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 conomique 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. He says furthermore: Adam Smith says furthermore: 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. 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, After Adam Smith has thus entirely excluded the fixed capital from the net revenue of a country, he continues: And so we learn hear that: 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: 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: 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 conomique) 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. In manufacture: 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 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: 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: 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: 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. 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. 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): 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. 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 Ramsay makes the following remark against Ricardo: 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 Storch, who likewise accepts Adam Smith s doctrine in principle, finds however that Say s practical application of it does not hold water. 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.
Economic Manuscripts: Capital: Volume Two