Posts Tagged ‘Venezuela’


Special mention



Special mention



Special mention



Special mention



Every economic theory includes—or, at least, is haunted by—the distinction between productive and unproductive labor. The distinction serves as the basis of all their major claims, from the most basic theory of value to the conception of who deserves what within capitalism.

The distinction began with the French Physiocrats, especially François Quesnay, who in his 1758 Tableau Économique made a distinction between the “Productive” Class (which consisted of agricultural producers) and two other groups: the “Proprietary” class (which consisted of only landowners) and the “Sterile” class (which was made up of artisans and merchants). The idea was that all new value was created only by agricultural producers, not by industry or commerce.

It was then picked up by Adam Smith, who criticized the Physiocrats for overlooking the important contribution of manufacturing to the wealth of nations. While Smith broadened the concept of productive labor (to include both agriculture and industry), he retained the notion of unproductive labor (especially the “menial servants” he worried industrial capitalists would waste their profits on, thus undermining their “historic mission” to accumulate capital).

Karl Marx, in his critique of Smith, took over the distinction between productive and unproductive labor but then transformed it. For him, labor was productive to the extent that it produced surplus-value; all other labor (e.g., the labor of corporate managers as well as that of personal servants) was considered unproductive labor.*

Neoclassical economists, for their part, sought to abolish the distinction between productive and unproductive labor, based on the idea that any labor (when combined with physical capital and land) that contributes to a nation’s wealth should be considered productive.**

And, of course, there’s John Maynard Keynes, who, after the crash of 1929 and in the midst of the first Great Depression, referred to the “rentier,” the “functionless investor,” who contributed nothing but was still able to capture returns based on the scarcity of capital. Keynes therefore imagined a time when, with the aid of the state, capital would become abundant, which would mean “the euthanasia of the rentier, and, consequently, the euthanasia of the cumulative oppressive power of the capitalist to exploit the scarcity-value of capital.”

This brief survey of the history of economic thought is just a prelude to Branko Milanovic’s response to Ricardo Hausmann’s invoking of the distinction between productive and unproductive labor (in saying, with reference to Venezuela, “This is the crazy thing about the system. A lot of people are putting in effort [to buy the goods and resell them], and none of that increases the supply of anything. This is perfectly unproductive labor.”):***

That statement made me stop. “Perfectly unproductive labor”? But that “unproductive labor”, as every economist knows, improves the allocation of goods. The goods flow toward those who have greater ability to pay and since we tend to associate greater ability to pay with greater utility, the goods, thanks to bachaqueros’ activities, are better allocated. If one argues that bachaqueros activity is unproductive because it “does not increase the supply of anything” then one should argue that the activity of any trade or intermediation is unproductive because it does not produce new goods, but simple reallocates. The same argument could be used for the entire financial sector, starting with Wall Street. The entire activity of Wall Street has not produced a single pound of flour, a single loaf of bread or a single sofa. But why we believe that financial intermediation is productive is that it allows money to flow from the places where it would be less efficiently used to the places where it would be used more efficiently. Or for that matter from the consumers who cannot pay much to the consumers who can. Exactly the activity done bybachaqueros.

Milanovic is right: if “bachaqueros” are unproductive, why isn’t the labor of the financial sector? Or, more generally, of FIRE (finance, insurance, and real estate)? Or of CEOs and other corporate managers?

That’s exactly the reason neoclassical economists generally don’t make a distinction between productive and unproductive labor. They want to see it all as productive: manufacturing, services, commerce, and finance; factory workers, office workers, and CEOs. The difference, in Hausmann’s case, is he wants to criticize the socialist economic policies of the Venezuelan government. So, the veil falls and even he, against the dictates of his own economic theory, invokes the distinction between productive and unproductive labor.

But once that door is open, who knows what ideas might follow? What happens if we begin to conceive of many kinds of labor and whole groups of economic agents within contemporary capitalism not only as unproductive, but as parasitical and even downright destructive?


*But note, because this point is often missed, Marx is not making a distinction between goods and services. Both can and often do involve productive labor.

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; while a jobbing tailor who comes to the capitalist’s house and patches his trousers for him, producing a mere use-value for him, is an unproductive labourer.  The former’s labour is exchanged with capital, the latter’s with revenue.  The former’s labour produces a surplus-value; in the latter’s, revenue is consumed.

**However, there are forms of labor—such as that performed in households—that are not included in the usual neoclassical-inspired national-income accounts. One can argue, then, that neoclassical economics does retain some notion of unproductive labor.

***Hausmann, a former minister of planning of Venezuela and former Chief Economist of the Inter-American Development Bank, currently Professor of the Practice of Economic Development at Harvard University (where he is also Director of the Center for International Development) views Venezuela as “the poster child of the perils of rejecting economic fundamentals”—because the Venezuelan government has had the temerity to attempt to achieve economic and social goals by sidestepping and regulating “the market.”

Venezuela key indicators graphic


Some indicators of how Venezuela has changed since Hugo Chavez first assumed office. . .

Adam David Morton’s superb review of the publication of a new book by Carlos Nelson Coutinho, one of the foremost interpreters of Gramsci’s work in Brazil (and, for that matter, in the world), reminded me of a research project I started (but never finished) a few years ago.

The goal of my research was to use Gramsci’s work to make sense of the rise of a whole host of new left-wing governments in Latin America (e.g., in Brazil, Bolivia, and Venezuela) as a a result of the crisis of neoliberalism. And, for that, I decided I needed to make sense of the rise of the neoliberal state and its perceived crisis, which meant going back to an earlier period when capitalist hegemony was first being established in Brazil (as well as Bolivia and Venezuela) prior to neoliberalism.*

My preliminary findings were more or less in accord with what Morton argues: the rise of the developmentalist state in those countries was based on a series of “passive revolutions” (to use one of Gramsci’s key concepts), revolutions without revolution from below, without mass mobilization (with the exception of Bolivian miners, a tiny percentage of the population). These were revolutions in and through the State, and from there decrees (against the opposition of traditional elites) for universal suffrage, agrarian reform, the organization of trade unions and the regulation of formal sector work rules, and so on.

Later, in the 1970s, starting with the Chilean coup of 1973, the “exhaustion” of import-substitution ushered in a period of authoritarian regimes and neoliberal political economy, based on a complex alliance of social forces (from a domestic capitalist class demanding to “open up” for access to foreign markets and foreign capital to State technocrats, often with degrees from U.S. universities, attempting to solve the “fiscal crisis of the state”). If the goal of import-substitution industry was to shift the center of gravity from agriculture to industry, from feudal latifundistas to capital, from rural peasants to agricultural and industrial wage-laborers, and from independent artisans to a middle class employed in both the private and public sectors, neoliberalism was an attempt to shift the center of gravity from the State to the private sector and from traditional manufacturing to services, finance, and lowest-cost exports (to finance increased imports).

My argument was that the rise of neoliberalism did not represent a new set of passive revolutions but, instead, a revolution within the revolution, a “passive transformation” (to use, again, Gramsci’s language), a transformation of the existing hegemony but not a new hegemony. Nor, for that matter, did the crisis of neoliberalism lead to an alternative hegemony. Rather, what we have seen is a “losers’ alliance” or “alliance of the excluded” that has been able to elect nominally anti-neoliberal governments. However, without an alternative hegemony, it’s been impossible to enact a program of economic and social transformation beyond neoliberalism. Instead, they’ve been stuck with ensuring the rules of the neoliberal game, with each group trying to get some piece of the economic and political pie. “I’m going to get mine”—which leads to the expression of corporate interests and corruption and not the universalization of a working-class project.

Thus far, this has been the trajectory of left-wing governments in Latin America. But it is not their ultimate fate, no matter how “large and terrible and complicated” the world actually is.

*So, quickly, the project spiralled out of control and, unfortunately, other pressing projects prevented me from finishing it.