- Created: Tuesday, 15 September 2009 10:53
From Revolutionary Communist 3/4 November 1975 (reprinted November 1979)
Fundamental Questions of Marxist Theory
In his Budget speech of April, 1975, Mr Denis Healey, echoing the sentiments of his ‘Right Honourable friend’, Mr Wedgwood Benn, announced measures which, hopefully, would reverse the process of ‘deindustrialisation’ which Britain has been experiencing in recent years. Mr Benn, of course, has made it clear that he has found particularly worrying the recent trend towards an absolute decline in the number of people employed in manufacturing. He has even warned - with a distinctly Smithian touch - that the more our manufacturing population contracts, the greater will be the gulf between what we can physically produce and the minimum amount needed to pay our way as a great trading nation. If the Government is to maintain a competitive and profitable manufacturing sector, it must aim at nothing less than the preservation of our ‘industrial base’.2
Sharing Benn’s concern, if not his prescriptions, Sir Keith Joseph has also called for measures which would restore vitality to our dwindling industrial base, even at the expense of the unproductive sector which is, after all, ‘wealth-consuming’ rather than ‘wealth-creating’. How lamentable that we should live in a society in which so many live off the ‘surplus’ created by so few. Rather, we should strive towards an economy of solid worth, founded upon manufacturing, manned by proletarians and headed by the entrepreneur, that ‘rare type of person, relatively, compared to your wage and salary-earner’. Above all, what we require in Britain now is a thorough-going bourgeois revolution out of which will emerge a sturdy bourgeoisie, unencumbered by ‘feudal’ fetters. Britain, alas has
‘never had a capitalist ruling class or a stable haute bourgeoisie….The great feudal families, together with the landed gentry, court, church and legal profession set their stamp so firmly on post-medieval British society that the merchant classes sought acceptance rather than challenging it, as they did in France….The tradition was too strong for the industrial revolution to shake, though the middle classes tried, in mid-Victorian days….You may remember Marx’s complaint that feudal-oriented opponents of nascent capitalism dressed up as socialists. He was concerned that they should be clearly differentiated from the real product.’3
Replying to the Trade and Industry article, Samuel Brittan, writing in the Financial Times, lashed out at Benn for his ‘physiocratic’ distaste for ‘non-productive’ labour, for failing to consider the rise in industrial productivity which accompanied the drop in manufacturing employment and for not recognising that the shift from manufacturing to services is perfectly ‘normal’ in a modern economy.4 In a similar vein, although with different intentions, Labour MPs George Rodgers and Ivor Clemitson have argued that the decline in the numbers employed in manufacturing is an economic fact of life which we should learn to accept, and even welcome. What we should be doing, therefore, is ‘diverting more people into areas of public service - public transport, teaching, the health service, the social services, and so on down a long list….Our Socialist forefathers would have welcomed the chance which faces us. Why do we not grab it with both hands?’5
Thus Benn is taken to task for upholding a work ethic suited more to the first Industrial Revolution than 20th century social democracy, while those such as Rodgers and Clemitson are castigated by Sir Keith for concealing a feudal intent behind socialist garb.
For those of us with more than just a passing interest in the course taken by bourgeois society, it comes as no surprise to find the ruling classes of this country again bringing to life an ever-recurrent theme of classical political economy - the distinction between productive and unproductive labour. In its decay, as in its infancy, capital seems intent on throwing up directly economic questions which shed special light on the condition not only of bourgeois society in general, but of British capital in particular. That the dwarfs of today should uphold the giants of the past is the prerogative of a ruling class in decay. For our part, we may take comfort in the realisation that as the history of British capital assumes its farcical dimension the end, of rather a new beginning, is surely in sight.
When Sir Keith calls for the consummation of the bourgeois revolution he is more than just an ideological stuntman. His aim is to divide the working-class- into the ‘wealth-producers’ and the ‘wealth-consumer’ - if only as a prelude to an attack on them all. Accordingly, it is the purpose of this paper to reaffirm the original intention behind Marx’s formulation of the concepts productive and unproductive labour, at both the level of theory and political struggle, so that we might isolate all the more easily the really parasitic element in our society, the ‘entrepreneur’, a very rare specimen indeed. This is made all the more necessary in the light of recent attempts to abandon altogether many of the basic categories developed by Marx, in the misguided belief that their use can only serve to confound a working class already divided and confused. Far from sowing the seeds of disunity, the categories of Marx’s Capital, if properly considered and used, will enable us to build the strongest possible concord amongst the masses of people in this country. They will also enable us to demonstrate, once and for all, that the way to combat this farcical retreat into political economy is not by refining that economy, but by subjecting it to a revolutionary critique.6
We shall begin, therefore, by taking a close look at the classics, starting with the Physiocrats and ending with Ricardo’s criticism of Malthus.7 As we shall show, there is very definitely a reformist side to political economy, despite its revolutionary soul. And as we shall see further on, our present day ‘Marxists’ are tending more and more to this reformism - the price that must inevitably be paid by those who disregard Marx’s concept of productive labour.
In the second part of this paper, we shall examine Marx’s critique of the categories of political economy, and in so doing shall re-establish what Marx really taught us on the subject. Since, moreover, the category of productive labour is an integral part of the concept of capital, it will be necessary to return to the classical economists to show how little they penetrated into the secret of the tendency of the rate of profit to fall. This will make it clear that the ‘purpose’ of Marx’s concept of productive labour is not - as Gough and others contend - merely ‘to explain the existence and quantity of surplus value in the capitalist mode of production.’8 This is a half-truth and therefore a distortion. The full purpose of Marx’s concept of productive labour is to reveal to the working-class the laws of motion of bourgeois society.
In the third part, we shall follow the dour and dismal progress of contemporary revisionism as it moves little by little against the concept of capital, until there is nothing left but the vulgar conception, according to which all labour employed in the capitalist mode of production is productive. This has offered to the ideological spokesmen of capital an ideal opportunity to present their sordid account of the present crisis.
Finally, we shall point to the real causes underlying the crisis of capitalism today, exposing the various representatives of British capital in their attempt to provide solutions which can only be made effective at the expense of the working-class. In the process it will be made abundantly clear that our motley assortment of would-be Marxists, having ‘doctored’ the concept of productive labour, are incapable of offering the working class any viable alternative.
I CLASSICAL POLITICAL ECONOMY
(i) The Physiocrats
The true founders of modern political economy were the Physiocrats. They were the first to transfer the inquiry into the origin of surplus-value from the sphere of circulation into the sphere of production and this was one of their valuable contributions to science. The Physiocrats however, did not analysed surplus value from the standpoint of general social labour, which is the sole source of value instead, surplus-value was analysed in the concrete form in which it first appeared in agriculture as the excess of use-values produced over those consumed. Since, moreover agriculture was the sole activity in which the creation of a surplus could be seen in a material and tangible form -and apart from the process of circulation - the Physiocrats concluded that agricultural labour alone was productive. The entire burden of the country’s economic well-being rested firmly on the shoulders of the farmer, for no other labour alone was capable of creating the surplus out of which accumulation could take place and from which the other classes could draw their subsistence.
But what appears in the Physiocrats as glorification of agricultural labour is in fact only the celebration of nature. The surplus left over at the end of the production process is a gift of nature and not the result of surplus-labour, unpaid labour. Agricultural labour serves merely as the means through which Nature’s potentiality can be realised to the full. In the Physiocratic system then, surplus-value is explained in ‘a feudal way, as derived from nature and not from society; from man’s relation to the soil, not from his social relations. Value itself is resolved into mere use-value, and therefore into material substance.’9
By taking as their point of departure use-value instead of value the Physiocrats erected an economic edifice without having laid the foundation stone.10 The advance from the purely technical conditions of production to the core of the problem was therefore not permitted. For the Physiocrats it was merely a question of whether or not the economy could be made more efficient and less cumbersome through the application of enlightened government policy, and this by ensuring that sufficient surplus was available to improve nature’s wealth creating capacity. Excessive government expenditure, together with misguided economic policies, served only to dissipate the surplus needed for accumulation, thus leading to economic ruin.
Consumption habits also played an important part in the physiocratic system. To allow for a healthy rate of accumulation it was necessary that a frugal outlook be maintained. This meant that ‘no encouragement at all should be given to luxury in the way of ornamentation to the detriment of the expenditure involved in the operations and improvement of agriculture…’.11
Large-scale industry at the time of the Physiocrats was only beginning. The barriers encountered by the capitalist mode of production as it initially emerged, especially in the form in which it first appeared in agriculture, presented themselves in a technical rather than a social light. On the other hand, notwithstanding their apparent feudal bias, the Physiocrats made it abundantly clear that the bourgeoisie would not solve its economic problems until first it had resolved its political tasks.
It was left to Adam Smith to argue the Physiocratic case in a more decisive and systematic manner by giving their case its explicitly capitalist form.
(ii) Adam Smith
In much the same vein as the Physiocrats, Adam Smith was concerned lest too large a part of the annual product be squandered in unproductive consumption. Great nations, he remarked, are all too often impoverished by ‘public prodigality and misconduct. The whole, or almost the whole public revenue, is in most countries employed in maintaining unproductive hands…When multiplied, therefore, to an unnecessary number, they may in a particular year consume so great a share of this produce, as not to leave a sufficiency for maintaining the productive labourers, who should reproduce it next year’.12
But as against the Physiocrats, Smith treated the value of the product, and not its material substance, as the ‘essential basis of bourgeois wealth.’13 No longer is it a question of one particular sort of concrete labour standing out as productive, but of all labour which is directly subsumed by capital.
‘Productive labour is here defined from the standpoint of capitalist production, and Adam Smith here got to the very heart of the matter, hit the nail on the head. This is one of his greatest scientific merits…that he defines productive labour as labour which is directly exchanged with capital…This also establishes absolutely what unproductive labour is. It is labour which is not exchanged with capital, but directly with revenue…’14
The main difference, then, between productive and unproductive labour noted by Adam Smith, is that the former is exchanged directly for capital and the latter for revenue.15 But this definition - although it represented an immense advance over the Physiocrats - was by no means free from ambiguities.
Unable to distinguish between capital employed in the direct process of production and capital employed in the process of circulation, Smith confused the creation of surplus-value with its realisation. On the one hand, he defined as productive that labour ‘which adds to the value of the subject upon which it is bestowed’16 and yet, on the other, he also defined as productive that labour employed in the retail trade.17 The latter form of labour, however, does not create value but merely gives the retailer a claim to part of the social surplus-value which has already been produced. This confusion was further compounded by Smith’s eclectic treatment of capitalist production as a whole.
From the standpoint of the individual capital all labour is productive which enables the capitalist to obtain a profit. But from the standpoint of the total social capital, only that labour is productive whose product ‘is destined for replacing a capital.’18 On the one hand, the producer of luxuries is productive, since he adds to the value of the product, on the other, he is unproductive since luxuries cannot re-enter the cycle of production.
This dual character of luxury production occupies a special place in Smith’s analysis, for he sees it as an effective means for regulating the process of accumulation. Through luxury production capital finds release from that terror of Political Economy, thetendency of the rate of profit to fall.
An increase in luxury production will slow down the rate of accumulation since part of the annual product will not be expended again in productive labour. But equally, if part of the annual product which is destined for maintaining productive labour increases, the rate of reproduction will decline because owners of capital ‘find it difficult to get labourers to employ. Their competition raises the wages of labour and sinks the profits of stock.’19 The accumulation of capital therefore leads to its own stagnation. Political economy at last perceives, although superficially, that the contradiction of capital is to be found in the accumulation process itself. But in the end ‘wisdom’ prevails - judicious policy with just the right amount of luxury production will ensure that accumulation proceeds at a steady and healthy pace.20
Smith was writing at a time when large-scale capitalist industry had not yet learnt to stand on its own feet. The contradiction of capital appeared most strikingly in the form of a competitive struggle among the classes over the distribution of the social product. Capitalists, in the eyes of Smith, were confronted either by a burdensome State which consumed too large a share of the country’s produce, or by the workers themselves whose excessive wages prevented the re-conversion of part of the surplus-product into capital. These were hard times for the capitalists.
It was left to Ricardo to carry the analysis forward, this time I from the standpoint of advanced capitalist production.
Ricardo fully agreed with the distinction made by Smith between labourers paid by capital and those paid out of revenue. But it mattered little to Ricardo whether the size of a country’s labour force was large or small what mattered was the amount of surplus-value (net income) produced. The relative smallness of the productive population was even to be welcomed for it was ‘only another way of expressing the relative degree of the productivity of labour.’21
‘Adam Smith constantly magnifies the advantages which a country derives from a large gross, rather that a large net income…Provided its net real income, its rent and profits be the same, it is of no importance whether the nation consists of ten or of twelve millions of inhabitants. Its power of supporting fleets and armies, and all species of unproductive labour, must be in proportion to its net and not in proportion to its gross income.’22
The growth in unproductive consumption need not in itself retard the process of capital formation. With every improvement in the science of technology, and with every advance in the science of agriculture, the value of the worker’s means of subsistence would decline, the profits of the capitalists would rise and with it the country’s capacity to maintain ‘all species of unproductive labour.’23
Nor was Ricardo concerned that too rapid a growth of accumulation would strengthen the bargaining power of the workers at the expense of the capitalists. If a shortage of labour arose the capitalists would introduce labour-saving machinery, thereby creating a ‘diminution in the progressive demand for labour.’24
Here Ricardo touched on the nerve centre of capitalist production and in so doing introduced a discordant note into political economy. So much so that one apologist, Carey, promptly denounced him as the ‘father of communism’, a demagogue whose pernicious writings served only to promote ‘hostility among cIasses.’25
But in the end the Ricardian system, like that of Smith’s, becomes manageable. Since the workers, according to Ricardo, have an interest in ensuring that the supply of labour does not greatly exceed the demand ‘they must naturally desire that as much of the revenue as possible should be…expended in the support of menial servants.’26 Provided the workers who are made redundant are re-employed in the unproductive branches of labour, the productive labourers will hold their own in the competitive struggle against the capitalists. Similarly they will maintain a good bargaining position in times of war when the State maintains ‘large fleets and armies.’27
Ricardo’s position is now that of an apologist, his prescription essentially reformist. Of his ‘reformism’ Marx had this to say:
‘What a convenient arrangement it is that makes a factory girl to sweat twelve hours in a factory, so that the factory proprietor, with a part of her unpaid labour, can take into his personal service her sister as maid, her brother as groom and her cousin as soldier or policeman!… This is indeed a fine result of machinery, that a considerable section of the female and male labouring class is turned into servants.’28
In the last analysis the Ricardian system breaks down, not because of the hostility it engenders but because of the limits it encounters in nature. The law of diminishing returns, despite the advances in science, finally asserts itself. The more capital accumulates the more difficult it becomes to wrest from the soil sufficient food to sustain the workers. The subsistence of the worker declines and he is compelled into the struggle for higher wages ‘and whatever increases wages, necessarily reduces profits.’29
‘The contradiction we encounter in the Ricardian system is the abstract contradiction between Man and Nature; a contradiction which presents itself in the social form of a struggle among he classes over society’s ever-diminishing surplus-product. Darwin’s beasts are transformed into capitalists and workers.
Ricardo now adopts a Smithian posture, seeing in capital’s dilemma an insufficiency of surplus-value, not because real wages have risen too high-as Smith held-but because nature has become too sparing with her ‘free gifts’.
‘Adam Smith…uniformly ascribes the fall of profits to accumulation of capital, and to the competition which will result from it, without ever adverting to the increasing difficulty of providing food for the additional number of labourers which the additional capital will employ.’30
Having again raised the spectre of a diminishing surplus-product, Ricardo turns his attention away from Adam Smith in order to do battle with Malthus, the arch advocate of ‘splendid courts’ and waste.
(iv) Ricardo versus Malthus
As against Ricardo, Malthus re-established the vulgarised conception of profit. Commodities sell at a profit not because they are sold at their value but because they are sold above their value. That is to say, capitalists make their profits by selling their commodities back to the workers at a higher price than the workers were paid for producing them.
Although exploitation occurs in the Malthusian system, it does so only in the market after commodities have been produced. The workers are not exploited in the process of production-they are simply cheated. The contradiction of capital now shifts from the sphere of nature into the sphere of competition.
But, said Malthus, if all capitalists sell their commodities by overcharging the workers it is inconceivable how any profit at all can be made. If the worker is unable to buy back the whole of his product with his wages, his demand will not correspond to the supply.
Having posed a false dilemma Malthus proceeded to provide the capitalists with an equally false solution. Demand in capitalist society, he claimed, can only be made effective if it comes from those standing outside production, from those who consume but do not produce. The required consumption must therefore take place among the unproductive labourers of Adam Smith.
Malthus did not disguise the fact that the worker performs part of his labour without an equivalent return. He was not interested ‘in concealing the contradictions of bourgeois production, but on the contrary, in emphasising them, on the one hand, in order to prove that the poverty of the working classes is necessary…and, on the other hand, to demonstrate to the capitalist the necessity for a well-fed Church and State hierarchy in order to create an adequate demand for the commodities they produce.’ What Malthus wanted is capitalist production, but only insofar as it creates ‘a broader and more comfortable material basis for the “old” society’.
‘A body of unproductive labourers are just as necessary and as useful with a view to future production, as a fire, which should consume in the manufacturers’ warehouse the goods which those unproductive labourers would otherwise consume…What could be more wise if Mr Malthus’ doctrine be true than to increase the army and double the salaries of all the officers of the government…?’ 
At any rate, as the debate among the economists raged, there emerged a class which began to perceive that its interests were by no means tied to those whom the economists sought to defend. This class, moreover, began to take a keen interest in the fact that some people were being maintained by the industry of others. In short, political economy was soon to learn that it did not pay to do battle against the representatives of an ‘old’ order when the present contained within it the seeds of the new.
(v) The categories of political economy and the class struggle
Prior to the emergence of the capitalist mode of production, the extraction of surplus-labour generally served as a means towards ‘splendid courts’ and a sumptuous existence for the idle rich. The dominant classes of pre-capitalist societies would hardly have objected to the accusation that theirs was an unproductive life-the mere title labourer would have been sufficient to arouse their indignation.
By contrast, the procurement of surplus-labour under the stern regimen of capital came to serve not as a means towards consumption but towards a nobler end, that of accumulation itself. Thanks to emergence of this new system the productive powers of social labour were developed enormously and in a manner eclipsing all former modes. Thus it came that productive labour was extolled and unproductive labour damned, and for the first time in history directly economic categories were used in the ideological confrontation of one class against another.
Of all the representatives of political economy Adam Smith was the least restrained in venting his hatred for unproductive labour. Large-scale industry was as yet only in its infancy and needed all the assistance it could get. To dissipate the surplus which might otherwise be used for accumulation would hinder its development. But the numerous offices and sinecures relating to the administration of Government, not to mention ‘churchmen, lawyers, physicians, men of letters of all kinds; players, buffoons, musicians, opera-singers, opera-dancers, etc’, did just that. They were mere servants of the public and therefore ‘are maintained by a part of the annual produce of the industry of other people.’  This, wrote Marx,
‘is the language of the still revolutionary bourgeoisie, which has not yet subjected to itself the whole of society, the State, etc…State, church, etc., are only justified in so far as they are committees to superintend or administer the common interests of the productive bourgeoisie, and their costs-since by their nature these costs belong to the overhead costs of production-must reduced to the unavoidable minimum.’ 
Although Smith’s writings stand out as a critique of existing conditions it is important to remember that ‘what on the surface is glorification of the productive labourer is in fact only glorification of the industrial capitalist in contrast to landlords and such moneyed capitalists as live only on their revenue.’  But herein lay the rub.
Since labour is the source of all value and since, therefore, we can always trace the direct genesis of capital from labour, the question arises, how or for what reason does capital appear productive? We can have either the productive power of labour or the productive power of capital-since the same productive power cannot be counted twice-and if the latter there can be no law of value.
Political economy was trapped in a contradiction of its own making and, as Marx described it, ‘it was natural for those thinkers who rallied to the side of the proletariat to seize on this contradiction, for which they found the theoretical ground already prepared. Labour is the sole source of exchange-value and the only active creator of use-value. This is what you say. On the other hand, you say that capital is everything, and the worker is nothing or a mere production cost of capital. You have refuted yourselves. Capital is nothing but defrauding of the worker. Labour is every thing.’ 
And when finally the workers themselves stand up and declare that the capitalists are unproductive, and when the capitalists can no longer sustain a revolutionary pitch, if only because their own pitch has now become the storm centre of a new and even more forbidding struggle, then the time has arrived for them to cry out that a monumental blunder has been made and to call, in cowardly fashion, for a truce, a sickly compromise, in which every conceivable activity, however tenuous its connection with capitalist production, is to be honoured with the title productive labour.
‘When…the bourgeoisie has won the battle, and has partly itself taken over the State, partly made a compromise with its former possessors; and has likewise given recognition to the ideological professions as flesh of its flesh and everywhere transformed them into its functionaries, of like nature to itself; when it itself no longer confronts these as the representatives of productive labour, but when the real productive labourers rise against it and moreover tell it that it lives on other people’s industry…then things take a new turn, and the bourgeoise tries to justify “economically”, from its own standpoint, what at an earlier stage it had criticised and fought against.’ 
The Ricardian law of value, for all its imperfections, had to go-at least from the universities-thereby enabling the economists to aspire to that lofty endeavour of providing society with the science of the superficial. The haunting paradox capital or labour, could now find its substitution in the crass resolution: capital and labour, and land and management and technology and any other freebooting hireling of the bourgeoisie one may care to name.
The capitalists had every interest in abandoning the distinction between productive and unproductive labour. The working- class, on the other hand, had, and always will have, every interest in emphasising this distinction. Without this emphasis it is possible to turn Ricardo’s statement that labour is the creator of value into the opposite-that capital is the creator of value. Give the capitalist a second and he will lay claim to the entire working day
Marx welcomed the fact that the proletariat had found a number of sympathisers able to seize on the contradictions of political economy and use them against the capitalists from the workers’ standpoint. But as Marx well knew, the revolutionary initiative of the workers could not for long be maintained, let alone developed further, simply by confronting the Ricardian argument on its own terms. Rather it was these terms themselves which had to be subjected to Marx’s own revolutionary critique. Having already rescued from the Hegelian dialectic its revolutionary essence Marx was equipped to deal with political economy in similar fashion. Indeed, it was precisely due to his critique of the former that the latter could now be transcended on the basis of historical materialism.
While it is true that Marx’s general approach to history forms both the background and starting point for a critique of political economy, it is no less true that without this critique Marx’s historical approach, for all its brilliant insights, would have remained within the realm of speculative philosophy. Marx’s analysis of capital does more than reveal the laws of motion of bourgeois society; it also entrusts into the hands of the, revolutionary worker’s movement the science of society-historical materialism.  To this end Marx dedicated the concept productive labour, a concept which ‘expresses precisely the specific form of the labour on which the whole capitalist mode of production and capital itself is based.’ 
II THE CONCEPTS OF PRODUCTIVE AND UNPRODUCTIVE LABOUR IN MARX
(i) Marx’s critique of Adam Smith’s concept of productive labour
Marx shared Smith’s view that labour is unproductive if it exchanges directly for revenue. But the corollary, that labour is productive if it exchanges directly for capital is both inadequate and superficial, and therefore erroneous. What Smith failed to grasp was that in the ‘exchange’ between labour and capital two closely related but nevertheless distinct acts take place.
The first phase of the exchange between capital and labour entails a formal transaction between capitalist and worker in the market. Here the worker sells his commodity labour-power for a definite sum of money. The capitalist purchases this commodity only for its use-value, in order to consume it in the process of material production. This he does by setting the labourer to work in what Marx calls ‘the human labour-process’.  , a process in which human beings appropriate, with the aid of the instruments of labour, Nature’s products in a form adapted to their own wants. From the standpoint of Marx’s general conception of history all labour engaged in the production of use-values may be regarded as productive, since it is through the labour-process that human beings are distinguished from animals. 
The production of use-values or, what amounts to the same thing, the labour-process, constitutes the material basis of all human life and in this sense may be conceived independently of its particular social forms. But it is precisely ‘these forms that are alone of importance when the question is the specific character of a mode of social production.’ To argue otherwise ‘is just as if the physiologist said that the different forms of life are a matter of complete indifference, that they are all only forms of organic matter.’  Accordingly, the definition of productive labour, from the standpoint of capitalist production, has absolutely nothing to do with the labour-process as such; it is derived not from the material characteristics of labour ‘but from the definite social form, the social relations of production, within which the labour is realised.’ 
The labour-process in capitalist society entails more than just the production of use-values; it is at one and the same time the production of commodities and surplus-value. What really interests the capitalist in the worker’s labour-power is not the particular concrete manner in which it is expended, but ‘the specific use-value which this commodity possesses of being a source not only of value but of more value than it has itself.’  It is important to remember, therefore, that labour-power has not one but two use-values. Besides its use-value as a particular form of concrete labour it assumes a general use-value. This latter kind of use-value constitutes its special feature, emanating as it does, from the specific part which it plays in the production of commodities. What the capitalist purchases from the worker, and what he subsequently consumes, is “a self-expanding, value-creating power, viz., labour-power, which not only reproduces its value, paid by the capitalist, but simultaneously produces a surplus-value, a value not existing previously and not paid for by any equivalent.’  It is precisely this value creating capacity which constitutes ‘the specific use-value of productive labour for capital’.  Here is the use-value which forms the basis for the existence of capital.
Unable to arrive at an understanding of the specific use-value of productive labour for capital, political economy proved incapable of dealing with the exchange between labour and capital in its entirety. The first phase of the exchange takes place entirely within the bounds of the market, and according to its own specific laws.
‘The second phase of the exchange between capital and labour in fact has nothing to do with the first, and strictly speaking is not an exchange at all. …The owner of money now functions as capitalist. He consumes the commodity which he has bought…In this process, therefore, labour is…transformed directly into capital, after it has been formally incorporated in capital through the first transaction.’
‘In the exchange between capital and labour, the first act is an exchange…The second is a process qualitatively different from exchange, and only by misuse could it have been called any sort of exchange at all. It stands directly opposite exchange; essentially different category.’ 
Political economy never succeeded in venturing very much further than the first exchange between capital and labour. The most it achieved was to pose the following riddle: How is it that the capitalist purchases labour at its value, sells the product of labour at its value and yet at the end of the process has more value than when starting. But the riddle was never solved, and indeed it could not be solved so long as capital was set directly against labour instead of against labour-power .’ 
The productive labourer, for Marx., is one whose labour-power is first exchanged directly against money-capital and then consumed by the capitalist in the direct process of production. ‘Productive labour is only a concise term for the whole relationship and the form and manner in which labour-power figures in the capitalist production process.’ 
We can now understand what lay behind Smith’s confused, treatment of luxury commodities. Instead of first considering the basis of the capitalist relation-the specific use-value of productive labour for capital-he launched headfirst into a consideration of the particular kinds of use-values in which labour is realised. Later Marx examined the importance of the material content of labour, but only after a solid foundation had been laid.
Smith’s failure to conceive of labour-power as a commodity prevented him from developing a concept of capital and, more importantly, from understanding its specific composition.
The value which the capitalist lays out in the means of production remains a constant magnitude both before and after its incorporation into the labour-process, and for this reason is defined as constant capital. Variable capital, on the other hand, remains a constant magnitude only while it is in the hands of the capitalist in its commodity-or money-form. When it passes from its money-form into its productive-form, that is, into living labour-power, it is converted from a definite, constant magnitude into a variable one, into self-expanding value, and hence into capital. Variable capital ‘becomes real variable capital only after…being converted into labour-power functioning as a component part of productive capital in the capitalist process.’  But by classing, like Smith, the labourer’s means of subsistence instead of his labour-power as an element of productive capital ‘the understanding of the distinction between variable and constant capital, and thus the understanding of the capitalist process of production in general, is rendered impossible.’ 
It was perfectly understandable to Marx why political economy should have clung instinctively to Smith’s confused treatment of productive and circulating capital. Without a clear distinction between the two ‘the basis for an understanding of the real movement of capitalist production, and hence of capitalist exploitation, is buried at one stroke.’  Political economy thus offered to the vulgar economists ‘a secure basis of operations for their shallowness, which on principle worships appearance only.’  As Marx notes:
‘The first formal act of exchange between capital and labour is only potentially the appropriation of someone else’s living labour by materialised labour. The actual process of appropriation takes place only in the actual production process, behind which lies as a past stage that first formal transaction…For which reason all vulgar economists…go no further than the first formal transaction, precisely in order by this trick to get rid of the specific capitalistic relation.’ 
Marx’s definition of labour-power enables him to ‘force’ his way into capital’s ‘hidden abode’ and to take us in thought where the worker creates surplus-value in actu. Thus enters Marx into that sacred realm of bourgeois society upon whose threshold there stares us in the face: No Admittance Except on Business. The ‘secret’ of the profit is finally revealed. 
(ii) The concept of productive labour and its further development
(a) Material production.
Having considered the form and manner in which labour-power is expended in capitalist production, Marx arrives at the following formula:
This formula expresses the social character of the labour-process under conditions of capitalist production and shows the origin of the capitalist’s profit as it arises out of the direct process of material production itself. Considering the capitalist relation from the standpoint of material production alone, the productive labourer may be defined as one who plays an active part in the labour-process and who produces surplus-value for the capitalist.
(b) Immaterial production.
It is possible, however, for the purely social mode of existence of capital to function apart from the labour-process proper and for surplus-value to appear immediately in the form of an excess of money-capital over and above the money-capital originally advanced. Here the formula would be:
Once we have grasped the distinction between concrete and abstract labour this aspect of our analysis should present few difficulties. As Marx reminds us, the materialisation of labour is not to be taken in such a restricted sense as Adam Smith conceived it. ‘When we speak of the commodity as a materialisation of labour…it is conceived as a definite quantity of social labour or of money. It may be that the concrete labour whose result it is leaves no trace in it…The mystification here arises from the fact that a social relation appears in the form of a thing.’ 
In industry proper, the direct outcome of the labour-process is the commodity C', a commodity greater in value than the labour-power and means of production consumed in its production. In the case of immaterial production, however, the activity of labour leaves ‘no tangible result existing apart from the persons themselves who perform them, in other words, their result is not a vendible commodity.’  For example, a worker employed in the entertainments industry produces both surplus-value and use-values, although the use-values only materialise in the instance of their consumption. All that remains is surplus-value in its specifically social form.
Immaterial production functions not in the labour-process proper - although without the labour-process all immaterial production would cease - but in the sphere of individual consumption. The workers are therefore placed in a direct relation to the consuming public and the sale of their products is invariably bound with the promotion of their own personality, charm, wit, etc. Matters are very different in industry proper - at the end of the production-process worker and product go their own separate ways.
Those employed directly by capital in the process of immaterial production are productive labourers, be they teachers, doctors, nurses or artists. The consumption of their labour-power by the capitalists is at one and the same time the production of commodities and surplus-value.
So far we have considered the production of commodities without taking into account their transportation. The peculiar feature of the transport industry is that it forms a link between the sphere of production and the sphere of circulation. Consequently, notes Marx, it is common for economists to bring transport into the cost of circulation and not production. This, however, is wrong. Transporting a commodity to the market ‘is part of the production process itself.’  The transport industry thus appears ‘as a continuation of a process of production within the process of circulation and for the process of circulation.’ 
Since the useful effect of the transport worker’s labour can only be consumed the instance it is performed, the formula for the transport industry ‘would therefore be M–C …P –M', since it is the process of production itself that is paid for and consumed: not a product separate and distinct from it.’ 
d) The production of the money-material
In all the above cases the following question arises: How can the capitalists continually draw a sum of money equal to M' out of circulation when they continually throw a sum equal to M into it?  ‘Whereas one part of the capitalists constantly pumps more money out of circulation than it pours into it, the part that produces gold constantly pumps more money into it than it takes out in means of production.’  This leads us to our next form of productive labour, labour engaged in the production of the money-material, that is, gold.
In the production of gold the formula would be
M – C ...P ...M'
because the process of production, P, furnishes more gold than was advanced for the elements of production of the gold in the first M. 
Here we have a unique form of productive labour since in no other branch of capitalist production are the conditions of direct exploitation identical with those of its realisation. This follows from the character of ‘gold-digging’ as directly social labour.  As in industry proper, worker and product go their own separate ways, although in this case the surplus-value contained in the gold appears immediately in its socially recognizable form.
The direct outcome of the productive process is a special commodity - the money-commodity - which cannot be transformed into either constant or variable capital, but which must be sacrificed to the sphere of circulation in which it functions as exchange-value.  The productive consumption of the gold-miner’s labour-power must therefore assume an unproductive form. This however in no way affects the characterisation of the gold-miner as a productive labourer. 
(iii) Productive labour of a special kind.
Having examined the circumstances in which different commodities are produced in capitalist society, we must now turn our attention to labour which is expended directly on the elements of productive capital. First we shall consider labour engaged in maintaining and repairing the passive element of productive capital, that is, the means of production and, in particular, fixed capital, notably machinery.
a) Labour expended on the passive element of productive capital.
In the same way as a worker must wash himself, and by so doing maintain the efficacy of his labour-power, so too must a machine be maintained.  In the same way as a worker has medical treatment to keep him from dying prematurely, so too is a machine repaired.  Without the expenditure of this labour the machine would cease to function as a machine, would become useless. But it is not the value already existing in the machine which this labour replaces; it is additional labour made necessary by its use. The wages of the workers who maintain machinery are therefore ‘part of the variable capital and the value of their labour is distributed over the product’  Here we have a special form of productive labour. It adds to the value of the final product yet does not itself ‘enter into the labour-process proper to which the product owes its existence.’  Marx accordingly categorises this labour as labour ‘sui generis’. 
Now it all too often happens in capitalist society that the workers are required to clean and maintain machinery in their ‘rest-periods’. In this way the workers provide the capitalist with labour-time gratis. ‘This labour does not figure in the price of the product. …the capitalist thus does not pay the maintenance costs of his machine. The labourer pays in persona, and this is one of the mysteries of the self-preservation of capital ….’ 
Whether the capitalists purchase labour-power for the purpose of maintaining machinery, or whether they impose this work on the workers in their ‘rest-periods’, will depend on the relative strengths of capitalists and workers in the competitive struggle.
(b) Labour expended on the active element of productive capital
We shall now consider the expenditure of labour on the active, and hence most important, element of productive capital, living labour-power. It is not surprising that Smith ignored this form of labour since he was unable to conceive of labour-power in the first place.
The worker who sells her labour-power to another-whether the capitalist or the State-for the purpose of rearing, training or maintaining productive labour-power is herself a productive labourer. A nurse, for example, does not merely replace the value of the patient’s labour-power but adds to it, although nursing itself does not enter into the labour-process proper. Here again we encounter labour sui generis, but in this case we have labour-power acting directly upon labour-power, a relation between one person and another, between worker and worker, which modifies the relation in its content, though not in its economic form. The object of the nurse’s labour is not a ‘thing’ which confronts her as an alien and independent force, as ‘capital’, but the living subject of capital itself, the labourer. This has given the bourgeoisie considerable scope to impose its own standards of hypocritical morality designed to separate nurse from nurse and nurse from patient.
Surplus-value is not normally generated in the production of labour-power as a commodity but in the production of commodities by labour-power. Capitalists will not for long purchase labour-power which is itself impregnated with surplus- value. The process of capital accumulation-always the independent variable-will render the capitalists free from such labour-power, for which reason the State invariably assumes direct control over the ‘maintenance’ and ‘training’ depots of capital-the hospitals and schools-to ensure that labour expended on the workers is kept to a minimum. Unless this feature of the production of labour-power is taken into account, it will prove impossible to analyse the effects this labour has on the average rate of profit.
As in the reproduction of fixed capital so too in the reproduction of labour-power do we find labour performed in the worker’s ‘rest-period’.
The consumption of the worker’s means of subsistence requires the expenditure of labour-time-meals must be cooked, shelter maintained and repaired, children cared for, and so on. The largest part of society, that is to say the working class ‘must…perform this kind of labour for itself…’.  By so doing it preserves for the capitalist the efficacy of labour-power, the instrument by means of which alone he can remain a capitalist. 
‘The individual consumption of the labourer, whether it proceed within the workshop or outside it, whether it be part of the process of production or not, forms therefore a factor of the production and reproduction of capital; just as cleaning machinery does, whether it be done while the machinery is working or while it is standing. The fact that the labourer consumes his means of subsistence for his own purposes, and not to please the capitalist, has no bearing on the matter. It is the production and reproduction of that means of production so indispensable to the capitalist: the labourer himself.’ 
In capitalist society, where separation appears as the normal relation, it is the female section of the proletariat which, in the main, performs this labour. In so far as it is carried out in the woman’s ‘rest-period’, it is neither productive nor unproductive. It is a specific form of concrete labour, toil, which although not assuming a value-form nevertheless remains a vital and necessary condition to the reproduction of capital. The woman pays in persona .Her toil is bestowed gratis on society, and consequently the capitalist, and does not enter into the price of labour-power or into the creation of value in general. Her efforts are doubly subsumed by capital-she not only produces surplus-value in the factory but in the home maintains and rears the value creators themselves. Hers is a life of unremitting labour and toil, ‘completing each day’s work, she becomes the slave of the domestic needs of her family; and when at night she drops wearied upon her bed, it is with the knowledge that at the earliest morn she must find her way again into the service of the capitalist, and at the end of the coming day’s service for him hasten homeward again for another round of domestic drudgery’. 
The extent to which capital directly takes over those functions previously performed in the home depends on many circumstances, among the most important of which are the manner in which capital has developed in a particular region and the condition of the accumulation process in any given period. But this tells us about the relative position of women, a position which differs from country to country and from one phase of capital’s development to the next. Here we are concerned with the absolute position of women, emanating as it does from the nature of capital itself.
The actual process of capitalist production presupposes the separation of labour-power from the labourer. At the end of the production process the worker must take his leave in order to replenish what previously the capitalist had consumed-his labour-power. The worker does this not only by cooking his meal or, as is commonly the case, having it cooked for him, but also by eating it, for the ‘labour of eating’ produces brain, muscles, etc.’  The worker’s capacity to labour, once restored, is again sold to its consumer-the capitalist. There is no immanent tendency within capital to assume direct responsibility for the individual consumption of the working-class, to cook its meat, polish its boots, keep its furniture and dwellings clean, care for its children after the process of production has ended. Even assuming some capitalists put this labour to their own use for the purposes of extracting additional surplus-value-by employing workers to cook for other workers, for example-it simply means while some workers are replenishing their labour-power others are having their’s consumed. And after their labour-power has been consumed they in turn must perform their own domestic labour. To assume a never ending chain of workers employed in restoring the labour-power of other workers is to lose sight of the process of capitalist production as a whole.
When we examine not the single worker or the single capitalist, but the capitalist class and the working class, not an isolated process of production but capitalist production as a whole, it is evident that domestic labour will always be performed by the working class and, in particular, by the female section of that class. The capitalist kills two birds with one stone: the mystery of the self preservation of capital stands revealed. 
Only when labour-power is no longer consumed by another, only when it ceases to be a commodity will the production of wealth in general become inseparable from the reproduction of the human race. The ‘survival’ of the family as an economic unit in society has as its basis the continued existence of capital; the separation of labour from the objective conditions of labour; the separation of the labourer from labour-power. The family survives not despite capital but because of it. 
Since the continued oppression of women derives from the specific oppression of the female section of the proletariat and since, moreover, this oppression has its origin in the reproduction of labour-power as a commodity, it follows that the broad masses of women in bourgeois society have an interest not only in the abolition of capital but in ensuring that the future socialist society makes rapid strides towards the eradication of the family as an economic unit. It is precisely now, at a time when capitalism is faced with its greatest crisis ever, that various individuals are striving to make respectable the production of labour-power as a commodity, and this by conferring upon domestic toil a ‘wage-form’ adequate to its ‘value-creating’ content. As one associate editor of Newsweek Magazine marked: if domestic workers were guaranteed a wage by the State, ‘the houseworker could at least be recognised as a professional member of the…labour force…’. 
(iv) Unproductive labour exchanged against capital
Before passing on to a consideration of unproductive labour proper, that is, labour which is paid not by capital but out of revenue, it is necessary to deal with labour engaged in the realisation rather than the production of surplus-value. Although this labour is unproductive for capital it is nevertheless exchanged against capital and for this reason deserves special attention.
Political economy consistently failed to analyse the specific historic form in which labour presents itself as social labour under conditions of capitalist commodity production. Not for a moment did it consider or concede that the labour of the individual must present itself as abstract labour and, in this form, as social labour, if value is to be created at all. Even Ricardo, the most consistent and incisive of the economists, proved incapable of passing beyond value’s immediate form of appearance, exchange-value. His attention was therefore concentrated on the quantitative and not on the qualitative aspect of value, its magnitude and not its substance.  Like Smith and those before him, Ricardo failed to grasp the connection of abstract labour with money, or that this labour must assume the form of money.  Money was regarded as a mere device for overcoming the technical inconveniences of barter and not the means by which the value of the commodity is first expressed and then realised.
We can now understand why Smith was unable to draw the distinction between the creation of value and its realisation and why, therefore, he defined the commercial worker as productive. As long as value was considered only in its quantitative aspect it proved impossible to distinguish between the conditions of direct exploitation and those of its realisation.
What distinguished Marx’s method from that of Smith’s is that in defining productive labour Marx dealt ‘only with productive capital, that is, capital employed in the direct process of production.’  Later Marx considered capital in the process of circulation and showed that the commercial worker, although he fulfils a necessary function for capital, and performs unpaid labour (for the individual capitalist), ‘intrinsically his labour creates neither value nor product.’  His labour merely converts a certain value from one form to another, from its commodity form to its money farm, and conversely. Here we have an exchange between capital and labour, but it is a formal, exchange and on no account must it be confused with the ‘exchange’ that takes place between capitalist and worker in the direct process of capitalist production.
To summarise. Smith’s definition of productive labour is inadequate for three related reasons. Firstly, he deals with value only quantitatively and not qualitatively and therefore confuses the actual process in which it is produced with those in which it is realised. Secondly, he deals with capital set directly against labour instead of labour-power and therefore is unable to fathom the ‘secret’ of the profit. Thirdly, since he fails to deal with the elements of capital as they present themselves in the direct process of capitalist production he cannot but ignore labour which is expended on the elements of productive capital itself.
Despite the many weaknesses to be found in Smith’s analysis, his definition of productive labour is notable since it was the first to establish absolutely-atleast from the standpoint of capitalist production-what unproductive labour is. It is labour which is not exchanged with capital, but directly with revenue.
(v) Unproductive labour exchanged with revenue
We have no quarrel with Adam Smith’s definition of unproductive labour. All we need emphasise is the fact that the character of this labour has undergone considerable change since capitalism first made its appearance. The unproductive labourers of today are not the unproductive labourers of Adam Smith.
Today, the vast majority of those who are paid out of revenue are themselves wage-labourers and form part of the working-class. Where feudal remnants remain, they do so in a stunted and caricatured form and tend more often than not to be ridiculed by the working-class, especially in periods of crisis.
By the time Marx began write on the subject of productive and unproductive labour in the early 1860’s, the triumph of industrial capital in Britain had long since been proclaimed. The largest number of unproductive workers were domestic servants, more numerous in fact than the productive workers employed in industry. Over the years, and especially during the course of this century the proportion of domestic servants in the economy has dwindled to a minimum. Along with this, decline there has been an increase in the number of unproductive-workers employed directly by the State, for example, in public and local administration, the ideological professions, the repressive apparatus and health and welfare (assuming, of course, that the labour of the medical and educational workers is not expended on productive labour-power).
In the article ‘Inflation, the crisis and the post-war boom’ (Revolutionary Communist 3/4) comrades Bullock and Yaffe dealt with the changing composition of the labour-force and present patterns of employment and we need not pursue this further. It is sufficient to remind ourselves that the aim of Marx in developing the concepts of productive and unproductive labour was not to divide the workers. Exactly the opposite is the case. With the aid of these concepts it proved possible for Marx to analyse how value is expanded in the direct process of production and how it is circulated in the reproduction process. This, in turn, enabled Marx to examine bourgeois society in its fundamental relations and to reveal to the workers-both productive and unproductive-the real causes of the convulsions through which bourgeois society must periodically pass. By penetrating into the secret of the falling rate of profit-the most compelling expression of the system’s contradictory nature-Marx was able to provide the basis for the unity of all workers. In the remaining sections of this paper we shall consider these aspects of Marx’s analysis.
III THE CONTRADICTION OF CAPITAL AND THE CONCEPTS OF PRODUCTIVE AND UNPRODUCTIVE LABOUR
The contradictory nature of capitalist society assumes many forms, with one contradiction continually coming to the fore as another recedes. The point, however, is not to describe, catalogue and arrange them according to fancy, but to show how these contradictions themselves correspond to the inner coherence of bourgeois society. Instead of exposing the contradictions of capital as shown by its intrinsic relations, political economy would merely seize on this or that aspect of the problem, analyse it superficially and hold it up as the problem. And because its approach was essentially eclectic, because it proved incapable of resolving the external movement into the true intrinsic movement, it always managed to find some means of tempering the system’s contradictory nature.
For Adam Smith the contradiction of capital is to be found in the market, in the competitive struggle among the classes over the distribution of the social product. The accumulation of capital creates its own barrier by strengthening the bargaining power of the workers at the expense of the capitalists, that is to say, the workers consume too much -‘over consume’. Luxury production, however, since it slows down the rate of accumulation, and therefore the demand for labour, will restore a healthy balance of class forces-wages will decline and profits will rise. The contradiction therefore resolves itself into one of ‘over-consumption’ on the part of the workers; the means for its solution? - raising the level of unproductive consumption in order to ease the pressure of labour on capital.
For Malthus, the origin of capital’s contradiction is also to be found in the market. Low wages make high profits possible, but at the same time they make profits impossible because they reduce the demand for goods. The contradiction now fakes on an ‘underconsumptionist’ form; the means for its solution?-unproductive consumption.
Although Ricardo developed a concept of relative surplus-value, and although he moved tentatively and with hesitation towards some understanding of the role of the reserve army of labour, his analysis lacked that vital ingredient which would have opened the way for an even deeper understanding of capital’s contradiction…Ricardo had absolutely no conception of the organic composition of capital, of capital as it manifests itself in the direct process of production as the difference between constant capital and real variable capital. Ricardo was therefore prevented ‘from elaborating the rate of profit out of the relationship of this active element to the passive element, and from showing that it declines as society advances.’ 
According to Ricardo, the rate of profit is not determined by the ratio of surplus-value to the total capital outlay, but by the ratio of surplus-value to variable capital. Consequently, he could only explain falling profits as a result of decreasing surplus-value, and therefore decreasing surplus-labour  .
But if the mass of society’s surplus-value is continually declining, how do we account for the increase in the number of unproductive workers that accompanies the accumulation of capital?  How, moreover, do we account for the fact that those who do not live directly by their own labour become more numerous as well.  Indeed, what Ricardo conveniently forgot to emphasise is ‘the constantly growing number of the middle classes, those who stand between the workman on the one hand and the capitalist and landlord on the other.’ 
What Ricardo conveniently failed to realise was that the productive labourers are not less exploited because there is so much unproductive consumption, but on the contrary, there is so much unproductive consumption because the productive labourers are more exploited.  The increase in the number of those living on revenue therefore lends a lie to the contention that the rate of profit falls as bourgeois society advances because of a decrease in the rate of exploitation. Even the economists who were unable to criticise political economy from the standpoint of historical materialism, but who nevertheless had been won over to the side of the working-class, had enough intelligence ‘to emphasise the fact that the proportional number of those who live on profit has increased with the development of capital.’ 
But the very circumstance which allows the scope of unproductive consumption to be extended leads to a decline in the rate of profit. Nothing is more natural for the Ricardian, therefore, than to associate unproductive consumption with declining profits, provided of course he leaves out of account that which is common to both-the growing productivity of labour and the rise in the organic composition of capital.
Marx was adamantly opposed to the Ricardian view that the rate of profit declines because of a decrease in the rate of exploitation. Precisely the opposite is the case. The rate of profit falls, although the rate of surplus-value rises ‘because the proportion of variable capital to constant capital decreases with the development of the productive power of labour. The rate of profit thus falls, not because labour becomes less productive, but because it becomes more productive. Not because the worker is less exploited, but because he is more exploited, whether the absolute surplus-time grows or, when the state prevents this, the relative surplus-time grows, for capitalist production is inseparable from falling relative value of labour.’  To argue otherwise is tantamount to saying that capitalism has not yet learnt to stand on its own feet (on the back of the proletariat), a very convenient position: for the Ricardians to have held, especially at a time when bourgeois society was rapidly passing into advanced age. For the Ricardian, bourgeois society would always be in need of a bourgeois revolution.
The barriers confronting capital at the time of the Physiocrats were very different to those encountered in its mature and developed phase. As early as 1862, Marx could write;
‘Although the bourgeoisie was originally very thrifty, with the growing productivity of capital, ie, of the labourers, it imitates the retainer systems of the feudal lords.’ 
The contemporary representatives of capitalism prove Marx correct as they set about aping those classical economists whom earlier they had criticised and fought. Faced with the greatest crisis ever, the bourgeoisie seems intent on returning to that moss-ridden battlefield upon which political economy once stood. As the clarion call against the unproductive labourer is again sounded, the days of the grand compromise are drawing rapidly to a close.
Before taking up the question of the present crisis we must ask ourselves how this parasitical excrescence of the labour of others-the bourgeoisie-could conceivably have, the gall to raise a voice against the unproductive labourer. A look at the literature on the English left-from the Communist Party (which is something of a misnomer) to the International Socialists (a misnomer on both counts)-will provide the answer. By dispensing with both the law of value and the tendency of the rate of profit to fall, and by disregarding altogether the distinction between productive and unproductive labour, they have left the field wide open to the bourgeoisie and its ideological spokesmen, the Wedgwood Benns and the Keith Josephs.
IV HOW THE CREATIVE MARXISTS DEFORM MARX
(i) A farewell to arms
The first full frontal attack from the post-war left came from the International Socialists. Marx’s analysis of bourgeois society, we learn, is no longer fit for the purpose for which it was intended-at least not in terms of present day realities. Its relevance is limited to the 19th century, when unproductive consumption-particularly in the form of armaments expenditure-was of minor importance.
But if a philosopher born into the 19th century is not good enough for the International Socialists then a parson born into the 18th apparently is. In the journals of the IS Thomas Robert Malthus is up-dated, refined and drawn into the ranks of trade union militancy-to which the IS has always subordinated its politics. The underlying origin of capital’s contradictions is no longer to be found in the actual process of capitalist production but in the competitive struggle between the giant multinational companies which ‘leads to more goods being produced than workers’ wages can buy.’ 
As Marxists they feel it incumbent upon themselves to deal with Marx’s analysis of the falling rate of profit in a ‘critical’ fashion, and the man for the job is Kidron. 
For a start Kidron lets it be known that he has no basic quarrel with Marx’s law of the falling rate of profit-provided we accept it is only applicable to the production of ‘investment goods’ (Department I) and ‘wage goods’ (so-called Department II). The problem with Marx’s ‘model’ is that it represents ‘a closed system’ which does not take into account the production of luxury goods (so-called Department III). 
Why did Marx ‘choose’ to ‘ignore’ the production of luxuries? Well, he was, after all, ‘hewing a system from brute rock, and they (luxuries) were neither here nor there in practice at the time. Later non-Marxist theorists within the classical tradition, forced (sic!) to refine the model and also writing in a more affluent age, probed deeper into this non-productive “Department III”. Von Bortkiewicz showed, in a paper published in 1907, that the (organic composition of capital) in luxury goods production…has no part in determining the rate of profit.’ 
By increasing the size and scope of luxury production the tendency of the rate of profit to fall can be stopped or even reversed.  Capital at last escapes its own immanent contradiction.
Alas, Marx had chiselled away at his ‘brute rock’ in vain. Had he lived a decade or more longer, he would have discovered that what for him was the most important law governing bourgeois society had died a natural death, to be superseded by new laws appropriate to a more affluent age. But let us take a closer look at the nature of this ‘non-productive’ luxury industry and just how much Marx ‘chose’ to ignore it.
According to Kidron, luxuries occupy a ‘non-productive’ place in the system because their role is ‘purely passive’.  He has not noticed apparently that all commodities, with the single exception of labour-power play a ‘passive’ role. But this is by the way - the question to which Kidron should first address himself is whether or not the luxury producer is productive. Had he done so it would have become obvious that the luxury producer not only reproduces the value of his own labour-power but simultaneously produces a surplus-value, a value not existing previously and not paid for by the capitalist. It therefore remains a complete mystery how additional value can be produced and yet play no part in the determination of the average rate of profit.
It is precisely because the luxury producer is a productive labourer that Marx considers luxury production at each and every stage in the analysis of capitalist production.
(1) When analysing the production of surplus-value in Volume II of Capital Marx deals specifically with luxury production. 
(2) When analysing how the total social capital is reproduced he deals with luxury production; so much so that if we care to look we find a chapter heading: ‘Exchange within Department II. Necessities of life and articles of luxury.’ 
(3) When analysing the transformation of simple prices into prices of production, again he deals with luxury production, ensuring that one of the five branches of production is devoted to luxuries. 
(4) And, finally, when analysing the law of the tendency of the rate of profit to fall Marx deals with luxury production, lest we forget, as some of his contemporaries did, that luxuries enter into the determination of the average rate of profit. 
It is not Marx who ignored luxury production but Kidron who imagines he can indulge in the luxury of ignoring Marx. But ignorance soon degenerates into falsification when we come to Kidron’s handling of Marx’s reproduction schema.
Kidron would actually have us believe that Marx’s reproduction schema represents a ‘closed system in which all output flows back as inputs in the form of investment goods or of wage goods. There are no leaks.’  Either Kidron has not bothered to read Capital or he is trying to mislead us. Even if we choose to ‘ignore’ Marx’s treatment of luxury goods, simple reproduction would still necessitate unproductive consumption. If we consider Marx’s presentation of simple reproduction from the standpoint of Department I (means of production) and Department IIa (means of subsistence of both workers and capitalists  ) we arrive at the following: 
constant variable surplus- total
Department capital capital value value
I 4000 + 1000 + 600 = 5600
IIa 1600 + 400 + 240 = 2240
5600 + 1400 + 840 = 7840
It is clear from the above that Marx bases his study of simple reproduction on the assumption that ‘the entire surplus-value enters into the individual consumption of the capitalist’  , that is to say, ‘the entire surplus-value is unproductively consumed…’ 
How then can Kidron inform us that Marx did not include unproductive consumption in his treatment of the reproduction process, that he only included ‘wage goods’ and ‘investment goods’? The answer is simple. It is obvious from the above that although the surplus-products -of Department IIa do not enter into the production of other commodities, their values do enter into the determination of the average rate of profit. A simple and brief arithmetic calculation reveals that the average rate of profit in both Departments land IIa is 12%. For Kidron, however, the rate of profit must equal 0%, since the surplus-products of the two Departments are unproductively consumed. A splendid result this is.
But not to be deterred by simple logic Kidron presses on. Following Von Bortkiewicz/Sweezy he divides the economy into 3 sectors - Department I (means of production), Department II (‘wage-goods’) and Department III (‘luxury goods’). This gives us the following absurdity: 
constant variable surplus- total
Department capital capital value value
I 200 + 100 + 100 = 400
II 100 + 50 + 50 = 200
III 100 + 50 + 50 = 200
It would seem from the above that the entire surplus-product of Department II is consumed by the workers in Department III, leaving no surplus-product, that is, no subsistence, for the capitalists. A very affluent age this -all luxuries and no subsistence.
The reproduction schema in Marx’s Capital is very different from the one used by Kidron. In Marx’s presentation we have, in addition to Department land IIa, Department IIb, the production of luxuries. This gives us the following; 
constant variable surplus- value total
Department capital capital subsistence luxuries value
I (4000) + 1000 + 600 + 400 = 6000
IIa 1600 + (400 + 240) + 160 = 2400
IIb 400 + 100 + 60 + (40) = 600
??? ??? ??? ??? ???
6000 + 1500 + 900 + 600 = 9000
(The bracketed items are circulated and consumed only within their own Departments and sub-departments.)
Two things emerge here which are conveniently glossed over in the Von Bortkiewicz/Sweezy presentation which Kidron uses. Firstly, although the workers in Department IIa produce a surplus-product over and above that needed to maintain the workers in Department IIb, the remaining surplus-product is unproductively consumed by the capitalists in Department IIa. Secondly, although the workers in Department IIb produce commodities in a form which cannot, or do not, re-enter the cycle of reproduction, they clearly produce a surplus-value not existing previously.
We can now discern the confusion that Kidron and others create by submerging the distinction between Department IIa and IIb in that between Department II and Department III, the latter constituting the so-called ‘leak’ from which capital finds ultimate release from its inner contradiction. If Kidron had dealt with the reproduction of the total social capital in terms of Department IIa and IIb, then Department IIa itself would have emerged as clearly entering into the determination of the average rate of profit, notwithstanding the fact that a portion of the surplus-product does not enter into the production of other commodities. We may conclude, therefore, that the real ‘leak’ exists not in Department III but in Kidron’s own brand of Marxism.
Now we come to the second stage of their argument, and here we are told that if we wish to understand why Department III has no bearing on the determination of the average rate of profit we must turn to ‘Von Bortkiewicz’s solution to the transformation problem…found in Sweezy ...’ 
According to Sweezy, Marx’s method of transforming ‘values’ into prices of production ‘is logically unsatisfactory’. The source of Marx’s ‘error’ lies in the fact that ‘the constant capital and the variable capital used in production are still expressed in value terms. Outputs, on the other hand, are expressed in price terms. Now it is obvious that in a system in which price calculation is universal both the capital used in production and the product itself must be expressed in price terms. The trouble is that Marx went only half way in transforming values into prices. It need occasion no surprise that this procedure leads to contradictory results.’ 
Sweezy is to be commended for drawing our attention to the fact that under conditions of capitalist production price calculation is universal. These are good and true words and we would be perfectly happy if Sweezy understood them instead of saying elsewhere things that contradict them. It is precisely because value as such can only be expressed in money’  that Marx set out to resolve the transformation problem in price terms. In case there can be any doubt, this is how Marx presented the five branches of production - the framework in which the subject is dealt with - before the transformation has been effected:
‘We have here, in the categories I, II, III, IV and V (five different spheres of production), commodities whose respective values are £1,000, £1,200, £1,300, £1,150 and £1,250. These are the money prices at which these commodities would exchange if they were exchanged according to their values. 
Could matters have been made more simple? Reading Sweezy, apparently not.
At no time does Marx transform values, that is, general abstract labour, into prices, for it would have been irrational for him to do so. What Marx transforms into prices of production are the prices at which the commodities would exchange if they were exchanged according to the magnitude of their values. Once it is recognised that the commodities used in Marx’s five branches of production are expressed in prices both before and after the transformation has taken place then it follows logically that the same total prices will always express the sametotal values.
It is Sweezy and not Marx who has forgotten that price calculation is universal, for it is Sweezy and not Marx who expresses commodities in value terms before finding his own solution to the problem.
If we express Sweezy’s so-called value calculation in price terms- which Sweezy should have done in the first place - this gives us 875 units of gold. How then does Sweezy arrive at 1000 units of gold after the transformation has taken place? It is beyond all human logic, writes Marx, ‘how more value should come out of production than went into it, for something cannot come out of nothing.’  The same principle, notes Marx, applies to the amount of money which circulates in the economy, for capitalists cannot draw more money out of circulation than they throw into it. And again the point is made ‘Nothing comes from nothing.’  Indeed, once we abandon the fundamental materialist conception, the law of value itself has absolutely no scientific meaning and we may just as well discard all pretence at a scientific analysis, But is this not the outcome of the analysis of Sweezy, Kidron and others? Do not the results of their ‘solutions’ show an additional source of money which does not have its origin in the expenditure of additional labour time? >From where does the additional gold come? Does it spring from the soil - as the physiocrats would have us believe? Does it arise out of the sphere of circulation - as Malthus would contend? Or does it come from the entrepreneur, that rare type of person relatively compared to your average wage labourer?
And yet, after all this, Sweezy can claim that Marx never succeeded in ‘proving’ the law of value in a ‘logically convincing manner, although if he had lived to rewrite Volume III it is quite possible that he would have left this subject in a more satisfactory state.’  On one thing and one thing alone Sweezy and I can agree - if Marx were alive today he would be a very old man.
(ii) A farewell to Marx
Strange as it may seem the International Socialists have been criticised not so much for their assault on Marx as for not going far enough. Kidron, after all, treats the law of the tendency of the rate of profit to fall as if it had some relevance in a modern economy, if only in the ‘wage’ and ‘investment’ goods sectors, All we need do, therefore, is show that the labourers in Department III are productive and his whole argument falls apart.
This evidently worries Purdy (of the British Communist Party) for he lashes out at Kidron for daring to relegate Marx’s ‘law’ to a mere segment of the economy. It is ‘pointless’, claims Purdy, for the IS to demonstrate that Department III can permanently off-set the tendency of the rate of profit to fall for in none of the Departments can Marx’s law be ‘empirically demonstrated and theoretically explained.’  The IS would therefore have done better to show that ‘the “law” of the falling rate of profit is no law at all in any accepted sense of the word “law”.’ With this keen juridical insight Purdy proceeds to adopt a seemingly critical posture. He writes: ‘Deprived of any support from the “law” of the falling rate of profit the arms economy theory becomes in effect another species of underconsumptionist theory.’ 
But the question remains, if we do away with the ‘law’ of the falling rate of profit with what are we left? The formulation of Ricardo? Or perhaps that of Smith? Purdy, it would seem, opts for Smith. The rate of profit has a tendency to fall because of the ‘growing strength of organised labour combined with intense international competition which weakens the ability of each national capitalist class to resist labour’s demands.’ 
Deprived of any support from the ‘law’ of the falling rate of profit the view held by the Communist Party of Great Britain becomes in effect another species of Adam Smith’s ‘overconsumptionist’ theory.
But what is really worrying about the IS position is that despite its vulgarisation of Marxism it still attempts to derive ‘prices’ from ‘values’. If we are to undermine Marx in a competent manner, value must be done away with altogether, The man for this particular task is yet another member of the British CP, Ian Steedman.
For a start Steedman repeats the old nonsense that Marx’s efforts at shoring up the law of value in Volume III are ‘internally inconsistent’, since the problem is first presented in ‘value terms’ and then only half-heartedly resolved in ‘money terms’. At which point Steedman becomes hot under the collar and throws out the following challenge:
‘Why is it that some Marxist economists (eg Yaffe and Co) shy away from the fact that Marx’s “solution” is incoherent, while the alternative solutions are perfectly logical, ignoring the direct logical criticisms of the former and shutting their eyes to the fact that they have no direct, logical criticisms to make of the latter?’ 
Steedman, to his credit, gives a good answer. People, he claims, are ‘afraid’ of alternative solutions because they ‘fear’ that if total prices can diverge from total values (at the level of abstraction of Volume III analysis) ‘the way is open to all sorts of theories attributing the existence of profits to circulation processes, “contributions” made by capitalists, etc.’ 
Steedman has put our case very well - with the minor reservation that we do not ‘fear’ this outcome but know that once the intrinsic connection between value relations and their forms of mediation is done away with, then vulgar economists have a solid basis for their operations and reformists a solid basis for their politics.
But since you, Steedman, regard the Von Bortkiewicz solution as internally consistent,  perhaps you can explain the source of the additional gold that springs to life in his system. No doubt you will inform us it comes from the ‘circulation process’ or even the ‘contributions’ made by capitalists, etc. And while you are at it, perhaps you might also like to explain Von Bortkiewicz’s utterly incomprehensible presentation of Marx’s reproduction schema which everyone seems to be adopting so uncritically these days.
In fact, Steedman, you would do well to ponder more carefully the whole question of ‘logic’ before informing us that your efforts ‘are severely handicapped in converting non-Marxist economists by having to explain away the large amount of nonsense to be found in Marxist literature on this (the transformation) question.’  But logic is not what you are out to defend. Marx’s solution lacks sufficient ‘respectability’  and nothing is more painful to a respectable Marxist than a Marx who lacks respectability.
In the end even the Von Bortkiewicz solution becomes untenable because he too derives prices -however imperfectly- from values. If we wish to remain ‘logical’ we must face up to the fact that ‘prices cannot be derived from the ordinary value schema…’ 
However, not wishing to fall entirely within the camp of vulgar economy - which deals only in prices - Steedman feels obliged to find some alternative means to underpin his own price calculations. And this he does by harking back to the Physiocrats. Not only must we build a theory of prices around a ‘physical’ reproduction schema but we are ‘forced to do so’  Steedman then makes the point that Marxists cannot ‘challenge’ the conclusions derived from his model because the model contains no ‘logical flaw’.  This is truly remarkable. Evidently there is logic and logic! First Steedman insists that a price system cannot be derived from a value system, and then he provides us with a physical system in which ‘labour’ is presented in units of labour-time. In order to overcome the deficiencies in the Physiocratic argument, he smuggles in abstract general labour and hopes by burying it among a welter of products in their concrete form, it will go unnoticed in its abstract form. What on earth is labour-time doing in your physical tableau, Steedman?
Shorn of its sophistication, Steedman’s analysis amounts to nothing but a tortuous refinement of the old Sraffian presentation of the problem - the production of ‘commodities’ by ‘commodities’ a fetishistic expression if ever there was one.
Sraffa, it is worth noting, begins by considering a subsistence economy from the standpoint of the production of its necessary use-values. To begin with, 400 qr. wheat and 20 tons of iron are annually reproduced. Then suddenly, and from some unknown source, a ‘surplus’ arises. Instead of 400 qr. wheat this fortunate commune now finds itself with 575 qr. wheat. The surplus (the 175 qr. wheat) is defined by Sraffa as the ‘profit’  since for some inexplicable reason the community of peasant producers has suddenly been transformed into a bourgeois society, peopled by workers and capitalists. The whole thing is like a bad play with a stream of new actors continually making unexpected entrances, cluttering the stage rather than lending clarity to the overall performance.
What is the source of this ‘profit’? Is it the consumption, by the capitalist, of the worker’s labour-power in the direct process of capitalist production? Not at all, for labour-power does not figure in Sraffa’s reproduction schema we have instead the worker’s means of subsistence - variable capital in its passive form. Like Smith, Sraffa reduces capital to the material elements in which it presents itself in the labour process, ie, means of production and means of subsistence.
It was common even in Marx’s time for economists of one sort or another to tackle the question of the origin of profit from the standpoint of use-value. Cherbuliez, for example, starts off correctly by stating that profits are determined by values.
‘Then he flies off suddenly to the product itself, to the total amount of products. But the amount of products may increase without its value increasing…Why does Cherbuliez stray on to this false path? Because, despite his vague idea that the organic composition of capital is decisive for the rate of profit, he in no way uses the contradiction between variable capital and the other part of capital in order to explain surplus-value - which, like value itself, he does not explain at all. He has not shown how surplus-value arises and therefore has recourse to surplus product, ie, to use-value.’
Although all surplus-value takes the form of surplus product, surplus product as such does not represent surplus-value....’
‘In itself it was already a mistake on the part of Cherbuliez to represent variable capital in the “passive” and purely material form of means of subsistence that is, as use-value, a form which it obtains in the hands of the workers. 
Marx was totally opposed to all analyses which took use-value as their starting point rather than value. By not considering at the outset the specific historic form in which labour presents itself as social labour under conditions of commodity production, the field is literally handed over to the vulgar economists.
As Marx warned:
‘Since land itself is productive (of use-value) and is itself a living productive force (of use-value or for the creation of use-values), it is possible either superstitiously to confuse use-value with exchange- value, ie, to confuse it with a specific social form of the labour contained in the product ...or “enlightened” political economy may deny altogether that rent is a form of surplus-value, because it is not connected with either labour or capital, and declare that it is merely a surcharge which the landowner is able to make as a result of his monopoly of ownership.’ 
Neither Sraffa nor Steedman wish to defend landlordism or justify rent. Nor for that matter do they wish to defend the capitalists. What their works provide for is what Marx has termed ‘a technological justification’ for capital’s existence.  Like the ‘English Socialists’ of Marx’s time, they would like to be rid of the capitalists but at the same time would like to keep capital.  Capital itself is reduced to something purely physical and the distinction between real variable capital in opposition to constant is lost entirely. Even in the Steedman version of the Sraffian model we simply have ‘accumulated labour’ and ‘immediate labour’ as they present themselves in the process of production. The labour-process is treated independently of its specific historic form and social relations become important only in so far as the surplus-product is to be distributed -or fought over - among the social classes. The barrier of capitalist production is no longer capital itself, but the capitalists who dissipate and misallocate the surplus-product, which might otherwise be used for accumulation.
Since, moreover, profit is merely the front the surplus-product assumes in the hands of the capitalist it follows that the distinction drawn by Marx between labour which does and labour which does not produce surplus-value is irrelevant. All labour, by definition, is productive, since all labour in one way or another is ‘linked’ to the labour-process from which the surplus-product owes its existence.
As Marx notes:
‘Man himself is the basis of his material production, as of any other production that he carries on. All circumstances, therefore, which affect man, the subject of production, more or less modify all his functions and activities, and therefore too his functions and activities as the creator of material wealth, of commodities. In this respect it can in fact be shown that all human relations and functions, however and in whatever form they may appear, influence material production and have a more or less decisive influence on it.’ 
By confusing use-value with value it is not difficult to demonstrate that ‘it is productive labour when somebody picks the lice out of his (the capitalist’s) hair, or strokes his tail, because for example the latter activity will make his fat head - block- head- clearer the next day in the office.’  The specific concrete labour of capitalist tail-stroking, assuming it dissipates the morning mist from the capitalist’s head, and assuming the greater clarity of vision results in the purchase of a new and better grade of fertiliser, and assuming this fertiliser enables the workers to wrest from the soil not 400 but 575 qr. of wheat - then capitalist tail-stroking becomes productive labour.
We may now safely recite the following with Rossi:
‘I am far from seeing producers only in those who pass their lives making cotton cloth or shoes. I honour labour. whatever it may be…but this respect should not be the exclusive privilege of the manual labourer.’ 
And so, following Sraffa’s enquiry into the origin and determination of the capitalist’s profit there is but one remaining task for our ‘English socialists’ to carry out, and that is to launch into an outright attack on the Marxist distinction between productive and unproductive labour. The men for this job are Harrison and Gough.
(iii) A farewell to reason
The question of productive and unproductive labour finally reaches its limits in the thought of Harrison and Gough. It is time, they say, ‘we rejected Marx’s simple dichotomy (between productive and unproductive labour) and used terms that are more precisely definable.’  In place of a ‘simple dichotomy’ we are provided with no dichotomy at all. ‘All labour,’ claims Harrison, ‘performed under the capitalist mode of production should be treated as “productive”,’  thereby affirming Marx’s conviction that ‘all “unproductive” economists, who achieve nothing in their own speciality, come out against the distinction between productive labour and unproductive labour.’ 
Gough, too, entreats us to ‘abandon Marx’s criterion of unproductive labour,’ particularly the criterion which he developed when analysing commercial capital.
‘Commercial and allied workers are, like workers involved in production, employed by capital, they perform unpaid labour, and they are “qualitatively exploited”, that is they work under the direct control of the capitalist in the labour-process.’ 
Little does Gough realise that the labour-process has absolutely nothing to do with the exchange between commercial labour and capital, or would he have us believe that nature, too, is a merchant? The exchange that takes place between the commercial worker and capitalist is a formal exchange that remains outside the limits of production. On no account must this exchange be confused with the ‘exchange’ that takes place between worker and capitalist in the direct process of production. As Marx notes:
‘The conditions of direct exploitation (sphere of production) and those of realising it (sphere of circulation) are not identical. They diverge not only in place and time, but also logically.’ 
But logic was never the forte of our ‘English socialists’. In terms of their analysis neither the production nor the realisation of surplus-value can occur.
If the commercial workers produce surplus-value, who realises it? With the exception of the labour engaged in the production of the money-material, labour producing surplus-value cannot simultaneously engage in its realisation. But without realisation, no profits - and without profits, no capital. So if all labouremployed in the capitalist mode is productive then no capitalist mode can exist. What Harrison and Gough have failed to grasp is that the very nature of capital necessitates unproductive labour being exchanged directly against capital. That is to say, ‘the process of reproduction itself includes unproductive functions.’ 
If Harrison and Gough were to concede that some workers engage in the realisation of surplus-value then they must likewise concede that these workers could play no part in its production. Surplus-value can only be realised after it has been produced. Harrison and Gough have defeated themselves.
When Marx defined commercial workers as unproductive it was not because of any aversion for commercial activities and certainly not because he wished to diminish their status within the ranks of the working class. Not at all; as he wrote: ‘It is not a question…of definitions which things must be made to fit. We are dealing…with definite functions which must be expressed in definite categories.’ 
By confusing the production of surplus-value with its realisation, Harrison and Gough give way to the vulgarised conception of profit, according to which the capitalist makes his profit by selling his commodities above their value. The capitalist, after all, sees his profit materialise with the sale of his goods: if they are not sold there is no profit. Nothing is more natural, therefore, than for the capitalist to conclude that the realisation of profit and the creation of profit are identical. This illusion is further reinforced by the fact, so clearly apparent to every capitalist, that the sale of his goods depends on skilful bargaining, inside knowledge, and a thousand favourable market opportunities that he must know how to seize. 
The position of Harrison and Gough becomes totally incomprehensible when they take up the question of domestic labour. First Harrison  informs us that since domestic work is value-creating (it produces the commodity labour-power) and since, moreover, the capitalist does not pay for this work, he is able to acquire labour-power at a price below its value. In this way the capitalist earns additional surplus-value. Then Harrison, together with Gough,  inform us that whether or not domestic labour creates value is beside the point. The important thing, they argue, is that the capitalist obtains labour-power at prices lower than those that would prevail if women were paid for their domestic work. Either way capital ‘benefits’ since the domestic labour is transferred to the capitalist ‘sector’ in the form of surplus-value.
How on earth non-value-creating labour can appear as surplus-value remains a complete mystery. Evidently such a wondrous feat of alchemy is their own closely guarded secret.
If domestic work is productive of surplus-value how is it that the domestic labourer does not exchange her labour-power against capital, even at the formal level? Domestic labour, we are told by Harrison and Gough, is performed in a non-capitalist mode of production. From this we may conclude that domestic work is not essential for capital and that the whole question resolves itself into which ‘mode of production’ is the most efficient in providing the capitalist with maximum surplus-value. The ‘specificity’ of the oppression of the female section of the proletariat is thereby lost entirely - in fact it is trivialised - and the distinctive character of women’s toil is conveniently relegated to something which lies outside the capitalist mode, rather than at its very heart.
The domestic labour of the female section of the proletariat is a specific form of concrete labour which is absolutely essential to the reproduction of capital but which cannot assume the form of abstract labour. This is the specific characteristic of female oppression in bourgeois society. It is not the case that the female section of the proletariat performs labour in a non- capitalist mode. It is in the nature of capital that part of women’s labour is bestowed upon capitalist society, and consequently the capitalist, gratis. The capitalist does not pay for her labour; she pays in persona.
If we are to pay heed to the analysis of Harrison and Gough we must abandon the distinction between concrete and abstract labour, productive capital and circulating capital, the conditions of direct exploitation and those of its realisation. In fact, we must abandon nothing less than Marx’s concept of capital itself. And what are we left with? Labour which is productive because it ‘benefits’ capital.
‘The educated bourgeois and his mouthpiece are both so stupid that they measure the effect of every activity by its effect on the purse.’ 
But there is method in the stupidity of our modern ‘Marxists’. By regarding all wage-labour in capitalist society as productive - whether employed in the sphere of circulation or by the State - Harrison is able to show that ‘the entire wage fund is variable capital.’  By this trick it is possible to explain the decline in the rate of profit by the increase of the variable capital in relation to the constant, and therefore by a decrease in the rate of exploitation.
What appears in Harrison as mere assertion takes on the form of an absolute truth in Gough. Thanks to Gough’s distortion of Marx’s reproduction schema it is impossible for unproductive wage-labour to exist in capitalist society.
Like Kidron, Gough presents us with a reproduction schema made up of three Departments, producing respectively means of production, wage-goods and luxuries.  But the unproductive workers, if they are to exist at all, draw their subsistence from Department II. This means that part of the surplus-product of the ‘wage-goods’ industries, although unproductively consumed, must enter into the average rate of profit. According to Gough, however, only those products which re-enter into the cycle of production can play a part in the determination of the average rate of profit, from which we are left to conclude that all ‘wage-goods’ are productively consumed. But since all workers consume ‘wage-goods’, and since, moreover, no wage-goods can be unproductively consumed, all workers by definition are therefore productive. Those who produce neither means of subsistence nor means of production are placed in Department III, there to consume ‘productively’ the surplus-product of Department II. Even the police are productive labourers since they too fall within ‘Department III’.  Their wages, like those of the workers in Departments I and II, are a part of society’s total variable capital, and the ‘value’ of their labour is distributed over society’s total product.
This kind of nonsense serves Gough’s purpose very well, for he can now demonstrate, along with Harrison, Purdy, Steedman and Devine, that the balance of class forces has shifted in favour of the working class, and that the rate of profit has fallen, not because the rate of exploitation has increased, as the Marxists hold, but because it has decreased. 
(iv) The common thread
The gulf separating Kidron from Gough is purely formal, however much the latter has distanced himself from the formers ‘underconsumptionist’ view.  To be sure, Kidron has defined as unproductive the luxury producer of so-called Department III, only to advance the absurd notion of a ‘permanent’ arms economy. Gough, by contrast, has defined the luxury producer as productive, only to smuggle in alongside him the unproductive worker. The outcome of their respective distortions has enabled them, each in his own inimitable style, to expunge from the analysis the law of the tendency of the rate of profit to fall and to substitute for Marx’s concept of capital the defunct views of Robert Thomas Malthus and Adam Smith.
For Kidron and Gough the contradiction of capital lies in the inability of the capitalist to either sell or produce sufficient surplus which might be used for accumulation. In the one case, because low wages prevent the workers from purchasing back from the capitalist the product of their own labour, in the other, because high wages enable the workers to consume too large a portion of it. In both cases we need go no further than the competitive struggle between capitalists and workers over the buying and selling of labour-power, in order to understand the contradictory nature of capitalist production. The under- and over-consumptionist positions held respectively by Kidron and Gough have as their common denominator the same distorted account of Marx’s reproduction schema.
However divergent the views of our modern ‘Marxists’, and regardless of the forms in which these views are expressed, they all share a universal distaste for Marx’s law of the falling rate of profit. The lengths to which they have gone to ‘refute’ this law are remarkable, and possibly without parallel in the annals of revisionism. And what is the result? Every step in Marx’s analysis, literally almost every category, every idea, has been mangled beyond repair until we are left with nothing but a farcical mirror image of all that is rotten in classical political economy.
When they turn to the luxury producer it is either to use him against Marx or to echo with tedious regularity that commonplace of the classics, that if too much of society’s resources were expended in the production of luxuries we should all ‘starve to death’.  And this is the most they can offer by way of an analysis of luxury production? How pathetic!
It is time we took up the real significance of luxury production in capitalist society.
V DEPARTMENT IIb AND THE CRISIS OF CAPITALISM
(i) The need for Department IIb and its place in Marx’s reproduction schema
Marx did not include luxury production in his reproduction schema out of love for academic exercise. The accumulation process, as he well knew, continually creates new wants and new modes of satisfying them, even if these wants bear the hallmark of bourgeois respectability alone. Department IIb expresses the dynamic character of capitalist production since it forms the breeding-ground in which the luxuries of today mature into the socially determined needs of tomorrow. Virtually all the mass produced consumer items which have made their appearance in the course of this century were at one time or another confined almost exclusively to the sphere of luxury production. The drive to raise productivity in these industries, prompted largely by the need to branch out into the world of Departments I and IIa, tells a gruesome tale of its own. Today there is hardly a major industrial undertaking whose products do not span the various departments of social reproduction.
Now at no time did Marx, in his presentation of extended reproduction, take up the question of whether or not accumulation would stagnate under pressure from the luxury industries. The aim of Marx at this stage of the analysis was not to render an account of the accumulation process, but to analyse the framework within which accumulation can take place. All we need assume at this particular level of abstraction is that the relationship between the departments of social reproduction remains ‘qualitatively determinant in every distribution of the total annual product.’  Department IIb exists alongside Department IIa and grows with it.
If we wish to consider the impact which Department IIb has on the rate of reproduction, indeed, if we are to consider accumulation at all, we must first have a clear understanding of how the general rate of profit is formed and why this rate tends to fall, something which Marx does in Volume III.  It is therefore meaningless for Harrison and others to repeat parrot-like the Physiocratic platitude that ‘too much’ luxury production will have an adverse effect on the rate of accumulation, precisely since they deny that Department IIb has any bearing on the rate of profit at all. It is not only meaningless but serves reactionary ends, since the capitalists, faced with declining profits, will use every conceivable excuse to increase unemployment in order to depress wages below the value of labour-power. To this end they will call for a reduction in the amount of ‘luxury production’ under the guise of providing ‘our’ economy with sufficient funds to maintain a healthy standing among the nations of the world. In the meantime, thousands of workers are thrown out of work, wages fall, profits rise, the accumulation process revives, and with it Department IIb. 
By holding fast to the dogma that conditions of production within Department IIb do not enter into the determination of the average rate of profit, Harrison and Co. are left with no other alternative than to conclude that the extension of luxury production depends ultimately upon the decisions of the capitalist class, rather than the immanent laws which affect such decisions. Little do they realise that only by considering the negative effects which Department IIb has on the rate of profit can we ascertain the extent to which ‘too much’ money-capital has been diverted to luxury production.
(ii) The law of the falling rate of profit and the impact of Department IIb
The aim of capitalist production is to obtain as large an amount of. surplus-value as possible with a given amount of wealth. This aim is achieved by setting in motion the greatest possible constant capital with the least possible variable capital. But accumulation for its part is not directly determined by the rate of surplus value, but by the ratio of surplus-value to the total capital outlay, that is, by the rate of profit. The same cause, then, which effects an increase in the mass of surplus-value also leads to a decline in the rate of profit. 
We have here a special kind of ‘insufficiency’ which is peculiar to the capitalist mode of production. But it is not Department IIb which is the cause of this insufficiency. Rather it is the capitalist relation of production which demands that the value of society’s growing surplus-products be measured not only against the value of living labour - which is the sole source of surplus-value - but against the value of dead labour which the living sets in motion. Department IIb drives this particular form of insufficiency to its extreme.
Among the most important countervailing tendencies which might off-set falling profits are the decrease in the value of labour-power and the cheapening of the elements of constant capital. Leaving aside for the moment the question of the competitive struggle between capitalists and workers  the crucial significance of Department IIb lies in the fact that it prevents these countervailing tendencies from holding back the tendency of the rate of profit to fall.
We have already demonstrated that all commodities which contain surplus-value enter into the determination of the average rate of profit, regardless of whether or not these commodities enter into the production of other commodities. We have also shown that from the standpoint of capital accumulation Department IIb is necessary and that without it capital loses its dynamic character. The particular contradiction which arises here is that capital, which thrives on relative surplus-value, posits as necessary that which from the standpoint of the working-class is superfluous. Even if luxury is an historically transient category, at any given moment its relation to necessity is antithetical. This antithesis stems from the nature of capital itself. 
Since the products of Department IIb do not enter into the consumption of the working-class, they play no part in the determination of the value of labour-power. A rise in the organic composition of capital in the luxury industries will therefore accelerate rather than hold in check the tendency of the rate of profit to fall.  Indeed, for Marx, one of the reasons why an overall increase in the rate of exploitation will never ‘fully offset’ the trend towards declining profits is that the development of the productive power of labour in Department IIb - while contributing towards arise in the organic composition of capital - will leave the value of labour-power undisturbed. 
Far from ignoring luxury production Marx showed that it has the diametrically opposite effect to the one advanced by George Ramsey and his modem followers. But as Marx said on more occasions than one: ‘That in their appearance things often represent themselves in inverted form is pretty well known in every science except political economy.’ 
The accumulation of capital within IIb does not prevent the total mass of society’s surplus-value from rising. On the contrary, Department IIb comes into being, develops further and expands not because the social fund diminishes, but because it grows. What it prevents is the growing mass of surplus-value from rising sufficiently to offset the tendency of the rate of profit to fall, a tendency which originates in the direct process of capitalist production in which dead and living labour come face to face.
So when we argue that there is ‘too much’ luxury production we do so within the context of the formation of the general rate of profit and the tendency of this rate to fall: we do so, that is, from the standpoint of the specific character of a mode of social production. By considering the role of Department IIb only in terms of its effect on the mass of surplus-value, Harrison, Blake, Gough and others remain imprisoned within the confines of Political Economy.
But if Department IIb is the thorn in the side of accumulating capital, then capital in turn pays back the luxury producer in kind. When the immanent laws of capitalist production finally begin to take their toll, it is the luxury producer who is the first to go to the wall. As Marx noted:
‘Every crisis at once lessens the consumption of luxuries. It retards, delays the reconversion of (IIb) v into money-capital, permitting it only partially and thus throwing a certain number of the labourers employed in the production of luxuries out of work, while on the other it thus clogs the sale of consumer necessities and reduces it. And this without mentioning the unproductive labourers who are dismissed at the same time…’ 
It must not be imagined that a crisis signifies an end to the system. Quite the contrary. In the absence of any revolutionary movement, or with the crushing defeat of such movement, the breakdown of the accumulation process provides the means for its own recovery. The working-class finds itself increasingly out on a limb as massive lay-offs are followed by factory closures. As the ranks of the unemployed swell, and as the bourgeoisie attacks the living standards of the workers, insidiously and then more openly, wages are driven below the value of labour-power. The historic trend towards a rise in the quantity of use-values consumed by the workers - notwithstanding the parallel trend towards a decline in the value of labour-power - is reversed. The tendency for the value of dead labour to grow at a faster rate than the living is off-set by the devaluation of living labour itself - the final solution of the labour question is put into effect.
The execution of capital’s final solution - associated as it is with inter-imperialist rivalry and ultimately imperialist war itself - contains within it the possibility of either the destruction of humanity or its liberation. This last possibility presents a challenge to the bourgeoisie. And so the State steps in, as it has done on so many occasions in the post-war period in an attempt to ensure capital’s continued reproduction. Events now take a new turn. The working class, with the increase in employment, is afforded the privilege of maintaining the price of its labour-power at its full value. Unable to increase profits by reducing wages below the value of labour-power, the application of machinery is accelerated in a bid by the capitalists to cheapen commodities, and by so doing to cheapen the labourers themselves. The tendency towards falling profits is partially off-set by the rising productivity of labour which develops along with accumulation.
The State, by maintaining the general conditions of accumulation of capital, necessarily underwrites the expansion of luxury production. But since the development of the productive power of labour within the luxury industries does not enable the workers to live more cheaply, this will limit the effect of increasing productivity on the value of labour-power. As the crisis develops luxury producers, together with capitalists in general, will seek in practice to ‘depress the wages of labour below its value, below its minimum’.  This they are able to do owing to the increase in the number of workers who are displaced by machinery. With the growth in the relative surplus population the working-class as a whole, and not just those employed in the luxury industries soon loses what previously it had gained in its competitive struggle against the bourgeoisie
But the State steps in and the accumulation process revives. The workers maintain their competitive position and so the mechanisation process intensifies. The mass of surplus-value and the organic composition of capital rises, the rate of profit tends to fall and the number of productive workers displaced by machinery increases. The State continues to intervene and the reserve army of labour is prevented from increasing. And so the cycle repeats itself, until finally, along with accumulation the number of productive workers declines not only relatively but absolutely, and as a percentage of both the total population and the working population.
The existence of Department IIb now becomes critical. The application of machinery increases the number of redundancies without contributing to a reduction in the value of labour-power. The development of the productive power of labour in the luxury industries therefore reduces the mass of surplus-value in these industries, and hence the rate of profit, even if no increase in constant capital takes place.  Capital finally reaches an impasse.
(iii) How the bourgeoisie responds to the crisis
Alarmed at the new ramifications of unproductive branches of labour which are continually being formed, one section of the bourgeoisie calls for a reversal of the ‘deindustrialisation’ process. Into this camp there falls both pro- and anti-State factions. The pro-State defenders of capital advocate a massive investment programme which, so they claim, would increase the number of workers employed in the ‘manufacturing’ sector. Apart from their vague and ambiguous schemes for raising the finance needed to accomplish their goal one thing stands out clearly - their contempt for the unproductive worker. This is evidenced by the following piece of anti-working class trash in Tribune.
‘During the period 1970 to 1974 the average number of manufacturing jobs lost through redundancies was about 180,000 a year…To those who, like the Secretary of State for Prices, say that these jobs are being replaced by jobs in service industries we would point out…that a manufacturing nation which imports its food and raw materials to survive will find it difficult to export, in return, hospital attendants and ice-cream salesmen…’ 
The anti-State faction is more explicit about the source of funds needed to put industry back on its feet. They are to come from the dismantling of a sizeable section of the social democratic apparatus which in its present state serves only to dissipate the surplus needed for industry. Far from it being the State which is to guide our economy through troubled waters, it is the entrepreneur, that wise and intrepid member of the human species, who will ensure that additional finance shall be put to proper use. 
In their efforts to present themselves as the champions of the industrial workers, the pro- and anti-State representatives of British capital have issued solemn guarantees that provided more funds are made available for industry, factory jobs will be maintained, and even increased. How conveniently they forget that it was the growth in the productive power of labour which created the redundancies in the first place, and which prompted the State to intervene in the interests of ‘industrial peace’. Far from reversing Britain’s ‘deindustrialisation’ process, an increase in investment under present conditions will accelerate it. If, however, the State were to cut back on unproductive consumption - if it were to throw to the wolves the service workers - it would not only provide industry with additional funds, it would also, and far more importantly, create the pre-conditions for the profitable employment of these funds, namely, mass unemployment and the reduction of wages below the value of labour-power.
If the industrial worker can be convinced that the source of the present crisis lies in an insufficiency of funds needed to reequip and modernise industry, all that remains is for the bourgeoisie to point a reproving finger at, the unproductive worker who, as we-all know, lives off other people’s industry.
But the unproductive labourers are not without their friends. Yet another section of the bourgeoisie - again spanning the ideological spectrum of parliamentary politics - has challenged the Benn-Joseph thesis that there is something abnormal in the shift towards ‘services’ in a growing economy. The 1970-73 drop in manufacturing employment, it is argued, must be viewed in the context of ‘what is by British standards a sharp rise in industrial productivity - 17 per cent in three years.’  It is further argued, moreover, that since investments in Britain have tended to assume a capital-intensive character, additional funds will not create more jobs, or even maintain the same employment in industry, but will hasten their decline. We must therefore rejoice at the fact that our social democratic state has expanded the service sector, for without its continued expansion unemployment would surely rise. 
Little do our apologists realise that an increase in manufacturing investment, if accompanied by a rise in unemployment, will again increase the productive labour-force absolutely, if not relatively. Capitalists will re-employ the previously discharged workers precisely because the growth in the reserve army of labour enables them to do so on more favourable terms. As Marx pointed out, time and time again, not one but two tendencies are at work in capitalist society. The one is to employ as little labour as possible in order to produce the same or a greater surplus-value. The other is to employ the largest possible number of workers because at a given level of productivity the mass of surplus-value grows with the amount of labour employed.
‘The one tendency throws the labourers onto the streets and makes a part of the population redundant, the other absorbs them again and extends wage-slavery absolutely, so that the lot of the worker is always fluctuating but he never, escapes from it.’ 
Nevertheless, it is noteworthy that our apologists admit that the same cause which increases the wealth of the capitalists renders part of the labouring population redundant. But are we to conclude from this that the workers are perfectly justified in regarding the development of the productive power of their own labour as hostile to them? Not at all. However much capital may seek to increase the reserve army of labour through the displacement of workers by machines, a beneficent social democratic state can always be relied upon to transform an ever growing portion of the labouring population into service workers. We must therefore patiently await the day when capital phases itself out of existence by discharging from its ranks the last lingering remnants of Britain’s industrial work-force. Needless to say, this perspective is not only utopian in form and reactionary in content, but stupid.
How conveniently our apologists forget that the very cause which increases the mass of wealth needed to maintain the unproductive workers also leads to the tendency of the rate of profit to fall. The productive workers are thus required to accept a drastic curtailment in their living standards so that the capitalists - aided by our social democratic state - can proceed undaunted in their heroic mission of turning us all into servants. Whereas previously it was the unproductive worker who, was blamed for all our ills, so now it is the productive worker who is taken to task for inhibiting the State from pursuing its full-employment policy.
If we take the various representatives of British capital and view them in their totality, productive and unproductive worker come face to face as hostile factions. The groundwork for capital’s final solution is thus laid.
(iv) The final solution
Luxury production, as we have seen, is a particular burden on the accumulation of capital. By preventing increased productivity from fully offsetting the tendency of the rate of profit to fall it accentuates rather than diminishes capital’s immanent contradiction. But there is another reason why the rise in the organic composition of capital will not be permanently balanced by an increase in the mass of surplus value. The workers themselves, although they cannot prevent reductions in the value of labour-power, will not permit a reduction in their living standards, ‘on the contrary, they achieve a certain quantitative participation in the general growth of wealth.’  The contradictory nature of capitalist society therefore finds its u1timate expression in a struggle by the workers to maintain their conditions of existence, although anti-Marxists present this struggle as a perpetual jockeying among the social classes for access to society’s surplus-products. 
It is not a question here of good or bad will, but what the capitalists are compelled to do on the basis of capitalist relations of production. Only by devaluing living labour-power, only by defeating the working class itself, can the capitalists hope to overcome the tendency of the rate of profit to fall. The choice confronting the working class is either to smash the bourgeois State or itself be smashed. The more it delays the former the more it invites the latter. As for the bourgeoisie, it is faced in Britain with the formidable task of securing a sufficiently reliable and broad social base upon which to wage its barbarous assault against the working class. The absence in this country of a peasantry and the presence of an exceedingly vacillatory petty-bourgeoisie has-prompted the capitalists to divide the workers not only along racial, sexual, religious and national lines - as is customarily the case - but also along economic lines, between the ‘wealth-creators’ and the ‘wealth-consumers.’
As we have seen, one section of the bourgeoisie is doing all it can to convince the workers that if the State were to relinquish its hold over the unproductive worker and divert more funds towards industry the lot of the productive labourer would be immeasurably improved. This perspective can serve only to reinforce among the industrial workers the misguided notion that those who stand in the way of a better life are their own unproductive brothers and sisters in the service sector. The seductiveness of this view, its pervasive and pernicious character is brought out clearly by the following report which appeared in the Financial Times:
‘Mr. Jones (of the Transport Workers) praised the Government for “pumping many millions of pounds into industry” to keep companies going in many areas, and then condemned the drift of manpower from manufacturing to service industries because it created “unnecessary employment”.’ 
The other section of the bourgeoisie is doing its utmost to impress us all that if only the industrial worker were a trifle more patient he too could become a service worker. This view, if it prevails at all, will arouse even more the hostility of those who produce the funds from which the unproductive workers draw their revenue.
As for Britain’s would-be Marxists- ranging from the IS through to the IMG, and the CP (of Great Britain) - their analysis is hardly capable of challenging the bourgeoisie in its efforts to promote rivalry among the various categories of workers. Far from it. By abandoning Marx’s concept of capital and by disregarding the critical distinction Marx drew between productive and unproductive labour, they have failed dismally to measure up to the revolutionary task of providing the working class with an account of the root causes of the present crisis. It is to their shame that an increasingly vocal section of the bourgeoisie - its most reactionary section - could have so few qualms about holding up the entrepreneur as the creator of wealth. The analysis of our would-be Marxists does not even differ in substance from that of the pro-State sector of the bourgeoisie. The only difference lies in the moral indignation it has managed to retain. But moral fervour alone can never serve as a substitute for scientific analysis.
While the bourgeoisie and opportunists within the ranks of the working class are daily mounting attacks on the unproductive workers, it is characteristic that our ‘unorthodox marxists’ are denying their very existence. By contrast we emphasise the distinction between productive and unproductive labour in order to reveal to all workers the real causes underlying the present crisis. And by so doing, we prove that capital’s dilemma lies not in an insufficiency of surplus but in the capitalist relation itself. Only on this basis can we safeguard the interests of both the productive and unproductive workers who are at present being attacked for either producing too little or consuming too much of society’s surplus. The distinction between productive and unproductive labour is, therefore, the precondition for the political unity of the working class.
Peter Howell September 1975.
1 This article is a response both to the attack on the unproductive labourers by the actual parasites of our society - the bourgeoisie, and the inability of ‘marxists’ to provide an adequate defence of the working class.
2 Trade and Industry, April 4th 1975, p2. At a different level, but not in an entirely different context, James F Becker, addressing himself to current trends in the U.S. economy, has written: ‘Industrial accumulation is slackening, its volume declining relative to “administrative” accumulation. Within the system of dual accumulation, the expansion of the circulatory superstructure has proceeded so rapidly and relentlessly that the unproductive consumption it represents undermines the industrial base.’ Class Structure and Conflict in the Managerial Phase:II Science and Society, Vol 37, 1974, p437.
3 Keith Joseph, New Statesman, April 18th, 1975, pp501-2. Paul Johnson has expressed this view in even cruder terms. ‘As our economy contracts, there are fewer and fewer “real” jobs, and more and more phoney ones…Britain is in danger of becoming a Parasite State, where more and more ghost workers are supported by fewer and fewer active, productive workers.’ News of the World, August 31st, 1975, p10. We wonder in which category he considers himself to be. This catholic ‘socialist’ is, of course, backed by none other than the Financial Times which recently entreated the Government ‘to control the growth of the unproductive public sector…’ Financial Times, October 1st, 1975, p20.
4 Financial Times, April 24th, June 5th, 1975. The reader should not be surprised if in the same article Brittan can also appear to argue a contrary position. This only reflects the dilemma in which sections of the bourgeoisie find themselves, faced with the growing crisis.
5 The Guardian, April 21st, 1975.
6 It is wrong to treat Marx’s analysis of capitalist production as though it were another variant of political economy. The contrary is the case. Marx’s Capital is a critical presentation of the capitalist mode of production and simultaneously, through this presentation, a critique of the categories of political economy. See Marx and Engels, Selected Correspondence, Lawrence and Wishart, 1973, p125.
7 For a more detailed account of the views of the political economists see Karl Marx, Theories of Surplus- Value (TSV) Prt I, Lawrence and Wishart, 1964, pp44-67 for the Physiocrats; Prt II, 1969, pp161-235 for Smith and Ricardo and pp470-587 for Ricardo. In addition, many useful references are to be found in S H Coontz, Productive Labour and Effective Demand, Routledge & Kegan Paul, 1965, pp16-52.
8 Ian Gough, ‘On Productive and Unproductive Labour - A Reply’. Bulletin of the Conference of Socialist Economists, Winter, 1973, p71.
9 TSV I. pp51-52.
10 Karl Marx, A Contribution to the Critique of Political Economy,
Lawrence and Wishart, 1971, p57.
11 Quoted in Ronald L. Meek, The Economics of Physiocracy, London, 1962, p237.
12 Adam Smith, The Wealth of Nations, Everyman, 1964, p306.
13 TSV I, op cit, p169.
14 Ibid, p153.
15 We shall not concern ourselves in this paper with Smith’s second and more superficial definition of productive labour, according to whether it is or is not directly realised in a ‘vendible’ (material), commodity.
16 Adam Smith, op cit, p294.
17 Ibid, p323.
18 Ibid, p298.
19 Ibid, p316, p80. ‘For Adam Smith, the accumulation of capital is identical with growing demand for labour, continual rise of wages, and consequently with a fall of profits. In his time, the demand for labour did in fact grow at least in the same proportion in which capital was accumulated, because manufacture still predominated at that time and large-scale industry was only in its infancy.’ ‘The laws which correspond to large-scale industry are not identical with those corresponding to manufacture. The latter constitutes merely a phase of development leading to the former.’ Karl Marx, Theories of Surplus-Value, Prt III, 1972, p335; Prt II, op cit, p583. Hodgson evidently imagines that Marx was Adam Smith’s contemporary. In an article in which he set out ‘to refute the theory of the falling rate of profit’ he wrote: ‘Marx’s insistence on an increasing organic composition of capital stems from the fact that Marx was witnessing the transition from hand labour to mechanised production.’ G Hodgson, ‘The Theory of ‘the Falling Rate of Profit’, New Left Review, No84, p61.
20 See TSV I, op cit, p256; III, op cit, p246.
21 TSV I, op cit, p221.
22 David Ricardo, On the Principles of Political Economy and Taxation, Works and Correspondence, Vol 1, Cambridge University Press, 1966, p345, p348.
23 Ibid, p120, p420.
24 Ibid, p397.
25 Quoted in Marx, TSV II, op cit, p196.
26 D. Ricardo, op cit, p393.
27 Shame on Gough for writing, and shame on the New Left Review for publishing the following piece of trash: ‘The experience of full employment and wide-spread state planning during Second World War contributed to…the greater security enjoyed by many during wartime, despite the absolute fall in living standards…’. Ian Gough, ‘State Expenditure and Capital’. New Left Review, 92, 1975, p69. And despite, no doubt, the slaughter organised by the capitalist predators which maimed and killed millions. Gough has disgraced himself in full view of the working-class. And yet he has the impudence to accuse us of neglecting the class struggle.
28 TSV op cit, I p195, II p570.
29 Ricardo, op cit, p118.
30 Ibid, p289. Gough strikes a Smithian note when he informs us that the present crisis of capitalism is due to an insufficiency of surplus-value brought on by ‘the raised tempo of the class struggle and intensifying competition between the capitalist economies.’ Gough, op cit, p80.
 Theories of Surplus-Value III, op cit, p53. On a number of occasions Malthus would draw on Adam Smith’s perspective, if only to provide a balance to his own. The following passage gives the clearest expression of the bourgeoisie striving to find a happy medium between irreconcilable extremes and an outlet for an irreconcilable contradiction. ‘If consumption exceeds production, the capital of the country must be diminished, and its wealth must be gradually destroyed from its want of power to produce; if reproduction be in a great excess above consumption, the motive to accumulate and produce must cease from the want of the will to consume. The two extremes are obvious; and it follows that there must be some intermediate point, though the resources of political economy may not be able to ascertain it…’. From Malthus’s Principles of Political Economy, in Ricardo’s ‘Notes on Malthus’s Principles of Political Economy’, Collected Works, Volume II, Cambridge University Press, 1966, pp9-10.
 Ricardo, Works and Correspondence, Vol II pp421, p450.
 Adam Smith, op cit, p295.
 TSV I, op cit, p292.
 Ibid, p262.
 TSV III, op cit, p260.
 TSV I, op cit, p292.
 ‘The working out of the method which underlies Marx’s critique of political economy is, we think, a result hardly less significant than the basic materialist conception. ‘Frederick Engels, in the Lawrence and Wishart edition of A Contribution to the Critique of Political Economy, op cit p225.
 TSV I, op cit, p384.
 Karl Marx, Capital Vol I, Lawrence and Wishart, 1961, p179.
 Ibid, p181, p179.
 TSV I, op cit, pp286- 7.
 Ibid, p383, p153.
 Capital Vol I, op cit, p193.
 Karl Marx, Capital Vol II, Lawrence and Wishart, 1961, p218.
 TSV I, op cit, p387.
 Ibid, pp385-6, Grundrisse, Penguin, 1975, p275.
 TSV I, op cit, p72.
 Ibid, p384-5.
 Capital Vol II, op cit, p439.
 Ibid p213, see also TSV III, op cit, p327. See also D. Yaffe ‘Value and Price in Marx’s Capital’ in Revolutionary Communist No.1 Jan 1975 for the importance of these points for the so-called transformation problem.
 Capital Vol II, op cit, p219.
 Capital Vol I, op cit, p538.
 TSV I, op cit, p394.
 Capital Vol I, op cit, p176.
 Capital Vol II, op cit, p23.
 TSV I, op cit, p167.
 Ibid, p392.
 Grundrisse, op cit, p635.
 Capital Vol II, op cit, p152.
 Ibid, p55.
 Throughout his analysis of the production and reproduction of capital in Volumes I and II of Capital, Marx assumes that gold alone is the circulating medium.
 Capital VoI II, op cit, p336.
 Ibid, p46.
 Michael Williams, ‘An Analysis of South African Capitalism - Neo-Ricardianism or Marxism?’, Bulletin of the Conference of Socialist Economists Feb 1975 VoI IV I, p9.
 Capital Vol I, op cit, p104; VoI II. op cit, p136.
 An analogy may be drawn here between gold and luxury production. As Marx notes: ‘Production for unproductive consumption is quite as productive as that for productive consumption; always assuming that it produces or reproduces capital. Grundrisse, op cit, p306. Hence the producer of luxuries is productive, although the consumption of luxuries is unproductive, provided the luxury producer produces surplus-value for the capitalist.
 Capital Vol II, op cit, p173.
 Ibid, p175.
 Ibid, p176.
 Ibid, p173.
 Ibid, p176.
 Ibid, p174.
 TSV I, op cit, p161.
 Capital Vol II, op cit, p381.
 Capital Vol I, op cit, p572.
 James Connolly, The Re-Conquest of Ireland. New Books, 1972, : p44.
 TSV I, op cit, p180.
 Capital Vol I, op cit, p572.
 How little the IS has understood the nature of capital is revealed, by the following: ‘Now, in theory, capitalism could do without the family. It could turn the job of caring for the workers of today and rearing the workers of the future into an industry, employing waged workers’. International Socialism, No 68, 1974, p27.
 Ann Crittenden Scott, MS, Vol I No I, July 1972, p56. This position should not be confused with that held by members of the left who have also argued for ‘wages for housework’. Their position is that wages for housework will serve both psychologically and economically to abolish the family as an economic unit, and with it the specific oppression of women. A detailed criticism of their position lies beyond the scope of this paper.
 Capital Vol I, op cit, p81, p83, TSV, op cit, II p504, III p131.
 TSV II, op cit, p164.
 TSV I, op cit, p400.
 Capital Vol II, p.131
 TSV III, op cit, p371
 Ibid, p106.
 TSV II, op cit, p560, p562.
 Ibid, p580.
 Ibid, p573. ‘His (Malthus’) supreme hope, which he himself describes as more or less utopian, is that the mass of the middle class should grow and that the proletariat (those who work) should constitute a constantly declining proportion (even though it increases absolutely) of the total population. This in fact is the course taken by bourgeois society.’ TSV III. op cit. p63.
 TSV III, op cit, p313.
 Ibid, p313.
 TSV II, op cit, p439.
 TSV I, op cit, p195.
 Socialist Worker, Jan 25th, 1975.
 See Chris Harman, ‘Marxist Economics and the World Today’, International Socialism, March 1975.
 M. Kidron, ‘Maginot Marxism: Mandel’s Economics’, reprinted from lntemational Socialism, April/May, 1969, Marxist Education, February, 1973, p3.
 M. Kidron, Western Capitalism Since the War, Weidenfeld and Nicolson, 1968, p46.
 Kidron, Maginot Marxism, op cit, p3.
 Kidron, Western Capitalism Since the War, op cit, p47. 101. Capital I, op cit, p315.
 Capital I, op cit, p315.
 Capital II, op cit, p402.
 Grundrisse, op cit, p441.
 Capital Voll11, Lawrence and Wishart, 1962, p259-60. The view that variations in the organic composition of capital in the luxuries industry can in no way affect the general rate of profit was put forward by George Ramsay as early as the 1830’s (an affluent age?). Marx dismissed this view as nonsense. TSV III, op cit, pp349-50.
 Kidron, Maginot Marxism, op cit, p3.
 Capital II, op cit, p403.
 This reproduction schema is taken from Capital II, p397, having deducted the luxury Department considered by Marx on p406.
 Capital II p65.
 Ibid, p397. Marx makes the point that unproductive consumption not only increases with accumulation, but that accumulation ‘emphatically includes it’. Ibid, p68.
 See Sweezy, The Theory of Capitalist Development, Monthly Review Press, 1964, p110.
 See Capital op cit, p397, p406.
 Steve Bolchover, Marx and Mattick, International Socialism, No 52, July/Sept 1972, p41. For the correct solution to the trans- formation of values into prices of production see Capital III, op cit, pp152-69. For a detailed argument on the correctness of Marx’s transformation see D. Yaffe ‘Value and Price…’ op cit
 Sweezy, The Theory of Capitalist Development, op cit, p115.
 TSV I, op cit, p93.
 TSV II,op cit, p67.
 Capital III , op cit, p38.
 Capital II, op cit, p334. See footnote 62.
 Sweezy, The Theory of Capitalist Development, op cit, p118.
 David Purdy, ‘The Theory of Permanent Arms Economy -A critique and an Alternative,’ Bulletin of the Conference of Socialist Economists, Spring, 1973, p20.
 Ibid, p22.
 Ibid, p20.
 Ian Steedman, ‘The Transformation Problem Again’, Bulletin of the Conference of Socialist Economists, Autumn, 1973, p37.
 Ibid, p40.
 Ibid, p40.
 Ibid, p37.
 Ibid, p40.
 Ian Steedman, ‘Value, Price and Profit’, New Left Review, No 90, 1975, p78.
 Ibid, p78.
 Ibid, p79.
 Piero Sraffa, Production of Commodities by Commodities, Cambridge U.P., 1963, p6.
 TSV III, op cit, p371 .
 Ibid, p489.
 Ibid, p276.
 Ibid; p296.
 TSV I, op cit, p280.
 Grundrisse, op cit, p273.
 TSV I,op cit, p285
 Ian Gough and John Harrison, ‘Unproductive Labour and Housework Again’, Bulletin of the Conference of Socialist Economists, Feb 1975 Vol IV 1, p7.
 John Harrison, ‘Productive and Unproductive Labour in Marx’s Political Econol1ly’, Bulletin of the Conference of Socialist Economists, Autumn, 1973, p81.
 TSV I, op cit, pp281-2.
 Ian Gough, ‘On Productive and Unproductive Labour-A Reply, Bulletin of the Conference of Socialist Economists, Winter, 1973, p81. How little Gough has grasped the nature of the labour- process is revealed by the following: ‘The production of (immaterial commodities) follows Marx’s circuit of money capital: M - C ...P ...C’-M”. Ibid, p73.
 Capital III, op cit, p239.
 Capital II, op cit, p131. 145. Ibid, p226.
 Ibid, p226.
 Capital III, op cit, p807.
 John Harrison, ‘Political Economy of Housework’, Bulletin of the Conference of Socialist Economists, Winter, 1973.
 Ian Gough and John Harrison, ‘Unproductive Labour and Housework Again’, op cit.
 TSV I, op cit, p279.
 John Harrison, Productive and Unproductive Labour…, op cit, p81.
 Ian Gough, ‘State Expenditure and Capital,’ op cit. p70-71.
 Ibid, p83.
 Sad to say Mandel seems to have reached a similar view. ‘…the prolonged expansion has been exhausted by the combined effects of the increase in the organic composition of capital…and the stagnation or decline in the rate of surplus value (a result of the long period of full employment). The rate of profit has been whittled down.’ See Inprecor Jan 16, 1975 no 16-17 p7.
 For some curious reason Gough finds it necessary to inform us that ‘Lenin long ago attacked the underconsumptionism of the Narodniks…’. State Expenditure and Capital, op cit, p55. Surely Gough, who has no doubt read his Lenin, is not unaware that Lenin accepted without reservation the view that the organic composition of capital rises with the development of capitalism. Here are a few extracts from Lenin’s writings against the Narodniks: ‘As Marx proved in Volume I of Capital, technical progress is expressed by the gradual decrease of the ratio of variable capital to constant capital…’. On ‘the so-Called Market Question, Collected Works, Vol I, p85, emphasis added. ‘…Department I of social production (the production of means of production) can and must develop more rapidly than Department II (the production of articles of consumption).’ ‘A Note on the Question of the Market Theory’, Collected Works, Vol 4, p59, emphasis added. ‘According…to the general law of capitalist production constant capital grows faster than variable capital.’ The Development of Capitalism in Russia, Collected Works, Vo13, p54. And for good measure we include the following: ‘Arise in the productivity of labour implies a more rapid growth of constant capital as compared with variable capital. Inasmuch as surplus value is a function of variable capital alone, it is obvious that the rate of profit (the ratio of surplus value to the whole capital, not to its variable part alone) tends to fall.’ ‘Essay on Karl Marx’, Collected Works, Vol 21, p67, emphasis added. It would appear that Gough is more interested in Lenin’s authority than his revolutionary ideas. For our part, it is Lenin’s theory in which we are interested, not his name.
 Jacob Morris, ‘Unemployment and Unproductive Employment’, Science and Society, Vo122, 1958, p195. ‘...in the long term waste production will affect the rate of profit. Because it reduces the overall surplus available for expanding production it reduces the rate at which industry expands.’ Chris Harman, ‘Marxist Economics and the World Today,’ op cit, p32. ‘One can envisage a capitalist economy suddenly diverted totally to arms production. Though surplus value will have been produced, there will be no material basis for any further rounds of production’. Gough and Harrison, ‘Unproductive Labour and Housework Again’, op cit, p2.
 Capital II, op cit, p408.
 If we care to examine the initial schema for accumulation on an extended scale we find that the general rate of profit has not yet been formed. Capital II, p510.
 Our opposition to the production of armaments stems not from the fact that it falls within Department IIb, but from our opposition to imperialism.
 We refer the reader to the article ‘Inflation, the Crisis and the Post-War Boom’ by P. Bullock and D. Yaffe in Revolutionary Communist 3/4, for a more substantial treatment of the tendency of the rate of profit to fall.
 ‘The tendency of the rate of profit to fall does not manifest itself in an absolute form, if it were to do so capitalist production would soon be brought to a head. There are, in fact, a number of different ways in which it can be delayed and held back, one of them being the “depression of wages below the value of labour- power.” (Capital III, op cit, p230) Although Marx regards this as “one of the most important factors checking the tendency of the rate of profit to fall”, he only devotes a few lines to it in Capital, and for good reason. As he explains, the depression of wages below the value of labour-power “is mentioned here only empirically since…it has nothing to do with the general analysis of capital, but belongs in an analysis of competition, which is not presented in this work.” (ibid.) This is not to suggest that the clash between workers and capitalists over wage-rates is of little importance to Marx. Quite the contrary. The struggle on the part of the workers to defend life and limb against the onslaught of capital remains one of the most pervasive features of the system, and Marx spent a good deal of his life upholding that struggle. But as he emphasised, time and again, “a scientific analysis of competition is not possible, before we have a conception of the inner nature of capital…” (Capital I, op cit. p3I6) Marx is clearly warning against the temptation of substituting for the analysis of capital an empirical treatment of the conflict between workers and capitalists over the distribution of the social product and, on this basis, of regarding the contradiction of capital as the competitive struggle itself. It is also clear that the class struggle, for Marx, meant far more than the competitive rivalry which takes place between workers and capitalists over the buying and selling of labour-power. Class conflict is the dynamism of all written history and it is for this very reason that Marx set about placing the modern class struggle on a scientific footing by an elaboration of the concept of capital and, above all, by a specification of its inner contradiction.’ Michael Williams, ‘ An Analysis of South African Capitalism…’ op cit, pp26-7
 Grundrisse, op cit, p528.
 Capital I, op cit, p350, TSV III, op cit, p350.
 Ibid, p312.
 Capital I, op cit, p537.
 Capital II, op cit, p410.
 TSV III, op cit, p350.
 TSV III ibid p351.
 Tribune, June 27th 1975.
 Keith Joseph, New Statesman, April 18th 1975.
 Samuel Brittan, Financial Times, April 24th 1975.
 George Rodgers and Ivor Clemitson, The Guardian, May 21st 1975.
 TSV II,op cit, p573.
 TSV III, op cit, p312.
 It is befitting that a rabid anti-communist like Talcott Parsons can commend Marx in the following terms: ‘The permanent importance of the Marxian exploitation theory…lies…in the fact that, starting as Marx did from the element of class conflict, the centre of his attention was on bargaining power.’ The Structure of Social Action, 1949, p109.
 Financial Times, 1st September, 1975.