Beyond Smith and Ricardo: Marx, Exploitation, and the Predictive Power of Historical Materialism

The classical political economists — Adam Smith, David Ricardo, and others — laid the groundwork for understanding capitalist production. They grappled with profound questions about the origins of value, the nature of labour, and the role of markets. Yet their theories left one question fundamentally unresolved: Where does profit come from? While they recognised that labour produces value, they could not reconcile this with the capitalist’s appropriation of profit without resorting to mystification or assumptions about “capital productivity.” It was Marx who resolved this contradiction — not by rejecting the classical tradition, but by radically reinterpreting its insights through the lens of historical materialism.

Smith and Ricardo both endorsed the idea that labour is the source of value. For Ricardo especially, value was understood in terms of the quantity of socially necessary labour time embedded in commodities. However, neither could explain how capitalists, who appear to buy labour at its market value, systematically extract profit. If goods exchange according to the law of value — that is, equal values for equal values — then where does the surplus come from? This question gnawed at the foundations of classical economics.

Marx’s answer, outlined in Das Kapital, was revolutionary. The source of profit is not found in circulation — not in buying cheap and selling dear — but in production itself. The capitalist purchases a commodity unlike any other: labour power. While labour power has a price (wages), it creates more value in the labour process than it costs. The difference between the value produced by the worker and the wage they are paid is surplus value — the foundation of capitalist profit. This is exploitation: not a moral failing of individual employers, but a structural feature of the wage-labour system.

From this standpoint, capitalism is not merely a system of inequality or market exchange, but a mode of production rooted in the exploitation of human labour. It commodifies labour power and disciplines workers through the imperative to sell their labour in order to live. Marx does not deny the productive dynamism of capitalism — it revolutionises the means of production, creates global interdependence, and advances technology at an astonishing rate. But it does so at a cost: alienation, periodic crisis, and the reproduction of class hierarchy.

To argue, therefore, that capitalism is “good” because it is productive is to miss the point. Its productivity emerges through exploitation, through the compulsion to compete, expand, and accumulate. The value it creates for society is incidental to its drive for profit. If capitalism alleviates some forms of scarcity, it reproduces others: insecurity, environmental degradation, and uneven development.

Marx’s most powerful contribution, however, is not simply his diagnosis of exploitation. It is his method: historical materialism. This approach understands history not as a series of moral triumphs or failures, but as the unfolding of contradictions between productive forces and social relations. Societies are shaped by how they produce their material life, and by the class struggles that arise when those arrangements become obstacles to further development.

Historical materialism offers a framework for predicting how systems change. When the relations of production (such as feudalism or capitalism) come into contradiction with the productive forces (technology, labour capacity, scientific knowledge), crisis ensues. These crises are not random disruptions — they are moments of potential transformation. Revolutions occur not simply because people are angry, but because existing systems can no longer contain the contradictions they produce.

In this sense, historical materialism is a scientific theory of history. It allows us to trace patterns of development, resistance, and transformation across different societies and epochs. It is why Marx could anticipate the global expansion of capitalism, the rise of imperialism, and the increasing centrality of the working class.

Understanding profit as rooted in exploitation helps us cut through today’s ideological fog. Whether the conversation is about billionaire philanthropy, "ethical capitalism," or AI replacing workers, the underlying logic remains unchanged: profit depends on extracting unpaid labour. The gig economy, financialisation, and austerity are not anomalies — they are strategies for capital to restore or maintain surplus value in the face of declining profitability.

Historical materialism helps us understand why crises recur, why reform alone is insufficient, and why organised working-class resistance remains the engine of historical change. It exposes not just that the world is unequal, but why — and more importantly, how it can change.

Marx answered the central question that eluded Smith and Ricardo: profit arises from exploitation, not exchange. This insight, grounded in the labour theory of value, revealed capitalism not as a neutral or benevolent system, but as a historically specific mode of domination. Through historical materialism, Marx offered not just critique, but a method for understanding social change. It remains our most powerful tool for analysing the present and imagining a future beyond exploitation.