36 ECONOMIES PROSPER BY ‘PRODUCTIVE LABOUR’

Adam Smith writes about the accumulation of capital via labour and states, ‘There is one sort of labour which adds to the value of the subject upon which it is bestowed: there is another which has no such effect. The former as it produces a value, may be called productive; the latter, unproductive labour.’

DEFINING IDEA…

Just as there is a trend toward high tech today, there is another trend toward high touch - homemade and wholesome.

~ MERYL GARDNER, MARKETING SPECIALIST

Smith uses the examples of manufacturing and a ‘menial servant’ to illustrate his point about productive versus unproductive labour:‘The labour of a manufacturer adds, generally to the value of the materials which he works upon, that of his own maintenance and of his master’s profit. The labour of a menial servant on the contrary adds to the value of nothing.’ His point is not that the menial service isn’t of value, but that it cannot be stored and doesn’t add value to the economy. In Smith’s time the wealthy had servants and while their employers may have ‘valued’ their assistance around their stately home, they did not add to their wealth. If anything, they detracted from it. The factory owner, however, employing productive labour became wealthier as a result of that labour.

Smith equates this idea to governments and ‘sovereigns’, where the vast bulk of their expense is paid out on unproductive labour. Today, just check out your nearest roadworks to see the stark difference between productive private sector labour and unproductive public sector labour! Most likely, you will witness a dozen men standing around in bright yellow vests, leaning on shovels and looking down a hole that one of them made three weeks ago!

Smith reminds us that, ‘A man grows rich by employing a multitude of manufacturers; he grows poor by maintaining a multitude of menial servants.’ If this is true of an individual, then it is also true of a community and a country. When you think of great manufacturing nations, Japan or China immediately spring to mind. China is booming largely because of their manufacturing based economy. This is no coincidence: most Chinese workers are employed in productive labour. That’s no longer true of the UK, where only 14% of the total workforce is employed in manufacturing.

This must have consequences for the UK economy. In October 2008, the Office of National Statistics reported that UK manufacturing output fell by 4.9% compared to the same time in the previous year, the biggest drop in six years. A national aversion to making things may also be seen in the supermarket, where everything from grated cheese to frozen sliced lemon can be purchased. Are we really so inept or lazy that we buy frozen sliced lemon? Perhaps it’s time to take note of Smith’s advice and turn our attention back to productive labour.

HERE’S AN IDEA FOR YOU…

Making stuff is good for the soul and doesn’t have to be done in a factory, so bring the idea of manufacture into your home. Start making things yourself instead of buying them - no one is too busy to grate cheese! Instead of buying a frozen lasagne that tastes of cardboard, hop online, print out a recipe and make it yourself! It’s better for you, often cheaper and tastes a whole lot better.