Gordon Brown grew up in the Scottish seaside town of Kirkcaldy where his father was a minister in one of the local kirks. Adam Smith was born there in 1723, though his father was a customs official. In February, at Brown’s invitation, Alan Greenspan, chairman of the US Federal Reserve Board, visited Kirkcaldy to deliver a lecture on Adam Smith.

Smith’s Wealth of Nations was, said Greenspan, “one of the great achievements in human intellectual history”. Smith’s view that capitalists should be allowed by governments to pursue profits unhindered since, “led by an invisible hand”, this resulted in the “public good” being promoted had, he argued, became “the sole remaining effective paradigm for economic organisation” (Times, 7 February).

That’s the side of Smith that is promoted by free-marketeers such as the Adam Smith Institute. But that’s only one side of his theories. Do the free-marketeers – does Greenspan – know that the Wealth of Nations opens with a declaration that useful things are produced by labour: “The annual labour of every nation is the fund which originally supplies it with all the necessaries and conveniences of life which it annually consumes”? Or that Smith went on to expound a labour theory of value: “Labour is the real measure of the exchangeable value of all commodities” (Book I, chapter V)?

Smith even went so far as to identify profits as deriving from the value added by workers in the process of production:

“As soon as stock has accumulated in the hands of particular persons, some of them will naturally employ it in setting to work industrious people, whom they will supply with materials and subsistence, in order to make a profit by the sale of their work, or by what their labour adds to the value of the materials . . . The value which the workmen add to the materials . . . resolves itself . . . into two parts, of which one pays their wages, the other the profits of their employer upon the whole stock of materials and wages which he advanced” (Book I, chapter VI).

Smith’s labour theory of value was refined by David Ricardo and used by early critics of capitalism to argue that the capitalists were exploiters who robbed the workers of a part of the product of their labour. Marx took over and further developed this labour theory of value as the basis for his analysis of capitalism which saw the capitalists’ pursuit of profit as seeking to extract a maximum of unpaid labour from the working class.