The peasant producer exchanges 1,000 hours of value, contained in their grain, for 1,000 hours of value contained in linen. The textile worker expends 1,000 hours of labour-time, but is paid only for 800 hours, equal to the value of their labour-power, and thereby obtains only 800 hours of value, in grain, whilst the textile capitalist appropriates the other 200 hours of value, in grain, for themselves.
When looked at in terms of an exchange of commodities, all the requirements of the law of value have been met. As a commodity owner, the peasant exchanged a commodity – grain – with 1,000 hours of value, for another commodity – linen – also with 1,000 hours of value. The worker, as a commodity-owner, has exchanged their commodity – labour-power – with a value equal to 800 hours, for another commodity – grain – also with a value equal to 800 hours. The difference resides in the fact that, in both cases, the value of the labour-power was equal to 800 hours, but the value of the output of that labour-power was equal to 1,000 hours, creating 200 hours of surplus value, in each case. But, the peasant, as owner of the means of production, sold the product of their labour, not their labour-power itself, and thereby appropriated to themselves, the surplus value they created. They expended 1,000 hours of labour, divided 800 hours of necessary and 200 hours of surplus labour, and it took the form of a quantity of grain, which they exchanged for an equal value of linen.
The worker, however, also expended 1,000 hours of labour, similarly divided 800 hours necessary, and 200 hours of surplus labour, which took the form of linen. But, because the worker sold their labour-power, rather than the product of their labour, this linen belongs not to the worker, but to the capitalist. The capitalist exchanges the 1,000 hours of value of linen, for 1,000 hours of value of grain. The capitalist then gives the worker 800 hours of value of grain, in exchange for the value of the labour-power provided, and retains the other 200 hours of value of grain for themselves.
In other words, looked at from the perspective of what labour-time is expended to obtain commodities in exchange, the peasant expends 1,000 hours of labour, and obtains 1,000 hours in return, whereas the worker expends 1,000 hours and obtains only 800 hours of value in return.
“Conversely, the money with which the capitalist buys labour contains a smaller quantity of labour, less labour-time, than the quantity of labour or labour-time of the workman contained in the commodity produced by him. Besides the quantity of labour contained in this sum of money which forms the wage, the capitalist buys an additional quantity of labour for which he does not pay, an excess over the quantity of labour contained in the money he pays out. And it is precisely this additional quantity of labour which constitutes the surplus-value created by capital.” (p 87)
To be more precise, Marx should really have said appropriated by capital, rather than created by capital, because, for the reasons outlined, the surplus value already exists, as a consequence of the difference between the value of labour-power, and the value of the product of labour. Capital appropriates the surplus value, because the product is alienated by labour, and owned by capital, and consequently, capital appropriates the surplus value contained within it.
The capitalist buys labour-power, in exchange for a money wage, but this money wage is only a transmuted form of the commodities required for the reproduction of labour-power. At any one time, the society's consumption fund, or variable-capital, is just as much a fixed quantity of use values, which must be “reproduced in kind” as is the fund for means of production, or constant capital.
In fact, as Marx outlined in Capital, the variable capital is denoted precisely by the fact that it is a fixed sum of value, equal to the value of these necessities, which creates a larger sum of value. It would then be just the same if the capitalist paid the workers not in money, but in these commodities, in the necessities required for the reproduction of labour-power. That indeed was a situation that the Physiocrats encountered.
But, then it would be clearer that the workers had bought commodities representing one amount of labour-time, only with a greater quantity of their own labour-time; that, in order to obtain commodities with a value of 800 hours, they had to exchange 1,000 hours of their own living labour.
“It is Adam Smith’s great merit that it is just in the chapters of Book I (chapters VI, VII, VIII) where he passes from simple commodity exchange and its law of value to exchange between materialised and living labour, to exchange between capital and wage-labour, to the consideration of profit and rent in general—in short, to the origin of surplus-value—that he feels some flaw has emerged.” (p 87)