exchange, a violation of the law of value, in which the merchant takes advantage of surfeits or shortages which cause prices to move away from values.
John Maynard Keynes, who boasted of his ignorance of Marx’s economic theories, commented that:
real exchange relations … bear some resemblance to a pregnant observation by Karl Marx…. He pointed out that the nature of production in the actual world is not, as economists seem often to suppose, a case of C–M–C′, i.e. of exchanging commodity (or effort) for money in order to obtain another commodity (or effort). This may be the standpoint of the private consumer. But it is not the attitude of business, which is a case of M–C–M′, i.e. of parting with money for commodity (or effort) in order to obtain more money.”67
However, in one crucial respect, this garbles Marx’s concept. M–C–M′, as we have seen, describes the behavior of the merchant, who buys and sells C, commodities, in order to increase M, his money, but not the behavior of the capitalist. Whereas small commodity producers sell in order to buy, and merchants buy in order to sell, capitalists buy in order to make. The merchant does not physically alter the commodity that has come into her/his possession (s/he does not in any way produce it). Mercantile capitalism is a primitive form, in which capitalists have yet to separate the producer from the means of production and take possession of the production process. This distinction between simple commodity production and capitalist production, which Keynes omits from his reference to Marx, requires a fundamental modification of the formula expressing the circuit of commodities, which now becomes M–C–C′–M′. Here the merchant has turned into a capitalist. M–C is now the purchase not of commodities for resale, but of “factors of production”: labor-power, means of production, and raw materials. C–C′ is the production process, in which living labor replaces C, its own value and that of materials, etc., used up in production, and generates a surplus value (the difference between C and C′). The time spent by living labor producing this surplus value Marx called surplus labor. This surplus labor is the source and substance not only of profit in all its forms, but of capital itself, which is nothing but accumulated surplus labor. Marx commented, “The production process [C–C′] appears simply as an unavoidable middle term, a necessary evil for the purpose of money-making.”68
In this schema, value production takes place only in C–C′; the other two links, M–C and C′–M′, encompass the circulation of these values, the exchange of titles of ownership. Whether or not a task or link in a value chain is productive of value depends not on the specific nature of this particular task or link, but where in the circuit of capital it is situated. This forms the foundation for Marx’s theory of productive and non-productive labor.
Productive and Non-Productive Labor
As with our earlier discussion of different ways to measure the magnitude of outsourcing, what is of fundamental importance is not the physical properties of the commodities being produced but the social relations of their production. And more important than the largely spurious distinction between services and industry is another that is often confused with it—the one between productive and non-productive labor. As Anwar Shaikh and E. Ahmet Tonak have pointed out, “The very term ‘services’ conflates a vital distinction between production and nonproduction labor.”69 This question is of great relevance to our investigation into labor productivity and the “GDP illusion,” and to the development of a theory of the imperialist form of the value relation. Its introduction at this point is necessary in order to liberate our concepts of industry and services from the vulgar physicalist approach that dominates mainstream conceptions and has contaminated Marxist approaches.70
Marxist value theory maintains that economic activities that are not integral but contingent to the production process, for example banking and finance, police and security services, government bureaucracies and so forth, make no net addition to social wealth; they therefore produce no value and should instead be regarded as nonproduction activities, as forms of social consumption of values produced elsewhere. Nonproduction activities also include security, administration, advertising—activities that may be no less necessary than production activities but do not in themselves add to social wealth and should instead be regarded as forms of social consumption. Commerce, too, pertains to the circulation of commodities, and therefore consumes value but does not produce any. As Marx explains:
Since the merchant, being simply an agent of circulation, produces neither value nor surplus-value … the commercial workers whom he employs in these same functions cannot possibly create surplus-value for him directly…. Commercial capital’s relationship to surplus-value is different from that of industrial capital. The latter produces surplus-value by directly appropriating the unpaid labor of others. The former appropriates a portion of surplus-value by getting it transferred from industrial capital to itself.71
Marx’s rejection of a crude physicalist conception of value is perhaps nowhere clearer than in his attitude to transportation, where “the purpose of the labor is not at all to alter the form of the thing, but only its position.”72 Provided this transportation is socially necessary, the productive labor of the transport worker is materialized as the enhanced exchange value of the commodity that has been transported, yet the physical properties of the commodity show no trace of this. But this is not necessarily the case, as Shaikh and Tonak point out:
It is important to understand that not all transportation constitutes production activity…. Suppose our oranges are produced in California to be sold in New York, but are stored in New Jersey because of cheaper warehouse facilities…. The loop through New Jersey has no (positive) effect on the useful properties of the orange as an object of consumption [thus] this loop is internal to the distribution system. It [is] therefore … a nonproduction activity.73
We therefore need to radically redefine what we mean by industry and services. For Marx, industry is the application of human labor to harness or alter natural forces and resources in order to satisfy human needs. From this perspective, agriculture, and much of what is counted as services, are all “industry.” Agriculture differs from manufacturing industry in that the productivity of agricultural labor is determined by the inherent fecundity of soil and climate as well as the efficient application of technology, and is similar to the case of extractive industries. These natural monopolies give rise to differential profits, and provide the point of departure for Marx’s theory of rent developed in Capital, vol. 3.74 Though of necessity we have no choice but to work with the categories of bourgeois economic theory and the statistical data based on them, the theoretical concept of industry informing this study includes all that is encompassed by the standard International Labour Organization (ILO) classification of industry and agriculture, and also includes many production tasks conventionally counted as services.
Services in low-wage countries comprise a very different mix of ingredients than in imperialist countries. Financial services and other non-productive, rent-seeking activities that have come to dominate the “financialized” economies of the imperialist nations have a much smaller weight in the economies of the Global South (and are themselves increasingly dominated by Northern financial TNCs). With the exception of tourism, services as a whole make a proportionately smaller contribution to the exports and GDP of Southern nations than of the imperialist countries. But by far the biggest difference is that in the South the services sector encompasses—and is almost everywhere dominated by—the informal economy where people scratch out a subsistence by providing ultra-cheap services to the formal economy.
Finally, data on services trade are much less reliable than data on trade in minerals and agricultural and manufactured goods. In contrast to merchandise trade, most services trade does not pass through customs and is not subject to import tariffs. For this and other reasons, data on the outsourcing of services is vitiated by under-reporting and dubious accounting practices.75
THE MAINSTREAM ECONOMISTS’ TAUTOLOGICAL
