While we cannot reproach Adam Smith for going in this analysis no farther than all his successors (although a step in the right direction could already be discerned among the physiocrats), he subsequently gets lost in a chaos and this mainly because his "esoteric" conception of the value of commodities in general is constantly contravened by exoteric conceptions, which on the whole prevail with him, and yet his scientific instinct permits the esoteric standpoint to re-appear from time to time. 4. Capital and Revenue in Adam Smith That portion of the value of every commodity (and therefore also of the annual product) which is but an equivalent of the wages, is equal to the capital advanced by the capitalist for labour-power; i.e., is equal to the variable portion of the total capital advanced. The capitalist recovers this portion of the total capital through a portion of the newly produced value of the commodities supplied by the wage-labourers. Whether the variable capital is advanced in the sense that the capitalist pays the labourer in money for his share in a product which is not yet ready for sale or which, though ready, has not yet been sold by the capitalist, or whether he pays him with money already obtained by the sale of commodities previously supplied by the labourer, or whether he has drawn this money in advance by means of credit -- in all these cases the capitalist expends variable capital, which passes into the hands of the labourers in the form of money, and on the other hand he possesses the equivalent of this capital-value in that portion of the value of his commodities in which the labourer has produced anew his share of its total value, in other words, in which he has produced the value of his own wages. Instead of giving him this portion of the value in the bodily form of his own product, the capitalist pays it to him in money. For the capitalist the variable portion of his advanced capital-value now exists in the form of commodities, while the labourer has received the equivalent for his sold labour-power in the form of money.
Now while that portion of the capital advanced by the capitalist, which has been converted by the purchase of labour-power into variable capital, functions in the process of production itself as operative labour-power and by the expenditure of this power is produced anew as a new value, in the form of commodities, i.e., is reproduced -- hence a reproduction, or new production, of advanced capital-value -- the labourer spends the value, or price, of his sold labour-power on means of subsistence, on means for the reproduction of his labour-power. An amount of money equal to the variable capital forms his income, hence his revenue, which lasts only so long as he can sell his labour-power to the capitalist.
The commodity of the wage-labourer -- his labour power -- serves as a commodity only to the extent that it is incorporated in the capital of the capitalist, acts as capital; on the other hand the capital expended by the capitalist as money-capital in the purchase of labour-power functions as a revenue in the hands of the seller of labour-power, the wage labourer.
Various processes of circulation and production intermingle here, which Adam Smith does not distinguish.
First : Acts pertaining to the process of circulation .
The labourer sells his commodity -- labour-power -- to the capitalist;the money with which the capitalist buys it is from his point of view money invested for the production of surplus-value, hence money-capital; it is not spent but advanced. (This is the real meaning of "advance" -- the avance of the physiocrats -- no matter where the capitalist gets the money. Every value which the capitalist pays out for the purposes of the productive process is advanced from his point of view, regardless of whether this takes place before or post festum; it is advanced to the process of production itself.) The same takes place here as in every other sale of commodities:
The seller gives away a use-value (in this case his labour-power) and receives its value (realises its price) in money; the buyer gives away his money and receives in return the commodity itself -- in this case labour-power.
Second : In the process of production the purchased labour-power now forms a part of the functioning capital, and the labourer himself serves here merely as a special bodily form of this capital, distinguished from its elements existing in the bodily form of means of production. During the process, by expending his labour-power, the labourer adds value to the means of production which he converts into products equal to the value of his labour-power (exclusive of surplus-value); he therefor reproduces for the capitalist in the form of commodities that portion of his capital which has been, or has to be, advanced by him for wages, produces for him an equivalent of the latter; hence he reproduces for the capitalist that capital which the latter can "advance" once more for the purchase of labour-power.
Third : In the sale of a commodity one portion of its selling price replaces the variable capital advanced by the capitalist, whereby on the one hand he is enabled anew to buy labour-power, and the labourer on the other to sell it anew.
