1 Production for the satisfaction of needs, and production for exchange
In primitive society, and then within the village community born of the neolithic revolution, production was essentially based on the satisfaction of the needs of the productive collectivities. Exchange was only accidental, and affected only a tiny fraction of the products at the disposal of the community.
Such a form of production presupposes the deliberate organisation of labour. As a consequence, labour is directly social. Deliberate organisation of labour is not necessarily the same as conscious (and certainly not scientific) organisation. Many things may be left to chance, precisely because no thrust towards private enrichment presides over economic activity. Morals, ancestral habits, customs, rites, religion and magic can determine the alternation and rhythm of productive activities. But they are always essentially destined to satisfy the immediate needs of the collectivities, and not for exchange or enrichment as an end in itself.
A diametrically opposed form of economic organisation slowly emerges from this primitive community. Owing to progress in the division of labour, and the appearance of a certain stable surplus, the labour potential of the collectivity is progressively fragmented into units (big families, patriarchal families) working independently of each other. The private character of labour and the private ownership of the products of labour and even of the means of production gradually separate the members of the community one from another. This also prevents them from deliberately and immediately establishing economic relations amongst themselves. These units or individuals no longer have a direct relationship to each other in economic life. Their relations are formed through the intermediary of the exchange of the products of their labour.
The commodity is a product of social labour which is destined to be exchanged by its producer and not to be consumed by him or her, or by the immediate collectivity of which they are a part. The social situation is therefore fundamentally different from that in which the mass of products are destined to be immediately consumed by the collectivity which produced them. There are, of course, transitional cases (e.g. the so-called subsistence farms of our epoch, which sell a small surplus on the market). But the fundamental difference between a society in which production is essentially for the direct consumption of the producers, and one in which production is for exchange, is well caught in the malicious reply of the German socialist Ferdinand Lassalle to a liberal economist of his time: is it true that Mr Smith, an undertaker, would first of all manufacture coffins for his own use and that of the members of his household, and would sell only the surplus coffins he was left with….?
2 Petty commodity production
The production of commodities first appeared about ten to twelve thousand years ago in the Middle East, within the framework of the first fundamental division of labour between professional artisans and peasants – that is, after the appearance of the first towns. The economic organisation in which production for exchange by producers who remain masters of their conditions of production prevails is called petty commodity production.
Although there were many forms of petty commodity production, especially in Antiquity and in the Asiatic mode of production, it experienced its principal upsurge between the Fourteenth and Sixteenth Centuries in Northern and Central Italy and the Northern and Southern Netherlands (and to a lesser extent in England, France and Western Germany). This was as a result of the decline of serfdom in these regions and the fact that the commodity owners who did business with each other on the market were generally free and enjoyed more or less equal rights.
It is precisely this relative liberty and equality of the commodity owners within a society based on petty commodity production which allows us to grasp the real function of exchange, of the so-called ‘market economy’: to allow the continuity of all essential productive activities, in spite of the already well-advanced division of labour, without these activities depending on the deliberate decisions of the collectivity or of its masters.
At this stage a more or less ‘anarchic’ and ‘free’ division of labour takes over from the organisation of labour based on the deliberate and planned allocation of the work-force between the various branches of activity essential to the satisfaction of the recognised needs of the society. Chance now apparently governs the allocation of living labour and ‘dead’ productive resource which [missing?], it is true, many ‘accidents’, crises, interruptions of reproduction, and other manifestations of discontinuity occur), so that people continue to carry out all essential activities.
3 The law of value
It is the way in which exchange is governed that assures this result, at least in the medium and long term. Commodities are exchanged according to the quantities of labour necessary to produce them. The products of a farmer’s day’s work are exchanged for the products of a weaver’s day’s work. It is precisely at the dawning of petty commodity production, while the division of labour between the artisan and the peasant remains rudimentary, while many artisan-type activities are still performed on the farm, that it is evident that exchange can only be based on such an equivalence. Otherwise one or another of these productive activities, being less well compensated than the others, would be quickly abandoned. Thus scarcity would develop in this field. This scarcity would make prices rise, and therefore the compensation obtained by the said producers would also rise.
Then the productive efforts would be reoriented between the different sectors of activity, re-establishing the rule of equivalence: for the same amount of work done, the same amount of value given in exchange.
We call the law which governs the exchange of commodities and, through this, the distribution of the work-force and all the productive forces throughout the different branches of activity the ‘law of value’. This is therefore an economic law essentially based on a specific form of organisation of labour, on the relations formed between human beings which are distinct from those which prevail in the organisation of an economy planned according to the customs or conscious choices of the associated producers
The law of value assures the social recognition of labour which has become private labour. In this sense, it must function according to objective criteria which are equal for all. It is, therefore, inconceivable that a lazy shoe-maker needing two days of labour to produce a pair of shoes that a skilful shoemaker could produce in one day of labour could produce twice as much value as the latter. If the market functioned like that, compensating laziness or lack of skill, this would lead a society based on the division of labour and private labour into rapid regression and even total decline.
That is why the equivalence of days of labour which is assured by the law of value is an equivalence of labour of socially average productivity. In a pre-capitalist society this average is usually stable and known to all, as in such a society productive techniques develop very slowly, if at all. We can say, therefore, that the value of commodities is determined by the quantity of labour socially necessary to produce them.
4 The appearance of capital
In petty commodity production the small farmers and artisans go to the market with the products of their labour. These they sell in order to buy the products they need for immediate consumption but do not produce themselves. Their economic activity on the market can be summed up in the formula: to sell in order to buy.
However, petty commodity production very quickly necessitates a universally accepted means of exchange (also called a ‘universal equivalent’) to facilitate exchange. This means of exchange against which all commodities are exchanged independently of each other is money. With the appearance of money, another social type, another social class, can appear following the new progress in the social division of labour: the money-owner, separate from and opposed to the owner of simple commodities. This is the usurer or merchant specialising in international commerce.
This money-owner carries out a completely different activity on the market from that of the small peasant or artisan. As he arrives at the market with a certain sum of money, he no longer sells in order to buy, but on the contrary buys in order to sell. The small artisan or peasant sells in order to buy a commodity different from the one they produce themselves; but the aim of this operation is still the satisfaction of more or less immediate needs. On the other hand, the money-owner cannot ‘buy in order to sell’ just to satisfy his needs. For the banker or merchant the phrase ‘to buy in order to sell’ only means something if he sells for a sum which exceeds that in his possession when he came to the market. The activity of the usurer or the merchant is therefore to increase the value of money by surplus value, to acquire wealth as an end in itself.
Capital – and this is what we are talking about, in its initial and elementary form: money-capital – is therefore any value which is increased by surplus value, which attempts to acquire surplus value. This Marxist definition of capital is opposed to the current definition of bourgeois manuals, according to which capital is quite simply any instrument of labour or, vaguer still, ‘any durable goods’. According to this definition, the first monkey to hit a banana tree with a stick to bring a banana down would have been the first capitalist. …
Let us underline it once again: like all ‘economic categories’, the category ‘capital’ can only be understood if we understand that it is based on specific social relations between human beings, relations which allow an owner of capital to appropriate a surplus value produced by others.
5 .From capital to capitalism
The existence of capital is not to be confused with the existence of the capitalist mode of production. On the contrary, capital existed and circulated for thousands of years before the birth of the capitalist mode of production in Western Europe in the Fifteenth and Sixteenth Centuries.
The usurer and the merchant first appear in pre-capitalist, slave and feudal societies, as well as those based on the Asiatic mode of production. In these societies they operate essentially outside the sphere of production. They assure the introduction of money into a natural society (in general this money comes from foreign parts), bring in luxury products from afar, and assure minimum credit to the possessing classes – which own much real estate but little money – as well as to kings and emperors.
Such capital is politically weak, unprotected from exactions, pillage and confiscation. That is its usual fate, and that is why its owner jealously protects his treasure, even hiding part of it, and taking care to split it up into various fields of investment for fear of provoking confiscation. Some of the richest groups of capital owners in the first centuries of the Middle Ages suffered such confiscations: for example, the Fourteenth Century Templars of France. The Italian bankers who financed the wars of the English kings in the Fourteenth Century found themselves dispossessed because these kings did not repay their debts.
It is only when the political balance of forces has changed to such an extent that these direct and indirect confiscations become more and more difficult that capital can be accumulated – can grow – in a more continuous manner. From this moment the penetration of capital into the sphere of production becomes possible, as does the birth of the capitalist mode of production, the birth of modern capitalism.
Now the owner of capital is no longer simply a usurer, a banker or a merchant. He is the owner of the means of production, he hires workers, and organises manufacturing and industrial production. Surplus value is no longer extracted through the sphere of distribution. It is generally produced during the productive process itself.
6 What is surplus value?
In pre-capitalist society, when the owners of capital essentially operate in the sphere of circulation, they can only appropriate surplus value by parasitically exploiting the revenues of other classes in society. The origin of this parasitic surplus value can be either a part of the agricultural surplus (for example, of the feudal rent) of which the nobility or the clergy are the initial owners, or a part of the slender revenues of the artisans and peasants. This surplus value is to a large extent the product of deception and pillage. Piracy, pillage and the slave-trade played an essential role in establishing the initial fortunes of the Arab, Italian, French, Flemish, German and English merchants in the Middle Ages. Later on, the purchase of merchandise at a price below its value on faraway markets, and its sale at a price higher than this value on the markets of the Mediterranean, West Europe and Central Europe, played a similar role in enriching Portuguese, Spanish, Dutch, British and French merchants and bankers.
It is clear that such surplus value as this simply results from the transfer of value. The global wealth of the society taken as a whole is scarcely increased; some lose what others gain. In fact, the global personal wealth of humanity increased by relatively little for thousands of years. It has been totally different since the arrival of the capitalist mode of production. From this moment on, surplus value is no longer simply syphoned off during the process of the circulation of commodities. It now habitually appears during the course of production itself, and therefore constantly increases in size.
We have seen that in all pre-capitalist class societies the producers (slaves, serfs, peasants) were obliged to divide their week’s work, or their annual production, into a part they themselves consumed (necessary product) and a part which was appropriated by the ruling class (social surplus product). In the capitalist factory the same phenomenon occurs, although veiled by the appearance of market relations which seem to govern the ‘free buying and selling’ of labour power between the capitalist and the worker.
From the beginning of their day’s (or week’s) work in the factory, the workers incorporate a new value into the raw materials they work with. After a certain number of hours (or days) of work, they have produced a value which is exactly equivalent to their daily (or weekly) wages. If they stopped work at this precise moment, the capitalist would not obtain a penny of surplus value. But in those conditions the capitalist would not serve his own interests by buying the labour power. Like the usurer or the merchant in the Middle Ages, he ‘buys in order to sell’. He buys the labour power only so that, as a result of its use, what is produced can be sold for more than what its components, including labour power, cost him to buy. This ‘supplement’ is his surplus value, his profit. It is therefore understood that if the workers produce the equivalent of their wages in four hours of work, they will work not four but six, seven, eight or nine hours. During these two, three, four or five ‘supplementary’ hours they produce surplus value for the capitalist and gain nothing in return.
The essence of surplus value is therefore surplus labour, ‘free’ labour appropriated by the capitalist. ‘But it’s stealing’, you will say. The reply will be: ‘yes and no’. Yes from the worker’s point of view, no from the capitalist’s point of view.
The capitalist has not in fact bought ‘the value produced by, or to be produced by, the worker’ on the market. He has not bought their ‘labour’, i.e. the labour the worker will carry out (if he had done this it would be a straightforward case of stealing – he would have paid £100 for something worth £200). He has bought the worker’s labour power. This labour power, under capitalism, has become a commodity, and therefore has its own value as every commodity has. The value of labour power is determined by the quantity of labour necessary to reproduce it, that is necessary for the subsistence (in the larger sense of the word) of the worker and the worker’s household.
Surplus value originates from the fact that a difference appears between the value produced by the worker and the value of the commodities needed to assure that worker’s subsistence. This difference is due to a growth in the productivity of the worker’s labour. The capitalist can appropriate to himself the advantages of that growth in the productivity of labour because labour power has become a commodity, because the workers have been placed in conditions such that they no longer have access to their own means o f production or o f livelihood.
7 The Conditions For The Appearance Of Modern Capitalism
Modern capitalism is the product of three basic economic and social transformations:
(a) The separation of the producers from their means of production and subsistence. This separation took place in agriculture through the expulsion of small peasants from the seigneurial lands which were transformed into pastures; amongst the artisans by the destruction of the medieval corporations; by the private appropriation of the reserves of virgin lands overseas; by the private appropriation of the communally owned land in the village; etc.
(b) The formation of a social class which monopolises these means of production: the modern bourgeoisie. The appearance of this class presupposes first of all an accumulation of capital in money form, and then a transformation of the means of production which makes them so expensive that only the owners of considerable money-capital can acquire them. The industrial revolution of the Eighteenth Century, which based all future production on mechanisation, brought about this transformation in a definitive manner.
(c) The transformation of labour power into a commodity. This transformation results from the appearance of a class which owns nothing but its labour power, and which is obliged to sell this labour power to the owners of the means of production in order to subsist.
‘Poor and needy people, of whom many are charged with the burden of women and many children, and who possess nothing other than what they can earn through the work of their hands’: this excellent description of the modern proletariat is an extract from a late Sixteenth Century petition, drawn up in Leiden (in the Netherlands).
Because this proletarian mass does not have the freedom of choice – except the choice between selling its labour power and living in permanent starvation – it is obliged to accept the price dictated by the normal capitalist conditions of the ‘labour market’ as the price for its labour power – that is to say, a sum of money just sufficient to buy commodities satisfying only those ‘basic needs’ which are recognised socially. The proletariat is the class of those who are obliged by this economic constraint to sell their labour power in a more or less continuous fashion.