Within a capitalist economic system, Commodification is the transformation of goods, services, ideas and people into commodities or objects of trade. A commodity at its most basic, according to Arjun Appadurai, is "anything intended for exchange," or any object of economic value.
Commodification is often criticised on the grounds that some things ought not to be treated as commodities--for example water, education, data, information, knowledge, human life, and animal life.
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. Google's Ngram viewer indicates a usage as early as 1891.
The word commodification, which describes assignment of economic value to something not previously considered in economic terms, is sometimes also used to describe the transformation of the market for a unique, branded product into a market based on undifferentiated products.
These two concepts are fundamentally different and the business community more commonly uses commoditization to describe the transformation of the market to undifferentiated products through increased competition, typically resulting in decreasing prices. While in economic terms, commoditization 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.
Consumers can benefit from commoditization, since perfect competition usually leads to lower prices. Branded producers often suffer under commoditization, since the value of the brand (and ability to command price premiums) can be weakened.
However, false commoditization can create substantial risk when premier products do have substantial value to offer, particularly in health, safety and security. Examples are counterfeit drugs and generic network services (loss of 911).
The terms commodification and commoditization are sometimes used synonymously, particularly in the sense of this article, to describe the process of making commodities out of anything that was not used to be available for trade previously; compare anthropology usage.
However, other authors distinguish them (as done in this article), with commodification used in social contexts to mean that a non-commercial good has become commercial, typically with connotations of "corrupted by commerce", while commoditization is used in business contexts to mean when the market for an existing product has become a commodity market, where products are interchangeable and there is heavy price competition. In a quip: "Microprocessors are commoditized. Love is commodified."
The difference between the terms of commodification (Marxist political theory) and commoditization (business theory) has been drawn by James Surowiecki (1998) and Douglas Rushkoff (2005). In particular, Rushkoff argued that the words commodification and commoditization were used to describe the two different processes of the assignment of value to a social good, and the movement towards undifferentiated competition, respectively:
Commodification (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 in everyday use.
Commoditization (early 1990s in 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.
American author and feminist bell hooks (Gloria Jean Watkins) refers to cultural commodification as "eating the other". By this she means that cultural expressions, revolutionary or post modern, can be sold to the dominant culture. Any messages of social change are not marketed for their messages but used as a mechanism to acquire a piece of the "primitive". Any interests in past historical culture almost always have a modern twist. According to Mariana Torgovnick:
What is clear now is that the West's fascination with the primitive has to do with its own crises in identity, with its own need to clearly demarcate subject and object even while flirting with other ways of experiencing the universe.
Hooks states that marginalized groups are seduced by this concept because of "the promise of recognition and reconciliation".
When the dominant culture demands that the Other be offered as sign that progressive political change is taking place, that the American Dream can indeed be inclusive of difference, it invites a resurgence of essentialist cultural nationalism.
Socialist movements are losing their voices on change because members of the "movement" are not promoting the message but participating in a fashion statement. Activists' hard works are marketable to the masses without accountability. An example of commodification is the colors red, black, and green, which are the colors of the African Liberation Army (ALA). For people of African descent these colors represent red (the innocent bloodshed of Africans), black (African people) and green (stolen land of Africa). These colors are marketed worldwide on all types of apparel and clothes.
Digital commodification is when a business or corporation uses information from an online community without their knowledge for profit. The commodification of information allows a higher up authority to make money rather than a collaborative system of free thoughts.
The Marxist understanding of commodity is distinct from its meaning in business. Commodity played a key role throughout Karl Marx's work; he considered it a cell-form of capitalism and a key starting point for an analysis of this politico-economic system. Marx extensively criticized the social impact of commodification under the name commodity fetishism and alienation.
Arjun Appadurai, "Introduction: commodities and the politics of value," in Arjun Appadurai (ed.), The Social Life of Things: Commodities in a Cultural Perspective, Cambridge University Press, 1986, p. 3.
What corporations fear is the phenomenon now known, rather inelegantly, as "commoditization." What the term means is simply the conversion of the market for a given product into a commodity market, which is characterized by declining prices and profit margins, increasing competition, and lowered barriers to entry. ("Commoditization" is therefore different from "commodification," the word cultural critics use to decry the corruption of higher goods by commercial values. Microprocessors are commoditized. Love is commodified.
Polanyi, Karl. "The Self-Regulating Market," Economics as a Social Science, 2nd edn, 2004.