Simple commodity production
Simple commodity production, is a term coined by Friedrich Engels in 1894 when he had compiled and edited the third volume of Marx's Capital. It refers to productive activities under the conditions of what Karl Marx had called the "simple exchange" or "simple circulation" of commodities, where independent producers trade their own products to obtain other products of equivalent value. The use of the adjective simple is not intended to refer to the nature of the producers or of their production, but rather to the relatively simple and straightforward exchange processes involved, from an economic perspective.
As discussed below, both Karl Marx and Engels claimed explicitly that the law of value applied also to simple exchange, and that the operation of this law is modified by merchant capitalism and the capitalist mode of production in which most of the inputs and outputs of production become tradeable commodities. Many classical economists were aware of differences between simple commodity exchange and capitalist exchange, but they could not adequately explain the historical transformation of the one into the other. Sometimes their theories confused capitalist commodity trade with simple commodity trade.
According to Marx and Engels, simple commodity production and trade existed for millennia before the advent of industrial capitalism. From the beginnings of the bourgeois epoch in 15th century Europe, the reach and scope of commodity production began to grow incrementally, although sometimes this process was interrupted by wars, epidemic diseases, power relations and natural disasters. Only with the growth of free wage labour is commodity production generalized to most of the economy, and fully integrated into national and international markets. Obviously, this market growth also required institutions, conventions and rules, so that the competing burghers could resolve their trade disputes fairly and efficiently, without destroying the markets and destroying people's livelihoods; through learning from experience as well as from the invention and widespread adoption of new ideas, a "market culture" gradually evolved to make that possible. Civil society could not be "civil", if the burghers defied all religion and authority, and resolved their trading disputes by robbing, physically attacking and killing each other.
Originally production for market sale existed alongside subsistence production. That continued for millennia until urbanization, merchant trade and industrialization began to take off. Through the last six centuries, the share of commodity production in total output grew more and more, together with productivity growth and population growth. It grew steeply in the 19th and 20th centuries, until production for the market represented the largest part of total output value in the majority of countries.
To explain this lengthy historical process, Marx and Engels took a nuanced approach. They did not argue crudely that economic categories can only be either "transhistorical categories" or "categories specific to one historical period". Instead, they argued that economic categories can and do evolve from one historical epoch to the next, along with the evolution of the social relations which they express. Transitional phases and forms occurred, and continuities co-existed with discontinuities. Marx and Engels were both very aware that historically there existed gradations of market integration, and that the achievement of complete market integration was a very lengthy and complex historical process. The challenge was to understand dialectically, how the new economic relations could evolve out of the old ones - by retaining some of their content, losing some content, and also gaining some completely new content. Historically, the simple production and exchange of commodities evolved, it took different forms, and showed varying degrees of sophistication – from the simple exchange of surplus goods by independent farmers, to fulltime self-employed production of goods or services for profitable sale, using tools and other inputs bought in markets.
Different interpretations
This historical, evolutionary viewpoint is however not accepted by all Marxists. The historical role of simple exchange based on simple commodity production has been the subject of considerable controversy among Marxist scholars. It has been claimed by academics that Marx never had a concept of "simple commodity production" because he did not use those words. If that is true, then it seems to academics that Engels's concept was really alien to Marx's thought. For example,- the Italian Marx-scholar Roberto Fineschi alleges that Friedrich Engels failed to understand the difference between circulation and production, so that Engels falsely equated Marx's concept of "simple exchange of commodities" with "simple commodity production".
- According to Rolf Hecker's interpretation, by contrast, Engels does not equate Marx's concept of simple exchange of commodities with simple commodity production, but instead replaces simple exchange of commodities with simple commodity production.
- According to David Harvey, "Value... becomes an embedded regulatory norm in the sphere of exchange only under conditions of capital accumulation".
- Christopher J. Arthur claims that an economy or society fully based on simple commodity production has never existed in history, contrary to what Engels suggested. Since Marx never even used the term "simple commodity production", Arthur considers the whole idea a "myth" that refers to something that never existed. However, Arthur completely ignored that in several places Marx refers to simple commodity production although Marx did not use that name for it.
- John Weeks believed that the law of value applies only to industrial capitalism, and not to market systems which preceded industrial capitalism.
- According to Helmut Reichelt, the law of value applies only when the whole of society is subsumed under the bourgeois form of the division of labour.
- Similarly, Tony Smith claims that “‘Value’ is a property of products only when commodity production and exchange is generalised”.
- Alex Callinicos argues that "the so-called historical interpretation of the labour theory of value" which claims that "it holds true in conditions of simple commodity production, prior to the development of capitalism", involves "a complete misunderstanding of Marx’s value theory". Following John Weeks and Robert Brenner, Callinicos claims that if an independent producer produces his own outputs with his own means of production, and sells part of his output in the village market, then no “commodity production” occurs at all, because the inputs for his production are not commodities, and the production process is not subject to the laws of competition. Therefore, Callinicos argues, it is simply wrong to call such production “simple commodity production”.
- Paul Sweezy accepted the validity of the category of simple commodity production, but he argued that “commodity production and feudalism are mutually exclusive concepts”, because in feudalism, the land is “owned by a class of non-producers".
The new anti-Engels interpretation is contrary to the traditional Marxist view, the latter which defines a commodity as a product of labour and not as a product of exchange. According to the traditional Marxist view, the simple exchange of commodities presupposes at least that the commodities are produced. Otherwise there would not exist any commodities that could be exchanged. Commodities are created with the intention of exchanging them for other goods or money, but they are not created by the exchange process itself; at best one can say that the existence of commodities normally presupposes that there exists a market for them. Historically speaking, the development of the simple exchange of reproducible commodities could never occur without simple commodity production. Engels does not argue that the law of value disappears when commodity trade is regulated by production prices, but rather that the law of value is transformed and modified. It is transformed, because:
- Originally the exchange-value of what a producer creates is regulated by his own necessary labour-time. But, in the end, the exchange-value of his production is completely regulated by a socially average labour-cost, i.e. a market value expressed as the normal price-level which is imposed on him as an objective external force, regardless of whether his own labour-time is more or less than the normal social average. Paradoxically, as Marx says, the more that the producers become dependent on exchange, the more the whole exchange process appears to become independent of them, following its own laws and logic.
- The simple exchange of approximate labour-equivalents as the basis for balanced trade is gradually replaced by the more complex exchange of unequal labour-values, where fluctuating market-prices for products systematically diverge from average product-values, and their supply-cost contains a surplus value formed in production. The exchange-values of products are no longer directly regulated by labour-values, but by prices of production. What therefore determines commodity prices at this stage are the average cost-prices and the average profit yields from their production and sale.
- While originally the commodities sold were a surplus to the requirements of the seller, alongside subsistence production, eventually the market sale of the commodities produced is the precondition and the only practical purpose of producing them. In contrast to partial commodity production, generalized commodity production means that most of the inputs of production are supplied as commodities, and most of the outputs are sold as commodities - with the consequence, that the whole production process is reorganized to conform to commercial criteria. This is the economic background for the transition from the formal subsumption of labour and production under capital to its real subsumption.
In the anti-Engels explanation, it is unclear what regulates commodity-trade in the pre-capitalist economy, if not the law of value. It is unclear how the law of value can "suddenly" appear out of nowhere, once most of production becomes commodity production through the growth of markets. Apparently, capital began to exist when wage-labour exists, i.e. when peasants and serfs were thrown off the land and were forced to work for a wage from an employer, to make a living. Somehow, a mass of employers "suddenly" appears out of nowhere to employ a mass of unemployed workers in mechanized factories, in exchange for wages. But how this could have resulted from the situation that preceded it, remains a puzzle.
This mystery is solved only when labour history and business history is studied. Long before the industrial capitalist appeared on the stage of history, wage-labourers were already being hired - when officials of the early state paid soldiers for their services, temple officials employed contract labourers, and landowners hired farm workers. The first known workers' strike recorded in written history, on a papyrus, was staged more than three thousand years ago by building workers at the royal necropolis at Deir el-Medina in Egypt, during the reign of Ramses III.