An understanding of the difference between productive labour and unproductive labour, (both of which exist under the capitalist mode of production) is essential in order to grasp the contradictory nature of the present crisis of the capitalist system. This difference was initially articulated most cogently by Adam Smith in the18th century. (see endnote for extracts.) Smith was attacked and contradicted in this analysis by many of his contemporary economists. However, Karl Marx, in his extensive economic studies defended Smith’s analysis and corrected an insufficiently considered aspect of it. Although the concept and practical difference appears a number of times in Das Capital, Marx also made extensive notes, which were later published as ’Theories of Surplus Value‘, in which he devoted a whole chapter to the subject. However, a rounded understanding of the capitalist system of exploitation, requires a working knowledge of both forms of labour. In this context it is particularly important to understand how the capitalist mode of production, creates for the capitalists a surplus obtained from ‘productive labour’ in contrast to the unproductive form.
a) The fundamentals of the Capitalist mode of production.
The capitalist mode of production is based upon the creation of elite wealth through an exchange between capital and labour. The owners of capital are able to exploit the difference between the cost of labour (wages) and the value of the total product created, by the efforts of the workers. This they achieve through control of the means of production. From the capitalist perspective, only labour which reproduces the capital they advance, together with an extra amount (the surplus value), is productive. All other forms of labour – no matter how productively important to humanity – such as giving birth and nurture – are considered un-productive by the capitalist!
We need to recognise from the start that productive labour is not the only form of wage labour which exists within the capitalist system. There are other forms. However, productive labour is the only form which reproduces the above-noted capital together with a surplus. It is this surplus which supports tax deductions, rents, research and development as well as profits. Under the capitalist mode of production, therefore, there are different circumstances in which the expenditure of labour power, (ie work done for a wage or salary) creates surplus value and those where it does not.
An understanding of these different circumstances is necessary because capitalism is an economic system where the creation and augmentation of capital is the prime motive for production in general. The concepts used here are specific to the capitalist ‘mode of production’ and this needs to be born in mind at all times. As Marx described it;
“Productive labour, in its meaning for capitalist production, is wage-labour which exchanged against the variable part of capital.., reproduces not only this part of the capital (or the value of its own labour power), but in addition produces surplus-value for the capitalist.” (Marx ‘Theories of Surplus Value’ Volume 1. Chapter 4)
In one sense at a general level, all labour ie the expenditure of physical skill and energy on some task is productive, (ie produces something) but as stated, under the capitalist mode of production, it is only in the specific productive circuit of capital that labour is productive and reproduces capital along with a surplus. Many forms of labour are also useful and even essential to humanity, but this essentialness or usefulness does not always produce capital or reproduce it.
Productive labour is activity (the creative force) which via production processes both consumes (raw materials and labour power) and produces wealth in the form of (commodities) which return the invested capital and profit. The circuit of capitalist production goes through the following stages, M – C – P – C – M. In other words, M (money from the capitalist goes to) – C (purchases of raw materials and the commodity labour power) this goes into a production process – P (both aspects produce commodities and surplus commodities) – C+ (which are sold in exchange for) – M+ (money plus profit).
In the terms of Marx‘s Das Capital this process is shortened to; M – C – (P) – C+ – M+. In the circuit of capitalist production, money-capital [M] is not simply or only a means of exchanging commodities, but the form in which capital is transformed and augmented. This is done via successive phases from its first money-capital phase to its final enhanced money-capital phase.
Thus the employing capitalist obtains a living productive force, wielded by the workers, which combined with other forms of capital; buildings, machinery, raw materials (themselves the results of past labour) creates the products (commodities or services) which on sale maintains and augments capital. The value of the wages given to the productive workers are regained (as are the other costs of production) by the sale of the commodities which also yields a surplus value. This surplus value is the source of interest, profits, rents and other deductions such as taxes.
Under the capitalist mode of production, the productive worker is productive in a double sense; his or her efforts, through the production process, returns the value of the capital expended on raw materials, machinery and his or her wages along with a profit. Labour power (the creative power of the worker) is the activity by means of which capitalist realises and augments his or her wealth. This is the defining criteria of productive labour and why Marx noted that under the rule of capital wage-labour was a curse not a privilege. It was a curse because productive labour is always under an unremiting pressure from the capitalist to increase intensity and duration.
Under the capitalist mode, the forms of labour which do not complete such a capital augmenting circuit are not considered productive. As Marx commented to himself on this question in the Grundrisse; ‘all else is horse piss’ or the muttering’s of ‘sycophantic bourgeois’ economists. The blurring or denial of the distinction between productive and unproductive labour, according to Marx arose because;
“..the sycophantic underlings of political economy felt it their duty to glorify and justify every sphere of activity by demonstrating that it was ‘linked’ with the material production of wealth, (Marx ibid)
The worker, the owner of labour power, sells this labour power for a wage or salary and gives up its creative power and the duration of its expenditure to the employer. In general, the wage or salary is determined, not by the value creating output of the worker, but by the average cost of maintaining the worker in his or her average life-style. That goes for all labour employed under the capitalist system. However, it is not the fact of employment by a capitalist or capitalist government which determines the nature of the resulting exchange, but as was noted above, the nature of the form of capitalist production which determines whether it falls into the category of productive for capital or not.
It is true, that in highly industrialised and capitalised countries, some workers are employed by the state to re-produce – in a process of production – the capital set aside from revenue and return a surplus. In this case the state owns the ’means of production’ and the circuit is M – C – (P) – C+ – M+. However, in the overall development of capitalism, this is rare and most such cases run at a loss or break-even point, usually relatively good for the workers, but not for the capitalists.
b) The fundamentals of simple economic exchange.
The other form of employment under capitalism, which does not augment capital, is the above-noted category known as unproductive labour. An example of this would be the employment of a servant by a capitalist. The servant would have a use-value for the capitalist and an exchange value for that service agreed. The capitalist then pays a wage (or salary) to the servant, which the servant consumes in whatever manner he or she is accustomed. The servant provides labour services to the capitalist who consumes them in the manner agreed – polishing shoes, running errands, cooking, answering the door etc. In short this is a simple economic exchange. M (money paid for wage) is exchanged for C (the commodity of labour power). Money [M] in simple exchange just acts as a medium of exchange not a medium of accumulation via production of surplus value.
The servants labour power in this simple circuit does not return his or her wages, nor does it return a profit. In fact the servants wages are a deduction from the capitalists income or money-capital used as revenue, which he or she must continually make good or suffer a gradual reduction. To paraphrase Adam Smith; A millionaire with a thousand productive workers gets richer: a millionaire with a thousand servants gets poorer.
Under the capitalist mode of production, this fundamental principle applies to whoever controls the capital, whether this is private, a consortium of capitalists or the state functioning as controller of social capital. This is true, no matter how pleasant, or useful the results of his or her efforts may be to those who employ such labour or to society in general. The unproductive worker, of all levels, stands in the same relationship to the individual consortium or state as the servant to the individual capitalist. His or her costs must be born out of revenue or capital and thus are a drain on their respective resources. It is a drain which must be continually made good or capital resources will suffer a gradual reduction.
“As to the purchase of such as those services which train labour-power, maintain or modify it etc., in a word give it a specialised form or even only maintain it – thus the schoolmasters service, in so far as it is industrially necessary or useful; the doctors service, insofar as he maintains health and so conserves the source of values, labour-power itself – these are services which yield in return ‘ a vendible commodity’, etc., namely labour-power itself, into whose costs of production or reproduction these services enter. Adam Smith knew however, how little ‘education‘ enters into the costs of production of the mass of working men. (Marx. Ibid)
c) Unproductive labour within the modern capitalist system.
As noted above, Marx had a lot to say on this question and it is worth noting the following with regard to his Capital Volume 1 chapter on Machinery and Modern Industry. He notes;
“…the extraordinary productiveness of modern industry, accompanied as it is by both a more extensive and a more intensive exploitation of labour-power in all other spheres of production, allows of the unproductive employment of a larger and larger part of the working class, and the consequent reproduction, on a constantly extending scale, of the ancient domestic slaves under the name of a servant class, including men-servants, women servants, lackey’s etc.” (Marx. Capital. Volume 1 page 446.)
The huge development of a servant class,(1.2 million in England and Wales in 1861) supported out of the realised surplus value of productive workers, noted by Marx no longer exists. However, the productiveness of 20th century capitalism far exceeds that of the 19th and therefore manages to support a working class in different and desirable spheres of activity, such as education, health and social services. The link with this past role being evidenced by the term ’public services’ as distinct from ‘private services‘.
So not all work done in capitalist societies is productive in the capitalist sense of the term. Domestic work and child-rearing, for example, are necessary and important but do not directly return any energy and time expended upon them, nor within the family do they generally create commodities or services which return a profit. However, it is the modern capitalist state that is the primary modern employer of unproductive labour. Marx again;
“That labour alone is productive, who produces surplus-value for the capitalist, and thus works for the self-expansion of capital. If we may take an example from outside the sphere of production of material objects, a schoolmaster is a productive labourer, when in addition to belabouring the heads of his scholars, he works like a horse to enrich the school proprietor. That the latter has laid out his capital in a teaching factory, instead of a sausage factory, does not alter the relation. Hence the notion of productive labourer implies not merely a relation between work and a useful effect, between labourer and product of labour, but also a specific, social relation of production, a relation that has sprung up historically and stamps the labour as the direct means of creating surplus-value.” (Marx. Capital. Volume 1 page 509.)
The economic activity of state workers in general takes place in the simple circulation of exchange, the foundational socio-economic system upon which capital is parasitic. The state purchases skills and activities out of its revenue, not out of its capital, and the workers deliver a contracted amount of time, skill and knowledge. Money [M], in this case, is a means of exchange – in the simple economic circuit – it is not advanced as money capital in a circuit of capital accumulation.
Their skills and knowledge in most cases are not packaged and sold, nor are they bought. Teachers, health workers, fire-fighters, police, civil servants, judges etc., do deliver use-values, and do utilise, local state-owned means of production, but these workers’ use value’s do not directly, or in most cases not even indirectly, contribute to the creation and augmentation of capital. In this sense, the modern public services, in their essence (although not in their form) are examples of production for need and not for profit.
Nor do such public-service workers directly return the cost of their salaries. Indeed, in some instances the less these services delivery their use-values, the better. If a fire – fighter does not have to attend any fires, he or she does not deliver any direct labour power or use value. His or her use value remains a potential one in case of fire. The same goes for accident and other emergency services. Thus as the case with an individual capitalist, a capitalist state with a majority of productive workers would grow financially richer; a capitalist state with a majority of service workers would get financially poorer; which of course, is the actual case at least in most advanced capitalist countries.
d) Most state workers do not reproduce capital or create profits.
The labour power expended in the act of teaching, for example, has a use value and therefore as noted, has an exchange value, but the activity of teaching does not go through a capital augmenting circuit in a state school, even though it may do so in a private school. The same goes for nursing and medical care. Marx again;
“The great mass of so-called ‘higher grade’ workers- such as state officials, military people, artists, doctors, priests, judges, lawyers, etc., – some of whom are not only not productive but in essence destructive, but who know how to appropriate to themselves a very great part of the ‘material’ wealth, partly through the sale of their immaterial commodities and partly by forcibly imposing the latter on the people – found it not at all pleasant to be relegated economically to the same class as clowns and menial servants and to appear merely as people partaking in the consumption, parasites on the actual producers……(Marx. ibid)
The same goes for the armed forces of the capitalist state. The wholesale killing of enemies of the state, by its military employees, may be of immense benefit to the ruling state elite, but this of itself, by no means augments any revenue advanced by the state, let alone any capital. Indeed, military expenditure is a drain on the states revenue, which must be continually replaced by taxation or borrowing. Militarised murder is a use value purchased, alongside weapon commodities, by the capitalist state’s officials, but this grotesque use-value may produce and advantage for the state, but does not produce a return of expenditure (or capital) or profit. Indeed, such a ‘use’ produces massive revenue loss.
Profits from warfare can be made, but these can only be created outside the circuit of simple exchange. They require labour power to be exchanged for the production of commodities or services which return the amount invested, together with a surplus-value, ultimately derived from unpaid labour, emerging as profit. This is why the creation of armaments and the means to deliver them (highly profitable, military-industrial companies) are predominantly within the private sector, subsidised by the state, or in special separate state-funded units. The workers in these industries and units produce more actual value than the costs of their wages and the difference is returned as profit. Extra profits can be squeezed from such enterprise by various means, official and unofficial, because of the unique and colluding relationship between this branch of production and the governing elites in politics and state.
Indeed, as noted above, under the capitalist mode, such unproductive workers are a drain on the resources of the capitalist state. Capitalist states in the advanced countries, have no capital to invest and insufficient revenue for the burdens they have increasingly taken on. They have to borrow huge tranches’ of capital from the international bond-markets, but this is primarily used as revenue, not capital. Hence the current sovereign debt crisis.
This undeclared bankruptcy is a result of a number of reasons but one is the historic change in the ratio of unproductive to productive workers. The means of production have become so efficient that in relative terms there is less need for productive workers. Fewer workers in these sectors are needed to supply everyone’s needs for basic levels of enjoyment. This, for a brief period in the 20th century, enabled many more workers to be deployed in the service sectors. And these sectors are the alternative mode of production (production for need) arising within the capitalist mode of production for profit. Their form is deformed by the hierarchical control they are subjected to, but their essence is post-capitalist. Hence the desire for capitalists to destroy them by taking them over and reto-engineering them into capitalist forms. [See ‘Defending Public Services‘]
However, since the late 1960’s the economic and political champions of the capitalistic mode of production, which only fully values productive labour, has made the choice to allow an increasing amount of the surplus value produced to be retained by the capitalist class. This in turn has left less to fund the ‘welfare’ provisions built up after the Second World War. The means of production controlled by the capitalist class, therefore are again in conflict with the current mode of production. It is a conflict in which austerity, low pay and large-scale redundancies are the solutions proposed by all political representatives of capital.
e) Can Capitalism survive the current problems?
The argument that all state workers produce surplus value – which is returned to the state – has been used by some commentators, to suggest that the capitalist system has much more life in it and can continue to deliver a decent life to the bulk of their citizens. The first part of this may or may not be true, capitalism is very adept at surviving, but its survival will not be because of state service workers reproducing capital and a surplus. Nor will it survive just because it is capable of inventing new innovative commodities.
This line of reasoning would suggest that the current sovereign debt crisis is only accidental and therefore solvable under the capitalist mode of production. Or that people always have enough money to purchase all the desired commodities and services produced by capital. If this were true then businesses will continue to flourish and of course the state could largely exist on its surplus value and taxation with little need to borrow. However, as we have seen it is not true. Such reasoning, to my mind has failed to grasp the real distinction between productive and unproductive labour and failed to understand the fundamental circuit of capitalist production. [See ‘Workers and others in the 21st century’.]
Since the majority of state employment in capitalist countries, neither creates surplus value nor capital, capitalist inspired sovereign debt solutions can only be attempted by printing money via their central banks. However, printing money does not create capital nor surplus value, it merely adds to general monetary liquidity and at the same devalues the existing currency, creating uncertainty along with inflation. Printing of money has been done repeatedly by capitalist governments over recent years, in order to try to overcome the developing crisis. The mistaken understanding that the crisis is one of liquidity rather than solvency has led to this ineffectual strategy. The present crisis, however, is dominated by two further symptoms for which increased liquidity is not a solution. First insolvency and the second, relative overproduction.
The insolvency of the banking system, was not rescued by increasing the money supply. There is now huge amounts of fiat currency residing in bank accounts and on company books, which is not being used or being used speculatively. An uncertain amount of the asset value of companies is also tied up in ‘bonds’ and other financial instruments, which themselves are not worth what was originally paid for them. Banks and companies are not fully using the ample resources, they as yet control, because of fears that such investments and investment loans will default or not produce returns, either because of counter-party defaults and/or poor sales (ie a failure to realise the surplus value). (See ‘The Five-fold crisis of Capitalism‘ also ‘What Triggered the Crisis?’)
The existing productive forces are sufficient to feed, clothe, house and look after all people, but not under the capitalist mode of production. This is precisely because the mode primarily requires productive labour which produces not for general need, but for private greed. All the elements of the solution to the current economic, social and environments problems facing humanity and the planet are in existence. But these problems can only be solved once the mode of production has been altered. The capitalist system and its supporters, stand in the way of such a change. Whether capitalism will survive depends to a large extent on whether, in the present and future circumstances of crisis, enough people become desperate enough and reach an understanding of the need to go beyond the capitalist mode of production. Or as Marx more eloquently put it;
“..if these material elements of a complete revolution are not present (namely, on the one hand the existing productive forces, on the other the formation of a revolutionary mass, which revolts not only against the separate conditions of society up to then, but against the very ‘production of life’ till then, the ‘total activity’ on which it is based), then, as far as practical development is concerned, it is absolutely immaterial whether the idea of revolution has been expressed a hundred times already…“ (Marx. German Ideology.)
Roy Ratcliffe (August 2012)
A number of readers of the above article have found their way to it via a search for Adam Smith on productive and unproductive labour.
For this reason I have added a few key quotations on this issue from Book 2 Chapter 3 of Adam Smith’s ‘An Inquiry into the Nature and Causes of the Wealth of Nations’. The language is somewhat antiquated but by a careful reading the meaning is clear.
“There is one sort of labour which adds to the value of the subject upon which it is bestowed; there is another which has no such effect. The former as it produces value, may be called productive, the latter unproductive labour.”
“Thus the labour of a manufacturer adds generally to the value of the materials which he works upon, that of his own maintenance , and of his masters profit. The labour of a menial servant, on the contrary, adds to the value of nothing. Although the manufacturer has his wages advanced to him by his master, he in reality costs him no expense, the value of those wages being generally restored, together with a profit, in the improved value of the subject upon which his labour is bestowed. But the maintenance of a menial servant never is restored. A man grows rich by employing a multitude of manufacturers, he grows poor by maintaining a multitude of menial servants. “
“The labour of the menial servant, on the contrary, does not fix or realize itself in any particular subject of vendible commodity. His services generally perish in the very instant of their performance, and seldom leave any trace of value behind them, for which an equal quantity of service could afterwards be procured. The labour of some of the most respectable orders in the society is, like the menial servants, unproductive of any value, and does not fix or realize itself in any permanent subject, or vendible commodity, which endures after that labour is past….”
“The sovereign, for example, with all the officers both of justice and war who serve under him, the whole army and navy are unproductive labourers. They are the servants of the public, and are maintained by a part of the annual produce of the industry of other people…”
“The protection, security, and defence, of the commonwealth, the effect of their labour this year, will not purchase its protection, security, and defence, for the year to come.”
“Both productive and unproductive labourers, and those who do not labour at all, are all equally maintained by the annual produce of the and labour of the country.”
“The whole, or almost the whole public revenue is, in most countries, employed in maintaining unproductive hands. Such are the people who compose a numerous and splendid court, a great ecclesiastical establishment, great fleets and armies, who in times of peace produce nothing, and in time of war acquire nothing which can compensate the expense of maintaining them, even while war lasts. Such people, as they themselves produce nothing, are all maintained by the produce of other men’s labour.”
The implication being that all those who work productively – under the capitalist mode of production – are supporting all those who do not. Hence – under the capitalist mode of production – the enormous tax burden of the state – the largest employer of unproductive labour – placed on the backs of the employed labouring populations. And hence also the 20th and 21st century crisis of unsustainable governmental debt. RR
[See the article; ‘Past Labour and Present Labour’ on this blog.]
[Also see http://philosophytheology.wordpress.com/2014/06/03/capital-in-the-21st-century for extended notes on Thomas Piketty’s new book ‘Capital’.]