Cooking the Books 2: Businessmen and opera-dancers
“Smith argued that only labour (by which he meant entrepreneurial businessmen) created value and that government and its hangers-on added nothing” (6 June) (www.thestar.com/article/645833).
It is true that Adam Smith did argue that governments and their hangers-on did not create any new value but were maintained out of the value of those who did. It is not true, however, that he thought that only the labour of entrepreneurial businessmen created value.
He deals with this question in Chapter III of Book II of The Wealth of Nations (1776):
“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. Thus 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. Though the manufacturer has his wages advanced to him by his master, he, in reality, costs him no expense, the value of those wages being generally restored, together with a profit, in the improved value of the subject upon which his labour is bestowed. But the maintenance of a menial servant never is restored. A man grows rich by employing a multitude of manufacturers: he grows poor by maintaining a multitude of menial servants.”
This is clear enough. Only those who manufacture (in the original, literal sense of someone who makes something with their hands, manus being the Latin word for hand) something tangible and lasting, that can be exchanged for something with the same labour content, create value. This does not include the “masters”. Smith explicitly says that they get rich from the value created by the “manufacturers” they employ.
Smith’s concept of productive labour could even be called “workerist” in that it has to be manual labour that produces a tangible, a material, object. Even Marx didn’t go that far as he counted the non-manual work of designing and planning manual work as productive.
Smith went on:
“The labour of some of the most respectable orders in the society is, like that of menial servants, unproductive of any value, and does not fix or realize itself in any permanent subject; or vendible commodity, which endures after that labour is past, and for which an equal quantity of labour could afterwards be procured. The sovereign, for example, with all the officers both of justice and war who serve under him, the whole army and navy, are unproductive labourers. 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, some both of the gravest and most important, and some of the most frivolous professions: churchmen, lawyers, physicians, men of letters of all kinds; players, buffoons, musicians, opera-singers, opera-dancers, etc.”
Smith certainly saw the economic role of “masters” as essential but not because he thought they alone created value while government employees, buffoons and opera-dancers merely consumed it. It was because he thought that private enterprise, laissez-faire capitalism was the most natural way to organise the production and distribution of wealth. But it isn’t. So entrepreneurial businessmen are not needed.