Smith had already removed the mysticism that limited the Physiocratic view, by showing that value is labour, and that the surplus value is indeed created in production, but is the result, therefore, of surplus labour. In other words the labour undertaken by the labourer, is greater than the labour required to reproduce the labourer's own labour (power). Its manifestation is the surplus product. But, in the process, Smith also thereby disposes of the Mercantilist theory, because if the surplus is created in production, it can only ever be simply realised in exchange.
The Mercantilists, however, did reflect a very real process referred to earlier. For the feudal ruling class, a growing surplus product becomes increasingly useless, for the reasons described above. Particularly, a relatively small ruling class can only consume a limited quantity of products of any type. Even allowing for feeding and otherwise providing for a growing band of retainers and state lackeys, there are limits. Either the peasant producers must be allowed to keep more of what they produce, or else the surplus collected from them, as rent, tithes and taxes goes to waste. This is one reason to move to money rents from rent in kind. But, unless the money rent can be used to buy a wider range of products, it too simply accumulates as a hoard of treasure. It provides the basis for the feudal lords to form a symbiotic relation with the growing merchant class, to explore the world, develop trade, and so bring back an increased range of exotic products that can be bought with the accumulated surplus.
Once this global trade is established, and the feudal landlords, in alliance with the merchants, develop colonies, and colonial markets, the merchants themselves become the ones who source the manufactured goods to be exported, and the materials, foodstuffs and luxury products to be imported, which then leads to the idea that the wealth of the nation is derived from this trade, rather than the creation of surplus value in production. Those today who try to explain the wealth of the more developed capitalist economies by reference to this kind of unequal exchange, and super exploitation, also, thereby, fall back to a stage before Marx and even Smith, into the theories of the Mercantilists, like James Steuart, and their explanation of profit as profit on alienation.
The reality was, of course, that the profit/surplus value was not primarily explained by exchange and profit on alienation, but by the fact that all commodities, whether sold in the domestic market, or traded internationally, already contain, as part of their value, the surplus value created in the production process, by labour. The sale of the commodity in the domestic market, or the export market, does not create the surplus value, it merely realises it as profit. This is recognised by the author of the pamphlet, as shown in the quotes given by Marx.
““For do what you will, in a series of years the whole world can take little more of us, than we take of the world […] so that all your foreign trade, of which there is so much talking, never did, never could, nor ever can, add one shilling, or one doit to the wealth of the country, as for every bale of silk, chest of tea, pipe of wine that ever was imported, something of equal value was exported; and even the profits made by our merchants in their foreign trade are paid by the consumer of the return goods here” (op. cit., pp. 17-18).” (p 252)
But, the author is still limited within the Ricardian framework, as described earlier, in relation to the expansion of the surplus product, and the process of accumulation. Essentially, the surplus product, in the hands of the capitalists, is viewed in similar terms to the surplus product in the hands of the feudal ruling class. In other words, it can only be exchanged for luxury imports, or, for a time, to finance the accumulation of fixed capital. So, the author writes,
““…foreign trade is mere barter and exchange for the convenience and enjoyment of the capitalist: he has not a hundred bodies, nor a hundred legs: he cannot consume, in cloth and cotton stockings, all the cloth and cotton stockings that are manufactured; therefore they are exchanged for wines and silks; but those wines and silks represent the surplus labour of our own population, as much as the cloths and cottons, and in this way the destructive power of the capitalist is increased beyond all bounds:—by foreign trade the capitalists contrive to outwit nature, who had put a thousand natural limits to their exactions, and to their wishes to exact; there is no limit now, either to their power, or […] desires…” (loc. cit., p. 18).” (p 253)
The significance of foreign trade here is the extent to which it facilitates not this diversification of consumption, for the rich, but the extent to which it broadens the range of use values, and of the market in total.
“If surplus labour or surplus-value were represented only in the national surplus product, then the increase of value for the sake of value and therefore the exaction of surplus labour would be restricted by the limited, narrow circle of use-values in which the value of the [national] labour would be represented. But it is foreign trade which develops its [the surplus product’s] real nature as value by developing the labour embodied in it as social labour which manifests itself in an unlimited range of different use-values, and this in fact gives meaning to abstract wealth.” (p 253)
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