As a matter of fact, if we adhere to that part of Smith's exposition which is correct, namely, that the value newly created by the annual labour and contained in the annual social commodity-product (the same as in every individual commodity, or every daily, weekly, etc., product)is equal to the value of the variable capital advanced (i.e., to the value-part intended to purchase new labour-power) plus the surplus-value which the capitalist can realise in means of his individual consumption -- simple reproduction being assumed and other circumstances remaining the same;if we furthermore keep in mind that Adam Smith lumps together labour, so far as it creates value and is an expenditure of labour-power, and labour, so far as it creates use value, i.e., is expended in a useful, appropriate manner -- then the entire conception amounts to this: The value of every commodity is the product of labour; hence this is also true of the value of the product of the annual labour or of the value of society's annual commodity- product. But since all labour resolves itself 1) into necessary labour-time, in which the labourer reproduces merely an equivalent for the capital advanced in the purchase of his labour-power, and 2) into surplus-labour, by which he supplies the capitalist with a value for which the latter does not give any equivalent, hence surplus-value, it follows that all commodity value can resolve itself only into these two component parts, so that ultimately it forms a revenue for the working-class in the form of wages, and for the capitalist class in the form of surplus-value. As for the constant capital-value, i.e., the value of the means of production consumed in the creation of the annual product, it cannot be explained how this value gets into that of the new product (except for the phrase that the capitalist charges the buyer with it in the sale of his goods), but ultimately, since the means of production are themselves products of labour, this portion of value can, in turn, consist only of an equivalent of the variable capital and of surplus-value, of a product of necessary labour and of surplus-labour.
The fact that the values of these means of production function in the hands of their employers as capital-values does not prevent them from having "originally," in the hands of others if we go to the bottom of the matter -- even though at some previous time -- resolved themselves into the same two portions of value, hence into two different sources of revenue.
One point herein is correct: that the matter presents itself differently in the movement of social capital, i.e., of the totality of individual capitals, from the way it presents itself for each individual capital considered separately, hence from the standpoint of each individual capitalist. For the latter the value of commodities resolves itself into 1) a constant element (a fourth one, as Adam Smith says), and 2) the sum of wages and surplus-value, or wages, profit and rent. But from the point of view of society the fourth element of Adam Smith, the constant capital-value, disappears. 5. Recapitulation The absurd formula that the three revenues, wages, profit and rent, form the three "component parts" of the value of commodities originates with Adam Smith from the more plausible idea that the value of commodities "resolves itself" into these three component parts. This is likewise incorrect, even granted that the value of commodities is divisible only into an equivalent of the consumed labour-power and the surplus-value created by it. But the mistake rests here too on a deeper, a true foundation. Capitalist production is based on the fact that the productive labourer sells his own labour-power, as his commodity, to the capitalist, in whose hands it then functions merely as an element of his productive capital. This transaction, which pertains to circulation -- the sale and purchase of labour-power -- not only inaugurates the process of production, but also determines implicitly its specific character. The production of a use-value, and even that of a commodity (for this can be carried on also by independent productive labourers), is here only a means of producing absolute and relative surplus-value for a capitalist. For this reason we have seen in the analysis of the process of production that the production of absolute and relative surplus-value determines 1) the duration of the daily labour-process and 2) the entire social and technical configuration of the capitalist process of production.
Within this process there is realised the distinction between the mere conservation of value (of the constant capital-value), the actual reproduction of advanced value (equivalent of labour-power), and the production of surplus-value, i.e., of value for which the capitalist has neither advanced an equivalent previously nor will advance one post festum .
The appropriation of surplus-value -- a value in excess of the equivalent of the value advanced by the capitalist -- although inaugurated by the purchase and sale of labour-power, is an act performed within the process of production itself, and forms an essential element of it.
The introductory act, which constitutes an act of circulation -- the purchase and sale of labour-power -- itself rests on a distribution of the elements of production which preceded and presupposed the distribution of the social products , namely on the separation of labour-power as a commodity of the labourer from the means of production as the property of non-labourers.