A value-oriented distinction between productive and unproductive labour

A value-oriented distinction
betvy^een productive and
unproductive labour
Sergio Cdmara Izquierdo

This paper offers a new 'position' in the distinction

between productive and unproductive labour, using
two opposing approaches to the matter. Shaikh and
Tonak ground their argument on the concept of
productive labour in general, and support the need
for an 'extensive' classification of unproductive labour.
In Laibman's view, on the other hand, the distinction
should be abandoned. In this paper, I argue that both
approaches are founded on the same use-value
criterion. This non-capitalist criterion is inappropriate
for the analysis. In contrast, I offer a distinction based
on specifically capitalist criteria; the relevance of the
analysis is placed on the production of value rather
than use value.

I. Introduction

T
he distinction between productive and unproductive
labour is one of the cornerstones of the labour theory
of value. Savran and Tonak (1999: 115-120) provide
a brief enumeration of the relevant theoretical aspects: the
analysis of capital accumulation, the determination of
economic variables, the rate of profit, state intervention, the
growth of the service sector, financial and consumer services,
privatisation, etc. Particularly in its fundamental importance
to the empirical analysis of capitalist economies, the concept
of productive labour is essential for the conversion of
economic variables of the conventional national account
systems into categories coherent with the labour theory of
value. Nevertheless, this importance is paralleled by a
continuing controversy over the definition and delimitation
of the concept of productive labour in Marxian literature.
This can be traced back to the heterogeneous treatment of
38 Capital & Class #90

the subject in Marx's work, principally, due to his main

writings on productive labour being inconclusive. As a
consequence, any exegetic approach to the reading of Marx
must be abandoned. Instead, the search for the greatest
explanatory power guides the development of the concept
of productive labour in this paper. Controversy over the
concept has recently become evident in the debate held both
on theoretical and empirical grounds by significant
proponents of the labour theory of value. On the one hand,
some authors (led by Shaikh) have defended the need to
maintain the distinction, and have emphasised its importance
in empirical analysis. On the other hand, other authors (led
by Laibman) have proposed abandoning the distinction,
arguing that it is insignificant for the labour theory of value.
The lack of agreement about the concept of productive
labour is really harmful for the labour theory of value. In
fact, it hinders any breakthrough in empirical analysis. Does
the rate of profit fall? Does it fall as a consequence of a
rising proportion of unproductive labour? Is the accumulation
of capital affected by an expansion of unproductive activities?
What are the consequences of the growth of services, finance,
etc. for capital accumulation? What is the role of the state in
capital accumulation? These questions have completely
different answers depending on the attitude taken towards
the concept of productive labour.
Using the first approach, the evolution of the ratio of
unproductive to productive labour becomes the key factor
in explaining the main economic aspects of the present times.
With the second approach, this ratio is irrelevant, and
alternative explanations are sought.
In this situation, the labour theory of value does not
represent a useful basis for empirical analysis. As a
consequence, no valid conclusion for economic policy can
be extracted from economic theory (the labour theory of
value), and economic agents lose the material basis for their
economic decisions: workers can no longer rely on workers'
theory. For these reasons, the theoretical analysis of the
concept of productive labour is a requirement for the
successful development of the labour theory of value and,
consequently, for the development of the progressive project.
Marx's most precise definition of productive labour is found
in extracts fi-om ChapterVI (unpublished) and Theories of Surplus
Value, in which productive labour is defined as labour that
produces surplus value. In the former tejct, Marx establishes that
 39
A value-oriented distinction between productive and unproductive labour

since the direct purpose and the actual product of capitalist

production is surplus value, only such labour is productive
... as directly produces surplus value. Hence only such
labour is productive as is consumed directly in the
production process for the purpose of valorising capital'.
(P- 77)

More concretely, in Theories of Surplus Value he writes that

productive labour, in its meaning for capitalist production,

is the wage-labour which, exchanged against the variable
part of the capital (the part of capital that is spent on
wages) reproduces not only this part of the capital ... but
in addition produces surplus value for the capitalist, (p.
152)

Its essential feature lies in its specifically capitalist content,

as Marx mentions in a crystal-clear passage:

Productive labour is only an abbreviated expression for

the whole relation, and the manner in which labour
capacity and labour figure in the capitalist production
process. Hence if we speak of productive labour, we speak
of socially determined labour. iChapter vr. 83)

Nowadays, this simple defmition is widely accepted among

Marxist economists, and it is the basis for the rejection of
wrong defmitions existing in the literature." However, this
consensus soon vanishes when the defmition is applied to
the classification of different forms of concrete labour. The
main point of this paper is to show that the apparent adherence
of Marxist economists to Marx's basic definition of produc-
tive labour is deceptive. In particular, most interpretations
do not entirely consider the social determination of the
concept but, on the contrary, are founded on a use-value
criterion, which relies heavily on features non-specific to
the capitalist mode of production. In contrast, a distinction
between productive and unproductive labour is proposed
here that is based on specifically capitalist criteria.
Section 2 introduces Shaikh's defence of the distinction
based on the concept of productive labour in general, and
his support of an 'extensive' classification of unproductive
labour. Section 3 deals with Laibman's proposal that the
distinction between productive and unproductive labour be
40 Capital & Class #90

abandoned. In both sections, I show that their arguments

are not coherent with the social and historical content of the
concept of productive labour. In section 4 I offer an
alternative approach, in which relevance is placed on the
production of value rather than on the production of use
value. At the end of this section, two essential aspects of the
distinction are addressed: the articulation of production and
circulation spheres, and the relation between value and use-
value creation. Finally, by way of conclusion, section 5 draws
out the implications of this approach for empirical research
in capitalist economies.

2. Productive labour in general

Shaikh andTonak's (1994: 20) analysis of productive labour

rests on the existence of a 'prior and more general distinction
between production and non-production activities' that sheds
light on 'more concrete distinctions between labours which
are and are not productive of capital'. They argue, moreover,
that the neglect of this general concept has caused the lack
of understanding of the concept of productive labour in the
literature (Savran & Tonak, 1999: 120). The application of
this general concept leads to the distinction of four basic
activities of social reproduction: production, distribution,
social maintenance, and personal consumption. Personal
consumption does not require any expenditure of labour.
From the remaining labour activities, only production
involves productive labour in general (the term 'productive
labour' is used in Savran and Tonak [1999], while Shaikh &
Tonak [1994] refer to 'production' and 'non-production'
labour. The terms are equivalent). Therefore, 'labour is not
synonymous with production' (ibid: 22).^
The concept of productive labour in general is only the
starting point of their definition of productive labour for
capital (Savran & Tonak, 1999: 123). They proceed to
incorporate into the analysis the specifics of the capitalist
mode of production.^ In Shaikh and Tonak's words (1994:
29), the concepts of productive and unproductive labour 'take
on additional content when ... considered in relation to
specific social relations under which they might be conducted
... Labour might be conducted for direct use, for sale for
income, and for sale for profit'; but only in the last case 'it
represents capitalist commodity production that produces
 41
A value-oriented distinction between productive and unproductive labour

not only use values and values but also surplus value'.
Therefore, they arrive at the accepted definition of productive
labour: labour that creates surplus value.
To sum up, in addition to being productive in general,
productive labour for capital must be 'wage labour which is
first exchanged against capital (i.e. it is capitalistically
employed)' (ibid: 30). According to this approach, productive
labour for capital is a sub-set of productive labour in general,
since 'surplus value can only be produced in the immediate
process of production' and 'only labour which is productive
in general ... can produce surplus value' (Savran & Tonak,
1999: 124).
It should be noted that Shaikh and Tonak's definition of
productive labour in general rests on a use-value criterion.
For them, 'the process of production involves the creation
or transformation of objects of social use by means of
purposeful human activity' (Shaikh & Tonak, 1994: 22).
Accordingly, 'in the case of production activities, the labour
involved is production labour, which utilises certain use
values in the creation of new use values' (ibid: 24). Conversely,
non-production labour does not create new wealth, as 'certain
types of labour share a common property with the activity
of consumption—namely, that in their performance they use
up a portion of the existing wealth without directly resulting
in the creation of new wealth' (ibid: 25). This type of labour
is related to distribution and social maintenance activities.
Thus, 'although distribution activity does transform the use
values it circulates, this transformation relates to their
properties as objects of possession and appropriation, not to
the properties which define them as objects of social use'
(ibid: 26). Likewise, in the activities of social maintenance,
'use values enter as material inputs into activities designed
to protect, maintain, administer, and reproduce the social
order, and as such they are quite distinct from production
labour' (ibid: 27).
The distinction between productive and non-productive
labour, therefore, implies the existence of labour that does
not produce use values. In other words. Shaikh and Tonak's
approach severs the link between the execution of concrete
labour and the creation of use values—a link I believe to be
generally valid. If the link is retained, all labour is production
labour (of use values) and there is no room for the concept
of non-production labour. Therefore, my critique of Shaikh
and Tonak is centred around a critique of their concept of
42 Capital & Class #90

productive labour in general. For this reason, the definition

of use value that they employ is worth some close
examination.
Guerrero (1997: i) rightly points out, in a comment about
their definition of productive labour, that Shaikh and Tonak
define the concept of use value according to Lancaster's
classification of the various characteristics of the objects of
social use:

Shaikh and Tonak (1994) use Lancaster's well-known

approach ofthe many 'characteristics' of every commodity
in order to distinguish between the different properties
that encompass the material thing or eflFect produced. So,
in any commodity it is possible to find some material
(objective) properties, some social properties and other
properties that are not relevant to our purposes. Only the
material or objective properties (such as colour, shape or
location) enter in the definition of use-value. (Guerrero,
1997: I)

But in spite of this narrow definition of use value, I do not

think it is possible to consider activities such as distribution
and the maintenance of social order as performed by non-
production labour, as Guerrero himself argues. 'The crucial
point is that if one just looks at the definition of use-value, it
is absolutely impossible to leave activities like distribution,
sales, advertising, social maintenance, etc., outside the
borders of the definition given by Shaikh and Tonak
themselves' (Guerrero, 1997: i).
Instead, I would argue that both distribution and social-
maintenance labour create objective or material properties
in their products on the same grounds as production labour
does. For instance, a cashier in a supermarket creates an
object of social use (a service sale) characterised by its
objective properties (and in fact, this is the only way to obtain
goods from a supermarket without the risk of being stopped
by the security service). Precisely, a security guard arresting
a shoplifter is creating a use value (an arrest) whose objective
properties are undeniable. Therefore, the separation of
production and non-production labour by means of a use-
value criterion seems unfounded.
The debate about the role played by the concept of use
va}ue in the distinction between productive and unproductive
labour has recently been enriched by the controversy between
 43
A value-oriented distinction between productive and unproductive labour

Mohun and Laibman. Mohun (1996: 44) holds that the

assertion that circulation labour creates use values is only
possible if we employ a neoclassical concept of use value: 'If
it is argued that all workers employed by capital are
productive, irrespective of their location with respect to the
circuit of capital, then there must be a slippage in the
category of "use-value" to its neo-classical sense as a
subjective property, qua psychological characteristic, of the
purchaser'.
Laibman (1999: 68), surprisingly, accepts the subjective
content of the use-value concept, since he believes that it
does not contradict the labour theory of value. He writes,
'Use-values do have a subjective component, if they are
appropriated by conscious human beings; the subjective
aspect is of course socially and historically conditioned, and
shaped by class location and production relations. Does
Mohun wish to argue that use-values are physical artefacts,
outside of social and cultural determination?' In my view,
only objective properties enter into the defmition of use value,
thus I reject Laibman's position. This is not to say, of course,
that I do not recognise that conscious human beings have
different subjective appreciation of the objective properties
ofthe use value of commodities. For instance, the objective
properties created in the production of a car advertisement
are independent of the different subjective responses that
the advertisement may cause.
On the other hand, I cannot agree with Mohun's statement
that circulation labour only adds subjective properties to
the use values. As a matter of fact, the subjective perceptions
of conscious human beings cannot arise from nothing, but
must arise from the new objective properties created. I agree
with Guerrero's (1997: i) statement that 'we do not need to
remove the neo-classical identification between production
and labour if we understand production as production of
use-values', and that 'maintaining this identification is not
the same thing as maintaining the neo-classical approach'.
Consequently, the only way to rescue the distinction
between production and non-production labour is by
classifying the different objective properties of use values
following some previously established evaluative criterion.
Hence, the claim that the 'classical distinction between
production and non-production labour is essentially
analytical' (Shaikh & Tonak, 1994: 25) is unfounded." In
conclusion, I believe that it is not possible to identify the
44 Capital & Class #90

production of use value (under capitalist social relations)

with the creation of value and surplus value.
That is to say, it is not possible to sever the link between
concrete labour and use value. As a consequence, all kinds
of labour must be regarded as production labour (of use
values), and the concept of non-production labour is simply
misconceived. To sum up. Shaikh and Tonak's intention to
provide an 'analytical' definition of productive labour is faulty
because of their utilisation of a use-value criterion. In this
sense, it is very illuminating to analyse the authors' reasons
for this use:

The distinction between productive and unproductive

labour is necessary, but not sufficient, for the analysis of
reproduction. We need also to know the specific
components of unproductive labour and their interaction
with the circuits of capital and revenue. This is precisely
why we began our analysis with the general distinction
between production, distribution, social maintenance, and
personal consumption activities, rather than merely
beginning with Marx's definition of productive labour,
(ibid: 31-32)

Hence, it is the emphasis on social reproduction that is

misleading in their definition of productive labour. For the
social reproduction of capitalist society, two requisites must
be met: i) the quantity of surplus value created and
transformed into capital must be enough to guarantee the
extended reproduction of capital; and 2) the composition of
the output must have the adequate proportion of means of
production, means of consumption, etc. Of these requisites,
the first, social one is specific to capitalist society, while the
second, technical one is necessary in all modes of
production.
However important the technical aspect of the social
reproduction may be, it undoubtedly has nothing to do with
the definition of productive labour. Productive labour is not
defined as labour that meets both the above requisites—the
concept of 'reproductive labour' would fit that description.
On the contrary, the concept of productive labour is limited
to the analysis of value and surplus-value creation; that is, to
the first aspect of social reproduction. Despite Marx's
heterogeneous treatment of productive labour, he is very
clear on this point:
 45
A value-oriented distinction between productive and unproductive labour

A large part ofthe annual product... consists of extremely

paltry products (use values), serving to satisfy the most
miserable appetites, fancies, etc. But content is entirely
irrelevant to whether the labour is determined to be
productive or not (although the development of wealth
would of course be checked if a disproportionate part
were reproduced in this way, instead of being reconverted
into means of production and means of subsistence, which
enter anew into reproduction, whether that of the
commodities or that ofthe labour capacities themselves—
which are, in short, consumed productively)'. (Chapter vi:
85)

In conclusion, I find no support for the use of the distinction

between production and non-production labour for the
delimitation ofthe concept of productive labour for capital.
Hence I consider all labour activities to be productive of
use values.'

3. Laibmans' rejectioii ofthe distinction

Among Marxist economists, the loudest voice raised against

the distinction between productive and unproductive labour
is Laibman's:

The productive/unproductive labour distinction, in the

strong uses that most proponents (including, it must be
said, Marx) claim for it, is unsound and should be
discarded as a residue of bourgeois classical economics.
(Laibman, 1992: 71)

Laibman identifies seven different definitions of productive

labour, each of which, in turn, he refuses—although in fact,
he does not reject the socioeconomic definition, which
distinguishes between the capitalist and non-capitalist spheres
of production. He simply asserts that it 'does nothing to
resolve the thorny issues surrounding the presumably central
categories of labour working within capitalist enterprises,
especially in the areas of circulation and supervision, that
are thought to be unproductive' (Laibman, 1999: 63). As
stated below, this problem can be solved using two different
levels in the distinction between productive and unproductive
labour. For the purposes of this paper, I limit the analysis
46 Capital & Class #90

to the analytical definition of productive labour, which

applies

the unproductive label to some of the labour that is

organised under the control of capitalists for the purpose
of producing and realising surplus value. ... The labour
associated with the circulation of commodities, as opposed
to their production, is often singled out as a major
component of unproductive labour. (Laibman, 1992: 76)

Although Laibman believes this definition to be compatible

with the generally accepted definition, he rejects it since
'this definition, as stated, is empty or "non-operational"'
(Laibman, 1999: 62). Concretely, he asserts that it is not
possible to maintain this distinction without making use of
a non-analytical criterion:

The problem is finding an operational criterion that will

identify workers who do not create value or surplus value.
In looking for such a criterion, we have to be careful not to
fall back into alternative, and unsatisfactory, definitions such
as the physicalist or the evaluative. (Laibman, 1992: 76)

This last warning seems most appropriate; and in fact, I

have criticised modern versions of the distinction on the
same grounds. For example, Laibman rightly observes that
the classification of disciplinary and coercive workers into
the unproductive group implies the abandonment of an
analytical criterion. According to him, 'workers who perform
disciplinary and coercive functions within the workplace are
deemed unproductive, because they exercise functions of
capitalist control rather than actually "contributing to
production'". And he points out that the logic behind this
argument is that 'given more advanced social relations, the
coercive apparatus in capitalist workplaces are unnecessary
and wasteful'. Hence the argument falls into 'the presumably
surpassed and unacceptable evaluative position' (Laibman,
1999: 63). Laibman, here, is answering Mohun's (1996: 37)
position: 'Labour which enforces hierarchy and discipline
arises out of the need for capital to retain coercive control
over the class antagonisms inherent in the capital relation.
The labour which performs this function merely personifies
the coercive power of the latter, and in so doing does not
create value'. Surprisingly, when Mohun considers these
 47
A value-oriented distinction between productive and unproductive labour

critiques, he asserts that 'the necessity or otherwise of a

particular type of labour is a different criterion for
distinguishing types of labour from that with respect to their
location in the circuit of capital' (ibid: 42). As Laibman
(1999: 65) evidences, his reasoning 'does not fit easily into
the circuitry framework'.
Laibman carries on with his critique of the analytical
definition, tackling the distinction between production and
circulation labour. He recognises that this distinction 'is at
least superficially more convincing, in that circulation labour
can presumably be identified with distinct phases of the
capital circuit'. However, he insists that no convincing
criterion has been given to support it 'other than the imagery
of the circuit with its phases or "metamorphoses"' (ibid:
66). Without any doubt, the hub of the matter lies in what
Laibman considers to be a valid analytical criterion: what
would be, in his opinion, an operative criterion with which
to distinguish between production and circulation labour?
His answer cannot come as a surprise: an analytical criterion
must identify the moments in which labour activity creates
new use values from the moments in which it does not:

The critical question is whether an aspect of buying, selling,

insuring, legal, accounting labour can be identified, that is
not reducible in further analysis to some aspect of the
transformation and processing of use values: the concrete
labour activity that provides the bodily form (to use the
well-known Volume I metaphor) for abstract labour and
the creation of value.... At what point does the production
of use value stop? (Laibman, 1992: 77-78)

Laibman, therefore, is of the same opinion as that expressed

in the greater part of the literature, including in Shaikh and
Tonak: for him, the distinction between production and
circulation must be grounded on a use-value criterion. The
only difference is that he believes this criterion to be non-
operative: either it is not feasible to delimit these moments,
or all the labour activity must be considered as production
labour. As a consequence, Laibman (1999: 63) thinks that
'the attempt to ground the analytical distinction on
something solid had failed, and the analytical use of the
productive/unproductive distinction should therefore be
abandoned'. Therefore, 'the clear positive implication of this
conclusion is that all waged labour employed by capitalists
48 Capital & Class #90

creates value' (ibid: 64). However, as we will see in section

4, the failure to differentiate between production and
circulation in employing a use-value criterion does not
impede the grounding of this distinction on different,
capitalist criteria.

4. A value-oriented definition of productive labour

In this section, I provide a value-theoretic definition of

productive labour, in which the specificity of the capitalist
mode of production is grasped at all times. This definition
takes the form of two consecutive steps, as shown in Table 1.
In the first step, I distinguish between capitalist production
and non-capitalist production. In the second, I differentiate
between production and circulation activities within capitalist
production.

Table 1: Different levels in the distinction between productive and

unproductive labour

Capitalist mode of production

Capitalist production Non capitalist production

Production activities Circulation activities

In the capitalist mode of production, forms of capitalist and

non-capitalist production coexist. The goal of the first step
is to separate them through the identification of the
distinctive features of capitalist labour. Concretely, capitalist
labour must be subsumed under the circuit of capital: M—
C...P...C'—M'; its characteristics are: i) that it is wage
labour; and 2) that its product is sold in the market. This
 49
A value-oriented distinction between productive and unproductive labour

distinction is made by Marx in a concise and precise manner

in Chapter vi. (Note that since Chapter vi is an unpublished
appendix to the first volume of Capital, which is devoted to
the process of capitalist production, Marx's analysis deals
exclusively with the first level of the distinction). He
acknowledges that 'the capitalist labour process does not
abolish the general determinations of the labour process. It
produces products and commodities'. But he also points out
that 'the labour process is only a means to capital's
valorisation process' (Chapter vr. p.8). In other words, 'the
owner of labour capacity ... is a wage labourer', whose labour
'not only preserves in part and reproduces in part the capital
values that have been advanced, but at the same time
increases them, and therefore converts them into self-
valorising value, into capital' (ibid: 79-80). To sum up, 'in
capitalist production, the production of products as
commodities, on the one hand, and the form of labour as
wage labour, on the other, become absolute' (ibid: 81).
Following this definition, non-capitalist labour can be
classified according to the requisite (s) it fails to meet. For
example, 'every productive worker is a wage labourer; but
this does not mean that every wage labourer is a productive
worker'. This is the case of the wage labour hired 'in order
to be consumed as use value', because it is not employed 'in
order to replace the value of the variable capital as a living
factor and to be incorporated into the capitalist production
process' (ibid: 80). This kind of labour, though waged, is
not intended to make profits through the sale of its products.*
Only wage labour exchanged for capital is capitalist labour,
while wage labour exchanged for revenue is non-capitalist.
Clear examples of non-market wage labour are domestic
labour and public employees. Also, labour can be directed
to the market but performed by non-waged labourers. Again,
we cannot talk about capitalist labour, far less about
productive labour. This situation occurs as a consequence
ofthe coexistence of pre-capitalist forms of production within
the capitalist social formation; independent workers belong
in this category. As Marx points out, 'Some of the labour
which produces commodities in capitalist production is
performed in a manner which belongs to earlier modes of
production, where the relation of capital and wage labour
does not yet exist in practice, and therefore the category of
productive and unproductive labour, which corresponds to
the capitalist standpoint, is entirely inapplicable' (ibid: 82).
50 Capital & Class #90

Finally, there is labour that is neither waged nor directed to

the market, such as household labour, which Gouverneur
(1990: 2) calls 'autonomous labour'. (See his Table i for a
similar classification of labour in the capitalist mode of
production.)
The next step in the definition of productive labour
consists in differentiating production and circulation labour.^
In this task, the general formula of capital is again a useful
starting point. Along its circuit, M—C...P...C'—M', capital
performs different functions—as money capital, productive
capital and commodity capital—and suffers several
metamorphoses, from money form to commodity form and
vice versa. Some transformations—those represented by a
hyphen in the formula—take place in the circulation sphere,
while those represented by dots occur in the production
sphere.
It is precisely this distinction between the production and
the circulation spheres in which the foundation of the
distinction between productive and unproductive labour
within capitalist production lies. Specifically, it is grounded
on Marx's statement that value (and surplus value) is only
created in the production process, since in the circulation
process, value solely undergoes changes in its form which
do not affect its magnitude:

There is in an exchange nothing (if we except the replacing

of one use-value by another) but a metamorphosis, a mere
change in the form of the commodity. The same exchange
value, i.e., the same quantity of incorporated social labour,
remains throughout in the hands of the owner of the
commodity first in the shape of his own commodity, then
in the form of the money for which he exchanged it, and
lastly, in the shape of the commodity he buys with the
money. This change of form does not imply a change in
the magnitude of value. ... So far therefore as the
circulation of commodities effects a change in the form
alone of their values, and is free from disturbing influences,
it must be exchange of equivalents. (Marx, 1906: 176)

Nevertheless, both production and circulation are necessary

instances of the global reproduction of capital. Hence, capital
reproduction is constituted by the sum of production and
circulation time, though these periods affect the valorisation
A value-oriented distinction between productive and unproductive labour

of capital—the very aim of capitalist production—differently.

In Marx's words:

The time of circulation and the time of production

mutually exclude one another. During its time of
circulation, capital does not perform the functions of
productive capital and therefore produces neither
commodities nor surplus value. (Marx, 1909: 142)

Subsequently, the activities belonging to the circulation

sphere imply the performance of circulation labour, which
is unproductive of value and surplus value. Moreover, the
labour and the means of production employed in circulation
activities 'consume' part ofthe already-created value. In other
words, unproductive circulation activities are fmanced out
of value-creating production activities. For this reason, we
must distinguish clearly between capital invested in the
production sphere—productive capital—and capital invested
in the circulation sphere—unproductive capital. Both capitals
claim an aliquot part of total surplus value, but only
productive capital creates it.
The unproductive functions of capital related to the
circulation sphere and the agents performing them are
analysed by Marx in volume III of Capital, in which section
4 deals with commercial capital, section 5 with financial
capital, and section 6 with ground rent. The emphasis is
placed on the mechanism by means of which unproductive
capitals appropriate an aliquot part of total profit: these
capitals obtain the general rate of profit through the
redistribution of value which occurs in the circulation sphere
due to the deviations between materialised labour time in
the production of commodities and realised labour time in
their sale.
In summary, I have presented a distinction between
productive and unproductive labour in two steps. The first
step differentiates between capitalist and non-capitalist
production, and its content is widely accepted in the
literature. Shaikh andTonak consider it to be a second step
in the definition of productive labour when it is applied
only to productive labour in general. Laibman identifies it
with the socioeconomic definition, which he considers correct
in its content, though limited in its application. Consequently,
the modern controversy over the definition of productive
labour lies in the subtleties ofthe second step: the distinction
52 • Capital & Class #90

between production and circulation activities. The two

opposing approaches analysed here base this distinction on
a use-value criterion, i.e. on the identification of activities
unproductive of use value, yet with different conclusions. In
contrast, I have rejected this criterion and have argued instead
for a criterion founded on the production of value. In the
remaining part of this section, I again focus on this second
step, setting the patterns for the identification of production
and circulation activities according to my value criterion.
In this task, the focus must be directed onto two essential
matters: the division between production and circulation,
and the relation between value and use-value creation.

Production and circulation

Let us return to Laibman's rejection of the definition of
productive labour. Laibman clearly acknowledges that it is
not possible to distinguish between labouring activities
productive and unproductive of use value, so he concludes
that the distinction between productive and unproductive
labour is ill-founded. While I agree with his acknowledge-
ment, the consequence he extracts is, in my view, wrong. It
is easy to see that the differences lie in the interpretation of
the distinction between the production and circulation
spheres. Laibman (1992: 77) maintains that it is 'essential to
distinguish between production and circulation of
commodities. ... It is quite another thing, however, to speak
of production and circulation as distinct "places" and to
attempt to visualise an instant in which a commodity "leaves"
the sphere of production and "enters" the sphere of
circulation'. In other words, 'production and circulation are
not "sectors". They are simultaneous-yet-distinct moments
of the same social process' (Laibman, 1999: 68).
Therefore, Laibman defends a unity of the process of
capital reproduction, as formed by the production and
circulation processes, in which it is not possible to 'physically'
distinguish between these two moments; instead, both
moments take place simultaneously during capitalist
reproduction. In other words, there is no division between
the labour deployed in production and circulation activities:
the distinction between the production and the circulation
spheres is purely formal, rather than material. Hence, capital
turnover time is both and simultaneously production and
circulation time. This interpretation clearly opposes Marx's
A value-oriented distinction between productive and unproductive labour

statement that 'the time of circulation and the time of

production mutually exclude one another' (Marx, 1909:142).
Laibman considers 'the circuitry formulas [to] have been
misinterpreted in a mechanistic fashion to imply an artificial
separation of circulation and production. ...These conceptual
devices should not, however, be used to imply that use-values
pass "from" a distinct sphere of circulation "to" a sphere of
production, and then out again' (ibid.). Actually, he suggests,
'the metamorphoses in the circuit of capital can be treated
more metaphorically than literally' (Laibman, 1999: 71).
I agree entirely with Laibman that production and
circulation are not 'sectors', as we will see in section 5.
However, I cannot agree that the distinction between
production and circulation is founded on purely formal
criteria with no material content, since I do not share his
contention that the labour theory of value is not undermined
by the abandonment of the productive-unproductive
distinction: 'Neither the proposition that value and surplus
value are created in production (not circulation), nor the
distinction between production and (re) distribution of value,
requires that labour be rigidly separated into production
labour and circulation labour' (Laibman, 1999: 71). Laibman
intends to endorse a distinction of the production and
circulation spheres valid for Marx's Capital Volume I, but
not for Volumes II and III. On the contrary, I believe that
the theoretical power of the analysis in Volume I is dubious
if we do not separate production and circulation labour. Also,
the explanatory power of the analyses carried out in sections
4, 5 and 6 of Capua/Volume III is neglected.
First, Laibman (1992: 77) acknowledges the usefulness
of the separation of production and circulation in Volume I:
'Marx lays the groundwork for the theory of surplus value
in volume I of Capital by developing both the distinctness
and the close interdependence of production and circulation,
and his generating insight is that surplus value arises only
in production that is also a moment of circulation, that is,
both within and without the process of circulation'.
He also praises the use of the comparison between pure
commodity circulation and capital circulation: 'Marx's C—
M—C vs. M—C—M' distinction is a brilliant insight into
two forms of market relations, and his questions surrounding
the origin of surplus value were a path-breaking means of
investigating the connection between the surface structure
of formal equality in exchange and a deep structure of
54 Capital & Class #90

exploitation and coercion' (1999: 68). However, he judges

that the comparison can be maintained even though he rejects
the concept of unproductive labour. In my opinion, Marx's
aim in Volume I is not to show labour as the only source of
value (this constitutes his starting point), but to demonstrate
that value is only created in the act of production. Therefore,
Marx's effort is senseless if we consider exchange as a purely
formal act, with no labour activity attached to it. To sum up,
the separation of production labour and circulation labour
is essential for the proposition that labour is solely created
in production.^
Second, Laibman is against the distinction between the
production and the circulation sphere used in Volume III,
and he rejects the theory of commercial capital. In my opinion,
this implies that many phenomena occurring in capitalism
remain unexplained. For instance, the generalised difficulties
of commodity realisation associated with crises cannot entail
an absolute increment in circulation labour (devaluation)
and a relative decrement in production time (valorisation)^
instead, they produce a general increase in the value of
commodities.
In contrast, Laibman (1999: 70) asserts that 'other
questions in the theory of redistribution of surplus value,
such as the interest rate and the retum to interest-bearing
capital' remain. However, this is only reconcilable with his
rejection of the existence of circulation labour if he argues
that although interest-bearing capital is not productive of
value or surplus value, the labour activities carried out within
its circuit (as represented in the simple formula M—M')
are productive. In other words, that unproductive capital
employs productive labour! Alternatively, one may think that
no labour is necessary for interest-bearing capital to obtain
its share of total surplus value.
In any case, no convincing reconciliation is provided.
Therefore, the existence of circulation labour is a necessary
condition for the existence of unproductive capital and
unproductive activities. Of course, there is productive labour
activity related to interest-bearing capital—I am not defending
a 'sectoral' classification of circulation labour, as argued in
section 5. But it does not negate the necessary existence of
unproductive labour due to the existence of interest-bearing
capital.
To summarise, I think a complete distinction between
the production and circulation spheres is needed if we are to
A value-oriented distinction between productive and unproductive labour

preserve the essentials of the labour theory of value. This

distinction, nonetheless, cannot be founded on a use-value
criterion; it must be built on a pure value criterion.

Value and use-value creation

At this point, my distinction between production and
circulation labour seems to be indeterminate, as I have not
offered an alternative concrete criterion for the practical
separation of forms of labour that is different from the use-
value criterion. What is the operational criterion for this
distinction? Paradoxically, some defenders of the use-value
criterion give us clues as to how we might confer content on
the value criterion. Mohun (1996: 43) refers to the moments
in, the process of valorisation of capital:

The reproduction of capitalist social relations is

inseparable from the reproduction of circuits of capital,
and from the way in which values, manifested in particular
use-values appear in successively different forms. That is,
concrete labours are understood as the bearers of particular
moments in the valorisation of value, and hence
consequences, not causes, of the latter. The issue is not
what is happening to value as a result of this or that
concrete labour, but rather what concrete labour is
required by this or that moment in the valorisation of
value; not the manner in which some particular concrete
labour determines how valorisation occurs, but rather the
manner in which valorisation determines what concrete
labours are necessary.

Here, Mohun rightly points out the core of the matter: the'
determinant criterion is the production of value, not of use
value; nevertheless, in capitalist production, value production
is inevitably connected to use-value production. As a
consequence, the delimitation of production and circulation
labour must entail the identification of certain concrete forms
of labour with the corresponding label of productive or
unproductive in the different particular cases. It is not the
labour content that operates this classification, but the value
creation. Actually, the same concrete labour may be regarded
as productive or unproductive depending on its relation to
the valorisation process. Conceptually, the analytical
distinction between productive and unproductive labour does
not require a use-value criterion. In practice, it is the use
56 Capital & Class #90

values and the concrete forms of labour that must be classified

in the particular cases.
In the same vein, Savran and Tonak (1999: 42) address
the critique that since circulation labour is necessary in all
modes of production, it must be productive, noting that 'this
type of criticism confuses and conflates in an unjustifiable
manner the circulation of use-values and the circulation of
commodities, money and capital'. Hence, it is the circulation
of commodities as values (not as use values) and the need to
transform the money capital into commodity capital and vice
versa that determines the productive character or not of the
labour employed. Therefore, the task consists in investigating
the processes of reproduction of the different capitals,
identifying the moments of valorisation and the moments of
circulation (and the concrete labours related to them).
Finally, it is useful to address Laibman's (1999: 68)
critique: 'To avoid arbitrary reliance on concrete labours',
he writes, 'we will have to explain why the concrete labour
of title transferring is treated differently from other concrete
labours. It is this imputed difference that accounts for the
assignment of such labour in the circuit of capital in the
first place'. Now, it is possible to show why this critique is
wrong. Simply, there are no concrete 'labours' generally
associated with the title-transferring activity (if we identify
it with the circulation activity).
Therefore, we cannot assign any concrete labour to the
unproductive label. On the contrary, it is the title-transferring
character of some concrete forms of labours that place them
in the unproductive group. Of course, this consideration
requires a thorough investigation of particular cases and of
•particular branches of production.
That is to say, the classification of productive and
unproductive labour needs microeconomic foundations,
based on the analysis of the valorisation process of every
branch of production. However, this need does not preclude
the real content of the distinction being founded on an
analytical value criterion.

5. Unproductive labour and empirical research

The alternative definition provided above implies an

alternative approach to empirical research. In this section, I
A value-oriented distinction between productive and unproductive labour

briefly elucidate the important differences between the

orthodox approach and mine, drawing the conclusions of
this paper.
The main differences lie in the delimitation of
unproductive circulation activities. I agree with Laibman
that circulation activities are not sectors, nor can they be
identified with branches of production of conventional
national account systems: On the contrary, I think this
identification is a consequence of a pervasive utilisation of
the use-value criterion, with perverse effects for the empirical
research of capitalist economies. Actually, the conventional
classification of branches of production in national accounts
is based on the different use values produced. Therefore, it is
only if we use a use-value criterion that we can identify
circulation activities with some branches of production. In
conclusion, commercial capital, financial capital and ground
rent do not have any correspondence with the branches of
production of conventional national accounts: trade, finance
or other sectors.
In spite of this, I regard these sectors as productive ones,
inserted in the general circuit of capital M—C...P...C'—
M'. Correspondingly, inside them we find both production
and circulation labour, as in any other sector. For instance,
the trade sector involves the production activity of a sale
service (which includes concrete operations such as transport,
storing, packing and advertising, among others) that creates
both value and surplus value. Of course, circulation activity
is also to be found within this sector. The same holds true
for the fmancial sector and production activities such as
money transfers, security-box renting, the creation of bank
accounts, etc. In conclusion, the presence of production and
circulation activities in these branches of production is
qualitatively comparable to that existing in any other branch.
The quantitative presence may vary from one branch to
anotherj and there might exist evidence supporting a greater
participation of circulation labour in these branches. However,
I explicitly reject any direct identification of trade, finance,
etc. with the unproductive circulation spheres.
Notwithstanding, this methodological error is committed
in a vast majority of empirical investigations. For instance.
Shaikh and Tonak (1994: 252) consider the totality of the
trade, finance and real-estate sectors as non-production
activities; hence, they classify all the labour employed in
these sectors as unproductive. What is more, they include in
58 Capital & Class #90

this category the non-production labour belonging to

production sectors (ibid: 295). Similarly, Moseley (1991:176-
177) assigns the fmancial, insurance and rent sectors to the
unproductive category. In terms of the trade sector, he
assumes that unproductive labour accounts for the greater
part of the sector.' Other empirical works assume identical
hypotheses. As a consequence, their estimation of the ratio
of unproductive labour to total labour has steadily increased
during the last decades, due to the increasing participation
of trade and finance in total output. Hence, estimates of
economic categories like the rate of surplus value or profit
are strongly affected by this evolution.
In my opinion, a microeconomic classification of
productive and unproductive labour based on a value
criterion would not show these trends, and the proportion
of unproductive to total labour would not play any significant
role in the explanation of the long-term evolution of main
economic categories. In this respect, my view is closer to
that of those who reject the concept of unproductive labour
within capitalist production: 'There are many reasons why
profits may rise or fall, but the proportion of "productive"
and "unproductive" workers has nothing to do with this rise
or fair (Houston, 1997: 138). Actually, in the absence of an
adequate microeconomic separation of production and
circulation, an empirical analysis of capitalist economies may
perfectly assume that the ratio of circulation to total labour
is constant over the period, as in Camara (2002, 2003). It is
worth noting that this unorthodox alternative approach to
the distinction between productive and unproductive labour
implies a much more orthodox interpretation of the
accumulation trends than the traditional orthodox approach.
However, there are still many points about the influence
of unproductive labour in capitalist economies to be
investigated. Although I believe that the proportion of
unproductive labour does not play any role in accumulation
trends in the long term, it is not so in the short term. Thus,
recurrent difficulties in the realisation of commodities, the
corresponding increase in unpaid loans and mortgages and
so on, which are associated with capitalist production, may
cause cyclical behaviour in the ratio of unproductive to total
labour. In other words, circulation costs may become
excessive in periods of crisis, as happens with production
costs. It is essential to investigate the general behaviour of
'circulation costs' and the question of whether there exists a
 59
A value-oriented distinction between productive and unproductive labour

tendency of these costs to decrease in a competitive

environment, as happens with production costs. These
investigations could provide a real breakthrough in the
understanding of capitalist economies within the labour
theory of value, instead of the devastating effects of the
increasing importance being placed on unproductive labour.

Acknowledgments

This paper was written while I was a postgraduate student

in the Department of Applied Economics at the Universidad
Complutense de Madrid. I wish to thank Diego Guerrero
and my student colleagues for their helpful comments during
our discussion ofthe subject. Any remaining errors, of course,
are mine. A previous version of this paper was presented at
the fourth annual conference ofthe Association of Heterodox
Economists, held in Dublin from io—ii July 2002.

Notes

It is possible to find several classifications of wrong

definitions of productive labour. The physicalist definition
considers productive that labour which creates tangible
commodities. This is Adam Smith's second definition
and, though practically banished from the literature
nowadays, it was dominant among the Soviet theorists
and present in the work of some Western economists
such as Poulantzas (Savran & Tonak, 1999: I5on, 136;
Guerrero, 1989: 252-255, 255-258). The evaluative
definition evaluates labour and its products according
to a standard of social usefulness, and its main proponents
are Gillman, and Baran and Sweezy (Laibman, 1992:
75; Shaikh & Tonak, 1994: 20; Guerrero, 1989: 276).
Finally, the reproductive definition classifies into the
unproductive group that labour whose products are not
used in the reproduction of capital. Morris, Blake and
Gough consider the production of luxury goods as
unproductive (Guerrero, 1989: 277-282). The Sraffian
and 'global' versions also fit into this definition
(Laibman, 1992: 72-73). Finally, it also encompasses
the claim that labour which increments the use value of
60 Capital & Class #90

the workforce is productive, as found in Gough,

O'Connor, or inYaffe and Bullock (Guerrero, 1989:289-
298).

2. Savran and Tonak (1999: 121-123) provide a slightly

different classification, with five social activities:
production, circulation, distribution of the product,
personal and social consumption, and reproduction of
the social order. Consumption and distribution do not
involve expenditure of labour, while circulation and
reproduction of the social order imply the performance
of non-production labour.

3. In this vein, Savran and Tonak (1999: 124) assert that 'a
definition of productive labour based on the concrete
character of the labour spent in the production process
is manifestly insufficient within the context of capitalism.

4. Note that it is not the usefulness or inner coherence of

the distinction that is under critique here. Even if this
evaluative distinction might be operative and coherent,
it is not useful for the definition of productive labour
for capital, since the 'general rule' of the social and
historical content ofthe concept is broken. In fact, Savran
and Tonak (1999: 144-145) themselves admit to the
limited validity that they assign to this 'rule':
When Marx emphasises that distinction between
productive and unproductive labour is independent of and
indifferent to the type of use-value produced, his statement
is ... restricted to that set of use-values which correspond
to the set of productive labour in general. ... The type of
use-value that results firom a certain activity is immaterial
to the distinction between productive and unproductive
labour only when the activity in question is part of
production.

5. Although not explicitly identified with the concept of

productive labour in general, the use-value criterion is
very common in the literature. Carchedi (1991: 28) writes
that 'any labour process which does not affect the use
value of a material object, such as the purchase and sale,
banking and insurance, etc., should be regarded as a
formal transformation and thus unproductive. This is a
formal material labour process which can produce
A value-oriented distinction between productive and unproductive labour

neither value nor surplus value'. In the same vein,

Leadbeater (1985: 597) considers that 'the decisive point
Marx recognised is that labour expended in genuine
cost [of circulation] does not affect physically the process
of production or use values of commodities'. Leadbeater
admits, too, that Marx's 'remarks to the effect that use
value does not matter refer specifically to the sphere of
production, not circulation' (ibid: 599).
A flagrant instance is to be found in Mohun. After stating
that his distinction is 'analytic' and that 'in the valorisation
of value, it does not matter what use-value is produced;
instead, what is required is a specification ofthe moments
of that valorisation', he goe's on to say that 'the
commodity being traded undergoes no transformation
whatsoever, other than a change of ownership, and
neither use-value nor value is produced' (Mohun, 1996:
44,43-44). More recently, he reiterates this proposition:

Does an activity produce a new use-value or alter an

existing one in some way? ... For those who assert
that all wage labour is productive, then all such labour
does produce a new use-value, or does alter an existing
one, and it does produce surplus value.... Conversely,
for those who assert that some wage labour is
unproductive, then that labour does not produce a
new use-value, or does not alter an existing one, and
it does not produce surplus value, but rather consumes
it'. (Mohun, 2000: 5)

The distinction between market and non-market wage

labour is analogous to the distinction between capital
and revenue: it plays an important but limited role in
the definition of productive labour. In spite of this, it
has often been used to encompass its whole complexity.

This level of the distinction is only introduced into the

analysis in Volumes II and III of Capital:

The capitalist, as representative of capital engaged in

its valorisation process—productive capital—performs
a productive function, which consists precisely in
directing and exploiting productive labour. The
capitalist class, in contrast to the other consumers of
surplus value, who do not stand in a direct and active
62 Capital & Class #90

relation to its production, is the productive class par

excellence. ... As yet, we are only acquainted with
capital within the direct production process. The
situation with the other functions of capital—and with
the agents used by capital to perform these functions—
can only be examined later'. iChapter vr. 89)

Houston (1997: 132) believes that the conclusions of

Volume I cannot be made extensible to capitalism:
'Simple commodity production and exchange are part
of a system of social relations which are not capitalist,
and abstract conclusions drawn from the C—M—C
circuit are not necessarily applicable to a different
concrete, capitalism. Whatever the role of exchange and
circulation in petty commodity production, it is hardly
comparable to that of an advanced capitalism system'.
He commits two errors: i) he believes that Volume I
deals with non-capitalist social relations, since he
considers value to be a category non-specific to
capitalism; and 2) he assumes the unacceptable 'sectoral'
determination of circulation labour.

Moseley makes two sets of estimates. First, he obtains

an average proportion of unproductive labour of 55.46
per cent (see tables A.7 and A.8 on pp. 168-169), and
then he raises it to 60.49 per cent (see tables A.9 and
A.io on p. 170).

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