2) That which is true of a commodity produced in some individual industrial establishment by any individual labourer is true of the annual product of all branches of business as a whole. That which is true of the day's work of some individual productive labourer is true of the year's work set in motion by the entire class of productive labourers. It "fixes" (Adam Smith's expression) in the annual product of a total value determined by the quantity of the annual labour expended, and this total value resolves itself into one portion determined by that part of the annual labour wherewith the working-class creates an equivalent of its annual wages, in fact, these wages themselves; and into another portion determined by the additional annual labour by which the labourer creates surplus-value for the capitalist class. The annual value-product contained in the annual product consists therefore of but two elements: namely, the equivalent of the annual wages received by the working-class, and the surplus-value annually provided for the capitalist class. Now, the annual wages are the revenue of the working-class, and the annual quantity of surplus-value the revenue of the capitalist class; hence both of them represent the relative shares in the annual fund for consumption (this view is correct when describing simple reproduction) and are realised in it. There is, then, no room left anywhere for the constant capital-value, for the reproduction of the capital functioning in the form of means of production. And Adam Smith states explicitly in the introduction to his work that all portions of the value of commodities which serve as revenue coincide with the annual product of labour intended for the social fund for consumption: "To explain in what has consisted the revenue of the great body of the people, or what has been the nature of those funds, which, in different ages and nations, have supplied their annual consumption, is the object of these first Four Books." (P. 12.)And in the very first sentence of the introduction we read: "The annual labour of every nation is the fund, which originally supplies it with all the necessaries and conveniences of life which it annually consumes, and which consists always either in the immediate produced of that labour, or in what is purchased with that produce from other nations." (P. 11.)Now Adam Smith's first mistake consists in equating the value of the annual product to the newly produced annual value .
The latter is only the product of labour of the past year, the former includes besides all elements of value consumed in the making of the annual product, but which were produced in the preceding and partly even earlier years : means of production whose value merely re-appears --which, as far as their value is concerned, have been neither produced nor reproduced by the labour expended in the past year. By this confusion Adam Smith spirits away the constant portion of the value of the annual product.
This confusion rests on another error in his fundamental conception: He does not distinguish the two-fold nature of labour itself: of labour which creates value by expending labour-power, and of labour as concrete, useful work, which creates articles of use (use-values). The total quantity of the commodities fabricated annually, in other words, the total annual product is the product of the useful labour active during the past year; it is only due to the fact that socially employed labour was spent in a ramified system of useful kinds of labour that all these commodities exist; it is due to this fact alone that the value of the means of production consumed in the production of commodities and reappearing in a new bodily form is preserved in their total value. The total annual product , then, is the result of the useful labour expended during the year;but only a part of the value of the annual product has been created during the year; this portion is the annual value-product , in which the quantity of labour set in motion during the year is represented.
Hence, if Adam Smith says in the passage just cited: "The annual labour of every nation is the fund which originally supplies it with all the necessaries and conveniences of life which it annually consumes, etc.," he takes the one-sided standpoint of solely useful labour, which has indeed given all these means of subsistence their consumable form. But he forgets that this was impossible without the assistance of instruments and subjects of labour supplied by former years, and that, therefore, the "annual labour," while it create value, did not create all the value of the products fabricated by it; that the value newly produced is smaller than the value of the product.