Capitalism surrounds us with commodities. Food, clothes, cars, computers and almost everything else people need are produced not simply to be used, but to be sold. Marx therefore began his study of capitalism with the commodity.
Value comes from human labor
Every commodity has a use value: it has to be useful to somebody. A coat keeps someone warm, food satisfies hunger, a bus carries people from one place to another. But under capitalism these useful things are also produced for exchange — they have a value that appears in the market as an exchange value or price.
This raises a question. How can completely different things — coats, wheat, steel, computers — be compared and exchanged with one another? What they have in common is human labor. The different kinds of work that produce them are concrete labor: sewing, farming, mining, driving, programming and countless other activities. But capitalist exchange also treats all these different kinds of work as quantities of human labor in general — what Marx called abstract labor.
Production is social but nobody plans it
Capitalism does not organize production by having society consciously decide how much labor should go into food, housing, transportation, healthcare and everything else people need. Production is carried out by separate owners and businesses, each making its own decisions — yet all of them depend on one another. A factory depends on mines, power plants, transportation workers, machinery producers and millions of others. Workers in turn depend on other workers to produce their food, housing, clothing and everything else they need to live. Production is therefore profoundly social, even though control over it remains private.
The market is the way this privately controlled system tries to hold together. Prices rise and fall. Goods sell or go unsold. Businesses expand or collapse. Workers are hired or laid off. Through these movements, labor is continually shifted from one part of production to another — but no one consciously controls the whole process.
Social relations appear as relations between things
This is why Marx said that under capitalism social relations between people appear as relations between things. A shortage appears as a movement in prices. The need for more labor somewhere appears as higher wages or greater profits. Too much production appears as unsold commodities, falling prices and layoffs. People created this system, but its movements confront them as forces outside their control. Marx called this commodity fetishism.
Money grows out of commodity exchange
Money develops out of the same system. As commodity exchange grows, society needs one commodity that can express the value of all the others, and money becomes the universal form in which value appears. Money is therefore much more than a convenient device invented to replace barter — it grows out of a society where the products of human labor confront one another as commodities.
Once wealth takes the form of money, a new possibility appears. Money can be used not simply to buy something useful, but to acquire still more money. At that point we have reached the threshold of capital.
Socialism turns the relationship right side up
Capitalism takes the social labor of billions of people and organizes it through commodities, money, private property and the market. What looks on the surface like countless separate buying and selling decisions is really an interconnected system of social production that its own producers do not control.
Socialism turns that relationship right side up. Instead of human beings being ruled by the movements of commodities and money, the producers themselves can consciously organize society’s labor and resources to meet human needs.
Additional reading
Capital, Volume I, Chapter 1: Commodities — by Karl Marx (1867). Marx’s starting point for understanding commodities, value, labor, money and commodity fetishism.
Value, Price and Profit — by Karl Marx (1865). A shorter and more accessible explanation of value, wages, profit and the role of labor in capitalist production.
Critique of Crisis Theory — by Sam Williams. A long-running Marxist blog, its first ten years gathered into a book, that works through Marx’s theory of value, money, surplus value and capitalist crisis in depth — the detailed treatment of the material this page introduces.