||619| At this stage we shall not examine Smith s interesting account of how the rent of the principal vegetable food dominates all other strictly agricultural rents (stock raising, timber, industrial crops), because each of these branches of production can easily be transformed into one of the others. Adam Smith excludes rice from this, wherever it is the principal vegetable food, since rice fields (or bogs) are not convertible into grass land, wheat lands, etc. and vice versa. [In Chapter XI, Book I] Adam Smith correctly defines rent as the price paid for the use of land ([O.U.P., Vol. I, p. 162; Garnier,] t, I, p. 299), the term land is intended to mean every power of nature as such, therefore also water, etc. In contrast to Rodbertus s peculiar notion, Smith, from the outset, enumerates the items of agricultural capital: Now what is this price paid for the use of land? Smith refuses to confuse rent with the interest on capital invested in the land. and, he adds, even this second form of rent [i.e., the rent on the improved land] is peculiar in that the interest from the capital used on improvement is interest on a capital which has not been laid out by the landlord, but by the farmer. Smith stresses very strongly, that it is landed property, the landlord, who as landlord demands the rent . [Regarded] as a mere effluence of landed property, rent is monopoly price, this is perfectly correct, since it is only the intervention of landed property which enables the product to be sold for more than the cost-price, to be sold at its value. It is in fact a price which is only enforced through the monopoly of landed property, and as a monopoly price, it differs from the price of the industrial product. From the standpoint of capital and capital dominates production the cost-price only requires that the product should pay the average profit in addition to the capital advanced. In this case, the product, be it product of the land or any other product, can be brought to market . Why does rent enter into price differently from wages and profit? That is the question. Originally, Smith had resolved value correctly, into wages, profits and rents (apart from constant capital). But almost at once he takes the opposite course and identifies value with natural price (the average price determined by competition or the cost-price of the commodities) and builds up the latter from wages, profit and rent. In these passages, the resolving of value into wages, etc. and the compounding of price from wages, etc., are jumbled together (this applies to Chapter VI in general which deals with the Component Parts of the Price of Commodities ). (Natural price and market-price are for the first time discussed in Chapter VII). Book I, Chapters I, II, III deal with the division of labour , Chapter IV with money. In these, as in the following chapters, value is determined in passing. Chapter V deals with the real and nominal price of commodities, with the transformation of value into price; the Component Parts of the Price of Commodities are considered in Chapter VI; the natural and market-price in Chapter VII. Then Chapter VIII deals with the wages of labour, Chapter IX with the profits of stock; Chapter X with the Wages and Profit in the different Employments of Labour and Stock; finally, Chapter XI with the Rent of Land. But in this connection we want first to draw attention to the following: According to the passages cited above, there are commodities whose price consists solely of wages, others, whose price consists only of wages and profit, and finally a third group of commodities, whose price consists of wages, profit and rent. Hence: According to this, there would be no grounds for saying that rent enters into price in a different manner from profit and wages, but one could say that rent and profit enter into price in a different way from wages, since the latter always enters [into price], the former not always. Whence, then, the difference? Moreover, Smith should have investigated, whether it is possible that the few commodities which only comprise wages, are sold at their value, or whether the poor people who gather the Scotch pebbles are not in fact the wage-labourers of the stone-cutters, who pay them only the usual wages for the commodity, in other words for a whole working-day, which apparently belongs to them, these people receive only as much as a worker in other trades, where part of the working-day forms profit and belongs not to him but to the capitalist. Smith should have either affirmed this or else asserted that in this case the profit only seems to be confounded with wages. He says himself: He nevertheless works out this problem in the following manner: If an independent labourer (like those poor people of Scotland) uses only labour (without recourse to capital), if, altogether, he only employs his labour and the elements, then the price resolves itself solely into wages. If he employs a small capital as well, then the same individual receives wages and profit. If, finally, he employs his labour, his capital and his landed property, then he unites in his person the characters of landowner, farmer and worker. {The whole absurdity of Smith s approach comes to light in one of the final passages of Chapter VI, Book I: The produce of labour [is] not equal to the value of this produce. On the contrary (one may gather) this value is increased by the addition of profit and rent. The produce of labour can therefore command, purchase, more labour, i.e., pay a greater value in labour, than the labour contained in it. This proposition would be correct if it ran like this: (Here Smith returns again to his second conception of value, a concept of which he writes the following in the same chapter. (In Chapter VI, the resolution of value into wages, profit and rent is still dominant. It is only in Chapter VII, on the natural price and market-price, that the compounding of the price from these constituent elements wins the upper hand.) Hence: The exchangeable value of the annual product of labour consists not only of the wages of the labour employed in order to bring forth this product, but also of profit and rent. This labour however is only commanded or purchased with that part of the value which resolves into wages. It is thus possible to set into motion a much larger amount of labour, if a part of the profit and rent is used to command or purchase labour, i.e., if it is converted into wages. So it amounts to this: the exchangeable value of the annual product of labour resolves itself into paid labour (wages) and unpaid labour (profit and rent). If therefore a part of that part of the value which resolves itself into unpaid labour is converted into wages, one can purchase a greater quantity of labour than if one merely assigns that part of the value which consists of wages, to the purchase of new labour.) Let us go back then: This is indeed confounded. Is not the whole the earnings of his labour ? And are not, on the contrary, the conditions of capitalist production in which, with the alienation of labour from its objective conditions, the worker, capitalist and landowner confront one another as different characters too transferred to this gardener, so that the product of his labour or rather the value of the product is regarded, part of it as wages, in payment of his labour, part of it as profit, on account of the capital employed, and part of it as rent, as the portion due to the land or rather the proprietor of the land? Within capitalist production(it is) quite correct, when considering those conditions of labour in which these elements are not separated (in actual fact), to assume them to be separated and so to regard this gardener as his own ||622| journeyman and as his own landowner in one person. The vulgar conception however that wages arise from labour, but profit and rent independently of the labour of the worker arise out of capital and land as separate sources, not for the appropriation of alien labour, but of wealth itself, evidently creeps into Adam Smith s writing already at this stage. In this fantastic fashion, the profoundest concepts intermingle with the craziest notions, such as the common mind forms in an abstract manner from the phenomena of competition. Having first resolved value into wages, profits, rents, he then on the contrary compounds value out of wages, profit and rent, whose magnitudes are determined independently of value. Since Adam Smith has thus forgotten the origin of profit and rent correctly explained by himself, he is able to say: In accordance with his own explanation, he should have said: From the passages quoted it can be seen how in Chapter VI, on the Component Parts of the Price of Commodities , Adam Smith arrives at the resolution of price into wages, where only (immediate) labour enters into the production; into wages and profit, where, instead of the independent workman, a journeyman is employed by a capitalist (i.e., capital); and finally into wages, profit and rent, where land enters into the production besides capital and labour. In this latter case, however, it is assumed that the land is appropriated, that consequently alongside the worker and the capitalist, there is also a landowner (although he notes that it is possible for all three or two of these characters to be united in one person). In Chapter VII, on natural price and market-price, rent (where land enters into the production) is presented as a component part of the natural price in exactly the same way as wages and profit. The following passages will show this: (Book I, Chapter VII). ||623| If, in consequence of the state of the market, his rent sinks below, or rises above, its natural rate, Adam Smith allows the landowner to withdraw his land or transfer it from the production of one commodity (such as wheat) to that of another (such as pasture for instance). After this exposition of the subject in Chapter VII, it is difficult to see how Adam Smith can justify his proposition in Book I, Chapter XI, Of the Rent of Land , that rent does not always enter into price where appropriated land enters into production; how he can differentiate between the manner in which rent enters into price from that in which profit and wages enter into it, since in chapters VI and VII he has turned rent into a component part of the natural price, in just the same way as profit and wages. Now let us return to this Chapter XI (Book I). We have seen that there rent is defined as the surplus which remains from the price of the product, after the expenses of the capitalist (farmer) plus the average profit have been paid. In this Chapter XI, Smith makes a complete turn-about. Rent no longer enters into the natural price. Or, rather, Adam Smith takes refuge in an ordinary price which is as a rule different from the natural price, although we were told in Chapter VII, that the ordinary price can never, for any length of time, be below the natural price and that none of the component parts of the natural price can for any length of time, be paid below its natural rate and even less, not paid at all, as he now asserts in relation to rent. Neither does Adam Smith tell us whether the produce is sold below its value when it pays no rent, or whether it is sold above its value, when it pays rent. Previously, the natural price of the commodity was Now we are told that: The ordinary price is therefore not the natural price, and the natural price need not be paid, in order to bring these commodities to market. ||624| Previously we were told that if the ordinary price (that time, the market-price) were not sufficient to pay the whole rent ( the whole value of the rent, etc.), land will be withdrawn until the market-price rises to the level of the natural price and pays the whole rent. Now, on the other hand: Thus rent, from being a component part of the natural price suddenly turns into a surplus over the sufficient price,[a] a surplus whose existence or non-existence depends on the state of demand. But the sufficient price is that price which is required for the commodity to appear on the market, and therefore to be produced, thus it is the price of production of the commodity. For the price which is required for the supply of the commodity, the price which is required for it to come into existence at all, to appear as a commodity on the market, is of course its price of production or cost-price, That [is the condition] sine qua non of the existence of the commodity. On the other hand the demand for certain products of the land must always be such that their ordinary price pays a surplus over and above the price of production, that is, a rent. For others it may or may not be so. So instead of the natural price we have the sufficient price here. The ordinary price, in turn, is different from this sufficient price. The ordinary price if it includes the rent is above the sufficient price. If it does not comprise rent it is equal to the sufficient price. It is even characteristic of the sufficient price that rent is excluded. The ordinary price is below the sufficient price, when it does not pay the average profit, in addition to replacing the capital. Thus the sufficient price is in fact the price of production or cost-price as abstracted by Ricardo from Adam Smith and as it indeed presents itself from the standpoint of capitalist production, in other words the price which, apart from the outlay of the capitalist, pays the ordinary profit; [it is] the average price brought about by the competition of capitalists in the different employments of capital. It is this abstraction based on competition which induces Adam Smith to confront his natural price with the sufficient price, although in his presentation of the natural price he on the contrary declares that in the long run only the ordinary price which pays rent, profit and wages, the component parts of the natural price, is sufficient. Since the capitalist controls the production of commodities, the sufficient price is [that] which is sufficient for capitalist production from the standpoint of capital and the price which is sufficient for capital does not include rent, but, on the contrary, excludes it. On the other hand: This sufficient price is not sufficient for some products of the land. For them the ordinary price must be high enough to yield a surplus over and above the sufficient price, a rent for the landowner. For others it depends on the circumstances. The contradiction that the sufficient price is not sufficient that the price which suffices to bring the product to market does not suffice to bring it to market does not worry Adam Smith. Although he does not turn back, even for one moment, to glance at chapters V, VI and VII, he admits to himself (not as a contradiction, but as a new discovery which he has suddenly hit upon), that with the sufficient price, he has overthrown his whole doctrine of natural price. Let us take the final proposition first. The sufficient price, the cost-price, which only pays wages and profit, excludes rent. If the product pays a great deal more than the sufficient price, then it pays a high rent. If it pays only a little more, then it pays a low rent. If it pays only exactly the sufficient price, then it pays no rent. It pays no rent if the actual price of the product coincides with the sufficient price, which pays profit and wages. Rent is always a surplus over and above the sufficient price. By its very nature, the sufficient price excludes rent. This is Ricardo s theory. He accepts the concept of the sufficient price, the cost-price, from Adam Smith; but avoids Adam Smith s inconsistency of differentiating it from the natural price, and sets it forth consistently. Having committed all these inconsistencies, Smith is sufficiently inconsistent to demand, for certain products of the land, a price which is higher than their sufficient price. But this inconsistency itself is in turn the result of a more correct observation . The beginning of the passage is truly amazing in its naivet . In Chapter VII Smith explained that rent, profit and wages enter equally into the corn position of the natural price, having first turned the dissolution of value into rent, profit and wages upside down and transformed it into the composition of value from the natural price of rent, profit and wages. Now he tells us that rent enters into the composition of the price of commodities differently from profit and wages. And in what way does it enter differently into that composition? By not entering into that composition at all. And here we are first given a true explanation of the sufficient price. The price of the commodities is dear or cheap, high or low, because wages and profit their natural rates are high or low. The commodity will not be brought to market, will not be produced, unless these high or low profits and wages are paid. They form the price of production of the commodity, its cost-price; and are thus in fact, the constituent elements of its value or price. Rent, on the other hand, does not enter into the cost-price, the price of production. It is not a constituent element of the exchangeable value of the commodity. It is only paid when the ordinary price of the commodity is above its sufficient price. Profit and wages as constituent elements of the price are causes of the price; rent, on the other hand, is only its effect, its result. It does not, therefore, enter into the composition of the price as an element, as do profit and wages. And this is what Smith calls entering into this composition in a different way from profit and wages. He does not appear to be in the slightest bit aware of the fact that he has thrown over his doctrine of natural price. For what was the natural price? The central point around which the market-price gravitated: the sufficient price, below which in the long run the product could not fall, if it were to be produced and brought to market. Thus rent is now the surplus over the natural price, previously [it was] a component part of the natural price; now [it is the] effect, previously [it was] the cause, of price. There is however no contradiction in Adam Smith s assertion that for certain products of the land, the circumstances of the market are always such that their ordinary price must be above their sufficient price, in other words: that landed property has the power to force the price above that level which would be sufficient for the capitalist if he were not confronted by a counteracting influence. ||626| Having thus, in Chapter XI, thrown overboard chapters V, VI and VII, he calmly proceeds by saying that: he will now make it his business to consider 1. the produce of the land which always affords rent; 2. the produce of the land which sometimes affords rent and sometimes not; finally 3. the variations which take place, in the different periods of development of society, in the relative value, partly of these two sorts of produce compared with one another and partly in their relationship to manufactured commodities. Part I. Of the Produce of Land which always affords Rent. Adam Smith begins with the theory of population. The mean s of subsistence always create a demand for themselves. If the means of subsistence increase, then the people, the consumers of the means of subsistence, also increase. The supply of these commodities thus creates the demand for them. This sounds quite physiocratic and contains neither proof nor explanation of why the price of these particular commodities pays a rent, a surplus over and above the sufficient price . As an example he immediately refers to pasture and uncultivated pasture. Then follows the proposition on differential rent: On this occasion rent and profit appear as mere surplus of the product, after that part of it has been deducted in kind which feeds the worker. (This is really the physiocratic view, which is based on the fact that in an agricultural country man lives almost exclusively on the agricultural product, and industry manufacture, itself appears as a rural side-line which uses the local product of nature.) The growing of corn must therefore yield a greater profit than pasture. (Thus it is not a question of price here, but of the absolute quantity of food for man.) (Although corn costs more labour, the cornfield yields a larger surplus of food, after labour has been paid, than a meadow used for stock raising. And it is worth more, not because corn costs more labour, but because the surplus in corn contains more nourishment.) Having replaced the natural price by the sufficient price, and declared rent to be the surplus over and above the sufficient price, Smith forgets altogether, that it is a question of price, and derives rent from the ratio between the amount of food yielded by agriculture and the amount of food consumed by the agricultural worker. In point of fact apart from this physiocratic interpretation he postulates that the price of the agricultural product which supplies the principal food pays rent in addition to profit. This is the starting-point for his further arguments. With the extension of cultivation, the natural pastures become insufficient for stock raising and cannot satisfy the demand for butcher s meat. Cultivated land has to be employed for this purpose. ||627| The price of meat therefore has to rise to the point where it pays not only the labour which is employed in stock raising, but also: (In this passage Adam Smith correctly derives the differential rent from the surplus of the market-value over the individual value. In this case, however, the market-value rises, not because there is a transition from better to worse, but from less fertile to more fertile land.) Having thus set forth the relationship between rent yielded by pasture and by tilled land, Smith continues: Then he speaks of vineyards, fruit and vegetable gardens, etc Then he passes on to sugar cultivation in the colonies [and] tobacco. Adam Smith then returns to the physiocratic theory, as interpreted by him, namely that food creates consumers for itself. [He asserts that] if corn were replaced by some other crop, which with the same amount of labour yielded a much greater quantity of food on the most common land, then Adam Smith cites rice as an example. ||628| The rice field, however Second example potatoes (Ricardo s criticism of this has been mentioned earlier). If potatoes became the principal food, in place of corn, A few more comments on wheaten bread, bread made of oatmeal, and on potatoes conclude the first section of Chapter XI. One can therefore sum up this section, which deals with the product of land which always pays a rent, as follows: after postulating the rent of the principal vegetable food, it sets forth how this rent regulates the rent of cattle-breeding, wine-growing, market gardening, etc. There is nothing about the nature of rent itself, except the general thesis that, provided rent exists, its amount is determined by fertility and situation. But this only relates to differences in rents, differences in the magnitude of rents. But why does his product always pay a rent? Why is its ordinary price always higher than its sufficient price? Smith leaves price out of account here and reverts to the physiocratic theory. What runs through it, however, is that the demand is always so great because the product itself creates the demand, [since it creates] its own consumers. Even provided that this were so it is incomprehensible why the demand should rise above the supply and thus force the price above the sufficient price. But there is here a secret recollection of the image of the natural price which includes rent as well as profit and wages and which is paid when supply corresponds with demand. It is however characteristic that Adam Smith nowhere in this section states this clearly. In opening Chapter XI, he had just said that rent does not enter into price as a component part. The contradiction was too conspicuous. Part II: Of the Produce of Land which sometimes does, and sometimes does not, afford Rent. It is actually only in this section that the general nature of rent is first discussed. ||629| Here therefore an explanation of rent [is] derived, from the excess of demand over the supply which can be provided at the sufficient price. Foreign trade here raises the price of an agricultural by-product to such an extent, that the land which produces it can yield some rent. What Smith says here, is the true physical basis of Physiocracy, namely, that the creation of surplus-value (including rent) always has its basis in the relative productivity of agriculture. The first real form of surplus-value is surplus of agricultural produce (food) , and the first real form of surplus labour arises when one person is able to produce the food for two. Otherwise this has nothing to do with the development of rent, this specific form of surplus-value, which presupposes capitalist production. Adam Smith continues: Here therefore again: Rent arises from the demand being greater than the supply at the sufficient price which only includes wages and profits, but no rent. What else does this mean, but that the supply at the sufficient price is so great that landed property cannot offer any resistance to the equalisation of capitals or labour? That therefore, even though landed property exists legally, it does not exist in practice, or cannot be effective as such in practice? Adam Smith s mistake is that he fails to recognise that if landed property sells [products] above the sufficient price, it sells [them] at their value. His positive point, compared with Ricardo, is that he realises it depends on the circumstances, whether or not landed property can assert itself economically. It is therefore essential to follow this part of his argument step by step. He begins with the coal mine, then goes over to timber and then returns to the coal mine, etc. Accordingly we shall let him start with timber. Thus in fact, the rent of woodland is by nature identical with that of pasture. It belongs therefore in this category, although wood does not serve for food. The economic category does not depend on the use-value of the product, but on whether or not it is convertible into arable land and vice versa. Coal mines. Smith observes correctly, that the fertility or in-fertility of mines in general depends on whether the same quantity of labour can extract a larger or a smaller amount of mineral from the mine. Infertility can offset the favourable situation, so that such mines cannot be exploited at all. On the other hand, an unfavourable situation can offset the fertility, so that despite its natural fertility, such a mine cannot be exploited. This is in particular the case where there are neither good roads, nor shipping ([O.U.P., Vol. I, pp. 188-89; Garnier,] l.c., pp. 346-47). There are mines whose produce just reaches the sufficient price. Hence they pay profit for the entrepreneur but no rent. They can therefore be worked only by the landowner himself. In this way he gets the ordinary profit of the capital which he employs . There are many mines of this type in Scotland. These could not be exploited in any other way. Here Adam Smith has correctly defined under what circumstances land which has been appropriated pays no rent, namely where landowner and entrepreneur are one person. He has already told us earlier that this is so in the colonies. A farmer cannot cultivate the land there because he cannot pay any rent. But the owner can cultivate it with profit, although it does not pay him a rent. This is the case, for example, in the colonies in Western America, because new land can always be appropriated. The land as such is not an element that offers resistance, and the competition of landowners who cultivate the land themselves is here in fact competition between workers or capitalists. The position of coal mines, or mines in general, is different in the supposed circumstances. The market-value, as determined by the mines which supply their product at this value, yields a smaller rent, or no rent at all but just covers the cost-price in the case of mines that are less fertile or less favourably situated. These mines can only be worked by persons for whom the resistance of landed property and the consequent exclusion of others from the land, does not exist, because they are landowners and capitalists in one person; [this] only happens where in fact landed property disappears as an independent element opposed to capital. The position differs from that of the colonies in that: in the latter, the landowner cannot prohibit the exploitation of new land by anyone. In the former he can do so. He only gives himself the permission to exploit the mine. This does not enable him to draw a rent, but it does enable him to exclude others and to invest his capital in the mine, with profit. What Adam Smith writes about the regulation of rent by the most fertile mine, I have already commented on, when discussing Ricardo and his polemic. Here only one proposition needs to be stressed: It is evident that the sufficient price has taken the place of the natural price, Ricardo regards them as identical, and rightly so. ||631| Smith maintains, Adam Smith correctly sets forth here the case presented in Table C. When speaking of rent in connection with precious metals. Adam Smith again gives his interpretation of the sufficient price, which he puts in the place of the natural price. Where he speaks of non-agricultural industry, he has no need for this, since the sufficient and the natural price coincide here, according to his original explanation namely that it is the price which repays the capital outlay plus the average profit. With regard to precious stones, he observes that: There can only be a differential rent here. The products of the less fertile precious metal and precious stone mines carry no rent, because it is always the most fertile mine which determines market-value and ever more fertile new mines are being opened up the line is always in the ascending direction, Hence they are sold below their value, merely at their cost-price. Then Adam Smith s argument again goes somewhat wrong. (But only if it does not produce the same product as the fertile lands in its neighbourhood; only if this product of the barren lands does not compete with that of the more fertile. In this case Adam Smith is right and indeed, this is of importance to the way in which the total amount of rent from different kinds of natural products may increase in consequence of the fertility of the land which yields food.) But in all this, Adam Smith does not offer any explanation for absolute rent, which he presupposes to exist for land that produces food. He is correct when he observes that it does not necessarily exist for other lands, mines, for instance, because they are always available in such relatively unlimited quantities (in comparison with demand), that landed property cannot offer any resistance to capital [so that] even if it exists in a legal sense, it does not exist in the economic sense. (See p. 641 on house rent.) |632|| ||641| See p. 632. On house rent Adam Smith says: In the case of the ground-rent of houses, situation constitutes just as decisive a factor for the differential rent, as fertility (and situation) in the case of agricultural rent. Adam Smith shares with the Physiocrats, not only the partiality for agriculture and the landlord, but also the view that they are particularly suitable objects of taxation. He says: The considerations which Ricardo (p. 230) advances against Adam Smith s views on the subject, are very philistine. |641|| ||632| Part III, Of the variations in the Proportion between the respective Values of that sort of Produce which always affords Rent, and of that which sometimes does, and sometimes does not, afford Rent. ([Garnier,] Book I, Vol. II, Ch. XI.) The peculiar manner in which Adam Smith mixes up the measuring of value by the quantity of labour, with the price of labour or the quantity of labour which a commodity can command, is evident from the above quotation, and especially from the following passage, which also shows how it has come about that at times he elevates corn to the measure of value. When comparing the value of gold and silver, Adam Smith once more sets forth his views on the sufficient price and notes ||633| expressly that it excludes rent: There are three sorts of raw products ([O.U.P., Vol. I, p. 248; Garnier,] Vol. II, p. 89). The first, whose increase is almost, or entirely, independent of human industry; the second, which can be increased in proportion to the demand; the third, upon whose increase human industry only exercises a limited or uncertain influence. First sort: Fishes, rare birds, different sorts of game, almost all wild-fowl, in particular the birds of passage, etc. The demand for these increases greatly with wealth and luxury. According to Adam Smith, the gradual rise in the price of these raw products only proves that, little by little, they are becoming products of human industry, while previously, they were practically only products of nature. Their transformation from products of nature into products of industry is itself the result of the advance of cultivation, which is increasingly limiting the scope of the spontaneous productions of nature. On the other hand, under less developed conditions of production, a large part of these products was sold below its value. The commodities are sold at their value (hence the rise in prices), as soon as they cease to be a by-product and become an independent product of some branch of agriculture. Here it is once more evident, how Smith is only able to use value as determined by the quantity of labour it [value] can buy, in so far as he confuses it with value as determined by the quantity of labour required for the production of the commodities. Third sort: This is the raw product, Wool and raw hides are limited by the number of large and small cattle that are kept. But the first by-products already have a large market, while the animal itself does not yet have this. The market for butcher s meat is almost always confined to the inland market. Wool and raw hides, even in the rude beginnings [of cultivation], are in most cases already sold in foreign markets. They are easily transported and furnish the raw material of many manufactured goods. They may thus find a market in countries which are more developed industrially when the industry in the country where they are produced does not yet require them. Here Adam Smith therefore determines the real price by the quantity of labour necessary for the production of the commodity. According to Adam Smith, the real price of vegetable food (corn, etc.) must fall in the course of civilisation. Adam Smith sees that the price of manufactured commodities in general has fallen wherever On the other hand, he asserts that the real price of labour, i.e., wages, has risen with the progress in production. Hence also, according to him, the prices of commodities do not necessarily rise because of a rise in wages, or the price of labour, although wages [form] a component part of the natural price and even of the sufficient price or the lowest price at which commodities can be brought to market . So how does Adam Smith explain this? By a fall in profits? No. (Although he assumes that the general rate of profit falls in the course of civilisation.) Or of rent? No again. He says: Thus the value of the commodities falls, because a smaller quantity of labour is required to produce them; the value moreover falls although the real price of labour rises. If here the real price of labour means the value [of labour], then the profit must fall, if the price of the commodity falls as a result of the fall in its value. If, on the other hand, it means the quantity of the means of subsistence received by the worker, then the Smithian thesis is correct even where profit is rising. The extent to which Adam Smith uses the correct definition of value, wherever he actually analyses [facts] can be seen at the end of the chapter where he examines why woollen cloths were dearer in the 16th century, etc. The mistake here consists only in the use of the word price. Conclusion of the Chapter. Adam Smith concludes his chapter on rent with the observation that In exactly the same way Ricardo explains the increase in the proportion of rent, as the price of corn rises on the more fertile land, only this rise in price is not the result of improvement, and therefore leads Ricardo to the opposite conclusion from Adam Smith. Adam Smith says that the landlord moreover benefits from every development of the productive power of labour in manufacture. From this Adam Smith concludes that the interests of the landlord are always in harmony with the general interest of society . This also applies to the labourers ([O.U.P., Vol. I, pp. 287-88; Garnier,] Vol. II, pp. 161-62). But Adam Smith is honest enough to make the following distinction: The interests of the capitalists (manufacturers and merchants), on the other hand, are not identical with the [a] The term prix suffisant (sufficient price) is used in the French translation of the Wealth of Nations from which Marx quotes. Ed. [b] i.e., out of the product of the land situated at a greater distance from the market. Ed. [c] requisite for each particular article inserted by Garnier in the French version. Ed.
Economic Manuscripts: Theories of Surplus-Value, Chapter 14