In manufacture: "The value which the laborers add to the material resolves itself...into two parts, one of which pays their wages, and the other the profit of their employer on the entire capital advanced by him in materials and wages." (Book I, chapter 6, page 41.) "Although the manufacturist gets his wages advanced by his master, he does not cost the latter anything in reality, since as a rule the value of these wages is preserved together with a profit, in the increased value of the object to which the labor was ap- plied." (Book II, chapter 3, page 221). That portion of the stock which is invested "in the maintenance of produc- tive labor...after it has served him (the employer) in the function of a capital...forms a revenue for them" (the laborers). (Book II, chapter 3, page 223.)
Adam Smith says explicitly in the chapter just quoted: "The entire annual product of the soil and the labor of each country...naturally resolves itself into two parts. One of them, and frequently the greater, is intended pri- marily to replace capital and to reproduce the means of subsistence, raw materials and finished products obtained from some capital; the other is intended to form a revenue either for the owner of this capital, as a profit on his capital, 428 Capital.
or for some one else, as a rent of his real estate." (Page 222.) Only a portion of the capital, so Adam Smith informed us just awhile ago, also forms a revenue for some one, namely that which is invested in the purchase of productive labor. This portion — the variable capital — performs first "the func- tion of capital" for its employer and in his hands, and then it "forms a revenue" for the productive laborer himself. The capitalist transforms a portion of the value of his capi- tal into labor-power and thereby into variable capital; it is only due to this transformation that not alone this portion of capital, but his entire capital, serve as industrial capital. The laborer — the seller of his own labor-power — receives its value in the form of wages. In his hands, labor-power is but a saleable commodity, a commodity whose sale keeps him alive, which is the sole source of his revenue; labor- power serves 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 laborer.
After Adam Smith has thus shown that the value of a product in manufacture is equal to v plus s (s standing for the profit of the capitalist), he tells us that, in agri- culture, the laborers effect, aside from "the reproduction of a value which is equal to their own consumption and the (variable) capital employing them plus the profit of the capitalist," furthermore, "over and above the capital of the farmer and all his profit regularly the reproduction of the rent of the owner of the real estate." (Book II, chapter 5, page 243.) The fact that the rent passes into the hands of the real estate owner, is immaterial for the question under consideration. Before it can pass into his hands, it must be in those of the farmer, that is to say, of the industrial capitalist. It must form a part of the value of the product, before it can become a revenue for any one. Rent as well as profit are but component parts of surplus-value, even in the opinion of Adam Smith himself, and the productive laborer reproduces them continually together with his own wages, that is to say, with the value of the variable capital. Hence rent and profit are parts of the surplus-value s, and Former Discussions of the Subject. 429 thus, with Adam Smith, the price of all commodities re- solves itself into v plus s.
The dogma, that the price of all commodities (also of the annual product in commodities) resolves itself into wages plus profit, plus ground rent, assumes in the interspersed esoteric portion of Smith's work quite naturally the form that the value of every commodity, hence also that of the annual social product in commodities, is equal to v plus s, or equal to the value of the capital invested in labor-power and continually reproduced by the capitalist plus the sur- plus-value added by the labor of the laborers.
This outcome of the analysis of Adam Smith reveals at the same time — see farther along — the source of this one- sided analysis of the component parts into which the value of a commodity resolves itself. But the determination of the magnitude of these component parts and of the limit of their value has no bearing on the circumstance that they are at the same time different sources of revenue for different classes engaged in production.
Various inconsistencies are jumbled together when Adam Smith says: "Wages, profit, and ground rent are the three primary sources of all revenue as well as all exchange-value. Every other revenue is derived, in the last instance, from one of these." (Book I, chapter 6, page 48.)
(1). All members of society not directly engaged in reproduction, with or without labor, can obtain their share of the annual product of commodities — in other words, their articles of consumption — primarily only out of the hands of those classes who are the first to handle the product, that is to say, productive laborers, industrial capitalists, and real estate owners. To that extent their revenues are substan- tially derived from wages (of the productive laborers), profit, and ground rent, and appear as indirect derivations when compared to these primary sources of revenue. But, on the other hand, the recipients of these revenues, thus indirectly derived, draw them by grace of their social func- tions, for instance that of a king, priest, professor, prosti- tute, soldier, etc., and they may regard these functions as the primary sources of their revenue.
430 Capital.
430 Capital.
(2). Here the ridiculous mistake of Adam Smith reaches its climax. After having taken his departure from a cor- rect determination of the component parts of the value of commodities and the sum of values of the product incor- porated in them, and having demonstrated that these com- ponent parts form so many different sources of revenue;31 after having in this way deducted the revenues from the value, he proceeds in the opposite way — and this remains the ruling conception with him — and makes of the revenues ''primary sources of all exchange-value" instead of "com- ponent parts," thereby throwing the doors wide open to vulgar economy. (See, for instance, our Roscher.)
III. The Constant Portion of Capital.
Let us now see, how Adam Smith tries to spirit away the constant portion of the value of commodities.
"In the price of corn, for instance, one portion pays the rent of the land owner." The origin of this portion of value has no more to do with the circumstance that it is paid to the land owner and forms for him a, revenue in the shape of rent than the origin of the other portions of value has to do with the fact that they constitute sources of revenue as profit and wages.
"Another portion pays the wages and subsistence of the laborers" (and of the laboring cattle, as he adds) "employed in its production, and the third portion pays the profit of the capitalist farmer. These three portions seem" (they seem indeed) "to constitute either directly, or in the last in- stance, the entire price of corn."35 This entire price, that 34 1 reproduce this sentence verbatim from the manuscript, although it seems to contradict, in its present connection, both the preceding and the following statements. This apparent contradiction is solved farther along in (4). Capital and Revenue in Adam Smith. — F. E.
35 We do not make anything of the fact that Adam Smith was here particularly unlucky in the choice of his example. The value of the corn resolves itself into wages, profit, and rent only, because the fpod consumed by the laboring cattle is regarded as wages, and the laboring cattle as laborers, so that, on the other hand, the wage laborer also appears in the role of the laboring cattle. (Note added from manu- script II.)
Former Discussions of the Subject. 431 is to say, the determination of its magnitude, is absolutely independent of its distribution among three kinds of people. "A fourth portion may seem necessary in order to reproduce the capital of the farmer, or the wear of his laboring cattle and of his other implements. But it must be considered that the price of any agricultural implement, for instance of a laboring horse, is in its turn composed of the above three parts: the rent of the land on which it is bred, the labor of breeding, and the profit of the farmer who ad- vances both the rent of this land and the wages of this labor. Hence, although the price of the corn may reproduce the price as well as the cost of maintenance of the horse, the entire price still resolves itself, directly or in the last in- stance, into the same three parts: ground rent, labor," (he means wages) "and profit." (Book I, chapter 6, page 42.) This is verbatim all that Adam Smith has to say in sup- port of his surprising doctrine. His proof consists simply in the repetition of the same contention. He admits, for instance, that the price of corn does not only consist of v plus s, but contains also the price of the means of produc- tion consumed in the production of corn, in other words, the value of a capital not invested in labor-power by the farmer. But, says he, the prices of all these means of pro- duction likewise resolve themselves into v plus s, the same as the price of corn. He forgets, however, to add in this case, that they also contain the prices of the means of pro- duction consumed in their production. He refers us from one line 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 plus s would not be a specious subterfuge in the sole case that he could dem- onstrate that the product in commodities, the price of which resolves itself immediately into c (price of consumed means of production) plus v plus s, is ultimately compensated by products which reproduce those "consumed means of production" completely and which are themselves produced by the investment of mere variable capital, by a mere in- vestment of capital in labor-power. The price of these last products would then be v plus s. And in that case the price 432 Capital.
of the first products, represented by c plus v plus s, where c stands for the constant portion of capital, could be ulti- mately resolved into v plus 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, do not produce any surplus-value, but produce only their own wages, and who, in the second place, do not employ any means of production (they do, however, employ them, such as baskets, sacks, and other means of carrying the stones).
We have already seen that Adam Smith later on throws his own theory over, without, however, being conscious of his contradictions. But the source of these is found pre- cisely in his scientific premises. The capital converted into labor produces a greater value than its own. How does it do that? It is due, says Adam Smith, to the laborers, who impregnate, during the process of production, the things on which they work with a value which forms not only an equivalent for their own purchase price, but also a surplus- value, appropriated, not by them, but by their employers (profit and rent). That is all they accomplish, and all that they can accomplish. And what is true of the industrial labor of one day, is true of the labor set in motion by the entire capitalist class during one year. Hence the aggregate mass of the annual social product in values can resolve itself only into v plus s, into an equivalent by which the laborers reproduce the value of the capital expended for the purchase of their labor-power, and into an additional value which they must deliver over and above their own value to their employers. These two elements of 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 laborers; 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 real estate owners. Whence, then, should come an- other element of value, since the value of the annual product contains no other elements but v plus s? We are working on the basis of simple reproduction. Since the entire Former Discussions of the Subject. 433 quantity of annual labor resolves itself into labor required for the reproduction of the value of the capital invested in labor-power, and labor required for the creation of surplus- value, where would the labor required for the production of the value of a capital not invested in labor-power come from?
The situation is as follows: (1). Adam Smith determines the value of a commodity by the quantity of labor which the wage worker adds to the object of labor. He calls it materials of labor, since he is dealing with manufacture, which is working up products of other labor. But this does not alter the matter. The value which the laborer adds to a thing (and this "adds" is an expression of Adam Smith) is entirely independent of the fact whether or not this thing, to which value is added, had itself any value before this addition took place. The laborer creates a product of 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 value of his wages; according to whether his wages are high or low, he has to add more or less value in order to produce or reproduce an equivalent for his wages. On the other hand, the laborer adds more labor over and above the limit so drawn, and this constitutes the surplus value for the capitalist who employs him. Whether this surplus-value remains entirely in the hands of the capitalist or is yielded by him in portions to third persons, does not alter the qualitative fact that the ad- ditional labor of the laborer is surplus-value, not the quantity of this additional value. It is value the same as any other portion of the value of the product, but it differs from other portions by the fact that the laborer has not received any equivalent for it, nor will receive any later on, because it is appropriated by the capitalist without any equivalent. The total value of a commodity is determined by the quanti- ty of labor expended by the laborer in its production; one portion of this total value is determined by the fact that it is equal to the value of the wages, an equivalent for them. The second portion, the surplus-value, is, therefore, likewise determined, for it is equal to the total value of the product minus that portion which is equivalent to the wages; it is 434 Capital.
equal to the excess of the value created in the manufacture of the product over that portion which is an equivalent for the wages.
(2). That which is true of a commodity produced in some individual industrial establishment by any individual laborer is true of the annual product of all lines of busi- ness together. That which is true of the day's work of some individual productive laborer is true of the entire year's work realized by the entire class of productive labor, ers. It "fixes" (expression of Adam Smith) in the anf/jal product a total value determined by the quantity cf che annual labor expended, and this total value resolves itself into one portion determined by that part of the annual labor which reproduces the equivalent of its annual wages, or these wages themselves; and into another portion determined by the additional labor by which the laboring class creates surplus- value for the capi- talist class. The value contained in the annual product then consists of but two elements, namely the equivalent of the wages received by the laboring class, and the surplus-value annually created for the capitalist class. Now, the annual wages are the revenue of the work- ing class, and the annual quantity of surplus-value the reve- nue of the capitalist class; both of them represent the rela- tive shares in the annual fund for consumption (this view is correct when simple reproduction is the premise) and are realized in it. There is, then, no room left anywhere for the value of the constant capital, for the reproduction of* the capital serving in the form of means of production. And Adam Smith states explicitly in the introduction of his work that all portions of the value of commodities which serve as revenue coincide with the annual product of labor in- tended for a social fund for consumption: "In what the revenue of the people consisted generally, or what was the nature of the fund, which...supplied their annual con- sumption, to explain this is the purpose of these first four books." (Page 12.) And in the very first sentence of the introduction we read: "The annual labor of every nation is the fund, which supplies them originally with all the sub- Former Discussions of the Subject. 435 sistence which they consume in the course of the year, and which always consist either of the immediate product of this labor, or in articles bought with this product from other nations." (Page 11.)
The first mistake of Adam Smith consists in identifying the value of the annual product with the annual product in values. The latter is only the product of labor of the current year, the former includes furthermore all elements of value consumed in the making of the annual product, but which have been produced in the preceding or even in earlier years, means of production whose value merely re-appears, but which have been neither produced nor rethis mistake, Adam Smith spirits away the constant portion of the value of the annual product. His mistake rests on another error in his fundamental conception: He does not distinguish the two-fold nature of labor itself, of labor which creates exchange-value by the expenditure of labor-power, and labor which creates articles of use (use-values) as a concrete, useful, activity. The total quantity of the com- modities made annually, in other words, the total annual product, is the product of the useful labor active during the the past year; all these commodities exist only because so- cially employed labor has been spent in a systematized net- work of many kinds of useful labor; it is due to this fact alone that the value of the means of production consumed in their production, re-appearing in a new natural form, is contained in their total value. The total annual product, then, is the result of the useful labor expended during the year; but only a portion of the value of the annual product has been created during the year; this portion is the annual product in values, in which the quantity of labor set in motion during the year itself is represented.
Hence, if Adam Smith says in the just cited passage: "The annual labor of every nation is the fund, which supplies them originally with all the subsistence which they con- sume in the course of the year, etc.," he places himself one- sidedly upon the standpoint of mere useful labor, which has indeed given all these means of subsistence their con- 436 Capital.
sumable form. But he forgets that this was impossible without the assistance of instruments and materials of labor supplied by former years, and that, therefore, the "annual labor," so far as it has created any values, did not create all the value of the products finished by it; that the product in values is smaller than the value of the products.
While we cannot reproach Adam Smith for going in this analysis no farther than all his successors (although a step toward a correct solution is already found among the physi- ocrats), he loses himself, on the other hand, in a chaos fur- ther along, mainly because his "esoteric" conception of the value of commodities in general is constantly vitiated by exoteric ideas, which on the whole prevail with him, while his scientific instinct permits his esoteric conception to re- appear from time to time.
IV. 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 equiv- alent of the wages is equal to the capital advanced by the capitalist for labor-power, in other words, equal to the vari- able portion of the total capital advanced. The capitalist recovers this portion of the value of his advanced capital through a portion of the value of a commodity newly sup- plied by the wage laborer. Whether the variable capital is ad- vanced in such a way that the capitalist pays the laborer 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 obtained by the sale of commodities previously supplied by the laborer, 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 laborer in the form of money, and at the same time he possesses the equivalent of this value of his capital in that portion of the value of his commodities by which the laborer repro- duces his share of its total value, in other words, by which he reproduces his own wages. Instead of giving him this por- Former Discussions of the Subject. 437 lion of the value in its natural form, that of his own product, the capitalist pays him in money. The capitalist then holds the variable portion of his advanced capital in the form of commodities, while the laborer has received the equivalent for his sold labor-power in the form of money.
Now while that portion of the capital advanced by the capitalists, which has been converted by the purchase of labo^-power into variable capital, serves in the process of production itself as laboring power and is produced as a new value, or reproduced, by the expenditure of this force, in the form of commodities, — hence a reproduction, or new production of capital — the laborer spends the value or price of his sold labor-power in means of subsistence, in means for the reproduction of his labor-power. A quantity of money equal to the variable capital forms his revenue, which lasts only so long as he can sell his labor- power to the capitalist.
The commodity of the wage laborer — his labor-power -—serves as a commodity only to the extent that it is incor- porated in the capital of the capitalist and acts as capital; on the other hand, the capital expended by the capitalist as money-capital in the purchase of labor-power serves as a revenue in the hands of the seller of labor-power, the wage laborer.
Various processes of circulation and production inter- mingle here, which Adam Smith does not clearly distinguish.
First: Processes belonging to circulation. The laborer sells his commodity — labor-power — to the capitalist; the money with which the capitalist buys it is from his point of view money invested for gain, in other words, money- capital; it is not spent, but advanced. (This is the real meaning of "advance" — avance in the language of the physi- ocrats— 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, re- gardless of whether this takes place before or after the fact; it is advanced for the process of production.) The same takes place here as in every other sale of commodi- ties: The seller gives away a use-value (in this case his 438 Capital.
438 Capital.
labor-power) and receives its value (realizes its price) in money; the buyer gives away his money and receives in turn the commodity itself — in this case labor-power.
Secondly: In the process of production, the purchased labor-power now forms a part of the acting capital, and the laborer himself serves here merely as one particular natural form of this capital, distinguished from the elements ex- isting in the natural form of means of production. During the process, the laborer adds value to the means of produc- tion which he converts into products, by expending labor- power to the amount of his wages (without surplus-value); he reproduces for the capitalist that portion of his capital in the form of commodities which has been, or has to be, advanced for wages; hence he produces for the capitalist that capital which he can "advance" once more for the pur- chase of labor-power.
Thirdly: In the sale of the commodities, one portion of their selling price reproduces the variable capital ad- vanced by the capitalist, whereby he, on the one hand, is en- abled to buy more labor-power, and the laborer, on the other hand, to sell more.
In all purchases and sales of commodities — so far as these transactions are merely regarded by themselves, — it is quite immaterial what becomes of the money in the hands of the seller received for his commodities, and what becomes of the article of use in the hands of the buyer re- ceived in exchange for this money. Hence, so far as the mere process of circulation is concerned, it is quite im- material that the labor-power bought by the capitalist re- produces the value of capital for him, and that, on the other hand, the money received by the laborer as a purchase-price of his labor-power serves as his revenue. The magnitude of the value of the commodity of the laborer, his labor- power, is not affected either by serving as a revenue for him or by reproducing, through its use, on the part of the buyer, the value of the capital of the buyer.
Since the value of the labor-power — that is to say, the ade- quate selling price of this commodity — is determined by the quantity of labor required for its reproduction, and this Former Discussions of the Subject. 439 quantity of labor itself is here determined by that required for the necessary subsistence of the laborer, the wages be- come a revenue on which the laborer has to live.
It is entirely wrong, when Adam Smith says (page 223): "That portion of capital which is invested in the mainte- nance of productive labor...after it has served him" (the capitalist) "in the function of a capital...forms a revenue for them" (the laborers). The money with which the capitalist pays for the labor-power purchased by him, "serves him in the function of a capital," to the extent that he thereby incorporates labor-power in the material elements of his capital and thus enables his capital to serve as pro- ductive capital. We make this distinction: The labor-power is a commodity, not a capital, in the hands of the laborer, and it constitutes for him a revenue, so long as he can repeat its sale; it serves as capital, after its sale, in the hands of the capitalist, during the process of production it- self. That which here serves twice is labor-power; as a commodity which is sold at its value, in the hands of the laborer; as a power creating exchange-values and use-values, in the hands of the capitalist who has bought it. But the money which the laborer receives from the capitalist is not given to him until after he has given the capitalist the use of his labor-power, after it has already been realized in the value of the product of labor. The capitalist holds this value in his hands, before he pays for it. Hence it is not the money which serves twice here; first, as the money-form of the variable capital, and then as wages. It is labor-power which has served twice; first, as a commodity in the sale of labor-power (in stipulating the amount of wages to be paid, the money serves 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 serves as capital, in other words, as an element in the hands of the capi- talist creating exchange-value and use-values. Labor-power first supplies, in the form of commodities, the equivalent which is to be paid to the laborer, and then only is it paid by the capitalist to the laborer in money. In other words, the laborer himself creates the fund out of which the capi- talist pays him. But this is not all.