Simple commodity production

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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" or "simple circulation" of commodities, where independent producers trade their own products to obtain other products. The use of the adjective simple does not refer to the nature of the producers or of their production,^[1] but rather to the relatively simple and straightforward exchange processes involved.

Simple exchange of reproducible commodities is as old as the history of trade, insofar as it progressed from incidental barter of use-values^[2] according to cultural custom to exchange according to a standard of value.^[3] It occurred for thousands of years before most production became organized in the capitalist way. It begins when producers in a simple division of labour (e.g. farmers, hunters 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 regular trade and competition, normal exchange values become established for products, which reflect an economy of labour-time and a cost-structure of production.

As discussed in this article, both Karl Marx and Engels claimed explicitly that the Marxian law of value applied also to simple exchange, and that this law is 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 Marxist believe that capitalist markets function in a completely different way from pre-capitalist markets, or they believe that the law of value applies only to industrial capitalism and not to economic systems which preceded industrial capitalism.^[4] 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.^[5] 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 in the 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.

In Marxian economics, simple commodity production also refers 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.^[6] In this model, a market economy exists in which all producers own their own resources (including the ability to work) which they use for their own production. There are no proletarians who sell their labor power to an employer. Instead, each producer is self-employed. In this model, there is a direct and close correspondence between the labour-values and the prices of commodities. The model is, of course, only a thought experiment to identify some quantitative implications of commercial production and trade. There has never existed a society consisting exclusively of simple commodity producers (except that many of the initial colonial settlements in various places in the world involved a large majority of self-employed producers, who were farmers of their own land or craftsmen and independent technical/service professionals.^[7]). Historically, simple commodity production is usually combined with (or co-exists with) some other modes of production. As soon as a market economy reaches any size, it begins to utilize more and more wage labor in production, and falls under the sway of the laws of capitalist accumulation.