But, just as Smith strayed from his labour theory of value into his cost of production theory of value, so he also strayed from this correct definition of productive labour into other incorrect definitions, as a result of the contradictions he found himself in, by not distinguishing between labour and labour-power, and as a result of his absurd dogma, whereby he claimed that the value of commodities resolves entirely into revenues. At points, Smith suggests that it is only the production of material commodities as against immaterial services that is productive, and at others he includes labour that merely produces new value as productive. All of this confusion on Smith's part enabled his detractors to focus on these errors, as against what was correct in his definition, and Marx sets about those detractors, in order to preserve the correct elements of Smith's analysis.
This is important in terms of understanding the nature of Smith's absurd dogma, and its relation to GDP, and national output. As Marx points out, the prostitute, or the tutor, or the doctor, who sells a labour service to a buyer, is not a productive labourer, because the labour exchanges with revenue, not capital. Even if it produces surplus value, it does not produce capital. But, that does not change the fact that it is value producing labour. Otherwise, as Marx says, if the prostitute does not create new value, by their labour, what is the buyer of that service paying for, why would they hand over a given amount of value in money form, for something which has no value!?
Marx quotes Garnier's statement that the non-productive labourer subsists only on revenues “... it is paid immediately by the consumer; and he pays only from revenues. As against these, the labourers of the productive class, being as a rule paid by an intermediary who intends to make a profit from their labour, are most often paid by capital. But this capital is always in the end replaced by the revenue of a consumer, otherwise it would not circulate and therefore would not yield any profit to its possessor.” (p 187) But, its clear from what has already been said that this is not possible.
“This last “but” is quite childish. In the first place, a part of the capital is replaced by capital and not by revenue, whether this part of the capital circulates or does not circulate (as in the case of seed).” (p 187)
In the next sub-section, Marx returns to this question of the impossibility of replacing the constant capital by an exchange with revenue, and shows how it must be replaced by an exchange of capital with capital.
“When a coal-mine supplies coal to an ironworks and gets from the latter iron which enters into the operations of the coal-mine as means of production, the coal is in this way exchanged for capital to the amount of the value of this iron, and reciprocally the iron, to the amount of its own value, is exchanged as capital for coal. Both (considered as use-values) are products of new labour, although this labour was produced with means of labour that were already in existence. But the value of the product of the year's labour is not the product of the labour [newly added] in the year. It also replaces the value of the past labour which was materialised in the means of production. Therefore the part of the total product which is equal to this value is not a part of the product of the year’s labour, but the reproduction of past labour.” (p 187-8)
In other words, the coal-miner produces, say, 100 tonnes of coal, sold to the iron producer. The exchange-value of the 100 tonnes of coal is, say, £1,000, consisting of £750 of constant capital, and £250 newly added labour. The 100 tonnes of coal is most certainly, as regards its physical use value, the product of this year's labour, without which it would not exist. But, the £1,000 exchange-value of this coal is not at all the product of this year's labour, which amounts only to £250, however it divides into the revenues of wages, profit and rent. The major element of the value of the coal is the £750 of constant capital, be it wear and tear of fixed capital, the coal used to power steam engines and so on. This year's labour does not reproduce this value, by the creation of new values and revenues, but, merely, as concrete labour, preserves its value, which is transferred to the value of the newly produced 100 tonnes.
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