Karl Marx: Critique of Political Economy


2. Medium of Exchange

When, as a result of the establishing of prices, commodities have acquired the form in which they are able to enter circulation and gold has assumed its function as money, the contradictions latent in the exchange of commodities are both exposed and resolved by circulation. The real exchange of commodities, that is the social metabolic process, constitutes a transformation in which the dual nature of the commodity – commodity as use-value and as exchange-value – manifests itself; but the transformation of the commodity itself is, at the same time, epitomised in certain forms of money. To describe this transformation is to describe circulation. Commodities, as we have seen, constitute fully developed exchange-value only when a world of commodities and consequently a really developed system of division of labour is presupposed; in the same manner circulation presupposes that acts of exchange are taking place everywhere and that they are being continuously renewed. It also presupposes that commodities enter into the process of exchange with a determinate price, in other words that in the course of exchange they appear to confront one another in a dual form – really as use-values and nominally (in the price) as exchange-values.

The busiest streets of London are crowded with shops whose show cases display all the riches of the world, Indian shawls, American revolvers, Chinese porcelain, Parisian corsets, furs from Russia and spices from the tropics, but all of these worldly things bear odious, white paper labels with Arabic numerals and then laconic symbols £ s. d. This is how commodities are presented in circulation.


a. The Metamorphosis of Commodities

Closer examination shows that the circulation process comprises two distinct types of circuit. If commodities are denoted by C and money by M, the two circuits may be represented in the following way:


In this section we are solely concerned with the first circuit, that is the one which directly expresses commodity circulation.

The circuit C—M—C may be divided into the movement C—M, the exchange of commodities for money, or sale; the opposite movement M—C, the exchange of money for commodities, or purchase; and the unity of the two movements C—M—C, exchange of commodities for money so as to exchange money for commodities, in other words, selling in order to purchase. The outcome in which the transaction terminates is C—C, i.e., exchange of one commodity for another, actual exchange of matter.

C—M—C, when considered from the point of departure of the first commodity, represents its conversion into gold and its reconversion from gold into commodity; that is to say a movement in which at the outset the commodity appears as a particular use-value, then sheds this form of existence and assumes that of exchange-value or universal equivalent – which is entirely distinct from its natural form – finally it sheds this as well and emerges as a real use-value which can serve particular needs. In this last form it drops out of the sphere of circulation and enters that of consumption. Thus to begin with, the whole circuit of C—M—C represents the entire series of metamorphoses through which every individual commodity passes in order to become a direct use-value for its owner. The first metamorphosis takes place in C—M, the first phase of the circuit; the second in M—C, the other phase, and the entire circuit forms the curriculum vitae of the commodity. But the cycle C—M—C represents the complete metamorphosis of an individual commodity only because it is at the same time an aggregate of definite partial metamorphoses of other commodities. For each metamorphosis of the first commodity is its transformation into another commodity and therefore the transformation of the second commodity into the first; hence it is a double transformation which is carried through during a single stage of the cycle. To start with, we shall separately examine each of the two phases of exchange into which the cycle C—M—C is resolved.

C—M or sale: C, the commodity, enters the sphere of circulation not just as a particular use-value, e.g., a ton of iron, but as a use-value with a definite price, say £3 17s. 10 1/2d. or an ounce of gold. The price while on the one hand indicating the amount of labour-time contained in the iron, namely its value, at the same time signifies the pious wish to convert the iron into gold, that is to give the labour-time contained in the iron the form of universal social labour-time. If this transformation fails to take place, then the ton of iron ceases to be not only a commodity but also a product; since it is a commodity only because it is not a use-value for its owner, that is to say his labour is only really labour if it is useful labour for others, and it is useful for him only if it is abstract general labour. It is therefore the task of the iron or of its owner to find that location in the world of commodities where iron attracts gold. But if the sale actually takes place, as we assume in this analysis of simple circulation, then this difficulty, the salto mortale of the commodity, is surmounted. As a result of this alienation – that is its transfer from the person for whom it is a non-use-value to the person for whom it is a use-value – the ton of iron proves to be in fact a use-value and its price is simultaneously realised, and merely imaginary gold is converted into real gold. The term “ounce of gold” or 3 17s. 10 1/2d., has now been replaced by an ounce of real gold, but the ton of iron has gone. The sale C—M does not merely transform the commodity – which by means of the price was nominally turned into gold – really into gold, but gold, which as measure of value was only nominally gold and in fact functioned only as the money name of commodities, is through the same process transformed into actual money. [1] As gold became nominally the universal equivalent, because the values of all commodities were measured in terms of gold, so now, as a result of the universal alienation of commodities in exchange for it – and the sale C—M is the procedure by which this universal alienation is accomplished – does it become the absolutely alienated commodity, i.e., real money. But gold becomes real money through sale, only because the exchange-values of commodities expressed in prices were already converted into nominal gold.

During the sale C—M, and likewise during the purchase M—C, two commodities, i.e., units of exchange-value and use-value, confront each other; but in the case of the commodity exchange-value exists merely nominally as its price, whereas in the case of gold, although it has real use-value, its use-value merely represents exchange-value and is therefore merely a formal use-value which is not related to any real individual need. The contradiction of use-value and exchange-value is thus polarised at the two extreme points of C—M, so that with regard to gold the commodity represents use-value whose nominal exchange-value, the price, still has to be realised in gold; with regard to the commodity, on the other hand, gold represents exchange-value whose formal use-value still has to acquire a material form in the commodity. The contradictions inherent in the exchange of commodities are resolved only by reason of this duplication of the commodity so that it appears as commodity and gold, and again by way of the dual and opposite relation in which each extreme is nominal where its opposite is real, and real where its opposite is nominal, in other words they are resolved only by means of presenting commodities as bilateral polar opposites.

So far we have regarded C—M as a sale, as the conversion of a commodity into money. But if we consider it from the other side, then the same transaction appears, on the contrary, as M—C, a purchase, the conversion of money into a commodity. A sale is inevitably and simultaneously its opposite, a purchase; it is the former if one looks at the transaction from one side and the latter if one sees it from the other. In other words, the difference between the transactions is in reality merely that in C—M the initiative comes from the side of the commodity or of the seller while in M—C it comes from the side of money or of the purchaser. When we describe the first metamorphosis of the commodity, its transformation into money, as the result of the first phase of the circuit, we simultaneously presuppose that another commodity has already been converted into money and is therefore now in the second phase of the circuit, M—C. We are thus caught up in a vicious circle of presuppositions. This vicious circle is indeed circulation itself. If we do not regard M in C—M as belonging to the metamorphosis of another commodity, then we isolate the act of exchange from the process of circulation. But if it is separated from the process, the phase C—M disappears and there remain only two commodities which confront each other, for instance iron and gold, whose exchange is not a distinct part of the cycle but is direct barter. At the place where gold is produced, it is a commodity like any other commodity. Its relative value and that of iron or of any other commodity is there reflected in the quantities in which they are exchanged for one another. But this transaction is presupposed in the process of circulation, the value of gold is already given in the prices of commodities. It would therefore be entirely wrong to assume that within the framework of circulation, the relation of gold and commodities is that of direct barter and that consequently their relative value is determined by their exchange as simple commodities. It seems as though in the process of circulation gold were exchanged merely as a commodity for other commodities, but this illusion arises simply because a definite quantity of a given commodity is equalised by means of prices with a definite quantity of gold: that is, it is compared with gold as money, the universal equivalent, and consequently it can be directly exchanged for gold. In so far as the price of a commodity is realised in gold, the commodity is exchanged for gold as a commodity, as a particular materialisation of labour-time; but in so far as it is the price of the commodity that is realised in gold, the commodity is exchanged for gold as money and not as a commodity, i.e., for gold as the materialisation of general labour-time. But the quantity of gold for which the commodity is exchanged in the process of circulation is in both cases determined not by means of exchange, but the exchange is determined by the price of the commodity, by its exchange-value calculated in terms of gold. [2]

Within the process of circulation gold seems to be always acquired as the result of a sale C—M. But since C—M, the sale, is simultaneously M—C, a purchase, it is evident that while C the commodity which begins the process undergoes its first metamorphosis, the other commodity which confronts it as M from the opposite extreme undergoes its second metamorphosis and accordingly passes through the second phase of the circuit while the first commodity is still in the first phase of its cycle.

The outcome of the first stage of circulation, of the sale, provides money, the point of departure of the second stage. The first form of the commodity has now been replaced by its golden equivalent. This outcome may to begin with involve a pause, since the commodity has now assumed a specific durable form. The commodity which was not a use-value in the hands of its owner exists now in a form in which it is always useful because it can always be exchanged, and it depends on circumstances when and at which point in the world of commodities it will again be thrown into circulation. The golden chrysalis state forms an independent phase in the life of the commodity, in which it can remain for a shorter or longer period. The separation and independence of the acts of purchase and sale is a general feature of the labour which creates exchange-value, whereas in barter the exchange of one discrete use-value is directly tied to the exchange of another discrete use-value.

The purchase, M—C, is the reverse movement to C—M and at the same time the second or final metamorphosis of the commodity. Regarded as gold or as the general equivalent, the commodity can be directly expressed in terms of the use-values of all other commodities, all of which through their prices seek gold as their hereafter, and simultaneously they indicate the key note which must be sounded so that their bodies, the use-values, should change over to the money side, while their soul, the exchange-value, is turned into gold. The general result of the alienation of commodities is the absolutely alienated commodity. The conversion of gold into commodities has no qualitative limit but only a quantitative limit, the fact that the amount of gold, or the value it represents, is limited. Everything can be obtained with ready money. Whereas the commodity realises its own price and the use-value of someone else’s money through its alienation as a use-value in the movement C—M, it realises its own use-value and the price of the other commodity through its alienation as an exchange-value in the movement M—C. Just as by the realisation of its price, the commodity simultaneously turns gold into real money, so by its retransformation it converts gold into its (the commodity’s) own merely transitory money form. Because commodity circulation presupposes an advanced division of labour and therefore also a diversity of wants on the part of the individual, a diversity bearing an inverse relation to the narrow scope of his own production, the purchase M—C will at times consist of an equation with one commodity as the equivalent, and at other times of a series of commodity equivalents determined by the buyer’s needs and the amount of money at his disposal. Just as a sale must at the same time be a purchase, so the purchase must at the same time be a sale; M—C is simultaneously C—M, but in this case gold or the purchaser takes the initiative.

Returning to the complete circuit C—M—C, we can see that in it one commodity passes through the entire series of its metamorphoses. But at the same time as this commodity begins the first phase of its circuit and undergoes the first metamorphosis, another commodity commences the second phase of the circuit, passes through its second metamorphosis and drops out of circulation; the first commodity, on the other hand, enters the second phase of the circuit, passes through its second metamorphosis and drops out of circulation, while a third commodity enters the sphere of circulation, passes through the first phase of its cycle and accomplishes the first metamorphosis. Thus the total circuit C—M—C representing the complete metamorphosis of a commodity is simultaneously the end of a complete metamorphosis of a second commodity and the beginning of a complete metamorphosis of a third commodity; it is therefore a series without beginning or end. To demonstrate this and to distinguish the commodities we shall use different symbols to denote C in the two extremes, e.g., C'—M—C''. Indeed, the first term C'—M presupposes that M is the outcome of another C—M, and is accordingly itself only the last term of the circuit C—M—C', while the second term M—C'' implies that it will result in C"—M, and constitutes the first term of the circuit C"—M—C''', and so on. It is moreover evident, that, although M is the outcome of a single sale, the last term M—C may take the form of M—C' + M—C'' + M—C''', and so forth; in other words it may be divided into numerous purchases, i.e., into numerous sales and hence numerous first terms of new complete metamorphoses of commodities. While in this way the complete metamorphosis of a single commodity forms not only a link of just one sequence of metamorphoses without beginning or end, but of many such sequences, the circulation of the world of commodities – since every individual commodity goes through the circuit C—M—C – constitutes an infinitely intricate network of such series of movements, which constantly end and constantly begin afresh at an infinite number of different points. But each individual sale or purchase stands as an independent isolated transaction, whose complementary transaction, which constitutes its continuation, does not need to follow immediately but may be separated from it temporally and spatially. Because every particular cycle C—M or M—C representing the transformation of one commodity into use-value and of another into money, i.e., the first and second phase of the circuit, forms a separate interval for both sides, and since on the other hand all commodities begin their second metamorphosis, that is turn up at the starting point of the circuit's second phase, in the form of gold, the general equivalent, a form common to them all, in the real process of circulation any M—C may follow any particular C—M, i.e., the second section of the life cycle of any commodity may follow the first section of the life cycle of any other commodity. For example, A sells iron for £2, and thus C—M or the first metamorphosis of the commodity iron has taken place, but for the time being A does not buy anything else. At the same time B, who had sold two quarters of wheat for £6 two weeks ago, buys a coat and trousers from Moses and Son with the same £6, and thereby completes M—C or the second metamorphosis of the commodity wheat. The two transactions M—C and C—M appear to be parts of the same sequence only because. as M [money or] gold, all commodities look alike and gold does not look any different whether it represents transformed iron or transformed wheat. In the real process of circulation C—M—C, therefore, represents an exceedingly haphazard coincidence and succession of motley phases of various complete metamorphoses. The actual process of circulation appears, therefore, not as a complete metamorphosis of the commodity, i.e., not as its movement through opposite phases, but as a mere accumulation of numerous purchases and sales which chance to occur simultaneously or successively. The process accordingly loses its distinct form, especially as each individual transaction, e.g., a sale, is simultaneously its opposite, a purchase, and vice versa. On the other hand, the metamorphoses in the world of commodities constitute the process of circulation and the former must therefore be reflected in the total movement of circulation. This reflection will be examined in the next section. Here we shall merely observe that the C at each of the two extremes of the circuit C—M—C has a different formal relation to M. The first C is a particular commodity which is compared with money as the universal commodity, whereas in the second phase money as the universal commodity is compared with an individual commodity. The formula C—M—C can therefore be reduced to the abstract logical syllogism P—U—I, where particularity forms the first extreme, universality characterises the common middle term and individuality signifies the final extreme.

The commodity-owners entered the sphere of circulation merely as guardians of commodities. Within this sphere they confront one another in the antithetical roles of buyer and seller, one personifying a sugar-loaf, the other gold. Just as the sugar-loaf becomes gold, so the seller becomes a buyer. These distinctive social characters are, therefore, by no means due to individual human nature as such, but to the exchange relations of persons who produce their goods in the specific form of commodities. So little does the relation of buyer and seller represent a purely individual relationship that they enter into it only in so far as their individual labour is negated, that is to say, turned into money as non-individual labour. It is therefore as absurd to regard buyer and seller, these bourgeois economic types, as eternal social forms of human individuality, as it is preposterous to weep over them as signifying the abolition of individuality. [3] They are an essential expression of individuality arising at a particular stage of the social process of production. The antagonistic nature of bourgeois production is, moreover, expressed in the antithesis of buyer and seller in such a superficial and formal manner that this antithesis exists already in pre-bourgeois social formations, for it requires merely that the relations of individuals to one another should be those of commodity-owners.

An examination of the outcome of the circuit C—M—C shows that it dissolves into the exchange of C—C. Commodity has been exchanged for commodity, use-value for use-value, and the transformation of the commodity into money, or the commodity as money, is merely an intermediary stage which helps to bring about this metabolism. Money emerges thus as a mere medium of exchange of commodities, not however as a medium of exchange in general, but a medium of exchange adapted to the process of circulation, i.e., a medium of circulation. [4]

If, because the process of circulation of commodities ends in C—C and therefore appears as barter merely mediated by money, or because C—M—C in general does not only fall apart into two isolated cycles but is simultaneously their dynamic unity, the conclusion were to be drawn that only the unity and not the separation of purchase and sale exists, this would display a manner of thinking the criticism of which belongs to the sphere of logic and not of economics. The division of exchange into purchase and sale not only destroys locally evolved primitive, traditionally pious and sentimentally absurd obstacles standing in the way of social metabolism, but it also represents the general fragmentation of the associated factors of this process and their constant confrontation, in short it contains the general possibility of commercial crises, essentially because the contradiction of commodity and money is the abstract and general form of all contradictions inherent in the bourgeois mode of labour. Although circulation of money can occur therefore without crises, crises cannot occur without circulation of money. This simply means that where labour based on individual exchange has not yet evolved a monetary system, it is quite unable of course to produce phenomena that presuppose a full development of the bourgeois mode of production. This displays the profundity of the criticism that proposes to remedy the “shortcomings” of the bourgeois system of production by abolishing the “privileges” of precious metals and by introducing a so-called rational monetary system. A proposition reputed to be exceedingly clever may on the other hand serve as an example of economic apologetics. James Mill, the father of the well-known English economist John Stuart Mill, says:

"Whatever... be the amount of the annual produce, it never can exceed the amount of the annual demand.... Of two men who perform an exchange, the one does not come with only a supply, the other with only a demand; each of them comes with both a demand and a supply.... The supply which he brings is the instrument of his demand and his demand and supply are of course exactly equal to one another. It is, therefore, impossible that there should ever be in any country a commodity or commodities in quantity greater than the demand, without there being, to an equal amount, some other commodity or commodities in quantity less than the demand.” [5]

Mill establishes equilibrium by reducing the process of circulation to direct barter, but on the other hand he insinuates buyer and seller, figures derived from the process of circulation, – into direct barter. Using Mill's confusing language one may say that there are times when it is impossible to sell all commodities, for instance in London and Hamburg during certain stages of the commercial crisis of 1857/58 there were indeed more buyers than sellers of one commodity, i.e., money, and more sellers than buyers as regards all other forms of money, i.e, commodities. The metaphysical equilibrium of purchases and sales is confined to the fact that every purchase is a sale and every sale a purchase, but this gives poor comfort to the possessors of commodities who unable to make a sale cannot accordingly make a purchase either. [6]

The separation of sale and purchase makes possible not only commerce proper, but also numerous pro forma transactions, before the final exchange of commodities between producer and consumer takes place. It thus enables large numbers of parasites to invade the process of production and to take advantage of this separation. But this again means only that money, the universal form of labour in bourgeois society, makes the development of the inherent contradictions possible.


1. “There are two kinds of money, nominal and real, and it can be used in two distinct ways, to measure the value of things and to buy them. Nominal money is as suitable for valuing things as is real money and it may be even better. Money is also used for buying the things which have been valued.... Prices and contracts are calculated in nominal money and are executed in real money” (Galiani, op. cit., p. 112 et seq.].

2. This does not, of course, prevent the market-price of commodities from rising above or falling below their value. But this consideration lies outside the sphere of simple circulation and belongs to quite a different sphere to be examined later, in which context we shall discuss the relation of value and market-price.

3. The following extract from M. Isaac Pereire's Lecons sur l'industrie et les finances, Paris, 1832, shows that delicate spirits can be deeply hurt even by the quite superficial aspect of antagonism which is represented by purchase and sale. The fact that the same Isaac is the inventor and dictator of the Crédit mobilier and as such a notorious wolf of the Paris stock exchange points to the real significance of such sentimental criticism of economics. M. Pereire, at that time an apostle of St. Simon, says: “Since individuals are isolated and separated from one another, whether in their labour or their consumption, they exchange the products of their respective occupations. The necessity of exchanging things entails the necessity of determining their relative value. The ideas of value and exchange are therefore closely linked and in their present form both are expressions of individualism and antagonism.... The value of products is determined only because there is sale and purchase, in other words, because there is antagonism between different members of society. Preoccupation with price and value exists only where there is sale and purchase, that is to say, where every individual is compelled to fight in order to obtain the things necessary for the maintenance of his existence” (op. cit., pp. 2, 3 passim).

4. “Money is only the medium and the agency, whereas commodities that benefit life are the aim and purpose.” Boisguillebert, Le déteil de la France, 1697, in Eugene Daires's Economistes financiers du XVIIIe siècle, Vol. I, Paris, 1843, p. 210.

5. A pamphlet by William Spence entitled Britain Independent of Commerce was published in London in November 1807, its thesis was further elaborated by William Cobbett in his Political Register under the more militant heading “Perish Commerce.” Against this James Mill wrote his Defence of Commerce, which appeared in 1808; in that work he already advances the argument which is also contained in the passage quoted above from his Elements of Political Economy. This ingenious invention has been appropriated by J. B. Say, and used in his polemic against Sismondi and Malthus on the question of commercial crises, and since it was not clear which new idea this comical prince de la science – whose merit consists rather in the impartiality with which he consistently misinterpreted his contemporaries Malthus, Sismondi and Ricardo – has contributed to political economy, continental admirers have proclaimed him as the discoverer of the invaluable proposition about a metaphysical equilibrium of purchases and sales.

6. The way in which economists describe the different aspects of the commodity may be seen from the following examples:

“With money in possession, we have but one exchange to make in order to secure the object of desire, while with other surplus products we have two, the first of which (securing the money) is infinitely more difficult than the second” (G. Opdyke, A Treatise on Political Economy, New York, [1851), pp. 287-88).

“The superior saleableness of money being the exact effect or natural consequence of the less saleableness of commodities” (Thomas Corbet, An Inquiry into the Causes and Modes of the Wealth of Individuals, etc., London, 1841, p. 117).

“Money has the ... quality of being always exchangeable for what it measures” (Bosanquet, Metallic, Paper, and Credit Currency", London 1842, p.100).

“Money can always buy other commodities, whereas other commodities cannot always buy money” (Thomas Tooke, An Inquiry into the Currency Principle, Second Ed., London, 1844, p.10.)