When industrial development creates a large industrial proletariat, that begins to press its own interests, and to analyse its exploitation, the theorists that undertake this analysis, such as Ravenstone, or Hodgskin, do so on the basis of the economic theories and knowledge available to them, in particular that of Ricardo, which leads to the development of the strand of Ricardian socialists, whose ideas form the basis of social-democracy. But, the vulgar economists do not begin from the standpoint of an honest analysis of the world around them, and on the grounds of the development of economic science, as handed down to them.
“They translate them into a doctrinaire language, but they do so from the standpoint of the ruling section, i.e., the capitalists, and their treatment is therefore not naïve and objective, but apologetic. The narrow and pedantic expression of vulgar conceptions which are bound to arise among those who are the representatives of this mode of production is very different from the urge of political economists like the Physiocrats, Adam Smith and Ricardo to grasp the inner connection of the phenomena.” (p 453)
The landlords can be seen as obtaining rent, in return for the use of their land, and its fertility. The capitalist pays the worker wages apparently for the labour they provide. The appearance of an increase in value, as the basis of the revenue obtained by the landlord and the capitalist at least superficially justifies their existence, but, where it the justification for the existence of the money lender? Here, money appears to turn into a greater sum of money without any reference to production whatsoever.
“This is the original starting-point of capital—money—and the formula M—C—M' is reduced to its two extremes—M—M'—money which creates more money. It is the original and general formula of capital reduced to a meaningless résumé.” (p 453)
As Marx says, in Capital III, Chapter 48, value is labour, so surplus value cannot be land. Moreover, land is a use value, whereas rent is exchange-value. Indeed, as Marx sets out, in that chapter, labour-power is a use value, whereas wages are exchange value. It is no more wage-labour than it is land, which creates value, and thereby surplus value, and so cannot be the source of the exchange-value that the owner of these use values receives for them.
Wages, like rent or profit, can only be paid as an amount of exchange-value, because new value has been created. It is not wage-labour that creates this new value, but labour itself, abstract, free, independent, human labour. It is not the use value, the thing, wage-labour/labour-power, that creates value, but the process, i.e. the activity of labour. It is only because of this activity, the labour process, that new value is created, and from this new value arises the ability to pay a portion of it to the worker as wages, in exchange for their labour-power, to the landlord as rent, in exchange for use of their land; to the capitalist as profit, in exchange for the use of their capital; to the money lender as interest in exchange for the use of their money, and to the state, as taxes, on the basis of it providing security, government and administration etc.
“Labour as the source of wages, that is, of the worker’s share in his product, which is determined by the specific social form of labour; labour as the cause of the fact that the worker by means of his labour buys the permission to produce from the product (i.e., from capital considered in its material aspect) and has in labour the source by which a part of his product is returned to him in the form of payment made by this product as his employer—this is pretty enough. But the common conception is in so far in accord with the facts that, even though labour is confused with wage-labour and, consequently, wages, the product of wage-labour, with the product of labour, it is nevertheless obvious to anybody who has common sense that labour itself produces its own wages.” (p 454)
What is not apparent on the surface is that labour not only produces the new value that returns to the worker as wages, but also the new value that is paid to the landlord as rent, the capitalist as profit, the money-lender as interest, and the state in taxes. On the basis of this superficial appearance, it seems that land produces rent, capital – usually conceived as means of production – produces profit, and money-capital produces interest. And, as seen in earlier chapters, for writers such as Say and McCulloch, these factors of production do indeed create new value, as well as labour. For the neoclassical economists, the incomes paid to the owners of these factors of production are nothing more than the equivalent of the marginal revenue product, which each contributes to the value of output.
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