I think the following passage provides a lucid account of how Marx distinguishes between objectification and alienation in Capital. This distinction is different from the early theory of alienation in so far as it is not tied to a theory of human essence, but simply describes how products are appropriated in the process of production. It also differs from the ‘fundamental and crude error’ Lukacs commits in the reification essay in that the process of objectification is transhistorical, whereas alienation only occurs as a result of the conditions of separation that are the core presupposition of the capitalist mode of production.
Objections thus consists in what Marx describes here:
‘Whatever the social form of the production process, it has to be continuous, it must periodically repeat the same phases. A society can no more cease to produce than it can cease to consume. When viewed, therefore, as a connected whole, and in the constant flux of its incessant renewal, every social process of production is at the same time a process of reproduction. The conditions of production are at the same time the conditions of reproduction. No society can go on producing, in other words no society can reproduce, unless it constantly reconverts a part of its products into means of production, or elements of fresh products’. Capital Volume 1. p. 711.
Alienation, on the other hand, is the result of a historically-specific type of objectification:
‘A division between the product of labour and labour itself, between the objective conditions of labour and subjective labour- power, was therefore the real foundation and the starting-point of the process of capitalist production. But what at first was merely a starting-point becomes, by means of nothing but the continuity of the process, by simple reproduction, the characteristic result of capitalist production, a result which is constantly renewed and perpetuated. On the one hand, the production process incessantly converts material wealth into capital, into the capitalist’s means of enjoyment and his means of valorization. On the other hand, the worker always leaves the process in the same state as he entered it-a personal source of wealth, but deprived of any means of making that wealth a reality for himself. Since, before he enters the process, his own labour has already been alienated [enifremdet] from him, appropriated by the capitalist, and incorporated with capital, it now, in the course of the process, constantly objectifies itself so that it becomes a product alien to him [fremder Produkt].’ Capital volume 1. p. 716.