"Suddenly the voice of the laborer, which had been stifled in the storm and stress
of the process of production, rises: The commodity that I have sold to you [my
beloved employer] differs from the crowd of other commodities, in that its use
creates value, and a value greater than its own. That is why you bought it."
--Marx, Capital, 1867, p. 224.
In selling any commodity, the Ricardian understanding of political economy describes the labor time required for the commodity's production as determining its value (and thus exchange value, forgetting about transformation problems of values into prices). The worker sells his/her labor directly to the capitalist. Yet, if the laborer would be selling a commodity which is itself labor time, i.e., value, how could there be surplus value (profit, etc.)? If the value of any commodity is determined by "the labor-time required for its production; how does it happen that this law of value does not hold good in the greatest of all exchanges, which forms the foundation of capitalist production, the exchange between capitalist and laborer? Why is the quantity of materialized labor received by the worker as wages not equal to the quantity of immediate labor which he gives in exchange for his wages?" (Marx, 1910, p. 89, written about 1863, commenting on James Mill's Elements of Political Economy, 1824).
Marx realized: labor itself is not produced, it is not sold. Rather, what is produced and becomes an expense for capitalists is the cost of the workers' subsistence needs. He therefore offered (produced) the required concept: labor-power (Arbeitskraft, an expression already well-known within German working-class culture in Marx's time. The capitalist purchases the labor-power at its exchange-value, the labor time required to produce the worker's subsistence needs. We arrive at a consistent theoretical system. Put another way, the capitalist confronts on the market the laborer -- a living human being with needs which must be produced, not labor (Marx, 1867, p. 503).
By purchasing labor-power, the capitalist obtains a very specific, and unique, use-value: the workers' ability to produce value! The use-value of a light bulb is to provide light. The use-value to the capitalist purchasing labor-power is the value the worker produces (not specific items like light bulbs, TV's, which are of no interest to the capitalist).
Our friend, Moneybags, must be so lucky as to find, within the sphere of circulation, in the market, a commodity, whose use-value possesses the peculiar property of being a source of value, whose actual consumption, therefore, is itself an embodiment of labor, and, consequently, a creation of value. (Marx, 1867, p. 224)
And Moneybags is so lucky. That is, the use-value of labor-power to the capitalist is precisely its ability to produce value.
Furthermore, the value produced is above cost. Thus, we read:
[T]he use-value of labor-power to the capitalist as a capitalist does not consist in its actual use-value, in the usefulness of this particular concrete labor -- that it is spinning labor, weaving labor, and so on. He is as little concerned with this as with the use-value of the product of this labor as such, since for the capitalist the product is a commodity (even before its first metamorphosis), not an article of consumption. ... the use-value of the labor is, for him, that he gets back greater quantity of labor-time than he has paid out in the form of wages. (Marx, 1905a, p. 156)
For it [capital], the use-value of labor-power is precisely the excess of the quantity of labor which it performs over the quantity of labor which is materialized in the labor-power itself and hence is required to reproduce it. ... [The] concrete character, which is what enables it to take the form of a commodity, is not its specific use-value for capital. Its specific use-value for capital consists in its quantity of labor in general, and in the difference, the excess, of the quantity of labor which it performs over the quantity of labor which it costs. (ibid., p. 400)3
Of Ricardo, Marx is now able to show the weakness of his system. Ricardo can only say that the value of 'labor' depends upon the means of subsistence which in turn depends merely upon supply and demand. However,
Instead of labor, Ricardo should have discussed labor-power. But had he done so, capital would also have been revealed as the material conditions of labor, confronting the laborer as power that had acquired an independent existence and capital would at once have been revealed as a definite social relationship. Ricardo thus only distinguishes capital as 'accumulated labor' from 'immediate labor'. And it is something purely physical, only an element in the labor-process, from which the relation between labor and capital, wages and profits, could never be developed. (Marx, 1905b, p. 400).
... the worker is compelled to sell not a commodity but his own labor-power as a commodity. This is because he finds on the other side, opposed to him and confronting him as alien property, all the means of production, all the material conditions of work together with all the means of subsistence, money, and means of production.... the conditions of his labor confront him as alien property.(Marx, 1933, p. 1003)
Without the distinction between labor and labor-power the class character of capitalism cannot be adequately theorized as we would be staying in the terrain of commodity transactions. Political economists after Ricardo had struggled around the problem of what workers sell. But the problem couldn't be solved without distinguishing labor-power from labor. It took someone not only with Marx's intellectual powers but also his commitment to working-class peoples to do so. Others were not commited as Marx to working-class interests or were even explicitly commited to capitalist-class interests.
A comment by E.K. Hunt suggests that the classical labor theory of value had originated not from within the class character of capitalism itself but rather from the industrial capitalist struggle against landlords and merchants: Commodity prices (setting aside scarce or one-of-a-kind commodities4) are determined by quantity of labor. Distinguishing between productive and unproductive labor within the labor theory would be a weapon of the industrial capitalists against the landlords (even manufacturing capitalists of the time often undertook labor which they could describe as productive 5). As capitalism in the 19th century developed, such a theory was no longer useful for bourgeois interests as the struggle against workers rose in importance. So, they found their own solution: dump labor as the creator of the value of commodities. We got 'marginalism', originating out of earlier utilitarianism of the likes of Bentham. We got an abandonment of a class-based political economy.6 Ricardo's theory had fulfilled its mission for capital. To drive it further required a transformation of its object to the interests of the working class.
The great importance of the concept of "labor power" was recognized by Engels. In his 'Preface' to Capital, Volume II after Marx's death, to aid understanding what Marx had accomplished with the discovery of 'labor-power', Engels compared Marx's discovery to Lavoisier's discovery of 'oxygen'.7
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3Also, a couple of remarks in Marx, 1910:
"the specific feature of this commodity [labor-power] is that its use-value is itself a factor of exchange-value, its use therefore creates a greater exchange-value that it itself contained".
"The use-value of nature of money. nature of money. labor-power is labor, the element which produces exchange-value. ... the value which the capitalist receives from the worker in exchange [for labor-power] is greater than the price he pays for this labor." (pp. 90 and 178)
4"By far the greatest part of those goods which are the objects of desire, are procured by labor; and they may be multiplied, not in one country alone, but in many, almost without any assignable limit, if we are disposed to bestow the labor necessary to obtain them" (p. 12 -- 'I.6' on web link for Ricardo's Chapter 1). Reproducible commodities would obviously include the commodities consisting of subsistence needs of workers, those being the cost of labor-power to the capitalists. It also includes the labor to extract raw materials, build all sorts of factories and machinery, etc., as well as many luxury commodities for capitalists and landlords (not, however, van Gogh paintings hanging in their private homes, maybe looked at once a month, while ten of thousands are deprived of any viewing).
5In the early stages of the industrial revolution, "industrial capitalists engaged in a prolonged struggle against the landed interests and merchant capitalists for economic and political supremacy. During this period, industrial capitalists usually were personally involved in directing, coordinating, and overseeing the actual processes of production.... The labor theory of value perspective had furnished the most serviceable insights into the process of capital accumulation, focusing on the distinction between productive and unproductive labor. It had shown how productive labor was the source of the surplus labor that made the expansion of capital possible." (Hunt, p. 282)
6Marx's commitment to expose the class character of capitalism in the interests of workers is opposed by bourgeois interests to hide same. Thus, Hunt (2002, p. 314) appropriately points to a revealing introductory comment in J. B. Clark's The Distribution of Wealth that the attitude of the laboring classes toward other classes "depends chiefly on the question, whether the amount they get, be it large or small, is what they produce. ... The indictment that hangs over society is that of 'exploiting labor'. ... If this charge were proved, every right minded man should become a socialist...." While not directly ignoring some understanding of social classes, Clark is trying to explain away exploitation (with his marginal productivity theory of income distribution) and thereby promote an idea of some type of equality of all before the market. Nevertheless, a spectre is haunting this American, recalling a "spectre is haunting Europe -- the spectre of Communism" (Communist Manifesto, first sentence).
7That is, Engels posed the question of what separates Marx from the classical economists. To answer that question, first he recalls the theoretical revolution Lavoisier produced in chemistry through the discovery of a new chemical element -- oxygen. Phlogistic theorists Priestly and Scheele had produced the fact of oxygen without recognizing what they had. Lavoisier produced the new category, i.e., discovered the new element, and so placed "all chemistry, which in its phlogistic form had stood on its head, squarely on its feet". Engels then says that Marx stands in the same revolutionary relationship to his predecessors in classical economics. Although the fact of surplus-value (under other names) was known long before Marx, Marx understood that he had to explain this fact, had to explain what value was, had to critique the Ricardian theory: "By substituting labor-power, the value-producing property, for labor he solved with one stroke one of the difficulties which brought about the downfall of the Ricardian school, viz., the impossibility of harmonizing the mutual exchange of capital and labor with the Ricardian law that value is determined by labor" (pp. 16-17).