Theories of Surplus Value Part I, Chapter 2 - Part 3

Like other economists, the Physiocrats looked at capitalist agriculture, and saw in its forms, not something historically specific, but something universal. The Physiocrats were studying a form of capitalist production in capitalist agriculture, which is historically a transition between feudal production and capitalist industrial production. That is why they see rent as the form of surplus value, because at the point of their analysis, as Marx set out in Capital III, examining pre-capitalist forms of rent, this indeed was the form in which surplus value was manifest.

For the peasant farmer, rent first took the form of labour rent. That is the peasant had to devote a portion of their own output to replacing their means of production – seeds etc. – and another portion of their output and current labour-time had to be devoted to producing the use values required for their own reproduction. Only the time they had left over after these more or less fixed material requirements had been met, was available as surplus labour-time that could be used to cultivate the land of the landlord.

This was not fundamentally changed when this was replaced by the payment of rent in kind, and then money rent, other than that, as productivity rose, the amount of necessary labour-time declined and surplus labour-time rose so that some peasants were able to accumulate means of production, and turn themselves into capitalist farmers.

The fact was that surplus value was represented by rent, which here was the form in which this surplus labour-time was extracted. For the Physiocrats, it is rent which constitutes surplus value, not profit, because at this point, profit appears merely as a deduction from rent. It is industrial capitalists obtaining a share of the rent, appropriated by landlords and capitalist farmers.

But, the achievement of the Physiocrats is that they locate the source of surplus value in the production process, rather than in the process of circulation. The source of this surplus value they identify is that the value of labour-power is fixed, because it comprises a given minimum quantity of use values, required for the reproduction of the worker, and yet that same worker is able to produce a greater quantity of these same use values.

The fact that they saw this minimum quantity of use values as an “unchangeable magnitude” does not significantly undermine this concept, because, as productivity rises, and a general improvement ensues, as history progresses, not only does this physical minimum rise, but the physical output of the worker rises too, so that even as the physical minimum rises, the difference between it and the workers output grows even wider.

The Physiocrats also were responsible for establishing a number of other concepts, essential for future economic thought. They developed the concept of fixed capital, which they termed Avances Primitive, as distinct from the circulating capital, which they termed Avances Annuelles. These concepts were inherited by Adam Smith.

“His service — in this connection — is limited to fixing the abstract categories, to the greater consistency of the baptismal names which he gave to the distinctions made by the Physiocrats in their analysis.” (p 44-5)

The problem with Smith's analysis in this regard, as Marx set out in Capital II, was that he confuses constant capital with fixed capital, and circulating capital with capital in circulation.

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