Notes and resources from our members who are meeting regularly to read and discuss Marx’s Capital

1. In this idealized society Marx envisions in the first few chapters of Capital, we are all atomized, independent producers pursuing our own private self-interest. We each decide what we produce and how much we produce of it without consulting anyone else. This division of labor develops spontaneously in history. And this is the foundation upon which capitalism is built.

Marx has not yet introduced the idea of class society. Classes do not appear until Chapter 6. But everything he is saying now is leading up to an explanation of how classes arise in capitalist society.

2. One factor influencing the labor theory of value that Marx only makes fleeting references to in Capital is the effect of supply and demand on how the labor theory of value operates. He develops its effect more fully in WAGE LABOR AND CAPITAL. Here is how supply and demand impact the labor theory of value:

Suppose commodities are pretty much exchanged according to how much labor time is required to produce them. So if one coat takes two hours to produce while one loaf of bread takes one hour to produce, then one coat will exchange for two loaves of bread. But suppose, for some reason, the demand for a particular commodity – we will call it commodity A – suddenly shoots up so there is not enough supply to meet the new demand. In this situation the seller of commodity A has the upper hand and can demand a higher exchange rate for commodity A than the labor time embodied in it would warrant. Other producers notice this fact and decide to start producing commodity A as well. Soon the number of commodity A’s entering the market begins to outnumber the people who want to buy it. Then the exchange rate of commodity A drops because there are not enough buyers. The supply exceeds demand. And when it drops so far that it is being exchanged for other articles with less labor time embodied in them, people will stop producing commodity A and look for another commodity to produce.

Marx describes this process in WAGE LABOR AND CAPITAL in dramatic terms:

“But it is precisely these fluctuations [caused by supply and demand] which, viewed more closely, carry the most frightful devastation in their train, and, like an earthquake, cause bourgeois society to shake to its very foundations – it is precisely these fluctuations that force the price [i.e., its exchange value] to conform to the cost of production [i.e. labor time]. In the totality of this disorderly movement is to be found its order. In the total course of this industrial anarchy, in this circular movement, competition balances, as it were, the one extravagance by the other.”

All of this is to say that capitalism has this perverted logic. People do not gather together and plan out how much to produce of each commodity in order to meet everyone’s needs. Instead, all individuals operate in isolation and try to maximize their individual, private interests. If it turns out by chance that too many individuals decide to produce a particular commodity so that supply exceeds demand, then its exchange value will drop below its labor time. If too few people decide to produce a commodity, then demand exceeds supply, so the exchange rate will rise above the labor time and more people will decide to produce it.

Far from distorting the labor time theory of value, supply and demand are actually how it gets enforced.

3. In Chapter 2 Marx makes this comment: “The persons exist for one another merely as representatives of, and, therefore, as owners of, commodities. In the course of our investigation we shall find, in general, that the characters who appear on the economic stage are but the personifications of the economic relations that exist between them.”
This observation is important since it indicates that Marx is arguing that the problems that capitalism creates are not due to the greed or selfishness of individuals. Rather the greed and selfishness of individuals is a product of capitalism. As will become clearer the further we get, capitalism does not encourage people to look out for one another. It encourages people to take advantage of one another.

4. Throughout Volume 1 of CAPITAL Marx is giving us the bare essence or the kernel of capitalism. All the complexities and monstrosities of modern capitalism grow organically from this core. But what this means is that capitalism cannot be reformed by just attacking the later developments by, for example, just cutting back on the big corporations. These corporations are the logical result of this inner core. We might reduce the size of the corporations temporarily, but they will grow back even stronger than before. The core must be destroyed and be replaced by an entirely new system where we do not operate like atomized, egoistic, selfish individuals but we act as a community mutually supporting one another, where, as Marx says in the COMMUNIST MANIFESTO: “… the free development of each is the condition for the free development of all.” We come to the realization that in order for each one of us to thrive everyone must thrive. So we all come to desire the good of all.

Summary of Capital, Chapters 1 and 2

The exchange of commodities dominates the capitalist economy where a commodity is specifically defined as something that is created in order to exchange it for something else.

What is it that determines the ratio in which the commodities are exchanged? There is nothing that they have in common with respect to their use or their particular physical properties. The only thing they have in common is that they all require an expenditure of human energy for a certain amount of time for their production. Some involve more time than others. It is the amount of time required to produce something that determines its Value, which then determines the ratio in which it will exchange with other commodities. [“…it is the magnitude of their value which controls their exchange proportions.”] [“We see then that that which determines the magnitude of the value of any article is the amount of labour socially necessary, or the labour time socially necessary for its production.”]

Marx describes how money came into existence in four steps:

STEP #1: (A) The Elementary Form of Value

Marx starts with a single equation: x commodity A = y commodity B.
Here the value of commodity A is being expressed in terms of commodity B: How much is A worth? It is worth y commodity B. So commodity B, in a very primitive way, is playing the role of money. [“The simple commodity form is therefore the germ of the money form.”]

Commodity A has the role of the “Relative Form” of value in this equation since its value is being expressed relative to commodity B.
Commodity B plays the role of the “Equivalent Form” since it is expressing the value of commodity A by saying that it is equivalent to commodity A.

This form comes into existence when the exchange of commodities is very infrequent. It occurs when two separate communities infrequently trade with one another.

STEP #2: (B) The Expanded Relative Form of Value

X commodity A = y commodity B or z commodity C, or f commodity D or g commodity E, etc. etc.

Here it is clear that the kind of labor involved (weaving, baking, mining, etc.) is irrelevant to the value of a commodity since all kinds of commodities involving different kinds of labor are being equated to commodity A.

This form comes into existence when a particular commodity, such as cattle, is regularly exchanged for a variety of other commodities. Nomadic communities with large herds of cattle would come into contact with other communities and engage in trade. So a cow could be exchanged for a variety of other things.

But this form clearly has defects. For example, it involves an endless series, and there are many competing equivalent forms. It’s like having many different currencies.

When the exchange of commodities becomes widespread, then the reverse of the expanded form begins to occur: many different kinds of commodities in specific quantities get equated to x commodity A. And this is basically the money form.

STEP #3: (C) The General Form of Value

Here all commodities express their value in a single commodity that has been separated out.

X commodity A, and y commodity B, and z commodity C, etc., etc. = n commodity D.

Here, the value of all commodities is expressed in a single commodity. Accordingly, it is easy to ascertain the relative value of each commodity with all the others since their value is being expressed in a single commodity. In this example, commodity D becomes the universal equivalent. It expresses the value of all other commodities. Commodity D, then, is basically playing the role of money. Because the precious metals have physical qualities that make them particularly appropriate to function as money, they soon became the money commodity.

STEP #4: (D) The Money Form

This last step is the same as step #3 except that gold (or some other precious metal) plays the role of the equivalent. All commodities then express their value in gold.

Gold is itself a commodity. This becomes clear by seeing how it evolved. Historically, other commodities (like cattle) played the role of money, but gold is far more suited to playing this role than cattle. [“That money is a commodity is therefore a new discovery only for those who, when they analyze it, start from its fully developed shape.”] Like all other commodities, the value of gold is determined by the amount of labor time required to produce it. So the value of gold is not some arbitrary fabrication as some argued. It has its basis in the labor theory of value.

COMMODITY: It is something that is produced specifically to be exchanged for some other commodity (which can include money). If someone bakes a cake for one’s family, it is not a commodity since it is not being exchanged. But if someone bakes a cake to sell, then it becomes a commodity. For something to become a commodity, it must have a use (or use value) for someone other than the person who creates it.

USE VALUE of a commodity: This refers to the commodity’s specific usefulness. For example, shoes are useful for protecting our feet. Bread is useful because we can eat it to reduce hunger. Not everyone will find the same things useful. Some people find a cane useful. Other people do not need a cane. The use value of a commodity is based on its physical properties. It refers to the qualitative nature of the commodity.

EXCHANGE VALUE of a commodity: This refers to how many other commodities people are willing to give you for it. One cake might be worth one brush or five pencils or two pens, etc. Exchange value only concerns the quantity in which commodities are exchanged for each other. The exchange value is entirely separate from the physical properties of the commodity, which determine its use value. One commodity might weigh a hundred times more than a second commodity, but this tells us nothing about their exchange ratio.

VALUE of a commodity: The value of a commodity refers to the socially necessary labor time required to produce it. The labor time required to produce each commodity determines the ratios in which they exchange with one another. If it takes one hour to produce a cake and two hours to produce a pencil, then (all things being equal), two cakes will exchange for one pencil. [“We see then that that which determines the magnitude of the value of any article is the amount of labour socially necessary, or the labour time socially necessary for its production.” – CAPITAL, Chapter 1]

CONCRETE HUMAN LABOR: This refers to the specific kind of labor being performed: it could be baking or weaving or tailoring, etc. Marx also calls this the use value of labor.

ABSTRACT HUMAN LABOR: This refers only to the amount of TIME that is being expended in the labor process, regardless of the type of labor that is involved. Marx often refers to it as “homogeneous human labor.” It abstracts from the type of labor, such as baking or weaving, etc. Abstract human labor determines the Value of a commodity (its Value could be one hour of labor time or two hours, etc., etc.), and this labor time in turn determines its exchange value.

The TWO-FOLD NATURE OF LABOR: Marx says he “was the first to point out and examine critically this two-fold nature of labor contained in commodities,” and adds: “As this point is the pivot on which a clear comprehension of political economy turns, we must go more into detail.” The two-fold nature refers to labor from the standpoint of creating use values, or concrete labor, and labor purely as the expenditure of human energy for a specific length of time, or abstract labor. [“On the one hand all labour is, speaking physiologically, an expenditure of human labour power, and in its character of identical abstract human labour, it creates and forms the value of commodities. On the other hand, all labour is the expenditure of human labour power in a special form and with a definite aim, and in this, its character of concrete useful labour, it produces use values.” CAPITAL, Chapter 1]

Note: When we say that labor is the source of value (and therefore the determining factor underlying exchange value), it is important to specify that we are referring to labor time, not the useful side of labor.

“What I have to examine in this work is the capitalist mode of production, and the relations of production and forms of intercourse that correspond to it.” From the first Preface to Capital by Marx.

So this is not intended to be a standard economics textbook that just talks about the market. It is intended to include how capitalism controls our social relations. And it is doing this with the purpose of letting people see how they themselves can take control of their own social relations by abolishing capitalism, and creating an economy that we control so that it operates in everyone’s interests.

But commodity fetishism hides this possibility from us.

Here is Marx’s description of commodity fetishism:

“The mysterious character of the commodity-form consists therefore simply in the fact that the commodity reflects the social characteristics of men’s own labor as objective characteristics of the products of labor themselves as the socio-natural properties of these things.”

And he adds this formulation: “To the producers, therefore, the relations connecting the labor of one individual with that of the rest appears, not as direct social relations between individuals at work, but as what they really are, material relations between persons and social relations between things.”

In other words, in the capitalist society Marx has imagined so far, which is an early stage of capitalism, we are all private producers. We all relate to one another, outside the family, through money. Nobody fixes our car for free, except as a rare exception. Nobody tutors for free except, as a rare exception. We do not consult with one another with respect to what we are going to produce or how many of them we will produce. There is no social plan regulating the capitalist economy. It is simply millions of private producers acting on their own. Yet in a very inaccurate and rough way, and leaving aside huge crises, we manage to more or less meet people’s needs, at least from the point of view of capitalism. This process works by means of supply and demand.

For example, if too many individuals decide to produce a particular commodity so that this commodity is overproduced, then the supply will exceed demand. It will be hard for producers to find buyers, and the exchange value will drop below the labor time required to produce the commodity. Many producers of this commodity will then switch to producing some other commodity to get a better rate of return.

If too few individuals decide to produce a particular commodity, then there will not be enough of this commodity for everyone who wants one. In this case, its exchange value will rise above the labor time required to produce it. Then, more people will decide to start producing this commodity to take advantage of the extra exchange value they will get.

This is how we very crudely make production line up with people’s needs – through the highly inefficient process of supply and demand where the exchange value of the commodity rises above and below the labor time required to produce it. Or, put differently, it is the rate at which commodities exchange with each other that dictates whether we producers leave a particular line of production or join another line of production. So the amount in which commodities exchange for one another dictates to us that we need to either produce more of a commodity or less of it.

Of course, all these wild fluctuations could be avoided if we came together, calculated how much our society needs of each commodity and assigned the right number of people to produce a specific amount in order to exactly meet those needs.

But not only do we not do this, the fetishism of commodities gives people the impression that we CAN’T do this. The fetishism of commodities leads us to believe that we cannot control our economy. It gives the impression that commodities have value because of something entirely intrinsic to them that has nothing to do with us and the total social labor time we spend producing them. It gives the impression that the economy is something objective that cannot be controlled by us. And, of course, a major reason why people think this way is because we are all looking at the economy from the perspective of an isolated, powerless, private individual where our major way of relating to one another is through the exchange of commodities (or money). From that perspective the economy seems objective and overpowering.

Commodity fetishism, therefore, arises with the establishment of social relations, where people do not discuss and plan out how much of each commodity to produce, but of people relating to objects, or things, which in turn relate to people. And so it appears to everyday consciousness that people are naturally related only through things, but in essence this manner of social organization is not a natural occurrence but is itself a collective social product, produced by humans. For this reason it can be changed by humans.

So we have unconsciously and without any planning produced a commodity economy that now rules over us.  Marx uses the analogy of religion: “As in religion man is governed by the products of his own brain, so in capitalistic production he is governed by the products of his own hand.” In other words, we create gods and then bow down to them and let them rule over us. Similarly, with the world of commodities. We created this capitalist economy but now it rules over us.

As long as the exchange of commodities governs how much we produce, argues Marx, the process of production has the mastery over humans, instead of being controlled by them. That is, the operation of the law of value inevitably involves the subjection of humans to things, and economic activity is controlled by the blind laws of the market.

We have all sorts of ways of revealing that we don’t see the economy as something that we can collectively control. We talk about the market as if it has a life independent of us. For example, we hear said: “We will see what the market will tolerate,” as if the market has a will of its own. Or, “The market crashed,” as if humans had nothing to do with it.

Marx’s goal is to unmask the phenomenon of commodity fetishism and emphasize that this entire system was collectively created by humans, although it was not consciously planned out and then created. But by becoming conscious of this entire process, we are then in a position to take control. But this must be done collectively and democratically. Otherwise we will be fighting among ourselves over who controls the decisions and who controls the products of labor, and we will not have real control over the economy.

One final point on the fetishism of commodities before we conclude: Above we quoted Marx as saying: “To the producers, therefore, the relations connecting the labor of one individual with that of the rest appears, not as direct social relations between individuals at work, but as what they really are, [my emphasis] material relations between persons and social relations between things.”

What Marx is saying here is that commodity fetishism is not entirely a false perception. Under capitalism, the exchange of commodities really does rule our lives. We do not control them; they control us. The point, then, is to understand that things could be organized in an entirely different way. This is the essence Marx wants us to grasp.

So this is an example where Marx depicts appearance and essence as being connected or related concepts as opposed to being opposites – one true and the other false. This is where appearance does correspond with reality in a sense, because in capitalism social relations really are mediated by things, commodities.

Appearance and essence are then part of the same reality. Commodity fetishism for Marx amounts to reality, but on the level of appearance, yet appearances are not all of what reality consists of.

I want to conclude with this long quote from the Fetishism section where Marx imagines an entirely different society, one that we would call socialism:

“Let us finally imagine, for a change, an association of free men, working with the means of production held in common, and expending their many different forms of labor-power in full self-awareness as one single social labor force. All the characteristics of Robinson’s labor are repeated here, but with the difference that they are social instead of individual. All Robinson’s products were exclusively the result of his own personal labor and they were therefore directly objects of utility for him personally. The total product of our imagined association is a social product. One part of this product serves as fresh means of production and remains social. But another part is consumed by the members of the association as means of subsistence. This part must therefore be divided amongst them. The way this division is made will vary with the particular kind of social organization of production and the corresponding level of social development attained by the producers. We shall assume, but only for the sake of a parallel with the production of commodities, that the share of each individual producer in the means of subsistence is determined by his labor-time. Labor-time would in that case play a double part. Its apportionment in accordance with a definite social plan maintains the correct proportion between the different functions of labor and the various needs of the associations. On the other hand, labor-time also serves as a measure of the part taken by each individual in the common labor, and of his share in the part of the total produce destined for individual consumption. The social relations of the individual producers, both towards their labor and the products of their labor, are here transparent in their simplicity in production as well as in distribution.”

This is a society in which people collectively take control and democratically decide what will be produced, who will produce it, and how much will be produced. This represents real freedom, not the worthless isolated individual freedom that the capitalists embrace where the isolated individual is truly powerless. Rather, it is the freedom of coming together, listening to one another’s arguments, and then proceeding along the course that attracted the most support. Here, people can be as powerful as their arguments. This is real freedom.