 The decisive outcome of the research carried on for over a century and a half by classical political economy, beginning with William Petty in Britain and Boisguillebert  in France, and ending with Ricardo in Britain and Sismondi in France, is an analysis of the aspects of the commodity into two forms of labour use-value is reduced to concrete labour or purposive productive activity, exchange-value to labour-time or homogeneous social labour. Petty reduces use-value to labour without deceiving himself about the dependence of its creative power on natural factors. He immediately perceives concrete labour in its entire social aspect as division of labour.  This conception of the source of material wealth does not remain more or less sterile as with his contemporary Hobbes, but leads to the political arithmetic, the first form in which political economy is treated as a separate science. But he accepts exchange-value as it appears in the exchange of commodities, i.e., as money, and money itself as an existing commodity, as gold and silver. Caught up in the ideas of the Monetary System, he asserts that the labour which determines exchange-value is the particular kind of concrete labour by which gold and silver is extracted. What he really has in mind is that in bourgeois economy labour does not directly produce use-values but commodities, use-values which, in consequence of their alienation in exchange, are capable of assuming the form of gold and silver, i.e., of money, i.e., of exchange-value, i.e., of materialised universal labour. His case is a striking proof that recognition of labour as the source of material wealth by no means precludes misapprehension of the specific social form in which labour constitutes the source of exchange-value. Boisguillebert for his part, in fact, although he may not be aware of it, reduces the exchange-value of commodities to labour-time, by determining the true value (la juste valeur) according to the correct proportion in which the labour-time of the individual producers is divided between the different branches of industry, and declaring that free competition is the social process by which this correct proportion is established. But simultaneously, and in contrast with Petty, Boisguillebert wages a fanatical struggle against money, whose intervention, he alleges, disturbs the natural equilibrium or the harmony of the exchange of commodities and, like a fantastic Moloch, demands all physical wealth as a sacrifice. This polemic against money is, on the one hand, connected with definite historical conditions, for Boisguillebert fights against the blindly destructive greed for gold which possessed the court of Louis XIV, his tax-farmers and the aristocracy;  whereas Petty acclaims the greed for gold as a vigorous force which spurs a nation to industrial progress and to the conquest of the world market; at the same time however it throws into bold relief more profound fundamental differences which recur as a perpetual contrast between typically English and typically French  political economy. Boisguillebert, indeed, sees only the material substance of wealth, its use-value, enjoyment of it,  and regards the bourgeois form of labour, the production of use-values as commodities and the exchange of commodities, as the appropriate social form in which individual labour accomplishes this object. Where, as in money, he encounters the specific features of bourgeois wealth, he therefore speaks of the intrusion of usurping alien factors, and inveighs against one of the forms of labour in bourgeois society, while simultaneously pronouncing utopian eulogies on it in another form.  Boisguillebert s work proves that it is possible to regard labour-time as the measure of the value of commodities, while confusing the labour which is materialised in the exchange-value of commodities and measured in time units with the direct physical activity of individuals. It is a man of the New World where bourgeois relations of production imported together with their representatives sprouted rapidly in a soil in which the superabundance of humus made up for the lack of historical tradition who for the first time deliberately and clearly (so clearly as to be almost trite) reduces exchange-value to labour-time. This man was Benjamin Franklin, who formulated the basic law of modern political economy in an early work, which was written in 1729 and published in 1731.  He declares it necessary to seek another measure of value than the precious metals, and that this measure is labour. "By labour may the value of silver be measured as well as other things. As, suppose one man is employed to raise corn, while another is digging and refining silver; at the year s end, or at any other period of time, the complete produce of corn, and that of silver, are the natural price of each other; and if one be twenty bushels, and the other twenty ounces, then an ounce of that silver is worth the labour of raising a bushel of that corn. Now if by the discovery of some nearer, more easy or plentiful mines, a man may get forty ounces of silver as easily as formerly he did twenty, and the same labour is still required to raise twenty bushels of corn, then two ounces of silver will be worth no more than the same labour of raising one bushel of corn, and that bushel of corn will be as cheap at two ounces, as it was before at one, caeteris paribus [other things being equal]. Thus the riches of a country are to be valued by the quantity of labour its inhabitants are able to purchase" (op. cit., p. 265). From the outset Franklin regards labour-time from a restricted economic standpoint as the measure of value. The transformation of actual products into exchange-values is taken for granted, and it is therefore only a question of discovering a measure of their value. To quote Franklin again: Trade in general being nothing else but the exchange of labour for labour, the value of all things is, as I have said before, most justly measured by labour (op. cit., p. 267). If in this sentence the term labour is replaced by concrete labour, it is at once obvious that labour in one form is being confused with labour in another form. Because trade may, for example, consist in the exchange of the labour of a shoemaker, miner, spinner, painter and so on, is therefore the labour of the painter the best measure of the value of shoes? Franklin, on the contrary, considers that the value of shoes, minerals, yarn, paintings, etc., is determined by abstract labour which has no particular quality and can thus be measured only in terms of quantity.  But since he does not explain that the labour contained in exchange value is abstract universal social labour, which is brought about by the universal alienation of individual labour, he necessarily fails to recognize in money the direct embodiment of this alienated labor*. He therefore fails to see the intrinsic connection between money and labour which posits exchange-value, but on the contrary regards money as a convenient technical device which has been introduced into the sphere of exchange from outside.  Franklin s analysis of exchange-value had no direct influence on the general course of the science, because he dealt only with special problems of political economy for definite practical purposes. The difference between concrete useful labour and labour which creates exchange-value aroused considerable interest in Europe during the eighteenth century in the following form: what particular kind of concrete labour is the source of bourgeois wealth? It was thus assumed that not every kind of labour which is materialised in use-values or yields products must thereby directly create wealth. But for both the Physiocrats and their opponents the crucial issue was not what kind of labour creates value but what kind of labour creates surplus value. They were thus discussing a complex form of the problem before having solved its elementary form; just as the historical progress of all sciences leads only through a multitude of contradictory moves to the real point of departure. Science, unlike other architects, builds not only castles in the air, but may construct separate habitable storeys of the building before laying the foundation stone. We shall now leave the Physiocrats and disregard a whole series of Italian economists, whose more or less pertinent ideas come close to a correct analysis of the commodity,  in order to turn at once to Sir James Steuart,  the first Briton to expound a general system of bourgeois economy. The concept of exchange-value like the other abstract categories of political economy are in his work still in process of differentiation from their material content and therefore appear to be blurred and ambiguous. In one passage he determines real value by labour-time ("what a workman can perform in a day"), but beside it he introduces wages and raw material in a rather confusing way.  His struggle with the material content is brought out even more strikingly in another passage. He calls the physical element contained in a commodity, e.g., the silver in silver filigree, its intrinsic worth, and the labour-time contained in it its useful value. The first is according to him something real in itself, whereas the value of the second must be estimated according to the labour it has cost to produce it.... The labour employed in the modification represents a portion of a man s time.  His clear differentiation between specifically social labour which manifests itself in exchange-value and concrete labour which yields use-values distinguishes Steuart from his predecessors and his successors. "Labour, he says, which through its alienation creates a universal equivalent, I call industry. He distinguishes labour as industry not only from concrete labour but also from other social forms of labour. He sees in it the bourgeois form of labour as distinct from its antique and mediaeval forms. He is particularly interested in the difference between bourgeois and feudal labour, having observed the latter in the stage of its decline both in Scotland and during his extensive journeys on the continent. Steuart knew very well that in pre-bourgeois eras also products assumed the form of commodities and commodities that of money; but he shows in great detail that the commodity as the elementary and primary unit of wealth and alienation as the predominant form of appropriation are characteristic only of the bourgeois period of production, and that accordingly labour which creates exchange-value is a specifically bourgeois feature.  Various kinds of concrete labour, such as agriculture, manufacture, shipping and commerce, had each in turn been claimed to constitute the real source of wealth, before Adam Smith declared that the sole source of material wealth or of use-values is labour in general, that is the entire social aspect of labour as it appears in the division of labour. Whereas in this context he completely overlooks the natural factor, he is pursued by it when he examines the sphere of purely social wealth, exchange-value. Although Adam Smith determines the value of commodities by the labour-time contained in them, he then nevertheless transfers this determination of value in actual fact to pre-Smithian times. In other words, what he regards as true when considering simple commodities becomes confused as soon as he examines the higher and more complex forms of capital, wage-labour, rent, etc. He expresses this in the following way: the value of commodities was measured by labour-time in the paradise lost of the bourgeoisie, where people did not confront one another as capitalists, wage-labourers, landowners, tenant farmers, usurers, and so on, but simply as persons who produced commodities and exchanged them. Adam Smith constantly confuses the determination of the value of commodities by the labour-time contained in them with the determination of their value by the value of labour; he is often inconsistent in the details of his exposition and he mistakes the objective equalisation of unequal quantities of labour forcibly brought about by the social process for the subjective equality of the labours of individuals.  He tries to accomplish the transition from concrete labour to labour which produces exchange-value, i.e., the basic form of bourgeois labour, by means of the division of labour. But though it is correct to say that individual exchange presupposes division of labour, it is wrong to maintain that division of labour presupposes individual exchange. For example, division of labour had reached an exceptionally high degree of development among the Peruvians, although no individual exchange, no exchange of products in the form of commodities, took place. David Ricardo, unlike Adam Smith, neatly sets forth the determination of the value of commodities by labour-time, and demonstrates that this law governs even those bourgeois relations of production which apparently contradict it most decisively. Ricardo s investigations are concerned exclusively with the magnitude of value, and regarding this he is at least aware that the operation of the law depends on definite historical pre-conditions. He says that the determination of value by labour-time applies to such commodities only as can be increased in quantity by the exertion of human industry, and on the production of which competition operates without restraint.  This in fact means that the full development of the law of value presupposes a society in which large-scale industrial production and free competition obtain, in other words modern bourgeois society. For the rest, the bourgeois form of labour is regarded by Ricardo as the eternal natural form of social labour. Ricardo s primitive fisherman and primitive hunter are from the outset owners of commodities who exchange their fish and game in proportion to the labour-time which is materialised in these exchange-values. On this occasion he slips into the anachronism of allowing the primitive fisherman and hunter to calculate the value of their implements in accordance with the annuity tables used on the London Stock Exchange in 1817. Apart from bourgeois society, the only social system with which Ricardo was acquainted seems to have been the parallelograms of Mr. Owen. Although encompassed by this bourgeois horizon, Ricardo analyses bourgeois economy, whose deeper layers differ essentially from its surface appearance, with such theoretical acumen that Lord Brougham could say of him: "Mr. Ricardo seemed as if he had dropped from another planet. Arguing directly with Ricardo, Sismondi not only emphasises the specifically social character of labour which creates exchange-value,  but states also that it is a characteristic feature of our economic progress to reduce value to necessary labour-time, to "the relation between the needs of the whole society and the quantity- of labour which is sufficient to satisfy these needs.  Sismondi is no longer preoccupied with Boisguillebert s notion that labour which creates exchange-value is distorted by money, but just as Boisguillebert denounced money so does Sismondi denounce large industrial capital. Whereas Ricardo s political economy ruthlessly draws its final conclusion and therewith ends, Sismondi supplements this ending by expressing doubt in political economy itself. Since the determination of exchange-value by labour-time has been formulated and expounded in the clearest manner by Ricardo, who gave to classical political economy its final shape, it is quite natural that the arguments raised by economists should be primarily directed against him. If this polemic is stripped of its mainly trivial  form it can be summarised as follows: One. Labour itself has exchange-value and different types of labour have different exchange-values. If one makes exchange-value the measure of exchange-value, one is caught up in a vicious circle, for the exchange-value used as a measure requires in turn a measure. This objection merges into the following problem: given labour-time as the intrinsic measure of value, how are wages to be determined on this basis. The theory of wage-labour provides the answer to this. Two. If the exchange-value of a product equals the labour-time contained in the product, then the exchange-value of a working day is equal to the product it yields, in other words, wages must be equal to the product of labour.  But in fact the opposite is true. Ergo, this objection amounts to the problem, how does production on the basis of exchange-value solely determined by labour-time lead to the result that the exchange-value of labour is less than the exchange-value of its product? This problem is solved in our analysis of capital. Three. In accordance with the changing conditions of demand and supply, the market-price of commodities falls below or rises above their exchange-value. The exchange-value of commodities is, consequently, determined not by the labour-time contained in them, but by the relation of demand and supply. In fact, this strange conclusion only raises the question how on the basis of exchange-value a market-price differing from this exchange-value comes into being, or rather, how the law of exchange-value asserts itself only in its antithesis. This problem is solved in the theory of competition. Four. The last and apparently the decisive objection, unless it is advanced as commonly happens in the form of curious examples, is this: if exchange-value is nothing but the labour-time contained in a commodity, how does it come about that commodities which contain no labour possess exchange-value, in other words, how does the exchange-value of natural forces arise? The problem is solved in the theory of rent.
Economic Manuscripts: Historical Notes on the Analysis of Commodities