Noni Mausa Inquires into the Nature and Causes of the Wealth of Nations: Monday Hoisted from Comments Weblogging
Noni Mausa: A Nation of the Non-Productive?:
Now and then for fun, I dip into the Wealth of Nations. Here’s a snippet from the beginning of Chapter III:
A man grows rich by employing a multitude of manufacturers; he grows poor by maintaining a multitude or menial servants. The labour of the latter, however, has its value, and deserves its reward as well as that of the former. But the labour of the manufacturer fixes and realizes itself in some particular subject or vendible commodity, which lasts for some time at least after that labour is past. It is, as it were, a certain quantity of labour stocked and stored up, to be employed, if necessary, upon some other occasion. That subject, or, what is the same thing, the price of that subject, can afterwards, if necessary, put into motion a quantity of labour equal to that which had originally produced it. The labour of the menial servant, on the contrary, does not fix or realize itself in any particular subject or vendible commodity. His services generally perish in the very instant of their performance, and seldom leave any trace of value behind them, for which an equal quantity of service could afterwards be procured.
Notably, within mere paragraphs he goes on to tell us that these nonproductive workers include “…“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…”
So, is America headed toward a state the majority of whose members are either unproductive rulers, soldiers, or servants? Because the growers, manufacturers, builders, miners etc are either disappearing or working for peanuts.
Rulers, soldiers, servants — of course, no nation can consist entirely of rulers and their servants (excepting small niche nations whose living is made off of niche jobs like banking, gambling, religion, and other intangibles.) However, it seems that the trend in the US over the past 30 years has been to offshore as many of Adam Smith’s “productive” jobs as possible, or cut their pay and power stateside. Meanwhile, the US has maintained the huge military and has built up the servant class.
Well, is this a problem? Every creature has its niche, so maybe it could be a good thing for America to become the largest unproductive niche nation on the planet. It works for other, admittedly much smaller, nations. Could it work for the US?
The hazards here depend on internal and external pressures. Externally, being able to reliably utilize the productivity of the rest of the world, as and when needed, at prices the US is happy with, is in large part a function of the huge military. Maybe this is a stable strategy, but the more you depend on a single strategy like this, the more likely a single unforeseen event can hammer a wedge in the spokes. If one American outrage, however objectively minor, induced oil producing nations to stop selling to US customers, what happens to the huge military, and the domestic servant economy?
Internally, reducing the bulk of the population to dependent soldiers or servants is no way to build a resilient, tough and responsive nation. Whether they revolt or not, such a social structure cannot be counted on to respond optimally to new situations and threats.
I have always found it interesting to try to puzzle out what Smith thinks he is getting at with his "productive" and "unproductive" labor distinction. Is it about accumulation at the bottom? It is about making stuff as opposed to providing services? Is at about being part of a value chain and hence part of a detailed and hence productive division of labor?