If Adam Smith had continued his analysis to this point, but little would have been lacking for the solution of the whole problem. He almost hit the nail on the head, for he had already observed that certain value-parts of one kind (means of production) of the commodity-capitals constituting the total annual product of society indeed form revenue for the individual labourers and capitalists engaged in their production, but do not form a constituent part of the revenue of society; while a value-part of the other kind (articles of consumption), although representing capital-value for its individual owners, the capitalists engaged in this sphere of investment, is only a part of the social revenue.
But this much is evident from the foregoing:
First : Although the social capital is only equal to the sum of the individual capitals and for this reason the annual commodity-product (or commodity-capital) of society is equal to the sum of commodity-products of these individual capitals; and although therefore the analysis of the value of the commodities into its component parts, valid for every individual commodity-capital, must also be valid for the commodity-capital of all society -- and actually proves valid in the end -- the form of appearance which these component parts assume in the aggregate social process of reproduction is different .
Second : Even on the basis of simple reproduction there takes place not merely a production of wages (variable capital) and surplus-value, but direct production of new constant capital-value, although the working-day consists of only two parts, one in which the labourer replaces the variable capital, in fact producing an equivalent for the purchase of his labour-power, and another in which he produces surplus-value (profit, rent, etc.).
The daily labour which is expended in the reproduction of means of production -- and whose value is composed of wages and surplus-value -- realises itself in new means of production which replace the constant part of capital laid out in the production of articles of consumption.
The main difficulties, the greater part of which has been solved in the preceding text, are not encountered in studying accumulation but simple reproduction. For this reason, Adam Smith (Book II) and Quesnay ( Tableau Economique ) before him make simple reproduction their starting-point, whenever it is a question of the movement of the annual product of society and its reproduction through circulation. 2. Adam Smith Resolves Exchange Value into v + s Adam Smith's dogma that the price, or "exchangeable value," of any single commodity -- and therefore of all commodities in the aggregate constituting the annual product of society (he rightly assumes capitalist production everywhere) -- is made up of three "component parts," or "resolves itself into" wages, profit, and rent, can be reduced to this: that the commodity-value is equal to v + s, i.e., equal to the value of the advanced variable capital plus the surplus-value. And we may undertake this reduction of profit and rent to a common unit called s with the express permission of Adam Smith, as shown by the following quotations, in which we at first leave aside all minor points, i.e., any apparent or real deviation from the dogma that commodity-value consists exclusively of those elements which we call v + s.
In manufacture: "The value which the workmen add to the materials .
. resolves itself . . . into two parts, of which the one pays their wages, the other the profits of their employer upon the whole stock of materials and wages which he advanced." (Book I, Ch. 6, p. 41.) "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." (Book II, Ch. 3, p. 221.) That portion of the stock which is laid out "in maintaining productive hands . . . after having served in the function of a capital to him (the employer) . . . constitutes a revenue to them" (the labourers). (Book II, Ch. 3 p. 223.)Adam Smith says explicitly in the chapter just quoted:
"The whole annual produce of the land and labour of every country .
. . naturally divides itself into two parts. One of them, and frequently the largest, is in the first place, destined for replacing a capital, or for renewing the provisions, materials, and finished work, which had been withdrawn from a capital; the other for constituting a revenue either to the owner of this capital, as the profit of his stock ; or to some other person, as the rent of his land ." (P. 222.) Only one part of the capital, so Adam Smith just informed us, forms at the same time a revenue for somebody, namely that which is invested in the purchase of productive hands. This portion -- the variable capital -- first "serves in the function of a capital" in the hands of its employer and for him and then it "constitutes a revenue" for the productive labourer himself.
The capitalist transforms a portion of his capital-value into labour-power and precisely thereby into variable capital; it is only due to this transformation that not alone this portion of capital but his entire capital functions as industrial capital. The labourer -- the seller of labour-power -- receives its value in the form of wages. In his hands labour-power is but a saleable commodity, a commodity by the sale of which he lives, which therefore is the sole source of his revenue; labour-power functions as a variable capital only in the hands of its buyer, the capitalist, and the capitalist advances its purchase price only apparently, since its value has been previously supplied to him by the labourer.