art’, championing a return to the ‘real economy’ long before it became fashionable to do so – indeed, around the time when such a distinction was still halfway plausible.
Assessing the contributions of Boisguillebert and others, Marx attributes to the physiocrats a laudable desire to investigate surplus value and relate it to labour-time, but without having first given thought to the form of value itself. In this way, the physiocrats were guilty of ‘discussing a complex form of the problem without having solved its elementary form’. This led to them ‘confusing the labour which is materialised in the exchange-value of commodities and measured in time units with the direct physical activity of individuals’.14
Smith and Ricardo
With the rise of classical political economy, Smith and Ricardo critiqued the physiocrats on the basis that burgeoning industry could not be accounted for within a framework that placed all productivity in the hands of agriculture.15 But this merely replaced the active agent in a similarly productivist appraisal of value. For Smith, value represented the time spent by workers in producing the object in which their labour is realized as productive. For Smith, labour was unproductive only when it did not result in an amount of value proportionate to that required to enable workers to subsist. The necessity of some other quantity through which this subsistence could be secured was what led Smith to conceptualize the role of the surplus in characterizing capitalist production. Workers who drew on the surplus to survive, as well as merchants who merely moved goods rather than created them, fell foul of this divide between the productive and the unproductive.16 Government, too, fell foul of this ideological distinction, the political consequences of which still cascade through capitalist societies today.
But Smith’s innovation was to retain an order-bestowing ‘substance’ embalmed in the product, associated not with direct labour itself but the cost of the inputs that contributed to a given thing’s production.17 Smith, for instance, demarcates unproductive labour that ‘consists in services, which perish generally in the instant of their performance’ – a live musician, for instance – from that which ‘fix[es] and realize[s] itself in [a] vendible commodity which can replace the value of the wages and maintenance’ of the labour expended in its production.18 For Smith, value comprised the so-called ‘natural’ prices of three elements: labour (wages), land (rent) and capital (profit). This has influenced political and sociological approaches to class which associate different classes with the different forms of capital or wealth they possess, and the relative productiveness and unproductiveness this implies. Smith’s approach forces us to question the social and political basis by which different groups benefit from the production of certain goods, undermining the apparent neutrality of economic value and ascriptions of worth. But this line of enquiry cannot overcome the circularity it conceals, almost fatal to its capacity to explain value. Wages, rents and profits are themselves prices expressing a value that must itself be explained, a requirement Smith tries unsuccessfully to absolve himself of with reference to the ‘natural’ value of labour, land and capital. Smith does not establish the ‘value structure’ behind the cost of production – the historical determination of the value of labour, land and capital, and the particular form in which this value is expressed in wages, rent and profit.19 In this way, Smithian approaches, right up to present-day pseudo-critiques of the inequities of class society, focus on the distribution of the different kinds of input and revenue drawn from by different actors and class, precisely without considering what needs to be explained: the underpinning, historically specific, class relations mediated in these forms of wealth.20 Whilst Smith captured the class-oriented character of the constitution of value, the underpinning relations were situated not in any social or historical specificity, but rather in a state of naturalized and ahistorical eternity.21
Moreover, whilst acknowledging the stratification of society necessary to the system of commodity production, and recognizing the ‘significance of labour’ in his theory of production costs, Smith incorporated labour only insofar as it cast producers as simple owners of commodities who enter the marketplace eager to exchange commodified portions of their own embodied, objectified labour with others. This process was not contextualized within capitalist society, but seen as an expression of ‘direct barter, the spontaneous form of exchange’ intrinsic to the human experience.22 In this ahistorical and asocial fashion, Smith’s analysis centred on the commodity as its key principle, labour’s significance relating only to its role in commodity production and exchange. Hence, it is not as simple as saying a labour ‘substance’ determines value in exchange, but rather there is a two-way process in which the one depends upon the other. This introduces a profound ambivalence in Smith’s value theory.23 The value of a commodity expresses the labour embodied in it, whilst at the same time positing the amount of labour its production commands from the labour marketplace – an apparent exchange of equivalent amounts of objectified labour Smith took at face value. Lacking an effective mechanism for explaining the ‘determining social matrix’ behind this state of affairs, Smith’s approach was ‘confused’ and ‘tautological’, and ultimately unsuccessful in its attempt to ‘overcome the problematic’ of value.24 It was left to Marx to confront capitalist society as the ‘immense collection of commodities’ Smith describes, and to uncover the secret of labour power concealed within.25
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Smith’s contradictions constituted productive contributions to the emergent field of political economy by spurring others to step in and solve them. The circularity of the cost-of-production approach acted as an effective heuristic for Ricardo, who was more successful than Smith in highlighting the potential political and social factors and consequences behind the appearance of value in price. Just as Smith’s value theory was based on an ahistorical natural propensity to truck, barter and exchange on the part of humanity, Ricardo also established a naturalistic basis for his theories in the eternal exchange-value-producing character of labour itself. As Marx writes, ‘Ricardo’s primitive fishermen and primitive hunter are from the outset owners of commodities who exchange their fish and game in proportion to the labour-time which is materialised in these exchange-values.’26 But, in viewing industrial capitalism as a qualitative realization of these eternal tendencies, Ricardo at least recognized the historical specificity of how a surplus is produced at the level of the employment relationship. Whilst Ricardo holds to the conceptualization of labour as the source of value, by ‘conceding to capital a systematic influence on price … irreducible’ to labour, he introduces an antagonistic class basis to the value of the things around us, where Smith had only offered harmony.27 Later, Marx picked up this thread and ran with it.
What Ricardo highlights is the analytical potential of the cost-of-production approach once its circularity is broken. The cost-of-production approach posits no metaphysical abstract order behind value; its virtue is that it takes at face value the price of inputs and relates them to the value of their output. By leaving open the huge logical blindspot of how the inputs acquire their value to begin with, this perspective leaves the field free for inquiries into the constitution of the value of inputs through historical, social, political and ethical processes and modes of contestation, including hierarchies, tastes, laws and customs. The value of the cost-of-production approach, therefore, lies in its circumvention of abstract inquiry in order to root value in a ‘skeptical empiricism that looks no farther than those social relationships of power, morality, and perhaps even reason as the basis on which social continuity is grounded and persists’.28
Ricardo, more so than Smith, held to a labour theory of value whereby ‘the value of a commodity was strictly proportional to the amount of labour time necessary to produce it’. Around this central position, Ricardo, like Smith, set up a productivist divide between nascent industrial production and apparently anachronistic rent-seeking activities, much along the lines of those today who criticize the purportedly ‘false’ economy of the finance sector in favour of the so-called ‘real’ economy represented by industry, or the ‘rentiership’ of platform firms upon the commonwealth of online
