1 ton of iron = 2 ounces of gold
1 quarter of wheat = 1 ounce of gold
1 hundred weight of Mocca coffee = 1-1/4 ounce of gold
1 hundred weight of potash = 1/2 ounce of gold
1 ton of Brazil timber = 1-1/2 ounces of gold
Y commodities = X ounces of gold
In the above series of equations iron, wheat, coffee, potash, etc. appear to each other as embodiments, of homogeneous labor, namely, as labor materialized in money, from which all the peculiarities of the different kinds of concrete labor represented in the different use-values are completely eliminated. As value they are all identical, they are the incarnation of the same labor, or the same incarnation of labor, viz., gold. As uniform embodiments of the same labor they display only one difference, a quantitative one, by appearing as different quantities of value, because unequal quantities of labor-time are contained in their use-values. The mutual relation of these separate commodities is that of embodiments of universal labor-time, since they are related to universal labor-time as to an excluded commodity, viz., gold. The same relation the development of which causes commodities to appear to each other as exchange values, causes the labor time contained in gold to appear as universal labor-time, a given quantity of which is expressed in different quantities of iron, wheat, coffee, etc,—in short, in the use-values of all commodities, or is directly unfolded in the endless series of commodity-equivalents. While all commodities express their exchange values in gold, gold expresses its exchange value directly in all commodities. While commodities assume the form of exchange value in relation to each other, they lend to gold the form of the universal equivalent, or of money.
Gold becomes the measure of value, because all commodities measure their exchange values in gold, in proportion as a certain quantity of gold and a certain quantity of the commodity contain the same amount of labor-time; and it is only by virtue of this function of being a measure of value, in which capacity its own value is measured directly in the entire series of commodity equivalents, that gold becomes a universal equivalent or money. On the other hand, the exchange value of all commodities is expressed in gold. In this expression, the qualitative aspect is to be distinguished from the quantitative: there is the exchange value of the commodity as the embodiment of the same uniform labor-time; while the magnitude of value is exhaustively expressed, since in the same proportion in which commodities are equated to gold they are equated to one another. On the one hand the universal character of the labor-time contained in them is revealed; on the other, its quantity is expressed in its golden equivalent. The exchange value of commodities thus expressed in the form of a universal equivalent and, moreover, as a numerical proportion of this equivalent, in terms of one specific commodity, or represented in the form of a series of commodities equated to one specific commodity, is PRICE. Price is the form into which the exchange value of commodities is converted when it appears within the sphere of circulation.
By the same process by which commodities express their values in gold prices, they turn gold into a measure of value i. e. into money. If all of them were to measure their values in silver, wheat, or copper, and therefore express them in the form of silver, wheat or copper prices, then silver, wheat or copper would be measures of value and consequently universal equivalents. In order to appear as prices in circulation, commodities must be exchange values before they enter circulation. Gold becomes the measure of value only because all commodities estimate their exchange value in it.
The universality of this relation which is the result of evolution and from which alone springs the function of gold as the measure of value, implies however, that every single commodity is measured in gold, in proportion to the labor-time contained in both; that the actual common measure of the commodity and of gold is labor; or that commodity and gold are passed for each other in direct barter as equal exchange values. How this equalization actually takes place, can not be discussed here when treating of simple circulation. So much, however, is clear, that in countries producing gold and silver, certain quantities of labor-time are directly embodied in definite quantities of gold and silver, while in countries which do not produce gold and silver the same result is reached in a round-about way, by direct or indirect exchange of the commodities of those countries; i. e. a definite portion of average national labor is given for a definite quantity of labor-time, embodied in the gold and silver of the mine-owning countries. In order to be able to serve as a measure of value, gold must be as far as possible a variable value, because it can become the equivalent of other commodities only as an incarnation of labor-time, and the same labor-time is realized in unequal volumes of use-values with the change in the productive power of concrete labor. In estimating all commodities in gold it is only assumed that gold represents a given quantity of labor at a given moment, as was done when the exchange value of any commodity was expressed in terms of the use-value of any other commodity. As for the variations of the value of gold, the law of exchange value formulated above holds good in its case as well. If the exchange value of commodities remains unchanged, then a general rise in their gold prices is possible only in the case of a fall in the exchange value of gold. If the exchange value of gold remains unchanged, a general rise of gold prices is possible only when the exchange value of all commodities rises. The reverse is true in case of a general fall in the prices of commodities. If the value of an ounce of gold falls or rises in consequence of a change in the labor-time required for its production, then the values of all other commodities fall or rise to an equal extent. Thus, the ounce of gold represents after the change, as it did before, a given quantity of labor-time with regard to all commodities. The same exchange values are now estimated in greater or smaller quantities of gold than before, but they are estimated in proportion to the magnitude of their values, and consequently retain the same proportion to each other. The ratio 2 ÷ 4 ÷ 8 remains the same when expressed as 1 ÷ 2 ÷ 4 or as 4 ÷ 8 ÷ 16. The change in the quantity of gold in which exchange values are estimated with a variation in the value of gold, interferes as little with the function of gold as a measure of value, as the fifteen times smaller value of silver as compared with that of gold interferes with the performance of that function by the latter. Since labor-time is the common measure of gold and commodities, and since gold figures as the measure of value only in so far as all commodities are measured by it, the idea that money makes commodities commensurable, is therefore a mere fiction of the process of circulation.[39] It is rather the commensurability of commodities as incorporated labor-time, that turns gold into money.
Commodities enter the process of exchange in the concrete form of use-values. They are yet to be turned into the real universal equivalent through their alienation. The determination of their prices merely amounts to their ideal transformation into the universal equivalent, a process of equation to gold which is yet to be realized. But since commodities are, in their prices, transformed into gold only in imagination, or are converted only into imaginary gold, and since their money form is not differentiated as yet from their concrete selves, it follows that gold has also been turned into money only in imagination; it appears so far but as a measure of value, and in fact definite quantities of gold serve merely as names for certain quantities of labor-time. The form in which gold is crystallized in money always depends upon the way in which commodities express their own exchange value to each other.
Commodities now confront one another in a double capacity: actually as use-values, ideally as exchange values. The twofold aspect of labor contained in them is reflected in their mutual relations; the special concrete labor being virtually present as their use-value, while universal abstract labor-time is ideally represented in their price in which commodities appear as commensurable embodiments of the same value—substance differing merely in quantity.
The difference between exchange value and price appears to be merely nominal or, as Adam Smith says, labor is the real price, and money the nominal price of commodities. Instead of estimating the value of one quarter of wheat in thirty days of labor, it is estimated in one ounce of gold if one ounce of gold is the product of thirty days ‘labor. However, far from this difference being merely nominal, all the storms which threaten commodities in the actual process of circulation center about it. Thirty days of labor are contained in a quarter of wheat and it need not, therefore, be expressed in terms of labor-time. But gold is a commodity distinct from wheat, and only in circulation it can be ascertained, whether the quarter of wheat can be actually turned into an ounce of gold as is anticipated in its price. That will depend on whether or not it proves to be a use-value, whether or not the quantity of labor-time contained in it is the quantity necessarily required by society for the production of a quarter of wheat. The commodity as such is an exchange value, it has a price. In this difference between exchange value and price lies the demonstration of the fact that the particular individual labor contained in a commodity has first to be expressed through the process of alienation in terms of its counterpart, i. e. as impersonal, abstract, universal and, only in that form, social labor, viz. money. Whether it can be so expressed seems to be a matter of chance. Thus, although the exchange value of a commodity finds only ideally a distinct expression in price, and the twofold character of labor contained in the commodity exists as yet merely as two distinct forms of expression, and, although in consequence thereof, the embodiment of universal labor-time, gold, confronts actual commodities only as an imaginary measure of value, yet the fact that exchange value exists as price, or that gold exists as a measure of value implies the necessity of the alienation of commodities for hard cash and the possibility of their non-alienation. In short, here lies latent the entire contradiction which is inherent in the fact that products are commodities or that the particular work of a private individual can be of no account in society until it has taken the very opposite form of abstract universal labor. For that reason, the utopians, who want to have commodities but not money, who want a system of production based on private exchange without the necessary conditions underlying such a system, are consistent when they “destroy” money not in its tangible form but in its nebulous illusory form of a measure of value. Under the invisible measure of value there lurks the hard cash.
The process by which gold has become the measure of value and exchange value has been turned into price, being once assumed, all commodities express in their prices but imagined quantities of gold of various magnitudes. As such various quantities of the same thing, gold, they are equated, compared and measured with each other, and thus arises the technical necessity of referring them to a definite quantity of gold as a unit of measure, a unit which develops into a standard measure by virtue of its divisibility into aliquot parts, which in their turn can be sub-divided into aliquot parts.[40] But quantities of gold as such are measured by weight.