Political Econ of Growth. Paul A. Baran
4 The labor of some of the most respectable orders in the society, is like that of menial servants, unproductive of any value.… The sovereign, for example, with all the officers both of justice and war who serve under him, the whole army and navy, are unproductive laborers. They are the servants of the public, and are maintained by a part Of the annual produce of the industry of other people.… In the same class must be ranked … churchmen, lawyers, physicians, men of letters of all kinds: players, musicians, opera singers, opera dancers, etc.…” Adam Smith, Wealth of Nations (Modern Library ed.), p. 295.
“When the annual productions of a country more than replace its annual consumption, it is said to increase its capital; when its annual consumption is not at least replaced by its annual production, it is said to diminish its capital. Capital may, therefore, be increased by an increased production or by a diminished unproductive consumption.” Ricardo, Principles of Political Economy and Taxation (Everyman’s Library ed.), p. 150.
5 Marx, Theories of Surplus Value (London, 1951), p. 177.
6 J. A. Schumpeter, Capitalism, Socialism and Democracy (New York, 1950), p. 143.
7 Capital (Kerr ed.), Vol. I, p. 668.
8 “The function of economic institutions is to organize economic life in conformity with the community’s wishes … the efficiency of economic organization will … be judged by its conformity to the community’s preferences.” T. Scitovsky, Welfare and Competition (Chicago, 1951), p. 5.
9 For instance Professor Scitovsky—one of the most authoritative writers in the field—observes: … if we begin questioning the consumer’s ability to decide what is good for him, we embark on a road on which it is difficult to stop, and we may end up by throwing overboard the whole concept of consumers’ sovereignty.” Op. cit., p. 184. In actual fact, what is at issue is not the “concept of consumers’ sovereignty” but merely the unhistorical, apologetic version of that concept that underlies bourgeois economics.
10 The Bureau of Labor Statistics of the United States Department of Labor works with some notion of “essential consumption” in compiling its cost of living index. The Heller Committee for Research in Social Economics at the University of California employs similar concepts. Food, housing, and medical requirements for various countries have been studied by the United Nations, by the Food and Agriculture Organization and other agencies, and represent a most important field for further investigations. Cf. Food and Agriculture Organization, FAO Nutritional Studies No. 5, Caloric Requirements (Washington, June 1950); National Research Council, Reprint and Circular Series, Recommended Dietary Allowances (Washington, 1948); United Nations, Housing and Town and Country Planning (1949–1950), as well as the material referred to in these sources.
11 It may be interesting to note that this drive to glorify the capitalist order by eliminating the distinction between productive and unproductive labor has seriously contributed to the self-emasculation of modern economics. Committing its protagonists to treat as productive all activities in capitalist society that earn a monetary reward, the criterion of market approval and market valuation that might have at least a claim to consistency under conditions of pure capitalism becomes a source of serious troubles when what has to be dealt with is a society permeated with feudal remnants. Adherence to the market valuation principle under such circumstances forces economists either into the somewhat ludicrous position of having to criticize the existing state of affairs from the unhistorical and unrealistic standpoint of Mises, Hayek, Knight, and others of that school, or into the uncomfortable necessity to twist and bend the “principle” by claiming usefulness and essentiality for various non marketed activities in view of their “indirect” contribution to marketable output or in view of their essentiality for the preservation and functioning of the capitalist system as a whole.
12 J. A. Schumpeter, Capitalism, Socialism and Democracy (New York, 1950), p. 198.
13 Marx, Grundrisse der Kritik der Politischen Ökonomie (Rohentwurf) (Berlin, 1953), p. 432.
14 Marx, Critique of the Gotha Program, in Marx and Engels, Selected Works (Moscow, 1949–1950), Vol. II. pp. 20 ff.
15 Incidentally, in a rationally planned economy there is no need for excess capacity to exist for any length of time even in declining industries, that is, in industries facing a shrinkage of demand for their products. Timely conversions of such capacities to the production of other outputs could reduce such excess capacity to a minimum.
16 America’s Capacity to Produce and America’s Capacity to Consume (Washington, 1934). For an excellent summary of this study, cf. J. Steindl, Maturity and Stagnation in American Capitalism (Oxford, 1952), pp. 4 ff., from which some sentences in the text above have been borrowed.
17 America’s Capacity to Produce and America’s Capacity to Consume (Washington, 1934), p. 31.
18 Ibid.
19 Lewis H. Robb, “Industrial Capacity and Its Utilization,” Science & Society (Fall 1953), pp. 318–325.
20 “While even under emergency conditions only a relatively small part of this type of potential economic surplus is actually tapped, what has been accomplished on occasions suffices to indicate at least the dimensions of the problem involved. The wartime increase in output that resulted merely from concentration of production in large-scale plants, from the elimination of the most flagrant cases of duplication, cross-hauling, and inefficiency, was most impressive in the United States as well as in Great Britain and Germany.
21 Not that Babbitt—the fittest participant in the “rugged” competitive struggle for survival—who is idolized by some liberal economists and some old-fashioned Chambers of Commerce is a more attractive human specimen than the “modern” man described in David Riesman’s The Lonely Crowd, in C. Wright Mills’ White Collar: The American Middle Classes, in T. K. Quinn’s Giant Business. There indeed would be little room for confidence in the future of the human race if these two types were the only ones to choose from.
22 “We know that under international cartel agreements, patents frequently served not as an incentive to investment but rather as a device for limiting production, establishing restricted market areas, limiting the rate of technical advancement, fixing prices, etc. We know that the prewar Standard Oil-I.G. Farben marriage seriously retarded the development of a synthetic rubber industry in the United States. We know that Standard’s concessions to Farben were, in large part, motivated by a desire to suppress the synthetic gasoline patents outside of Germany. We know that Du Pont’s arrangements with I.C.I. resulted in a division of world markets rather than a dynamic, competitive development of these markets.… Investigations revealed … that when Du Pont developed a pigment which could be utilized either in paints or as a textile dye, the director of one of its research laboratories wrote: ‘Further work may be necessary on adding contaminants to “Monastral” colors to make them unsatisfactory on textiles but satisfactory for paints.’ The investigations described the Rohm & Haas research effort to discover a contaminant which would make methyl methacrylate suitable for use as a commercial molding powder but unfit as an ingredient for dentures. The investigations told of the heroic effort by the General Electric research organization to shorten the life of flashlight batteries, etc.” Walter Adams, American Economic Review (May 1954), p. 191.
23 This approach, suggested originally by Schumpeter, has been given wide currency by J. K. Galbraith’s American Capitalism (Boston, 1952), where we read: “… the social inefficiency of a wealthy community grows with the growth of wealth that goes far to make this inefficiency inconsequential.” (P. 103.)
24 TNEC Investigation of Concentration of Economic Power, Hearings, Part 1 (Washington 1939), p. 12.
25 Ibid., p. 16.
26 Ibid., p. 77.
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