Year XXVIII, 1986, Number 2-3, Page 79
The World Economy and the Scientific Mode of Production
1.The new economy and the crisis in the international economy.
It is widely recognised today that the root cause of the crisis which is affecting most industrialized countries, and which has not spared Third World countries either, lies in the improper working of the international economy. Despite this, the vast majority of economists still believe that we can overcome the crisis with simple economic policy measures taken at a national level or at the very most with intergovernmental policies. But the issue is far more complex. Facing us is a radical change in the world economic system which can only be managed with completely new instruments of political economy, in essence with the creation of true supranational state institutions.
The chaos in the world economy and international politics is the result of the failure to appreciate the new reality: a world market and a highly interconnected world economic system. And yet there are very few economists who question Keynes’ statement which argues: “It is the simultaneous pursuit [of a domestic employment policy] by all countries together which is capable of restoring economic health and strength internationally, whether we measure it by the level of domestic employment or by the volume of international trade”. Experience should have made it clear by now that it is simply just not true that all countries act, as Keynes suggests, “simultaneously and together” as regards common objectives. This ingenuous conception of international relations overlooks the fact that we are completely at loss about what to suggest when one country decides to make other countries pay the cost of its development with beggar-my-neighbour policies. In actual fact, in a world of national sovereignties, anarchy is a much more frequent situation than the imaginary harmony postulated by economists. But, since we do not seem to learn the lessons of history, we go on governing the economy with the stale categories of internationalism drawn up in the 18th and 19th centuries in a world where international economic interdependence had not yet affected the development prospects of every single nation in any decisive way. Yet never before have national economic policy objectives been more subordinated to that unchanneled force which economists call the “international trend”. This is the clearest proof of the bankruptcy of economic thinking.
New ideas are, however, gaining ground in economic research as a result of careful examination of what is going to be known as the internationalisation of the economy. In particular, the facts brought to light by studies promoted by international organizations (for example the various agencies of the UN, the OECD and the EEC) force us to consider the world, or at least several great continental areas, as being entirely interdependent. For instance, input-output analysis, as Leontief has shown, may be usefully used to examine the structure of the world economy and draw conclusions about economic policies which will contribute to reducing the gap between rich and poor countries. Even Keynesian economists, who so far have only managed to envisage international problems as a simple arithmetic sum of national problems, have begun to conceive the existence of an aggregate worldwide demand and the consequent need to create a world instrument for economic policy. Finally, in the field of the reform of the international monetary system, after the phase of general chaos caused by the policy of flexible exchange rates, support for a system of fixed exchange rates is at last gaining ground, as is the courageous opinion of economists like Triffin, who have tenaciously argued the need to create a world currency and a World Central Bank, starting with the creation of international regional currencies, such as the European Ecu, and the progressive extension of this method to the world level.
Despite this progress, we still need to investigate the laws of development of today’s world economy, if there are any. We need to use the appropriate conceptual tools to examine the world economy as a single, specific structure. This approach has been adopted by a number of economic historians, such as Braudel and Wallerstein. Their reconstruction of the modern economy in the light of centre-periphery dynamics, which runs from the original world-economy of Italian Renaissance states to the current world-economy, is a precious and vital reference point for any scientific analysis of the current economic system. It helps us to appreciate, for example, that the celebrated “Japanese miracle” is in many ways nothing more than a by-product of the more general dialectic between the “Pacific pole” and the” Atlantic pole”, which is reproducing one of Braudel’s famous décentrages on a wider scale.
The obvious use of this approach must not, however, conceal the fact that too little attention has so far been paid to the relationship between the world economic system and the world system of states, in essence the relationship between the world economy and international politics. I. Wallerstein is the contemporary author who has examined these aspects the longest and it is perhaps worthwhile giving a thumbnail sketch of his method of analysis, a method, incidentally, commonly used by scholars in the Marxist tradition. Wallerstein believes that the world economic system is capitalistic in nature, even though most existing states claim to have achieved Socialist regimes. Socialism can only be the conscious government of men over the process of production. Wallerstein rightly argues that there can be no socialism without a “socialist world government”. The most general logic which controls the world system of production is thus the “capitalist mode of production”, i.e. the attempt by production forces to appropriate the greatest amount of world surplus. None of the world’s states (which according to Wallerstein are instruments in the hands of the ruling classes, and hence instruments of the bourgeoisie, where the private ownership of the means of production exists) can escape this general logic: “A state is stronger than another state”, argues Wallerstein, to “the extent that it can maximize the conditions for profit-making by its enterprises (including state corporations) within the world-economy”.
We could object that Wallerstein, though trying to take the idea of a world system of states into account, ends up by impoverishing the concept by subordinating it to the logic of “world capitalism”. His basic three-way division between centre, semi-periphery and periphery forces us, for example, to bracket the Soviet Union with semi-peripheral states, on a par, that is, with other Socialist states in Eastern Europe. We only need refer somewhat crudely to the doctrine of raison d’état to appreciate that the idea of bipolarism — or a bipolar world government — is much closer to international political reality. It raises the Soviet Union to the status of a superpower, on a par with the United States, and turns both Eastern and Western European countries into satellites of the superpowers.
Even though this article does not propose to go into the dynamics of the world system of states, as a political system, a passing reference is inevitable since we believe that correct examination of the historical process must account for the relative autonomy of political facts vis-à-vis the much vaster and much deeper dynamics which are progressively transforming the world system of production and world society. The development of the major advanced technologies such as energy from nuclear fusion, space exploration, information technology etc., which have had such a remarkable impact on the evolution of the economic system, is quite independent of the form of the ownership of the means of production. In other words, a profound change is currently taking place in the system of production which is affecting both Western market economies and Eastern countries with state ownership of the means of production to the same degree. In a nutshell, we are arguing that contemporary world society is experiencing a transition phase “from the industrial mode of production to the scientific mode of production”, or from a mode of production in which the worker and the factory (organized by the private owner or by the controller of the state plan) was the main production force to a mode of production in which automation and intelligent work are the new driving forces in social and economic progress.
Ours is not just a terminological innovation disagreeing with those who support the idea of the “capitalist mode of production”. What is at stake is the identification of the forces of progress and objectives which must from time to time be pursued to make progress possible. Wallerstein argues that the task of “anti-systemic forces” is to overcome the capitalist form of production, and he includes socialist countries among the anti-systemic forces. On the contrary, our argument is that the main hurdle to the development of productive forces, in our times, lies in the division of the world economy into national sovereign states. The development of modern science and technology leaves us with the possibility of freeing man from the physical toil of labour and accelerating the progress of the Third World to dignified living conditions. But this potential will not be turned in actual reality owing to the impossibility of planning a rational use of resources on a world scale, through a world development plan. A natural prerequisite for such a plan is the free and conscious participation of all peoples and all states, i.e. international democracy. But the present condition of international anarchy, in which powerful states dictate the conditions with which the rest of mankind must comply, entails the exploitation of the resources of science and the economy, “the common heritage of mankind”, not with a view to improving the human condition in its entirety, but merely to strengthen this or that raison d’état. The arms race, international monetary chaos and the miserable conditions in which the Third World is left to flounder are merely the result of an international system which accepts the fetishistic attachment to national sovereignties. Anyone who is against an end to the absolute national sovereignty of states is against the development of productive forces and this includes socialist states and all other political forces who, although they may call themselves progressive, do not have enough courage to question this atavistic postulate of political thinking.
The new economy will be the result of the process by which national economic policies will be superseded. Economics must begin to envisage the possibility of organizing public finance, regional, employment and development policies etc. at different levels of government, which range from the local to the national and from the continental to the world level. In this article it will not be possible to tackle all these aspects of the new economy: hence we shall restrict ourselves to discussing them in terms of what, at least from the economist’s standpoint, is the basic starting point: the evolution of the mode of production towards the new post-industrial stage.
2. Mode of production, economics and politics.
If we want to use the term “new economy” we must make sure it has a rational basis. We must, in other words, try to clarify what new economic phenomena there are today as compared with the past. This is a problem of identifying the various phases or stages in economic growth, a problem which is seldom discussed in contemporary economic thought. It is, therefore, worthwhile hinting at a method of analysis which seems essential to a thorough understanding of the contemporary economy.
Indeed, in the Wealth of Nations, recurring and enlightening parallels are scattered here and there which compare what happens in the civilized European world and what happened in “that early and rude state of society” which preceded it. The technique of examining social phenomena by comparing different stages of growth was drawn by Adam Smith from the wide literature which flourished at the dawn of the modern system of industrial production, as a consequence of geographical explorations and a natural desire to compare European society’s qualities and defects with those of the new societies which had just been discovered. As a result of the contributions made by many commentators, a new theory of development was put forward: the theory of the four stages. Adam Smith himself, in his lectures on moral philosophy, had widely discussed the distinction between “an hunters age, the shepherds age, the agricultural and the commercial age”.
As industrialization progressed, economics increasingly became centred on problems of growth connected with the industrial system (or the factory system, as it was then called) and was especially concerned with the new role of the entrepreneurial bourgeoisie and the working class. Ricardo did not hesitate to claim that the study of the laws determining the distribution of income between wages, profits and rents is the fundamental problem of political economy. In the light of this shift in thinking, the four stages theory inevitably became increasingly less important in English classical political economy.
But this theory was forcefully reproposed and deepened when continental European countries tried to follow England. A fundamental theoretical contribution came from Friedrich List in The National System of Political Economy which was published in 1841 and which lent support to the advocates of the German Customs Union (Zollverein). In this book, List called for protection in the face of England’s stronger and more well-established industry. Political and economic measures designed to foster infant industries were justified by List on the basis of: a) a theory of development of productive forces; b) the idea of an international order which would steadily develop towards equality in growth among all nations, where universal peace and free trade would be possible. “The future union of all nations”, argues List, “the establishment of perpetual peace, and of universal freedom of trade, [is] the goal towards which all nations have to strive, and more and more to approach”.
The central problem for political economy (or Nationalökonomie) is, thus, to define conditions which allow all nations to move from a primitive stage of development towards a more advanced stage. The main stages of development are, according to List, the savage state, the pastoral state, the agricultural state, the agricultural and commercial together, and, finally, the agricultural-industrial-commercial state. At every stage reached by the nation, certain productive potentialities will be displayed. It is the degree of development of productive forces which brings about the welfare and prosperity of a people. The productive forces of a nation do not depend, however, only on material factors such as the possession of natural resources or the quantity of disposable manpower, but “also on its social, political, and municipal laws and institutions, and especially on the provisions for the continued existence, independence, and power of the nationality. […] Productivity depends not only on the division of various manufacturing operations among many individuals, but still more on the moral and physical co-operation of these individuals for a common end”.
Classical economists, or the School, as List polemically calls them, made two fundamental mistakes. The first was to claim that it is in every nation’s interest to carry out a free-trade policy, regardless of the degree of development achieved by a particular nation. The second was defining a theory of exchangeable values without tying it in with the problem of development of productive forces. Political economy, therefore, comes down to being “the science which teaches how riches, or exchangeable values, are produced, distributed and consumed”. On the contrary, affirms List, “an independent theory of the ‘productive power’ must be considered by the side of a ‘theory of values’ in order to explain the economical phenomena”. According to List, we should note that a productive employment of resources is not restricted merely to those circumstances where existing productive forces are enlarged quantitatively (i.e. what is usually called accumulation in the industrial system). On the contrary, those investments which bring about an “awakening” of productive forces and which trigger off the transition from one stage to another should also be considered productive. Thus, in contrast to Adam Smith’s thinking, expenses for instruction and education must be considered productive, if we want to foster the industrial development of an agricultural nation and so on. This is the reason why protective duties are justified for a nation which considers the “industrial education” of her people as an essential factor in reaching a higher stage of industrial development, already attained by luckier nations.
List’s thought certainly had an impact on Marx. It is obviously improper to maintain that Marx was led to work out the concept of “mode of production”, which he discussed for the first time in The German Ideology (1845-46), urged on merely by List’s need to put forward a “theory of productive forces”. But at that time he was certainly actively interested in working out a critique of List’s system, and Marx’s writings show some significant aspects of Marxian thought which are worthwhile discussing here. In The German Ideology, Marx greatly enlarges on the idea of the four stages of development in the more general formulation of “mode of production”, which entails examination of all those conditions which make material reproduction of human life possible. It is, therefore, an examination of what Marx called a determined way of life. But, in many expressions, the links with List are almost literal. For instance, Marx says that “the various stages of development in the division of labour are just so many different forms of ownership; i.e. the existing stage in the division of labour determines also the relations of individuals to one another…”. And previously he says that “the relations of different nations among themselves depend upon the extent to which each has developed its productive forces… How far the productive forces of a nation are developed is shown most manifestly by the degree to which the division of labour has been carried”.
The change in terminology, from “stages of development” to “mode of production”, as mentioned above, corresponds to a substantial advance in social sciences. The fundamental importance of the concept of mode of production lies in the fact that, above all else, every society must assure its own survival, i.e. its reproduction. An examination of all the functions which assure the reproduction of social life will single out a set of necessary human behaviours which can be defined as structural (and which are the subject studied by historians concerned with the longue durée, to use Braudel’s terminology). A particular society’s reproduction is only guaranteed when it achieves an external equilibrium with nature (whose power it suffers almost entirely during the very first stages of development, but which it subsequently manages to control) and an internal equilibrium among the different productive forces. The productive forces are related in very specific ways to each other and thus ensure that a society has the quantity of commodities and services required. Every mode of production, therefore, determines the forms of social production, its productive potential, the maximum size of the population, the mode of income distribution and, finally, a set of specified types of social life (in the family, town, state, etc.). The specification of the role which every individual must play in the context of a certain mode of production is achieved by means of the analysis of the division of labour. The mode of production is the most general way of understanding man as a worker, i.e. studying human action as a behaviour directed to reproduction of social life.
On the basis of this outline sketch of the concept we can also give, as Marx does, an outline classification of history into periods. In a primitive age, man the hunter and fisher lived by robbing nature. With pasturing and agriculture, man learnt to regenerate natural resources used for his subsistence: cities were founded, written knowledge was developed, etc. Subsequently, man the artisan began to transform raw materials into goods required by the limited local market with the help of simple tools. Finally, with the industrial revolution, man, on the basis of his early scientific knowledge, constructed machines which exploited natural energies and greatly enhanced manual labour so that man could easily obtain the goods he needed in great quantities (mass production) from raw materials.
It is in this very general sense that it seems appropriate to speak of “new economy”. We will try, in other words, to outline the main economic aspects of the new mode of production: the scientific mode of production. In a first approximation, we could in fact argue that with the scientific mode of production man is finally achieving the conditions required to make machines do all the work required for the physical reproduction of society. The industrial mode of production was based on worker’s labour and industrial capital as production forces. With the new mode of production it is science itself which becomes the main production force.
Nevertheless, before we embark on an analysis of the scientific mode of production, it is worthwhile discussing a few ambiguities that various writings on the concept of mode of production have still not cleared up completely. The first relates to the confusion between the notion of the mode of production, taken as a typical concept of historical and social sciences, and historical materialism, taken as a typical concept of the philosophy of history. The dispute between Marxist and Liberal philosophers on determinism and the role to be assigned in history to freedom is well-known. Inasmuch as it is possible to do so, we will try to overcome this difficulty here by arguing that our concept of mode of production must be understood as an “ideal-type” in Max Weber’s sense of the word. In the historical and social sciences it is obviously indispensable to speak of determined human action: otherwise there would be no sense in attempting to formulate behavioural models or social laws. But this does not in any way imply that all human action is determined. For this reason, social sciences do not claim to provide an exhaustive explanation of human action and the ideal-type is a conceptual construction which is not designed to be a faithful representation of reality. It is obtained by means of the “unilateral accentuation of one or more points of view… in a conceptual framework which in itself is unitary”. The typology constructed by the social scientist is ideal only in the logical sense. It is a utopia, a theoretical construct “against which reality must be measured and compared”. Ideal-types are auxiliary instruments of knowledge. In essence, a social scientist only needs to be able to assume that human action is partly determined. And this is the sphere of social reality which constitutes his subject matter.
A second clarification must be made regarding the relationship between the mode of production and politics. This is a relationship that List places at the very heart of his analysis with a method that was subsequently unjustly overlooked in social sciences, in particular in economics. List should, in fact, be viewed as the first theoretician of the international economic order. On the basis of the evolution of production forces through different stages and the role of the state in international politics (the idea of raison d’état is often implicit in his reasonings), List managed in 1841, for example, to make the amazing prophecy that British imperial power would decline historically vis-à-vis the United States and that Europe would need to find some form of political union of a continental size to be able to sustain the challenge from the new power on the other side of the Atlantic. This happy blending in the analysis of the evolution of productive forces with the evolution of international politics was completely clouded in Marx’s thinking. Marx’s field of observation was very sharp and extensive at a structural level and concentrated on the idea of production forces, but was completely out of focus as regards the concept of state and international policy. This weakness emerges very clearly in his criticisms of List. The fact that individuals belong to their own social class constitutes the decisive factor in any social relationship. Nationality is thus entirely submerged and absorbed by class relationships. “The nationality of workers”, says Marx for example, “is not French, nor English, nor German… His government is not French, nor English, nor German, it is capital… Money is the fatherland of the industrialist”. The history of our century has tragically shown the falsity of these statements: after the collapse of the II International as a result of nationalism and the two World Wars there is certainly no further need to argue that national loyalties have, in some circumstances, proved to be much more profound and decisive than class loyalty, both for the bourgeoisie and for the proletariat. But though it was difficult in the first half of the 19th century to envisage that power politics when combined with nationalist ideology would have had such tragic consequences (and it was not foreseen even by List), nevertheless the state, both in its internal and its external relationships, should not have been construed as a mere appendage to civil society. Yet, in Marx’s thinking the state had no particular role other than as a defence for capital’s interests, as the comité d’affaires of the bourgeoisie. The reasons for this reductive conception of the role of the state are probably to be sought in Marx’s conviction that civil society’s institutions, such as the family and classes, play a very vital role in conditioning individuals’ action and thinking, much more than state “superstructures” do. The distinction introduced by Hegel between state and civil society was overshadowed in Marx by the doctrine of historical determinism, in which the forces of production and production relationships appear as the primary actors.
The theoretical and practical consequences of this conception of the state are highly relevant (we may merely think of the ensuing theories of imperialism and the often whimsical search for economic causes of war). But they cannot be discussed here for reasons of space. Two aspects of List’s approach need, however, to be stressed since they would otherwise run the risk of falling into oblivion, if we accept the methodology of the mode of production acritically. The first relates to the role of the state as a productive force. List continually repeats that no division of labour can be achieved without co-ordination and that co-ordination is achieved through the market and the state as a supreme organizer of the material and spiritual energies of the nation. In the second place, it should be recalled that the development of the international economy depends both on the evolution of the dominant mode of production (it is possible to achieve co-existence in time and space between several modes of production: in this case their relationships need to be examined) and on the laws which regulate the world system of states. Even the world system of states can be examined with the help of models or Weber’s ideal-types. But the question naturally arises at this stage as to what specific relationships need to be created between the evolution of the mode of production and the evolution of the world system of states. List himself showed that the evolution of the political system may influence the development of production forces. The issue cannot be tackled here. An analogy will perhaps help to visualize the problem. The melted waters of a glacier will certainly reach the sea, perhaps through underground passages and via thousands of rivulets. But we will never be able to define a priori or even in any precise way the course they will follow as they move down to the sea. Many factors determine the course of a river and they change constantly. In much the same way the evolution of the mode of production generates a process of rapid diffusion from the most advanced to the most backward societies which steadily changes the international equilibria between states. The details of this process are beyond our control. But we can reasonably foresee the point of completion and a few significant intermediate stages.
The third and final point on which we need to dwell is the presumed equivalence between mode of production and economy. Marx himself is responsible for this. Indeed, in his 1859 Preface to the Critique of political economy he writes that “the anatomy of civil society is to be sought in political economy”. This reduction of civil society to economy is extensively adopted by Marx’s followers and even theorized in a philosophical conception of the world, known as economic materialism, i.e. a reductive and vulgarized version of historical materialism.
In actual fact, historical materialism is the most general point of view from which to analyze social facts: it determines social roles by means of the analysis of the division of labour and production forces. It enables us, as we have already pointed out, to study man’s action inasmuch as his action is oriented to reproducing social life. It is the concept of mode of production that enables us to identify certain forms of life associated with the family (patriarchal family, monogamic family, etc.) in the village or in the city and so on. Economics is more limited in its scope. The economist takes the division of society into roles (studied by the sociologist and the anthropologist) as something which falls beyond his field of study and is concerned primarily with defining how work can be efficiently organised once this framework has been established. The most general form of organization of work is the market. The subject matter of economics is the behaviour of individuals in the market and the functioning of the economic system within the state framework (the economic plan). But since no state is a monad cut off from other states it is always vital, when examining the economic process in its entirety, to take the world system of states as its reference point.
3. The world market and the end of regional economic blocs.
The world market is not the result of recent events. Potentially, it began to exist in the Renaissance phase of geographical discoveries, the growth of extra-Mediterranean trade and the beginning, in the second half of the 18th century, of the first process of industrialization. The world-economy, or l’économie-monde to use Braudel’s meaningful statement, has progressively spilled over the borders of the increasingly tiny Europe and, in the last century, all other continents could be considered as “peripheral” to the European core. Indeed, as early as 1846, Marx could write: “Big industry universalized competition… established means of communication and the modern world market… it produced world history for the first time, insofar as it made all civilized nations and every individual member of them dependent for the satisfaction of their wants on the whole world”.
Nevertheless, it is true that even on the eve of the First World War, Europe monopolized more than 60 per cent of world trade and that, if North America is included, the figure is nearly 80 per cent. Therefore, the importance of extra-European countries was very restricted. A true turning point occurred only during the period following the Second World War. To begin with things did not change very much from a purely quantitative point of view. However, in certain respects things worsened. For instance, the ratio of underdeveloped countries’ foreign trade on the world total, which was 16 per cent in 1900 and which rose to 31 per cent in 1950, had dropped dramatically to 17-18 per cent by 1970. We must note that these percentages hide a very big increase in international trade in developed countries, but despite this it is clear proof of the difficulties poor countries have had in keeping pace with more advanced economies. Even so, since postwar reconstruction, there has undoubtedly been an extraordinary acceleration in world economic integration, following a model which we may define “by blocs”, in the sense that economic phenomena have more or less followed the great trends in world politics, characterized, in this phase, by Russian-American bipolarism, with the ensuing policy of opposing blocs.
Within every area of influence, the two superpowers were able to guarantee a fairly stable and progressive international order. Between these two world macro-regions, there can be no doubt that the West scored higher economically. The United States was very active in the IMF, GATT and UN ensuing the creation of a free Western market and a monetary system based on fixed exchange rates. The outcome was unprecedented growth in per-capita income: about 5 per cent per year between 1950 and 1970. This is the highest rate of growth in the world economy ever observed (during the Gold Standard phase, from 1870 to 1913, the rate of growth was exactly half this figure). With good reason, some economists have defined the twenty years following the Second World War as the “golden age” of world economic history. CMEA countries, led by the USSR, recorded even higher growth rates during the same period: in some cases 7 per cent. Nevertheless, their level of per-capita income is still lower than that of Western countries, though it is difficult to assess the real gap exactly.
This “by blocs” development model was turned upside down by a deep crisis during the seventies. There are at least three main factors that led to this structural crisis: the appearance of new autonomous centres within the two superpowers areas of influence; the Third World’s demand to participate in the world industrialization process and, finally, the progressive opening and integration between the two blocs of industrialized countries.
The first decisive change which must be considered is the decline in the bipolar system: new centres of economic power in the world sprang up and they started playing an autonomous role in the world equilibrium. Military bipolarism survives, but economic multipolarism is growing alongside it. The USA is still the world’s leading industrialized country, but its supremacy is no longer indisputable as it was in the immediate postwar period. In those years, 45 per cent of industrial world potential was concentrated in the USA. In 1980 it fell to 31 per cent. The USSR went up from 10 per cent to 14.8 per cent, Japan from 2.9 per cent to 9.1 per cent, China from 2.3 per cent to 5 per cent, Third World countries from 6.5 per cent to 12 per cent and Europe, though still maintaining an important position, went down from 26 percent to 23 per cent. To assess this data properly, we should remember that in the first years of this century, while the USA’s share forged ahead of Britain’s, the centre of the world-economy inevitably migrated from London to New York.
The relative decline in American economic leadership had considerable impact on the workings of the world market. On the monetary front, we have shifted from a system of fixed exchange rates, inaugurated at Bretton Woods, to a system of floating exchanges. The dollar has remained the reference point for international exchanges, but the USA is certainly no longer the “world banker” as it was in the immediate postwar period when the response to the “dollar shortage” crisis was the Marshall Plan. USA reserves, which in 1949 amounted to 66 per cent of total world reserves, had already fallen to 27 per cent in 1959 and were in the red when, on August 15th, 1971, the dollar ceased to be convertible into gold. At present, we are facing a real reversal in the situation: financial capital, especially from Europe and Third World countries, is being sucked into the USA because of high interest rates. We would have to go back to the years of the Great Depression to find a similar phenomenon.
Progressive dismantling of the Western free trade zone, painfully created by the United States in the postwar period, thanks to the adoption of the multilateral principle, is going hand in hand with growing monetary disorder. Unanimous agreement is increasingly difficult to reach within GATT. Third World countries are excluded either as a matter of fact or by statute. They could do nothing but create the UNCTAD, an alternative centre for trade negotiations within the UN. They are demanding a general system of preferences to protect their infant industries and exports towards richer economies. The European Community, which is the world’s leading trade power, has adopted her own common external tariff and has established special commercial ties with African (the Lomé Agreements) and Mediterranean countries. The Andine Pact countries, in Latin America, and ASEAN countries, in South-East Asia, are on the way to creating their own common market. Finally, the Pacific area is moving into a position of leadership in world economic growth, thanks to an extraordinary integration between the newly industrializing countries (NIC) , Japan and Australia. The latter has already diverted her exports from Europe towards the North Pacific area.
The second factor in the international crisis concerns the new role that Third World countries are trying to play in the world economy. Once they had obtained political independence, it was quite natural for them to seek emancipation from the age-old poverty to which they were abandoned during the Cold War years. Indeed, in this phase, they were practically excluded from the international economy. An event which foreshadowed the Third World awakening was the creation of a non-aligned countries’ front in the fifties, but the first concrete claims were put forward within the UN in the course of the first Conference on Trade and Development (Geneva 1964) when the “77s Front” rallied around the slogan “Trade, not Aid”. Nevertheless the problem was very soon envisaged in more general terms: it was necessary to reshape the entire world economic system to guarantee full industrial development in the Third World. Only in that way was it possible to lay the foundations, for real equality among all peoples (the Lima Conference in 1975 established a precise target: the Third World ought to achieve a 25 per cent share of world industrial production by the year 2000).
The richer and luckier countries cannot go on ignoring this challenge from the Third World. The raw materials crisis is to be considered as a sharp warning. We must begin to live with a population, some two-thirds of the world total, which wants to change its standard of living. The effects of these changes are already visible. The first achievements of the so-called newly industrializing countries have thrown some industries in more advanced economies into crisis. Indeed, in Third World countries, wages are ten or fifteen times lower than in the USA or Europe and, on that basis, we can quite easily understand how Third World products manage to be competitive on the international market. Therefore, we are really facing a restructuring in world production processes, with adverse effects on employment for those countries and sectors which are not able to face international competition. Certainly, as poorer countries advance on the road towards industrialization, wage levels will increase and threats to advanced countries’ employment will slow down. But we are only at the beginning of a process which will put an end to the old division of labour (explained by Ricardo’s model) whereby trade takes place between exporters of raw materials and manufacturers: international trade will increasingly become inter-industry trade, as already happens among more developed economies.
The third factor to be considered is the crisis in the socialist model of development adopted by CMEA countries in the postwar period. The CMEA (or COMECON) was created by Stalin in 1949 more as a defence institution, a reaction to both the American Marshall Plan offer of aid and various projects of a Balkan federation among Eastern European countries, rather than as a means of realizing true integration between Communist economies. Indeed, until Stalin’s death, the CMEA only had a containment effect, i.e. even if the CMEA did not produce very important international institutions, it was sufficient to interrupt trade between Eastern and Western Europe countries and divert it towards the Soviet Union. No co-ordinating institution was in fact needed to organize external trade among socialist countries. Everyone was encouraged to follow the Soviet model based on the idea of the construction of socialism “in only one country,” primarily developing heavy industry and infrastructural investment.
Towards the end of the fifties, problems related to domestic economic growth which objectively required efforts in co-ordination (every country showed a production deficit or surplus in the same sectors) and the Common Market challenge which could not be ignored any longer forced CMEA countries to adopt a rudimentary set of regulations (the 1959 Statute) which, though not envisaging a supranational body, at least made it possible to launch a programme to achieve a “socialist international division of labour”. During this phase, trade among member countries increased, but the same degree of integration as Western European countries was impossible to reach (the ratio between the total value of trade and the value of industrial production was four times lower than in the European Community), since trade was still mainly done on a bilateral basis and no common currency existed for the socialist area (the experiment to introduce a convertible rouble proved unsuccessful). Even if we look at the wider world market, comparison with the European Community is clearly unfavourable for the CMEA. Whereas the European Community (the Nine) very quickly became the world’s leading trade power, with a foreign trade share of over 30 per cent of the world total, the CMEA barely reached 10 per cent, at the beginning of the seventies, which fell back sharply with the raw materials crisis.
The crisis in the seventies gave rise to doubts about the old co-operation model adopted by CMEA countries. At that time, the model consisted in the extension of the principle of the construction of “socialism in only one country” to the entire community of socialist countries. In a nutshell, they were supposed to be self-sufficient vis-à-vis the rest of the world so that any international economic crisis that arose would not have harmed the basis of CMEA development. Indeed, in the thirties, when Western economies were swept away by the turmoil of economic nationalism, the Soviet Union unhesitatingly went on down the road mapped out in her five years plans (for the 1928-40 period the growth rate for USSR industrial production was 8.9 per cent as against 1.9 per cent in the USA). Within the CMEA, this was achieved thanks to the Soviet Union’s ability to supply raw materials and energy to European countries which could pay in manufactured goods. Nevertheless, this ideal situation was never reached and was later endangered by the need to buy machinery and advanced technology from Western countries, due to the lower growth rate in high technology in planned socialist economies. Moreover, in due course the spectacular increase in raw materials and energy prices compelled the Soviet Union to align her prices (which were still lower) with the world level and some European countries were forced to look elsewhere for alternative sources of supply. Thus Eastern European countries found themselves, during the crisis, in the doubly embarrassing situation of being neither able to meet their deficit with Western countries from whom they acquired technology nor their deficit with suppliers of raw materials. This is clearly an unbearable situation which allows only one progressive way out: participation on the world market on a competitive basis. It is a difficult choice but domestic production structures need to be renewed using technological standards comparable with the more dynamic economies. Direct CMEA participation on the world market is already becoming the cornerstone, especially for Eastern European countries, of a new phase of development which would otherwise be impossible.
On the eve of the new century, we can therefore state that there is no region in the world excluded from the world process of industrial development. We can in actual fact for the first time observe integration phenomena on a worldwide scale, such as the impact of the population boom, pollution of the seas and sky, raw materials and energy shortage to name but a few. The increasingly worldwide nature of the production and development process ought to be a basic fact in any analysis which aspires to being scientific and in any serious economic policy.
These observations on the worldwide nature of production processes must nevertheless be completed with an examination of a very marked structural change which has affected advanced societies, regardless of the type of ownership of the means of production. The reference is to the transition from industrial to post-industrial society or, to use more precise terminology, from the industrial to the scientific mode of production. The world-wide nature of the production process does represent anything more than the result of the geographical extension of the division of labour connected to the new production relations. But we need to consider these effects even on the inner structure of every society, in order to grasp their deep dynamics. Indeed it is well known, both in the East and West, that the old development model, founded on the stimulus of individual consumption and on mass production of indispensable commodities, is coming to an end. The success of Keynesian policies was founded on the exploitation of domestic demand: higher wages stimulated bigger production, more per-capita income, etc. In a slightly different way, the same development model was adopted even in socialist countries. Today, the new economy must reply to the new demands of a society striving for a better “quality of life and labour”. This is the goal of the following analysis.
Before concluding, we may note that the more general features of the international division of labour could be summarized by the “double industrial restructuring” formula: while advanced countries are facing transition from the industrial to the scientific mode of production, Third World countries are painfully entering their first process of industrialization. Though useful in giving a synthetic judgement, this formula conceals some difficulties which should not be underrated. The process of Third World industrialization cannot take place using pedantically old technologies which were the basis of European industrial development in the last century. Today, nobody can afford to disregard electronics or biotechnologies. Furthermore, even in richer countries, industrial restructuring cannot take place by simply disregarding integration problems with the Third World. To conclude, it is no longer permissible, nor possible, to ignore the close interdependence which, for better or for worse, unites all nations and every citizen on this already very tiny planet.
4. Industry, increasing returns and employment.
The main feature of the modern age is the shrinking, in terms of employment, of the industrial sector with regard to the total active labour force. This is a clear turning point vis-à-vis the 19th century trend which Marx christened the “increasing proletarization of society”.
The problem is of great theoretical interest, but has so far only generated a few occasional comments, mainly in relation to the impressive growth of the tertiary sector. As usual, the USA is way ahead of other countries in the mass emigration towards the so-called service sector. It can be compared in size to the exodus from country to town which occurred during the European industrial revolution. In the first half of the last century about 60-70 per cent of the active population of the USA and leading European countries was employed in agriculture. Tertiary sector employment amounted to or was just above 15 per cent. Industrialization implied a population shift towards the secondary sector, which in some cases in this century amounted to 45 per cent of the total work force. The current trend is a steady expansion of the (private and public) service sector, close on 70 per cent of the total USA labour force matched by a steady decline in industrial employment. Forecasts predict that, by the end of the century, only 9 per cent (or even less) of the active population in leading industrialized countries will be able to produce all the manufactured commodities required by society. The size of industry will become virtually the same as agriculture.
This historical trend has long been known by economists as Colin Clark’s “three-sectors law”. But traditional thinking on the causes of economic development is unable to account for the main features of the modern mode of production. The manufacturing sector is still considered unanimously as the true “engine” of growth.
On this subject it is interesting to examine the ups and downs of “Kaldor’s laws” of economic development. In 1966, in an attempt to explain Britain’s very slow economic growth rate, Kaldor very carefully defined and empirically tested the ancient law of increasing returns, whose roots go back to classical economists. The special attention paid to this law is justified: its existence is an index of the capability of productive forces to increase their efficiency.
According to Kaldor, “fast rates of economic growth are associated with the fast rate of growth of the ‘secondary’ sector of the economy, mainly the manufacturing sector”. The relatively lower dynamism of the British economy was caused, in Kaldor’s opinion, by the early achievement of the stage of maturity, i.e. a situation in which, broadly speaking, per-capita income increased at the same rate in every sector of the economy. Manufacturing developed at a high rate because it was able to get workers from other sectors, mainly agriculture. But when, as happened in Great Britain, agriculture reached a very low rate of employment, the possibilities for development in the industrial sector also faded away. Kaldor explained the greater dynamism of employment in the service sector by comparing the tertiary to a “buffer” sector, which weakens industrial fluctuations: “the relatively high rate of growth of employment in services is to some extent a consequence of the instability in the demand for labour in manufacturing”. The ensuing economic policy, Kaldor claimed, consists in a set of measures fostering the transfer of employment from the primary and tertiary sectors to manufacturing.
The manufacturing sector’s ability to work as the engine of growth is due to the effect of the law of increasing returns. “One finds the origin of this doctrine, says Kaldor, in the first three chapters of the Wealth of Nations. There Adam Smith argued that the return per unit of labour — what we now call productivity — depends on the division of labour, on the extent of specialization and the division of production into so many different processes, as exemplified by his famous example of pin-making. As Smith explained, the division of labour depends on the extent of the market: the greater the market, the greater the extent to which differentiation and specialization are carried, the higher the productivity. Neoclassical writers, with one or two famous exceptions, like Marshall and Allyn Young, tended to ignore, or to underplay, this phenomenon”.
It is worthwhile examining this statement carefully because it represents a synthesis of the economic wisdom which matured in the course of European industrial development. There can be no doubt that the explanation for the growth powers of the industrial mode of production are to be sought in the working of increasing returns. But if we wish to understand the features of the contemporary world we ought to look for an explanation of the reasons why several mature economies, the USA economy in particular, have enjoyed long-term growth with a stationary or contracting industrial base but an expanding tertiary sector.
In actual fact, Kaldor’s so-called “growth laws” seem more suitable for a description of the ancient world than the contemporary one: statistics clearly show that the correlation between increased productivity and increased employment in industry no longer holds good. On the contrary, significant productivity increases in manufacturing occur even when coupled with employment contractions. In this respect, we may usefully quote the case of the USA for the period 1973-1981: employment remained practically stagnant in agriculture and manufacturing, but increased by over 2 per cent per annum in the (private and government) service sector. On the other hand, productivity in the manufacturing sector for the same period was always positive. As far as the European Community is concerned, the evidence available is not so homogeneous, but confirms the general trend. During the first phase of postwar economic development (broadly speaking until the mid-sixties), growth (about 7 per cent yearly) in industrial production was faster than growth in employment within the sector (1 per cent yearly). But in subsequent years industrial employment either did not increase at all (but with simultaneous industrial increases in productivity), or even decreased. Therefore, some economists have suggested calling this new kind of economic development “Jobless Growth”.
To conclude, we can say that the main features of the new mode of production consist in: a) allowing increases in industrial production without visible increases in employment; b) displaying productivity increases in industry without increases in employment (and even with a fall of industrial employment). On the basis of these statements we may legitimately put forward two further observations. Firstly, it is necessary to note that the old Keynesian employment policies, based on the fostering of private and public investments, are gradually losing their effectiveness. Given the features of modern commodities’ production it is possible to satisfy increasing volumes of effective demand with increasingly lower numbers of workers. Secondly, it is worthwhile rediscussing the “factors”, as they are traditionally called, in economic development, which probably ought not to be sought merely within the industrial sector.
5. The law of increasing returns, repetitive and intelligent labour.
From the above remarks, it may be argued that the law of increasing returns would no longer work if, as Kaldor maintains, its existence is demonstrated by productivity increases related to employment increases. Indeed, we are faced with productivity increases per worker which are not matched by employment increases. This means that we must explain these productivity increases by causes other than those assumed in traditional doctrine, i.e. when productivity increases are strictly related to the size, in terms of employment, of the firm.
Clarification of this point needs to be made. In economic theory, by “increasing returns” we usually mean a situation where the unit cost of production of a certain commodity decreases, in the long run, when the volume of production rises. In the short run, the cost of production per unit of product could diminish merely for accounting reasons, when fixed costs are spread over a larger quantity of product. But this does not affect the long term behaviour of costs, where all factors are variable. In the long run, we can point to two fundamental causes for reduction in unit costs. The first relates to so-called static returns to scale which depend on the fact that, with no technological change, it becomes possible to use the disposable factors for a greater quantity of production in a more economic way (for instance, the production costs of a pipeline decrease as its length grows, given the machinery and the productivity of labour in use). The second relates to dynamic returns to scale where unit costs decrease because it become possible to organize work in a more efficient way when the volume of production increases, thanks to a better division of labour. The traditional doctrine tends to obscure or neglect this distinction and unsatisfactory explanations of the causes of increasing returns are usually put forward. The issue is quite decisive in our analysis and it is worthwhile re-examining it. We shall, of course, concentrate only on dynamic returns to scale, because any savings in raw materials, obtained with large scale production, are relatively independent of changes in the technique of production.
For this purpose, we may once more go back to Adam Smith’s observations about the widening of the market entailing the possibility of a better division of labour and, therefore, a rise in productivity. The process of economic growth, Smith argued, occurs mainly through cumulative forces. Increases in the quantities produced (the widening of the market) allow a better subdivision of work operations; but when work becomes more specialized, its productivity increases. Further increases in total production, stimulating new growth, are thus possible, with a given workforce. Therefore, the pivot around which all economic activity revolves is the worker’s ability to increase his efficiency when operations become simpler and more trivial.
The first observation, on this issue, is that an improvement in labour productivity is by no means an automatic event and requires, in fact, three different phases. The first is a mere enlargement of the productive layout: i.e. we add on one or more machines to the existing ones. In these circumstances, either new workers are taken on or new firms enter the sector (each with its machines and workers). At first, technology does not change and the skills required of every worker also remain unchanged. In a second phase, a certain reorganization of labour becomes possible, due to the increased number of workers gathered in the same place, belonging to a single firm or several interdependent firms. This is the phase in which new operations are entrusted to the workers with a view to making these new operations more trivial and repetitive, so that the labourer, as Smith says, “has no occasion to exert his understanding or to exercise his invention”, and since his labour absorbs a great share of his day he “generally becomes as stupid and ignorant as it is possible for a human creature to become”. The highest degree of specialization of this technique of labour organisation within the factory was Taylorism, which applies a rigorous division of labour between those who organise it, using “scientific” knowledge that the worker does not master, and those who must materially carry the task out, without their having any say in the matter. In all cases, in this phase some organisational economies can be obtained within the firm (if the firm has already expanded or, in the case where there are a number of firms, the economy becomes “internal” only after a process of fusion or incorporation). This allows unit costs per product to decrease. The final phase relates to what is usually called technological innovation, i.e. the possibility of replacing already mechanized human labour in all its movements with a real machine, generally much more efficient than the worker. The law of increasing returns is therefore a kind of essentially dynamic law, which implies at least two subsequent innovations (the first is organizational in nature) and a widening of the production base. At the same time it gives a simple and clear explanation of the reasons underlying large productive conglomerates in industrial society and self-driving forces in economic growth during the mechanical age.
Breaking the law of increasing returns down into its component parts helps us to assess its importance in contemporary economies. With the advance of technologies and the automation of production processes, we may argue that the first two phases do not play a major role any more. Thanks to modern technologies, planning and construction of new machines or the discovery of new production processes are no longer based on a preliminary “mechanisation” of human work, which a previous specialisation turned it into monotonous and repetitive labour. To a certain extent, elimination of human labour occurred even in the past. But contemporary scientific knowledge offers an infinity of opportunities to eliminate human labour even if operations are of a non-repetitive and complex kind. Thanks to electronic and, especially, information processes we can now build effective robots. During the industrial age machines were conceived to be coupled with workers to increase their productivity: the industrial worker became nothing more than an appendix to the machine. Nowadays, the machine can be planned for activities which no longer consist in an extension of repetitive labour, but in its complete substitution. Hence, technological changes are no longer strictly dependent on productivity and employment increases. This is clearly shown, for instance, by new biotechnologies which are causing a revolution in agriculture without there being in this sector, already reduced to a minimum as far as employment is concerned, any trend to concentrate and increase specialization in labour in advanced economies.
To conclude, technological change anticipates, rather than follows, productivity increases caused by the second phase of the reorganisation of labour. Turning the worker into a man-machine is no longer a necessary prerequisite of technicians’, engineers’ and scientists’ intelligent and creative labour. The lack of any correlation between increases in employment (i.e. work labour) and increases in productivity is not a simple statistical anomaly: it stacks up completely with a specific potential characteristic of the new scientific mode of production.
6. The role of the service sector and state as a productive force.
These industrial changes are the result of a great development in the service sector. Without research, accounting, trade activities, etc., which have flourished in recent decades firms and the economy in general could hardly have escaped from the heavy organization typical of the industrial age. We might, therefore, be tempted to formulate a new law of economic development: the engine of growth is the service sector; countries showing the highest growth rate in the service sector also show the highest overall growth rate. Kaldor’s laws would be turned upside down in their causal connections, if we agreed that “those countries with the fastest growth in services also have the fastest rate of growth in manufacturing”.
The possibility of basing this kind of law on mere empirical data is, nevertheless, very doubtful. We may mention other evidence which does not tally with this law. Productivity in the service sector, insofar as it can be measured (and insofar as it is theoretically correct to do so), is lower than industrial and agricultural productivity. The displacement of the labour force from agriculture and industry to the service sector should therefore lower the economy’s overall growth rate, not increase it. On the other hand, this argument is sometimes advanced to explain the lower postwar growth rate of US GNP compared to Europe’s and Japan’s, even if the absolute level of per-worker productivity in the USA is still the highest in the world.
Indeed, to speak of the service sector as the new engine of economic development is misleading. The boom in the service sector is only a symptom of a much more complex phenomenon. It has been calculated that about half of the activities in the tertiary sector are supplied by manufacturing while the other half regards services for individual and collective consumption. The expansion in the service sector is therefore only partly an end in itself. It answers two great needs of modern society: on the one hand, a new division of labour in which “intelligent” activities become increasingly more important than the repetitive ones and, on the other hand, a change in consumption and welfare standards, which attempt to achieve a better “quality of life” and which can be met only with an appropriate public service framework (schools, hospitals, protection of the urban and natural environment, etc.).
It is worthwhile, in this respect, hinting at a problem which raised a number of lively discussions among classical economists and which resurfaces, albeit in a different guise, in the new post-industrial society, namely the distinction between productive and unproductive labour. Today, we could indeed rightly ask whether the service sector ought to be considered as productive. Quesnay, it goes without saying, only considered agricultural labour as productive. Adam Smith extended the ability to produce income to labour in the industrial sector, but he considered what we now call services (whether private or public) as unproductive. Marx maintained this distinction and applied it to the commercial sector which “does not create either value, or surplus-value”. The controversy is not merely academic. In socialist countries the entire national accounting system is based on this distinction and the tertiary sector is excluded from total social income.
Today, in the light of the impressive boom in the service society we are forced to admit that the distinction between productive and unproductive labour is no longer really meaningful, since it affects entire sectors of economic life. Indeed, we can maintain, with some justification, that both workers directly employed in industry and workers “indirectly” employed in the service sector — including public services and consumption services, insofar as the “natural” level of wages already includes a share of that particular kind of consumption, which in many respects may be considered as necessary — contribute equally to net income production. However, it is not hard to appreciate that various service activities, like banking accounting, research, etc., are developing outside the industrial firm, but as an integrating aspect of a social division of labour whose major priority unshakeably remains the production of commodities, indispensable both for direct and indirect satisfaction of needs via the service sector (hospitals need medical machinery to take care of patients, etc.). The industrial sector is essential to service production, in the same way in which the service sector is essential to ensure high productivity in the industrial sector. Hence, the warning about the so-called de-industrialization process is merely the consequence of a servile application of stale concepts. The shrinking of employment in the industrial sector is by no means an economic disaster. The expansion of the service sector is nothing more than a particular form of modern industrial development.
Nevertheless, the discussion on productivity of the service sector cannot be rounded off without considering the function of the modern state in fostering scientific research. In the last century, List was able to describe the role of state as being a clearly productive force, thanks to its ability to create conditions favouring entrepreneurial development and modern industrial production. Since then, the tasks of the state in managing the economy have increased enormously. But economic theory is still unable to account for the fact that post-industrial society development would be impossible without massive state involvement in organizing scientific research. There are, of course, many levels and degrees of intervention. A very general level, which relates to research policy, i.e. the targets and size of research expenditure, depends primarily on the international role of the state. Today, the two superpowers greatly encourage research for military aims and for sectors which have an important impact on their attack and defence capabilities (e.g. space exploration). But even if military security is not directly concerned, the world dimension of the market already compels every state to take other states achievements in advanced technology research into consideration. The results Japan obtained in electronics and data-processing are, for instance, a yardstick by which to measure the efficiency of investment in these sectors. The active intervention of the state in research policy is necessary because no firm can shoulder the entrepreneurial risks connected with an activity with extremely uncertain returns, in some cases over a very long period of time. The market is not able to cover these costs. Expenditure in scientific research is a typical case of public good. Today, we have different kinds of state intervention in the research field. The first method is direct intervention: this is the case of research for “big science”, i.e. very expensive projects over a very long time span (nuclear fusion, for instance). A second method consists in state contracts with private firms: in this case the state becomes the customer of a certain project and shoulders the risks entirely. Thirdly, the state may finance a particular company’s research costs entirely or partially and share the likely returns, according to a percentage agreed beforehand.
But, besides the way in which state may intervene to foster scientific research, we need to stress that modern advanced technological development has highlighted the problem of the size of the state. List himself observed that it was not possible to speak of “nations” in cases when they were not big enough to assure economic autonomy and political independence: Denmark for instance was not a nation for List. In the field of advanced research it is clear that we need an expenditure and organization capability which encourages even the two superpowers to collaborate on common projects (as in sub-atomic physics). For that reason, the lack of continental unity is the main cause of Europe’s technological gap vis-à-vis Japan and the USA.
Finally, we need to observe that on the basis of the new role of the state as scientific research organizer it is possible to explain the seeming paradox we met in examining Kaldor’s laws. Statistical evidence does not point any longer to a strong interplay between productivity increases and employment increases because the main factor in economic development is the state as an advanced research organizer. Economists would certainly be uneasy with econometric research designed to find the new causes of increasing returns if they forgot to consider the state as a productive force. In our age, the market no longer holds the secrets of economic development as was the case in Smith’s, Marx’s, and Schumpeter’s age.
7. The firm and self-management.
One important aspect of economic change brought about by the new mode of production relates to the structure of the firm.
On this subject, it is worthwhile examining Schumpeter’s thesis regarding the steady and inevitable decline of the entrepreneurial function in a mature capitalist economy since this thesis is still widely accepted. Schumpeter diagnosed the capitalist system’s slow agony due to its intrinsic inability to further the technological innovation effort, which is fundamental in fostering entrepreneurial initiatives. The fall of capitalism in a stationary state will be caused, Schumpeter argues, by the steady enlargement of industrial entreprises, by the transformation of competitive markets into monopolistic or oligopolistic markets and by the consequent bureaucratization of technological research in specialized departments inside the firm. The entrepreneurial function, which Schumpeter claims is essentially personal and innovatory, would therefore be crippled and its vital organs maimed. When a firm becomes a bureaucratic body its dynamic role on the market ceases. The market in its turn wastes away, being dominated by a few huge industrial conglomerates which have no incentive to innovate because nothing is left to conquer and no enemy is left to overcome. It is a state similar to the one where technology has reached unsurpassable perfection. “A more or less stationary state, affirms Schumpeter, would ensue. Capitalism, being essentially an evolutionary process, would become atrophic. There would be nothing left for entrepreneurs to do. They would find themselves in much the same situation as generals would in a society perfectly sure of a permanent peace”.
Recent developments in the technological progress and its capillary diffusion in the economy would seem to contradict Schumpeter’s pessimistic outlook and his prophecy of a decline in the entrepreneurial function. Schumpeter was concerned with defining the ideal-type of the 19th century entrepreneur as a mythical demiurge capable of joining the world of scientific knowledge to human work so as to breathe new life into them. But this function of organizing scientific research, as we have seen, has been taken over by the state — though this does not, of course, mean that technological progress stops, or that the entrepreneurial function fades away. In the first place, experience shows that those states which are able to organize advanced research at the highest level are also in a position to get the maximum productivity from technological progress in the economy. But, in the second place, it is not true that the entrepreneurial function must be limited to advanced research. In modern societies, with a high degree of formal education, technological and scientific knowledge is no longer an attribute of a little club of initiates. The figure of the entrepreneurial innovator as an extraordinary individual is fading away because everybody can become an entrepreneur. With the achievement of the scientific mode of production the innovative function will become increasingly widespread and “popular”. Indeed it consists in the individual ability to organize and co-ordinate human labour efficiently in the pursuit of a common target, accepting, in the case of a private firm, the risk of bankruptcy. Of course, the common target will remain the highest profit, which is the best measure of a firm’s ability to compete on the market.
We need to revise Schumpeter’s prophecy when we take a second aspect into consideration. The tendency to develop huge scale industry is probably a vestige of the old mode of production. It is conceivable that small and average size firms will be able in the future to outstrip the giants of the past in terms of efficiency. The existence of the big enterprise depends on two circumstances. Firstly, on the technological factor, i.e. on the working of the law of increasing returns which makes large-scale production more convenient with a great concentration of workers and an extreme specialization of labour. Secondly, on the financial factor, i.e. on the usefulness of concentrating more productive units under a single owner and management, even if the technological factor does not exist. The tendency towards financial concentration is the result of efforts either to control a larger market share or to limit competition and price fluctuations.
Currently, there is some evidence of a turnabout. Even in the car sector, the giant industry par excellence, the technological factor has not developed with the same drive as in the past towards an enlargement of existing firms. Generally, we can observe, however, that modern technologies of information allow a widespread diffusion of productive processes in the direction both of a territorial diffusion and a splintering of the work unit. Many operations, not so long ago made inside the factory, are now made by a myriad of little firms working in the service sector. But the fundamental factor which will decide the optimum size of the firm will be the kinds of labour which will agree to bring together their efforts to attain the firm’s targets. Some time ago the size of the plant (for instance, an assembly line) determined a priori the number of workers to be employed. In the future, the functional dimension of the team of technicians and specialists who take the decision to join their efforts in a common economic activity will be increasingly decisive. Since a factory without manual workers is already conceivable, the volume of the means of production will become the “variable” factor in the firm. In the modern enterprise individual ability and scientific knowledge are much more important by far in comparison with the passive and idle contribution of capital and unqualified labour. Of course, this trend will assert itself completely only if all the financial obstacles which hamper it are removed. To this end, the banking system must not discriminate when handing out credit by favouring already existing large enterprises. Equally it is vital to end the uncertainty, risk and financial disorder which currently exist internationally, which have driven enterprises to create big multinational empires in order to get round the limitations created by the absence of a world economic order.
The main feature of the new firm will be self-management, which should not be interpreted, however, in terms of the old 19th century meaning of worker self-management. Self-management implies the disappearance of the distinction between managers and those managed. That dichotomy was based on the solid foundation of the division between intellectual and manual work. In the traditional system, as Taylor quite rightly explained, “even if the workman was well suited to the development and use of scientific data, it would be physically impossible for him to work at his machine and at a desk at the same time. It is also clear that in most cases one type of man is needed to plan ahead and an entirely different type to execute the work”. Since then, the situation has changed and today we can certainly affirm that the same man, sitting at his desk, can control the machine which is making the work which he has planned. For that reason, in the modern factory it would be more correct if we spoke about co-operation and not division of labour. The kind of relationship which will be created among the members of the same firm is indeed based more on the recognition of each other’s knowledge and skills than on the power of the capital share. It will be therefore necessary to adapt the 19th century juridical forms of company partnership, which granted wide powers to the capitalist, to the modern entrepreneurial reality, so that some more egalitarian juridical form arises, such as the co-operative, which seems more appropriate. In socialist countries, like the ones in Eastern Europe, the same result has to be achieved by the opposite route: i.e. by allowing everybody to join or create a co-operative using his own or credit capital.
8. Labour time and free time.
The social impact of the technological and scientific revolution is of great significance and cannot be dealt with exhaustively here. To understand how deeply the scientific mode of production will affect the material condition of modern men’s lives we need merely recall how a new conception of town planning — in which the distinction between city and country and between core and periphery disappears — becomes conceivable. Here it is possible only to hint at a narrower though vital concept: the reduction in working hours.
In this connection, nevertheless, we need firstly to reject the thesis of scholars who either undervalue or deny the importance of reduction in working hours. For instance, H. Braverman maintains that the technological progress and automation do not lead to progressive freedom from work but on the contrary increase its degradation and subordination to capital’s power. For Braverman, who is not able to rid himself of such old-fashioned categories as the “capitalist mode of production”, the boom in the service sector and creeping automation in market economies will merely change the form, but not the substance, of the antagonistic relationship between capital and work. Automation has no other effect save that of depriving the worker further of his residual creative potentialities, already devalued when industry replaced artisan labour.
Braverman’s thesis lays itself open to empirical attack. The increasing demand for jobs corresponding to the higher level of education attained by young people and the possibility of satisfying this demand mainly through either the expansion of the service sector (the only one growing in modern economies) or industrial jobs which are in any case more “intelligent” than traditional ones, raises some doubts about the existence of the continued “degradation” of labour.
But the essential point lies elsewhere. It is an innate feature of vulgar Marxism to restrict social life to the class struggle. In such a way, the categories of “capital” and “labour” assume an a-historical and eternal dimension so that we perceive incurable contrasts even where they are disappearing. The automation of productive processes by definition eliminates “stupid” (in Smith’s meaning) labour at the same time as it creates “intelligent” labour: the question is, therefore, whether it is possible to achieve rational control of that process and how society can obtain the maximum wellbeing. The prospect of increasingly freeing mankind from hard work cannot be refused a priori as a devilish capitalist plot designed to illude workers in order to exploit them better.
What Braverman refuses even to take into consideration was already foreseen and analyzed by Marx himself, even if, needless to say, only in its more general and abstract aspects. In the Grundrisse we can find an ante litteram description of post-industrial society and the new condition of labour free from the obsessing repetitiveness of the industrial factory. The great significance of an automated productive process lies in its ability to reduce the social need for specialized and “stupid” labour to a minimum. As compared with the old industrial system we should identify the great productive potential of the scientific mode of production precisely with this fact. “Saving labour time is tantamount, says Marx, to an increase in free time, i.e. the time devoted to the full development of the individual, development which in its turn reacts, as the highest productivity, on labour productivity… Free time — which is both leisure time and superior activities time — has, of course, transformed its holder into a different subject, and it is as a different subject that he afterwards participates even in the material productive process”. We are therefore confronted with a real reversal of economic categories: “labour time is no longer the measure of wealth, but leisure time”.
In the hunters’ and fishermen’s society, the standard of living of individuals is extremely precarious because they are exposed to nature. All human energies are spasmodically engaged against the external and adverse forces of nature: it is a case of life or death. With stock raising and permanent agriculture, human conditions clearly improve. Towns are built and theoretical activities can flourish. Later on, crafts and, on that basis, the first forms of capitalist production developed. But freedom and welfare once more belonged to few people: serfdom was a structural factor which accompanied human history from antiquity to the modern age (even if camouflaged, like peasants in the Tzarist empire). With the industrial revolution the new urban proletarian class was born. The proletarian condition consisted in being juridically free, but in fact subjugated to the hard law of factory work under the power of the capitalist bourgeoisie. The situation now in sight is profoundly different. With the new scientific mode of production the possibilities of freeing labour from alienating and repetitive tasks are practically boundless. There are no obstacles in principle to the complete automation of production processes and there are no limits to the quantity of energy available in nature, thanks to potential exploitation of renewable energies (nuclear fusion and solar energy). For the first time in history it is therefore possible to think of a society without class and individual exploitation. “If shuttles could weave alone, if plectrum itself could play the zither, said Aristotle, then employers would be able to do without workers, and masters without slaves”. And that is the condition of modern man who is at last able to let the loom weave and the zither play by means of “intelligent” machines.
Human labour will never stop being hard and painful, because even writing a novel or discovering a new chemical formula requires strain and sacrifice. But the novelist and the scientist will enrich their personality by their work. In the future, human labour will be productive and useful to society only when matched with creativity and self-education of individual. The scientific mode of production frees men from manual labour, not from work tout court, because, as we have already said, work is also the toil which matches intellectual creativity and which must be considered as essential to human nature, if it is true that what drives men towards knowledge has a moral basis. But it is important to acknowledge that in our age planning, i.e. the rational organization of social life, can at last place the goal of emancipating man from material and “stupid” work on history’s agenda. We are, therefore, on the threshold of a new world in which man’s old dream of “freeing himself from need”, vainly pursued since the very beginning of his passionate struggle against “niggardly and harsh” nature, really seems to be on the point of becoming a reality.
J.M. Keynes, The General Theory of Employment, Interest and Money, Macmillan, London, 1973, vol. VII, p. 349.
W. Leontief, “The World Economy in the Year 2000”, in Scientific American, September 1980.
A. Th. Angelopoulos, Global Plan for Employment. A New Marshall Plan, Praeger Publishers, New York, 1983.
We are referring to two collections of essays: The Capitalist World-Economy, CUP, Cambridge, 1980 and The Politics of the World-Economy, CUP, Cambridge, 1984.
Cfr. The Capitalist World-Economy, op. cit., p. 35.
Cfr. The Politics of the World-Economy, op. cit., p. 5.
For an accurate historical reconstruction of the theory of the four stages see R.L. Meek, Social Science and the Ignoble Savage, CUP, Cambridge, 1976.
F. List, The National System of Political Economy, Augustus M. Kelley, New York, 1966, p. 347.
Ibidem, p. 177.
See the Introduction, in M. Hirst, Life of Friedrich List, Augustus M. Kelley, New York, 1965, pp. 306-7.
F. List, The National System of Political Economy, op. cit., p. 137.
This manuscript was recently discovered and published in German in the Beiträge zur Geschichte der deutschen Arbeiterbewegung, 1972, n. 3, pp. 423-446.
K. Marx, F. Engels, The German Ideology, International Publishers, New York, p. 43. My italics.
For an interesting discussion of the notion of balance between society and nature, on the one hand, and between different social forces, on the other hand, see N.I. Bukharin, Teoria del materialismo storico, La Nuova Italia, Florence, 1977 (consulted in the Italian edition; the first Russian edition dates back to 1921).
These observations ought to be enough to justify the preference for Marxist terminology as compared with the commoner but less precise reference to “stages of development”. For example W.W. Rostow, (The Stages of Economic Growth, CUP, Cambridge, 1960) speaks of “stages of growth” both to discuss the problem of the transition from a pre-industrial mode of production to an industrial mode of production and to indicate the various phases of development within the same mode of production.
M. Weber, “Die ‘Objektivität’ sozialwissenschaftlicher und sozialpolitischer Erkenntnis”, in Gesammelte Aufsaetze zur Wissenschaftlehre, Mohr, Tübingen, 1922, pp. 146-214.
This is the way E. Weil puts it in Philosophie politique, Vrin, Paris, 1966. In particular, Weil asserts on p. 90: “Only a rationalistic and mechanistic society can attempt to understand itself in a science, i.e. in a calculating analysis, in a description which does not admit any criterion other than calculability itself, instead of trying to understand itself in a system of various values co-ordinated or which need to be co-ordinated (a moral, a summum bonum with its lower bona).” Later on he adds on p. 93: “… the individual who poses the problem of freedom, his freedom, does not, by virtue of his personal individuality, belong to the field of social sciences. These sciences do not deal with him and have nothing to say about him.”
These statements are perhaps enough to avoid the re-opening of the old dispute between the supporters of the dialectic method and the supporters of the scientific method which did so much damage to the proper understanding and use of the notion of mode of production even within the Marxist tradition of thinking. For example, Gramsci (in his collection of essays published as Quaderni del carcere, “Il materialismo storico e la filosofia di Benedetto Croce”, Einaudi, Turin, 1966) chides Bukharin for having tried to reduce the “philosophy of praxis” (Marxism for Gramsci) to a scientific theory, using the method of physical sciences. In. the same way, Gramsci criticizes Croce for having tried in his works on historical materialism (Materialismo storico ed economia marxista) to consider it a simple “canon for the interpretation of history”. In actual fact, it is possible to argue that this polemic clarifies why historical materialism, when interpreted as an ideal-type or canon for interpretation of history, finds consensus on its use among scholars belonging to different ideological trends.
This forecast is formulated in Ch. 35: “Continental Policy”, in the National system of political economy where List, among other things, states “If we only consider the enormous interests which the nations of the Continent have in common as opposed to the English wartime supremacy, we shall be led to the conviction that nothing is so necessary to these nations as union, and nothing is so ruinous to them as Continental Wars.”
“For the same causes which have raised Great Britain to her present exalted position, will (probably in the course of the next century) raise the United States of America to a degree of industry, wealth, and power, which will surpass the position in which England stands, as far as at present England excels little Holland.” (Op cit., pp. 421 and 423).
Beiträge zur Geschichte der deutschen Arbeiterbewegung, op. cit.
In the manuscript quoted, criticizing List, Marx states literally that “the state… is subjected to bourgeois society”. And on the political role of the idea of nation he argues that “All that nations have done as nations, has been done for human society, all their value lies only in this, that each nation has experimented to the full for other nations newer central points of determination, within which man has completely achieved his own development…”. Obviously this is the cultural role of nations, when culture acts and spreads all around spontaneously. But the nation state, as a military power, does not act in the world only through the spontaneous diffusion of culture.
On this point see Z.A. Pelczynski’s convincing analysis “Nation, Civil Society, State: Hegelian Sources of the Marxian Non-theory of Nationality”, in The State and Civil Society. Studies in Hegel’s Political Philosophy, (ed. by Z.A. Pelczynski), CUP, Cambridge, 1984, pp. 262-278.
On the relationship between the mode of production and power politics see the Introduzione of S. Pistone’s Politica di potenza e imperialismo (edited by S. Pistone), F. Angeli, Milan, 1973. Among scholars who have attempted to clarify the relationship between evolution of the productive process and raison d’état we should include O. Hintze. Among his most significant essays, as well as those contained in the Anthology just quoted, we may mention: “Der moderne Kapitalismus als historisches Individuum. Ein kritischer Bericht über Sombarts Werk” in Soziologie und Geschichte, Vandenhoeck & Ruprecht, Göttingen, 1964, pp. 374-426.
K. Marx, Foundations of the Critique of Political Economy, Penguin, Harmondsworth, 1973.
K. Marx, The German Ideology, op. cit., pp. 77-78.
P. Bairoch, The Economic Development of the Third World since 1900, Methuen & Co. Ltd, London, 1975, p. 93.
Data taken from A. Maddison, “Western Economic Performance in the 1970s: a Perspective and Assessment”, in Banca Nazionale del Lavoro Quarterly Review, vol. 33, September 1980, pp. 247-289.
Data taken from P. Bairoch, “International Industrialization Levels from 1750 to 1980”, in The Journal of European Economic History, vol. 11, n. 2, 1982, pp. 269-333.
Kiyoshi Kojima, “Economic Integration in the Asian-Pacific Region,” in Hitotsubashi Journal of Economics, February 1976, pp. 1-16; and, in the same review, “Australia’s Trade with Asia: some Policy Issues”, June 1981, pp. 1-14.
Proposals for a federation of Balkan countries were put forward by Tito and Dimitrov. During a press conference in Sophia, on the January 21st, 1948, Dimitrov proposed a Balkan federation between Romania, Bulgaria, Yugoslavia, Albania, Czechoslovakia, Poland and Hungary. But, after Pravda’s criticism (January 28th), the project was abandoned. Cfr. S. Leonardi, L’Europe et le mouvement socialiste, Fédérop, Lyon, 1978.
Cfr. A. Inotai, Regional Economic Integration and International Division of Labour, Hungarian Scientific Council for World Economy, Budapest, 1982.
Cfr. C. Coker, The Soviet Union, Eastern Europe and the New International Economic Order, The Washington Paper, vol. XII, Praeger, New York, 1984.
Cfr. J. Bognar, End-Century Crossroads of Development and Co-operation, Hungarian Scientific Council for World Economy, Budapest, 1980; especially the chapter on “The CMEA’s ties with the world economy at time of epochal change in international economic relations”. See also T. Palankai, Changes in the Character of International Economic Relations, Department of World Economy, University Karl Marx, Budapest, 1985.
Terminology, as with every new phenomenon, is still uncertain. Sociologists mainly use the term “post-industrial society” (for instance, D. Bell, The Coming of Post-Industrial Society, Penguin Books, Harmondsworth, 1973; and A. Touraine, La société post-industrielle, Denoël, Paris, 1969), while in socialist countries the term “Scientific and technological revolution” is preferred (Cfr. R. Richta, Civilizace na rozcesti, Prague, 1968). Both terms have some drawbacks. By post-industrial society we clearly mean the social and production framework which we are moving away from, we thus leave undefined the features of the new social form. With “scientific and technological revolution” we highlight the causes of the change, but no reference is made to the nature of the stages preceding the “revolution”: therefore some people speak of the third industrial revolution, others of the fourth, etc. The terminology here suggested, “scientific mode of production”, has no ambiguities from that point of view, but in its turn it has some shortcomings (for instance, the term “scientific society” is not commonplace, while the term post-industrial society is already widely used). On the social effects of the scientific mode of production, it should be pointed out that as long ago as 1957, Mario Albertini clearly illustrated its consequences on the working class in his essay Il modo di produzione post-industriale e la fine della condizione operaia, (Roma, 1957); reprinted in Il Federalista, November 1976, pp. 254-61.
Cfr. J. Bognar, Balance of Achievements of Twenty-five Years of Hungary’s Economic Development, Hungarian Scientific Council for World Economy, Budapest, 1982.
As far as the end of the development potential of Keynesian consumerism is concerned, we may note that in the thirties while there was a drastic slowdown in international trade, a marked increase in industrial production was nevertheless possible: there was therefore great potential in home demand which could be exploited for growth policies based on consumption and investment. On the contrary, in the seventies any fall in international trade was matched by a more drastic fall in manufacturing production. Therefore, it no longer seems possible to think in terms of national economic recovery, i.e. without being deeply integrated in world economic development (for statistics on this problem see A.G. Kenwood and A.L. Lougheed, The Growth of the International Economy, George Allen & Unwin, London, 1983, Chaps. 14 and 20).
For this data see J. Fourastié, Pourquoi nous travaillons, PUP, Paris, 1976; and The Economist, July 28th, 1984, pp. 17-20.
N. Kaldor, Causes of the Slow Rate of Economic Growth of the United Kingdom, CUP, Cambridge, 1966, p. 3.
N. Kaldor, op. cit., p.29.
Among the policies put into effect by the British Government, during the years in which Kaldor (then economic adviser to the Labour Party) put forth this strategy, was the Selective Employment Tax, which was designed to discourage employment in non-industrial sectors.
N. Kaldor, op. cit., p. 8.
Attempts to test Kaldor’s growth laws do not seem to have been successful. In a work by T.F. Cripps and K.J. Tarling (Growth in Advanced Capitalist Economies 1950-1970, CUP, Cambridge, 1973) they are summarized as follows: “(a) the growth of aggregate production is closely related to the growth of manufacturing output; (b) in manufacturing the growth of productivity (output per man) is closely related to the growth of employment; (c) the increase in manufacturing employment is inversely related to changes in employment in agriculture and services; (d) in these latter sectors the growth of output is independent of the growth of employment” (p. 6).
We may note that by itself the first statement (a) is not enough to formulate a growth law. As, on the other hand, Kaldor himself admits, a statistical correlation might arise between total production increases and manufacturing production increases, simply because of the relative size of value added to the total. Moreover, Cripps and Tarling find a correlation coefficient for the commercial sector as high as in the manufacturing sector (p. 22). The last statement (d) does not only concern the extra manufacturing sectors. Indeed, the lack of correlation between productivity increases and employment increases is a general feature of the new type of development. And this observation is true for statement (c) too, because shifts in employment between sectors are obviously meaningful only if there is a relationship between changes in employment and changes in productivity. The decisive question, to test Kaldor’s laws, is therefore statement (b), i.e. the relationship between productivity increases and employment increases in industry. But on this point Cripps and Tarling were not able to find meaningful evidence. Later on, this point was disputed by other economists, too (see R.E. Rowthorn, “What remains of Kaldor’s Law?”, in Economic Journal, March 1975; and for a survey of the subject cfr. A.T. Thirwall, “A Plain Man’s Guide to Kaldor’s Growth Laws”, in Journal of Post-Keynesian Economics, Spring 1983).
For data on employment cfr. M. Wegner, The Employment Miracle in the United States and Stagnation Employment in the European Community, Commission of the European Communities, Economic Paper n. 17, July 1983; and for productivity data efr. A.D. Roy, “Labour Productivity in the 1980: An International Comparison”, in National Institute Economic Review, 1982, n. 101, pp. 26-37.
R. Rothwell and W. Zegveld, Technical Change and Employment, Francis Pinter, London, 1979.
The distinction between the static and dynamic formulation of the law of increasing returns was practically abandoned after J. Viner’s treatment of the Marshallian cost curves (“Cost Curves and Supply Curves,” in Zeitschrift für Nationalökonomie, III, 1931, pp. 23-46) which was immediately accepted by all economists. Viner carefully distinguished economies arising from distribution on the quantities produced of overall expenses (a mainly short-term phenomenon) from internal economies for large-scale production arising from the adjustment of plant to greater and subsequently produced quantities: in the long run there are no fixed costs. In this way, Viner was able to draw a long-term supply curve sloping down towards the quantity produced.
Difficulties arise as soon as we try to explain the “causes” of increasing returns. The debate in the thirties (mainly between J. Robinson, H. Chamberlain and N. Kaldor) showed that economists are inevitably tempted to “extend” short-term causes to long-term causes, ascribing the cause of increasing returns to a “indivisibility of factors”, bringing the distinction between fixed and variable factors in again surreptitiously.
A restatement in “dynamic” terms of the law of increasing returns is more in keeping with traditional doctrine. A. Marshall, for instance, warned (Principles of Economics, Appendix H) against the attempt to bring in the concept of “margin of production” into the long-term analysis of firms with increasing returns. Moreover, he himself drew up an essentially dynamic law, as his attempt to draw an “irreversible” supply curve in the case of reduced production shows. Viner quite rightly pointed out that this is only possible when innovations are a function of the scale of production. But this is in fact the phenomenon discussed here, which can be represented only in an improper way by means of a long-term “static” curve, but the understanding of which is essential for proper definition of the law of increasing returns to scale.
A. Smith, An Inquiry into the Nature and Causes of the Wealth of Nations, Everyman’s Library, London, 1964, vol. II, p. 264.
On performances of new technologies during the phase of planning new machines and production see T.G. Gunn, “The Mechanization of Design and Manufacturing,” in Scientific American, September 1982; on biotechnologies see F. Gros, F. Jacob, P. Royer, Sciences de la vie et société, La Documentation française, Paris, 1979.
This is in fact the result which emerges from the statistical relationship examined by J. Gershuny, After Industrial Society? The Emerging Self-service Economy, Macmillan, London, 1978, pp. 111-112.
According to A. Maddison, (“Long Run Dynamics of Productivity Growth,” in Banca Nazionale del Lavoro Quarterly Review, n. 128, March 1979, p. 31), who considers 16 industrialized countries in the 1950-1976 period, the average growth rate in productivity increases was 5 per cent for agriculture, 4.5 per cent for industry but only 2.2 per cent for services. In the same period, the average GNP growth rate was 3.9 per cent.
Cfr. for instance R. Bacon and W. Eltis, Britain’s Economic Problem: Too Few Producers, Macmillan, London, 1976; and F. Blackby (ed), De-Industrialization, Heinemann, London, 1979. The same criticism could be of course levelled at Kaldor, who was unable to see the productive role of the service sector.
J.A. Schumpeter, Capitalism, Socialism and Democracy, Unwin University Books, London, 1970, p. 131.
For similar conclusions see R. Fuchs, The Service Economy, NBER, New York, 1968, p. 196.
F.W. Taylor, The Principles of Scientific Management (1911), The Norton Library, New York, 1967, p. 38.
H. Braverman, Labor and Monopoly Capital. The Degradation of Work in the Twentieth Century, Monthly Review Press, New York and London, 1974.
K. Marx, Grundrisse der Kritik der politische Ökonomie, Dietz Verlag, Berlin, 1953, p. 599.
K. Marx, op. cit., p. 596. Agnes Heller, who has cleverly reconstructed the world of freedom from hard work of the Grundrisse writes: “The true wealth of man and society is created not by working time, but by free time. Therefore the social wealth of the ‘partnership producers’ is not measurable in terms of work time but in terms of free time” (A. Heller, La teoria dei bisogni in Marx, Feltrinelli, Milan, 1978, pp. 114-115).