Imperialism in the Twenty-First Century. John Smith

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 equation of value with value added not only makes exploitation disappear, it also obliterates the classical distinction between productive and non-productive labor. If every price is by definition a value, then any activity that results in a sale is by definition productive. “To the practical economist … if it is sold, or could be sold, then it is defined as production. Thus—within orthodox accounts—commodity traders, private guards, and even private armies are all deemed to be producers of social output, because someone is paying for their services.”⁷⁶

      A distinction between productive and non-productive labor exists in all modes of production and is not specific to commodity exchange in general, let alone to capitalism. What is specific to capitalism is that this distinction is veiled by universal commodification, and by the capitalists’ new criterion for productivity, profitability.

      It may be asked, are not these non-productive activities providing “common goods” necessary for the reproduction of society? Shaikh and Tonak provide a cogent response: “To say that these labors indirectly result in the creation of this wealth is only another way of saying that they are necessary. Consumption also indirectly results in production, as production indirectly results in consumption. But this hardly obviates the need for distinguishing between the two.”⁷⁷ To see the veracity of this argument, consider an economy made up of laborers and security guards.⁷⁸ The laborers produce all of the goods that both they and the security guards need to live on; the security guards provide a “common good,” security. It is plain that the higher the ratio of security guards to laborers, all other things being equal, the lower the total product, and it is therefore logical to regard this economic activity as unproductive labor, a form of social consumption. Once this distinction is established for one category of economic activity, the door is opened for more additions to the list. Suppose, for instance, our imaginary community finds it necessary to allocate part of its social labor to weighing and recording the output of the production workers, and that the only available means of doing this is to carve the data into stone tablets, a slow process requiring many hours of labor. Their labor is non-productive in exactly the same way as it is of the security guards. These stones do not add to social wealth, they are merely representations of the wealth created by production labor. Were a technological advance to replace chisel and stone with pen and paper, much of this nonproduction labor could be released for production, thereby increasing total social wealth, or redeployed as security guards, resulting in no change to social wealth. Designation of security and administrative functions as nonproduction activities does not at all imply that they are unnecessary—in our simple model, both the security guards and the stone-carvers perform necessary functions.

      In this simple model, as in reality, the social wealth that is consumed by the nonproduction laborers derives from the surplus labor of the production laborers, that is, the labor they perform in excess of what is required to replace their own consumption, what Marx calls necessary labor. Just as with the distinction between productive and non-productive labor, the division of the working day or week into surplus labor time and necessary labor time exists in all modes of production—for example, serfs working three days on the manor lord’s land and three days on their own. In its capitalist form, surplus labor results from extending the workday beyond the time needed to replace the value of the basket of goods for which they exchange their wage—what Karl Marx called necessary labor time. In the Marxist framework, the ratio of surplus labor to necessary labor, or “the rate of surplus value” is synonymous with the rate of exploitation.

      It might be asked: If workers in finance, advertising, security, etc., produce no value, how can they be exploited? So long as workers are obliged to work for longer than the labor-time needed to produce their basket of consumption goods, they are exploited. This is independent of the specific way their labor is employed and of whether they are employed in production, circulation, or administration. For present purposes, we can assume that all these workers endure the (nationally prevailing) rate of exploitation in common with production labor.

      Nonproduction sectors are sustained by part