Question on economics

[Die Neue Zeit]

OK, so I've read many posts here regarding the decadence of capitalism, productive capital vs. speculative capital, wealth-creating sectors vs. wealth-consuming sectors.

I'm very doubtful myself in regards to the merits of mainstream economic activity measures (and even the old Soviet measure of GMP), and this is mainly because I come from a finance background (don't worry, I "aced" intro macro, so I'm in a position to posit this doubt).

For a basic example, a business whose sole purpose is to repair something: shouldn't its activity actually lower national income instead of increasing it ("consumption" in the GDP formula)? On the income statement of any company, repairs are considered to be an expense.



EDIT: What about a business whose sole purpose is to engage in consulting? [Unlike the shoe shiner below, it isn't modifying a pre-existing commodity.]

[ComradeRed]

Uh...what exactly is the question again? :huh:

[Die Neue Zeit]

Originally posted by [email protected] 08, 2007 08:36 pm
Uh...what exactly is the question again? :huh:
^^^ Should a business activity in the area of repairing something (as measured by the customer "consumption" of such) lower national income rather than increase it?

The traditional GDP formula is C + I + G + (X - M), but I'm arguing that some "increases" in C actually lower more proper, accounting-based measurements of national income. This, then, would explain all that stuff regarding wealth-producing sectors and wealth-consuming sectors, both of which for some reason "increase" national income:

WIKI: According to some economists, the service sector tends to be wealth consuming, whereas manufacturing is wealth producing. Sir Keith Joseph in his lecture Monetarism IS Not Enough, contrasted wealth-producing sectors in an economy such as manufacturing with the service sector which tends to be a wealth-consuming sector. He contended that an economy declines as its wealth-producing sector begins to shrink. (http://en.wikipedia.org/wiki/Tertiary_sector_of_industry#Attitudes_toward_terti ary_sector)

I am merely trying to provide an appropriate, more accounting-based approach towards supporting Joseph's position on this one issue (cuz he was a reactionary Tory, after all).

[ComradeRed]

Originally posted by [email protected] 08, 2007 08:23 pm
^^^ Should a business activity in the area of repairing something (as measured by the customer "consumption" of such) lower national income rather than increase it?
Well national income would measure the total value produced by a society, right?

So if its useful labor, which this is (it "produces" a use-value afterall), then it does increase the national income...albeit not at a rate that is comparable to, say, creating a brand new replacement for the broken commodities.

That's a Marxist perspective on the issue ;)

[Die Neue Zeit]

Originally posted by ComradeRed+September 08, 2007 10:16 pm--> (ComradeRed @ September 08, 2007 10:16 pm)
[email protected] 08, 2007 08:23 pm
^^^ Should a business activity in the area of repairing something (as measured by the customer "consumption" of such) lower national income rather than increase it?
Well national income would measure the total value produced by a society, right?

So if its useful labor, which this is (it "produces" a use-value after all), then it does increase the national income...albeit not at a rate that is comparable to, say, creating a brand new replacement for the broken commodities.

That's a Marxist perspective on the issue ;) [/b]
But what about wealth-consuming sectors of the economy? Lots of service sectors - like public administration - consume wealth, as opposed to manufacturing, no (and there was a lot of talk on this board about this only a short while back, not to mention the old Soviet measurement of gross material product, for all its non-depreciative deficiencies)? And if so, shouldn't their activities lower national income (thus national "retained earnings," too)?

[ComradeRed]

Originally posted by [email protected] 08, 2007 10:06 pm
But what about wealth-consuming sectors of the economy? Lots of service sectors - like public administration - consume wealth, as opposed to manufacturing, no (and there was a lot of talk on this board about this only a short while back, not to mention the old Soviet measurement of gross material product, for all its non-depreciative deficiencies)? And if so, shouldn't their activities lower national income (thus national "retained earnings," too)?
Hmm...I don't think that this "sector" of the economy is phrased quite right.

Consider a simplistic abstraction of a shoe shiner. He uses rags and shoe polish. But he is also "generating" useful labor, despite "consuming" rags and shoe polish.

So from the perspective of the LTV, there is more useful labor "generated" by this shoe shiner doing his work despite "consuming" commodities.

The same logic goes to machinery used in the construction of commodities...the difference being machinery builds commodities, and a shoe shiner only "modifies" pre-existing commodities.

But "modifying" pre-existing goods has happened historically...take, e.g., smithies or anyone else who turns raw materials into finished goods.

I suppose the case could be made that "repair men" don't create new goods, but that doesn't mean their labor is no longer useful.

In my book, as long as the labor is useful, then it's added to the national income.

[Die Neue Zeit]

^^^ So what's your take on the boom in the service sectors at the expense of manufacturing, then (and even the talk here about the difference between wealth production and wealth consumption)?

Consulting is the big one, especially service companies providing consulting services to other service companies, because unlike the shoe shiner isn't modifying a pre-existing commodity.

[ComradeRed]

Originally posted by [email protected] 09, 2007 08:33 am
^^^ So what's your take on the boom in the service sectors at the expense of manufacturing, then (and even the talk here about the difference between wealth production and wealth consumption)?
As I've said, the big criteria for whether a service laborer is a prole or not is whether: 1) s/he is exploited (i.e. surplus value is made from his/her labor), 2) the labor performed is useful labor.

I'm not certain the entire service sector as described by bourgeois economists fulfills this requirement.

Vulgar Economists, as pointed out by Piero Sraffa, are notorious for creating definitions of "sectors" which are either far too broad or too specific to actually be useful.


Consulting is the big one, especially service companies providing consulting services to other service companies, because unlike the shoe shiner isn't modifying a pre-existing commodity. This is true, but e.g. the programmer (which I think is considered a service laborer) is a prole if s/he is not self-employed. S/he performs useful labor and would be exploited in such an instance.

A consultant provides no useful labor, and indeed exploits labor! :o

In no way would a consultant be considered a proletariat. I think depending on "how big" the consultant is, s/he is a petit bourgeoisie scum bag.

[Die Neue Zeit]

Originally posted by ComradeRed+September 14, 2007 05:59 pm--> (ComradeRed @ September 14, 2007 05:59 pm)
[email protected] 09, 2007 08:33 am
^^^ So what's your take on the boom in the service sectors at the expense of manufacturing, then (and even the talk here about the difference between wealth production and wealth consumption)?
As I've said, the big criteria for whether a service laborer is a prole or not is whether: 1) s/he is exploited (i.e. surplus value is made from his/her labor), 2) the labor performed is useful labor.

I'm not certain the entire service sector as described by bourgeois economists fulfills this requirement.

Vulgar Economists, as pointed out by Piero Sraffa, are notorious for creating definitions of "sectors" which are either far too broad or too specific to actually be useful. [/b]
I'm not in any way deriding the services of service laborers. What I am deriding is this huge boom in service industries. Think of it from a "business perspective": you have, on an income statement, various revenue and expense items. All of a sudden, the business is getting all these warranty expenses, corporate repair expenses, consulting expenses, etc. - and all because it didn't pour enough money into R&D and capital equipment (for improved manufacturing) earlier in the "value chain."

On the other hand, food production hasn't gone up by much, due to limits on badly needed capital inflows and continued petit-bourgeois dominance over much of food production (which hampers profit).

All in all, this also coincides with the increased short-term mindedness of the business world, with more focus on the quarterly earnings than on the old multi-year strategic plans. [Decay of capitalism?]

[I guess my contention still boils down to #2 on "useful" labour. After all, while the business is "consuming" the services provided above, the more useful labour would have revolved around improved manufacturing and R&D.]

P.S. - Here's a stat: American corporate spending on IT takes up half of all capital expenditures ($2 trillion dollars/year).