If we take two commodities, A and B, A may be the produce of a direct producer, whilst B is produced by a wage worker. If we discount the value of means of production, in both cases, we may assume that both commodities require twelve hours of labour for their production. This is not changed in any way by the fact that, in the production of B, the wage worker expends twelve hours of labour, but receives a wage with a value of ten hours of labour (equal to the value of their labour-power.) It simply means that the value of commodity B, of twelve hours, provides a revenue of ten hours, which goes to reproduce the labour-power of the wage worker, and another revenue of two hours, which goes as profit to the capitalist.
If the value of labour-power falls, because wage goods become cheaper, again this does not change the fact that commodity B itself still requires twelve hours of labour for its production, and, therefore, the rate at which it exchanges with A is not altered. If previously ten units of A exchanged for twenty units of B, this will continue to be the case, after the fall in the value of the labour-power. If previously ten hours of labour-time were required to reproduce this labour-power, then, of the twelve hours of new value created, ten would go as wages and two as profits. If now only six hours are required to reproduce the labour-power, of the twelve hours of new value created, six will go as wages, and six as profit.
Nor is this in any way changed if this six hours of surplus value has to be shared by the capitalist with other exploiters. For example, if the capitalist has to rent land, the value of this rent may be equal to two hours of labour-time, and if they borrow money-capital, they may have to pay interest to a sum equal to one hour of labour-time.
Yet, the value of the commodity remains twelve hours, equal to the labour-time required for its production, but the revenue produced by this twelve hours of value is now simply divided six for wages, three for profit of enterprise, two for rent, and one for interest.
When 10A is exchanged for 20B, therefore, these 20 units of B are divided amongst the above revenue recipients in this proportion, not necessarily in terms of quantity of use value, but in terms of value.
“The relation between the labour-time contained in commodities A and B is in no way affected by how the labour-time contained in A and B is appropriated by various persons. “When the exchange of broadcloth for linen has been accomplished, the producers of broadcloth will share in the linen in a proportion equal to that in which they previously shared in the broadcloth” ([Karl Marx], Misére de la Philosophie, p. 29)” (p 74)
The Ricardians also raised this objection against Smith. Marx quotes John Cazenove.
““… Interchange and Distribution distinct from each other. … The circumstances which affect the one do not always affect the other. For instance, a reduction in the cost of producing any particular commodity will alter its relation to all others; but it will not necessarily alter its own distribution, nor will it in any way affect theirs. Again, a general reduction in the value of commodities affecting them all alike will not alter their relation to each other. It might or might not affect their distribution” (John Cazenove: Preface to his edition of Malthus’s Definitions in Political Economy, London, 1853, [p. VI]).” (p 74)
The reason that Smith finds himself in this position, therefore, is the fact that he confuses labour with labour-power, and so, at one time defines the value of commodities – which includes labour-power – according to the labour-time required for their production, and at others by the quantity of labour they command, i.e. the value of labour-power or wages. But, its clear that if the value of commodities is determined by the value of labour-power, wages, then surplus value is impossible. Discounting the value of constant capital, if the value of a commodity is equal to the value of wages of the workers that produced it, nothing is left over for surplus value.
Moreover, even if we include the value of constant capital, this remains the case, because, as Marx sets out, in Capital II, and III, Smith resolves the value of all commodities into v + s, rather than c + v + s, and he does this by claiming that the value of the commodities that comprise constant capital itself resolves into just v + s, i.e. the new value created by labour.
“The fact that he had also made the value of labour, or the extent to which a commodity (or money) can purchase labour, the measure of value, has a disturbing effect on Smith’s argument when he comes to the theory of prices, shows the influence of competition on the rate of profit, etc.; it deprives his work of all unity, and even excludes a number of essential questions from his inquiry.” (p 74)
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