Capital II, Chapter 10 - Part 13

The Physiocrats were prevented from understanding the source of surplus value because of their theory in which it is only agricultural labour that was productive, and that it is not the labour that produces surplus value but arises because “of the special activity (assistance) of nature in this branch”. (p 216) 

Smith classifies the means of subsistence as circulating capital because he confused capital involved in circulation i.e. commodity-capital with circulating capital.

“But the physiocratic conception too lurks in Smith’s analysis, although it contradicts the esoteric — really scientific — part of his own exposition.” (p 216)

Capital, advanced for production, can only take the form of products of past labour. That includes labour-power, which has been produced by the workers reproducing themselves. Part of that is through them consuming the means of subsistence. The latter, do not, of course, differ, either in their use value, or value, from the raw materials used in production, or the food provided to animals.

“The means of subsistence cannot themselves expand their own value or add any surplus-value to it. Their value, like that of the other elements of the productive capital, can re-appear only in the value of the product. They cannot add any more to its value than they have themselves.” (p 217)

In other words, here, the value of the labour-power. Wages are part of the circulating capital not for any reason attached to the means of subsistence bought with those wages, but simply because of the way this part of the advanced capital-value is to be replaced i.e. by the fact that its entire value is transferred in one go to the end product, and is then realised on sale, to be returned once more in the purchase of replacement labour-power of equal magnitude.

“The purchase and repurchase of labour-power belong in the process of circulation. But it is only within the process of production that the value laid out in labour-power is converted (not for the labourer but for the capitalist) from a definite, constant magnitude into a variable one, and only thus the advanced value is converted altogether into capital-value, into capital, into self-expanding value. But by classing, like Smith, the value expended for the means of subsistence of the labourers, instead of value laid out in labour-power, as the circulating component of productive capital, the understanding of the distinction between variable and constant capital, and thus the understanding of the capitalist process of production in general, is rendered impossible. The determination that this part of capital is variable capital in contrast to the constant capital, spent for material creators of the product, is buried beneath the determination that the part of the capital invested in labour-power belongs, as far as the turnover is concerned, in the circulating part of productive capital. And the burial is brought to completion by enumerating the labourer’s means of subsistence instead of his labour-power as an element of productive capital. It is immaterial whether the value of the labour-power is advance in money or directly in means of subsistence. However under capitalist production the latter can be but an exception.” (p 217-8)

Marx describes how this error prevents Smith and his followers from understanding the source of surplus value, and how they come to have such problems in distinguishing between Labour (measure of value) and labour-power (commodity).

“By thus establishing the definition of circulating capital as being the determinant of the capital value laid out for labour-power — this physiocratic definition without the premise of the physiocrats — Adam Smith fortunately killed among his followers the understanding that that part of capital which is spent on labour-power is variable capital. The more profound and correct ideas developed by him elsewhere did not prevail, but this blunder of his did.” (p 218)

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