This leads Marx to a "counter-intuitive" conclusion which distinguishes his account of the system-and it is one which even some Marxists have difficulties coming to terms with. A rise in productivity reduces the value at which things exchange. It seems absurd on the face of it. Yet there are numerous examples of increased productivity causing some goods to fall in price compared to others. Marx provided one from his own time:
The introduction of power-looms into England probably reduced by one-half the labour required to weave a given quantity of yarn into cloth. The hand-loom weavers, as a matter of fact, continued to require the same time as before; but for all that, the product of one hour of their labour represented after the change only half an hour's social labour and consequently fell to one-half its former value.16
Thousands more examples could be given today. For we are living in a period in which technical advance is much faster in some industries (especially those involving microprocessors) than others, and so the prices of things like DVDs, televisions and computers produced by industries using the most technologically advanced equipment are tending to fall while those in other industries using older techniques remain fixed or tend to rise. This is something of central importance as we shall see later when we discuss the dynamics of 21st century capitalism.
Once commodity production is generalised across a society, one particular good comes to be used to represent the value of all others-money (Marx calls it "the universal equivalent" ). In Marx's day it was usually in the form of gold (or sometimes silver), and a certain quantity of gold (say an ounce), produced by a certain amount of average labour time, could act as a measure of the value for all the other goods that were bought and sold. As capitalism developed as a system, banks and then governments found that they could use paper notes to stand in for gold in many transactions and eventually to dispense with reliance on it at all, so long as people believed others would accept those notes (known technically as "fiat money" ) for goods. Credit from banks could also function in the same way, so long as people continued to trust the banks.
Marx's Concepts
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