Re: Estimating the surplus\Doug's question

["Fred B. Moseley" <fmoseley@xxxxxxxxxxxxx>]

Hi Jim, thanks for your good questions.  A few responses below.


On Fri, 12 Dec 2003, Devine, James wrote:

> Hi, Fred.
>
> you write:
> > 6.  I have suggested another explanation of these important
> > trends, one
> > based on Marx's distinction between productive labor and unproductive
> > labor - that an important cause of the declines in the share
> > and the rate
> > of profit was a very significant increase in the ratio of unproductive
> > labor to productive labor.  I am not sure that this is the correct
> > explanation of these trends, but I think it may be, and I
> > think that it
> > worthwhile to at least consider what Marx's theory implies about the
> > causes of these trends and the likely prospects for the future.
> >
> > And one important advantage that this theory has over the
> > profit squeeze
> > explanation is that it provides a consistent explanation of
> > why the share
> > and rate of profit have only partially recovered in recent decades, in
> > spite of the loss of workers' power and stagnant real wages -
> > because the
> > ratio of unproductive to productive labor has continued to increase.
>
> A big question: _why_ does the ratio of unproductive to productive
> labor increase over time? if this ratio is squeezing profits, it seems
> that profit-seeking capitalists would make an effort to lower it. or is
> there some sort of technological or social imperative that pushes
> capitalists to increase the ratio anyway? or is it a matter of it being
> good for capitalists as individuals to raise the ratio even though it's
> bad for capital as a whole?

This is indeed a big and important question, and I think the answer is a
combination of the types of things that you have suggested.  I discuss
this question at some length in Chapter 5 of my 1992 book (The Falling
Rate of Profit in the Postwar US Economy).  It is complicated because the
category of unproductive labor is a mixed bag of different kinds of labor
(circulation labor and supervisory labor and subgroups of each), and the
increase of each of these different kinds of unproductive labor may be due
to different causes.

The main conclusion that I came to in this chapter is that the main cause
of the increase of circulation labor (roughly two-thirds of the total) is
that during this period the productivity of productive labor increased
faster than the productivity of sales labor, thereby requiring a relative
increase of the latter in order to sell the more rapidly increasing output
of the former.  The classic example is the auto industry.  The quantity of
autos produced per productive worker increases much more rapidly than the
quantity of autos sold by salesperson (which remains a largely
labor-intensive, person-to-person activity).

An interesting corollary of this explanation is that the "computer
revolution" has been one way to increase the productivity of unproductive
labor, and therefore slow down the increase in the number of unproductive
workers.  Indeed, much of the computer revolution has been aimed at
reducing unproductive labor (sales, accounting, debt-credit,
etc.).  Therefore, Marx's theory suggests that the rapid development of
computer technology in recent decades has been due in part to the
systematic imperative to reduce unproductive labor in order to restore the
rate of profit.


> alternatively, it could be that the geographical unit of analysis is
> wrong. What if the US-based operations of capital are specializing in
> what Marxists term "unproductive" labor, while exporting the
> "productive" jobs to other countries? In that case, we should be
> calculating the world-wide rate of profit, no?


Yes, I think the increasing geographical specialization of recent decades
(productive labor in the rest of the world, unproductive labor in the
US) is part of the explanation of the relative increase of unproductive
labor in the US.


> > This theory also provides an important prediction about the
> > future - that
> > if the ratio of unproductive to productive labor continues to
> > increase (as
> > I expect), then the recovery of the share and rate of profit
> > will continue
> > to be slow and partial, thus leading to more wage cuts, speed-up,
> > etc.  According to this theory, the US economy is definitely
> > NOT at the
> > beginning of another "long-wave" period of growth and
> > prosperity, similar
> > to the early postwar period (with steady real wage
> > increases).  The only
> > partial recovery of the share and rate of profit makes such a
> > return to
> > more prosperous conditions very unlikely.
>
> why can't the ratio of unproductive to productive spending change
> quickly in the future? didn't something like that happen in the 1990s,
> lowering the ratio?
>
> One indicator of what happened can be seen in Michael Reich's 1998
> article "Are U.S. Corporations Top-Heavy? Managerial Ratios in Advanced
> Capitalist Countries" (in the REVIEW OF RADICAL POLITICAL ECONOMICS,
> vol. 30, no. 3, 33-45). Reich's data on p. 37 show a rise in the
> "management ratio" until 1982 or so -- fitting with David Gordon's "fat
> and mean" hypothesis" -- but then the ratio levels off. In the 1990s, it
> falls pretty steeply. This is not the same as the
> unproductive/productive labor ratio, but it seems close.

The increase of the ratio of unproductive labor to productive labor has
certainly slowed down in recent decades, but it is still increasing.  Of
course, the slowdown could continue and perhaps even turn into declines,
and this would have a positive effect on the rate of profit.  At the same
time, it would contribute to an increase in the rate of unemployment.

I like Reich's paper.  It supports the argument that the relative increase
of management labor had a negative effect on the rate of profit, and that
the top managers even became aware of this negative effect.

Comradely,
Fred