Principles of Political Economy (Malthus)/Book 1/Chapter 1/Section 2
The question of productive labour is closely connected with the definition of wealth. Both the Economists and Adam Smith have uniformly applied the term productive to that species of labour, which directly produces what they call wealth, according to their several views of its nature and origin. The Economists therefore, who confine wealth to the products of the soil, mean by productive labour, that labour alone which is employed upon the land. Adam Smith, who considers all the material objects which are useful to man as wealth, means by productive labour, that labour which realizes itself either in the production or increased value of such material objects.
This mode of applying the term productive labour to that labour which is directly productive of wealth, however wealth may be defined, is obviously of the greatest use in explaining the causes of the increase of wealth. The only essential objection to it is, that it seems to underrate the importance of all other kinds of labour—at least the term unproductive labour, used by Adam Smith to express all other kinds of labour, has been frequently so interpreted, and has formed in consequence the great objection to his classification. To remove this objection to a classification in other respects sufficiently correct for practical purposes, and beyond comparison more useful in explaining the causes of the wealth of nations, than any other which has hitherto been suggested, it might be desirable to substitute the term personal services for unproductive labour.
Labour may then be distinguished into two kinds, productive labour, and personal services, meaning by productive labour that labour which is so directly productive of material wealth as to be capable of estimation in the quantity or value of the object produced, which object is capable of being transferred without the presence of the producer; and meaning by personal services that kind of labour or industry, which however highly useful and important some of it may be, and however much it may conduce indirectly to the production and security of material wealth, does not realize itself on any object which can be valued and transferred without the presence of the person performing such service, and cannot therefore be made to enter into an estimate of national wealth.
This, though differing in name, is essentially the doctrine of Adam Smith. It has been controverted by two opposite parties, one of which has imputed to him an incorrect and unphilosophical extension of the term productive to objects which it ought not to include, and the other has accused him of a similar want of precision, for attempting to establish a distinction between two different sorts of labour where no distinction is to be found.
In proceeding to give my reasons for adopting the opinion of Adam Smith with the modification above suggested, I shall first endeavour to show that some such classification of the different sorts of labour is really called for in an inquiry into the causes of the wealth of nations, and that a considerable degree of confusion would be introduced into the science of political economy by an attempt to proceed without it. We shall be less disposed to be disturbed by plausible cavils, or even by a few just exceptions to the complete accuracy of a definition, if we are convinced that the want of precision which is imputed to it, is beyond comparison less in amount and importance than the want of precision which would result from the rejection of it.
In the first place, then, it will readily be granted, that as material capital is the specific source of that great department of the national revenue, peculiarly called profits, and is further absolutely necessary to that division of labour, and extended use of machinery, which so wonderfully increases the productive powers of human industry, its vast influence on the progress of national wealth must be considered as incontrovertibly established. But in tracing the cause of the different effects of the produce which is employed as capital, and the produce which is consumed as revenue, we shall find that it arises principally from the different kinds of labour directly maintained by each. It is obvious, for instance, that it is only the productive labour of Adam Smith, which can keep up, restore, or increase, the material capital of a country. It is also this kind of labour alone, that is, the labour which is realized in the production, or increased value of material objects, which requires a considerable amount of capital for its continued employment; but that, for which there is an effectual demand, will generally be supplied, and the practical consequence is such as might naturally be expected. In those countries which abound in the number, and especially in the skill of their productive labourers, capital and wealth abound. In those where personal services predominate, capital and wealth are comparatively deficient.
It is true, that what is called capital, is sometimes employed in the maintenance of labour, which is not called productive; as by the managers of theatrical exhibitions, and in the payment of the expenses of education. In regard to the first kind of expenditure, however, it would be excluded from coming under the head of capital, if capital were defined, as I have defined it, namely, that portion of the stock or material possessions of a country which is kept or employed with a view to profit in the production or distribution of wealth. But at all events, the amount of it is too inconsiderable to be allowed to interfere with a classification in other respects correct, and in the highest degree useful. In regard to the expense of education, it should be recollected that no small portion of it is employed in acquiring the skill necessary to the production and distribution of material objects, as in the case of most apprenticeships; and as the persons who have the means of teaching this skill, are themselves employed in this sort of production and distribution; and that the skill so acquired will finally be realized, according to its value on material objects, the capital so employed must clearly be considered as maintaining productive labour, in the most natural sense of the term. The same may be said of all that is expended in the maintenance of those kinds of labour which, though they appear to have the same general character as personal services, are yet so necessary to the production and distribution of material objects, as to be estimated in the value of those objects when they reach the consumer. In regard to the remaining expenditure in education, it will be excluded from coming under the denomination of capital, by the definition of capital above adverted to: and it may fairly be questioned whether the expenses of general education, and even, for the most part, the education for the learned professions, ought not properly to be considered as being paid from revenue rather than from capital. Practically they seem to be so considered. But in whatever light we view the expenditure upon these services, which are not realized upon any material products, it must be allowed that the great source of what is peculiarly called profits, and the great mass of what is usually called wealth, is directly derived from the employment of material capital in the maintenance of what Adam Smith has called productive labour. In speaking therefore, and treating of capital, it seems highly useful to have some term for the kind of labour which it generally employs, in contradistinction to the kind of labour which in general is employed directly by revenue, in order to explain the nature of productive labour, and its peculiar efficiency in causing the increase of wealth.
Secondly, it is stated by Adam Smith, that the produce which is annually saved is as regularly consumed, as that which is annually spent, but that it is consumed by a different set of people. If this be the case, and if saving be allowed to be the immediate cause of the increase of capital, it must be desirable in all questions relating to the progress of wealth, to distinguish by some particular title a set of people who appear to act so important a part in accelerating this progress. Almost all the lower classes of people of every society are employed in some way or other, and if there were no grounds of distinction in their employments with reference to their effects on the national wealth, it is difficult to conceive what would be the use of saving from revenue to add to capital, as it would be merely employing one set of people in preference to another. How in such a case are we to explain the nature of saving, and the different effects of parsimony and extravagance upon the national capital? No political economist of the present day can by saving mean mere hoarding; and beyond this contracted and inefficient proceeding, no use of the term in reference to the national wealth can well be imagined, but that which must arise from a different application of what is saved, founded upon a real distinction between the different kinds of labour maintained by it.
If the labour of menial servants be as productive of wealth as the labour of manufacturers, why should not savings be employed in their maintenance, not only without being dissipated, but with a constant increase of their amount? But menial servants, lawyers, or physicians, who save from their salaries are fully aware that their savings would be immediately dissipated again if they were advanced to persons like themselves, instead of being employed in the maintenance of persons of a different description. To consider the expenditure of the unproductive labourers of Adam Smith as advances made to themselves, and of the same nature as the advances of the master manufacturer to his workmen, would be at once to confound the very useful and just distinction between those who live upon wages, and those who live upon profits, and would render it quite impossible to explain the frequent and important operations of saving from revenue to add to capital, so absolutely necessary to the continued increase of wealth. Some writers who refuse to adopt the classification of Adam Smith, endeavour to explain the nature of saving by substituting the term productive, or reproductive consumption for productive labour; but it does not seem to be agreed who are to be called the productive or reproductive consumers. If, as some affirm, every person is a reproductive consumer who obtains for himself a value equal to that which he consumes, it is obvious that all menial servants kept for pomp or pleasure will be productive consumers; but it is quite impossible that a saving, or an increase of wealth and capital can result to any individual from the employment of a great number of such reproductive consumers.
If, on the other hand, a more correct meaning be given to the expression productive consumption, if it be considered as a present sacrifice with a view to a future advantage, still every species of education would be included in the definition; and certainly it would be impossible to explain the nature of saving by stating that a country gentleman would equally increase his own and the national wealth and capital, whether he employed a considerable part of his revenue in improving his farms and increasing their saleable value, or in paying masters to teach his sons and daughters the most fashionable accomplishments. The latter sort of expenditure, to a certain extent, might be quite as proper and creditable as the former, or even more so; but that is not the question. The question is, what is saving? Now every body would readily pronounce that the first kind of expenditure judiciously applied, was a saving from revenue to add to capital; but few, I apprehend, could expect to be understood, if they pronounced that the second expenditure, in proportion to its extent, was an equal saving from revenue, and an equal addition to individual and national capital. It appears then upon examination, that the use of the term productive consumption will not enable us to explain what is most usually and most correctly meant by individual and national saving, unless when it is so defined as to mean the very same thing that Adam Smith means by the employment of productive labour.
It has been said, that many of the unproductive labourers of Adam Smith save, and add to the national capital in the usual sense of the term. This is no doubt true; and it is equally true that any person who received a portion of wealth as a gift might save some of it, and add to the national capital. The power of saving, which is equally possessed by both, is not necessarily connected with the means by which their wealth was obtained. But on this point there is another circumstance not sufficiently noticed, which draws a marked line of distinction between productive labour and personal services. Workmen and mechanics who receive the common wages, and various higher salaries, which are realized upon material objects, have the means of saving just in the same manner as menial servants, and others engaged in personal services. In this respect the two classes are precisely on a level. But the productive labourers at the same time that they obtain wealth, and the means of accumulation for themselves, furnish a large surplus to that other most important class of society which lives upon the profits of capital. This distinction alone is quite sufficient to place in a different point of view the productive labourers of Adam Smith, and those engaged in personal services.
Thirdly, it has been stated by Adam Smith, and it is allowed to have been stated truly, that there is a balance very different from the balance of trade, which according as it is favourable or unfavourable, occasions the prosperity or decay of every nation. This is the balance of the annual production and consumption. If in given periods the produce of a country exceeds in a certain degree the consumption of those employed in its production, the means of increasing its capital will be provided; its population will increase, or the actual numbers will be better accommodated, and probably both. If the consumption in such periods fully equals the produce, no means of increasing the capital will be afforded, and the society will be nearly at a stand. If the consumption continually exceeds the produce, every succeeding period will see the society worse supplied, and its prosperity and population will be evidently on the decline.
But if a balance of this kind be so important; if upon it depends the progressive, stationary, or declining state of a society, surely it must be of importance to distinguish those who mainly contribute to render this balance favourable, from those who chiefly contribute to make the opposite scale preponderate. Without some such distinction we shall not be able to trace the causes why one nation is thriving, and another is declining; nor will the superior riches of those countries where merchants and manufacturers abound, compared with those in which the retainers of a court and of a feudal aristocracy predominate, admit of an intelligible explanation. To such an explanation it is absolutely necessary, that by the balance of production and consumption, we should mean the production and consumption of material objects: for, if all the gratifications derived from personal services were to be included in the term produce, it would be quite impossible either to estimate such a balance, or even to say what was to be understood by it.
If a taste for idle retainers, and a profusion of menial servants, had continued among the great landholders of Europe from the feudal times to the present, the wealth of its different kingdoms would have been very different from what it is now. Adam Smith has justly stated that the growing taste of our ancestors for material conveniences and luxuries, instead of personal services, was the main cause of the change. While the latter continue to be the predominant taste, few comparatively will be living on the profits of capital. The great mass of society will be divided chiefly into two classes, the rich and the poor, one of which will be in a state of abject dependance upon the other. But a taste for material objects, however frivolous, almost always requires for its gratification the accumulation of capital, and the existence of a much greater number of manufacturers, merchants, wholesale dealers, and retail dealers.* The face of society is thus wholly changed. A middle class of persons, living upon the profits of stock, rises into wealth and consequence; and an increasing accumulation of capital, almost exclusively derived from the industry of the mercantile and manufacturing classes, effects to a considerable extent the division and alienation of those immense landed properties, which, if the fashion of personal services had continued, might have remained to this time nearly in their former state, and have prevented the increase of wealth on the land, as well as elsewhere. Surely then some distinction between the different kinds of labour, with reference to their different effects on national wealth, must be admitted to be not only useful, but necessary; and if so, the question is what this distinction should be, and where the line between the different kinds of labour should be drawn.
The opinion that the term productive labour should be exclusively confined to the labour employed upon the land, has been maintained by a particular class of French Economists, and their followers. Without entering upon the general merits of their system, it will only be necessary to observe here, that whatever advantages their definition may claim in point of precision and consistency, yet for the practical and useful purpose of comparing different countries together, with regard to all these objects, which usually enter into our conception of wealth, it is much too confined. Two countries of the same territory and population might possess the same number of agricultural labourers, and even direct the same quantity of skill and capital to the cultivation of the soil, and yet if a considerable proportion of the remaining population in one of them consisted of manufacturers and merchants, and in the other of menial servants and soldiers, the former might have all the indications of wealth, and the latter all the symptoms of poverty. The number and skill of the agricultural labourers, therefore, cannot alone determine the national wealth. We evidently want some definition of productiveness, which refers to the effects of manufacturing and mercantile capital and skill; and unless we consider the labour which produces these most important results as productive of riches, we shall find it quite impossible to trace the causes of those different appearances in different nations, which all persons, whatever may be their theories on the subject, universally agree in calling different degrees of wealth.
The opinion which goes to the opposite extreme of the one here noticed, and calls all labour equally productive, has already been sufficiently considered, in the endeavour to shew that a distinction between the different kinds of labour is really wanted, in an inquiry into the nature and causes of the wealth of nations. This distinction must be considered as so clearly the corner stone of Adam Smith’s work, and the foundation on which the main body of his reasonings rests, that, if it be denied, the superstructure which he has raised upon it, must fall to the ground. Of course it is not meant to be said that his reasonings should not fall, if they are erroneous; but it appears inconsistent in those who allow of no distinction in the different kinds of labour, to entertain a very high opinion of an ‘Inquiry into the nature and causes of the Wealth of Nations,’ in which, the increase of the quantity and skill of what is called productive labour is the main hinge on which the progress of national opulence and prosperity is made to turn.*
If in calling personal services productive of wealth, we do not look to the character of what is produced, but merely to its effect in stimulating other producers, this is introducing a new and separate consideration, which has no relation to the direct production of wealth. In this view, it will be seen that I consider personal services to a certain extent as very efficient; but this is evidently not as being productive themselves, but as encouraging the production of material objects to be exchanged for them, and as making a demand in proportion to the payments received. It is no doubt true, that the desire to enjoy the convenience or parade of personal attendance, and the advantages of legal and medical advice, has a strong tendency to stimulate industry. But though the tendency of personal services to act as a stimulus to the production of wealth be fully allowed, they can never be said directly to create it, so long as the definition is confined to material objects. Under the circumstances most favourable to their influence, their operation can only be indirect; and if we were to include under the head of productive labour, all the exertions which may contribute, however indirectly, to the production of wealth, the term would cease to have any definite and useful signification, so as to admit of being applied with advantage to an explanation of the causes of the wealth of nations. It would at once confound the effects even of production and consumption, as there is certainly no indirect cause of production so powerful as consumption.
When we consider then the difficulties which present themselves on every supposition we can make, it may fairly be doubted whether it is probable that we shall be able to find a distinction more useful for practical purposes, and on the whole less objectionable in point of precision than that of Adam Smith; which draws the line that distinguishes riches from other kinds of value, between what is matter and what is not matter, between what is susceptible of accumulation and definite valuation, and what is without either one or both of these essential properties.
Some degree of duration and a consequent susceptibility of accumulation seems to be essential to our usual conceptions of wealth, not only because produce of this kind seems to be alone capable of forming those accumulations which tend so much to facilitate future production, but because they so essentially contribute to increase that store reserved for consumption, the possession of which is certainly one of the most distinguishing marks of riches compared with poverty. The characteristic of poverty seems to be, to live from hand to mouth: the characteristic of riches is, to have a store to apply to for the commodities wanted for immediate consumption; but in every case of productive labour as explained by Adam Smith, there is always a period, though in some cases it may be very short, when either the stock destined to replace a capital, or the stock reserved for immediate consumption is distinctly augmented by it; and to this quality of adding to the national stock, the term enriching, or productive of riches seems to be peculiarly appropriate. But it is not enough that it should be susceptible of accumulation, and of adding to the national stock, to entitle it to be called productive according to the meaning of Adam Smith. In order to make the term useful for practical purposes, the results of the kind of labour to which it refers should be susceptible of some sort of definite valuation. The laws of the legislator, the precepts of the moralist, and the conclusions of the natural philosopher may certainly be said to be susceptible of accumulation and of receiving assistance from past labour; but how is it possible to estimate them, or to say to what amount the country has been enriched by them? On the other hand, the labour, which is the necessary condition of the supply of material objects is estimated in the price at which they are sold, and may fairly be presumed to add to the wealth of the country an amount at least equal to the value paid for such labour; and probably with few or no exceptions, the labour which is realized upon material products is the only kind that is at once susceptible of accumulation and definite valuation. It has been observed by M. Garnier, in his valuable edition of the Wealth of Nations, that it seems very strange and inconsistent to denominate musical instruments riches, and the labour which produces them productive, while the music which they yield, and which is the sole object for which they are made, is not to be considered in the same light; and the performers who can alone put them to their proper use, are called unproductive labourers.* But the difference between material products and those which are not matter, sufficiently warrants the distinction, in point of precision and consistency; and the utility of it is immediately obvious from the facility of giving a definite valuation to the instruments, and the absolute impossibility of giving such a valuation to all the tunes which may be played upon them. It has also been observed by the same authority, that it is still more inconsistent to denominate the clerk of a merchant a productive labourer, and a clerk employed by government, who may in some cases have precisely the same kind of business to do, an unproductive labourer.* To this, however, it may be replied, that in all business conducted with a view to the profit of individuals, it may be fairly presumed that there are no more clerks, or labourers of any kind employed, nor with higher salaries than necessary; but the same presumption cannot be justly entertained in regard to the business of government: and as the results of the labours of its servants are not brought to market, nor their salaries distributed with the same rigid attention to the exchangeable value of their services, no just criterion is afforded for determining this value.† At the same time it may be remarked, that if a servant of government perform precisely the same kind of labour in the preparation or superintendence of material products as the servant of a merchant, he ought to be considered as a productive labourer. He is one among the numerous instances which are always occurring, of productive labourers, or labourers occasionally productive, to be found among those classes of society, which, in reference to the great mass of their exertions, may with propriety be characterized as unproductive. This kind of exception must of course frequently happen, not only among the servants of government, but throughout the whole range of menial service, and in every other situation in society. Almost every person, indeed, must occasionally do some productive labour; and the line of separation which Adam Smith has drawn between productive and unproductive labour may be perfectly distinct, although the denomination which he has given to the different classes of society, founded on their general character, must unavoidably be inaccurate with regard to the exertions of some individuals. It should also be constantly borne in mind, that Adam Smith fully allows the vast importance of many sorts of labour, which he calls unproductive. From the enumeration, indeed, which he has made of these different sorts, he must have been aware, that some of them produce advantages to society, with which the results of the labour employed in making ribands and laces, or indeed of any other labour than that which directly supplies our most pressing physical wants, cannot for a moment be compared. Indirectly indeed, and remotely, there cannot be a doubt that even the supply of these physical wants, is most powerfully promoted by the labours of the moralist, the legislator, and those who have exerted themselves to obtain a good government; but a great part of the value of their labours, evidently depends upon the encouragement they give to the full development of industry, and their consequent invariable tendency to increase the quantity of material wealth. So far as they contribute to promote this supply, their general effect, though not the precise amount, will be estimated in the quantity of these material objects, which the country can command; and so far as they contribute to other sources of happiness, besides those which are derived from matter, it may be more correct, and more useful to consider them as belonging to a class of objects, most of which, cannot without the greatest confusion, enter into the gross calculations which relate to national wealth. To estimate the value of Newton’s discoveries, or the delight communicated by Shakespeare and Milton, by the price at which their works have sold, would be but a poor measure of the degree in which they have elevated and enchanted their country; nor would it be less groveling and incongruous to estimate the benefit which the country has derived from the Revolution of 1688, by the pay of the soldiers, and all other payments concerned in effecting it.
On the whole, therefore, allowing that the labours of the moralist and the manufacturer, the legislator and the lacemaker, the agriculturist and the vocal performer, have all for their object the gratification of some want or wish of mankind, it may still be the most natural, the most correct, and pre-eminently the most useful classification which the subject will admit, first to separate under the name of wealth or riches, every thing which gratifies the wants of man by means of material objects, and then to denominate productive every kind of labour which is directly productive of wealth, that is, so directly, as to be estimated in the quantity or value of the objects produced.
The reader will see that this discussion is not introduced with a view to the establishment of any nice and subtle distinctions, without a practical object. Its purpose is to shew, that there is really some difficulty in the definitions of wealth and of productive labour; but that this difficulty should not deter us from adopting any classifications which are obviously useful in conducting inquiry; that in treating of the nature and causes of the wealth of nations, a distinction between the different sources of gratification, and the different kinds of labour, seems to be not only useful, but almost absolutely necessary; and consequently that we should be satisfied with the best classification which we can get on these subjects, although it may not in all its parts be unobjectionable.