Karl Marx – Theories of Surplus Value – Chapter 1 – Sir James Steuart

As I am currently immersing myself in the three volumes of Karl Marx’s ‘Theories of Surplus Value,’ I thought that others would find it beneficial if i summarised each chapter as I work through them. Naturally, I will start with chapter one.

James Steuart is credited as being one of the founders of British political economy in the mid 18th century. Marx begins his assessment of Steuarts work by stating that prior to the physiocrats, who we come to in chapter 2, the explanation given for what created profit was much different. It was based on the idea that profit was derived from exchange and the same of a commodity above its value. Marx states that what Steuart does is put this existing theory on a more scientific basis by distinguishing between positive profit and relative profit.

Positive profit, according to Steuart, is that which arises from “augmentation of labour, industry and ingenuity,” which Steuart argues “augment the public good.” Marx states that “the public good” refers to the production of a greater number of use-values.

Relative profit, according to Steuarts theory, is that which is derived from the sale of commodities but which doesn’t actually create anything new and also will represent a loss to one of the parties involved in the transaction. Steuart sees compound profit as containing both elements, positive and relative.

The price of goods therefore comprises two elements – Their “real value” and the “profit upon alienation” i.e. profit realised through their sale.

Steuart also has the following to say about what creates the real value of goods:

“The real value is determined by the quantity of labour which ipon an average a workman of the country in general may perform in a day, a week a month. Secondly the value of the workmans subsistence and necessary expense both for supplying his personal wants and the instruments belonging to his profession. Thirdly the values of the materials (used in production). These three articles being known the price of the manufacture is determined. It cannot be lower than the amount of all three. That is the real value, whatever is higher is the manufacturers profit.”

So Steuart expresses (before Adam Smith) a version of the labour theory of value. Marx sums up Steuarts theory of profit derived through the sale of commodities as follows:

“The profit of the manufacturer, of the individual capitalist is always relative profit always profit upon alienation always derived from the excess of the price of the commodity over its real value for its sale above its value. If therefore all commodities were sold at their vale no profit would exist”

Marx summarises that Steuart rejected the mercantilist concept of profit as being derived purely from the same of commodities above their value and that this results in a positive increasing of wealth. He does however hold to the mercantilist view that profit is nothing but an excess of the price a commodity over it’s actual value. Steuart thus sees a transaction as having a profit on one side of a transaction and a loss on the other. Hence profit having the both a positive and a relative dimension. Marx concludes that the service Steuart provides to us is that he shows how “the process of separation take place between the conditions of production as the property of a definite class and labour power”. Steuart also did extensive work on what calls the “genesis of capital” which he viewed through an analysis of changes in British agriculture and how industrial capitalism grew out of these changes.

Marx later drew from his reading of Steuart when he considered how the long process of transformation in British agriculture lead to the development of industrial capitalism. This featured in Capital Volume 1.