Part One: From the Physiocrats to Adam Smith

General Remark

All economists share the error of examining surplus-value not as such, in its pure form, but in the particular forms of profit and rent. What theoretical errors must necessarily arise from this will be shown more fully in the third book, in the analysis of the greatly changed form which surplus-value assumes as profit.

Sir James Steuart

Before the Physiocrats, surplus-value — that is, profit, in the form of profit — was explained purely from exchange, from the sale of the commodity above its value. Sir James Steuart did not on the whole get beyond this restricted view; he must rather be regarded as the man who reproduced it in scientific form. He distinguished between "positive profit," which results from an increase of labour, industry or skill, and "relative profit," or "profit upon alienation," which is merely a transfer of wealth from one party to another — the gain of one being always the loss of another. Steuart thus rejects the illusion of the mercantilists that surplus-value arises from selling commodities above their value; but he cannot explain where positive profit comes from. His merit is that he understood that the separation of the producers from their means of production — the expropriation of the peasantry — was the presupposition of the new mode of production.

The Physiocrats

The analysis of capital, within the bourgeois horizon, is essentially the work of the Physiocrats. It is this merit that makes them the true fathers of modern political economy. They transferred the inquiry into the origin of surplus-value from the sphere of circulation into the sphere of direct production, and thereby laid the foundation for the analysis of capitalist production.

They correctly laid down the fundamental principle that only labour which creates a surplus-value is productive. But where did they find surplus-value most palpably? In agriculture, where nature itself seems to give back more than was put in: the seed sown yields a harvest many times greater; the labour of the farmer produces more food than he and his family need. So the Physiocrats held that agricultural labour alone is productive, and that the "net product" — the excess of the harvest over the costs of production — is the gift of nature, appropriated by the landowner as rent. Rent appears to them as the only form of surplus-value; industrial profit is merely a kind of wage paid to the capitalist.

Hence the contradiction in their system. Its form is feudal: it seems to glorify landed property, to make the landlord the real beneficiary of production. But its essence is bourgeois: it is the first systematic conception of capitalist production. For the land must be cultivated by capitalist farmers employing wage-labourers; the farmer must advance capital; and all taxes, they concluded, should fall on the rent of land alone — which is an attack on landed property, and the first form in which the claims of industrial capital against the landlords were expressed. So the feudal appearance of the system concealed its bourgeois content; and it is no accident that the Physiocrats were favoured by the absolute monarchy of France, and that Turgot, the Physiocrat minister, prepared the measures that the Revolution was to carry out.

Turgot developed the theory furthest. The worker who has nothing but his hands, he wrote, has only what he can sell to others; and his wage is limited, by the competition of the workers among themselves, to what is necessary for his subsistence. The cultivator alone produces more than his wages: what the earth gives him beyond his subsistence is a pure gift, which he can use to buy the labour of others. Here, in Turgot, the value of labour-power is understood as the value of the means of subsistence, and the surplus as the excess of the product over these. Only the place where the surplus arises is limited to the land.

Quesnay's "Tableau économique" tried to show the whole process of production of capital as a process of reproduction, with circulation only as its form — the movement of money only as a moment in the movement of capital; the origin of revenue, the exchange of capital against revenue, the relation between productive and final consumption, all comprised in one process. And all this he set down in a table of five lines, joining six points of departure and return — and this in the second third of the eighteenth century, when political economy was still in its childhood. It was a stroke of genius, beyond question the most brilliant idea that political economy had produced until then.

Linguet and Necker

Among the French writers of the time, two saw the matter more sharply than the economists. Linguet, in his "Théorie des loix civiles" (1767), attacked the bourgeois liberal ideals of the Enlightenment: the free worker, he said, is worse off than the slave, for the slave at least is fed by his master, while the wage-labourer is free only to choose his master, and to starve if he finds none; the rich man does not buy his labour, he buys his hunger. Linguet did not understand the capitalist mode of production; but he saw, with the eye of a reactionary, the misery of the free worker.

Necker, the banker and minister of Louis XVI, saw that the increase of the productive power of labour serves only to increase the wealth of those who own the means of production: the more quickly the worker can produce his own subsistence, the more time he works for the rich, the more the rich can buy with the surplus — luxuries, servants, the labour of others. He sees surplus-value in industry as well as agriculture; but he explains it only as the excess of labour over what is needed for the worker's wage, without asking how this excess arises within exchange.

Adam Smith

Adam Smith, like all economists worth speaking of, takes over from the Physiocrats the concept of the average wage. But he goes further: he extends the productive labour that creates value from agriculture to labour in general. And he gives two different determinations of value, which run side by side throughout his work.

In the first, the value of a commodity is determined by the quantity of labour required for its production. In the second, by the quantity of labour that it can command — that is, the quantity of living labour that can be bought with it. These two are equal only so long as the worker receives the whole product of his labour. But Smith himself says that, as soon as stock has accumulated in the hands of particular persons, and land has become private property, the worker must share his product with the owner of the stock and the owner of the land; and then the two determinations differ. He sees, therefore, that the profit of the capitalist and the rent of the landlord are deductions from the product of labour — from the value added by the worker to the materials. He has, in fact, recognised the true origin of surplus-value, though he does not distinguish it as a particular category from the special forms it takes in profit and rent. This is his great merit; and at the same time, by falling back on labour "commanded," he wavers, and opens the way to the opposite view — that wages, profit and rent are the three original sources of value.

Thence comes his dogma that the price of every commodity resolves itself into wages, profit and rent. He forgets that part of the value of the product which merely replaces the means of production used up. If he were right, the whole product could be consumed every year, and nothing would be left to replace the materials and tools consumed. Smith himself feels the difficulty, and tries to push it back from one producer to another: the farmer's seed, he says, resolves itself into the wages, profit and rent of the farmer who produced it, and so on — sending us from Pontius to Pilate.

Smith's error has a further consequence. He cannot explain how the annual revenue of society can buy the annual product, if part of that product must replace the constant capital used up. He tries to distinguish the "gross revenue" of society from its "net revenue," and admits that the maintenance of fixed capital must be deducted from the net revenue; but he does not see that the same holds for the raw materials and auxiliary materials that make up circulating capital. The whole difficulty is solved only when one distinguishes, in the annual product, between the part that replaces constant capital and the part that represents newly added value — and sees that the exchange between producers of means of production and producers of means of consumption balances the two. Smith came near to this, and then turned away.

Smith also describes the accumulation of capital in a way that his followers turned into a dogma. Whatever is saved, he says, is consumed as well as what is spent, but by a different set of people: by productive labourers instead of idle ones. Saving, in other words, means employing more workers. This is true as far as it goes; but Smith forgets again that the capital laid out in machines and materials is not spent on wages; he makes the whole capital resolve into wages, and so the whole product into revenue. From this error, taken over by Ricardo, comes the notion that accumulation is simply the employment of more labour — a notion that hides the growth of constant capital and with it the fall in the relative demand for labour.

Productive and Unproductive Labour

Adam Smith's distinction between productive and unproductive labour is of great importance. In one definition, productive labour is labour that is exchanged with capital and produces a profit for it; unproductive labour is labour that is exchanged directly with revenue, with the income of the person who consumes it. This is correct; it is the distinction from the standpoint of capitalist production. Productive labour, in the capitalist sense, is wage-labour which, exchanged against the variable part of capital, reproduces this part and in addition produces surplus-value for the capitalist.

The same kind of labour can be productive or unproductive. Milton, who sold "Paradise Lost" for five pounds, was an unproductive worker. He wrote it as a silkworm spins silk, because it was in his nature; afterwards he sold the product. But the hack writer of Leipzig, who turns out compilations to the order of his publisher, is a productive worker: his writing is from the start subordinated to capital, and done only to enlarge it. A singer who sings like a bird, for her own pleasure, is unproductive; if she sells her singing, she is so far a wage-earner or a dealer. But if an impresario hires her to sing in order to make money out of her, she is a productive worker, for she produces capital.

In his second definition, Smith calls productive the labour that fixes and realises itself in some particular object, a vendible commodity that lasts for some time after the labour is past; and unproductive, the labour of menial servants, which perishes in the very instant of its performance. To this class he assigns, besides servants, the sovereign and all the officers of justice and of war, the whole army and navy; churchmen, lawyers, physicians, men of letters of all kinds; players, buffoons, musicians, opera-singers, opera-dancers. This was the language of the still revolutionary bourgeoisie, which had not yet subjected to itself the whole of society, the state and so on. These transcendent occupations — the sovereign, judge, officer, priest — all the old ideological professions to which they give rise, their scholars, teachers and priests, are from an economic standpoint put on the same level as the swarm of their own lackeys and jesters, maintained by the rich. They are mere servants of the public, as the others are their servants. They live on the produce of other people's industry; they must therefore be reduced to the unavoidable minimum. Later, when the bourgeoisie had won the field, it changed its tune: Storch, Senior and the like set out to prove that the state, the army, the clergy are also productive, because they "produce" security, health, and the virtue of the people.

The controversy over this distinction, after Smith, is instructive. Garnier, Ganilh, Lauderdale, Say, Storch, Senior and others attacked Smith for calling the labour of servants unproductive; they discovered that every service is productive, because it is paid. In this way they defended not only the idle consumers, but also the whole army of state functionaries, priests and soldiers whom the bourgeoisie at first wished to reduce to a minimum, and later found so useful. The more developed bourgeois society becomes, the more its economists discover the productiveness of its unproductive classes.

Here Marx inserts an ironic digression: if every activity is "productive," then the criminal too is productive. He produces crimes, and with them the criminal law, the professor who lectures on it, the police, the judges, the hangmen and juries; he produces art, in the form of novels and tragedies; he breaks the monotony of bourgeois life, and spurs on the inventors of better locks and the makers of banknotes that cannot be forged.