Simple commodity production

Simple commodity production (German: einfache Warenproduktion), also known as petty commodity production, is a term coined by Friedrich Engels in 1894 to describe productive activities under the conditions of what Karl Marx had called the "simple exchange" of commodities, where independent producers trade their own products in order to obtain other products of an approximately equivalent value. The use of the word simple does not refer to the nature of the producers or of their production, but rather to the relatively simple and straightforward exchange processes involved.

Simple exchange of commodities is as old as the history of trade, insofar as it has progressed beyond barter, and occurred for thousands of years before most production became organised in the capitalist way. It begins when producers in a simple division of labour (e.g. farmers and artisans) trade surpluses to their own requirements, with the aim of obtaining other products with an equal value, for their own use. Through the experience of trade, regular exchange values become established for products, which reflect an economy of labour-time.

Bith Karl Marx and Engels claimed explicitly that the Marxian law of value applied also to simple exchange, this law being modified in the capitalist mode of production when all the inputs and outputs of production (including means of production and labour power) become tradeable commodities. This interpretation is however not accepted by all Marxists, some of whom see capitalist markets as functioning in a completely different way from pre-capitalist markets. Engels aimed to give a consistent explanation of the evolution and development of market economy from simple beginnings to the complexities of modern capitalist markets, but his critics argue he disregards the transformation of the relations of production involved.

Simple commodity production is compatible with many different relations of production, ranging from self-employment where the producer owns his means of production, and family labour, to forms of slavery, peonage, indentured labour, and serfdom. The simple commodity producer could aim just to trade his products for others with an equivalent value, or he could aim to realise a profit. That is to say, simple commodity production is not specific to any particular mode of production, and might be found in many different modes of production, with various degrees of sophistication. It does not necessarily imply that all inputs or outputs of productive activity are commodities traded in markets. Thus, for example, simple commodity producers could produce some products 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 themselves.

In Marxian political economy, simple commodity production also refers to a hypothetical economy used to interpret some of Karl Marx's insights about the economic laws governing the development of commodity trade: it refers to a market economy in which all producers own the resources (including the ability to work) that they use in production. No-one is a proletarian, selling his or her labor power to another. Instead, each is self-employed. In this imaginary model (strictly a thought experiment), there is a direct correspondence between prices and the values of commodities. The model is imaginary, because no "pure" society of simple commodity producers has ever existed in history, at least not on any significant scale. Simple commodity production has always combined with some other modes of production, and as soon as a market economy reaches any size, it begins to utilise wage labor in production, and falls under the sway of the laws of capital accumulation.

Textual source of the concept

In his 1894 preface to Capital, Volume 3, Friedrich Engels argued that:

"...at the beginning of Volume 1... Marx takes simple commodity production as his historical presupposition, only later, proceeding from this basis, to come on to capital... he proceeds... from the simple commodity and not from a conceptually and historically secondary form, the commodity as already modified by capitalism".

This interpretation by Engels closely followed what Marx himself stated in his 1864 manuscript titled Results of the immediate process of production:

"The individual commodity viewed as the product, the actual elementary component of capital that has been generated and reproduced, differs then from the individual commodity with which we began, and which we regarded as an autonomous article, as the precondition [Voraussetzung] of capital formation."

However, the interpretation by Engels did not completely match what Marx said about his own approach. In his critical notes on Adolph Wagner's Textbook on political economy (1879), Marx stated that:

"What I proceed from is the simplest social form in which the product of labour presents itself in contemporary society, and this is the "commodity." This I analyse, initially in the form in which it appears."

Here Marx states clearly, that he is talking about the commodity as the simplest traded product "in contemporary society", and not about a simple commodity in pre-capitalist society. What Marx really seems to be doing when he analyzes the economic form of a commodity as the simplest traded object, is that he is (for the time being) disregarding both how exactly the commodity is produced and how specifically it is traded. He is only examining the commodity as an "autonomous article" (as he says) just as it observably appears in a trading relation, without making all sorts of assumptions about how and where it originated or what it will be sold and used for.

In his 1895 afterword Supplement and addendum to Volume 3 of Capital, Friedrich Engels elaborates the concept of simple commodity production as follows:

”... Marx's law of value applies universally, as much as any economic laws do apply, for the entire period of simple commodity production, i.e. up to the time at which this undergoes a modification by the onset of the capitalist form of production. Up till then, prices gravitate to the values determined by Marx's law and oscillate around these values, so that the more completely simple commodity production develops, the more do average prices coincide with values for longer periods when not interrupted by external violent disturbances, and with the insignificant variations we mentioned earlier. Thus the Marxian law of value has a universal economic validity for an era lasting from the beginning of the exchange that transforms products into commodities down to the fifteenth century of our epoch. But commodity exchange dates from a time before any written history, going back to at least 3500 B.C. in Egypt, and 4000 B.c. or maybe even 6000 B.C. in Babylon; thus the law of value prevailed for a period of some five to seven millennia.”

Again, Engels based himself on (and cites) what Marx himself had said – in chapter 10 of Capital, Volume 3 (on the equalization of rates of profit by competition):

”The exchange of commodities at their values, or at approximately these values… corresponds to a much lower stage of development than the exchange at prices of production, for which a definite degree of capitalist development is needed. Whatever may be the ways in which the prices of different commodities are first established or fixed in relation to one another, the law of value governs their movement. When the labour-time required for their production falls, prices fall; and where it rises, prices rise, as long as other circumstances remain equal. Apart from the way in which the law of value governs prices and their movement, it is also quite apposite to view the values of commodities not only as theoretically prior to the prices of production, but also as historically prior to them. This applies to those conditions in which the means of production belong to the worker, and this condition is to be found, in both the ancient and the modern world among peasant proprietors and handicraftsmen who work for themselves. This agrees, moreover, with the opinion we expressed previously, viz. that the development of products into commodities arises from exchange between different communities, and not between the members of one and the same community. This is true not only for the original condition, but also for later social conditions based on slavery and serfdom, and for the guild organization of handicraft production, as long as the means of production involved in each branch of production can be transferred from one sphere to another only with difficulty, and the different spheres of production therefore relate to one another, within certain limits, like foreign countries or communistic communities.”

Nevertheless, this interpretation by Marx and Engels about 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 that the concept of simple commodity production was never used by Marx and therefore is alien to his thought, and that an economy or society fully based on simple commodity production has never existed, contrary to what Engels seems to have suggested.

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 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 from simple commodity production into capitalist production accompanying industrialisation requires profound changes in property relations, because it must be possible to trade freely in means of production and labour power (the factors of production). Only when that trade becomes possible, can the whole of production be reorganised to conform to commercial principles. 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."

For that purpose, many legal, political, religious and technical restrictions imposed on trade must be overcome. The unification of a "home market" among people in a country who 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, inherited plots of land, the property of religious orders and state property 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. Typically, previously independent producers on the land (but also serfs) 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.

References

• Frederick Engels, Afterword to Vol. 3 of Das Kapital.
• Ian Wright, "The Emergence of the law of value in a dynamic simple commodity economy", to appear in Review of Political Economy. https://web.archive.org/web/20051105080343/http://65.254.51.50/~wright/sce.pdf
• Ronald Meek, Studies in the Labour Theory of Value. New York: Monthly Review Press, 1975.
• Tom Brass and Marcel Van Der Linden (eds.), Free and Unfree Labour: The Debate Continues (International and Comparative Social History, 5). New York: Peter Lang AG, 1997.
• Arthur Diquattro, "The Labor Theory of Value and Simple Commodity Production". Science & Society, Vol. 71, No. 4, October 2007, 455–483.
• Christopher J. Arthur, "The Myth of ‘Simple Commodity Production’", 2005, in Marx Myths and Legends, https://www.marxists.org/subject/marxmyths/chris-arthur/article2.htm