Capital Volume II

Chapter 19: [35] Former Presentations of the Subject

I. The Physiocrats

Quesnay’s Tableau Économique shows in a few broad outlines how the annual result of the national production, representing a definite value, is distributed by means of the circulation in such a way that, other things being equal, simple reproduction, i.e., reproduction on the same scale, can take place. The starting-point of the period of production is properly the preceding year’s harvest. The innumerable individual acts of circulation are at once brought together in their characteristic social mass movement — the circulation between great functionally determined economic classes of society. We are here interested in the following: A portion of the total product — being, like every other portion of it, a use-object, it is a new result of last year’s labour — is at the same time only the depository of old capital-value re-appearing in the same bodily form. It does not circulate but remains in the hands of its producers, the class of farmers, in order to resume there its service as capital. In this portion of the year’s product, the constant capital, Quesnay includes impertinent elements, but he strikes upon the main thing, thanks to the limitations of his horizon, within which agriculture is the only sphere of investment of human labour producing surplus-value, hence the only really productive one from the capitalist point of view. The economic process of reproduction, whatever may be its specific social character, always becomes intertwined in this sphere (agriculture) with a natural process of reproduction. The obvious conditions of the latter throw light on those of the former, and keep off a confusion of thought which is called forth by the mirage of circulation.

The label of a system differs from that of other articles, among other things, by the fact that it cheats not only the buyer but often also the seller. Quesnay himself and his immediate disciples believed in their feudal shop-sign. So do our grammarians even this day and hour. But as a matter of fact the system of the physiocrats is the first systematic conception of capitalist production. The representative of industrial capital — the class of tenants — directs the entire economic movement. Agriculture is carried on capitalistically, that is to say, it is the enterprise of a capitalist farmer on a large scale; the direct cultivator of the soil is the wage-labourer. Production creates not only articles of use but also their value; its compelling motive is the procurement of surplus-value, whose birth-place is the sphere of production, not of circulation. Among the three classes which figure as the vehicles of the social process of reproduction brought about by the circulation, the immediate exploiter of “productive” labour, the producer of surplus-value, [Marx analyses Quesnay’s Tableau Économique in greater detail in his Theories of Surplus-Value (see English edition: Karl Marx, Theories of Surplus-Value [Volume IV of Capital], Part I, Moscow, 1963, pp. 299-333 and 367-69). — Ed.] the capitalist farmer, is distinguished from those who merely appropriate the surplus-value.

The capitalist character of the physiocratic system excited opposition even during its florescence: on the one side it was challenged by Linguet and Mably, on the other by the champions of the small freeholders.

Adam Smith’s retrogression [36] in the analysis of the process of reproduction is so much the more remarkable because he not only elaborates upon Quesnay’s correct analyses, generalising his “avances primitives” and “avances annuelles” for instance and calling them respectively “fixed” and “circulating” capital [37], but even relapses in spots entirely into physiocratic errors. For instance in order to demonstrate that the farmer produces more value than any other sort of capitalist, he says:

“No equal capital puts into motion a greater quantity of productive labour than that of the farmer. Not only his labouring servants, but his labouring cattle are productive labourers.” (Fine compliment for the labouring servants!) “In agriculture too nature labours along with man; and though her labour costs no expense, its produce has its value, as well as that of the most expensive workmen. The most important operations of agriculture seem intended not so much to increase, though they do that too, as to direct the fertility of nature towards the production of the plants most profitable to man. A field overgrown with briars and brambles may frequently produce as great a quantity of vegetables as the best cultivated vineyard or corn field. Planting and tillage frequently regulate more than they animate the active fertility of nature; and after all their labour, a great part of the work always remains to be done by her. The labourers and labouring cattle (sic!), therefore, employed in agriculture, not only occasion, like the workmen in manufactures, the reproduction of a value equal to their own consumption, or to the capital which employs them, together with its owners’ profits; but of a much greater value. Over and above the capital of the farmer and all its profits, they regularly occasion the reproduction of the rent of the landlord. This rent may be considered as the produce of those powers of nature the use of which the landlord lends to the farmer. It is greater or smaller according to the supposed extent of those powers, or, in other words, according to the supposed natural or improved fertility of the land. It is the work of nature which remains after deducting or compensating everything which can be regarded as the work of man. It is seldom less than a fourth, and frequently more than a third of the whole produce. No equal quantity of productive labour employed in manufactures can ever occasion so great a reproduction. In them nature does nothing; man does all; and the reproduction must always be in proportion to the strength of the agents that occasion it. The capital employed in agriculture, therefore, not only puts into motion a greater quantity of productive labour than any equal capital employed in manufactures, but in proportion too to the quantity of productive labour which it employs, it adds a much greater value to the annual produce of the land and labour of the country, to the real wealth and revenue of its inhabitants.” (Book II, Ch. 5, p. 242.)

Adam Smith says in Book II, Ch. 1:

“The whole value of the seed, too, is properly a fixed capital.”

Here, then, capital equals capital-value; it exists in a “fixed” form.

“Though it (the seed) goes backwards and forwards between the ground and the granary, it never changes masters, and therefore does not properly circulate. The farmer makes his profit, not by its sale, but by its increase.” (p. 186.)

The absurdity of the thing lies here in the fact that Smith does not, like Quesnay before him, see the re-appearance of the value of constant capital in a renewed form, and hence fails to see an important element of the process of reproduction, but merely offers one more illustration, and a wrong one at that, of his distinctions between circulating and fixed capital. In Smith’s translation of “avances primitives” and “avances annuelles” as “fixed capital” and “circulating capital,” the progress consists in the term “capital,” the concept of which is generalised, and becomes independent of the special consideration for the “agricultural” sphere of application of the physiocrats; the retrogression consists in the fact that “fixed” and “circulating” are regarded as the overriding distinction, and are so maintained.

II. Adam Smith

1. Smith’s General Points of View

Adam Smith says in Book I, Ch. 6, page 42:

“In every society the price of every commodity finally resolves itself into some one or other, or all of those three parts (wages, profit, rent); and in every improved society, all the three enter more or less, as component parts, into the price of the far greater part of commodities.” [38]

Or, as he continues, page 43:

“Wages, profit, and rent, are the three original sources of all revenue as well as of all exchangeable value.”

Below we shall discuss in greater detail this doctrine of Adam Smith concerning “the component parts of the price of commodities,” or of “all exchangeable value.”

He says furthermore:

“Since this is the case, it has been observed, with regard to every particular commodity, taken separately; it must be so with regard to all the commodities which compose the whole annual produce of the land and labour of every country, taken complexly. The whole price or exchangeable value of that annual produce, must resolve itself into the same three parts, and be parcelled out among the different inhabitants of the country, either as the wages of their labour, the profits of their stock, or the rent of their land. (Book II, Ch. 2, p. 190.)

After Adam Smith has thus resolved the price of all commodities individually, as well as “the whole price or exchangeable value ... of the annual produce of the land and labour of every country,” into wages, profit and rent, the three sources of revenue for wage-labourers, capitalists, and landowners, he must needs smuggle in a fourth element by circuitous route, namely the element of capital. This is accomplished by drawing a distinction between gross and net revenue:

“The gross revenue of all the inhabitants of a great country comprehends the whole annual produce of their land and labour; the neat revenue, what remains free to them after deducting the expense of maintaining; first, their fixed; and secondly, their circulating capital; or what, without encroaching upon their capital, they can place in their stock reserved for immediate consumption, or spend upon their subsistence, conveniences, and amusements. Their real wealth too is in proportion, not to their gross, but to their neat revenue.” (Ibid., p. 190.)

On this we comment as follows:

1) Adam Smith expressly deals here only with simple reproduction, not reproduction on an extended scale, or accumulation. He speaks only of expenses for “maintaining” the capital in operation. The “neat” income is equal to that portion of the annual product, whether of society or of the individual capitalist, which can pass into the “fund for consumption,” but the size of this fund must not “encroach upon capital” in operation. One portion of the value of both the individual and the social product, then, is resolved neither into wages nor into profit nor into rent, but into capital.

2) Adam Smith flees from his own theory by means of a play upon words, the distinction between “gross and neat revenue.” The individual capitalist as well as the entire capitalist class, or the so-called nation, receive in place of the capital consumed in production a commodity-product whose value — it can be represented by the proportional parts of this product — replaces on the one hand the expended capital-value and thus forms an income, or still more literally, revenue (revenue, pp. of revenir — to come back), but, nota bene, a revenue upon capital, or income upon capital; on the other hand components of value which are “parcelled out among the different inhabitants of the country, either as the wages of their labour, the profits of their stock, or the rent of their land”, a thing commonly called income. Hence the value of the entire product constitutes somebody’s income — either of the individual capitalist or of the whole country, but it is on the one hand an income upon capital, and on the other a “revenue” different from the latter. Consequently, the thing which is eliminated in the analysis of the value of the commodity into its component parts is brought back through a side door — the ambiguity of the word “revenue.” But only such value constituents of the product can be “taken in” as already exist in it. If the capital is to come in as revenue, capital must first have been expended.

Adam Smith says furthermore:

“The lowest ordinary rate of profit must always be something more than what is sufficient to compensate the occasional losses to which every employment of stock is exposed. It is this surplus only which is neat or clear profit.”

[What capitalist understands by profit, necessary expenditure of capital?]

“What is called gross profit comprehends frequently, not only this surplus, but what is retained for compensating such extraordinary losses.” (Book I, Ch. 9, p. 72.)

This means nothing else than that a part of the surplus-value, considered as a part of the gross profit, must form an insurance-fund for the production. This insurance-fund is created by a portion of the surplus-labour, which to that extent produces capital directly, that is to say, the fund intended for reproduction. As regards the expense for “maintaining” the fixed capital, etc. (see the above quotations), the replacement of the consumed fixed capital by a new one is not a new outlay of capital, but only a renewal of the old capital-value in new form. And as far as the repair of the fixed capital is concerned, which Adam Smith counts likewise among the costs of maintenance, this expense goes in with the price of the capital advance. The fact that the capitalist, instead of having to invest this all at one time invests it gradually, as required, during the functioning of the capital, and can invest it out of profits already pocketed, does not change the source of this profit. The value constituent of which it consists proves only that the labourer delivers surplus-labour for the insurance-fund as well as for the repair fund.

Adam Smith then tells us that one should exclude from the net revenue, i.e., from the revenue in its specific meaning, the entire fixed capital, and also the entire portion of the circulating capital which is required for the maintenance and repair of the fixed capital, and for its renewal, in fact all capital not in a bodily form intended for the consumption-fund.

“The whole expense of maintaining the fixed capital, must evidently be excluded from the neat revenue of the society. Neither the materials necessary for supporting their useful machines and instruments of trade ... nor the produce of the labour necessary for fashioning those materials into the proper form, can ever make a part of it. The price of that labour may indeed make a part of it; as the workmen so employed may place the whole value of their wages in their stock reserved for immediate consumption. But in other sorts of labour, both the price [i.e., the wages paid for this labour] and the produce [in which this labour is incorporated] go to this stock, the price to that of the workmen, the produce to that of other people, whose subsistence, conveniences, and amusements, are augmented by the labour of those workmen.” (Book II, Ch. 2, pp. 190, 191.)

Adam Smith comes here upon a very important distinction between the labourers employed in the production of means of production and those employed in the immediate production of articles of consumption. The value of the commodities produced by the first-named contains a constituent part which is equal to the sum of the wages, i.e., equal to the value of the part of capital invested in the purchase of labour-power. This part of value exists bodily as a certain quota of the means of production produced by the labourers. The money received by them as wages is their revenue, but their labour has not produced any goods which are consumable, either for themselves or for others. Hence these products are not an element of that part of the annual product which is intended to form a social consumption-fund, in which alone a “neat revenue” can be realised. Adam Smith forgets to add here that the same thing that applies to wages is also true of that constituent of the value of the means of production which, being surplus-value, forms the revenues (first and foremost) of the industrial capitalist under the categories of profit and rent. These value-components likewise exist in means of production, articles which cannot be consumed. They cannot raise articles of consumption produced by the second kind of labourers in a quantity corresponding to their price until they have been converted into money; only then can they transfer those articles to the individual consumption-fund of their owners. But so much the more should Adam Smith have seen that that part of the value of the annually begotten means of production which is equal to the value of the means of production functioning within this sphere of production — the means of production with which means of production are made — hence a portion of value equal to the value of the constant capital employed here, cannot possibly be a value constituent forming revenue, not only on account of the bodily form in which it exists, but also on account of its functioning as capital.

With regard to the second kind of labourers — who directly produce articles of consumption — Adam Smith’s definitions are not quite exact. For he says that in these kinds of labour, both the price of labour and the product “go to” the stock reserved for immediate consumption,

“the price” (i.e., the money received in wages) “to that of the workmen, the produce to that of other people, whose subsistence, conveniences and amusements, are augmented by the labour of these workmen.”

But the labourer cannot live on the “price” of his labour, the money in which his wages are paid; he realises this money by buying articles of consumption with it. These may in part consist of classes of commodities produced by himself. On the other hand his own product may be such as goes only into the consumption of the exploiters of labour.

After Adam Smith has thus entirely excluded the fixed capital from the “net revenue” of a country, he continues:

“But though the whole expense of maintaining the fixed capital is thus necessarily excluded from the neat revenue of the society, it is not the same case with that of maintaining the circulating capital. Of the four parts of which this latter capital is composed, money, provisions, materials, and finished work, the three last, it has already been observed, are regularly withdrawn from it, and placed either in the fixed capital of the society, or in their stock reserved for immediate consumption. Whatever portion of those consumable goods is not employed in maintaining the former” [the fixed capital] “goes all to the latter” [the fund for immediate consumption], “and makes a part of the neat revenue of the society. The maintenance of those three parts of the circulating capital, therefore, withdraws no portion of the annual produce from the neat revenue of the society, besides what is necessary for maintaining the fixed capital.” Book II, Ch. 2, p. 192.)

It is sheer tautology to say that that portion of the circulating capital which does not serve for the production of means of production goes into that of articles of consumption, in other words, into that part of the annual product which is intended to form society’s consumption-fund. However, the immediately following passage is important:

“The circulating capital of a society is in this respect different from that of an individual. That of an individual is totally excluded from making any part of his neat revenues, which must consist altogether in his profits. But though the circulating capital of every individual makes a part of that of the society to which he belongs, it is not upon that account totally excluded from making a part likewise of their neat revenue. Though the whole goods in a merchant’s shop must by no means be placed in his own stock reserved for immediate consumption, they may in that of other people, who, from a revenue derived form other funds, may regularly replace their value to him, together with its profits, without occasioning any diminution either of his capital or of theirs.” (Ibid.)

And so we learn hear that:

1) Just as the fixed capital, and the circulating capital required for its reproduction (he forgets the function) and maintenance, are totally excluded from the net revenue of every individual capitalist, which can consist only of his profit, so is the circulating capital employed in the production of articles of consumption. Hence that portion of his commodity-product which replaces his capital cannot resolve itself into constituents of value which form any revenue for him.

2) The circulating capital of each individual capitalist constitutes a part of society’s circulating capital the same as every individual fixed capital.

3) The circulating capital of society, while representing only the sum of the individual circulating capitals, has a character different from that of the circulating capital of every individual capitalist. The latter circulating capital can never form a part of his own revenue; however a portion of the first-named circulating capital (namely that consisting of consumable goods) may at the same time form a portion of the revenue of society or, as he had expressed it above, it must not necessarily reduce the net revenue of society by a portion of the annual product. Indeed, that which Adam Smith here calls circulating capital consists of the annually produced commodity-capital, which is thrown into circulation annually by the capitalists producing articles of consumption. This entire annual commodity product of theirs consists of consumable goods and therefore forms the fund in which the net revenues of society (including wages) are realised or expended. Instead of choosing for his illustration the goods in a merchant’s shop, Adam Smith should have selected the masses of goods stored away in the warehouses of the industrial capitalists.

Now if Adam Smith had welded together the snatches of thought which forced themselves upon him at first in the study of the reproduction of that which he calls fixed, and now of that which he calls circulating capital, he would have arrived at the following result:

I. The annual product of society consists of two departments: one of them comprises the means of production, the other the articles of consumption. Each must be treated separately.

II. The aggregate value of that part of the annual product which consists of means of production is divided as follows: One portion of the value represents only the value of the means of production consumed in the fabrication of these means of production; it is but capital-value re-appearing in a renewed form; another portion is equal to the value of the capital laid out in labour-power, or equal to the sum of wages paid by the capitalists in this sphere of production. Finally, a third portion of value is the source of profits, including ground-rent, of the industrial capitalists in this category.

The first constituent part, according to Adam Smith the reproduced portion of the fixed capital of all the individual capitalists employed in this first section, is “totally excluded from making any part of the neat revenue,” either of the individual capitalist or of society. It always functions as capital, never as revenue. To that extent the “fixed capital” of every individual capitalist is in no way different from the fixed capital of society. But the other portions of value of the annual product of society consisting of means of production — portions of value which therefore exist in aliquot parts of this aggregate quantity of means of production — form indeed simultaneously revenues for all agents engaged in this production, wages for the labourers, profits and ground-rents for the capitalists. But they form capital, not revenue, for society, although the annual product of society consists only of the sums of the products of the individual capitalists who belong to that society. By nature they are generally fit to function only as means of production, and even those which, if need be, might be able to function as articles of consumption are intended for service as raw or auxiliary materials of new production. But they serve as such — hence as capital — not in the hands of their producers, but in those of their users, namely:

III. The capitalists of the second department, the direct producers of articles of consumption. They replace for these capitalists the capital consumed in the production of articles of consumption (so far as this capital is not converted into labour-power, and hence is not the sum of the wages of the labourers of this second department), while this consumed capital, which now exists in the form of articles of the consumption in the hands of the capitalist producing them — socially speaking — in its turn forms the consumption-fund in which the capitalists and labourers of the first department realise their revenue.

If Adam Smith had continued his analysis to this point, but little would have been lacking for the solution of the whole problem. He almost hit the nail on the head, for he had already observed that certain value-parts of one kind (means of production) of the commodity-capitals constituting the total annual product of society indeed form revenue for the individual labourers and capitalists engaged in their production, but do not form a constituent part of the revenue of society; while a value-part of the other kind (articles of consumption), although representing capital-value for its individual owners, the capitalists engaged in this sphere of investment, is only a part of the social revenue.

But this much is evident from the foregoing:

First: Although the social capital is only equal to the sum of the individual capitals and for this reason the annual commodity-product (or commodity-capital) of society is equal to the sum of commodity-products of these individual capitals; and although therefore the analysis of the value of the commodities into its component parts, valid for every individual commodity-capital, must also be valid for the commodity-capital of all society — and actually proves valid in the end — the form of appearance which these component parts assume in the aggregate social process of reproduction is different.

Second: Even on the basis of simple reproduction there takes place not merely a production of wages (variable capital) and surplus-value, but direct production of new constant capital-value, although the working-day consists of only two parts, one in which the labourer replaces the variable capital, in fact producing an equivalent for the purchase of his labour-power, and another in which he produces surplus-value (profit, rent, etc.).

The daily labour which is expended in the reproduction of means of production — and whose value is composed of wages and surplus-value — realises itself in new means of production which replace the constant part of capital laid out in the production of articles of consumption.

The main difficulties, the greater part of which has been solved in the preceding text, are not encountered in studying accumulation but simple reproduction. For this reason, Adam Smith (Book II) and Quesnay (Tableau Économique) before him make simple reproduction their starting-point, whenever it is a question of the movement of the annual product of society and its reproduction through circulation.

2. Adam Smith Resolves Exchange Value into v + s

Adam Smith’s dogma that the price, or “exchangeable value,” of any single commodity — and therefore of all commodities in the aggregate constituting the annual product of society (he rightly assumes capitalist production everywhere) — is made up of three “component parts,” or “resolves itself into” wages, profit, and rent, can be reduced to this: that the commodity-value is equal to v + s, i.e., equal to the value of the advanced variable capital plus the surplus-value. And we may undertake this reduction of profit and rent to a common unit called s with the express permission of Adam Smith, as shown by the following quotations, in which we at first leave aside all minor points, i.e., any apparent or real deviation from the dogma that commodity-value consists exclusively of those elements which we call v + s.

In manufacture:

“The value which the workmen add to the materials ... resolves itself ... into two parts, of which the one pays their wages, the other the profits of their employer upon the whole stock of materials and wages which he advanced.” (Book I, Ch. 6, p. 41.)

“Though the manufacturer has his wages advanced to him by his master, he, in reality, costs him no expense, the value of those wages being generally restored, together with a profit, in the improved value of the subject upon which his labour is bestowed.” (Book II, Ch. 3, p. 221.)

That portion of the stock which is laid out

“in maintaining productive hands ... after having served in the function of a capital to him (the employer) ...constitutes a revenue to them” (the labourers). (Book II, Ch. 3 p. 223.)

Adam Smith says explicitly in the chapter just quoted:

“The whole annual produce of the land and labour of every country ... naturally divides itself into two parts. One of them, and frequently the largest, is in the first place, destined for replacing a capital, or for renewing the provisions, materials, and finished work, which had been withdrawn from a capital; the other for constituting a revenue either to the owner of this capital, as the profit of his stock; or to some other person, as the rent of his land.” (p. 222.)

Only one part of the capital, so Adam Smith just informed us, forms at the same time a revenue for somebody, namely that which is invested in the purchase of productive hands. This portion — the variable capital — first “serves in the function of a capital” in the hands of its employer and for him and then it “constitutes a revenue” for the productive labourer himself. The capitalist transforms a portion of his capital-value into labour-power and precisely thereby into variable capital; it is only due to this transformation that not alone this portion of capital but his entire capital functions as industrial capital. The labourer — the seller of labour-power — receives its value in the form of wages. In his hands labour-power is but a saleable commodity, a commodity by the sale of which he lives, which therefore is the sole source of his revenue; labour-power functions as a variable capital only in the hands of its buyer, the capitalist, and the capitalist advances its purchase price only apparently, since its value has been previously supplied to him by the labourer.

After Adam Smith has thus shown that the value of a product in manufacture is equal to v + s (s standing for the profit of the capitalist), he tells us that in agriculture the labourers besides

“the reproduction of a value equal to their own consumption, or to the [variable] capital which employs them, together with its owners’ profits ...” — furthermore, “over and above the capital of the farmer and all its profits regularly occasion the reproduction of the rent of the landlord.” (Book II, Ch. 5, p. 243.)

The fact that the rent passes into the hands of the landlord is wholly immaterial for the question under consideration. Before it can pass into his hands, it must be in those of the farmer, i.e., of the industrial capitalist. It must form a component part of the value of the product before it becomes a revenue for anyone. Rent as well as profit are therefore, according to Adam Smith himself, but component parts of surplus-value and these the productive labourer reproduces continually together with his own wages, i.e., with the value of the variable capital. Hence rent and profit are parts of the surplus-value s, and thus, with Adam Smith, the price of all commodities resolves itself into v + s.

The dogma that the price of all commodities (hence also of the annual commodity-product) resolves itself into wages plus profit plus ground-rent, assumes even in the intermittent esoteric constituents of Smith’s work the form that the value of every commodity, hence also that of society’s annual commodity-product, is equal to v + s, or equal to the capital-value laid out in labour-power and continually reproduced by the labourers, plus the surplus-value added by the labourers through their work.

This final result of Adam Smith reveals to us at the same time — see further down — the source of his one-sided analysis of the component parts into which the value of a commodity resolves sources of revenue for different classes engaged in production has nothing to do with the determination of the magnitude of each of these component parts and of the sum of their values.

All kinds of quid pro quo’s are jumbled together when Adam Smith says:

“Wages, profit, and rent, are the three original sources of all revenue as well as of all exchangeable value. All other revenue is ultimately derived from some one or other of these.” (Book I, Ch. 6, p. 48.)

1) All member of society not directly engaged in reproduction, with or without labour, can obtain their share of the annual commodity-product — in other words, their articles of consumption — primarily out of the hands of those classes to which the product first accrues — productive labourers, industrial capitalists, and landlords. To that extent their revenues are materially derived from wages (of the productive labourers), profit, and rent, and appear therefore as derivative vis-à-vis those primary revenues. But on the other hand the recipients of these revenues, derived in this sense, draw them by virtue of their social functions — as a king, priest, professor, prostitute, soldier, etc., and they may, therefore, regard these functions as the original sources of their revenue.

2) — and here Adam Smith’s ridiculous blunder reaches its climax. After starting by correctly defining the component parts of the value of the commodities and the sum of the value-product incorporated in them, and then demonstrating how these component parts form so many different sources of revenue, [39] after thus deriving the revenues from the value, he proceeds in the opposite direction — and this remains the predominant conception with him — and turns the revenues from “component parts” into “original sources of all exchangeable value,” thereby throwing the doors wide open to vulgar economy. (See our Roscher. [Marx has in mind W. Roscher”s System der Vokswirtschaft. Band I: Die Grundlagen der Nationalökonomie. Dritte, vermehrte und verbesserte Auflage. Stuttgart und Augsburg, 1858. — Ed.] )

3. The Constant Part of Capital

Let us now see how Adam Smith tries to spirit the constant part of the capital-value away from the commodity-value.

“In the price of corn, for example, one part pays the rent of the landlord.”

The origin of this constituent of value has no more to do with the circumstance that it is paid to the landlord and forms a revenue for him in the shape of rent than the origin of the other constituents of value has to do with the fact that as profit and wages they form sources of revenue.

“Another [portion] pays the wages or maintenance of the labourers” [“and labouring cattle,” he adds] “employed in producing it, and the third pays the profit of the farmer. These three parts seem” [they seem indeed] “either immediately or ultimately to make up the whole price of corn.” [40]

This entire price, i.e., the determination of its magnitude, is absolutely independent of its distribution among three kinds of people.

“A fourth part, it may perhaps be thought, is necessary for replacing the stock of the farmer, or for compensating the wear and tear of his labouring cattle, and other instruments of husbandry. But it must be considered that the price of any instrument of husbandry, such as a labouring horse, is itself made up of the same three parts: the rent of the land upon which he is reared, the labour of tending and rearing him, and the profits of the farmer who advances both the rent of this land, and the wages of this labour. Though the price of the corn, therefore, may pay the price as well as the maintenance of the horse, the whole price still resolves itself either immediately or ultimately into the same three parts of rent, labour” (he means wages), “and profit.” (Book I, Ch. 6, p. 42.)

This is verbatim all that Adam Smith has to say in support of his astonishing doctrine. His proof consists simply in the repetition of the same assertion. He admits, for instance, that the price of corn does not only consist of v + s, but also of the price of the means of production consumed in the production of corn, hence of a capital-value not invested in labour-power by the farmer. But, he says, the prices of all these means of production resolve themselves into v + s, the same as the price of corn. He forgets, however, to add: and, moreover, into the prices of the means of production consumed in their own creation. He refers us from one branch of production to another, and from that to a third. The contention that the entire price of commodities resolves itself “immediately” or “ultimately” into v + s would not be a hollow subterfuge only if he were able to demonstrate that the commodities whose price resolves itself immediately into c (price of consumed means of production) + v + s, are ultimately compensated by commodities which completely replace those “consumed means of production,” and which are themselves produced by the mere outlay of variable capital, i.e., by a mere investment of capital in labour-power. The price of these last commodity-products would then be immediately v + s. Consequently the price of the former, c + v + s, where c stands for the constant part of capital, would also be ultimately resolvable into v + s. Adam Smith himself did not believe that he had furnished such a proof by his example of the collectors of Scotch pebbles, who, according to him 1) do not generate surplus-value of any description, but produce only their own wages, and 2) do not employ any means of production (they do, however, employ them, such as baskets, sacks, and other containers for carrying the pebbles).

We have already seen above that Adam Smith himself later on overthrows his own theory, without however being conscious of his contradictions. But their source is to be found precisely in his scientific premises. The capital converted into labour produces a greater value than its own. How? Says Adam Smith: by the labourers imparting during the process of production to the things on which they work a value which forms not only an equivalent for their own purchase price, but also a surplus-value (profit and rent) apportioned not to them but to their employers. That is all they accomplish, and all they can accomplish. And what is true of the industrial labour of one day is true of the labour set in motion by the entire capitalist class during one year. Hence the aggregate mass of the annual value produced by society can resolve itself only into v + s, into an equivalent by which the labourers replace the capital-value expended for the purchase of their own labour-power, and into an additional value which they must deliver over and above this to their employers. But these two elements of commodity-value form at the same time sources of revenue for the various classes engaged in reproduction: the first is the source of wages, the revenue of the labourers; the second that of surplus-value, a portion of which is retained by the industrial capitalist in the form of profit, while another is given up by him as rent, the revenue of the landlord. Where, then, should another portion of value come from, when the annual value-product contains no other elements than v + s? We are proceeding here from simple reproduction. Since the entire quantity of annual labour resolves itself into labour needed for the reproduction of the capital-value laid out in labour-power, and into labour needed for the creation of surplus-value, where should the labour for the production of a capital-value not laid out in labour-power come from?

The case is as follows:

1) Adam Smith determines the value of a commodity by the amount of labour which the wage-labourer adds to the subject of labour. He calls it literally “materials,” since he is dealing with manufacture, which itself is working up products of labour. But this does not alter the matter. The value which the labourer adds to a thing (and this “adds” is the expression of Adam Smith) is entirely independent of whether or not this object to which value is added had itself any value before this addition. The labourer therefore produces a value in the form of a commodity. This, according to Adam Smith, is partly an equivalent for his wages, and this part, then, is determined by the magnitude of value of his wages; depending on that magnitude he has to add labour in order to produce or reproduce a value equal to that of his wages. On the other hand the labourer adds more labour over and above the limit so drawn, and this creates surplus-value for the capitalist employing him. Whether this surplus-value remains entirely in the hands of the capitalist or parts of it are yielded by him to third persons, does not in the least alter either the qualitative (that is at all surplus-value) or the quantitative (magnitude) determination of the surplus-value added by the wage-labourer. It is value the same as any other portion of the value of the product, but it differs in that the labourer has not received any equivalent for it, nor will receive any later on, in that, on the contrary, this value is appropriated by the capitalist without any equivalent. The total value of a commodity is determined by the quantity of labour expended by the labourer in its production; one portion of this total value is determined by the fact that it is equal to the value of the wages, i.e., an equivalent for them. The second part, the surplus-value, is, therefore, necessarily likewise determined as equal to the total value of the product minus that part of its value which is equivalent to the wages; hence equal to the excess of the value produced in the making of the commodity over that part of the value contained in it which is an equivalent for his wages.

2) That which is true of a commodity produced in some individual industrial establishment by any individual labourer is true of the annual product of all branches of business as a whole. That which is true of the day’s work of some individual productive labourer is true of the year’s work set in motion by the entire class of productive labourers. It “fixes” (Adam Smith’s expression) in the annual product of a total value determined by the quantity of the annual labour expended, and this total value resolves itself into one portion determined by that part of the annual labour wherewith the working-class creates an equivalent of its annual wages, in fact, these wages themselves; and into another portion determined by the additional annual labour by which the labourer creates surplus-value for the capitalist class. The annual value-product contained in the annual product consists therefore of but two elements: namely, the equivalent of the annual wages received by the working-class, and the surplus-value annually provided for the capitalist class. Now, the annual wages are the revenue of the working-class, and the annual quantity of surplus-value the revenue of the capitalist class; hence both of them represent the relative shares in the annual fund for consumption (this view is correct when describing simple reproduction) and are realised in it. There is, then, no room left anywhere for the constant capital-value, for the reproduction of the capital functioning in the form of means of production. And Adam Smith states explicitly in the introduction to his work that all portions of the value of commodities which serve as revenue coincide with the annual product of labour intended for the social fund for consumption:

“To explain in what has consisted the revenue of the great body of the people, or what has been the nature of those funds, which, in different ages and nations, have supplied their annual consumption, is the object of these first Four Books.” (p. 12.)

And in the very first sentence of the introduction we read:

“The annual labour of every nation is the fund, which originally supplies it with all the necessaries and conveniences of life which it annually consumes, and which consists always either in the immediate produced of that labour, or in what is purchased with that produce from other nations.” (p. 11.)

Now Adam Smith’s first mistake consists in equating the value of the annual product to the newly produced annual value. The latter is only the product of labour of the past year, the former includes besides all elements of value consumed in the making of the annual product, but which were produced in the preceding and partly even earlier years: means of production whose value merely re-appears — which, as far as their value is concerned, have been neither produced nor reproduced by the labour expended in the past year. By this confusion Adam Smith spirits away the constant portion of the value of the annual product. This confusion rests on another error in his fundamental conception: He does not distinguish the two-fold nature of labour itself: of labour which creates value by expending labour-power, and of labour as concrete, useful work, which creates articles of use (use-values). The total quantity of the commodities fabricated annually, in other words, the total annual product is the product of the useful labour active during the past year; it is only due to the fact that socially employed labour was spent in a ramified system of useful kinds of labour that all these commodities exist; it is due to this fact alone that the value of the means of production consumed in the production of commodities and reappearing in a new bodily form is preserved in their total value. The total annual product, then, is the result of the useful labour expended during the year; but only a part of the value of the annual product has been created during the year; this portion is the annual value-product, in which the quantity of labour set in motion during the year is represented.

Hence, if Adam Smith says in the passage just cited:

“The annual labour of every nation is the fund which originally supplies it with all the necessaries and conveniences of life which it annually consumes, etc.,”

he takes the one-sided standpoint of solely useful labour, which has indeed given all these means of subsistence their consumable form. But he forgets that this was impossible without the assistance of instruments and subjects of labour supplied by former years, and that, therefore, the “annual labour,” while it created value, did not create all the value of the products fabricated by it; that the value newly produced is smaller than the value of the product.

While we cannot reproach Adam Smith for going in this analysis no farther than all his successors (although a step in the right direction could already be discerned among the physiocrats), he subsequently gets lost in a chaos and this mainly because his “esoteric” conception of the value of commodities in general is constantly contravened by exoteric conceptions, which on the whole prevail with him, and yet his scientific instinct permits the esoteric standpoint to re-appear from time to time.

4. Capital and Revenue in Adam Smith

That portion of the value of every commodity (and therefore also of the annual product) which is but an equivalent of the wages, is equal to the capital advanced by the capitalist for labour-power; i.e., is equal to the variable portion of the total capital advanced. The capitalist recovers this portion of the total capital through a portion of the newly produced value of the commodities supplied by the wage-labourers. Whether the variable capital is advanced in the sense that the capitalist pays the labourer in money for his share in a product which is not yet ready for sale or which, though ready, has not yet been sold by the capitalist, or whether he pays him with money already obtained by the sale of commodities previously supplied by the labourer, or whether he has drawn this money in advance by means of credit — in all these cases the capitalist expends variable capital, which passes into the hands of the labourers in the form of money, and on the other hand he possesses the equivalent of this capital-value in that portion of the value of his commodities in which the labourer has produced anew his share of its total value, in other words, in which he has produced the value of his own wages. Instead of giving him this portion of the value in the bodily form of his own product, the capitalist pays it to him in money. For the capitalist the variable portion of his advanced capital-value now exists in the form of commodities, while the labourer has received the equivalent for his sold labour-power in the form of money.

Now while that portion of the capital advanced by the capitalist, which has been converted by the purchase of labour-power into variable capital, functions in the process of production itself as operative labour-power and by the expenditure of this power is produced anew as a new value, in the form of commodities, i.e., is reproduced — hence a reproduction, or new production, of advanced capital-value — the labourer spends the value, or price, of his sold labour-power on means of subsistence, on means for the reproduction of his labour-power. An amount of money equal to the variable capital forms his income, hence his revenue, which lasts only so long as he can sell his labour-power to the capitalist.

The commodity of the wage-labourer — his labour power — serves as a commodity only to the extent that it is incorporated in the capital of the capitalist, acts as capital; on the other hand the capital expended by the capitalist as money-capital in the purchase of labour-power functions as a revenue in the hands of the seller of labour-power, the wage labourer.

Various processes of circulation and production intermingle here, which Adam Smith does not distinguish.

First: Acts pertaining to the process of circulation. The labourer sells his commodity — labour-power — to the capitalist; the money with which the capitalist buys it is from his point of view money invested for the production of surplus-value, hence money-capital; it is not spent but advanced. (This is the real meaning of “advance” — the avance of the physiocrats — no matter where the capitalist gets the money. Every value which the capitalist pays out for the purposes of the productive process is advanced from his point of view, regardless of whether this takes place before or post festum; it is advanced to the process of production itself.) The same takes place here as in every other sale of commodities: The seller gives away a use-value (in this case his labour-power) and receives its value (realises its price) in money; the buyer gives away his money and receives in return the commodity itself — in this case labour-power.

Second: In the process of production the purchased labour-power now forms a part of the functioning capital, and the labourer himself serves here merely as a special bodily form of this capital, distinguished from its elements existing in the bodily form of means of production. During the process, by expending his labour-power, the labourer adds value to the means of production which he converts into products equal to the value of his labour-power (exclusive of surplus-value); he therefore reproduces for the capitalist in the form of commodities that portion of his capital which has been, or has to be, advanced by him for wages, produces for him an equivalent of the latter; hence he reproduces for the capitalist that capital which the latter can “advance” once more for the purchase of labour-power.

Third: In the sale of a commodity one portion of its selling price replaces the variable capital advanced by the capitalist, whereby on the one hand he is enabled anew to buy labour-power, and the labourer on the other to sell it anew.

In all purchases and sales of commodities — so far as only these transactions are under discussion — it is quite immaterial what becomes of the proceeds the seller receives for his commodities, and what becomes of the bought articles of use in the hands of the buyer. Hence, so far as the mere process of circulation is concerned, it is quite immaterial that the labour-power bought by the capitalist reproduces capital-value for him, and that on the other hand the money received by the labourer as the purchase-price of his labour-power constitutes his revenue. The magnitude of value of the labourer’s article of commerce, his labour-power, is not affected either by its forming “revenue” for him or by the fact that the use of this article of commerce by the buyer reproduces capital-value for this buyer.

Since the value of labour-power — i.e., the adequate selling price of this commodity — is determined by the quantity of labour required for its reproduction, and this quantity of labour itself is here determined by that needed for the production of the necessary means of subsistence of the labourer, hence for the maintenance of his existence, the wages become the revenue on which the labourer has to live.

It is entirely wrong, when Adam Smith says (p. 223):

That portion of the stock which is laid out in maintaining productive hands ... after having served in the function of a capital to him [the capitalist] ... constitutes a revenue to them” [the labourers].

The money with which the capitalist pays for the labour-power purchased by him “serves in the function of a capital to him,” since he thereby incorporates labour-power in the material constituents of his capital and thus enables his capital to function altogether as productive capital. We must make this distinction: The labour-power is a commodity, not capital, in the hands of the labourer, and it constitutes for him a revenue so long as he can continuously repeat its sale; it functions as capital after its sale, in the hands of the capitalist, during the process of production itself. That which here serves twice is labour-power: as a commodity which is sold at its value, in the hands of the labourer; as a power-producing value and use-value, in the hands of the capitalist who has bought it. But the labourer does not receive the money from the capitalist until after he has given him the use of his labour-power, after it has already been realised in the value of the product of labour. The capitalist possesses this value before he pays for it. Hence it is not the money which functions twice: first, as the money-form of the variable capital, and then as wages. On the contrary it is labour-power which has functioned twice: first, as a commodity in the sale of labour-power (in stipulating the amount of wages to be paid, money acts merely as an ideal measure of value and need not even be in the hands of the capitalist); secondly, in the process of production, in which it functions as capital, i.e., as an element, in the hands of the capitalist, creating use-value and value. Labour-power already supplied, in the form of commodities, the equivalent which is to be paid to the labourer, before it is paid by the capitalist to the labourer in money-form. Hence the labourer himself creates the fund out of which the capitalist pays him. But this is not all.

The money which the labourer receives is spent by him in order to preserve his labour-power, or — viewing the capitalist class and the working-class in their totality — in order to preserve for the capitalist the instrument by means of which alone he can remain a capitalist.

Thus the continuous purchase and sale of labour-power perpetuates on the one hand labour-power as an element of capital, by virtue of which the latter appears as the creator of commodities, articles of use having value, by virtue of which, furthermore, that portion of capital which buys labour-power is continually restored by labour-power’s own product, and consequently the labourer himself constantly creates the fund of capital out of which he is paid. On the other hand the constant sale of labour-power becomes the source, ever renewing itself, of the maintenance of the labourer and hence his labour-power appears as that faculty through which he secures the revenue by which he lives. Revenue in this case signifies nothing else than a appropriation of values effected by ever repeated sales of a commodity (labour-power), these values serving only for the continual reproduction of the commodity to be sold. And to this extent Smith is right when he says that the portion of the value of the product created by the labourer himself for which the capitalist pays him an equivalent in the form of wages, becomes the source of revenue for the labourer. But this does not alter the nature or magnitude of this portion of the value of the commodity any more than the value of the means of production is changed by the fact that they function as capital-values, or the nature and magnitude of a straight line are changed by the fact that it serves as the base of some triangle or as the diameter of some ellipse. The value of labour-power remains quite as independently definite as that of those means of production. This portion of the value of a commodity neither consists of revenue as an independent factor constituting this value-part nor does it resolve itself into revenue. While this new value constantly reproduced by the labourer constitutes a source of revenue for him, his revenue conversely is not a constituent of the new value produced by him. The magnitude of the share paid to him of the new value created by him determines the value-magnitude of his revenue, not vice versa. The fact that this part of the newly created value forms a revenue for him, indicates merely what becomes of it, shows the character of its application, and has no more to do with its formation than with that of any other value. If my receipts are ten shillings a week that changes nothing in the nature of the value of the ten shillings, nor in the magnitude of their value. As in the case of every other commodity so in that of labour-power its value is determined by the amount of this labour is necessary for its reproduction; that the amount of this labour is determined by the value of the labourer’s necessary means of subsistence, hence is equal to the labour required for the reproduction of the very conditions of his life — that is peculiar for this commodity (labour-power), but no more peculiar than the fact that the value of labouring cattle is determined by the value of the means of subsistence necessary for its maintenance, i.e., by the amount of human labour necessary to produce these means of subsistence.

But it is this category of “revenue” which is to blame for all the harmful confusion in Adam Smith. The various kinds of revenue form with him the “component parts” of the annually produced, newly created commodity-value, while, vice versa, the two parts into which this commodity-value resolves itself for the capitalist — the equivalent of his variable capital advanced in the form of money when purchasing labour, and the other portion of the value, the surplus- value, which likewise belongs to him but did not cost him anything — form sources of revenue. The equivalent of the variable capital is advanced again for labour-power and to that extent forms a revenue for the labourer in the shape of wages; since the other portion, the surplus-value, does not serve to replace any advance of capital for the capitalist, it may be spent by him in articles of consumption (both necessities and luxuries) or consumed as revenue instead of forming capital-value of any description. Commodity-value itself is the preliminary condition of this revenue and its component parts differ, from the point of view of the capitalist, only to the extent that they constitute either an equivalent for an excess over the variable capital-value advanced by him. Both of them consist of nothing but labour-power expended during the production of commodities, rendered fluent in labour. They consist of outlay, not income or revenue — of outlay of labour.

In accordance with the quid pro quo, by which the revenue becomes the source of commodity-value instead of the commodity-value being the source of revenue, the value of commodities new has the appearance of being “composed” of the various kinds of revenue; these revenues are determined independently of one another, and the total value of commodities is determined by the addition of the values of these revenues. But now the question is how to determine the value of each of these revenues which are supposed to form commodity-value. In the case of wages it can be done, for wages represent the value of their commodity, labour-power, and this value is determinable (the same as that of all other commodities) by the labour required for the reproduction of this commodity. But surplus-value, or, as Adam Smith has it, its two forms, profit and rent, how are they determined? Here Adam Smith has but empty phrases to offer. At one time he represents wages and surplus-value (or wages and profit) as component parts of the value, or price, of commodities; at another, and almost in the same breath, as parts into which the price of commodities “resolves itself”; but this means on the contrary that the commodity-value is the thing given first and that different parts of this given value fall in the form of different revenues to the share of different persons engaged in the productive process. This is by no means identical with the notion that value is “composed” of these three “component parts.” If I determine the lengths of three different straight lines independently, and then form out of these three lines as “component parts” a fourth straight line equal to their sum, it is by no means the same procedure as when I have some given straight line before me and for some purpose divide it, “resolve” it, so to say, into three different parts. In the first case, the length of the line changes throughout with the lengths of the three lines whose sum it is; in the second case, the lengths of the three parts of the line are from the outset limited by the fact that they are parts of a line of given length.

As a matter of fact, if we adhere to that part of Smith’s exposition which is correct, namely, that the value newly created by the annual labour and contained in the annual social commodity-product (the same as in every individual commodity, or every daily, weekly, etc., product) is equal to the value of the variable capital advanced (i.e., to the value-part intended to purchase new labour-power) plus the surplus-value which the capitalist can realise in means of his individual consumption — simple reproduction being assumed and other circumstances remaining the same; if we furthermore keep in mind that Adam Smith lumps together labour, so far as it creates value and is an expenditure of labour-power, and labour, so far as it creates use value, i.e., is expended in a useful, appropriate manner — then the entire conception amounts to this: The value of every commodity is the product of labour; hence this is also true of the value of the product of the annual labour or of the value of society’s annual commodity-product. But since all labour resolves itself 1) into necessary labour-time, in which the labourer reproduces merely an equivalent for the capital advanced in the purchase of his labour-power, and 2) into surplus-labour, by which he supplies the capitalist with a value for which the latter does not give any equivalent, hence surplus-value, it follows that all commodity value can resolve itself only into these two component parts, so that ultimately it forms a revenue for the working-class in the form of wages, and for the capitalist class in the form of surplus-value. As for the constant capital-value, i.e., the value of the means of production consumed in the creation of the annual product, it cannot be explained how this value gets into that of the new product (except for the phrase that the capitalist charges the buyer with it in the sale of his goods), but ultimately, since the means of production are themselves products of labour, this portion of value can, in turn, consist only of an equivalent of the variable capital and of surplus-value, of a product of necessary labour and of surplus-labour. The fact that the values of these means of production function in the hands of their employers as capital-values does not prevent them from having “originally,” in the hands of others if we go to the bottom of the matter — even though at some previous time — resolved themselves into the same two portions of value, hence into two different sources of revenue.

One point herein is correct: that the matter presents itself differently in the movement of social capital, i.e., of the totality of individual capitals, from the way it presents itself for each individual capital considered separately, hence from the standpoint of each individual capitalist. For the latter the value of commodities resolves itself into 1) a constant element (a fourth one, as Adam Smith says), and 2) the sum of wages and surplus-value, or wages, profit and rent. But from the point of view of society the fourth element of Adam Smith, the constant capital-value, disappears.

5. Recapitulation

The absurd formula that the three revenues, wages, profit and rent, form the three “component parts” of the value of commodities originates with Adam Smith from the more plausible idea that the value of commodities “resolves itself” into these three component parts. This is likewise incorrect, even granted that the value of commodities is divisible only into an equivalent of the consumed labour-power and the surplus-value created by it. But the mistake rests here too on a deeper, a true foundation. Capitalist production is based on the fact that the productive labourer sells his own labour-power, as his commodity, to the capitalist, in whose hands it then functions merely as an element of his productive capital. This transaction, which pertains to circulation — the sale and purchase of labour-power — not only inaugurates the process of production, but also determines implicitly its specific character. The production of a use-value, and even that of a commodity (for this can be carried on also by independent productive labourers), is here only a means of producing absolute and relative surplus-value for a capitalist. For this reason we have seen in the analysis of the process of production that the production of absolute and relative surplus-value determines 1) the duration of the daily labour-process and 2) the entire social and technical configuration of the capitalist process of production. Within this process there is realised the distinction between the mere conservation of value (of the constant capital-value), the actual reproduction of advanced value (equivalent of labour-power), and the production of surplus-value, i.e., of value for which the capitalist has neither advanced an equivalent previously nor will advance one post festum.

The appropriation of surplus-value — a value in excess of the equivalent of the value advanced by the capitalist — although inaugurated by the purchase and sale of labour-power, is an act performed within the process of production itself, and forms an essential element of it.

The introductory act, which constitutes an act of circulation — the purchase and sale of labour-power — itself rests on a distribution of the elements of production which preceded and presupposed the distribution of the social products, namely on the separation of labour-power as a commodity of the labourer from the means of production as the property of non-labourers.

However this appropriation of surplus-value, or this separation of the production of value into a reproduction of advanced value and a production of new value (surplus-value) which does not replace any equivalent, does not alter in any way the substance of value itself or the nature of the production of value. The substance of value is and remains nothing but expended labour-power — labour independent of the specific, useful character of this expenditure. A serf for instance expends his labour-power for six days, labours for six days, and the fact of this expenditure as such is not altered by the circumstance that he may be working three days for himself, on his own field, and three days for his lord, on the field of the latter. Both his voluntary labour for himself and his forced labour for his lord are equally labour; so far as this labour is considered with reference to the values, or to the useful articles created by it, there is no difference in his six days of labour. The difference refers merely to the different conditions by which the expenditure of his labour-power during both halves of his labour-time of six days is called forth. The same applies to the necessary and surplus-labour of the wage-labourer.

The process of production expires in the commodity. The fact that labour-power was expended in its fabrication now appears as a material property of the commodity, as the property of possessing value. The magnitude of this value is measured by the amount of labour expended; the value of a commodity resolves itself into nothing else besides and is not composed of anything else. If I have drawn a straight line of definite length, I have, to start with, “produced” a straight line (true, only symbolically, as I know beforehand) by resort to the art of drawing, which is practised in accordance with certain rules (laws) independent of myself. If I divide this line into three sections (which may correspond to a certain problem), every one of these sections remains a straight line, and the entire line, whose sections they are, does not resolve itself by this division into anything different from a straight line, for instance into some kind of curve. Neither can I divide a line of a given length in such a way that the sum of its parts is greater than the undivided line itself; hence the length of the undivided line is not determined by any arbitrarily fixed lengths of its parts. Vice versa, the relative lengths of these parts are limited from the outset by the size of the line whose parts they are.

In this a commodity produced by a capitalist does not differ in any way from that produced by an independent labourer or by communities of working-people or by slaves. But in the present case the entire product of labour, as well as its entire value, belongs to the capitalist. Like every other producer he has to convert his commodity by sale into money before he can manipulate it further; he must convert it into the form of the universal equivalent.

Let us examine the commodity-product before it is converted into money. It belongs wholly to the capitalist. On the other hand as a useful product of labour, a use-value, it is entirely the product of a past labour-process. Not so its value. One portion of this value is but the value of the means of production expended in the production of this commodity and re-appearing in a new form. This value has not been produced during the process of production of this commodity, for the means of production possessed this value before the process of production, independently of it; they entered into this process as the vehicles of this value; it is only its form of appearance that has been renewed and altered. This portion of the value of the commodity constitutes for the capitalist an equivalent of the portion of the constant capital-value advanced and consumed in the production of the commodity. It existed previously in the form of means of production; it exists now as a component part of the value of the newly produced commodity. As soon as this commodity has been turned into money, the value now existing in the form of money must be reconverted into means of production, into its original form determined by the process of production and its function in it. Nothing is altered in the character of the value of a commodity by the function of this value as capital.

A second portion of the value of a commodity is the value of the labour-power which the wage-worker sells to the capitalist. It is determined, the same as that of the means of production, independently of the process of production into which labour-power is to enter, and it is fixed in an act of circulation, the purchase and sale of labour-power, before the latter enters the process of production. By means of his function — the expenditure of labour-power — the wage-labourer produces a commodity-value equal to the value which the capitalist has to pay him for the use of his labour-power. He gives this value to the capitalist in the form of a commodity and is paid for it by him in money. That this portion of the commodity-value is for the capitalist but an equivalent for the variable capital which he has to advance in wages does not alter in any way the fact that it is a commodity-value newly created during the process of production and consisting of nothing but what surplus-value consists of, namely, past expenditure of labour-power. Nor is this truth affected by the fact that the value of the labour-power paid by the capitalist to the labourer in the form of wages and assumes the form of a revenue for the labourer, and that not only labour-power is continually reproduced thereby but also the class of wage-labourers as such, and thus the basis of the entire capitalist production.

However, the sum of these two portions of value does not comprise the whole of commodity-value. There remains an excess over both of them — the surplus-value. This, like the portion of value which replaces the variable capital advanced in wages, is a value newly created by the labourer during the process of production — congealed labour. But it does not cost the owner of the entire product, the capitalist, anything. This circumstance actually permits the capitalist to consume the surplus-value entirely as revenue, unless he has to surrender parts of it to other participants — such as ground-rent to the landlord, in which case such portions constitute a revenue of such third persons. This same circumstance was the compelling motive that induced our capitalist to engage at all in the manufacture of commodities. But neither his original benevolent intention of snatching surplus-value, nor its subsequent expenditure as revenue by him or others affects the surplus-value as such. They do not impair the fact that it is congealed unpaid labour, nor the magnitude of this surplus-value, which is determined by entirely different conditions.

However, if Adam Smith wanted to occupy himself, as he did, with the role of the various parts of this value in the total process of reproduction, even while he was investigating the value of commodities, it would be evident that while some particular parts function as revenue, others function just as continually as capital — and consequently, according to his logic, should have been designated as constituent parts of the commodity-value, or parts into which this value resolves itself.

Adam Smith identifies the production of commodities in general with capitalist commodity production; the means of production are to him from the outset “capital,” labour is from the outset wage-labour, and therefore

“the number of useful and productive labourers ... is everywhere in proportion to the quantity of capital stock which employed in setting them to work.” (Introduction, p. 12.)

In short, the various factors of the labour-process — both objective and personal — appear from the first with the masks characteristic of the period of capitalist production. The analysis of the value of commodities therefore coincides directly with the consideration of the extent to which this value is on the one hand a mere equivalent of capital laid out, and on the other, to what extent it forms “free” value, value not replacing any advanced capital-value, or surplus-value. Compared from this point of view, parts of commodity-value thus transform themselves imperceptibly into its independent “component parts,” and finally into the “sources of all value.” A further conclusion is that commodity-value is composed of, or “resolves itself” into, revenues of various kinds, so that the revenues do not consist of commodity-values but the commodity-value consists of “revenues.” As little, however, as the nature of a commodity-value as such, or of money as such, is changed through their functioning as capital-value, just so little is the nature of a commodity-value as capital-value, just so little is the nature of a commodity-value changed on account of its functioning later as a revenue for some particular person. The commodity with which Adam Smith has to deal is from the outset commodity-capital (which comprises surplus-value in addition to the capital-value consumed in the production of the commodity); it is therefore a commodity produced capitalistically, the result of the capitalist process of production. It would have been necessary, then, to analyse first this process, and also the process of self-expansion and of the formation of value, which it includes. Since this process is in its turn premised by the circulation of commodities, its description requires also a preliminary and independent analysis of the commodity. However, even where Adam Smith at times hits “esoterically” upon the correct thing he always takes into consideration the formation of value only as incidental to the analysis of commodities, i.e., to the analysis of commodity-capital.

III. Later Economists [41]

Ricardo reproduces the theory of Adam Smith almost verbatim:

“It must be understood that all the productions of a country are consumed; but it makes the greatest difference imaginable whether they are consumed by those who reproduced, or by those who do not reproduce another value. When we say that revenue is saved, and added to capital, what we mean is, that the portion of revenue, so said to be added to the capital, is consumed by productive instead of unproductive labourers.” (Principles, p. 163.)

In fact Ricardo fully accepted the theory of Adam Smith concerning the resolution of the price of commodities into wages and surplus-value (or variable capital and surplus-value). The points of dispute with him are 1) the component parts of the surplus-value: he eliminates ground-rent as an essential element of it; 2) Ricardo splits the price of the commodity into these component parts. The magnitude of value is, then, the prius. The sum of component parts is assumed as a given magnitude, it is the starting point, while Adam Smith frequently acts to the contrary, against his own better judgement, by subsequently deducing the magnitude of value of the commodity through the sum of the component parts.

Ramsay makes the following remark against Ricardo:

“... He seems always to consider the whole produce as divided between wages and profits, forgetting the part necessary for replacing fixed capital.” (An Essay on the Distribution of Wealth, Edinburgh, 1836, p. 174.)

By fixed capital Ramsay means the same thing that I mean by constant capital:

“Fixed capital exists in a form in which, though assisting to raise the future commodity, it does not maintain labourers.” (Ibid., p. 59.)

Adam Smith opposed the necessary conclusion of his resolution of the value of commodities, and therefore also of the value of the social annual product into wages and surplus-value and therefore into mere revenue — the conclusion that in this event the entire annual product might be consumed. It is never the original thinkers that draw the absurd conclusions. They leave that to the Says and MacCullochs.

Say, indeed, settles the matter easy enough. That which is an advance of capital for one, is or was a revenue and net product for another. The difference between the gross and the net product is purely subjective, and

“thus the total value of all products, has been distributed in society as revenue.” (Say, Traitè d’Economie Politique, 1817, II, p. 64.) “The total value of every product is composed of the profits of the landowners, the capitalists, and those who ply industrial trades” [wages figure here as profits des industrieux!] “who have contributed towards its production. This makes the revenue of society equal to the gross value produced, not equal to the net products of the soil, as was believed by the sect of the economists” [the physiocrats]. (p. 63.)

Among others, Proudhon has appropriated this discovery of Say.

Storch, who likewise accepts Adam Smith’s doctrine in principle, finds however that Say’s practical application of it does not hold water.

“If it is admitted that the revenue of a nation is equal to its gross product, i.e., that no capital” [it should say: no constant capital] “is to be deducted, then it must also be admitted that this nation may consume unproductively the entire value of its annual product without the least detriment to its future revenue.... The products which represent the” [constant] “capital of a nation are not consumable.” (Storch, Considérations sur la nature du revenu national, Paris, 1824, pp. 147, 150.)

However, Storch forgot to tell us how the existence of this constant portion of capital harmonises with the Smithian analysis of prices accepted by him, according to which the value of commodities contains only wages and surplus-value, but no part of any constant capital. He realises only through Say that this analysis of prices leads to absurd results, and his own last word on the subject is

“that it is impossible to resolve the necessary price into its simplest elements.” (Cours d’Économie Politique, Petersburg, 1815, II, p. 141.)

Sismondi, who occupies himself particularly with the relation of capital to revenue, and in actual fact makes the peculiar formulation of this relation the differentia specifica of his Nouveaux Principes, did not say one scientific word, did not contribute one iota to the clarification of the problem.

Barton, Ramsay, and Cherbuliez attempt to go beyond the formulation of Adam Smith. They founder because they pose the problem one-sidedly from the outset by failing to make clear the distinction between constant and variable capital-value and between fixed and circulating capital.

John Stuart Mill likewise reproduces, with his usual pomposity, the doctrine handed down by Adam Smith to his followers. As a result, the Smithian confusion of thought persists to this hour and his dogma is one of the orthodox articles of faith of Political Economy.


35. Beginning of Manuscript VIII. — F. E.

36. Kapital, Band I, 2. Ausgabe, S. 612, Note 32. [Eng. ed., Moscow, 1954, p. 591, Note 1.]

37. Some physiocrats had paved the way for him even here, especially Turgot. The latter uses the term capital for avances more frequently than Quesnay and the other physiocrats and identifies still more the avances, or capitaux, of the manufacturers with those of the farmers. For instance: “Like these (the entrepreneurs-manufacturers), they (les fermiers, i.e., the capitalist farmers) must receive in addition to returning capitals, etc.” (Turgot, Oeuvres, Daire edition, Paris, 1844, Vol. I, p. 40.)

38. In order that the reader may not misconstrue the meaning of the phrase “the price of the far greater part of commodities,” the following shows how Adam Smith himself explains this term. For instance, no rent enters into the price of sea fish, only wages and profit, only wages enter into the price of Scotch pebbles. He says: “In some parts of Scotland a few poor people make a trade of gathering, along the sea-shore, those little variegated stones commonly known by the name of Scotch pebbles. The price which is paid to them by the stone-cutter is altogether the wages of their labour; neither rent nor profit makes any part of it.”

39. I reproduce this sentence verbatim from the manuscript, although it seems to contradict, in its present context, both what precedes and immediately follow. This apparent contradiction is resolved further down in No. 4: Capital and Revenue in Adam Smith. — F. E.

40. We ignore the fact that Adam Smith was here particularly unfortunate in the choice of his example. The value of the corn resolves itself into wages, profit, and rent only because the food consumed by the labouring cattle is depicted as wages of the labouring cattle, and the labouring cattle as wage-labourers, so that the wage-labourer on his part is also depicted as labouring cattle. (Added from the Manuscript II. — F. E.)

41. From here to the end of the chapter, a supplement from Manuscript II. — F. E.