Marx was not the first to try to understand such workings. He was preceded by the classical political economists-early supporters of capitalism who tried to understand its basic dynamics as it struggled to break through, in a Europe still dominated by landowning classes. Two were of special importance: Adam Smith, who wrote in the 1 770s at the time when the first modern factory, a spinning mill, was opening at Cromford in Derbyshire; and David Ricardo, who defended the interests of the early industrialists against the big landowners 40 years later in the aftermath of the Napoleonic wars.
Use value and exchange value
Smith is often treated as the patron saint of present day capitalism and of its neoclassical economic theorists. But he made an important point, developed further by Ricardo, which has been completely obliterated by nearly all those mainstream economists who claim to follow in his footsteps. He noted that once society is based on production for the market, every commodity can be seen from two completely different points of view:
The word value . . . has two different meanings, and sometimes expresses the utility of some particular object, and sometimes the power of purchasing other goods which the possession of that object conveys. The one may be called "value in use"; the other, "value in exchange". The things which have the greatest value in use have frequently little or no value in exchange; and on the contrary, those which have the greatest value in exchange have frequently little or no value in use. Nothing is more useful than water: but it will purchase scarce any thing; scarce any thing can be had in exchange for it. A diamond, on the contrary, has scarce any value in use; but a very great quantity of other goods may frequently be had in exchange for it.2
Marx's Capital took up and developed this insight, removing certain ambiguities found in Smith's work:
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Understanding the System: Marx and Beyond