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.
Origins
Simple exchange of reproducible and portable commodities is as old as the history of trade, insofar as it progressed from incidental barter of use-values according to cultural custom, to regular exchange using a standard of value. Simple exchange occurred for thousands of years before most production became organized in the capitalist way. It begins when producers in a simple division of labour trade surpluses to their own requirements, with the aim of obtaining other products with an equivalent value, for their own use. In Marx's own words,Through the experience of regular trade and competition, normal exchange values become established for products, which reflect an economy of labour-time and a cost-structure of production. The simple commodity producers could aim just to trade their products or services to obtain other products with an equivalent value, or they could, in favourable circumstances, aim to realise a profit. They could sell their products or services to the final consumer, or to an intermediary such as a merchant. Simple commodity production and simple exchange are compatible with many different relations of production and exchange, ranging from self-employment in which the producer owns his own means of production and family labour, to forms of slavery, peonage, indentured labour, and serfdom. In the cooperative farming system of the Soviet Union, members of the kolkhozy were quite often permitted to cultivate small plots of private farmland, to raise some livestock, and to sell their produce themselves.
The technologies used by a simple commodity producer might be characteristic for a specific mode of production, but simple commodity production as such is not specific to any particular mode of production, and might be found alongside many different modes of production, with various degrees of sophistication. It does not necessarily imply, that all the inputs or outputs of productive activity in the local economy are commodities traded in markets. For example, simple commodity producers could produce some products for their own subsistence and for their own use on their own land, while trading another part of their products. They might buy or trade some tools and equipment, but also make some tools and equipment themselves. Simple commodity production continues to occur in capitalist societies, especially in developing countries. According to Marcel van der Linden, "The different combinations of subsistence labor and commodity production are infinite".
Early settler colonies
A society which literally consisted only of simple commodity producers has never existed, and Friedrich Engels never claimed that either. No serious Marxian scholar has ever claimed that such a society really existed, although there were plenty agricultural regions where the vast majority of the economically active population consisted of independent farmers. However, at the dawn of the bourgeois epoch of history, many of the initial colonial settlements in foreign lands consisted largely of self-employed producers, who farmed their own land, or worked as artisans, tradesmen and craftsmen. In his discussion of colonization in Capital, Vol. 1, Marx illustrates the colonial labour problem with an anecdote about an English entrepreneur who decided to emigrate to Australia:In the colony, there existed no absolute necessity or socio-economic compulsion to work for an employer, the rule of law could not be properly enforced, and conditions in the Swan River settlement were harsh, particularly because of a lack of infrastructure. So many workers ran off to go into business for themselves, or to find better conditions, jobs and wages in Perth, Sydney or other settlements in Australia. Mr Wakefield stated very precisely and explicitly why he thought attempts at colonization could fail despite favourable conditions :
Wakefield's own proposed method of "systematic colonization" was specifically designed to overcome the labour problems encountered in previous attempts at establishing settler colonies. A "sufficient price" would be put on colonial land, so that workers first had to earn and save money with wage-labour for several years, before they could eventually buy their own land. However, Wakefield's scheme assumed, that the colonial government would have full control over land ownership and land sales. This was usually not the case, especially in the "anarchic" first stage of colonialization. It created opportunities and openings for settlers to stake out claims, occupy land, obtain contracts, and trade properties without intermediation or strict supervision by the colonial government. Moreover, it was often also in the interest of colonial governments to make it easier for new colonists to set up in business, in order to attract still more settlers; the more settlers arrived, the faster new infrastructures and services could be established for the colony, and the more powerful the colony became.
An American historian comments that:
The proportion of early American colonists who worked as artisans is estimated to have been between 10% and 18%. So the vast majority of the workforce at that time consisted not of waged employees, but of independent farmers plus artisans, both engaging in simple commodity production. Imported African slaves "worked mainly on the tobacco, rice and indigo plantations of the southern coast, from the Chesapeake Bay colonies of Maryland and Virginia south to Georgia." Before 1660, few Virginia planters owned slaves. By 1675 the use of slaves was common, and by 1700 slaves largely replaced indentured servants. "With plentiful land and slave labor available to grow a lucrative crop, southern planters prospered, and family-based tobacco plantations became the economic and social norm". In hindsight, Marx concluded that:
In an early appraisal of David Ricardo’s theory of land rent, Marx notes the difference between independent "farming colonists" in colonial Australia and America who “are not capitalists” and who do not engage in capitalist production, although they sell their surpluses for money to obtain manufactured goods, and the hybrid form of colonial plantations based mainly on slave labour, which is conducted by capitalists who are “at the same time capitalist and landowner”.
From the time of the earliest British colonial settlements of the 1600s until America began to issue its own currency in 1783, three different types of money were used in colonial commodity trade: coins such as Spanish dollars and shillings, including fiat money denominated in British pounds, shillings and pence; land notes; bank notes; and tobacco notes, and portable goods and services offered in exchange, including tobacco, corn, wampum, buttons, etc.
Textual sources of the concept
In The Wealth of Nations, Adam Smith introduces the concept of simple commodity production as follows:If the trading process cost too much labour and yielded too little in exchange, the trading process would break down, and none of the trading partners would be able to get what they wanted. So there were definite conditions for balanced and sustainable trade. Smith went on to contrast simple commodity production with capitalist production involving wage labour:
In a conspectus and critique of Adam Smith's theory of value, Marx similarly gives a brief description of simple commodity production :
In this situation of simple exchange, Marx argues that a given quantity of living labour would ordinarily always command an equivalent amount of labour objectified in commodities. However, Marx continues, in all modes of production where one or more social classes own the means of production, while commoners own only their ability to work for a living, this general equivalence does not exist. This explained why Adam Smith, who believed that labour is the substance of value, mistakenly concluded that when wage-labour coexists with capital and landed property, labour is no longer “the immanent measure which regulates the exchange value of commodities”. According to Marx, Smith should have concluded instead, that the expressions “quantity of labour” and “value of labour” are no longer identical in a class society.
In his 1894 preface to Capital, Volume 3, Friedrich Engels argued that:
This interpretation by Engels closely followed what Marx himself stated in his 1864 manuscript titled Results of the immediate process of production:
However, the interpretation by Engels arguably did not completely match what Marx said about his own approach. In his critical notes on Adolph Wagner's Textbook on political economy, Marx said about his analysis of the commodity form in Capital, Volume 1 that:
Here Marx states clearly, that in the first chapter of Capital Vol. 1 he was talking about the commodity as the simplest traded object "in contemporary society", and not about a simple commodity in pre-capitalist society. Point is, when Marx first analyzes a commodity as such, he disregards how exactly the commodity is produced and how specifically it is traded. He just examines the commodity "as an autonomous article", as a separate thing just as it observably appears in an everyday trading relation - without introducing all sorts of assumptions about how and where it originated, or what it will be used for. Put another way, Marx is talking about simple commodity circulation, not simple commodity production, although the former could assume the latter.
In his 1895 afterword Supplement and addendum to Volume 3 of Capital, Friedrich Engels elaborates the concept of simple commodity production as follows:
Again, Engels based himself on what Marx himself had said – in chapter 10 of Capital, Volume 3 :
In these passages, both Engels and Marx make it very clear, that they believed the law of value governed the trade of commodities long before capitalism existed, and that the law of value is altered by the emergence of mercantile and industrial capitalism. Since people normally take their own interest and advantage into account when they trade, labour requirements become a general regulator of the terms of trade. The more that trade and markets develop, the more the value of commodities is set by the socially average replacement costs in living labour time, and the more prices will approximate that value. The higher the average labour content represented by commodities, the higher their value, and the lower their average labour content, the lower their value. In general, there is therefore an approximate correspondence between relative hours of labour worked, and the relative price levels of the products of that labour.
From simple commodity production to capitalist production
The large-scale global transformation of simple commodity production into capitalist production based on the wage labour of employees occurred only in the last two centuries of human history. It is preceded by the strong growth of merchant trade, supported by credit from financiers who earn rents, profit and interest from the process. The merchants not only act as intermediary between producers and consumers, but also integrate more and more of production into a market economy. That is, more and more is produced for the purpose of market trade, rather than for own use. The initial result is known as "merchant capitalism", which flourished in Western European cities especially in the 17th and 18th centuries but already existed on a smaller scale in the 15th century and even earlier.However, the transformation of more and more simple commodity production into capitalist production which accompanies industrialisation requires profound changes in property relations, because it must be possible to trade freely in means of production and labour power. Only when that trade becomes possible, can the whole of production be reorganised to conform to commercial principles. Parallel to the growth of markets, capital and industries is a growing class of wage earners who are compelled to sell their labour for a living, because they lack other means of survival.
Marx describes capitalist society as "a society where the commodity-form is the universal form of the product of labour, hence the dominant social relation is the relation between people as possessors of commodities". He argues that "The capitalist epoch is... characterized by the fact that labour-power, in the eyes of the worker himself, takes on the form of a commodity which is his property; his labour consequently takes on the form of wage-labour... it is only from this moment that the commodity-form of the products of labour becomes universal." Thus, "...from the moment there is a free sale, by the worker himself, of labour power as a commodity... from then onwards... commodity production is generalized and becomes the typical form of production."
In a 1864 manuscript, Marx emphasized specifically that:
To reach the stage of a universal market, many legal, political, religious and technical restrictions imposed on commercial trade must be overcome. The unification of a "home market" among people in a country who can speak the same language typically stimulated nationalist ideologies. But depending on the existing social systems, the transformation might occur in many different ways. Typically, though, it has involved wars, violence and revolutions, since people were unwilling to just give away assets, rights and income that they previously had. Communally owned property, hereditary land ownership, the property of religious orders and state property all had to be privatised and amalgamated, in order to become tradeable assets in the process of capital accumulation. The ideology of the rising bourgeoisie typically emphasized the benefits of privately owned property for the purpose of wealth creation and industriousness.
Marx refers to this process as the primitive accumulation of capital, a process which continues particularly in developing countries to this day. Marx shows that primitive accumulation involves to a large extent the expropriation of independent producers, who lose their means of production, and therefore are forced to work for an employer to earn a living. Typically, previously independent producers on the land are proletarianised and migrate to the urban centres, in search of work from an employer.
Simple commodity production nevertheless continues to occur on a large scale in the world economy, particularly in peasant production. It also persists within industrialised capitalist economies in the form of self-employment by free producers. Capitalist firms sometimes contract out specialised services to self-employed producers, who can produce them at a lower cost, or provide a superior product. Many digital products are produced by self-employed specialists who own their own computer.
Modelling simple commodity production
The historical example of early settler colonies suggests that an "imaginary society" of simple commodity producers temporarily became a reality, as an early phase in the evolution of new social formations. In that sense, a "93% society of simple commodity producers" did exist for a while. However, in some schools of Marxian economics, simple commodity production refers only to a model of a hypothetical economy used by economists to interpret some of Karl Marx's insights about the economic laws governing the development of commodity trade. The model is only a thought experiment to identify some quantitative implications of commercial production and trade. In this society, a market economy is supposed in which all producers are independent individuals who own and operate their own means of production, and who trade their own products. According to Michio Morishima,Ronald L. Meek explains:
Academic discussion
The theoretical debates about simple commodity production have attracted contributions from numerous economists, philosophers and historians across the last century. This seemingly obscure topic has important implications for quite a few different areas of research:- The interpretation of Marx’s method of analysis and his theory of value;
- The interpretation of the historical transition from pre-capitalist society to capitalism ;
- The so-called transformation problem;
- Understanding settler colonialism and the post-colonial economy;
- The theory and practice of development economics;
- The economics of the transition from capitalism to socialism and communism.
- The debates about the desirability, feasibility and unorthodoxy of a market socialism with a variety of trading processes and property forms.