Political Econ of Growth. Paul A. Baran
manpower and fully usable productive facilities, and, while varying in intensity from period to period, immobilizes a large proportion of the available human and material resources. The impact of this continuously present unemployment of productive potentialities is not adequately gauged by assessing and aggregating the differences between output in times of prosperity and times of depression. This procedure overlooks in the first place that even in most periods of so-called full employment there is not inconsiderable unemployment of labor and productive capacity, and secondly that even boom outputs are lower than what they could be if businesses were not constrained to reckon with bad years as well as with good years and to adjust accordingly their plans for production and investment. Thus calculations based merely on comparisons between outputs in different phases of the business cycle necessarily understate the volume of output lost through fluctuations in the level of employment.
Yet even such calculations, conservative as they are, present a picture sufficiently illustrative of the volume of potential economic surplus attributable to mass unemployment. For instance, Isador Lubin, then Commissioner of Labor Statistics, United States Department of Labor, stated in his testimony at the Hearings of the Temporary National Economic Committee (December 1, 1938) : “Assuming a working population of the size of 1929, you will note that if you add the employment lost in ’30, ’31, ’32, up to 1938, the total number of man-years lost during that period of time was 43,435,000. Or, to put it in other words, if everybody who had worked in 1929 continued their employment during the past 9 years, all of us who were working could take a vacation for a year and 2 months and the loss in national income would be no greater than it has actually been.”24 In terms of national income valued in 1929 prices the total loss amounted to $133 billion (as compared with the national income in 1929 of $81 billion).25 This unemployment of manpower was accompanied by surplus capacity of productive facilities amounting in the aggregate to about 20 percent “at the peak,” that is, in 1929, and to “more than a third” at the time of the hearings, that is, in 1938.26
It should be remembered that Lubin’s calculations were based on the assumptions that the working population remained constant from 1929 to 1938 and that its productivity also stayed unchanged during the entire period. In actual fact, as he himself realized, the working population had grown by 6 million, and output per capita would have grown at usual rates given more or less prosperous economic conditions. Taking this increase of employable manpower into account, and considering the rates of growth of productivity that were observed in the ’20s and that could have been expected to prevail in the ’30s, “Dr. L. H. Bean of the Department of Agriculture has estimated that the loss in national income has been $293 billion since 1929.”27
These calculations were carried to 1938 because that was the time the hearings were held. The conditions of underemployment there depicted prevailed until the outbreak of the Second World War. The war mobilization demonstrated even more convincingly than all statistical computations how large a productive potential had been dormant in the American economy. As is well known, in the years of the war the United States was not merely able to raise a military establishment comprising over 12 million people, to produce a prodigious quantity of armaments, to supply its allies with large quantities of food and other goods, but to increase simultaneously the consumption of its civilian population. The entire war, in other words—the largest and most costly war in its history—was supported by the United States by the mobilization of a part of its potential economic surplus.
It hardly needs stressing that the waste resulting from unemployment is neither an exclusively American phenomenon nor of merely historical interest. It can be readily observed at the present time, and it has been characteristic of the entire history of capitalism everywhere. While its magnitude has been different in different countries at different times, it always depressed total output considerably below what it could have been in a rationally organized society. Nor is the impact of unemployment adequately expressed in any measure of output foregone. No one can estimate the benefits to society that might have been realized, if the energy, the ability to work, the creative genius of the millions of unemployed had been harnessed for productive ends.
IV
If the potential economic surplus is a category of considerable scientific interest for the understanding of the irrationality of the capitalist order, and of major practical significance to a capitalist society under emergency conditions or facing the necessity of economic development, the planned economic surplus is relevant only to comprehensive economic planning under socialism. It is the difference between society’s “optimum” output attainable in a historically given natural and technological environment under conditions of planned “optimal” utilization of all available productive resources, and some chosen “optimal” volume of consumption. The meaning and contents of the “optimum” involved are essentially different from those attached to this notion in bourgeois economics. They do not reflect a configuration of production and consumption determined by profit considerations of individual firms, by the income distribution, tastes, and social pressures of a capitalist order; they represent a considered judgment of a socialist community guided by reason and science. Thus as far as resource utilization is concerned, it implies a far-reaching rationalization of society’s productive apparatus (liquidation of inefficient units of production, maximal economies of scale, etc.), elimination of redundant product differentiation, abolition of unproductive labor (as previously defined), a scientific policy of conservation of human and natural resources, and the like.
Nor does this “optimum” presuppose the maximization of output that might be attainable in a country at any given time. It may well be associated with a less than maximum output in view of a voluntarily shortened labor day, of an increase in the amount of time devoted to education, or of conscious discarding of certain noxious types of production (coal mining, for example). What is crucial is that the volume of output would not be determined by the fortuitous outcome of a number of uncoordinated decisions on the part of individual businessmen and corporations, but by a rational plan expressing what society would wish to produce, to consume, to save, and to invest at any given time.28
Furthermore the “optimum” husbandry of resources in a socialist economy does not call by any means for reduction of consumption to merely what is essential. It can and will go together with a level of consumption that is considerably higher than what the criterion of essentiality might suggest. Again, what is decisive is that the level of consumption and therefore also the volume of the actually generated surplus would not be determined by the mechanism of profit maximization but by a rational plan reflecting the society’s preference as to current consumption versus future consumption. Therefore the economic surplus under socialism may be smaller or larger than the actual economic surplus under capitalism, or may even be equal to zero if society should choose to refrain from net investment. It would depend on the stage that has been reached in the historical process, on the degree of development of productive resources, on the structure and growth of human needs.
So much about our primitive tools. Now let us try to use them on some historical material.
1 It comprises obviously a lesser share of total output than that encompassed by Marx’s notion of surplus value. The latter, it will be recalled, consists of the entire difference between aggregate net output and the real income of labor. The “actual economic surplus” as defined above is merely that part of surplus value that is being accumulated; it does not include, in other words, the consumption of the capitalist class, the government’s spending on administration, military establishment, and the like.
2 While it need not detain us at this point, it is worth bearing in mind that from the standpoint of economic development it is most important whether the actual economic surplus assumes the form of capital goods increasing productivity, or appears as additions to inventories or gold hoards only tenuously, if at all, related to the “strengthening of society’s technical arm.”
3 This also refers to a different quantity of output than what would represent surplus value in Marx’s sense. On one hand, it excludes such elements of surplus value as what was called above essential consumption of capitalists, what could be considered essential outlays on government administration and the like; on the other hand, it comprises what