, thereby altering the value of commodities.

The labour value that is embodied in the commodity is simple, average, human labour, or unskilled labour of average intensity. If the labour is skilled, Marx argues that this amounts to simple labour intensified (Marx, p. 135). As different types of human labour are embodied in commodities, they become comparable in that these commodities are exchanged. All represent a portion of society's total social labour.

Value is considered by Marx to be a social relation, and not merely an economic one. If exchange did not occur, social relationships would differ. Through exchange of commodities produced by labour, labour acquires a social character in that people are working for each other. The nature of this changes as the division of labour and the type of exchange and markets develop. As commodity exchange becomes highly developed, the expenditure of labour is no longer that of a particular type, but becomes abstract labour, the expenditure of human muscle, brain and nerves.

Recall, that commodities have a two fold character for Marx – they are both use values and exchange values. Similarly, once markets develop, labour is both useful labour and abstract labour. Note the connection with alienated labour in that the exercise of concrete labour creates objects which are exchanged for other commodites, thus alienating the labour of the worker.

Section 3 of chapter 1 deals with the different forms of exchange-value that develop logically and historically, initially being use-values, then accidental values, relative values (exchange of one specific use-value for another specific use-value), total or expanded values (many specific commodities exchanged), a general form (all commodities valued in terms of one specific commodity), and the money form.

Question – students as consumers. What is the commodity that is being sold and purchased? How does this change social relationships? Does the concept of commodity fetishism help understand this?

Fetishism refers to an "object believed by primitive people to have magic power." Marx uses this term to refer to the power of commodities in a well developed system of market exchange.

Commodity fetishism refers to the characteristics that appear to be attached to

commodities, but have another source. Marx argues that these particular characteristics result from the social relationships that exist in a society. That is, each commodity has a definite value in exchange, and this appears to be a natural part of the commodity – its cost of production. We look on this as more or less inevitable, necessary, and detached from what went into it. Further, commodities appear to have powers of their own, with commodity exchange and markets exercising a degree of control over people. "The world of commodities is one in which the relations between things appear to determine the fate of persons; this fate seems also to have something to do with the natural properties of those things" (Hadden, p. 63). For example, the availability and location of jobs is often portrayed as an inevitable result of impersonal market forces, when in fact there are social relationships that have created this. A further stage of the development of commodity fetishism has occurred in contemporary society, with advertising, the media, and trade names on products.

It is this masking of the social relationships that stand behind the value of commodities and the power and influence of commodity exchange that Marx examines in part 4 of Chapter 1. He calls this commodity fetishism – the way that powers are conferred on commodities "in virtue of the prevailing social relationships" (Dictionary, p. 165). One way to understand this is to look at the last parts of part 4 – Robinson Crusoe’s individual production, the feudal and religious organization of medieval Europe, and societies with labour in common or exchanged freely among individual producers. In each of these cases, the objects produced by labourers are clearly the product of their labour and this is understood by all. In the case of feudal social relationships, payment to the lord may be in actual days of labour of the peasant for the lord. The case of labour in common is like family labour – each family member knows who carries out each task and the labour time involved in these tasks. Times are roughly balanced, although perhaps inequitably in some families. In the case of association of free men (p. 171), there may be simple commodity production, where products are exchanged, but roughly in proportion to the labour-time necessary for producing each product. In each of these historical cases, the social relationship standing behind commodity exchange is evident to those involved in exchange. That is, because exchange is closely related to production and use in these circumstances, the manner in which human labour is embodied in production is readily apparent.

But in commodity production, understanding of this relationship may be lost – it appears that commodities of equal value are exchanged, but the social and labour relationship on which this is based is obscured. This is because the specific labour of each producer is equated through a process whereby values are equalized as equivalent amounts of homogeneous human labour (p. 172) or abstract labour. Marx notes (pp. 173-4) that political economists have a good analysis of these values, but do not investigate the source of the commodity form. For Marx, this "social formation in which the process of production has mastery over man, insteat of the oppposite, appear to the political economists’ bourgeois consciousness to be as much as self-evident and nature-imposed necessity as productive labour itself" (p. 175). That is, when we examine markets, we see only the exchange relations between commodities, and this appears to be a natural relationship. But behind these is a social relationship, one between buyers and sellers, between owners and non-owners, and one that has developed over time to take a particular form at each stage of historical development. When market exchange fully develops so that commodity exchange dominates economic life, the commodity seems to acquire properties of its own. As an economic system, capitalism derives a life of its own, dominating its creators. In particular, when labour power becomes a commodity, behind this is an exploitative social relationship.

One way of looking at this chapter is to keep in mind the distinction between appearance and essence. Most people consider only the appearance – the value of the commodity. In this part, Marx is interested in understanding the essence that stands behind the appearance, or which creates the apparent. Returning to the beginning of part 4 of Chapter 1, Marx notes that the mystical character of commodities does not emerge out of use-values but "from this form itself. The equality of the kinds of human labour takes on a physical form in the equal objectivity of the products of labour as values" (p. 164). That is, while commodity exchange demonstrates the commodity values in the market, it is social relationships that produce these values. The social relationships may be equal or unequal ones, but in a developed market society, they tend to be exploitative. In particular, the commodity form hides the social relationship of worker and owner, which Marx goes on to analyze later.

The process by which this occurs is an historical one, with the development of the conditions for commodity exchange and labour markets. Marx notes that "it is only by being exchanged that the products of labour acquire a socially uniform objectivity as value" (p. 166) and this occurs only when exchange has reached a certain stage. "From this moment on, the labour of the individual producers acquires a twofold social character. … as a definite useful kind of labour" (p. 166) and as producing something for exchange, so that the producer can obtain something useful for himself or herself. In order for this to occur, "human labour in the abstract" (p. 166) must develop. Note how Marx uses an historical and logical method, noting that historical conditions must emerge, but also how the logical conditions must exist.

In summary, commodity fetishism means that the "customary stability" of the exchanges appears "to result from the nature of the products" when in fact it is the social relationships among producers that create this. Today commodity fetishism has reached a new level, with producers and processes almost completely lost from sight – clothes produced by invisible (to us) producers in Guatemala or Bangladesh and global market forces that are very distant from us, difficult to understand, and very powerful. Marx did not further develop the concept of commodity fetishism, but it could be applied widely today.

Last edited September 29, 2002

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