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Commodification

[kuh-mod-uh-fahy]

Commodification (or commoditization) is the transformation of goods and services (or things that may not normally be regarded as goods or services) into a commodity.

The Marxist understanding of commodity is distinct from the meaning of commodity in business theory.

The earliest use of the word Commodification in English attested in the Oxford English Dictionary dates from 1975.

Use of the concept of commodification became common with the rise of critical discourse analysis in semiotics.

Business and economics

In the business world, commodification is the transformation of the market for a unique, branded product into a market based on undifferentiated products through increased competition, typically resulting in decreasing prices. While in economic terms, commodification is closely related to and often follows from the stage when a market changes from one of monopolistic competition to one of perfect competition, a product essentially becomes a commodity when customers perceive little or no value difference between brands or versions. "When consumers perceive that all products are the same, their only real factor for selecting one supplier over another becomes price".

Commodification can be the desired outcome of an entity in the market, or it can be an unintentional outcome that no party actively sought to achieve.

Consumers can benefit from commodification, since perfect competition usually leads to lower prices. Branded producers often suffer under commodification, since the value of the brand (and ability to command price premiums) can be weakened.

However, false commodification can create substantial risk when premier products do have substantial value to offer particularly in health, safety and security. Examples are counterfeit drugs, pirated software, generic network services (loss of 911).

Marxist theory

In Marxist political economy, commodification takes place when economic value is assigned to something not previously considered in economic terms; for example, an idea, identity or gender. So commodification refers to the expansion of market trade to previously non-market areas, and to the treatment of things as if they were a tradeable commodity.

For instance, sex becomes a marketed commodity, something to be bought and sold rather than freely given. Human beings can be considered subject to commodification in contexts such as genetic engineering, social engineering, cloning, eugenics, social Darwinism, Fascism, mass marketing and employment. An extreme case of Commodification is slavery, where human beings themselves become a commodity to be sold and bought. Similarly, the use of non-human animals for food, clothing, entertainment, or testing represents the commodification of other living beings.

Criticism

Karl Marx extensively criticized the social impact of commodification under the name commodity fetishism and alienation.

Commodification is often criticised on the grounds that some things ought not to be for sale and ought not to be treated as if they were a tradeable commodity.

Commodification and commoditization

An alternative approach to the above is highlighted by Douglas Rushkoff. This approach uses the word Commodification and the neologism Commoditization to describe the two different processes between the assignment of value to a social good and the movement towards undifferentiated competition. Rushkoff's approach is closer to the common usages of the words.

Commodification (a word, 1975, origins Marxist political theory.) is used to describe the process by which something which does not have an economic value is assigned a value and hence how market values can replace other social values. It describes a modification of relationships, formerly untainted by commerce, into commercial relationships.

Commoditization (a neologism, early 1990s, origins Business theory) is the process by which goods that have economic value and are distinguishable in terms of attributes (uniqueness or brand) end up becoming simple commodities in the eyes of the market or consumers. It is the movement of a market from differentiated to undifferentiated price competition and from monopolistic to perfect competition.