DOCUMENT 5 Theories of Surplus Value (1905)

The next obvious step was to re-read the history of industry as the ‘open book of human faculties’, or of man's own self-creation through labour.^[538] In The German Ideology, written in 1845-6, Marx and Engels undertook to do precisely that; to initiate a reinterpretation of economic history in terms of historical materialism, beginning with the proposition that ‘men must be in a position to live in order to “make history”. But life involves before everything else eating and drinking, a habitation, clothing and many other things. The first historical act is thus the production of means to satisfy these ends, the production of material life itself'.^[539]

If economic history opened one book, the history of economic thought must open another. That conclusion can be seen in the famous remark in the preface to the Critique of Political Economy: ‘The mode of production of material life conditions the general process of social, political and intellectual life. It is not the consciousness of men that determines their existence, but the social exist­ence that determines their consciousness'.^[540] That being the case, the writings of earlier economists must themselves be a repository of insights into the emer­gence of capitalism and its implications, much as Hegel's philosophy provided an insight, albeit confused, into the meaning of history. Marx's investigation of his predecessors was not an exercise in intellectual history; rather, by critically analysing earlier economic literature, separating class interests from scientific advances, he was looking for the historical emergence of economic categor­ies with which he would concretely reconstruct capitalist society in terms of thought.

Among the numerous writers mentioned in Part I of Theories of Surplus­Value, Francois Quesnay and Adam Smith were of decisive importance: Ques- nay for his attempt to trace the social surplus to agricultural production, and Smith for attributing all economic growth to productive labour. The Physiocrats and Smith redirected economic thought away from the mercantilist preoccupa­tion with net revenue as ‘money', and instead studied the ‘real' process of mater­ial production. Smith's accomplishment was to premise economic growth upon three fundamental conditions: 1) the expansion of‘productive' labour, creating vendible commodities that could be stocked and stored up as capital; 2) a high rate of social investment (capital accumulation); and 3) extensive division of labour to promote specialised skills and labour productivity^{[541] [542] - all ideas that became central to Marx's account of capitalism's laws of motion.}

Heinrich Cunow's review of Theories of Surplus-Value argues that the prom­inence Marx attributed to the Physiocrats and Adam Smith had the unfortu­nate implication of underestimating the contribution of Sir James Steuart. He claims that Steuart's concept of ‘positive profit', as a ‘surplus product' result­ing from production rather than exchange, was an important step towards a scientific concept of surplus value. Cunow's thoughtful argument reflects his own background as editor and scholar. From 1898 he served as one of the edit­ors of the spd theoretical journal Die Neue Zeit, and from 1902 onwards he also worked as editor of the spd central organ Vorwarts, where, together with Heinrich Strobel, he was considered an anti-revisionist spokesman for the Left. In 1907, Cunow became a lecturer at the spd party school in Berlin, teaching alongside Rudolf Hilferding, Rosa Luxemburg and Franz Mehring, who also wrote a review of the first volume of Theories of Surplus-Value.¹ His theoretical works included several studies in anthropology and a history of the revolu­tionary press during the French Revolution.

Heinrich Cunow’s Review of Karl Marx, Theories of Surplus-Value, Parti

1 The Beginnings of the Theory of Surplus Value up to Adam Smith^[544]

For more than two decades the earth in the silent Highgate Cemetery has been covering the mortal remains of the brilliant thinker and fighter Karl Marx, but from the mind of that man a vibrant, active force still emanates. His thoughts not only guide the working class in its struggle; they are also the inexhaustible source from which economic science - however much this may be denied for political reasons - draws its deepest insights. Just as Capital, Marx's life-work, has been the most important economic and literary event of the second half of the nineteenth century, so it is also an economic standard at the entrance gate to the twentieth century, and its influence is expected to endure as long as the capitalist economic system that it describes and analyses.

How often guild economists have critically ‘destroyed' this work in the nearly fifty years since publication of its first volume, and how many times this ‘de­struction' has been exultantly proclaimed by bourgeois newspapers! Yet while the writings of petty critics have mostly disappeared without a trace, and their names are forgotten, Capital still stands as a defiant rock in the surging seas. Entire economic schools have come and gone in the meantime. Where do we find today the liberal economic school, which, as an offshoot of Adam Smith's doctrines, dominated German liberal daily journalism in the 60s and 70s of the last century? Where is the historical school, [which in its time] was hailed by the peal of bells? It has outlived itself and become obsolete. It has accomplished some useful minor work that illuminated selected areas of capitalism's operation - small-scale hard labour - but not a single fundamental work.

The first volume of Marx's Theories of Surplus-Value - edited by Kautsky from the manuscript left by Marx - which is nothing but a continuation of A Contribution to the Critique of Political Economy, meets this need to a degree unparalleled by any other economic work of the recent past. When Marx published this work in 1859, he regarded it as the beginning of a long series of monographs, in which he intended to deal systematically, from a critical- historical point of view, with all the most important problems of bourgeois economy, such as the structure of capital, landed property, wage-labour, public finance, trade and the world market. From 1844, when he concluded in Paris that the political and legal life of every historical epoch is determined by its material conditions of existence, by its economic character, Marx immediately threw himself into the study of political economy, as his reply to Proudhon's Systeme des contradictions economiques ou Philosophie de la misere proves. He eagerly continued those studies after his expulsion from Paris to Brussels, and then to London in 1850. The fruit of those studies was a series of short sketches, initially written to clarify his own ideas and to gain a thorough overview of the previous course of development of economic theory, in which Marx dealt with various issues of political economy in more or less detail and from a critical- historical point of view.

Marx prepared some of these works for the press in the winter of 1858-9. He combined them with the previously mentioned Contribution to the Critique of Political Economy, which deals, in an initial book, with simple commodity cir­culation and monetary circulation. They were to be followed, in a second book, by a further section on the general structure of capital; and this, in turn, was to be followed by a book on landed property and by another on wage-labour.

That was Marx's original plan, which he seems to have maintained until 1863. Then he dropped it and decided not to discuss the problems of political economy in direct connection with a critique of his predecessors, as he had first intended, but first to develop his own theories systematically, in their logical connection, and only later to follow this exposition with a history of economic theory in a special volume. Pursuing this new plan, in 1867 Marx published the first volume of Capital. He announced in the preface that this first book, analysing capital's process of production, would be followed by a second book on ‘the process of circulation of capital' and the ‘total process of capitalist production' (the conversion of surplus value into the various forms of profit), to which then would be added, as a third and final volume, a critical history of economic theories.

As we know, Marx's plan was not carried out even in this form. Following Marx's death in 1883, Friedrich Engels decided - if he did not want to abbreviate greatly Marx's posthumous manuscripts for the second volume, and to rework large parts of them completely - that instead of adding one additional book to the first one he had to add two more volumes on the process of capital's circulation and on the metamorphoses of surplus value, thus raising the total to three books.^[545]

Because of his own sudden death, it was not given to Engels to edit the fourth volume. His place was taken by Karl Kautsky, at the request of Marx's heirs, because Engels had still not appointed a successor before his death. According to Engels's plans for the edition, Marx's posthumous manuscripts should have been turned, after eliminating the remarks already contained in the second and third volumes of Capital, into a Critical History of the Theory of Surplus­Value. In filial respect for Engels's wishes, Kautsky at first tried to follow these intentions, but in vain. In Marx's manuscript, the controversies and criticisms are bound up with historical digressions and with his own follow-up of the train of thought begun by the authors he criticises. Those elements are too closely interwoven - mutually complementing and determining each other - for them to be removed from their context without mutilating and injuring Marx's work. Most parts of the manuscript had to be completely rewritten, expanded and cast in a different form, or else Engels's plans had to be abandoned and Marx's draft had to be published while preserving its inner connection. What to do? A revision of the manuscript would have corresponded more to the intentions of Marx and Engels; eliminating some passages, which were similar to others appearing in the first three volumes of Capital, would have limited the extent of the new work, giving a better structure to the material and filling existing gaps - but a ‘fourth volume of Capital’, composed in this way, would not have been Marx's history of the theory of value and surplus value but rather a history of those theories, written by Kautsky on the basis of Marx's conception.

However tempting it must have been for Kautsky to write the fourth volume of Capital, and thus to link his name forever with the standard work of eco­nomic science, he decided to publish the manuscript in Marx's version. And for this modesty, for this voluntary demurral, he deserves our most heartfelt thanks. Although some things appear incomplete in the present work - upon reading it, one would often wish for some interrupted thoughts to be followed through and for the logical conclusion to be drawn from them - the first volume of Theories of Surplus-Value, as edited by Kautsky, appears as a great achieve­ment and is fascinating in its overall impression. It is an unfinished intellectual structure, yet that of a brilliant architect; its subtle and yet massive lines, its boldly emerging pillars and columns, betray in their proud simplicity the hand of the Master, contemptuous of all petty flourishes and of all modern show­manship. In a way, the study of this structure - indeed, precisely of its unfin­ished parts - gives even greater pleasure than the study of Capital, for in the latter we find readily elaborated and polished forms, while the work that has recently appeared allows us an intimate look into Marx's intellectual workshop; it shows us Marx at work, the young Marx, whose impetuous urge to know and create had not yet been affected by later persistent and exhausting illnesses.

10

If the impression that the book made upon me is indicative of the impact it will have upon other socialist readers, then its success will be considerable despite some passages that are difficult to understand. I did not set out to read it with particular interest. If I have to be honest, at first I did so only because

1 had to, because I assumed that it would be merely a repetition, in different form, of remarks contained in individual chapters of the first three volumes of Capital. But the more I continued to read it, the more it fascinated me. A part of youth returned to life within me, a time when I first knew only a few socialist economic writings and yet, as befits a young businessman, was caught up in bourgeois economic doctrines and read for the first time the first volume of Capital - which, though I only half-understood much of it, opened up a new and different world for me.

But next to Marx we owe to the editor of the work, to Karl Kautsky, the fact that Theories of Surplus-Value appears today in this form. Kautsky assembled the book from an illegible, continuous manuscript, one lacking divisions into chapters or sections and containing countless digressions, repetitions and ref­erences to things already said. This was by no means an easy and minor task, because he had to string together remarks, scattered over 1,472 closely-written quarto pages, according to their conceptual connection, so that not only was the historical succession of the theories respected, but the whole thing was assembled into a logical structure, progressing from the simple to the com­plex - and yet giving to Marx what is Marx's. Kautsky managed to accomplish this task so that the reader, if he does not pay attention to the footnotes, hardly notices the composition of the text from all sorts of fragments.

2 The English Mercantilists

The first volume of Theories of Surplus-Value, assembled by Kautsky from the manuscript, deals with the beginnings of the theory of value and surplus value up to Adam Smith. Kautsky promises to publish in the second volume Marx's critique of Ricardo's Principles of Political Economy, while the third volume will critically follow the wanderings of Thomas Robert Malthus and describe the dissolution of the Ricardian School. Most of the first volume deals with Smith's conception of the theory of labour value and surplus value; with the transformation of surplus value into business profit, ground rent and [the interest on loan] capital; and with Smith's definition of productive labour. It is preceded by a brief characterisation of Physiocracy and of the English mercantilists' original views on surplus value, which constitutes, as it were, a kind of historical introduction to Smith's ideas and makes their connection with Physiocratic conceptions stand out more sharply.

The first 33 pages of the book, developing the concepts of value on the part of English mercantilism, are not found in Marx's manuscript in the context in which Kautsky presents them to us.^[546] Kautsky pieced them together from fragments that Marx interposed in his criticism of the theories of Smith and Ricardo, in order to show how far back the first attempts in that direction go in the history of English political economy. Marx takes into consideration Sir William Petty, Charles d'Avenant, Dudley North, John Locke, David Hume, and Joseph Massie. The most detailed assessment is afforded to William Petty, the ‘founder of modern political economy' as Marx calls him. With a certain rever­ence, which clearly shows how highly he values Petty as an economic theorist, Marx describes his determination of the value of commodities by the socially necessary labour required for their production; his distinction between natural prices (exchange-value) and the respective market price (trueprice currant); his conception of ground rent as the surplus that labourers working the land pro­duce beyond their cost of maintenance; and his calculation of the value of land according to the magnitude of rent, taking as a basis John Graunt's work on the Bills of Mortality, which were generally considered correct in England at that time. As the basis for his criticism, Marx takes Petty's Treatise on Taxes and his Political Arithmetick. Marx seems to have been unacquainted, in the prepara­tion of this manuscript, with Petty's Quantulumcunque concerning Money, pub­lished in 1682 and mentioned in Engels's Anti-Duhring, which in a way consti­tutes the culmination of Petty's development because it summarily deals with the relation between the value of commodities and the value of money (coin).

The continuous presentation of the theories of surplus value first appears in Marx's manuscript with the criticism of Sir James Steuart, which, in my opinion, is the weakest part of the book. As in his 1859 Contribution to the Cri­tique of Political Economy, so also in this document Marx sees Steuart - in my view exaggeratedly - as the scientific interpreter of a refined mercantilism, who closed the pre-classical period of English political economy and, as the last in a series, synthesised mercantilist principles into a carefully thought out system and employed a more precise formulation. This view is certainly true throughout. But Steuart^js major work, An Inquiry into the Principles of Polit­ical Economy, demonstrates that he was already strongly influenced by French Physiocracy, which he encountered during the years of his stay in France. And this influence consists of the fact that Steuart's ‘system' not only incorporates some physiocratic views as ornaments, but that he also, while trying to integ­rate them logically into English mercantilist views, actually came up with many new concepts and insights. His conclusions, however, are on the whole genu­inely mercantilistic. This is partly explained by the fact that he repeatedly fails to find the synthesis between differing mercantilistic and physiocratic views, but still more by the postulates from which Steuart proceeds in his investiga­tions and by the purposes that he pursues with them. We can only understand the tendencies of English political economy in the seventeenth and eight­eenth centuries if we realise that its main representatives were not scholars, who sought to achieve a scientific reputation through their investigations, but mostly traders or civil servants working in public administration, the commer­cial service, the customs administration, or the colonial and financial offices, where it was considered axiomatic that Britain was ideally suited by its loca­tion, nature and historical development to be a manufacturing and commercial country like no other. The main purpose of their investigations was to show the vigorously developing English commercial bourgeoisie how to achieve this goal. Even in Petty we find this trade-policy and commercial character sharply defined. In his character, if not by profession, Petty was quite the English mer­chant; as private secretary of Henry Cromwell (son of the famous Oliver), he was largely responsible for the latter's financial and economic matters, espe­cially when [Cromwell] took over the government of Ireland. D'Avenant was a financier and Inspector General of British foreign trade; Dudley North was first a wholesaler, then Commissioner-General of Customs and administrator of the English crown lands; Richard Cantillon was a merchant and later a banker; and even John Locke wrote his works on political economy as a well-appointed offi­cial of the British Colonial Office.

This character of English mercantilism also explains its deep understand­ing of the labour theory of value as well as of international trade issues. In its tendency, so to speak, it was only a theoretical reflection of the replacement of the rule of British feudalism by that of the urban trading and manufacturing bourgeoisie, [a transformation] brought about by the great English Revolution of the seventeenth century, which led to the victory of the bourgeoisie of the commercial cities, especially London, over the regime of the Stuarts, which was supported by the ‘cavaliers' and the feudal-Catholic clergy. And its theoretical definitions were not mere word play but rather polemical weapons, sharpened by a consciousness of class antagonisms in the struggle against feudal landown­ership and its outdated conception of the state. Although he was a Scottish landlord, even James Steuart considered England to be the predestined com­mercial state, and his work specifically pursued the goal of providing England with a scientific guide for its economic policies - a fact already proclaimed in the subtitle of his work: An Essay on the Science of Domestic Policy in Free Nations (he particularly considered England to be such a ‘free' nation). From this point of view, however, some of the French Physiocratic views naturally appear to Steuart to have been derived from other economic conditions, inap­propriate for Britain's commercial purposes and unworthy of attention. But secondly, Steuart wants to obtain practical results for English economic policy. He therefore often abandons his theoretical discussions as soon as he thinks he has attained such a result. Investigations for their own sake do not interest him.

Despite this undeniable incompleteness and one-sidedness, one finds in Steuart really brilliant insights into the economic conditions of his time, in­sights that Marx definitely underestimates. Marx says, for example, on page 220 of his book:

Steuart does not share the illusion that the surplus-value which accrues to the individual capitalist from selling the commodity above its value is a creation of new wealth. He distinguishes therefore between positive profit and relative profit.

Positive profit, implies no loss to any body; it results from an augmentation of labour, industry, or ingenuity, and has the effect of swelling or augment­ing the public good... Relative profit, is what implies a loss to some body; it marks a vibration of the balance of wealth between parties, but implies no addition to the general stock. The compound is easily understood; it is that species of profit., which is partly relative, and partly positive. both kinds may subsist inseparably in the same transaction. (Principles of Political Economy, Vol. I, The Works of SirJames Steuart, etc., ed. by General Sir James Steuart, his son, etc., in 6 vols., London, 1805, pp. 275-76.)

Positive profit arises from ‘augmentation of labour, industry and ingenu­ity'. How it arises from this Steuart makes no attempt to explain. The fur­ther statement that the effect of this profit is to augment and swell ‘the public good seems to indicate that Steuart means by it nothing but the greater mass of use-values produced in consequence of the development of the productive powers of labour, and that he thinks of this positive profit as quite distinct from capitalists' profit - which always presupposes an increase of exchange-value.^{[547] [548] [549]}

This definition of ‘positive profit' shows that Marx only half understood Steuart's conception of surplus value. Referring to primitive land cultivation, Steuart proceeds from the basic view that only the labour providing a surplus product [Mehrertrag: additional yield, increase in yield] can be considered to promote culture - i.e. only the labour creating a greater quantity of use-values than the ones consumed in production for the maintenance of the tiller of the soil and for amortisation of the wear and tear of the work tools. If labour does not produce this surplus product, if the product covers only the amount of use­values consumed in production, then population cannot increase and produc­tion cannot expand, because the fund necessary for this is lacking. As Steuart explains, ‘the produce, therefore, of agriculture must be estimated, not accord­ing to the quantity of fruits only, but also according to the labour employed to produce them'; and he goes on to say that the most advantageous agriculture is the one supplying the largest product in proportion to the labour employed in production?³

But where does this surplus product come from? According to Steuart, it comes from the fact that the labourer works longer than he would have had to in order to produce his means of subsistence; that he performs supplementary labour - Steuart calls it ‘additional labour?⁴ The production surplus is small at lower stages of agriculture, but it increases with the increase in the skill of the workers and the appropriateness of the tools, or with general productivity. If this surplus product of labour is immediately consumed individually by the worker, it produces no profit in Steuart's view. Only the part that is somehow converted into capital or, as Steuart put it, in a genuinely mercantilist form, into money, produces a profit, thereby increasing ‘the good of society'.

Admittedly, Steuart never goes beyond that insight; and it may be the fact that he became stranded in this ingenious formulation that led Marx to under­estimate him. Steuart never drew the conclusion that, if the worker performs additional labour, the surplus product actually represents surplus labour. Instead, he conceives that ‘surplus' in naive Physiocratic terms, as a product obtained by labour but actually springing from the ‘fertility of the soil'. And still less did he draw the conclusion that the ‘additional labour' is unpaid labour. When reading his work with the benefit of hindsight, it often seems as though he failed, beyond a certain point, to draw the necessary consequences from his inferences. Nevertheless, it is clear from Marx's remarks that he underrates the significance of Steuart's ‘positive profit' when he says that it ‘appears' as though Steuart had understood by it only the ‘larger mass of use-values' resulting from the growth in productivity. Steuart actually understands it to mean the surplus product obtained in production, which, as an excess of production returns over production costs, is again partly applied to the social process of production and leads to its expansion.

In addition to this ‘positive' (real) profit obtained in production, according to Steuart, there is also a ‘relative', commercially obtained ‘profit', the profit upon alienation (sales-profit), arising from the fact that goods are ‘sold' above their value in trade. This profit is not positive; it does not spring from a growth in commodity values, but from their being over-priced. What one party wins, the other must lose. Accordingly, the total wealth of a country only changes if this profit is not made on the home market but in foreign trade.

Relative profit, is what implies a loss to somebody; it marks a vibration of the balance of wealth between parties, but implies no addition to the general stock. Relative loss is what, on the contrary, implies a profit to somebody; it also marks a vibration of the balance, but takes nothing from the general stock.^[550]

This misunderstanding of the nature of Steuart's ‘profit' led Marx to another misconception.

Profit, that is, surplus-value, is relative and resolves itself into ‘a vibration of the balance of wealth between parties'. Steuart himself rejects the idea that surplus-value can be explained in this way. His theory of ‘vibration of the balance of wealth between parties', however little it touches the nature and origin of surplus-value itself, remains important in consider­ing the distribution of surplus-value among different classes and among different categories such as profit, interest and rent.

That Steuart limits all profit of the individual capitalist to this ‘relative profit', profit upon alienation, is shown by the following:

The ‘real value', he says, is determined by the ‘quantity' of labour, which ‘upon an average, a workman of the country in general may perform. in a day, a week, a month'. Secondly: ‘the value of the workman's subsist­ence and necessary expense, both for supplying his personal wants, and. the instruments belonging to his profession, which must [...] taken upon [...] average as above...' Thirdly: ‘... the values of the materials...' (Steuart 1767, Vol. 1, pp. 182-183). ‘These three articles being known, the price of manufacture is determined. It cannot be lower than the amount of all the three, that is, than the real value; whatever is higher, is the manufacturer’s profit. This will [...] be in proportion to demand, and therefore will fluctu­ate according to circumstances’ (Steuart 1767, Vol. 1, p. 183).^{[551] [552]}

In fact, this co-determination of the ‘real' value by wages and raw materials is not, as Marx argues, confused, but is based upon an insight into the production process that can be called almost brilliant in light of the state of economic science at that time. Steuart wants to show in that chapter, which bears the title ‘How the Prices of Goods are determined by Trade', what value components go into the ‘price' regulated by supply and demand?⁷ His train of thought is this: first to be considered is maintenance of the worker and of the tools he uses, as well as the price of the raw materials used - more precisely, replacement of the variable and constant capital spent. But, with this determination, the constituent elements of value are still incomplete; to them should be added the value of the surplus labour that the worker imparts to the product beyond the value of the means of subsistence he has received. How can we determine this addition of value? Steuart offers the following cumbersome definition:

The first thing to be known of any manufacture when it comes to be sold, is, how much of it a person can perform in a day, a week, a month, according to the nature of the work, which may require more or less time to bring it to perfection. In making such estimates, regard is to be had to what, upon an average only, a workman of the country in general may perform, without supposing him the best or the worst in his profession; or having any peculiar advantage or disadvantage as to the place where he works.^[553]

Next to wages, the value of raw material and the wear and tear of tools, Steuart therefore also wants to take into account the rate of average labour perform­ance, or the productivity of labour. Though certainly naive and mistaken, this definition is rooted in a correct awareness that the ‘real’ value (i.e. the exchange-value) of a commodity not only refunds the production costs, but that to those costs is also added, in the course of production, a further increase in value (surplus value). If a commodity is sold below the sum of these value components, then its price, as Steuart says, falls short of its value; if it is sold more expensively, the price will be above its value and the manufacturer who obtained such a price will make a special sales-profit (profit upon alienation). The ‘real’ value of a commodity thus includes the ‘additional’ value created in production, but not the profit upon alienation, as Steuart says at the beginning of the chapter under consideration: ‘In the price of goods, I consider two things as really existing, and quite different from one another; to wit; the real value of the commodity, and the profit upon alienation’?^[554]

But if Marx perhaps underestimated Steuart’s theoretical achievement in this respect, he would not have been Marx, the founder of the materialist conception of history, if he had not, on the other hand, also identified and recognised Steuart’s historical understanding of the capital-formation process and of the bourgeois character of commodity production in England in the eighteenth century. Even in his Introduction to a Contribution to the Critique of Political Economy (Kautsky edition),^{[555] [556] Marx notes that Steuart progressed beyond his predecessors.21}

3 The Character of Physiocracy

Marx's voice resonates with full force for the first time in his characterisa­tion of Physiocracy: a section that, in its concise and accurate presentation, far surpasses all the existing monographs dealing with Physiocracy and its place in the development of political economy. Marx gives no overall picture of Physiocratic theories; he limits himself to an outline of their main prin­ciples and the conclusions drawn from them. But just as a gifted illustrator is often able to represent the characteristic features of a personality more vividly in a few strokes than another might do in a fully executed portrait, so Marx also knew how to sketch with the utmost clarity the connection of ideas characterising the Physiocratic worldview. The basic conceptions consti­tuting the foundations of the Physiocratic intellectual structure emerge, as it were, plastically and tangibly. Marx has a great advantage over all the bour­geois economists who have dealt critically with Physiocracy, an advantage that elevates his standpoint from the outset and gives him a much larger perspect­ive for assessing the Physiocratic system. That advantage lies in his histor­ical sense, which reveals to him the development of Physiocratic doctrines in their connection with the particular development of the French economy in the eighteenth century. Moreover, this standpoint enables him to show that the conceptions of Physiocratic theorists, despite the semi-feudal conclusions they drew from them, already contained the basic elements of English clas­sical political economy. Compared with Marx, for instance, how insignificant appears Professor August Oncken, Berne's economic luminary and the special researcher in the field of Physiocratic theory, officially recognised as such by the scientific guild. In a painstaking and tormented work, which contrasts with Marx's brilliant conceptual sketch as some pedantically completed, ordinary little genre picture would with the brilliantly powerful strokes of Rembrandt, Oncken digs up Physiocratic formulations and calls their juxtaposition a ‘His­tory of Physiocracy'.²² But this ‘history' lacks every historical perspective, every historical standard, and Oncken gets so lost in his search for Physiocratic wis­dom that a few years ago he famously undertook to prove the legitimacy of the agricultural demand for taxes on grain imports in present-day Germany with the help of Sir Josiah Child, Thomas Mun's reflections on the impact of British foreign trade on agricultural products, and Quesnay's plea for high corn prices.

22

but posited by nature. This illusion has been common to each new epoch to this day. Steuart avoided this simple-mindedness because as an aristocrat, and in antithesis to the eighteenth century, he had in some respects a more historical footing' (Marx1993, p. 84)]. [A reference to Oncken 1893. Oncken was the editor of Quesnay 1888].

According to Marx, the difference between the views of Physiocracy and mercantilism lies in the fact that the Physiocrats shifted the investigation of the origin of surplus value away from the sphere of circulation and into the sphere of immediate production:

In the Mercantile system, surplus-value is only relative - what one wins, the other loses: profit upon alienation or oscillation of wealth between different parties. So that within a country, if we consider the total capital, no creation of surplus-value in fact takes place. It can only arise in the relations between one nation and other nations. And the surplus realised by one nation as against the other takes the form of money (the balance of trade), because it is precisely money that is the direct and independent form of exchange-value. In opposition to this - for the Mercantile system in fact denies the creation of absolute surplus-value - the Physiocrats seek to explain absolute surplus-value: the net product. And since the net product is fixed in their minds as use-value, agriculture [is for them] the sole creator of it...^{[557] [558] [559]}

Thus the Physiocrats saw the production of surplus-value as the essence of capitalist production. It was this phenomenon that they had to explain. And it remained the problem, after they had eliminated the profit upon alienation of the Mercantile system?⁴

In fact, the progress of Physiocracy lies in this shift of the research focus, in the transfer of the investigation to the sphere of production. However, in the previously mentioned English mercantilists, we already partially find the idea that, in addition to the commercially obtained relative profit, there is also a profit or ‘surplus' in agriculture that consists of an excess of the production yield over the use-values that went into production. In this respect, we have also just seen how far James Steuart was able to go beyond the original mercantilist views; but even in Petty we already encounter the insight that the labour applied to cultivation of the soil provides a surplus, and that wherever the tiller of the soil is not simultaneously its owner, this surplus product devolves on the landowner as ground rent; [an insight] which Petty postulated in the totally physiocratic-looking sentence: ‘Labour is the Father and active principle of Wealth, as Lands are the Mother'?⁵

All such findings, however, never went beyond their initial stages. They did not lead to a closer examination of the surplus product obtained in agricul­ture, or more accurately, of profit - not because the English economists of the pre-classical period did not have the necessary acumen, but because Eng­land’s economic development directed their investigations into other chan­nels. Since the days of Cromwell, and especially the accession of William of Orange, England had developed into the first commercial country in the world. The former predominance of Spain and the Netherlands as commer­cial states was destroyed, and French naval power was broken. The English flag ruled the seas. England’s foreign trade, her manufacturing industry, and her colonial possessions experienced a huge boom. Treasures flowed from all parts of the world into its port cities, and from there travelled on to the continental countries. The abundant profit that those commercial and colo­nial enterprises yielded was almost palpable in the constantly swelling num­ber of those who participated in such undertakings and obtained enormous wealth. In the face of such obvious success, which soon found expression in the dogma that England was destined by its geographic position to be the world’s commanding commercial state, a doctrine [such as Physiocracy], which put forward the claim that trade and a flourishing industry were of second­ary importance for the increase of national wealth, necessarily seemed absurd. The task of the English economists (who, moreover, as already indicated, were directly interested in the commercial status of England, mainly as merchants and bankers or as officials of the British Trade and Colonial Office) rather appeared to be to investigate the principles according to which English trade had to be pursued in order to promote the country’s wealth as much as pos­sible.

Their investigations, therefore, followed that direction; and it is most inter­esting to see how the English economists, influenced by the views then prevail­ing in England, came to very different conclusions even when they proceeded from basic principles similar to those of the earlier French Physiocrats. For example, while French Physiocracy concluded that trade and industry were ‘sterile’, based upon the idea that only agriculture supplies a production sur­plus, James Steuart, raising the question of what happens to the agricultural surplus product if it does not find employment in trade and a market among the industrial population, came to the conclusion that agriculture can only spread and bring about an increase in population if it develops ‘in line with industry’. Whereas in the theories of French Physiocrats the industrial middle class appears as a kind of parasite on rural landownership, in Steuart’s view the extension of this middle class appears as a condition for the development of agricultural production.

The situation of France's foreign trade and manufacture in the middle of the eighteenth century was totally different. Both had increasingly lost their previous international importance. Completely pushed into the background by England, ruined by war and economic mismanagement, and loaded with enormous debt, the country appeared to have no other way to achieve a better economic position than to increase the cultivation of the soil and its yields. But this also raised the question of how best to increase this yield and its surplus over the costs [of production]. And that question led the Physiocrats to investigate further the nature of the surplus product and its distribution.

Marx critically follows the path of development that this investigation took among the various representatives of Physiocracy. He offers a short outline of the general nature of the Physiocratic system, dealing successively with the views of Turgot, Ferdinando Paoletti, Pietro Verri, Theodor Schmalz, the Count du Buat [Louis-Gabriel, Comte du Buat-Nanςay], Necker, etc. He shows in detail how the surplus product, the so-called prodult net’, is initially deemed by the older Physiocrats to be only a surplus of use-values and is not conceived as sur­plus labour (i.e. as the product of unpaid labour) but rather as mere gift of beneficent nature. Thus the surplus product appears in the Physiocratic sys­tem as a gift from mother earth that is simply identified with ground rent, so that industrial profit and the interest on money only appear as different headings into which ground rent is distributed among landowners, industri­alists and moneylenders in the circulation process - [i.e. those two categories of income, industrial profit and the interest on money, are regarded as] a trib­ute of agriculture to industry. But Marx was too much an historian, as well as an economist, to be satisfied with such critical references. In brief historical digressions, interspersed in the main text, he explains how the Physiocratic system - by regarding rural landowners as capitalists buying labour power on the one hand, and, on the other hand, by drawing from the alleged sterility of industrial production the implication that industrial enterprises should not be burdened either by taxes or by state intervention in their competition with each other - resulted, despite its feudal trappings, in the promotion of capital­ist production:

In the conclusions which the Physiocrats themselves draw, the ostensible veneration of landed property becomes transformed into the economic negation of it and the affirmation of capitalist production. On the one hand, all taxes are put on rent, or in other words, landed property is in part confiscated, which is what the legislation of the French Revolution sought to carry through and which is the final conclusion of the fully developed Ricardian modern political economy. By placing the burden of tax entirely on rent, because it alone is surplus-value - and consequently any taxation of other forms of income ultimately falls on landed property, but in a roundabout way, and therefore in an economically harmful way, that hinders production - taxation and along with it all forms of State intervention, are removed from industry itself, and the latter is thus freed from all intervention by the State. This is ostensibly done for the benefit of landed property, not in the interests of industry but in the interests of landed property.

Connected with this is laissez faire, laissez aller; unhampered free com­petition, the removal from industry of all interference by the State, mono­polies, etc. Since industry [as the Physiocrats see it] creates nothing, but only transforms values given it by agriculture into another form; since it adds no new value to them, but returns the values supplied to it, though in altered form, as an equivalent; it is naturally desirable that this process of transformation should proceed without interruptions and in the cheapest way; and this is only realised through free competition, by leaving capital­ist production to its own devices. The emancipation of bourgeois society from the absolute monarchy set up on the ruins of feudal society thus takes place only in the interests of the feudal landowner transformed into a capitalist and bent solely on enrichment. The capitalists are only cap­italists in the interests of the landowner, just as political economy in its later development would have them be capitalists only in the interests of the working class.^[560]

The conclusion of the chapter on the Physiocrats is taken up by an explanation of Quesnay's Tableau economique. Marx simplifies it considerably. He summar­ises the fourteen mutual acts of circulation, postulated by Quesnay in the ori­ginal Tableau, into five, but, on the other hand, he makes an interesting addition to it by not letting circulation start only in the act with which Quesnay initiates it (the payment of the annual rent by the tenants to the landowner), but also by assuming several other starting points for the circulation process and then investigating how, from these starting points, circulation appears to the tenant, to industrial capitalists and to the workers - an investigation providing an inter­esting complement to Marx's remarks on the metamorphosis of commodities contained in the first volume of Capital (Part One, Chapter 3.2.a).

4 Adam Smith

Adam Smith's famous book, An Inquiry into the Nature and Causes of the Wealth of Nations, whose concepts of value and surplus value Marx criticises in detail in the second chapter^[561] of this book, represents, so to speak, a synthesis of the Physiocratic views on surplus value and the English mercantilists' theory of labour value and prices. The notion of surplus value, or rather of the profit identified with it, as ‘profit upon alienation', naturally drove the English mer­cantilists to study exchange, i.e. the transformation of commodities into money and the merchants' re-conversion of their money into commodities. And the study of that process again led them to recognition of a continuous fluctu­ation of commodity prices in trade, without the properties [of commodities], their usefulness, having changed. As a result, the mercantilists soon began to distinguish between two values: a market value, determined by market condi­tions (price, extrinsicvalue, contingentvalue, currentprice, etc.), and an intrinsic value, inherent in the commodity as such (intrinsic value, real value, natural value, etc.).

The ‘inner', ‘real' value was initially conceived as a kind of use-value due to utility, but very early on it was recognised (in unrefined form, for example, already by Rice Vaughan) that even if every commodity must have a use-value in order to find a buyer in the market, the extent [Grad] of this use-value is not decisive for the price level. Vaughan already presented the wages of ordinary workers (the price of labourers) as the real factor determining the price of goods. With his followers, especially Petty, the place of wages, as measure of the exchange-value of goods, is taken more and more by the amount of labour measured in labour time, without, however, properly distinguishing between the amount of labour (the necessary labour time) and the value of labour [power]. On the contrary, time and again we find - most notably with William Harris - the desire to calculate the value of commodities on the basis of the ‘price of labour' (wages).

The constant reappearance of this confusion - often in the same author who had previously determined the value of goods by the labour time required for their production - is explained very simply by English industry's stage of devel­opment. During the seventeenth and first half of the eighteenth century, we find only the first imperfect approaches to actual large-scale machine produc­tion in England. Even manufacturing industry had achieved some importance only in a few regions. Craft-like small-scale production outweighed them all by far. In this type of operation, in which the producer usually acts as the factory owner, worker, landowner and seller of his product, the value of the commodities actually is mostly equal to the value of the labour to be realised in the commodity price [gleich dem sich im ‘Arbeitspreis’ realisierenden Werte der Arbeit]. If he sold the product at its value, the craftsman, who devoted to the manufacture of a product ten hours of work, had to get exactly the amount of money required to buy the product of another ten hours of labour performed under the same circumstances. Because money served only as a medium of exchange, equal amounts of labour were thereby actually exchanged against each other. Each commodity simply materialised in another; and with the product that each of the small-scale producers received in exchange, they could again purchase - provided that exchange always took place at the commod­ities’ values - other commodities containing ten hours of labour; or (if, for example, the desired product was not ready, but had first to be manufactured by craftsmen) they could purchase ten hours of living labour yet to be objectified [noch nichtvergegenstandlichter Arbeit]. In the latter case, the ‘value of labour’ (the ten working hours) was exchanged directly against the ten-hour labour product. Value of labour and value of the commodities thus appear here as the same thing, as a mutual measure of exchange. The basic difference between those two values could first be clearly grasped only at that stage of develop­ment of capitalist economy in which the worker was no longer the owner of the means of production and of the product he created, and where the seller of that product was no longer the worker but the owner of the means of pro­duction who bought his labour power, the manufacturer. Indeed, that situation already existed in England in the eighteenth century, but small-craft individual production was still dominant.

To this should be added a second factor. To the extent that an historical view can be found in the English mercantilists, it consists of the fact that they look at the economic stage of their own time only as a continuation and a mere complication of an economic system existing, in its general outlines, in an unchanged form since the beginning of all culture; and from this they drew the conclusion that, in order to recognise those general outlines, they had to go back to those original pure conditions. This view was advanced most pro­nouncedly by James Steuart. Just as liberal vulgar economy was later to derive its naive concepts gladly from Robinson Crusoe, so Steuart, to exemplify his statements, fell back on the primitive agricultural forms of medieval England or even of the biblical patriarchs.

The French Physiocrats paid no heed to the labour theory of value, although they were sometimes quite familiar with English mercantilist doctrines. The shift in the analysis of surplus value, from the sphere of commodity circula­tion to the production process, made them look at exchange with different eyes. From the Physiocrats’ standpoint, only agricultural production (but not industry and trade) supplies a net product, a surplus product, and industrial and commercial profit was simply that part of the ground rent flowing, in the process of circulation, to the classes with non-agricultural occupations. From this standpoint, it appeared completely futile to find in goods an inner real value that was not identical with the market price. It was enough to know that prices were determined by supply and demand. It was more important to find out how, in the circulation process, the surplus product generated in agriculture was distributed among the various occupational classes [Erwerbsklassen], and the Physiocratic investigations moved in this direction. Quesnay’s table also serves this purpose. The question of how the price of a commodity is related to exchange-value, and of which factors determine the latter, was thus virtually disregarded by the Physiocrats.

The importance of Adam Smith lies in the fact that he recognised Physio­cracy’s neglect of the theory of value as a failure of this system; that he added to the English mercantilist theory of labour value the Physiocratic views on surplus value; and that, by trying to combine them both logically, he adap­ted them to the contemporary economic conditions of England, which were the most advanced in the world. This combination explains both the fact that Smith often suddenly goes backwards and forwards between mercantilist and Physiocratic views, and that he offers directly contradictory definitions of the same economic phenomena and relationships - often without being conscious of the contradiction. His overcoming of Physiocracy is far more practical than theoretical. He recognises that the theoretical conclusions of the Physiocratic economists do not agree with the phenomena of British economic life in his time; and when he confronts Physiocratic abstractions with actual conditions, he often makes the proper corrections and additions. But his insights into the inadequacy of Physiocratic doctrines are not solid or clear enough to enable him to overcome those doctrines theoretically, i.e. to prove the falsity of their individual premises and conclusions. He recognises that in many Physiocratic inferences there is a mistake, and sometimes he even sees where it lies, but for the most part his insight is not sufficient to recognise it as such in the deduc­tions of the Physiocratic theoreticians and to replace it by another mediating moment [Mittelglied: mediating link, middle term].

Adam Smith’s theoretical helplessness clearly appears in his critique of Physiocracy (Book iv, Chapter 9: ‘Of the Agricultural Systems, or of those Sys­tems of Political Economy, which Represent the Produce of Land, as either the Sole or the Principal, Source of the Revenue and Wealth of Every Country’). For instance, he did not confront the Physiocrats’ assertion that only agricul­tural labour is productive, i.e. that it alone yields a surplus, by positing general human labour, regardless of the form in which it was applied and in what products it appears, as value-creating, and then by demonstrating how the profits of industrialists spring from precisely the same source of surplus value as ground rent because the industrial worker also does not receive in his wages the full equivalent of his labour output. Instead, Smith has recourse to a feeble excuse by arguing that after all, even according to the Physiocratic view, the artists, manufacturers and merchants produce yearly as much as they consume, and thus at least preserve the national wealth. But such people can no more be called unproductive than a couple who have produced only two children:

We should not call a marriage barren or unproductive though it produced only a son and a daughter, to replace the father and mother, and though it did not increase the number of the human species, but only continued it as it was before. Farmers and country labourers, indeed, over and above the stock which maintains and employs them, reproduce annually a net produce, a free rent to the landlord. As a marriage which affords three children is certainly more productive than one which affords only two; so the labour of farmers and country labourers is certainly more productive than that of merchants, artificers, and manufacturers. The superior produce of the one class, however, does not render the other barren or unproductive.^[562]

Smith's partiality for the views of the Physiocratic system, and his helplessness vis-a-vis their argumentation, can hardly be identified more clearly than in this passage from his major work. Yet this is the same Smith who, in other places, defines surplus value as unpaid labour, as the part of labour that the owners of the means of production, both in industry and in agriculture, appropriate in their exchange with living labour - the same Smith who regards ground rent and profit as equivalent forms of surplus value: a strange contradiction whose explanation, however, is very simple. His keen observation of the economic conditions of his time, and his pronounced Anglo-bourgeois instincts, lifted Smith above the Physiocratic system; but to dismantle that system critically, to draw a clear theoretical dividing line between it and his own system - that he could not do.

In his critique, Marx brings out sharply this theoretical dependence of the founder of classical political economy on French Physiocracy, without in any way underestimating the enormous progress represented by Adam Smith's work. In his work A Contribution to the Critique of Political Economy, published in 1859, Marx already proves how Smith, in his determination of the value of commodities, mistakes the labour time required to produce commodities for the value of labour [power]; an equation that, as mentioned before, always shows up in English political economy of the eighteenth century. In the first volume of Theories of Surplus-Value, Marx continues the earlier criticism. He first examines under which conditions the amount of labour employed in the production of commodities actually corresponds to the value of labour, and then he goes on to show how Smith, recognising that the two no longer coincide in capitalist commodity production, does not come to the conclusion that they have shifted in their relationship to each other, but rather [mistakenly] infers (implying a whole series of other errors) that in capitalist economy labour also no longer determines exchange-value as an immanent measure of value, and that determination of the value of the commodities by the amount of labour contained in them thus actually applies only in the pre-capitalist economic period. And after Marx has analysed Smith's concept of value in this way, he deals with the sixth chapter of the first book of Smith's The Wealth of Nations, entitled ‘On the Component Parts of the Price of Commodities', and shows how Smith admittedly conceives surplus value as unpaid labour but, on the other hand, does not distinguish surplus value, as a separate category, from its particular manifestations as ground rent and profit; and how, by defining capital and landed property as sources of exchange-value alongside labour, in contradiction with his previous reasoning, he finally goes astray and sees not only wages but also ground rent and profit as constitutive elements of the commodity's price.

Needless to say, Marx's critique of the relevant chapters of Smith's work is in the highest degree positive. Marx never limits himself to a mere defensive position such as the one adopted by Adam Smith vis-a-vis the Physiocratic the­orists. While following Smith's faulty reasoning, Marx seeks to prove the falsity of his assumptions and inferences and, at the same time, to develop his own opposing views. Often those views even occupy a much larger space than the criticism. This is especially true of his treatment of Adam Smith's views on how prices can be resolved into wages, profit and ground rent. The contradictions in which Smith becomes entangled here give Marx the opportunity to invest­igate from all directions, in an appendix over 70 pages long, the question of the turnover and reproduction of constant capital (capital invested in means of production) in its relation to variable capital (capital invested in wages). Some of these explanations, worked out, completed and placed in a different context, later passed into the second volume of Capital, where they fill several chapters of Part Two on the turnover of capital, as well as in the nineteenth and twentieth chapter of Part Three on the reproduction and circulation of the total social capital. Despite the fact that this part of the first volume of Theor­ies of Surplus-Value in a way offers expositions that parallel those contained in the second volume of Capital, it is very interesting for those who wish to know Marx as an intellectual worker. If the relevant sections of Capital appear as care­fully thought out and constructed, the newly published earlier treatment of the problem has the advantage of greater freshness and a certain rough intellec­tual robustness; and the fact that Marx sometimes draws on one, sometimes on another of his predecessors, makes the presentation superior in immedi­acy and liveliness. Moreover, in the Annex [to the section on Adam Smith], individual aspects of the problem are dealt with far more extensively than in Capital: especially the various phases of the turnover of constant capital, as well as the relation between industrial consumption (consumption of means of production) and individual consumption (the consumption of foodstuffs [and articles for personal use]), and the various reverse effects of these two types of consumption on the process of industrial reproduction.

It appears here, much more clearly than in Capital, that even if Marx did not have the opportunity to formulate his own theory of crises, all the basic elements of such a theory are still to be found in his works; and he must have known very well himself how a shift in the relative magnitudes of industrial and individual consumption, induced by the development of capitalism, also had to change the nature of crises.

5 Productive and Unproductive Labour

As in most of his definitions, Adam Smith did not reach any single view in the determination of productive labour and its antithesis, unproductive labour. In the third chapter of the second book of his work, called ‘On the Accumulation of Capital, or of Productive and Unproductive Labour', two mutually contra­dictory views instead run side by side. And if we look for the causes of this contradiction, it is again evident here that Smith succeeded neither in eman­cipating himself from the ideas of the English mercantilists nor in consistently developing the Physiocratic definition [of productive labour] in a direction cor­responding to the character of capitalist production.

What is productive labour? The earliest English mercantilists initially de­rived the exchange-value of commodities from their usefulness to society and therefore saw in general use-value the real component of ‘inner' value - until their observation of the price movement of goods in trade revealed to them the amount of labour contained in the commodities as the factor [determin­ing] value. Thus the question: ‘What is productive labour?' at first found with them a simple answer: productive labour is labour serving to satisfy the needs of society. But what kind of labour serves this purpose? According to the mercant­ilists’ definition, productive labour was labour objectified in saleable use-values (commodities) that could therefore be turned into money, but especially in the activity of the merchants and sailors who sold those products in foreign countries at a profit, for they brought back to the country more money than the exported goods were worth on the domestic market and thus increased the national wealth. Therefore, says Petty, ‘Husbandmen, Seamen, Soldiers, Artizans and Merchants, are the very Pillars of any Common-Wealth’.^[563] Lowest among the productive occupational classes stood the peasants, the craftsmen were higher, and the merchants still higher insofar as they truly serve the sale of goods and are not just some ‘sort of gamblers’. Highest of all stood the sea­men who sold the goods abroad, because, as Petty says, ‘There is much more to be gained by Manufacture than Husbandry, and by Merchandize than Man- ufacture’.^[564] But a seaman, according to Petty, ‘is in effect three Husbandmen’ because he fulfils three functions: he is the carrier of the goods, their defender against attacks (i.e. at the same time a soldier), and thirdly, as a merchant, he brings foreign money into the country. ‘The Labour of Seamen, and Freight of Ships, is always of the nature of an Exported Commodity, the overplus whereof, above what is Imported, brings home mony, &c’^{[565] [566]}

By contrast, doctors, lawyers, civil servants, etc., and especially the clergy, are unproductive. Petty therefore recommends that celibacy be reintroduced for them and that their livings should be reduced by half. Even David Hume said: ‘Lawyers and physicians beget no industry; and it is even at the expense of others they acquire their riches; so that they are sure to diminish the posses­sions of some of their fellow-citizens, as fast as they increase their own'.32

This concept of productive labour followed just as logically from the eco­nomic conditions of England at that time and from their ideological reflection in mercantilism as the opposite view - that only labour applied to the cultiva­tion of the soil is productive - followed from the preconditions of Physiocracy. If the view that a country’s wealth stems from the benefits obtained from for­eign trade is abandoned, then the increase of that wealth can only be looked for in growth of the production surplus in agriculture, the produit net; and con­sequently the labour employed in industry and trade, even if it is essential for the total production process and useful, cannot be considered as a cause of an increase in national wealth, i.e. cannot be regarded as productive.

Had Smith held onto this view consistently in his economic system, he would have come to the following conclusion: ‘In the Physiocratic doctrine only agricultural labour is productive, because it alone supplies a surplus product that increases the wealth of society and makes possible a constant reproduc­tion of durable goods [Gebrauchsguter] on a wider basis. But, as I will now demonstrate, not only labour employed in agriculture but also labour applied in industry yields such a surplus product, and consequently industrial labour is also productive - particularly the labour that produces surplus value and through it an increase in the social capital'.

This is a very simple inference, and Smith actually reaches these conclusions; but, on the other hand, he is unable to cast off the views of the English economists of his time, according to which the only productive labour is that which creates marketable social use-values ([physical] commodities) and thus enriches the nation's circulation of goods. For example, he says at the beginning of the above-mentioned chapter on productive and unproductive labour:

There is one sort of labour which adds to the value of the subject upon which it is bestowed: there is another which has no such effect. The former, as it produces a value, may be called productive; the latter, unpro­ductive labour. Thus the labour of a manufacturer adds, generally, to the value of the materials which he works upon, that of his own mainten­ance, and of his master's profit. The labour of a menial servant, on the contrary, adds to the value of nothing. Though the manufacturer has his wages advanced to him by his master, he, in reality, costs him no expense, the value of those wages being generally restored, together with a profit, in the improved value of the subject upon which his labour is bestowed. But the maintenance of a menial servant never is restored. A man grows rich by employing a multitude of manufacturers: he grows poor, by main­taining a multitude of menial servants.^[567]

The contradiction of Smith's conception already appears clearly in the first few sentences. He distinguishes between labour that adds new value to the product in which it is objectified, that produces surplus value, and labour that does not have such a result. Accordingly, his brief definition [of productive labour] should have read: productive labour is that labour which produces a surplus value; unproductive labour, that which does not generate any surplus value. Instead of this definition, however, Smith defines the first kind of labour as ‘productive’ not because it creates surplus value but because it ‘creates a value' in general. And furthermore, he contrasts not the labour that yields a profit (or, more correctly, surplus value) with that whose employment brings no profit to the capitalists, but rather the labour of the industrial worker with that of servants, and he finds the real difference between the activities of both in the fact that the former reimburses his wages in the value of the objects he produces while the latter does not.

Clearly, two different kinds of labour are defined here as ‘productive’: first, the labour that yields a profit for the ‘master’ (the industrial capitalist), and secondly, any labour in general that is materialised in a commodity and repro­duces wages. The fact that this is no mere inaccuracy of expression is proved by the statement in a footnote to the last chapter of the fourth book, in which Smith, in his polemic against the Physiocrats, also defines as productive the labour that creates no surplus value but only replaces its own costs - and fur­ther by a subsequent utterance in the above quotation:

The labour of the latter [i.e. menial servants], however, has its value, and deserves its reward as well as that of the former. But the labour of the manufacturer fixes and realizes itself in some particular subject or vend­ible commodity, which lasts for some time at least after that labour is past. It is, as it were, a certain quantity of labour stocked and stored up to be employed, if necessary, upon some other occasion. That subject, or what is the same thing, the price of that subject, can afterwards, if necessary, put into motion a quantity of labour equal to that which had originally produced it. The labour of the menial servant, on the contrary, does not fix or realize itself in any particular subject or vendible commodity... The labour of some of the most respectable orders in the society is, like that of menial servants, unproductive of any value, and does not fix or realize itself in any permanent subject, or vendible commodity, which endures after that labour is past and for which an equal quantity of labour could afterwards be procured.^[568]

By contrast, Smith elsewhere fittingly stresses that the essence of capitalist production consists of the creation of surplus value or - as Smith says, because he does not regard surplus value as a special category - in the generation of profit. And he further emphasises in the same chapter that the industrial capitalist only employs and regards as productive that labour which not only replaces for him the capital invested in the production process but additionally yields him a profit:

Whatever part of his stock a man employs as a capital, he always expects it to be replaced to him with a profit. He employs it, therefore, in main­taining productive hands only; and after having served in the function of a capital to him, it constitutes a revenue to them. Whenever he employs any part of it in maintaining unproductive hands of any kind, that part is, from that moment, withdrawn from his capital, and placed in his stock reserved for immediate consumption.^[569]

Marx demonstrates these contradictions in detail from an historical and dia­lectical point of view, by comparing and analysing Smith's most important observations in that chapter of The Wealth of Nations and by showing the reas­oning underlying them. For him the concept of productive labour, as it appears in the different earlier economic schools, is not something accidental, a mere question of abstraction and definition, but the conceptual reflection of dif­ferent economic stages: an historical category. At each [historical] stage, that labour is considered ‘productive' that best corresponds to the conditions of existence of the prevailing economic system and its apparently appropriate direction. Thus, Smith's view is also to some extent historical. His definition of productive labour as ‘surplus value-producing' labour - as labour that, in the exchange against the variable part of the industrial capital (invested in wages), not only reproduces that part but also provides the capitalist with a surplus product - is closely associated with his conception of the origin of surplus value. And since Smith's views on surplus value were, so to speak, just an exten­sion of the Physiocratic conception of surplus value to capitalist industrial production, in his definition of productive labour he simply follows the course set by the Physiocrats, ‘freeing it from misconceptions and thus developing its inner core'. Marx penetratingly exposes this connection and, drawing the con­sequences following from this view, he defines productive labour as that labour, exchanged directly against capital, which turns the means of production into capital in the first place. Unproductive labour, on the other hand, is labour not exchanged against capital but directly against revenue, i.e. labour exchanged for wages, industrial profit, ground rent or interest. Or in other words: product­ive labour is labour purchased by a capitalist with a portion of his capital and employed in production in order to extract from it surplus value, while unpro­ductive labour, on the other hand, is labour that supplies someone with services or use-values for the satisfaction of his needs and is paidforfrom his income.

Where all labour in part still pays itself (like for example the agricultural labour of the serfs) and in part is directly exchanged for revenue (like the manufacturing labour in the cities of Asia), no capital and no wage-labour exists in the sense of bourgeois political economy. These definitions are therefore not derived from the material characteristics of labour (neither from the nature of its product nor from the particular character of the labour as concrete labour), but from the definite social form, the social relations of production, within which the labour is realised.^[570]

But [in Adam Smith] this view stands in sharp contradiction with another, which regards all commodity-producing labour, without distinction, as pro­ductive. This second view not only fails to take into account the production of surplus value, the foundation of the capitalist economy; it also includes the aspect of social usefulness, or rather of usability - for instance, when Adam Smith finds the unproductiveness of the servants' labour in the fact that this labour is not fixed in a durable object or saleable product, and that it disap­pears immediately at the moment of its execution.

By contrast, the first definition [of productive labour] disregards whether and to what extent the surplus value-creating labour is realised in some useful or useless, more or less easily marketable product. The capitalists do not care about the usefulness of the labour employed by them or about the usefulness of its product. From their point of view, as well as from that of the capitalist economy in general, it all depends upon whether the labour provides a surplus value. Therefore, the labour of a clown, who pulls off bad jokes in the service of his director but yields his employer a profit, is quite productive, although this labour is certainly not fixed in durable goods but disappears immediately after its execution. In contrast, the labour of a village tailor, whom the farmer takes into his house in order to help him make a pair of trousers, is unproductive because this tailor produces no surplus value for the farmer but only a use­value for the satisfaction of his needs.

Labour which is to produce commodities must be useful labour; it must produce a use-value, it must manifest itself in a use-value. And conse­quently only labour which manifests itself in commodities, that is, in use­values, is labour for which capital is exchanged. This is a self-evident premise. But it is not this concrete character of labour, its use-value as such - that it is for example tailoring labour, cobbling, spinning, weaving, etc. - which forms its specific use-value for capital and consequently stamps it as productive labour in the system of capitalist production. What forms its specific use-value for capital is not its specific useful character, any more than it is the particular useful properties of the product in which it is materialised. But what forms its specific use-value for capital is its character as the element which creates exchange-value, abstract labour; and in fact not that it represents some particular quantity of this general labour, but that it represents a greater quantity than is contained in its price, that is to say, in the value of the labour-power?¹

The productiveness or unproductiveness of labour is therefore not decided by its material result, but by whether it yields surplus value; a property that arises not from its content or from the usefulness of its result, but from the particular social form in which it was applied. The distinction [between productive and unproductive labour] expresses, as Marx says, a particular historical and social relation of production, and for that reason the concept of productivity also naturally changes in different economic systems.

But the capitalist economy is based upon the production of surplus value, without which it would be unable either to exist or to fulfil its social functions. If production of surplus value were to end, the whole contemporary economic regime would immediately cease to exist. Accordingly, under the present eco­nomic system, only that labour can be considered productive which makes possible the continuation and further development of that system.

In a special annex, Marx develops this view in compelling ways by elab­orating on the conditions of the productivity of capital and investigating the various forms of exchange of labour against capital and revenue.

But if the concept of productive labour is determined by the character of every form of production, then it is folly to abstract from this character and to convert the question of what is productive labour from the standpoint of cap­ital, of the contemporary economic system, into what is productive labour in general (productive labour in itself, regardless of its form of application and of the production process). [If the latter standpoint is adopted,] the answer always necessarily boils down to the truism that productive labour is any labour having utility, thus letting everyone determine at his pleasure just what is to

37 Marx 1963, Addenda, p. 400. be understood by that ‘utility’. Nevertheless, this is how the question was usu­ally posed by Adam Smith’s successors, especially by the liberal German vulgar economists. Unable to reason historically - to regard the capitalist economic system as a particular, historically determined stage in the process of economic development, with its own principles and laws - and usually mired in pseudo­professional snobbery, those economists turned the question of what is pro­ductive in today’s economic system into the question of what is ‘productive’ in general, i.e. regardless of the historically given production and economic conditions - which is about as clever as asking what the stomach is ‘in itself’, unrelated to the other human body parts and regardless of its digestive func­tion.

Of course, the answer to such a vague and indistinct question can only be: any labour that generates something is productive - a mere tautology, which is not made more palatable by the fact that superimposed upon it, usually by a detour through all sorts of philosophical musings about the ‘ethics of work’, is the qualification that labour should, of course, be useful. Nevertheless, further consideration of the word ‘useful’ immediately reveals that, while some people understand it as individual usefulness, or the ‘good of the individual’, others take it to mean so-called general or social utility (its benefits for a country or state), and by this social utility they usually mean the interests of their own social stratum.

Marx offers a delicious satire of these strange explanations of the concept of ‘productive labour’ by showing what comic proverbs some followers of Adam Smith came up with in their search for a definition. Monsieur Germain Garnier, the French translator of Smith’s Wealth of Nations, grasped the word ‘useful’ in a purely individual sense and understood it to mean those results of labour that provide a benefit or convenience. Consequently, an adjunct perfumer is a highly productive worker - not because he yields a profit for his employer but because he makes people, a la Garnier, have a good odour, and this gives them aesthetic pleasure. Of course, from this standpoint the work of a prostitute is highly ‘productive’. By contrast, according to ‘servant of the Lord’ Thomas Robert Malthus, who is more inclined to material possessions than to aesthetic pleasures, the only productive labour is that which produces wealth. Even more curious is the statement of Mr. Charles Ganilh. According to him, any worker who is paid, and who promotes production by turning his wages into means of consumption, is productive. Therefore, ‘the work that produces pleasure’ is highly productive, since all the workers in this field - the actors, musicians, etc. - usually consume a great deal. Destutt de Tracy regards idle landowners as the least productive and the industrial capitalists as the most productive kind of men; while, for instance, Say arrived at the profound wisdom that all labour is productive that has a result, but that the most productive is that labour whose products are durable or, as he puts it, not consumed immediately as soon as they are produced.

Marx's Capital is not just a work of economic theory; it is also a work of eco­nomic history. His notion that economic laws do not apply uniformly to all stages of economic development, that each economic epoch has its own par­ticular tendencies and conditions of existence, leads Marx, in his analysis of the capitalist economic system, to go back again and again to its original forms and, at the same time, to pursue its further development beyond the stage already reached. As a consequence, many parts of Capital, especially where he deals with the development of modern industry, contain the most interest­ing historical digressions. But this historical character stands out much more sharply in this first draft of Marx's work. It was natural that the critical follow-up of theoretical directions taken by earlier economic schools offered a far bet­ter opportunity to explain and prove how economic views are conditioned by the economic character of different times than did the systematic-theoretical presentation that Marx later chose for Capital. Thus, many parts of the first volume of Theories of Surplus-Value actually appear as an application of the Marxist theory of history to political economy.

By analysing the beginnings of our present economic system in such a way, Marx not only shows us its historical foundations but also sharpens our under­standing of the economic conditions of our socialist movement as a class struggle. And this is particularly useful today, when all kinds of general cultural and humanitarian tendencies threaten everywhere - though in other countries even more so than in Germany - to blunt the sharpness of the socialist move­ment's class struggle. Marx's critique of England's economic theories clearly shows how bourgeois class consciousness rebelled in these theories against dying feudalism; how, indeed, in the most capable minds of eighteenth-century English political economy, the marked bourgeois instincts of their conceptions ran far ahead of their theoretical knowledge. Our contemporary movement can also avoid being diverted and temporarily misled into byways, and can only retain its unity and capacity for action, by remaining conscious of its spe­cific, historically determined class character. In my opinion, the significance of Marx's new book lies especially (though by no means exclusively) in the fact that it forcefully draws our attention to this conditionality of our movement, inducing us to follow the principles of economic development that are hidden below the surface of daily events. I therefore strongly recommend its study to all comrades for whom the watchwords of the day are not the ne plus ultra [the last word] of all wisdom, and who want to grasp the driving forces behind the struggle. The study [of the first volume of Theories of Surplus-Value] is worth the effort it demands from the reader.