This book provides an alternate foundation for the measurement of the production of nations, and applies it to the U.S. economy for the postwar period. The patterns that result are significantly different from those derived within conventional systems of na- tional accounts. Conventional national accounts seriously distort basic eco- nomic aggregates because they classify military, bureaucratic, and financial activities as creation of new wealth. In fact, these authors argue, such aggregates should be classified as forms of social consumption which, like personal consumption, actually use up social wealth in the performance of their functions. The difference between the two approaches has an impact not only on basic aggregate economic measures, but also on the very understanding of the observed patterns of growth and stagna- tion. In a world of burgeoning militaries, bureaucracies, and sales forces, such matters can assume great significance at the levels of both theory and policy. MEASURING THE WEALTH OF NATIONS Measuring the wealth of nations The political economy of national accounts ANWAR M. SHAIKH New School for Social Research E. AHMET TONAK Simon's Rock College of Bard CAMBRIDGE UNIVERSITY PRESS CAMBRIDGE UNIVERSITY PRESS Cambridge, New York, Melbourne, Madrid, Cape Town, Singapore, Sao Paulo Cambridge University Press The Edinburgh Building, Cambridge CB2 8RU, UK Published in the United States of America by Cambridge University Press, New York www.cambridge.org Information on this title: www.cambridge.org/9780521414241 © Cambridge University Press 1994 This publication is in copyright. Subject to statutory exception and to the provisions of relevant collective licensing agreements, no reproduction of any part may take place without the written permission of Cambridge University Press. First published 1994 Reprinted 1996 First paperback edition 1996 A catalogue record for this publication is available from the British Library ISBN 978-0-521-41424-1 hardback ISBN 978-0-521-56479-3 paperback Transferred to digital printing 2007 CONTENTS List of figures page viii List of tables xi Preface xv 1 Introduction 1 1.1 Approaches to the measurement of national product 1 1.2 Official national accounts 6 1.3 Extended national accounts for the United States 9 1.4 Toward an alternate approach to national accounts 17 2 Basic theoretical foundations 20 2.1 The distinction between production and nonproduction activities 20 2.2 Productive labor under capitalism 29 2.3 Productive labor in orthodox economics 32 2.4 Production labor, surplus value, and profit 34 3 Marxian categories and national accounts: Money value flows 38 3.1 Primary flows: Production and trade 40 3.2 Secondary flows 52 A. Private secondary flo ws: Ground rent, finance, royalties 53 B. Public secondary flows: General government activities 59 3.3 Net transfers from wages, the social wage, and the adjusted rate of surplus value 63 3.4 Foreign trade 65 3.5 Noncapitalist activities and illegal activities 71 3.6 Summary of the relation between Marxian and conventional national accounts 72 Contents vi 4 Marxian categories and national accounts: Labor value calculations 78 4.1 Calculating labor value magnitudes 78 4.2 Rates of exploitation of productive and unproductive workers 86 5 Empirical estimates of Marxian categories 89 5.1 Primary Marxian measures in benchmark years 89 5.2 Annual series for primary measures, based on NIPA data 92 5.3 Employment, wages, and variable capital 107 5.4 Surplus value and surplus product 113 5.5 Marxian, average, and corporate rates of profit 122 5.6 Rates of exploitation of productive and unproductive workers 129 5.7 Marxian and conventional measures of productivity 131 5.8 Government absorption of surplus value 137 5.9 Net tax on labor and adjusted rate of surplus value 137 5.10 Empirical effects of price-value deviations 141 5.11 Approximating the rate of surplus value 144 5.12 Summary of empirical results 146 6 A critical analysis of previous empirical studies 152 6.1 Studies that fail to distinguish between Marxian and NIPA categories 154 6.2 Studies that do distinguish between productive and unproductive labor 161 6.3 Studies based on the distinction between necessary and unnecessary labor (economic "surplus") 202 7 Summary and conclusions 210 7.1 Surplus value, profit, and growth 211 7.2 Marxian and conventional national accounts 216 7.3 Empirical results 221 7.4 Comparison with previous studies 224 7.5 Conclusions 228 Appendices 231 A Methodology of the input-output database 233 B Operations on the real estate and finance sectors 253 C Summary input-output tables 274 D Interpolation of key input-output variables 278 E Annual estimates of primary variables 283 F Productive and unproductive labor 295 Contents vii G Wages and variable capital 304 H Surplus value and profit 323 I Rates of exploitation of productive and unproductive workers 329 J Measures of productivity 336 K Government absorption of surplus value 344 L Aglietta's index of the rate of surplus value 346 M Mage and NIPA measures of the capitalist sector gross product 351 N The net transfer between workers and the state, and its impact on the rate of surplus value 356 References 361 Author index 369 Subject index 371 FIGURES 1.1 Alternate measures of GFP 16 2.1 Production and nonproduction labor 22 2.2 Nonproduction labor and social consumption 29 2.3 Productive and unproductive labor under capital 30 3.1 Division of value: Production alone 43 3.2 Use of product: Production alone 44 3.3 IO accounts and Marxian categories: Production alone 44 3.4 Division of value: Production and trade 46 3.5 Use of product: Production and trade 47 3.6 IO accounts and Marxian categories: Production and trade 48 3.7 IO accounts and Marxian categories: Primary flows 52 3.8 IO accounts and Marxian categories: Private royalties payments 56 3.9 Production and royalties only 58 3.10 IO accounts and Marxian categories: General government 61 3.11 IO accounts and Marxian categories: Overall summary 74 4.1 IO accounts and Marxian categories: Condensed form 79 4.2 Production, trade, and royalties sectors 83 4.3 Input-output coefficients matrix and labor coefficients vector 83 5.1 IO accounts and Marxian categories: Summary mapping 90 5.2 1972 IO table 91 5.3 Real total and final product, and real GNP 106 5.4 Ratios of real product measures 106 vin