Karl Marx

UNIT 2 USE VALUE AND EXCHANGE

VALUE*
Structure
2.0 Objectives
2.1 Introduction
2.2 Commodity
2.3 Use Value of Commodities
2.4 Exchange Value of Commodities
2.5 The Origin of Value and Value Form
2.6 Fetishism of Commodities
2.7 Circulation of Commodities
2.8 Theory of Surplus Value
2.9 Let Us Sum Up
2.10 References
2.11 Answers to Check Your Progress

2.0 OBJECTIVES
After going through the Unit, you will be able to:
 explain the concept of commodity in a capitalist society;
 discuss the changes in social relations with the development of exchange
relations in capitalist societies;
 describe the impact of commodity fetishism on relationship among
individuals; and
 outline Marx’s theory of surplus value.

2.1 INTRODUCTION
Values refer to the approved or desirable beliefs held by individuals in a society
or culture. Different individuals may value different beliefs for instance some
individuals may value sharing while others may value individualism. Values may
vary in societies, cultures and time periods. Individuals have always valued
certain beliefs or ideas since ancient times.
When Karl Marx analyses value he is looking at how value is seen in relation to
‘commodities’ subjected to exchange with the emergence of capitalist society.
Karl Marx looks at value in economistic terms through the concept of
commodities which embody both ‘use value’ and ‘exchange value’. Marx does

*
written by Charu Sawhney, Independent Researcher, New Delhi
22
not look at value in terms of immaterial beliefs but in terms of a tangible thing as Use Value and
Exchange Value
a ‘commodity.’
While Marx was in London in 1849 he devoted time to study economics and
wrote Capital in 1867. The chapter on ‘Commodities’ is the first chapter of Das
Capital Volume One written by Karl Marx. This chapter undertakes an
examination of the concept of commodity in a capitalist society and also its
related factors as use value and exchange value. Marx’s analysis of commodity is
a critique of the writings of political economists as Adam Smith and David
Ricardo. Ricardo’s writings largely shaped England’s economic policies.
Through an understanding of the concept of commodity Marx critiques the
economic principles of capitalist society.

2.2 COMMODITY
Marx examined the concept of commodity in a capitalist society as an economic
product which was an outcome of a system of social relations. Also a commodity
in subjected to buying and selling as the market develops in capitalist society.
There is an immense accumulation of commodities in societies with capitalist
mode of production. A single commodity is the basic unit of a capitalist society.
A commodity is a thing outside of the human beings and satisfies human needs.
There are various examples of commodities as shoes, dress, bread, butter.
Diverse commodities satisfy diverse wants. A commodity displays both quantity
and quality. The value of a commodity is determined by the amount of labour
socially necessary or socially necessary labour time required in producing it e.g.,
diamonds are more valuable than other commodities because they are rare to find
on Earth’s surface and diamonds also require more labour time to produce them.
The two factors associated with a commodity in a capitalist society are use value
and exchange value. Similarly, the labour that is embodied in a commodity also
displays the two fold character that is useful labour and abstract labour.

2.3 USE VALUE OF COMMODITIES

Commodities only have use value and value of a commodity is created when
useful labour in the abstract is embodied in it. The use value of commodities
according to Marx consists of two elements that are matter and labour. The use
value of a commodity refers to the utility of a commodity or human need that a
particular commodity fulfils. Use value refers to the ability of a commodity to
render ‘a particular service to an individual’ (Morrison 1995: 60) e.g., shoes
protect the feet, dress clothes the body, and bread and butter fulfils the need for
hunger. Also every commodity fulfils a particular need which cannot be fulfilled
by other commodity. This is because the use of a commodity is determined by the
physical properties and also their quality.
A thing can be useful without it being a commodity to be bought and sold in the
market e.g., air, water, soil etc. (Calhoun, Moody, Pfaff, Schmidt, and Virk 2002:
47). A thing can have use value, be useful and a product of labour without it
being a commodity e.g., A farmer raises agricultural produce for his family’s
23
Karl Marx subsistence produces use value and not commodities. In order to produce a
commodity an individual must expend useful labour on a thing, produce it for
others and also subject it to exchange. A commodity is therefore produced when
not only use value but social use value is produced as in producing value for
others (Calhoun, Moody, Pfaff, Schmidt, and Virk 2002: 47). Value is not found
in a commodity. If a thing that is produced is useless it does not have any value
and the labour that is expended on it is useless.
Useful labour creates simple use values. Commodities such as linen and coat both
have distinctive use values. Useful labour and production for subsistence has
happened for time immemorial. Only in capitalist society where there is
exchange it takes the form of commodity. In a capitalist society useful labour is
transformed into a commodity. In feudal society or tribal society there is no
system of exchange and useful labour does not take the form of commodity.
Useful labour signifies the capacity of human labour to engage in productive
activity and create simple use values in a commodity. Both linen and coat are
commodities which are a consequence of productive activities geared toward a
definite aim and employing certain means of production. There is a qualitative
distinction between the labour, skills and abilities that are required to produce
both linen and coat i.e. in activities such as both weaving and tailoring. Useful
labour is qualitatively distinct and produces different utilities in different
commodities. Only when useful labour and not simply labour is spent on a thing
that use value is created in a commodity.

2.4 EXCHANGE VALUE OF COMMODITIES

In a feudal society production is for use and consumption. In a feudal society
things only have use value. Exchange value emerges in developed economies as
capitalist society where commodities are bought and sold in the market.
Exchange value is represented as the ability of definite quantitative proportion of
a commodity to be represented in the value of a quantitative proportion of
another commodity. For example one kg of tea can be represented in the value of
4 kg of rice. Therefore a common element is found between two different
commodities and their values are commensurable in exchange. What emerges is a
‘value in exchange’ (Morrisson 1995:61). As commodities are represented by
values in exchange their use value becomes insignificant. A universal ground is
found in all commodities which is represented by quantitative measures only.
This is because one commodity is now replaceable with another. Also in
capitalist societies when we speak of value we speak of value in the abstract in
how a quantitative proportion of one commodity can be represented through an
equation and in relation to the value of a quantitative proportion of another
commodity. Also exchange value shapes all social relations in capitalist societies.
Exchange value of a commodity is accidental and changes with time and place.
Marx believed that in reality commodities are not comparable as each commodity
has a distinct quality and fulfils a unique function. Marx critiqued that for

24
commodities to be commensurable in exchange all useful distinctions between Use Value and
Exchange Value
different kinds of commodities are eliminated.
There are three consequences of exchange of commodities. Firstly, when
commodities are subjected to exchange it is abstracted from their use. A common
ground is established to determine the value of commodities on the basis of
quantitative measures. In exchange therefore qualitative distinction between
commodities and their use values recedes to the background. Secondly exchange
in capitalist production leads to the elimination of distinction between different
kinds of labour that is expended in different commodities. Marx believed that the
skills and abilities of a coat maker who makes a coat is different from the skills
and abilities of a shoemaker who makes shoes. He believed that different kinds of
labour produce different use values. Both shoemaker and coat maker are paid
wages according to the labour time required to make shoes and coats. Therefore
the distinct labours of the shoemaker and the coat maker are equated
quantitatively according to the labour time required to produce shoes and coats
respectively. The quantity of labour is measured by its duration, that is, its labour
time. The third consequence of the exchange value is its impact on social
relations. Marx held that in contrast to earlier societies where individuals are
valuable in themselves, in capitalist societies all relationships are subject to
buying and selling. Therefore the value of things is determined by their ability to
enter the market. For example, the relationship between a capitalist and a worker
is determined by the exchange value of the worker’s labour. The worker is paid
wages. This wage is a price of the worker’s labour. In a capitalist society the
capitalist exploits the worker as the capitalist partakes in the exchange of
commodities in the market. The worker on the other hand sells his labour power,
that is his capacity to do work, and creates value in production. The worker
receives only wages for his maintenance. Such wages are less than the value the
worker creates; therefore the worker is exploited.
Political economists David Ricardo and Adam Smith visualized that there is only
one kind of labour that is spent on a commodity. Marx held that there is a ‘dual
character of labour’ that is embedded in a commodity. The two kinds of labour
that are expended on a commodity are useful labour and abstract labour. Marx
questions as to how the values of coat and linen are different in capitalist society.
In other words, if coat and linen embody simple use values and are products of
qualitatively distinctive labour how is their exchange value different. This is
because in capitalist society only the physiological expenditure of energy on a
commodity is taken into account. There is a shift from the qualitative distinction
between different kinds of labour, skills and abilities, aims of useful labour to a
quantitative measure of physiological expenditure of energy. This change to a
quantitative measure leads to an abstraction from useful labour as there is a focus
on something comparable in different kinds of useful labour. Abstract labour is
there only in capitalist societies as it is measured in terms of duration of labour
time. Therefore the coat costs twice as much as linen as greater duration of labour
time has gone into creating it. On the other hand the value of useful labour gone

25
Karl Marx into creating coat and linen is qualitatively distinct and the labour embodied in
both of them is equally valuable. There is a generalisation from the useful labour
that is expended on a commodity and it is known as abstract labour which forms
the basis of exchange value of commodities.

2.5 THE ORIGIN OF VALUE AND VALUE FORM

Adam Smith and David Ricardo held that commodities are valuable because
labour is embedded in commodities. Marx was influenced by Smith’s and
Ricardo’s thinking and he critiqued it further. Marx analyses how value becomes
essentially associated with a commodity and how is the value of one commodity
expressed in relation to another. He holds that it has not been proved by any
chemist that a commodity has a substance which is a source of its value. Marx
holds that the value of a commodity is not an inborn part of a commodity. Value
emerges because of a system of social relations in which a commodity is seen in
relation to other commodities and a commodity is compared to other commodity.
This aspect of a commodity lies hidden as a ‘value form’. Value Form is not the
same as exchange value. The value of a commodity is determined in relation to
another commodity in a capitalist society (Morrison: 1995, 69). According to
Marx the common substance which emerges when commodities are subjected to
exchange is their value. The value of a commodity is determined by its relation to
other commodities and this is relative value (Morrison 1995: 70). Value of a
commodity emerges when relative and equivalent forms of value confront each
other and enter into a comparison. According to Alan Carling what Marx implied
is that a commodity as linen does not know its value until it is reflected in the
mirror of the coat, until it sees itself as a coat (Morrison 1995: 71).The first
commodity that is linen plays an active role is the relative form of value while the
second commodity the coat plays a passive role and represents the equivalent
form of value of linen. These expressions of value are opposed to one another yet
the two forms of value can swap with each other and this is the valuing moment
for Marx.

2.6 FETISHISM OF COMMODITIES

‘Fetish is the display of unusual devotion toward a material thing or object in the
belief that it has extraordinary powers’ (Morrison 1995: 72). As already
discussed commodities only have use values created by useful labour and not a
single atom of substance is found in a commodity which is valuable. In capitalist
societies it is believed that commodities are valuable in themselves and they also
possess extraordinary powers. (e.g., the use of branded items of consumption by
certain sections of society in liberalized World is due to the belief that the
branded items possess extraordinary powers that are not possessed by non-
branded items which may be of good quality).
Marx critiqued the political economists as Ricardo and Smith who held that
commodities were bearers of value. Also the political economists did not
investigate how commodities possessed exchange value in a system of social
26
relations in a capitalist society. Marx held that commodities are seen to possess Use Value and
Exchange Value
extraordinary powers as they enter into a system of exchange relations and a
market develops in a capitalist society. Commodities possess extraordinary
powers in relation to exchange value and not use value. This is because as bearers
of use value commodities satisfy just human needs and are products of useful
human labour. This occurs when social relations develop in a capitalist society
that individuals believe that value is a part of commodity and the commodity
manifests extraordinary powers. In order to explain fetishism of commodities in
capitalist societies Marx developed an analogy to tribal societies where
individuals believe that certain objects have magical powers. Marx held that there
is no magical power inherent in any object. The belief of an object possessing
extraordinary powers is due to the individual’s relation to the object which is part
of a social framework. In capitalism the belief that objects have extraordinary
powers is known as ‘commodity fetishism.’
Check Your Progress 1
Fill in the blanks with appropriate words:
1) A commodity is produced in capitalist society when not only use value but
…………………………………. is produced.
2) Exchange value is refers to the ability of definite quantitative proportion of
a commodity to be represented in the value of a ……………………… of
another commodity.
3) Abstract labour is measured in duration of ……………………….
4) …………………………labour creates simple use values.

2.7 CIRCULATION OF COMMODITIES

In capitalism commodities enter into a system of exchange. In earlier forms of
production as feudalism production is primarily for use and is regarded as social
production. Social relations are between individuals. In the stage of, commodity
fetishism, it appears that relations are between things and not individuals. In
capitalism, relations take the form of exchange. All the activities of buying,
selling, producing and consuming are for private gain. Social relations are
dominated by exchange and individuals confront each other as buyer, seller,
producer and consumer of commodities (Morrison 1995: 75).Individuals are
engaged in a system of exchange relations as possessors of commodities
circulated in the market. Things are seen as more valuable. Commodities appear
to have human like qualities, a fetish form and enter into social relations with one
another. The relations between individuals become material relations as
individuals are mere possessors of commodities. Commodities, on the other hand,
enter into exchange relations and are the determinants of value. As mere
possessors of commodities, the human form of individuals in production is
obscured.
27
Karl Marx

2.8 THEORY OF SURPLUS VALUE

For all commodities and also for the labour of the worker there is a market in
capitalist societies. The capitalist pays a price or wage to the worker in exchange
for the services of the worker. The capacity of the worker to do work is referred
to as labour power which is bought by the capitalist for a price. Labour power is
different from labour which refers to the physical act of labour. The capitalist
buys the labour power and pays the worker in the form of wages. The wages are
for the maintenance of the workers and for a new generation of workers to be
raised who will be valuable to the capitalist (Hughes, Sharrock, and Martin 2003:
64). The exchange value of labour is the price or wage paid by the capitalist to
the worker. The use value of labour refers to the capacity of the worker to add
value to the things being worked upon. The labour of the worker turns the raw
materials in the production process into commodities of utility. Marx holds that
the capacity of labour to add value to the commodity that is the ‘use value’ of
labour is greater than the ‘exchange value’ of labour that is the price or wages
paid by the capitalist to the worker. This difference in value represents the
surplus value which is appropriated by the capitalist and is a source of profit for
the capitalist. It is to be made clear that ‘surplus value’ is not profit as goods
produced must be sold in the market which entails a cost of distribution. It is the
capitalist who becomes the owner of the product of labour and appropriates profit
as the cost of production and distribution is discounted. Marx holds that the
relationship between the capitalist and the worker is inherently exploitative and
the worker is dehumanised.
Check Your Progress 2
1) Describe the consequences of exchange of commodities in capitalist
societies?
………………………………………………………………………………
………………………………………………………………………………
………………………………………………………………………………
2) Explain the phrase ‘fetishism of commodities’ in capitalist societies.
………………………………………………………………………………
………………………………………………………………………………
………………………………………………………………………………

2.9 LET US SUM UP

In this unit we discussed about the concept of commodity in capitalist society.
We understood that in contrast to feudal society where production is for use, in
capitalist society production is for exchange of commodities in the market.
Therefore, the two factors of commodities in capitalist society are use value and
exchange value. When we speak of use value of commodities we take into
account the qualitative distinction between commodities. The exchange value, on
28
the other hand, abstracts and generalizes from use value and takes the Use Value and
Exchange Value
quantitative distinction between commodities into consideration. Fetishism of
commodities implies that commodities possess extraordinary powers in capitalist
society which entails that relation between individuals are seen as more material
in terms of buyers, sellers, consumers and producers in the market and it appears
that social relations are between things and not individuals.

2.10 REFERENCES
Calhoun, C., J. Gerteis, J. Moody, S. Pfaff, K. Schmidt, and Indermohan Virk.
2002. Classical Sociological Theory. USA: Blackwell Publishers.
Hughes, John A., Wes Sharrock, and Peter J Martin. 2003. Understanding
Classical Sociology: Marx, Weber, Durkheim .London: Sage.
Marx, Karl 1867. Capital Volume I. Retrieved fromhttps://www.marxists.org/
archive/marx/works/1867-c1/ch01.htm.
Morrison, K. 1995.Marx, Durkheim, Weber: Formations of Modern Social
Thought. London: Sage.

2.11 SPECIMEN ANSWERS TO CHECK YOUR

PROGRESS
Check Your Progress 1
1) social use value
2) quantitative proportion
3) labour time
4) useful labour
Check Your Progress 2
1) The development of capitalism and exchange of commodities have certain
consequences. Firstly the qualitative distinction between use values of
commodities recedes to the background while determining exchange. In
exchange the emphasis is on a quantitative expression of something that
common in all commodities. There is an abstraction from use of
commodities. This common expression is the duration of time expended on
a commodity or labour time. Secondly the qualitative distinction between
different kinds of labour is not considered e.g., the distinction between
tailoring and weaving. Thirdly the exchange of commodities brings about
changes in social relations in capitalist society where individuals’ status in
society depends upon their ability to appropriate private products and enter
the market.
2) The phrase ‘fetishism of commodities’ refers to the beliefs of individuals
that certain commodities have extraordinary powers or human like
properties in capitalist societies. Similarly, in tribal societies certain objects
are believed to possess magical powers. Marx holds that objects do not
29
Karl Marx possess powers but beliefs of individual’s make them think that objects
possess powers. This occurs when social relations develop in a capitalist
society and individuals believe that value is a part of commodity and the
commodity manifests extraordinary powers. A fetish can be a branded
watch as it is seen as extraordinary and as having an ability to create a
certain expression in society.

30