From the August 1961 issue of the Socialist Standard
The Value of Labour-power
Adam Smith wavers in his analysis of commodities and there is confusion regarding the determination of exchange value. He determines the value of a commodity by the labour time contained in it, but then relegates the principle to older or more simpler times. What seems to him to be true about a simple commodity does not apply to the more complex forms of capital—wage labour, and rent. The value of commodities, he says, used to be measured by labour time.
There is also confusion in his analysis of commodities about which he varies regarding the determination of exchange value. He makes the exchange value of labour, wages, the measure of the value of commodities. Thus, wages are equal to the amount of commodities purchased by a stated amount of living labour, or to the quantity of labour which can be bought by a given quantity of commodities. The value of labour, or rather labour power, varies, like all other commodities, and in this respect does not differ in kind from the value of other commodities. And so value itself becomes both the measure and the explanation of value and we go round in a circle.
Marx has demonstrated the fallacy of this reasoning. He also said, very appropriately, "It is one of the chief failings of classical economy that it has never succeeded, by means of its analysis of commodities, and in particular of their value, in discovering that form under which value becomes exchange-value. Even Adam Smith and Ricardo, the best representatives of this school, treat the form of value as a thing of no importance, as having no connection with the inherent nature of commodities. The reason for this is not solely because their attention is entirely absorbed in the analysis of the magnitude of value. It lies deeper. The value form of the product of labour is not only the most abstract, but it is also the most universal form taken by bourgeois production, and stamps that production as a particular species of social production and thereby gives it its historical character."
Adam Smith also saw that profit sprang from the exploitation of labour, for he says: "The value which the workmen add to the materials therefore resolves itself in this case 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 advances." But he also confused surplus value and profit.
Smith was the product of the early manufacturing period in this country. He made a valuable contribution to political economy, and was one of the most painstaking and critical of the small band who tried before Marx to find out what makes society tick.