Marx explains that what leads to Smith's absurd dogma is a number of factors.
“1) The fundamental relationship of constant and variable capital, hence also the nature of surplus-value, and thereby the entire basis of the capitalist mode of production, are not understood. The value of each partial product of capital, each individual commodity, contains a portion of value = constant capital, a portion of value = variable capital (transformed into wages for labourers), and a portion of value = surplus-value (later split into profit and rent).” (p 843)
Forcade resolved this problem in a similar way to that used by Michael Roberts referred to previously. He equates the element of c to capital accumulation out of s, or the growth of output. (See: Note 53, p 843)
Secondly, the process by which the value of constant capital is preserved by concrete, use-value creating labour, as against the creation of new value by abstract labour was not understood.
Thirdly,
“... the difficulty is not understood how it is that the product in which wages and surplus-value, in short, the entire value produced by all the labour newly added during the year, is realised, replaces the constant part of its value and yet at the same time resolves itself into value limited solely by the revenues; and furthermore how it is that the constant capital consumed in production can be replaced in substance and value by new capital, although the total sum of newly added labour is realised only in wages and surplus-value, and is fully represented in the sum of the values of both. It is precisely here that the main difficulty lies, in the analysis of reproduction and the relations of its various component parts, both as concerns their material character and their value relationships.” (p 844)
Fourthly, there is the issue of the categories of revenue and capital being interchanged, and this becomes ever more complex as the process of social reproduction is characterised by an increasing social division of labour.
“One may, therefore, squeeze out of the dilemma by remonstrating that what is revenue for one is capital for another and that these designations thus have nothing to do with the actual peculiarities of the value components of commodities. Furthermore: commodities which are ultimately destined to form the substantive elements of revenue expenditure, that is, articles of consumption, pass through various stages during the year, e.g., woollen yarn, cloth. In one stage they form a portion of constant capital, in the other they are consumed individually, and thus pass wholly into the revenue. One may therefore imagine along with Adam Smith that constant capital is but an apparent element of commodity-value, which disappears in the total pattern. Thus, a further exchange takes place of variable capital for revenue. The labourer buys with his wages that portion of commodities which form his revenue. In this way he simultaneously replaces for the capitalist the money-form of variable capital. Finally: one portion of products which form constant capital is replaced in kind or through exchange by the producers of constant capital themselves; a process with which the consumers have nothing to do. When this is overlooked the impression is created that the revenue of consumers replaces the entire product, i.e., including the constant portion of value.” (p 845)
Fifthly, the whole process of social reproduction is obscured by the fact that, under capitalism, commodities exchange at market prices determined by price of production, not exchange-value. The source of value and surplus value is obscured, and it appears that value itself is created by all factors of production.
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