How Adam Smith influenced Karl Marx SPECTRE OF COMMUNISM

Spectre Of Communism · 2026-04-28

Core Argument

The central thesis of this episode is that Adam Smith's classical political economy provided the essential scientific foundation upon which Marx built his revolutionary critique of capitalism, but that Smith's bourgeois limitations prevented him from following his own insights to their logical conclusions. The argument claims that Smith's key contributions — the labour theory of value, the analysis of the division of labour, and the recognition that labour is the source of all wealth — contain within them revolutionary implications that Smith himself could not accept and that modern bourgeois economics has deliberately abandoned. The episode contends that Marx's achievement was not to reject Smith but to take his most advanced ideas, strip away their individualistic and apologetic distortions, and demonstrate that they lead inexorably to the conclusion that capitalism must be overthrown.

Theoretical Grounding

The analysis draws on several interconnected Marxist concepts:

The labour theory of value is presented not as a Marxian invention but as the high-water mark of classical political economy, which Marx transformed by replacing Smith's abstract, individualistic conception of labour with the category of socially necessary labour time. This shift — from seeing value as determined by the labour time of an isolated producer (Smith's hunters and fishermen) to understanding it as a social relation established through competition on the market — is identified as Marx's crucial theoretical advance.

The distinction between labour and labour-power is treated as Marx's decisive breakthrough, resolving the riddle that baffled Smith and Ricardo: how profit can arise from apparently fair exchange. The episode explains that the capitalist buys not labour but labour-power — the worker's capacity to work — whose value (wages) is less than the value it creates when set to work. The difference is surplus value, the source of profit, rent, and interest.

The theory of overproduction is presented as the necessary consequence of this analysis: because workers receive back only a fraction of the value they create, capitalism systematically produces more than the market can absorb, generating periodic crises that are not accidents but expressions of the system's inner contradictions.

The critique of vulgar economy — Marx's term for post-Ricardian bourgeois economics — is deployed to explain why modern economics abandoned the labour theory of value. The episode traces this abandonment to political motives: once workers began drawing revolutionary conclusions from classical political economy, bourgeois thinkers consciously replaced objective value theory with subjective marginal utility theory to disarm the working-class movement.

The analysis sits firmly within the Marxist tradition's understanding of its own intellectual genealogy. It treats Marx's relationship to Smith not as a rupture but as a sublation (Aufhebung): preserving the scientific content, discarding the bourgeois limitations, and pushing the logic to its revolutionary conclusion. This is consistent with Engels's characterisation of Marxism as the legitimate heir of German philosophy, French socialism, and English political economy.

Conjunctural Relevance

The episode connects its theoretical argument to the current conjuncture through several specific references:

The post-pandemic inflation crisis is analysed through the lens of the labour theory of value. The episode rejects both the bourgeois explanation (that workers caused inflation by demanding higher wages) and the reformist explanation (that capitalists arbitrarily raised prices through "greedflation"). Instead, it argues that both positions derive from Smith's erroneous view that prices are determined by adding up wages, profits, and rents — a view that treats these as independent variables rather than as divisions of a single value created in production. The Marxist alternative — that value is created first and then divided — leads to the conclusion that class struggle over the distribution of that value is inescapable.

The Argentine experiment under Javier Milei is presented as a contemporary attempt to implement the conclusions of vulgarised Smithianism. The episode notes that Milei's "chainsaw austerity" brought inflation down from 200% to 30% but at the cost of 200,000 jobs, 18,000 business closures, and poverty rates exceeding 50%. The irony that Milei required a $40 billion credit swap from Trump — the "visible hand" of imperialist state power — is highlighted as a refutation of the libertarian fantasy of a self-regulating market.

The current fragmentation of the world market — exemplified by supply chain disruptions, protectionist tendencies, and geopolitical tensions around energy supplies — is interpreted as the dialectical reversal of Smith's free trade ideal. The episode argues that the same competitive pressures that once drove the expansion of the world market now drive its contraction, as rival capitalist states and blocs turn against each other.

Where the Argument Continues

This episode is explicitly introductory and does not develop several crucial arguments that are treated elsewhere in the RCI corpus:

The theory of crisis is gestured at through the concept of overproduction but not developed in detail. The companion episode "The Tendency of the Rate of Profit to Fall" (Against the Stream, 2023) provides the fuller account of why capitalism's crises are not merely periodic but tend to become increasingly severe.

The theory of imperialism is mentioned but not elaborated. The episode notes that free trade under capitalism means imperialist powers plundering the rest of the world, but does not develop the Leninist theory of imperialism as the highest stage of capitalism. This is treated in the Spectre of Communism episode "Lenin's Imperialism: A Century On".

The political conclusions — the rejection of reformism and the necessity of revolution — are stated but not argued for. The episode's claim that workers should "demand the whole bakery" rather than squabble over crumbs is a rhetorical gesture toward the revolutionary programme developed systematically in the RCI's "Programme for the Communist Revolution in the 21st Century".

The method of dialectical materialism is invoked but not explained. The episode recommends Lenin's advice that one cannot fully understand Capital without reading Hegel, pointing toward the theoretical work done in the Spectre of Communism episode "Dialectics for Beginners".

Connections

Primary texts: Marx's Capital (especially Volume 1, chapters on the labour process, the fetishism of commodities, and the transformation of labour-power into a commodity); Marx's Wage Labour and Capital and Value, Price and Profit (recommended as accessible introductions); Smith's The Wealth of Nations (Book 1, chapters 1-6 on the division of labour and the labour theory of value).

Marxist secondary literature: The RCI's Understanding Marx's Capital: A Reader's Guide (mentioned in the episode); Isaac Rubin's Essays on Marx's Theory of Value (for the distinction between Smith's and Marx's conceptions of value); Roman Rosdolsky's The Making of Marx's Capital (for the intellectual history).

Bourgeois economics: The episode engages critically with the Austrian School (von Böhm-Bawerk, von Mises, Hayek) and marginal utility theory. The key text is Böhm-Bawerk's Karl Marx and the Close of His System, which explicitly attacks the labour theory of value on political grounds.

Historical context: The episode references the early 19th-century Ricardian socialists (Thomas Hodgskin, William Thompson) who first used classical political economy against the bourgeoisie, and the Peterloo Massacre (1819) as marking the emergence of an independent working-class movement.

Key Quotes

1. "Marx took from Adam Smith and David Ricardo this attempt to try and analyse the economy like it was and as it is a system, a lawful system, a set of phenomena and processes that can be understood lawfully, scientifically."

2. "The difference between Smith and Marx was that Smith was a bourgeois economist at the end of the day and was kind of restricted by a bourgeois individualistic outlook. For him, the labour theory of value actually didn't apply in modern capitalism. He thought it was more some sort of economic law that applied in pre-capitalist times when we were hunters and fishermen."

3. "Marx's big revolutionary step was to differentiate between labour and labour-power. What wages are is the price of labour-power. The key to understanding the origins of profit is understanding the difference between the exchange value of labour-power, which is the wages, and the use value of that labour-power, which is higher."

4. "The modern bourgeois economists aren't interested in scientifically explaining and understanding capitalism. They'd become apologists for capitalism, just mercenaries for the capitalists, brought out to justify all the most rotten elements of capitalism rather than explain why the world is the way it is."

5. "Marx wasn't interested in explaining why this particular commodity is this price at this time. Marxism isn't about trying to explain the speculation we see today. It's about trying to understand the system as a whole, why it has all these contradictions, why it inevitably goes into crisis."