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# Zombie Capitalism Global Crisis and the Relevance of Marx

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State Spending and the System

An important distinction

If the enormous growth of the economic importance of the state was one feature which distinguished 20th century capitalism from the capitalism of Marx's time, another was the growth of all sorts of expenditures that were not directly productive.

Marx had taken over from Adam Smith a distinction between "productive" and "unproductive" labour. Smith had been writing at a time when the capitalist mode of production was still in its infancy and he sought to work out what was needed for it to overcome obstacles to its further advance. He therefore distinguished between the uses of hired labour that enabled the capitalist to make profits so as to further advance production and those which simply absorbed existing resources. Employing someone to make things to sell was productive; employing someone to tend to one's individual desires was not. Or, as it was sometimes put, employing someone in a factory created wealth; employing someone as a personal servant simply used wealth up. But it was not only servants who Smith regarded as unproductive and wasteful in this sense: he had the same attitude to the hoards of placemen and women who lived off the revenues of a state which had not been reformed fully to suit the needs of capitalist production.1

Marx took up this distinction as he prepared various drafts for Capital and developed his own understanding of it. He, like Smith, was interested in what made capitalism function-even if out of opposition to, not support for, the system. And so his concern was with what was "productive" in capitalist terms.2 It was, he argued, that which was productive of surplus value. Labour which produced surplus value enabled capitalists to accumulate;

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labour which did not produce surplus value was of no use in this respect-it was "unproductive".

In all this, he was careful to make it clear that the "productiveness" of labour did not depend on the physical form or how socially useful the product was. What mattered was its ability to create surplus value-nothing else. "This distinction between productive and unproductive labour", he wrote in one of his notebooks, "has nothing to do with either the particular speciality of the labour or with the particular use value in which . . . [it] . . . is incorporated" .3

Marx's distinction was not between material production and what today are categorised as "services". Some "services" have a use value that is bought and sold as a commodity on the marketor make a useful addition to some other commodity. These have an exchange value which is determined by the socially necessary labour time needed to produce them and so can provide capitalists with new surplus value. They are therefore productive. Acting in a film, for instance, is productive insofar as it creates a use value (adding to people's enjoyment and so improving their living standard) that is sold profitably as a commodity by the capitalist who employs the actor. Similarly, moving things from where they are made to where they can be consumed, as is done by some transport workers, is productive, since it is in effect part of the process of completing their production. By contrast, actors who appear on television to urge people to buy a particular good are not productive, since their labour does not create new use or exchange values. It merely aids in the selling of goods that have already been produced.

Guglielmo Carchedi has rightly argued:

The category "services" only confuses matters and should be dropped. "A service is nothing more than the useful effect of a use value, be it of a commodity, or be it of labour" [according to Marx].4 Therefore, "services" encompass productive labour (hotels, entertainment) and unproductive labour (advertising, market research) <sub>. . .</sub> 5

In his first discussions on the issue in the early 1 860s Marx assumed, like Smith, that unproductive labour is concerned with services provided by individuals for the upper classes.6 These included providing "entertainments", dealing with "physical infirmities" (doctors) and "spiritual weakness" (parsons), and resolving "the conflict between private interests and national interests" (eg statesmen, lawyers, police and soldiers). The last sort were regarded "by the industrial capitalists themselves" as incidental expenses of production to be kept down to the most indispensable minimum and provided as cheaply as possible.7

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Marx recognised that sometimes personal services for the ruling class were provided not by individuals working on their own account, but by capitalists employing paid labour to provide them to others. In these cases, he argued, the labour was productive because it created surplus value. The capitalists who employed it, after all, sold the produce of the labour at more than they paid for the labour power and pocketed a profit as a result. So a teacher employed personally in someone's home to teach their children was providing a service from which no profit was made and was unproductive; by contrast, a teacher employed by a company which made a profit by running a school was productive. One did not in any way help capitalists to accumulate value; the other did. The distinction was between labour that was integral to capitalist production and accumulation, and that which was not.

But in Capital Marx also found himself having to revisit the distinction between productive and unproductive labour in a different context-a context which was integral to, not external to, capitalist production in its totality. For as capitalism developed, it became increasingly dependent on many forms of labour that produced nothing.

There was the labour involved in maintaining discipline inside the capitalist enterprise-the "work" of managers, supervisors, foremen. There was the commercial labour involved in the exchange of already produced commodities as they went through the various chains of buying and selling before reaching the final consumer. There was the financial labour involved in reckoning up profit and loss, advancing credit, and dividing up surplus value between the various sections of the capitalist class. Marx recognised that these sorts of labour would grow in quantity as capitalism expanded:

It is clear that as the scale of production is extended, commercial operations required constantly for the recirculation of industrial capital. . . multiply accordingly . . . The more developed the scale of production, the greater . . . the commercial operations of industrial capital.8

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Such labour could not be regarded as productive if the capitalist employed it in these ways, any more than the labour of the servant could be. Maintaining discipline, selling goods or getting the accounts done were necessary functions that had to be paid for by deductions from surplus value, not creative labour that added to surplus value. They did not produce something new, but were merely concerned with controlling the production of value by others, with transforming it from one form (commodities) into another (money), or with dividing it up between people. The activities of a supervisor, a bank clerk or a shop assistant could no more create value (and therefore surplus value) than could the valet.

But what happened if the productive capitalist used other capitalists to carry out some of these functions on his behalf? The labour employed by these other capitalists should be counted as productive according to Marx's established definition since it enabled them to make a profit. But seeing things like this presented a problem. The profit did not arise from increasing the total amount of output any more than it did when productive capitalists directly employed people to perform the tasks. It simply amounted to the second capitalist getting a slice of the surplus value originally in the hands of the first capitalist. Marx concluded that from the point of view of capitalist production such labour was unproductive, even though this seemed to be based on a different definition of productive labour to that he used elsewhere. For this reason Jacques Bidet, for instance, has argued that Marx was inconsistent.9 Yet it made sense in terms of the thing both Adam Smith and Karl Marx were interested in-the distinction between what advanced capitalist development and what retarded it.

So long as capitalists were operating in an economic environment in which capitalist production was not yet dominant, those who employed workers to provide personal services were providing them mainly to those whose wealth came from outside the capitalist system. The payments received, for instance, by the owners of a school constituted a transfer of resources into the capitalist sector from the pockets of pre-capitalist exploiters-resources that could then be used for productive accumulation. By contrast, the merchants or shopkeepers who handled the goods of the productive capitalists got their profit from the already created surplus value of the productive capitalist. They were not adding to total surplus value and with it the further accumulation of capital.

As Marx put it at one point:

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To industrial capital the costs of circulation appear as unproductive expenses, and so they are. To the merchant they appear as a source of profit, proportional, given the general rate of profit, to their size. The outlay to be made on these circulation costs is therefore productive investment for mercantile capital. . . And the commercial labour which it buys i s likewise immediately productive for it.10

The competition between commercial capitalists with each other meant that each was subject to the same pressures as the capitalists involved in production to keep wages down to the value of labour power. For this reason their workers were exploited in the same way as workers for capital involved in production. The more a commercial capitalist held down the wages and increased the workload of his employees, the greater was the share he could keep for himself of the payment he got from the productive capitalists for providing services to them. If it took eight hours of socially necessary labour time to perform, say, a certain sales task, but only four hours to cover a sales worker's wage, then the shopkeeping capitalist could pocket four hours worth of the surplus value supplied from elsewhere in the system.

But this did not mean that commercial labour could be equated with productive labour when it came to understanding the dynamics of the system as a whole. One created resources that could be used for further accumulation, and the other did not. That is why Marx is insistent:

Costs which enhance the price of a commodity without adding to its use value, which are therefore to be classed as unproductive expenses so far as society is concerned, may be a source of enrichment to the individual capitalist. On the other hand, as this addition to the price of the commodity merely distributes the costs of circulation equally, they do not cease to be unproductive in character. For instance, insurance companies divide the losses of individual capitalists among the capitalist class. But this does not stop these equalised losses from being losses so far as the aggregate social capital is concerned.11

The distinction between productive and unproductive labour is often seen as a merely scholastic question. But once seen in terms of what contributes to accumulation and what does not, it has enormous implications-including some that Marx himself never developed. What is "productive of surplus value" for the individual capitalist (the definition of productive labour Marx used in his notebooks) is not necessarily what is productive in terms of adding to the surplus value available to capital in general for accumulation. And it is this that is central for the dynamic of the system.

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The scale of unproductive labour

The level of unproductive expenditures involved in sales and finance grew throughout the 20th century. Anwar Shaikh and Ertugrul Ahmet Tonak calculate that the number of workers employed in trade in the US grew from 10,690,000 in 1948 to 24,375,000 in 1989, and of those in finance and insurance from 1 ,251,000 to 7,123,000. Meanwhile, the number of productive workers only grew from 32,994,000 to 41,148,000.12 Fred Moseley estimates the numbers in commerce as growing from 8.9 to 21 million between 1950 and 1980, and the number in finance from 1.9 to 5.2 million, while the productive workforce only grew from 28 to 40.3 million.13

The figures do not include the large number of managerial employees who Marx regarded as non-productive because they are involved in policing those who actually produce value. Simon Mohun has calculated that the growth in their numbers and remuneration caused the share of "unproductive" wages and salaries in the "material value added" in the US to rise from 35 percent in 1964 to over 50 percent in 2000.14 These figures also understate the total growth of unproductive labour because they do not include employees involved in non-productive state functions like the military and the legal system.

Unproductive expenditures and waste production

There is another sort of labour that also has to be taken into consideration when examining 20th and 21st century capitalism. This is the labour that goes into producing commodities that are sold like other commodities but which do not then re-enter later rounds of production, whether as means of production or as wage goods. The labour producing luxury goods for the capitalist class falls into this category. So too does labour that goes into military weaponry. Although such labour has usually been regarded as "productive" by Marxists, it shares with non-productive labour the fact that it does not add to capitalist accumulation. For these reasons it was argued by Mike Kidron in the early 1 970s that it should also be regarded as non-productive:

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The ageing of capitalism . . . opened a gulf between the two criteria of productiveness that he [Marx-CH] used interchangeablyemployment by capital and augmenting capital. . . Now that capital is king . . . the two criteria are no longer congruous. Millions of workers are employed directly by capital to produce goods and services which it cannot use for further expansion under any conceivable circumstances. They are productive by one criterion and unproductive by the other... Given the need to choose, productive labour today must be defined as labour whose final output is or can be an input into further production. Only such labour can work for capital's self-expansion . . . To spell it out, in late capitalism only part of the surplus can be used for the expansion of capital. The rest is waste product.15

More recently Alan Freeman has also suggested that the notion of unproductive labour has to be extended to involve the use of labour to produce things that are then used in an unproductive manner. "The workers who decked the European Bank for Reconstruction and Development in marble are just as unproductive as the clerks who now walk across it" .16 Guglielmo Carchedi, by contrast, argues there is labour that is productive if it has created new value, even if this does not then contribute anything to the next round of accumulation.17 Regardless of how it is categorised, the proportion of labour that is waste from the point of view of capital accumulation has become enormous. Kidron calculated that "three fifths of the work actually undertaken in the US in the 1 970s was wasted from capital's own point of view" .18

The state sector and non-productive labour

Expenditures by individual capitals that are neither going to capital investment nor to the wages of productive workers can be broken down into different categories:

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(a) Those concerned with the disciplining of the workforce and ensuring it works flat out-expenditures on internal security, supervisory labour and time and motion measurement, checking on work speeds.

(b) Those concerned with keeping the allegiance of the workforce, eg expenditures on internal public relations, works bulletins, management-run works committees, subsidies to works sports teams.

(c) Those devoted to financial transactions, obtaining credit, bank charges, etc.

(d) Those devoted to sales, advertising, etc.

(e) Those concerned with keeping the workforce fit and able to work-company medical facilities, factory canteens, etc, in some cases the provision of housing for the workforce.

(f) Those concerned with training the workforce-what mainstream economists often call "human capital" .

(g) Expenditures on research and development.

Expenditures (a) and (b) are unambiguously unproductive. They create nothing and are only concerned with getting the maximum of already created value from the workers. Expenditures (c) and (d) are unproductive from the point of view of capital in general. They do not in any way add to the capacity of the system as whole to accumulate. But the individual firm can regard them as productive in the same way as Marx wrote that the individual merchant capitalist did-they serve to get control of surplus value which would otherwise go to rival firms. So advertising expenditure, for example, may be seen by the firm, like expenditure on new equipment, as a way of expanding its position in the market, of forestalling attempts to enter the market by other capitalists, and so on. Similar expenditure on patents and patent protection may be seen as a way of getting a stranglehold on the market (I will return to the other types of expenditures (e) to (g) below).

The growth of state expenditures in the course of the last century has involved states taking over partial responsibility for many of these outlays from the hands of the private capitals based in their national territory. So state expenditures can be broken down into categories playing the same or analogous functions to the expenditures of firms.

There are those expenditures which are clearly unproductive in terms of accumulation throughout the system as a whole.

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Among these are those concerned with protecting property, maintaining social discipline and ensuring the smooth reproduction of class relations; maintaining state-run or financed forms of maintaining popular allegiance to the system, such as state produced propaganda and subsidies to religious institutions; the perpetuation of the ruling ideology through sections of the educational system; maintaining the financial infrastructure of the system through the printing of national currencies and running central banks.

Alongside these there are expenditures beneficial to nationally based capitals in competition with foreign capitals, but which, like the individual capitalists' expenditure on marketing or advertising, do not add to accumulation as a whole. This includes military expenditure, spending on export promotion schemes, negotiations with other governments over international trade and investment regulations, etc.

It was these unproductive expenditures that Marx referred to when he wrote:

Political economy in its classical period, like the bourgeoisie itself in its parvenu phase, adopted a severely critical attitude to the machinery of the state etc. At a later stage it realised and learnt from experience that the necessity for classes which were totally unproductive arose from its own organisation.19

Such growth in unproductive expenditures came to have a big impact on the dynamic of the system after Marx's death.

Waste output and the system's dynamic

Marx hinted at one important point about non-productive labour in his first attempt at a draft for Capital, the Grundrisse. He includes among the "moments" that can delay the rise in the organic composition of capital and the fall in the rate of profit:

the transformation of a great part of capital into fixed capital which does not serve as agency of direct production; unproductive waste of a great portion of capital etc (productively employed capital is always replaced doubly, in that the posing of a productive capital presupposes a countervalue). The unproductive consumption of capital replaces it on one side, annihilates it on the other . . . <sup>20</sup>

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