The puzzle of productive and unproductive labour

digging-a-hole-thIn their desperate search for profitable fields of investment, the capitalist class, especially the financial oligarchy, has presided over an explosive growth of unproductive expenditure that today threatens to undermine the very edifice of capitalism. As more and more surplus value is siphoned off into unproductive activities, the issue of “productive” and “unproductive” labour has once again resurfaced as a factor contributing to, and a reflection of, the present terminal decline of world capitalism.

“Capitalist production is not merely the production of commodities, it is, by its very essence, the production of surplus value”, explained Marx in volume one of Capital. “The worker produces not for himself, but for capital. It is no longer sufficient, therefore, for him simply to produce. He must produce surplus value. The only worker who is productive is one who produces surplus value for the capitalist…” 1

digging-a-holeAdam Smith, the classical economist, also uses a similar definition regarding “productive” and “unproductive” labour. “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 a value, may be called productive; the latter, unproductive labour.” 2

In their greed for profit, the capitalists have diverted more and more capital from the “productive” sectors of the economy into the “unproductive” sectors, such as finance, insurance, property dealing, currency speculation, derivatives and other unsound activities. This edifice of speculative activity serves to artificially expand the market in all kinds of ways, but at the expense of building chronic instability into the foundations of the system. The capitalist system has therefore increasingly become a house built on chickens’ legs, whose foundations are being undermined by the very contradictions of the capitalist economy.

The terms “productive” and “unproductive” work were considered of great importance to the early nineteenth century classical economists which underpinned their labour theory of value. While their understanding was far in advance of today’s bourgeois economists, who have become mere apologists for the capitalist system, it was nevertheless undeveloped and contained certain errors. It was left to Marx to correct these errors and furnish a scientific explanation of “productive” and “unproductive” labour. This was chiefly expounded in his Theories of Surplus Value, particularly the first volume, where he dealt with the definitions of Adam Smith and others. This analysis can provide valuable insights into the crisis and instability of modern-day capitalism.

In this present epoch, there has been a general shift in economic activity from industrial production to service industries and finance capital, but which are ever-reliant on the real wealth produced by industry. In the advanced capitalist countries, millions of jobs have been eliminated in steel, coal mining, shipbuilding, and car manufacturing, while the proportion employed in the service and financial sectors have grown continuously.  This has meant a general shift towards a rentier economy, which was anticipated by Marx, and increasingly indicated the parasitic nature of capitalism.

Thatcherism

In Britain, Margaret Thatcher epitomised this short-sighted process by seeking to rebuild the position of British capitalism through services and banking. However, a modern economy cannot survive without a manufacturing and industrial basis. The de-industrialisation of Britain over the last 30 years or more and its reliance on financial services, has not served to strengthen British capitalism, but weaken it. As a consequence, it was one of the hardest hit by the 2008-9 world slump.

Whereas Adam Smith once justified capitalism with the phrase “It is not from the benevolence of the butcher, the brewer, or the baker, that we can expect our dinner, but from their regard to their own interest”, today he would need to justify the actions of the market with reference to the junk bond salesman, the fund manager and the investment banker.

He would need to explain things in terms of the clients of Goldman Sachs who bought into a sub-prime mortgage deal called Abacus 2007-AC1, which had been constructed with the input from the Paulson & Co hedge fund, which was betting that the entire thing would implode. Such are the vagaries of modern capitalism, where parasitic finance capital has become dominant.

“The ‘entrepreneurs’, i.e. the monopolies, are not interested in an extensive increase in capacity when they cannot see a future market, and when they cannot make use of already existing capacity…” explained Ted Grant almost 40 years ago. “Now they are faced with the major problem of limited markets both at home and abroad, while saddled with surplus capacity.” 3 This surplus capacity is only a reflection of the over-production of capital and consumer goods, which has been the common characteristic of the present stage of capitalism. “Over-production, the credit system, etc., are means by which capitalist production seeks to break through its own barriers and to produce over and above its own limits”, states Marx. 4 In the present epoch, it is a reflection of the limits of the capitalist system.

This has forced the capitalists to look for new, more profitable fields of investment, as opposed to industry, that guarantees them quick returns. In the end, they have developed the notion that they could make money, “a quick buck”, without recourse to long-term investments in productive industry. The capitalists, particularly the financiers, wanted to make money out of nothing, without resorting to the laborious process of commodity production. That is why they have resorted to old-fashioned medieval financial alchemy to make money. When fortunes can be made with a single phone call, why bother to risk capital by investing in costly machinery which may never make a profit?

Surplus value extracted from productive activity was formulated by Marx as M —C — M2, where M = money and C = capital, while the attempt to create money from money is simply M — M2, in which production has no role to play. This reveals the real parasitic nature of modern capitalism. “It reproduces a new financial aristocracy, a new kind of parasites in the guise of company promoters, speculators and merely nominal directors; an entire system of swindling and cheating with respect to the promotion of companies, issue of shares and share dealings”, states Marx. 5

This development has been expressed in an explosion of speculation and an unprecedented increase in fictitious capital, namely capital not backed by real values. New investments were not made in productive industry but increasingly in gambling on the stock markets, bond markets, shadow banking, in derivatives, currencies, property and other financial instruments which are purely speculative in character. Increasingly, capitalists are buying back shares in their own companies to artificially push up the share price, and engage in money-making mergers, acquisitions and leverage buyouts. The capitalist class has become a barrier to the development of the productive forces of industry, technique and science, which was their historical justification. Instead, they systematically undermine and destroy these productive forces.

Today, central bankers, a real financial aristocracy, have become all-powerful and, together with some 500 monopolies, hold the economic fate of the world economy in their hands.  Never in history have the bankers, with their financial tentacles spread everywhere, become so dominant, and now apparently “too big to fail”.  Since the crisis of 2007-8, these “too big to fail” banks have become even more powerful. After the “Big Bang” of financial deregulation in the mid-1980s, they presided over the biggest orgy of financial speculation of all time. Banking and financial capital rule the roost, which reflects the real parasitic nature of the market economy. This has been accompanied by a general shift towards services, banking and finance, considered “unproductive” sectors of the economy, which are increasingly subsidised by the wealth created by the economy as a whole. This was reflected in the blunt comments of Lord Turner, the then chairman of the UK’s Financial Services Authority, who in 2009 stated that banking was a “socially useless” activity. It reflects the fact that the capitalist system is relying more and more on sectors that do not create surplus value, but act as a constant drain on the productive economy. And yet, paradoxically, they have become increasingly necessary to the capitalist system, as heroin is to a heroin addict. This speculative juggling of money, justified as “essential” activity by the powers that be, threatens to engulf the world in a new financial collapse, which in turn is preparing the way for an even bigger slump and greater depression.

Lenin’s Imperialism

Lenin had explained long ago that a key characteristic of imperialism was the domination of finance capital. “Thus, the twentieth century marks the turning-point from the old capitalism to the new, from the domination of capital in general to the domination of finance capital… The concentration of production; the monopolies arising therefrom; the merging or coalescence of the banks with industry – such is the history of the rise of finance capital.” 6  Lenin continues: “Finance capital, concentrated in a few hands and exercising a virtual monopoly, extracts enormous and increasing profits from the floatation of companies, issue of stock, state loans, etc., strengthens the domination of the financial oligarchy and levies tribute upon the whole of society for the benefit of monopolists.” 7

“During periods of industrial boom, the profits of finance capital are immense, but during periods of depression, small and unsound businesses go out of existence, and the big banks acquire ‘holdings’ in them by buying them up for a mere song, or participate in profitable schemes for their ‘reconstruction’ and ‘reorganisation’,” a tendency that has become ubiquitous. 8  “Hence the extraordinary growth of a class, or rather a stratum of rentiers, i.e., people who live by ‘clipping coupons’ who take no part in any enterprise whatsoever, whose profession is idleness. The export of capital, one of the most essential economic bases of imperialism, still more completely isolates the rentiers from producers and sets the seal of parasitism on the whole country that lives by exploiting the labour of several overseas countries and colonies…” In quoting Schulze-Gaevernitz, Lenin explains that in Britain, which was the dominant capitalist power at that time, there was “an increase in the relative importance of income from interest and dividends, issues of securities, commissions and speculation in the whole of the national economy.” 9

Since Lenin’s book on Imperialism, this domination of banking and financial oligarchy has today reached astronomical proportions. Some have claimed that this development represents a new stage in the evolution of capitalism (even inventing the new term of “financialisation”), but this is not the case. It is however undeniable that this tendency has certainly reached a new qualitative high-point and is connected with the present organic crisis of capitalism. The continuous attempts by the capitalists to overcome their contradictions simply lead to new barriers and deeper contradictions. Today, the system has reached a complete impasse and has become incapable of utilising the productive capacity it has brought into being. In the words of the ever-relevant Communist Manifesto, the system has become a massive fetter to growth and development. “The conditions of bourgeois society are too narrow to comprise the wealth created by them,” states the Manifesto. Therefore, the impasse of the capitalist system is presently revealed in today’s over-production and economic crisis. The fact that capitalism can only use 80% of productive capacity in a boom and a mere 65% in a slump reveals its bankruptcy. The system has become burdened with over-production and “excess capacity”.

The domination of finance capital has meant that the financiers suck up a greater and greater proportion of the wealth created by the rest of the economy. As Marx explained, surplus value comes from production, but is then redistributed to other sectors of the economy. The division is characterised by Rent, Interest, and Profit, the “Holy Trinity of Capitalism”, where the surplus value extracted from the labour of the working class is divided between the industrialists’ profit, the bankers’ interest and the landlords’ rent. While banks and other financial institutions do have a necessary function under capitalism in providing loans, they are parasitic in a way that other capital is not. The share now going to the financial sector has reached colossal proportions. In the United States, during the 1950s and 1960s, an average of 13.1 per cent of domestic profits derived from the finance sector. In the fourth quarter of 2001, that grew to a peak of 45.3 per cent. At the end of 2006, finance was responsible for a third of all domestic profits. Soon afterwards the collapse in house prices took their toll on bankers’ balance sheets, but even then, in early 2009, finance still accounted for a quarter of domestic profits. 10

This parasitic rentier development has now reached new heights. The “unproductive” sectors are out-weighing the “productive” sectors that produce surplus value and act as a colossal drag on capitalism and its profitability. According to the economist Fred Moseley, “Commercial labour… accounted for almost two-thirds of the total increase of unproductive labour. The other two types of unproductive labour, financial labour and supervisory labour, each accounted for approximately half the remaining increase of unproductive labour.” 11

“Productive” and “unproductive” labour has a special meaning for Marxism. In understanding this concept we must be careful. “Productive work” should not be confused with “socially-useful work”, while “unproductive work” should not be confused with “socially-useless work”. They have nothing whatsoever to do with these things. Incidentally, there are no equivalent terms in present-day bourgeois economics for productive and unproductive labour, as all workers are regarded as the same. However, they were extensively used by the great classical economists, such as Adam Smith and David Ricardo, to understand capitalism. People were regarded as productive or unproductive in the capitalist sense, which was the only way they could understand things. After all, the aim of capitalist production is the production of profit. Profit is the surplus value produced by the unpaid labour of the working class. Thus, according to the logic of the system, productive labour is that which creates surplus value.

“A man grows rich by employing a multitude of manufacturers; he grows poor, by maintaining a multitude of menial servant,” stated Adam Smith. The first would increase his profits, whereas the second would decrease his income. In the category of “unproductive” labour Adam Smith included a whole range of people, including domestic servants. This is hardly surprising given the large numbers of servants that existed at that time. The House of Commons report in April 1861 showed that there were more than one million domestic servants in Britain, an even greater number than factory workers. By the beginning of the 20th century, one in four workers was employed in domestic service. While these workers were undoubtedly exploited and forced to work long hours, they were deemed economically “unproductive” as they were paid wages from revenue and did not produce surplus value for the capitalist.

“What a convenient arrangement it is,”  noted Marx, “that makes a factory girl to sweat twelve hours in a factory, so that the factory proprietor, with a part of her unpaid labour, can take into his personal service her sister as maid, her brother as groom and her cousin as soldier or policeman!” 12 

Domestic servants were not the only people considered unproductive from the point of view of capitalism. As Adam Smith explained:

“The labour of some of the most respectable orders in society is, like that of menial servants, unproductive of any value… 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… In the same class must be ranked… churchmen, lawyers, physicians, men of letters of all kinds; players, buffoons, musicians, opera-singers, opera-dancers, etc.”

Marxists use the terms “productive” and “unproductive” labour, but in a more precise manner than defined by Adam Smith. Once again, these terms are not moral judgments about the quality of a person’s job, but are definitions based upon whether or not workers produce surplus value for the capitalists. Clearly people such as doctors, nurses, and teachers are extremely “socially-useful” and essential, but nonetheless, from the point of view of capitalism, are regarded as unproductive workers. “Productive labour, in its meaning for capitalist production, is wage-labour which… produces surplus value for the capitalist… Only that wage-labour is productive which produces capital,” explained Marx. 13 In other words, these terms refer to what is productive for capital. Likewise, “unproductive” labour, in the capitalist sense, is therefore labour which produces no surplus value for the capitalist. As such, unproductive labour has become an ever-expanding mill-stone around the neck of capitalism which takes an ever-increasing slice of the surplus value produced by the rest of the productive economy.

Exchange-value

Marx explains that the capitalist is not interested at all in the particular use-values created in the production process. The use-value of a pair of shoes, coat or car is simply a means to an end and nothing more. The Moneybags capitalists are interested only in the exchange-value and thereby the surplus value, which they will realise once the commodity has been sold. The whole basis of capitalist production is the production of surplus value, and nothing else. The use-value that is created is neither here nor there. All the capitalist is concerned with is getting “back a greater quantity of labour-time than he has paid out in the form of wages.” Marx therefore concludes that under the profit system: “Only labour which produces capital is productive labour.” 14

Whether workers produce material tangible things or not is also unimportant, as long as by their labour they produce surplus value. The workers who produce surplus value get their income by selling their labour power to the capitalist for wages. They are forced to do this out of economic necessity. Surplus value arises in production out of the unpaid labour of the working class. “A writer is a productive labourer not in so far as he produces ideas, but in so far as he enriches the publisher who publishes his works, or if he is a wage labourer for a capitalist,” explains Marx. 15

In other words, if a capitalist hires workers to make furniture for his personal needs, these workers produce use-values in the form of furniture. While they perform surplus labour (work over and above what they receive in wages), their labour will not take the form of value as the furniture will not be sold on the market. Therefore, as no value is produced, neither is surplus value produced. The labour of these workers is therefore “unproductive” in the capitalist sense as, while it produces use-values, it produces no surplus value.

Thus, the distinction between “productive” and “unproductive” work boils down to whether or not workers produce surplus value, irrespective of the usefulness of the things they produce. Therefore the definition of a productive worker does not come from what is produced, but from its particular social form.  Marx underlines the point by explaining that “Productive capital is here defined from the standpoint of capitalist production.” 16 So workers producing weapons of mass destruction, despite their abhorrent nature, are deemed “productive” if their labour creates surplus value. That is the only criteria from the point of view of capitalism. As Marx comments, “The use-value of the commodity in which the labour of a productive worker is embodied may be of the most futile kind.” What is produced is of no consequence as the key issue is whether or not it produces surplus value. While nurses and doctors working in the NHS are considered “unproductive”, as they produce no surplus value, if these very same workers were working in a private hospital or a profit-grabbing agency, then they would be deemed “productive” workers from the viewpoint of capitalism! The nature of their work is irrelevant. Everything boils down to whether it generates profit or not, the sole thing that motivates the capitalist.

Adam Smith made the mistake in believing that productive labour was labour that only produced tangible things. The product of an opera singer, stated Smith, vanishes as soon as it is performed. While this is true, he was confused about the nature of a commodity, which can be a tangible thing or a “service”. Both things can produce surplus value, and need not produce a material object. Workers employed in transport and communications, for instance, do not produce a thing, but their work in moving things around is nevertheless vital to the economy. It is irrelevant if surplus value is extracted from intellectual or manual labour. “Alongside the consumable articles existing in the form of goods [exist] a quantity of consumable articles in the form of service”, states Marx. 17

The mistaken distinction of Adam Smith arose from the fact that the classical economists regarded the labour of domestic servants as unproductive. While this was correct, Smith drew incorrect conclusions from this fact. Surplus value can certainly arise from a service of some kind, depending on how it is exploited. As explained, a doctor or nurse working for a profit-making private clinic, which does not produce a thing as such, but a service, nevertheless produces surplus value. The opera singer will produce surplus value for the theatre owner assuming the singer is only paid the value of their labour power. The earnings taken from ticket sales to watch the performance will be greater than the wages to the performers. In this case, the singer will be deemed “productive” by capitalism. It makes no difference whether the product lasts for a few seconds or not.

“Productive and unproductive labour is here throughout conceived from the standpoint of the possessor of money, from the standpoint of the capitalist, not from that of the workingman,” explained Marx. 18  Again, Marx provides us with a number of examples. “An actor, for example, or even a clown, according to this definition, is a productive labourer if he works in the service of a capitalist (an entrepreneur) to whom he returns more labour than he receives from him in the form of wages.”

Revenue

Marx then goes on to draw the distinction between those workers who produce surplus value (“productive”) and those who consume revenue (“unproductive”) from the capitalists. “While a jobbing tailor, who comes to the capitalist’s house and patches his trousers for him, produces a mere use-value for him, is an unproductive labourer... The former’s labour [the actor or clown] produces a surplus value; in the latter’s [the tailor], revenue is consumed.” 19 In other words, the clown produces surplus value for his employer by entertaining the paying crowds, while the tailor’s service simply consumes his money!

From the point of view of the capitalist, the issue boils down to how the money is spent: either “productively” in investing it to produce surplus value, or “unproductively” by flitting it away on pleasantries, such as wine, women and song. Of course, in this Alice-in-Wonderland way of looking at things, one capitalist’s pleasure is another capitalist’s profit. The capitalist who hires the clown to entertain people makes money, but the capitalist who actually goes to see the clown spends his money on an entrance ticket. For the producer, these services are commodities which create profits. However, for the buyer, these services are mere use-values, objects which consume a person’s hard-earned revenue!

“For example”, explains Marx, “the cooks and waiters in a public hotel are productive labourers, in so far as their labour is transformed into capital for the proprietor of the hotel. These same persons are unproductive labourers as menial servants, inasmuch as I do not make capital out of their services, but spend revenue on them. In fact, however, these same persons are also for me, the consumer, unproductive labourers in the hotel.” 20

If I am a cook employed in a rich person’s home, my labour is unproductive as my labour is “exchanged directly against their revenue”. But if I work for a first-class restaurant catering for the rich, my labour is productive, as it makes a profit for the capitalist for whom I work. Marx makes the same point. “The cook in a hotel produces a commodity for the person who as a capitalist has bought her labour — the hotel proprietor; the consumer of mutton chops has to pay for her labour, and this labour replaces for the hotel proprietor (apart from profit) the fund out of which he continues to pay the cook. On the other hand if I buy the labour of a cook for her to cook meat, etc., for me, not to make use of it as labour in general but to enjoy it, to use it as that particular concrete kind of labour, then her labour is unproductive… The great difference is (the conceptual difference) however remains: the cook does not replace for me (the private person) the fund from which I pay her, because I buy her labour not as a value-creating element but purely for the sake of its use-value. Her labour as little replaces for me the fund with which I pay for it, that is, her wages, as, for example, the dinner I eat in the hotel in itself enables me to buy and eat the same dinner again a second time.” 21

Big Mac

What is actually produced, or the labour that has gone into it, has nothing whatever to do with this distinction. Workers who produce “Happy Meals” at Burger King or MacDonalds are productive workers as they produce surplus value for their bosses. These workers act very much like being on an industrial conveyor belt producing “fast food”. This, however, makes no difference as to whether or not their labour is productive. The determining factor is that the “Big Mac”, even if considered a dubious use-value, is nevertheless a use-value that is sold. In doing so, these workers produce surplus value, despite being classified as “service workers” by capitalist statisticians.

Much of the financial services are unproductive as this sector merely serves to move around large amounts of fictitious capital in the form of derivatives and other financial wizardry. There is no production of surplus value in such activity, but it serves to hoover up an enormous slice of the surplus value created in the productive sector. Such financial juggling is purely parasitic in nature.

Commercial capital simply buys in order to sell, but produces no surplus value from these activities. It is indeed true that a particular capitalist often makes a profit by buying cheap and selling dear, but when this happens, it is at the expense of the capitalist from whom he buys, or to whom he sells. The source of profit is however not in exchange. He merely realises the surplus value existing in the commodity sold to him below its value by the manufacturer, namely at a discount. In this way, the industrial capitalist will get his money back quickly and will speed his turnover of his capital. As Marx explained, “Commercial capital does not itself produce any surplus value, it is clear that the surplus value that accrues to it in the form of the average profit forms a portion of the surplus value produced by the productive capital as a whole.” 22

When you apply this concept to the workplace, it becomes a bit more complicated. In fact, in practice, factories employ a mix of both productive and unproductive labour - those who produce surplus value and those who consume revenue, but are necessary to production. In a workplace, where there is a division of labour, we cannot isolate an individual’s contribution, but view the collective production as the effort of the collective labour employed. These days, many “hands” are involved in the production of commodities of every kind. Modern production is social labour. In other words, each worker has his or her function in the production process, from the cleaner on the shop floor to the production manager. The cleaner plays an indispensable role in clearing up everything, allowing production to take place unhindered, and permitting the assembly workers to carry their work without unnecessary stoppages, thereby helping to increase surplus value.

“Adam Smith naturally includes in the labour which fixes or realises itself in a vendible and exchangeable commodity all intellectual labours which are directly consumed in material production. Not only the labourer working directly with his hands or a machine, but overseer, engineer, manager, clerk, etc. —in a word, the labour of the whole personnel required in a particular sphere of material production to produce a particular commodity, whose joint labour (co-operation) is required for commodity production. In fact they add their aggregate labour to the constant capital, and increase the value of the product by this amount.” 23

Marx explains that a plant manager has a day-to-day role to play in the running and organising of production, and arises out of the need to oversee and plan the production process within the workplace. The free reign of the market place is not allowed to operate here! Consequently, due to this function, the manager is entitled to the “wages of superintendence”, to use an expression of Marx. But the role of management under capitalism has a dual role, namely to plan production within the factory, but also to keep the workers in check and under control for the owners and shareholders, which cannot be considered productive labour. Of course, in a democratic workers’ state, the workers themselves will run the workplace under workers’ control and management. This means that the workers will appoint their own worker-managers, under the control of the factory committee, to help surpervise production. Their role will be fundamentally different to the capitalist overseer.

Jobs can combine elements of both productive and unproductive labour. For instance, book-keepers or accountants can be productive or unproductive depending on whether they record the necessary balances and inventories for production or simply spend time manipulating the accounts made necessary by capitalism or other related tasks.

A commodity not only has to be produced, it has also to be sold if the surplus value contained within it is to be realised. The labour of those workers employed in wholesale and retail trade has to be considered likewise as an essential part of the productive process as a whole. All must be considered necessary links in the chain of capitalist production. While surplus value is made in production and not circulation, those employed in the distribution or retail sectors play an essential role in selling the commodities produced in the factories. They must serve to realise the surplus value locked-up in the commodities through their sale. Therefore the industrial capitalist sells his commodities to the capitalists in distribution and retail for less than their value. These are then sold at their full value, the difference being the source of profit for these capitalists and the wages of the workers in these spheres. “To industrial capital, the costs of circulation appear as expenses, which they are”, states Marx. “To the merchant, they appear as the source of his profit, which —on the assumption of a general rate of profit — stands in proportion to the size of these costs.”

While workers in commerce and services do not produce surplus value, their unpaid labour does “create his [the commercial capitalist] ability to appropriate surplus value, which, as far as this capital is concerned, gives exactly the same result; i.e. it is its source of profit.”  In other words, the commercial worker does not produce surplus value directly, but indirectly through its realisation. Of course, the commercial capitalist will see that the wages paid to his clerical and distributive workers are as low as possible, so that as much of the surplus value as possible represented by the difference between the “factory-gate” price and the final selling price may come to him as profits.

In other words, the circulation of goods is paid from the surplus value produced in production, which makes a claim on the basis of the average rate of profit. Without this cut it would have no interest in being in business. It is nevertheless a cost to the capitalist system. The same is true of distribution. We nevertheless need to differentiate between capitalist circulation and the physical transport of commodities, which is a necessary part of the productive process. 

As a consequence, Marx includes as productive those workers involved in transport. He explains this by saying that “the use-value of things is realised only in their consumption, and their consumption may make a change of location necessary… the productive capital invested in this industry thus adds value to the products transported.”

Today, businesses employ the services of Call Centres to take care of “customer services”, which would be viewed as a necessary expenditure and “unproductive” from their point of view.  However, from the point of view of the owners of Call Centres, these workers would be views as “productive” as they produce surplus value for them!

If a capitalist uses private passenger transport (God forbid!), he spends his own money “unproductively”. The same would be true if he hired a chauffeur to drive him around. However, bus workers carrying paying passengers for a private company produce surplus value by bringing in revenue far in excess of their wages, and are therefore “productive” in a capitalist sense. As can be seen, this concept can therefore be applied to different sections of workers according to how they work for the capitalist and whether or not they produce surplus value.

 How does capitalism define workers who work for nationalised state industries? Under capitalism, the nationalised industries are run on state capitalist lines, geared to making profit for the state. Most of these industries were bankrupt under private ownership and were therefore taken over by the state, which pumped in new investment from taxation. Workers are exploited in these industries as they produce more value than they receive in wages. These state-run industries were then used to produce cheap transport and energy to subsidise the rest of the capitalist economy. They were also milked through massive over-compensation to former owners and high interest rates to banks, which served to siphon off the surplus value produced by these workers to other capitalists.

As these nationalised industries become more profitable, they are normally sold off at a knocked down price to the private sector. When privatised, the workers, who tend to be on worse terms and conditions, now produce surplus value for the new owners of capital.

State employees, no matter how their labour benefits society, are regarded as “unproductive” workers from the view of capitalism. Nurses, doctors and teachers all perform essential work, but those employed by the state are not producing surplus value for the capitalists. These publicly-funded sectors are financed through taxation, which falls heavily on the working class, and lightly on the capitalists. In other words, the labour power of these workers is not exchanged against capital, but comes from state revenues from taxation. The same applies to medical personnel and teachers in further and higher education. While their function is to help keep workers healthy and train a new generation of human labour power, and certainly play an essential role in society, they are nevertheless not “productive” workers for capitalism, because their labour power is still exchanged against revenue and not capital.

The social wage, while vital for people in general, is regarded as a necessary expense for capitalism, and does not produce surplus value. Therefore, for the capitalist class, state expenditure is regarded as a drain and burden on the productive (profit-making) sector of the economy and lies behind the capitalists’ constant drive to reduce state spending. In addition, they attempt to throw the burden of taxation from big business (which pays next to no tax) onto the shoulders of the workers mainly through indirect taxation. State institutions are also pushed to sell or outsource their services to the private sector, increasing the “marketisation” of the public services, and acting as a new source of profits. “Patients” and “students” then turn into “customers” by buying their private education and health care. Increasingly, workers in the public sector are outsourced to the private sector. Once this takes place, they change from being so-called unproductive workers to productive workers for capitalism, as they produce surplus value for their private employers.

This process has also occurred in manufacturing with the drive to reduce costs and squeeze as much profit from the unpaid labour of the working class. In fact, much of the so-called service sector, which in any case is not a Marxist term, has come into being as a spin off from manufacturing. As we know, firms that once employed maintenance engineers, cleaners, research workers, computer-programming workers, and other skills in-house, now employ private “service” agencies that provide such specialised needs. Whole sectors, which were once part of manufacturing, have been hived off to drive down labour costs, namely the costs of labour power. Former manufacturing jobs have gone to service companies, whose “services” are either leased or rented back at a reduced cost as workers’ wage levels have been forced down. However, the workers are doing exactly the same work as before, only harder. The main difference is they are employed by capitalist agencies instead of the original manufacturer.

Military-industrial complex

Lastly, the increased burden of “unproductive” sectors of the economy, which whittles away at the very marrow of the system, has been exacerbated by the growth of the military-industrial complex and the colossal burden of defence expenditure on a world scale. While very profitable for the defence contractors, this wasteful expenditure draws vital resources away from the productive economy.

Whatever the position of different sectors of workers, the insane profit driven view of capitalism simply reflects the material interests of the capitalist class. What is clearly evident is the increasingly destructive and parasitic nature of the capitalist system, a reflection of its protracted death agony. The sectors that produce real wealth are contracting to the advantage of those that leech off it, serving to undermine the whole market economy. Nevertheless, the bourgeois economists are blind to this impending catastrophe. As the ancient Greek philosophers said, “those whom the gods wish to destroy they first make mad.”

The return of mass unemployment, which takes the form of a permanent organic character, eats away at the vitals of society. This terrible waste of human labour power, together with the money spent on keeping the unemployed alive for fear of the social and political consequences, is a stark reminder of the complete impasse of the system. The malignant cancer of mass unemployment, especially hitting the youth, is a stark reflection of the diseased state of capitalism in its epoch of terminal decline. Society is now in a complete impasse - in reality a new Depression - as the productive forces are being strangled by private ownership of the means of production and the nation state. The capitalist system has now become a colossal obstacle. Partial reforms and patchwork solutions are of no use. Society needs a new organiser. The market has utterly failed. The apologists of capital are desperately trying to hold their ground, but are faced with a sea-change of anti-capitalist opposition. More and more will come to realise that the only way out of this impasse is the complete overthrow of the system.

Abolition of private ownership of the means of production is the first prerequisite to a rationally-organised planned economy. Under democratic socialist planning, the anarchy of capitalism will be eliminated. There will be no such thing as “productive” and “unproductive” labour, as exploitation and surplus value will become a thing of the past. According to Marx, society will inscribe on its banners: “From each according to his ability, to each according to his needs!” Humanity will then be able to plan its life rationally, using the full resources and talents available to society, eventually leading to the abolition of classes and the domination of man by man.


1. Marx, Capital, vol.1, p.644, Penguin, our emphasis.

2. Adam Smith, An Inquiry into the Nature and Causes of the Wealth of Nations, 1776.

3. Ted Grant, World Perspectives (1977), The Unbroken Thread, p.415.

4. Marx, The Theories of Surplus Value, vol.3, p.122, emphasis in original.

5. Marx, Capital, vol.3, p.569.

6. Lenin, Imperialism, the Highest Stage of Capitalism, LCW, vol.22, p.226.

7. Lenin, ibid, p.232.

8. Lenin, ibid, pp.234-35.

9. Lenin, ibid, pp.277-278.

10. See Graham Turner, No Way to Run an Economy, p.136.

11. Fred Moseley, The Falling Rate of Profit in the Post-war United States Economy, pp.150-151.

12. Marx, Theories of Surplus Value, vol.1, p.201.

13. Marx, ibid, p.152, our emphasis.

14. Marx, ibid, p.156.

15. Marx, ibid, p.158.

16. Marx, ibid, p.157.

17. Marx, ibid, p.168.

18. Marx, ibid, p.158.

19. Marx, ibid, p.157.

20. Marx, ibid, p.159.

21. Marx, ibid, p.165.

22. Marx, ibid, p.164.

23. Marx, Capital, vol.2, p.226.