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Debates about what is real work have been taking place since the birth of economics in the 18 th Century. (D 103 p 33) The way work is organised defines our economy and the meaning of economic activity. (i. b. i. d. p 9) There are two definitions of work.
Firstly, activities done in order to bring in money as payment for the person doing it, based on exchange in the public domain, which may be seen as productive work. Secondly, activities that contribute to the reproduction of society, usually unpaid and undertaken in the private domain, which may been seen as unproductive work. Many activities fall into both categories but it is the social context in which an activity is done which determines whether a particular activity is seen as work or not. (i. b. i. d.
p 10) This essay will outline some of the ways the distinction between productive and unproductive labour has been drawn and see if the theories based on these distinctions have been successful in explaining the poor growth of the British economy especially during the 1970 s. Within the economy only paid work is recognised but a great deal of unpaid work, often carried out in the home, particularly domestic labour and caring for children, is vital to the reproduction of society. However, the identification of paid labour with work tends to make non-paid forms of work such as housework, charitable work and voluntary work slip from view and become invisible. (i. b. i. d.
p 134) As well as unpaid labour, the armed services, law enforcement officers, all public employees, domestic staff, servants and even the Sovereign are seen as unproductive labour because they do not produce a product for sale. (i. b. i. d.
p 36) These people are employed for the usefulness of the services they provide to their employers but it is seen to be the mark of a well-developed economy that a large number of people can be employed in providing services for the rest of the community. (i. b. i. d. p 40) It may not be the case that productive labour is more desirable than unproductive labour. It must be emphasised that all the civilised activities of a modern society are wholly or largely non-marketed.
Most universities, schools, libraries and hospitals produce outputs which are almost entirely non-marketable (i. b. i. d. p 44) These services are essential for the reproduction and well being of society but they are dependent on financing from the productive sector.
French physiocrats are often seen as the first modern economists. (D 103 p 34) For them the only productive labour was labour involved in agriculture, because this sector produced a net product. A net product is produced whenever output is greater than all the inputs needed to produce it. (i. b. i. d.
p 34) They referred to agricultural workers as the productive class in contrast to the sterile class of people who work in industry and commerce. (i. b. i. d. p 34) The physiocrats argued that because manufacturing comprised inputs and outputs of different types of things there was no net product, just labour being used to change one thing into another. This produced no increase in wealth. (i.
b. i. d. p 34) In contrast, Adam Smith, whose writings are said to have begun economics proper saw productive labour as marketable output. He recognised that inputs and outputs could be measured against each other even when they consisted of different types of thing. (i. b.
i. d. p 35) If the value of a product was greater than the value expended in its production, then a net gain in value or profit had been made, and he saw productive labour as labour employed to make a profit. (i. b. i. d.
p 36) More recently Nicolas Kaldor who was advisor to the Labour government of 1964 - 70 was of the view that the manufacturing sector was the most important for the growth of the economy as its possibilities for growth was limitless. (i. b. i. d.
p 37) His views were similar to those of the physiocrats. Robert Bacon and Walter Eltis defined productive labour along the same lines as Adam Smith some 200 years earlier as being solely based on the marketed sector as any economic activity which produces wealth has an exchange on the market. The Conservative government of 1979 claimed Adam Smith as one of its mentors and in practice its policies were ones that were consistent with the views of Bacon and Eltis. (i. b. i. d.
p 42) Nicolas Kaldor argued that manufacturing provided the motor growth for the economy. (i. b. i. d. p 37) Because he saw manufacturing's growth potential as limitless he felt that, as its productivity increased, less workers would be required to achieve the same output thus releasing workers to enable yet more expansion in the same plant or elsewhere. Only manufacturing in the right conditions could show growth over a long period in both productivity and employment. (i.
b. i. d. p 37) The key to economic growth and prosperity lay in a productive core of the economy and for Kaldor manufacturing constituted the productive core. The productivity of service workers could not be increased in the same way as much of this work was dependent on the personal nature of the service. If the service sector expanded, Kaldor was sure that growth would slow down.
Robert Bacon and Walter Eltis were also of the opinion that the productive sector was the motor growth for the economy. However, they differed from Kaldor in their definition of productive and unproductive work. They divided economic activities into those that produce marketed goods and those that do not Almost everything that industry produces is marketed. (D 103 p 41) All exports and investment are marketed and all money that workers, salary earners and pensioners spend must necessarily go to buy marketed output. (i. b.
i. d. p 42) Most government services in areas such as defence, health, education and law enforcement are not marketed and non-marketed production has to be paid for from private consumption so they must spend their incomes on the marketed products of the rest of the community (i. b. i. d.
p 41) In the 1970 s all countries experienced lower productivity growth than they had in the 1960 s but growth rates of both output and productivity for the UK compared unfavourably with those of all other advanced capitalist countries, with the exception of the US. (D 103 p 36) With the decline in manufacturing employment from eight million to six million by 1979 and service sector employment increasing by about the same amount over the period, Kaldor would not have been surprised that manufacturing's ability to produce real wealth was seriously affected. (TMA Tape A) This decline would not have mattered if the remaining workers could have increased their productivity to keep the sectors overall output growing but Kaldor's theory would support the view that the problems of the 1970 s stemmed from service employment squeezing the manufacturing core and rendering it incapable of providing the productivity increases necessary for growth. (D 103 p 38) Bacon and Eltis theory would also support the view that the poor economic performance was due to the growth of the service sector. They, however, would stress that the growth of the non-marketed public sector was reducing the productive potential of the economy mainly because more people were going into non-productive areas, leaving fewer people to produce goods and services which could be sold in the market place. By the 1970 s the state was involved in a far wider range of economic activities and some nationalized industries and local councils were failing to cover their costs. In these circumstances the public sector was seen to be a non-market sector and the private sector was needing to create the goods and services necessary both to pay for our imports and the revenue to finance public services. By the 1980 s productivity growth was much higher which would suggest that the growing service sector employment had not eroded the basis for productivity increases. (D 103 p 41) Kaldor's theory would support the fact that while manufacturing employment continued to fall, manufacturing productivity increased so the sectors overall output was growing strongly. On the other hand, Bacon and Eltis theory would suggest that the growing service sector came from privatisation of profitable nationalized industries and the decision to run the remaining nationalized industries profitably, as if they were private sector industries, meant that this sector no longer required public funds and were now providing marketed output.
A major criticism is the neglect of both theories of work that has no marketed outcome but is essential for the marketed sector to continue. There are many areas which are unproductive but are vital to the reproduction of society. Two examples of this are the National Health Service which is non-marketed but essential for a healthy workforce and the Education sector which is necessary in order to ensure an adequately educated workforce. Also neglected by both theories are the large increases in service productivity and efficiency which have taken place during the last two decades. In conclusion it can be seen that both theories have significant positions in the economy. Kaldor's theory shaped the economic policy of the 1964 - 1970 Labour Government and the 1979 Conservative governments economic policies were consistent with the views of Bacon and Eltis.
Both theories appear to be logical in what they say and both stand up and fit the facts. Both theories stress the importance of a strong productive sector and explain the poor performance of the British economy in the 1970 s by a shortage of productive workers. However, they have different definitions of productive and unproductive labour. Kaldor stresses the importance of the manufacturing industry as being the only true productive sector. However, Bacon and Eltis definition of marketed and non-marketed sectors would appear to be more logical in the 1980 s in the face of a steadily declining manufacturing industry and an increasing service sector at a time when UK productivity growth, taken for the whole decade and despite the recession of 1980 and further declines in 1984 and 1988, was higher than other advanced capitalist societies, in fact, second only to Japan.
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Research essay sample on Adam Smith Productivity Growth
