M. Proudhon undertakes to explain to us first of all the double nature of value, the distinction in value, the process by which use value is transformed into exchange value. It is necessary for us to dwell with M. Proudhon upon this act of transubstantiation. The following is how this act is accomplished, according to our author. A very large number of products are not to be found in nature, they are products of industry. If man s needs go beyond nature s spontaneous production, he is forced to have recourse to industrial production. What is this industry in M. Proudhon s view? What is its origin? A single individual, feeling the need for a very great number of things, cannot set his hand to so many things. So many things to produce presuppose at once more than one man s hand helping to produce them. Now, the moment you postulate more than one hand helping in production, you at once presuppose a whole production based on the division of labour. Thus need, as M. Proudhon presupposes it, itself presupposes the whole division of labour. In presupposing the division of labour, you get exchange, and, consequently, exchange value. One might as well have presupposed exchange value from the very beginning. But M. Proudhon prefers to go the roundabout way. Let us follow him in all his detours, which always bring him back to his starting point. In order to emerge from the condition in which everyone produces in isolation and to arrive at exchange, I turn to my collaborators in various functions, says M. Proudhon. I, myself, then, have collaborators, all with different function. And yet, for all that, I and all the others, always according to M. Proudhon s supposition, have got no farther than the solitary and hardly social position of the Robinsons. The collaborators and the various functions, the division of labour and the exchange it implies, are already at hand. To sum up: I have certain needs which are founded on the division of labour and on exchange. In presupposing these needs, M. Proudhon has thus presupposed exchange, exchange value, the very thing of which he purposes to note the genesis with more care than other economists. M. Proudhon might just as well have inverted the order of things, without in any way affecting the accuracy of his conclusions. To explain exchange value, we must have exchange. To explain exchange, we must have the division of labour. To explain the division of labour, we must have needs which render necessary the division of labour. To explain these needs, we must presuppose them, which is not to deny them contrary to the first axiom in M. Proudhon s prologue: To presuppose God is to deny him. (Prologue, p.1) How does M. Proudhon, who assumes the division of labour as the known, manage to explain exchange value, which for him is always the unknown? A man sets out to propose to other men, his collaborators in various functions, that they establish exchange, and make a distinction between ordinary value and exchange value. In accepting this proposed distinction, the collaborators have left M. Proudhon no other care than that of recording the fact, or marking, of noting in his treatise on political economy the genesis of the idea of value. But he has still to explain to us the genesis of this proposal, to tell us finally how this single individual, this Robinson [Crusoe], suddenly had the idea of making to his collaborators a proposal of the type known and how these collaborators accepted it without the slightest protest. M. Proudhon does not enter into these genealogical details. He merely places a sort of historical stamp upon the fact of exchange, by presenting it in the form of a motion, made by a third party, that exchange be established. That is a sample of the historical and descriptive method of M. Proudhon, who professes a superb disdain for the historical and descriptive methods of the Adam Smiths and Ricardos. Exchange has a history of its own. It has passed through different phases. There was a time, as in the Middle Ages, when only the superfluous, the excess of production over consumption, was exchanged. There was again a time, when not only the superfluous, but all products, all industrial existence, had passed into commerce, when the whole of production depended on exchange. How are we to explain this second phase of exchange marketable value at its second power? M. Proudhon would have a reply ready-made: Assume that a man has proposed to other men, his collaborators in various functions, to raise marketable value to its second power. Finally, there came a time when everything that men had considered as inalienable became an object of exchange, of traffic and could be alienated. This is the time when the very things which till then had been communicated, but never exchanged; given, but never sold; acquired, but never bought virtue, love, conviction, knowledge, conscience, etc. when everything, in short, passed into commerce. It is the time of general corruption, of universal venality, or, to speak in terms of political economy, the time when everything, moral or physical, having become a marketable value, is brought to the market to be assessed at its truest value. How, again, can we explain this new and last phase of exchange marketable value at its third power? M. Proudhon would have a reply ready-made: Assume that a person has proposed to other persons, his collaborators in various functions, to make a marketable value out of virtue, love, etc., to raise exchange value to its third and last power. We see that M. Proudhon s historical and descriptive method" is applicable to everything, it answers everything, explains everything. If it is a question above all of explaining historically the genesis of an economic idea, it postulates a man who proposes to other men, his collaborators in various functions, that they perform this act of genesis and that is the end of it. We shall hereafter accept the genesis of exchange value as an accomplished act; it now remains only to expound the relation between exchange value and use value. Let us hear what M. Proudhon has to say: If we have thoroughly grasped M. Proudhon s thought the following are the four points which he sets out to establish: We, too, shall begin at the end, and, in order to clear the economists from M. Proudhon s accusations, we shall let two sufficiently well-known economists speak for themselves. Sismondi founded on the opposition between use value and exchange value his principal doctrine, according to which diminution in revenue is proportional to the increase in production. Lauderdale founded his system on the inverse ratio of the two kinds of value, and his doctrine was indeed so popular in Ricardo s time that the latter could speak of it as of something generally known. We have just seen that the economists before M. Proudhon had drawn attention" to the profound mystery of opposition and contradiction. Let us now see how M. Proudhon explains this mystery after the economists. The exchange value of a product falls as the supply increases, the demand remaining the same; in other words, the more abundant a product is relatively to the demand, the lower is its exchange value, or price. Vice versa: The weaker the supply relatively to the demand, the higher rises the exchange value or the price of the product supplied: in other words, the greater the scarcity in the products supplied, relatively to the demand, the higher the prices. The exchange value of a product depends upon its abundance or its scarcity; but always in relation to the demand. Take a product that is more than scarce, unique of its kind if you will: this unique product will be more than abundant, it will be superfluous, if there is no demand for it. On the other hand, take a product multiplied into millions, it will always be scarce if it does not satisfy the demand, that is, if there is too great a demand for it. These are what we should almost call truisms, yet we have had to repeat them here in order to render M. Proudhon s mysteries comprehensible. What caps M. Proudhon s difficulty? That he has simply forgotten about demand, and that a thing can be scarce or abundant only in so far as it is in demand. The moment he leaves out demand, he identifies exchange value with scarcity and use value with abundance. In reality, in saying that things whose utility is nil and scarcity extreme are of incalculable worth, he is simply declaring that exchange value is merely scarcity. Scarcity extreme and utility nil means pure scarcity. Incalculable worth is the maximum of exchange value, it is pure exchange value. He equates these two terms. Therefore exchange value and scarcity are equivalent terms. In arriving at these alleged extreme consequences, M. Proudhon has in fact carried to the extreme, not the things, but the terms which express them, and, in so doing, he shows proficiency in rhetoric rather than in logic. He merely rediscovers his first hypotheses in all their nakedness, when he thinks he has discovered new consequences. Thanks to the same procedure he succeeds in identifying use value with pure abundance. After having equated exchange value and scarcity, use value and abundance, M. Proudhon is quite astonished not to find use value in scarcity and exchange value, nor exchange value in abundance and use value; and seeing that these extremes are impossible in practice, he can do nothing but believe in mystery. Incalculable worth exists for him, because buyers do not exist, and he will never find any buyers, so long as he leaves out demand. On the other hand, M. Proudhon s abundance seems to be something spontaneous. He completely forgets that there are people who produce it, and that it is to their interest never to lose sight of demand. Otherwise, how could M. Proudhon have said that things which are very useful must have a very low price, or even cost nothing? On the contrary, he should have concluded that abundance, the production of very useful things, should be restricted if their price, their exchange value is to be raised. The old vine-growers of France in petitioning for a law to forbid the planting of new vines; the Dutch in burning Asiatic spices, in uprooting clove trees in the Moluccas, were simply trying to reduce abundance in order to raise exchange value. During the whole of the Middle Ages this same principle was acted upon, in limiting by laws the number of journeymen a single master could employ and the number of implements he could use. (See Anderson, History of Commerce.) [A. Anderson, An Historical and Chronological Deduction of the Origin of Commerce from the Earliest Accounts to the Present Time. First edition appeared in London in 1764. p. 33] After having represented abundance as use value and scarcity as exchange value nothing indeed is easier than to prove that abundance and scarcity are in inverse ratio M. Proudhon identifies use value with supply and exchange value with demand. To make the antithesis even more clear-cut, he substitutes a new term, putting estimation value instead of exchange value. The battle has now shifted its ground, and we have on one side utility (use value, supply), on the other side, estimation (exchange value, demand). Who is to reconcile these two contradictory forces? What is to be done to bring them into harmony with each other? Is it possible to find in them even a single point of comparison? M. Proudhon goes on to develop this antithesis. And as demand, or exchange value, is identical with estimation, M. Proudhon is led to say: Thus there is no possible way out. There is a struggle between two as it were incommensurable powers, between utility and estimation, between the free buyer and the free producer. Let us look at things a little more closely. Supply does not represent exclusively utility, demand does not represent exclusively estimation. Does not the demander also supply a certain product or the token representing all products viz., money; and as supplier, does he not represent, according to M. Proudhon, utility or use value? Again, does not the supplier also demand a certain product or the token representing all product viz., money? And does he not thus become the representative of estimation, of estimation value or of exchange value? Demand is at the same time a supply, supply is at the same time a demand. Thus M. Proudhon s antithesis, in simply identifying supply and demand, the one with utility, the other with estimation, is based only on a futile abstraction. What M. Proudhon calls use value is called estimation value by other economists, and with just as much right. We shall quote only Storch (Cours d economie politique, Paris 1823, pp.48 and 49). According to him, needs are the things for which we feel the need; values are things to which we attribute value. Most things have value only because they satisfy needs engendered by estimation. The estimation of our needs may change; therefore the utility of things, which expresses only the relation of these things to our needs, may also change. Natural needs themselves are continually changing. Indeed, what could be more varied than the objects which form the staple food of different peoples! The conflict does not take place between utility and estimation; it takes place between the marketable value demanded by the supplier and the marketable value supplied by the demander. The exchange value of the product is each time the resultant of these contradictory appreciations. In final analysis, supply and demand bring together production and consumption, but production and consumption based on individual exchanges. The product supplied is not useful in itself. It is the consumer who determines its utility. And even when its quality of being useful is admitted, it does not exclusively represent utility. In the course of production, it has been exchanged for all the costs of production, such as raw materials, wages of workers, etc., all of which are marketable values. The product, therefore, represents, in the eyes of the producer, a sum total of marketable values. What he supplies is not only a useful object, but also and above all a marketable value. As to demand, it will only be effective on condition that it has means of exchange at its disposal. These means are themselves products, marketable value. In supply and demand, then, we find on the one hand a product which has cost marketable values, and the need to sell; on the other, means which have cost marketable values, and the desire to buy. M. Proudhon opposes the free buyer to the free producer. To the one and to the other he attributes purely metaphysical qualities. It is this that makes him say: The producer, the moment he produces in a society founded on the division of labour and on exchange (and that is M. Proudhon s hypothesis), is forced to sell. M. Proudhon makes the producer master of the means of production; but he will agree with us that his means of production do not depend on free will. Moreover, many of these means of production are products which he gets from the outside, and in modern production he is not even free to produce the amount he wants. The actual degree of development of the productive forces compels him to produce on such or such a scale. The consumer is no freer than the producer. His judgment depends on his means and his needs. Both of these are determined by his social position, which itself depends on the whole social organisation. True, the worker who buys potatoes and the kept woman who buys lace both follow their respective judgments. But the difference in their judgements is explained by the difference in the positions which they occupy in the world, and which themselves are the product of social organisation. Is the entire system of needs on estimation or on the whole organisation of production? Most often, needs arise directly from production or from a state of affairs based on production. Thus, to choose another example, does not the need for lawyers suppose a given civil law which is but the expression of a certain development of property, that is to say, of production? It is not enough for M. Proudhon to have eliminated the elements just mentioned from the relation of supply and demand. He carries abstraction to the furthest limits when he fuses all producers into one single producer, all consumers into one single consumer, and sets up a struggle between these two chimerical personages. But in the real world, things happen otherwise. The competition among the suppliers and the competition among the demanders form a necessary part of the struggle between buyers and sellers, of which marketable value is the result. After having eliminated competition and the cost of production, M. Proudhon can at his ease reduce the formula of supply and demand to an absurdity. One might as well say that exchange is merely a ceremonial form for introducing the consumer to the object of consumption. One might as well say that all economic relations are ceremonial forms serving immediate consumption as go-betweens. Supply and demand are neither more nor less relations of a given production than are individual exchanges. What, then, does all M. Proudhon s dialectic consist in? In the substitition for use value and exchange value, for supply and demand, of abstract and contradictory notions like scarcity and abundance, utility and estimation, one producer and one consumer, both of them knights of free will. And what was he aiming at? At arranging for himself a means of introducing later on one of the elements he had set aside, the cost of production, as the synthesis of use value and exchange value. And it is thus that in his eyes the cost of production constitutes synthetic value or constituted value. 
The Poverty of Philosophy - Chpt 1.1