Ricardo took up and developed Smith's ideas. In doing so he pointed to a central ambiguity in Smith's own writings. Smith mixes with the view that labour alone creates value another approach, in which profits and rent as well as labour contribute to the final value of goods. Ricardo rejected this latter view. But soon after his death in the 1 820s it became the orthodoxy among pro-capitalist economists. It was much more palatable to defenders of the existing system than implying that profits were parasitic on labour.
Marx, however, saw that the development of Smith's views by Ricardo could alone provide the basis for a scientific account of how capitalism functioned. Like Ricardo, he recognised it was absurd to say that profits somehow created value when they were part of value that had already been created. But he went much further than Ricardo had in clarifying the issues and working out the implications of the theory.
The first important advance he made was to differentiate clearly two different meanings given to "the value of labour" by Smith. On the one hand it meant the amount of labour required to keep the labourer for the time during which he or she worked. Adam Smith had argued:
There is . . . a certain rate below which it seems impossible to reduce for any considerable time the ordinary wages of even the lower species of labour. A man must always live by his work, and his wages must at least be sufficient to maintain him. They must even upon most occasions be somewhat more otherwise it would be impossible for him to bring up a family, and the race of such workmen would not last beyond the first generation.21
From this point of view, the "value of labour" was the value of the wage of the labourer.
But Smith also used the term "labour" to refer to the amount of labour actually performed by the worker. And, Marx stressed, the two amounts were by no means the same. Labour, he pointed out, was like all other commodities in that it was bought and sold. But it differed from them because it had the peculiar property that when put to use it performed more labour than required to produce it.
In the 1850s he introduced a new term designed to make the distinction between the two uses of the concept of labour in Smith and Ricardo (and in his own earlier writings) absolutely clear. He said that what the capitalist paid for when he employed someone was not labour as such but "labour power"-the ability of someone to work for a certain period of time. The value of labour power depended, like that of any other commodity, on the amount of labour needed to produce it. Workers could not provide labour power unless they had adequate food, clothing, housing, a certain amount of relaxation, etc. These were their requirements if they were to be fit and capable of working. Their wage had to cover the cost of these things-that is, to correspond to the amount of social labour needed to produce them. This determined the value of labour power.
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Understanding the System: Marx and Beyond