Commodity exchange

“ In the process of exchange, however, commodities must be not only use-values, but also exchange values to one another, and that should appear as their own mutual relation. The difficulty which we first encountered was that a commodity must be first alienated and delivered to its purchasers as a use-value, in order to appear as an exchange value, as materialized labor, while on the other hand its alienation as use-value implies its being an exchange value. ”

“ Money passes from country to country as a Medium of Exchange, through the Exchanges. We have thus far considered the precious metals as a commodity, imported like other commodities in the common course of trade, and have examined what are the circumstances which would in that case determine their value. But those metals are also imported in another character, that which belongs to them as a medium of exchange; not as an article of commerce, to be sold for money, but as themselves money, to pay a debt, or effect a transfer of property. ”

“ We may often, by trading with foreigners, obtain their commodities at a smaller expense of labour and capital than they cost to the foreigners themselves. The bargain is still advantageous to the foreigner, because the commodity which he receives in exchange, though it has cost us less, would have cost him more. ”

“ Nations exchange commodities, as individuals do, for mutual accommodation; each imparting of its superfluity to obtain that in which it is deficient.
The imparting is therefore only a means of obtaining. Exportation is the means of obtaining importation,--the end for which the traffic is instituted.
The importation of money into a country where money is deficient is desirable on the same principle which renders desirable the supply of any deficient commodity. ”

“ Such a view of the process of exchange indeed leaves no room for a commodity surplus inside the country. Any product of a worker’s annual labour must, from this point of view, represent a certain quantity of material of which it is made, of tools which have been used in its manufacture, and of the products which served to maintain the workers during the period of production. ”

“ The value of any commodity, therefore, to the person who possesses it, and who means not to use or consume it himself, but to exchange it for other commodities, is equal to the quantity of labor which it enables him to purchase or command. Labor, therefore, is the real measure of the exchangeable value of all commodities.
The real price of everything, what everything really costs to the man who wants to acquire it, is the toil and trouble of acquiring it. ”

“ The present purpose, therefore, is to inquire into this vital though neglected part of the subject; to call attention to the economic truths that money and credit fluctuate as much, and often more, than commodities; again to point out that continuing trade is, in substance, only its original form of barter; to show that an exchange of a commodity for money constitutes but a single step, the second and most vital step being the replacement of the commodity with the money thus obtained. ”

“ These commodities {343} are severally and collectively liable to fall short; either from deficient harvests, from waste in war, from losses abroad, or from too great a diversion of labour or capital in some special direction. When a scarcity of some chief commodity or necessary occurs, what is the remedy? The commodity of which there is an excess (or if none is in excess, then that which can best be spared) is exported in exchange for an additional supply of the deficient commodity. ”

“ In fact, it is evident that the method of maintaining par by selling exchange on other countries, and by exchanging currency directly for some commodity, such as gold, are at bottom much the same thing. ”

“ Thus, if it require the labor of one day to produce a pair of shoes, and the labor also of a day to produce three bushels of oats, then the rule of exchange would be three bushels of oats for a pair of shoes, because the required labor in the one case is precisely equal to that in the other.
This is the fundamental law, but it is modified in its operation by certain other facts and principles. Chief among these is the law of supply and demand. By supply is meant the quantity of any commodity which is in the market. Demand signifies the quantity which is desired at a given price. ”

“ We do not, however, reckon that trade disadvantageous, which consists in the exchange of the hardware of England for the wines of France, and yet hardware is a very durable commodity, and were it not for this continual exportation, might too be accumulated for ages together, to the incredible augmentation of the pots and pans of the country. But it readily occurs, that the number of such utensils is in every country necessarily limited by the use which there is for them; that it would be absurd to have more pots and pans than were necessary for cooking the victuals usually consumed there; ”

“ Now, as the prices of foreign commodities in the home market, which could not have been supplied in the usual abundance during the operation of the subsidy when we had a large balance to pay, would fall, and would be in greater demand from the moment that our commodities would be received in exchange, the exportation of our goods would be balanced by the importation of foreign goods, and the sellers of bills would neither exceed nor fall short of the purchasers. ”

“ It may be considered, therefore, as established, that when two countries trade together in two commodities, the exchange value of these commodities relatively to each other will adjust itself to the inclinations and circumstances of the consumers on both sides, in such manner that the quantities required by each country, of the articles which it imports from its neighbour, shall be exactly sufficient to pay for one another. ”

“ We have seen that the value at which a country purchases a foreign commodity, does not conform to the cost of production in the country from which the commodity comes. Suppose now a change in that cost of production; an improvement, for example, in the process of manufacture. Will the benefit of the improvement be fully participated in by other countries? Will the commodity be sold as much cheaper to foreigners, as it is produced cheaper at home? ”

“ Surely it is a commonplace of Political Economy, that the effect of an unfavourable exchange, i.e. of an excess of imports over exports, is to stimulate production and export, and bring about a more favourable course of exchange. ”

“ It is a first condition of any kind of permanent trade that each party to it shall be really benefited by the transaction; otherwise the one who is not benefited will withdraw from the trade, which would consequently come to an end. We have seen, then, that foreign trade, although the amount of it may be measured in money, must in reality be an exchange of commodities for commodities. ”

“ Every country exports and imports the very same things, and in the very same quantity, under the one system as under the other. In a barter system, the trade gravitates to the point at which the sum of the imports exactly exchanges for the sum of the exports: in a money system, it gravitates to the point at which the sum of the imports and the sum of the exports exchange for the same quantity of money. ”

“ Wherever the consumer and the producer are brought into close connection with each other, the increase of consumption is wonderful, even where there is no reduction in the nominal price; and wherever they are separated, the diminution of consumption is equally wonderful, even where there is a reduction of the nominal price—and it is so because the facility of exchange diminishes as the distance increases. ”

“ If one nation were in a condition to supply manufactured articles, on better terms than another, that other might find an abundant indemnification in a superior capacity to furnish the produce of the soil. And a free exchange, mutually beneficial, of the commodities which each was able to supply, on the best terms, might be carried on between them, supporting, in full vigor, the industry of each. ”

“ Manufactures, indeed, could not fall in any such proportion, because, under the circumstances supposed, there would be a new distribution of the precious metals among the different countries. Our cheap commodities would be exported in exchange for corn and gold, till the accumulation of gold should lower its value, and raise the money price of commodities. ”

“ All interchange is, in substance and effect, barter: whoever sells commodities for money, and with that money buys other goods, really buys those goods with his own commodities. And so of nations: their trade is a mere exchange of exports for imports; and whether money is employed or not, things are only in their permanent state when the exports and imports exactly pay for each other. When this is the case, equal sums of money are due from each country to the other, the debts are settled by bills, and there is no balance to be paid in the precious metals. ”

“ One country exports those commodities which it can produce the cheapest, in exchange for those of other countries that are either not produced at all in the first country, or can be produced only at a greater cost than by import. The immediate force impelling to the export and import of commodities is, in all cases, a difference in their values in the two countries. ”

“ It gets its imports cheaper, the greater the intensity of the demand in foreign countries for its exports. It also gets its imports cheaper, the less the extent and intensity of its own demand for them. The market is cheapest to those whose demand is small. A country which desires few foreign productions, and only a limited quantity of them, while its own commodities are in great request in foreign countries, will obtain its limited imports at extremely small cost, that is, in exchange for the produce of a very small quantity of its labour and capital. ”

“ Let us suppose the United States to be exporting a large quantity of cotton to England at a time when little merchandise is being imported here from England, but when much is being imported from France. If the volume of exports to England and of imports from France were large enough, we might conceivably be importing gold from England in payment of our produce, and exporting it to France in payment for her luxuries; but, in practice, gold does not move that way. Every morning, the New York exchange banker learns by cable the Paris market rate for demand bills on London. ”

“ The motive which determines us to import a commodity, is the discovery of its relative218 cheapness abroad: it is the comparison of its natural price abroad, with its natural price at home. If a country exports hats, and imports cloth, it does so because it can obtain more cloth by making hats, and exchanging them for cloth, than if it made the cloth itself. ”

“ No extension of foreign trade will immediately increase the amount of value in a country, although it will very powerfully contribute to increase the mass of commodities, and therefore the sum of enjoyments. As the value of all foreign goods is measured by the quantity of the produce of our land and labour, which is given in exchange for them, we should have no greater value, if by the discovery of new markets, we obtained double the quantity of foreign goods in exchange for a given quantity of ours. ”

“ Thus the natural market abroad for wheat and pork and petroleum and other provisions was enormously lessened by the prohibition of imports,—a market for products is products in market,—at the same moment when the actual prices for products exported were still further diminished by the action of depreciated money on the par of commercial exchange. ”

“ There is no doubt that our prohibiting the importation of a particular article, which, but for the prohibition, would have been imported, enables us to obtain our other imports at smaller cost. The article for which we have the greatest demand, and for which our demand is most increased by cheapness, is that which we should naturally import preferably to any other; now of this article we should import the quantity necessary to pay for our exports, on terms of interchange less advantageous to us than in the case of any other commodity. ”

“ Even under conditions of simple reproduction, he increases, on the one hand, the absolute quantity of money circulating inside the country, and on the other, he buys producer and consumer goods without, in his turn, selling commodities, paying with his own product, i.e. with the general exchange equivalent, for the goods he buys. ”

“ It is simply commodities. Each person's means of paying for the productions of other people consists of those which he himself possesses. All sellers are inevitably and ex vi termini buyers. Could we suddenly double the productive powers of the country, we should double the supply of commodities in every market; but we should, by the same stroke, double the purchasing power.
[pg 367] Everybody would bring a double demand as well as supply; everybody would be able to buy twice as much, because every one would have twice as much to offer in exchange. ”

“ But whatever may be the source of the difference in price levels, equilibrium will eventually be restored through an international or interlocal redistribution of money and goods brought about by international and interlocal trade. Other elements in the equation of exchange than money and commodities cannot be transported from one place to another. ”

“ Now an increased foreign demand for the commodities of a country, or a diminished demand in the country for imported commodities, are the very causes which, on the general principles of trade, enable a country to purchase all imports, and consequently the precious metals, at a lower value. ”