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UNITED NÂTIONS

AFRICAN INSTITUTE FOR ECONOMIC DEVELOPMENT AND PLANNING

IDEP/REPRODUCTION/311

~~

DAKAR

"For internal use only"

@

..

THE ECONOMIC SURPLUS, A FUNDAMENTAL FACTOR OF A DEVELOPMENT POLICY

By

Char les Bettlheim~

~xtract from "Planification et croissance accélérée" ed.

Maspéro, Paris

1971

pp.

57 - 98 .

MAY 1972

'

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1

112'.

IDEP/REPRODUCTION/311

THE ECOlWMIC SURPLUS, A FUNDAMENT.AL FAC'l10R OF A DEVELOHiENT POLICY.

C 0 N T E N T S

I. The concept of "économi:) surplus", i ts theoretical and prao- tic al importance.,

I .-1

1.2

I •. -3

II.

IL1

II.2

III.

III.1

III.2

From the concept of "agricul tural surplus" to that . of '1econo- mic surplus".

The trends of economie thought and the concept of "surplus".

Necessity for precise definitions.

The definitions of the economie surplus.

The concepts proposed.

Final re marks.

The use of the surplus, i ts g'rowth and the part i t plays in economie development.

The use of the surplus and its effects on the disp~able

social product and on the volume of the future surplus.

Remarks on the optimum ~use of the surplus.

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I.

IDEP /REPRDDUCTIQN

j)

1.1

Page 1. · ·

THE ECONOMie SURPLUS, A FUNDAMENT.AL FACTOR OF A DEVELOPMENT ·POL rer·

.: . . :·'-'

:THE CONCEPT -OF "ËCONOMIC SURPLUS", ITS 'THEORETICAL

AND

PRACTICAL HIPORTANCE !:

- ..

Many reasons justify the choice of the concept of "econoznio sur- plus" as a topic for a specifie ,reflection.

.·.-.:

Tb,ey_~é_tre bot,~ practica.l and the oreti,ca.:;J.. o

Ftdm )the :Pr~ctical point of view, ever:f develcipment po licy ne-

. .

. cessa.rily a.irlré·;~t-·iii:fluenci:ng

thê

aize

' and

the uae ·of··the eoonodlio::sur-

plus, hence the importance of defining this concept and all those con- nected witl:l.i~ a.s.:ci,ea.rly anQ: a.s preoisely as p.ossible.

The· straté'éic · 'cha.ra6tër of· this -concept becorri.és appare'nt ,' :Pa.rti-

·~·~17; ·-when-'vr~ exa.mine· .. tlie practica.l obstacle~ to a. ra:Pid rise in the

.. .

.:~~~•.,.,

t . ,·,

r,: .. · ..•... -. . i · . . . . . .

·g~wt]. rate of t'he ·~con:omy; and we discover tha.t the limited a.mount of

0

funds ava.ilach.e for investmênt 'only forma part of the~e ~btSÙJ:èie·s. This, a.mong others, .· ra.ises the question of the optimUl'il ra. te of' ·':in-ifestment · a.nd that of its relations wi. th the rate of formation of the surplus o A theo-

;r:etica.J. ~a.lysis then bec.omes necespa.ry.

The theoreticai ecope of the notion of "e·conomic surplus" ·is st".ll wider than it ma.y a.ppear from .the point ·of.vie-w ·af econdmic.theory <:Ùoneo

-- ·In fact, a· large number ;of recent works written by historians, ethno.:..o- gi'sts, · sociologists ·and

·of

course economiste have shawn that from· the

. '·

point of view of theory, the concept of 11econ:omic surplus"· is of -f-unda- mental . importance in the understa.nding of a. large numbe.r of problems raised by history, ethnology. and sociologyo

I. 1 FROM TBE CONCEPT OF "AG RI CULTURAL SURPLUS''- TO THAT OF

''ECONOMIC SURPLUS 11

ThF~ .simplest concept of ."sur.plus" is that .o{_"agri<;:utural s~plus".

_, .. This is tb;o'::con.cept most f'requ~ni;Jy used by ethnologists and histor;ians •

. . . . . 1 .. .

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IDEP /REPRODUCTION/3i 1

Page 2. ····

' ... -... ··----·--

"

The se _~cholars :use_ :t~~ n.otio_rr· in-pray_~ that ~_!le_ <::9_sence or .

-·· ... ~. -

the appearance of an agricultliral·surplus e-xpbüns various facts ob- served in the societies thèy study. For-·insta.l'lc·e, in l:d:~:f book "The Economie Life of··pr:imi tivo People

"(Londo~~Nè~

York,-

1941-)

Melville J.

Herzk0vits has shawn that there is no regular division of labour among

._JJ;t:>iwitive peoples because, in the absence of a regular food surplus,

·· .every ·econ,amical:ly act iv~ · meiilber of the society is co.:npelled to devote

, . ..,_ · . all

his time .. to the search for his food. Kaj Berket Smith rriade thJ Sé-i,!T.'3

-~

·'· observation in.his GESCHICHTE DER KULTUR (Zurich 1946) aboÙt.the Amcr::i-

- .

can Indian tribes, , as did Raymond Firth about · the tribes '()i ·the So:Lomc,~1 . Islands.

Conversely , .. the observation of societies which be come ca:pable cf supplying a regular food surplus, as a result of their mastery ovex·

·_stock breeding and agriculture, shows that th0se · societies

qn\ · . '

"JtUickly achieve a regular division of labour. Obsorvation also shows

wft

the

emergence of differentiatcd occupations iS subject to the existetce of a regular food surplÙs or, which is practically the safue thing, of a fairly fiiê;h level of a{sricul tural labour productivi ty. -;

.... A large number of historians of. Ma.sopotamia, .Ancient Gree ce and

~ ·-;·,:-·

Me·xican civilizations have also observed the connection between the appearunco of a regular agricul tural surplus and the écmergEmce first of trades and i~iè'r' 6:t'socia.l classes, town~ etc. As is shown by~ the'his­

tory of the g.r~'at ·river 6iviiizatiori~, particularly that of :alicierit

' 0 0 , . :· ,. ' : •• _ .... A,

Egypt, irrigation has pQayed a fundamental role.

History thus shows·.:·us that. the great civilizatio;ns 9-evelopa,d almost e~ç],usively on the basis of an agricult:ural surplus. This .sur- plus

often·;,~·presented

2Œfo; or even ,more than

2C/f~

of the grl!'ss agricul-

tural produçt. A proportion such as this is found under very different

. . ,., ......

.

.

historical conditions. Thus, .in the. feudal type of system obtaining in the Hawaiian I·slands, the pea:sants had to vrork one day out of five on the p::tqp~rty of the landowner, who thus obtained 20') o'f the total _pro- duction.

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IDEP /BEPRO~U:CTION /J1:1 -·

Page

3. . .

Egyp~ a.t the time of the Byzantine· Empire ha.d to pa.y to Byzan~

tium about

· 12~5%

of its

agrioü.l't~a.l

·production,lfa.

po~tion

of.,·about.

' . .. -~~ .

1

o%

of·-thi~ ·production rema.ining on the spot and forming a. i~cally. ,used

surplûS~ ...

·

Hist~;y thue sh9ws that the development of the agricultura.l sur- plus is tp.e -.~rima.ry pasj,~

or

::the development of trades'. of social dif.;. . ferentia.tions, of the emergence of classes, of the State, of commerce, of monay, etc~

Of qourse wh,en h~4cra.fts and industry are developed, the sur-;.

plus ie :~0 }enger exclusively an agricul tura.l surplus, it becomes ·an economie. ~:.,;;;· . .. s.urplus . . . . :and makes possible a general accumulation and :parti-. cula.rly a. productive .. accumulation which is not possible with the simple agricultural surplus.

::·- Wb,en a.ccUinula.tion becomes productive and lead.s to the creation of an increa.singly large number ·of; and diversi'fie\1, me·ans of produc- tion, economie growth. acc.e-lè'rates.

At· the sa.me time, however, the economie surplus, through mone- tary transactions-, ta.kes more and more · complex forma which makes i ta origin and reality. Th-is expla.ins the absence of the very concept "f economie surplus

in

the work of many economiste, in spite of the fa.ct tha.t this oo'hcept ·'is of funda.menta.l impoftance' . in analysing the pro- blems of e conom:ic growth.

·"

Before giving a general picture of the major trends of economie th"bught as règards the notion of •surplus", I wish to stress that, even in modern times, the aize of the purely agricultural surpluà m~ play

a..-considerable role with respect to developme:rit potentialÜie~ •. This rSle :±è obvious in a country like I~dia. where. industrial de~iàpment

j}

Cf. Bra.tianu, Etudes Byzanj;ines d 'h~~toi.J:-e économique et sociale, Paris 1938, p.133.

:_-,, .:....

·- f t_

··- 1

····'

·.,

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IDEP/REPRODUCTION/311 · Page

4•

. . . • t .

has ofter{been hindered by too slow an incre~s.e i,n the agricul tural output 'appea.r~ on the market. During the impleme.nt~tion of the ~e­

oond five year plan of.India, this too slow growth of the agricultural surplus was responsible for the rise in agricultural priees and in part~

for Jthe defiait. of the trade balance which marke'd the po'Ï'iods · of ra:pid industrial expansion, both of which 1-iere an obstacl'e to a policy of larger saale industrialization.

Another example may be found in the problems which the Soviet Union had to face ~t( ... the beginning of i ts industrialization p~lidy.

The latt.er was chepked as long as the agricul tural surpl~s wn's insuffï-:- cient • . Institutional means such as compuisory deliveries had t.o be de- vised so asto ensure tlie supply of an agricultural surplus ·large

enough to meet the demanda of industrialization. The example of the Soviet Union. in the lata twentias and early thirties also shows hovr in.,.

·1

dispensable tecliriicaJ. changes may be :in agriculture so that agriculture may be able to supply labour to industry without a decrease in the · agricultural surplus.

We sec clearly here the connection between the growth· .of<'the ; agricul,tural surplus, the influx of ma:n,power 'Of rural .orig~n,· .. cto the towns, and indus trial development., .• lt is obvious that :j;he. e:xisto.nce of an agri~ul tural surplus is not eno:ugh for industrial development to take place. For suoh a development to occur, favourable. social and tech- nical conditions must exist outside ~rieul ture, and agriculture .must supply a surplus, the pbysical nature of which corre, .. sponQ.s .to the requi:re- ments of industrial development.

\ ~-

. "7:".::· ... J·,:.i.,...,

For instance, in a s6c.ie.ty, in which the power of the dominant clas- ses is essentially conn.ected with the existence of an ngriculturrJ.l su~

plus, these classes do not make investments outside agriculture, and, they m~ not even attempt to oppose iuvostments of this nature. In a society auch. as this, industrial

develb~ment

talees place only ve,ry slowly. For centuries, the various dominant classes have used a consi- derable agricultural surplus without industrialization taking place.

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- J

: .

IDEP /REPRODUCTION j}l:1 Page

5. · · · ·

The pyramida, the cathedrale, the palaces are what remains of such uses of the agricul tura}, SJlrplus •.

i-1 . . . . . ··''··'··

,, ,, _: ,':''

0 'J., ... ,,,"":"'; ___ ;_·_ , . ; ..,_. ____ ,_ _ _ _ ,,,:~ ~-_:_,,,-,, ·~·~ ---·-•- -• , .. ,,_0 ' '' "' \''~ oA •• • •• "'-!•• • #00'0-'0'0~ - -·-- ' ''

·.

iriJ~strialize .

This is a wall lL'lown aspect of the situation in many. developing countries.

. . . .. . . . ~ . . ..

A particular very important e~am:J;>le .. of this situation is that of .the·:

~ingle agricult~al ~~mmodi

ty producing .. countries which cannat l,lSe

. '· . . . . : . i. . . . .

their surplus on the spot. These countries depend on the international markets to exchange the ir surplus again.st other commodi ties \vhich cq.n be

i.iseci

for the ir indus trial developmer:1t • . If these markets are controlled

....

by industrial countries where a monopoly capital predominates, the in-·.

dti~tl"ialization of the monoproducing coun:tr.ies may be blockèd or gret:.tly

. hinderad. · · . .i:.:

We can see that al though the existence of a surplus is a necessary

; ., ' : .• i,;. :

.. condition for ~rowth, it is not a sufficient condition. OSKAR LANGE.

:

..

. _;:·.: ,,

stuùiod the physical condi tians when speaking of the "technical laws and ... .

.. . .. .

balance sheet of production". (Economie Politique, Tome I, Paris, 1962,

p.67).

It should .be stressed, he.re that the concept of "economie surpHis"

is._ ~· far richer çoncept.

than

t!;!,ose "of savings" and "investment" as cur- rently used. By these last two concepts, we take into account only part of the cccnomic surplus. Conseq~ently, sorne phenornena of paramount im-

·.·· .

portance for the analysis of growth cannet be adequately .treated by using only to thes~ two conçepts ~ We can attempt to show:, this more accurately

· by studying briefly the positio~. . . taken by the. .L . . .. . major currents of economie ·' :.

! .. .

thought wi th respect to the c9ncept of surplus. , _

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IDEP /REPRODUCTION

/311

Page 6. · '

I. 2. THE TRENDS OI<' ECONONIC THOUGHT ;l.ND THE CONCEPT OF "SURPLUS11 The concept of "surplus" appaars at the same time aei' systematic ècon::Jmic thought. It is ··one of the underlying. cauèes of the mercântî~

J.ists 1 concern for a positive tracie ba1à.nce •· · It is a.lso one 'of the-mean- in,~;s of the thinking of physiocrate as regards· thê 11i)r6ductivity" of

., ,,

e;:;riculturai lè.i.bèur. .ùccording to Physiocrats, th~ characteristic feature of this lJrociuctivity is that agriculturaÎ laboUr would supply a surplus i'rhich ether ki:nds of labour do not supply.

The preoccupdion a.bout the gr01-lth in the surplus and its produc- tive use appears most clearly with the great class~cal economists~ Smith and Hicardo. Smith's attacks.against what he considera as "a wasto of -

. ~ .. . -·. . ...

the surplus by the feuda,l or monarchie State" are vTell known. Smith si- milarly criticizes the expenditure of ·the nobility and of·the wealthy merchants who use.the economie su~};llus unproductively.

Ricardo_ expresses similar preoccupations but in a more explicit ....

form. He believes that to achieve economie progress, production ehould be increased to the maximum and that the greatest possible part of this maximum production should form the surplus appropriatèd by.thèentrepre- neur vlhO will re-inv~Jst it. That is why l.t ·is· ·:Ric8::rd.ois wish t:b:ht wages

should be as low as possible and that landowriei's' incarnes should also ·be

as lov1 as possible. 1fe find the same preoccup'ations about the social

class 1-rhich appropriate the economie surplus~ about thE:l use they- make of ·~

i t c:md t~e effects of this use on economie growth in all the works of the cls.ssi.cal economists. ·They also appear in John Stuart Mill's work.

iJ.s vre know~ :Marx began from the study of the non classical eco-

nomists~ plc~cing them

in

c. historicc.l perspactïve. · He &howed that the concrete form taken by the economie surplus~ its size, its mode of appro- prie.tion and use "always corresponds to a definite stage of development ___ of la.bour and i ts social :productivi ty". In makii:lg this observation,

Marx laid emphasis on tht:: historioal forins taken by the surplus and

on

the rôle of the se various forms in economie his tory. This v1as a very

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IDEP /REPRODUCTION /311 · .. c

Page

7. · .·

profound view which is confirmed today by the works of historians, sociologists and ethnologists.

Therefore the disappearance of the notion of "economie surplus 11 from the worka of the ~ajority of non Marxiat economiste writing after 1850-1870 is really striking. There are r:1any reasons for this disappea- rance • . It is not my intention to examine them all. I would orily like to indicate on sorne of them.

First we have the actual economie arid ;social transformations in

.,

th~ count:ties in which the se economiste lived. · J~t that t ime, the se countries had reached the stage of a relatively developod capitalism at that time. It; was no longer important to fight against the feudai waste of the surplus since the waste practically no ~onger existed. Of course, this developed capitalism had its own forma of-waste of the surplus, but denouncing them was pointlass for the economiste who thought that this capitalism was the best or the most rational form of social organi- zation. For them, this was not really wastage, it did not correspond to a real use of the surplus, it constituted a socially necessary oost

:.t. of current production.

-Under these conditions, the economie qua.ntity which, apparently;

was the most significant for growth w~s investment anc:l n_?t~,::?}U'plu13.

This way of seei:Dg thi:Dgs had yet anothër origin •. It is kno)m tl:l~t~ the economiste of the second hhlf of the··

19tb. ' ce~~ury . had

givon 1fP

tJ::.~

.Jr.icro-

economic ·a:p:proach. They made the ir analysis at the lGvel of the firm and of the consumer. Investment at thi.s ievel does not seem to have . : ~ ;"•' . . . . ~:-it.s . .· . . · · ·-·.

source in.a social surplus but in

a ,

decision to s~ve, this bcing essen-

:..

tially an individual decision~-

Thus, respect for the existing social order and the individua- listic atmosphere of this social order contributed to the disappearance of the notion of "surplus" from tho works of the ~Jconotaist's .who WG:i:'e

imbued wi th this rèspect and this c.tr.10sphere.

. ' ..

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IDEP /REPRODUCTION /311 Page 8.

From then on, th8 concept of economie surplus has therefore been replz.ced in pa::r;'t, by the concepts of investment and savings. Unfcrfuna.tely these concepts are not so rich. They do not enable us to .explain satis- factorily the social origin of sn,vings .and investmont. They do not make:

i t possible to highlight the connections existing between tho l8vel of ,. ·· development of the productive forces, on the one hand, .. and the extent , and the forms of use of the investment fund on the other.

To the .reasons just mentioned for the disappearance of the con- cept of "surplus" :from a whole currt:nt of economie thinking should be added sorne ethers:

a} Indifference as regards the problems of economie growth~

In

fact1 until recently the main problems of concern to non-marxist econo- mists were those of priees, equilibrium and economie fluctuations and

:·:·-·

not thos.e of growth, that is the problems which, to sorne extent may be approached with the help of the concepts of profit, investment and savings aione. ·

b) The concern for formalism and great accuracy in the defini~

tions. But although the concept of "surplus" is easy to understand in- tuitively, it is difficult to formalize.

On this point we shall recall Paul J3aran 1 s observation: "The concept of economie surplus is undoubtedly somewhat tricky, and in clari- fying and' employing it for the understanding of the process of economie developmèrit neither simple definitions nor refined measurements can be substituted for.· analytical effort and rational judgment. Yet i t would certainly seem desirable to break with the time - honoured tradition of academie economies of sacrificing the relevance of subject matter to the elegance -of analytical méthod; i t is better to deal imperfectly wi th which is important than to attain virtuous skill in the treatment of what does not matter"• (Paul J3aran, "Political Economy of Growth" p.22).

Paul Baran is certainly right. But it is none the less true: 1) that the absence of a precise definition led scholars to re jo ct the notion of economie surplus whereas they should have nade an effort tc

..

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.

.

IDEP/REPRODUCTION/311 Page

9. ·

find a usable definition~ and 2) that an effort to find a precise do-

f ini·~;~~

is

~gent

t'oday

~

if

w~ ~ w~t

to.

re 'introduc~

ëffectively tho

. . ':., !' ;_ ... r; -, ~:_ .

1 •• ·"': ;· ~ • • •

concept of surp_lus into ourront Gconomic analysis. I 'shall attempt to

r:F:\:o this effort.

NECESSITY FOR PRECISE DEFINITIONS.

As regards tho difficultios menti.oru>d by those. ·.historia.ns }fj:),q_ ip- voke the absence of a suf'ficiently precise dt3finition· of the e;oonom:i,c :surplus. I sh_all mention the . . exar:1ple ' . . of ~-~hat ::F'rofessor Harry Pearson

~ . ..

w:rites in. a book entitled 11Trade . and Marl,{et in the Early Empires".

In this book (p.32-5 ·sq) ~ Pearson .makes two reproach8s of .'t:he. con- cept of surplus.

L. first reproach consists in saying that· the concept is ccmfused,

· .. ·.; ' " -fo' r"

àcêôrci~'

io

·this hist'orian~ therè are two ë-Oriœpts of sÙrplus.

1) .. Tha concept of '.'apsolute surplus 11 which would be the exoess . of production ovor the neces.sary . minimum consur:aption, and

.--· .,, . . . . .

2) The concept of ''rèlativo surplustt whioh would .be the excess of :çroducticn ov~;r 1vhe.t society has decid0d to consume •

. The sebond reproaoh consists in saying that these ttvo concep'ts of

sur'pÏus ar~ ~aguè, for, ·~n -tho one hand, says tho author, the-re is no

· pj_y~;iologicï:Ù minimum of consumption ~and, on the ether hand,.r the. dooisiom~

1.'8latïng to t'he share of consumption and surplus ·in the socï.al_ pr9duct -: nw.~r 1.~;:; -Jxtremoly diverse, pncl. m,ay be takan for all kinds of reas ons,

inolud.ing non Gconomic reasons .•

The size of the ·surplus would' 'thereforo be undétermined,; q,pd con- sequontly, it would be moth~dologicYally wrong to use as undetermined quantity as a tool of explanation.

Of these two reproàchos-~ only. the· second one should retain our

attention~ beccuse no one has ever included q. co,nce;pt of abs~Jute sur- plus in a historical analysis. On the one hand~ the, probl()m of_ the

.. '·· . ··"'·"• .

apparent undut • ..lrr:ninaoy of tho surplus ( that is of the "roletivo" surplus . in Poarson's terminology) is >.-orth discussing.

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IDEP /REPRODUCTION /311

l'éJ.b8 1 0. .•

If we think about Pearson1s objection, we sëe that if; according t o him, tho size of the surplus is undetermined, 'this is essentiallydue to two-reas ons.

His first reason is the refusal to make suffici0nt effort of analysis or research dealing with ~ •... , ....... ··---. the ·-· .,... objective economi.c -·-. . . . . ........ ·--... -.. ~---.. and -......... :,. s. ocial :\.<:n'JS .. ~hièh, at: every moment, dotE:rmine the distribution cf the social p:r-oduct

between the various. usus mado. of these products.

If we adni t, in fact, that such laws exist 1 tha:t is if :we agr::w 1

as observation shows 1 that societies do not function at random, .<?r -~r-

··· bitrarily, but according to objective regularities detormining their life, reproduction and development, the necessary resul t is that th8 size of the surylus is, at every instant, deterr.linod by a sot of factors. Thëse

..

factors act on tho ~ of the surplus and on its essential forms of use.

It is precisely tho duty of tho economist, the histOrian and thésociolo- gist to bring to light thO nature of these factors and thoir m~ode of

action. It is only through an analysis such as this that w:e ~.1ay ~ucceed

in l,mdorstanding economie a.nd social dovolqpBent.

It is be·causo it l ost sight of this methodological requirem~.mt

cm:.corning investmont (tho size of which is deal t w-i th by a wholo portion of tho o conor:üc l i ttoraturo as an "exogene ous 11 quanti ty that post-keynesian oconomic thought constructed "modols 11 which c:1nnot be applied to re ali ty, particularly to thG reality of the so-called doveloping countries.

The socond roas:on which lod Pearson to assert that tho size of tho surplus is undeterminod is tho inadoquato 8ff'ort made so far by t:1c very people vlho use the concept of "surplus 11 to de fine this concept strictly. We camo back hero to tho need for "definition of the surplus".

As ~v0 shall sev ~ i t is nocc;ssary to formula te sev8ral defini tiens 1 according to the type of "surplus" involvod.

The first thing to bu dono is to refer to sorne of tlw definitions

alroa~y formulated.

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IIJEP /REPROIJUCTION /311 Page 11.

a) The notic;>n. of economie surplus in Marx.

Economie su'fplus as defined by Marx is composed of the 'por- tion of the net social product appropriated by tlie non wo~king clr~sses,

and this whatever rhay be thè form in which th.oséicH:a~se~ are':t:he··sb.rplus~

:personal consumption? productive or un:productive accumulation~ tr~ù{::.~i\:li' to those sup:plying un:productive service-s, to members of the ·non -viof'king classes, etc. Marx stud·ied the ·Iawà' which? in a capi talist regime~

determine the distribution of the social product between the suxplus ( which then takes the form of the surplus valuel _.and the neoessary pro- duct ( whic;h is the counterpar t of what Marx cal], s. the_. "necessary

labour"). Ee also analysed sorne of the factors da~ermining the distri- bution of the economie surplus between the accumulation ünd the consump.- tion of the ruling classes.

b) P. :Baran and th;.; definitions of the economie surplus

These studios of Marx are, in r;zy- opiniop, an indispensable starting point for all further reflection concorning the economie sur-

;:.) .:-\ ~:·

plus. ·This can.be se en in Paul :Baran 1 s efforts to do fine certain c:~s- :pects of the economie surplus. In his book "Political Economy of

"

..

Growth, Chapter 2, Paul :B&.ran defin_,d three other concapts of surplus;

more precisely, he distinguishes between:

1) The. "actual economie surplus" which he defines as the dif- ference between society's actual current output and its actual current

~ consumption. As he says, the surplus thus definedis identical with

...

current saving accumulation. It finds its embodim0nt in assets of various kinds which are added to society 1 s weal th during the p8riod. in

' ..

question.

.. f'. ::.· ....

2) The "potential economie surplus" vrhich ·'is "the· ·diffêreïiëë between the output that cou1d be produced in given natural ahd techno- logical environment with the help of employable productive resources, and what mi.ght be regarded as essential consumption" ( op.e~ t • p. 23).

(14)

IDEP /BEPRODUGTION /311 Page 12.

3) Finally, Paul Baran de fines the "planned economie surplw:; "•

Abou~ this he says "the planned economie surplus is r_elova4t only to comprehensive economie planning under socialism. It is the difference between tho society's "optimum" output attainable in a historically given natural and technological enviro,nm~nt under conditions of plan- ned "optimal" utilization of all availablo productive resources and sorne chosen "optimal" volume of consumption. (pp.41-42 of the book already mentioned).

While the first of the three concepts mentioned above, be cause of i ts identi ty wi th the concepts of saving and investrrie'nt ~ does not in my view add any new ~nalytical tool to those available to oconomists, the other tvro concepts seem to me extremely important. The analyses presented by Paul Baran show how rich .the concept of economie surplus is and how neoessary it is to an aconomic theory ·which aspires not only to desoribe the past but also to assess the potentialities of the presant and of the future.

Personally I fe~l that the~e analyses of Paul Baran are a fun- damental contribution to the progress of economie thinking. In my vi~~v.r

the concept of potential economie surplus and of plannod economie sur- plus should be preserved and studied further.

However, I ccnsider that the definitions .. given by Paul Baren

·

raise a number of difficulties~ of which he is himself fully aware.

Hence I should like to propose ether concepts which seem to me to be easier to define precisely.

II. THE DEFINITIONS OF THE ECONOMIC SURPLUS II.1. THE CONCEPTS PROPOSED:

Tho concepts v<hose e.nalytical utili ty I wish to show are the following:

1) The eurre nt economie surplus.

2) The eurre nt surplus available for dGvelopment.

3) The surplus used for development.

(15)

.: .. .

IDEP /REPRODUCTION/311 Page 13.

Depend.ing on tho economie, social and poli ti cal fen. ture of' a

given ni:ltior:c.l 8Cüï1omy1 the surplus usecl for developme:n.t may be spon-

taneous or pla.nned. If it is co.r;t~idered ex ante, it may be simply ex- pectod or i t may be desired. - Ue can also say that, ·in relation to a certain c:Jnception of economie developrnent~ the surplus U$Gci for develop- rilent rr;a;y ·bo optimum or below cr ab ove the optimum.

a) The current economie surplus

(S.E.C.)

... ' -:... ..

In any cr.se the first thing 'ifhich we must do is to clarify the definition of the current economie surplus (S.E.C.). To define the concept of current economie ~}lrplus I 1dll start .with the concept of disposable social product (P.S.D.).

In the terminology I am using the disposable social product re- presents the difference betifOen the gross social product

(P. S.B.)

and

t ~20

:::-ene1ral

(R) 2 ,

henc0

·P.S.D. = P.S.:B. R (1)

As we know, in a developing economy the disposable social pro- d.:J.ct corresponds to a quantity gra<.:.ter than the net social product3(PSN) 1

P.S.N.

=

P.S.B.

Am ( 2)

I should add that, in my conception, the gross social product

corresponds only t o the sun: of the products of branches which supply

material output or which p::::-ovide services directly link:ed with material output such as~ for example, transport and trade. This excludes fror,1

1i tho gross social product the services provid0d by the army ~ the polico,

. 2)

3)

The rene-..ral referred to here is what may be called the "nëcessnry rene-v;al 11 · fvr the maintaining of simple reproduction. I shall not go into the detail of the clarifications which 1wuld b<3 ef3senti:ü for strictly defiriing this "nGcessary renewi:ü "~ I will me rely in\iieé;.t e that the renowal referred to he re must be both n<:Jcassary and effectio;'\';;.

On this point, sec "Studies in the Theory of Planning" pp.;388-,et seq_.

whcre I analyse the; relations between ren.:-;wal and depreciation in a steadil;y dovoloping economy.

(16)

I.JEl-' /REPRG:JUCTION/31 1 _p ::;.g.:;,

14.

t Le l aw or general ad.r:Jinistratiull~ national education or he al th ser-

'r:i_,~os, -,,ro shoul li. not e that most of these sorvices have a oost but very

~~'t: .. J. no prie:.:;~ since tho;y are not usually sold, The oost of these :F:rvi ces c~··rrt:Jsponcls t o a mF ... t ar ial consumption and t c the income:s of

St <!rt ing >-Ti th th;; definition of tha dispos able social product ~

I wi ll à.afin-3 the curr..:;nt 0cono1;1ic sur:!)lus (s.E.c.) as tho excess of the P.S.D. over tho SLJm of the consuœption of the p:rcJ.ucers 'i:Uld t b:·i:::' family (C.P.). i$ suming that the current economie surplus avail2bJ.:;, t o society st ems from the pt:riod ilïlrr:ad,iately proceding~ we wil l •n·ito:

SEC ( t

+

1) = PSDt

=

PSB (CPt + Rt) (3)

This i s th\3 equivalent cf the eccnor:1ic surpb.J.s as defirwd 'b;y Marx. At this lovGl of analysis ~ al l tho activi t ie s 2:nd consumpt icns ta!ü ng pL .. ce :utsià.e the sphere of material prcCiucticn appear as ciepen- ,J.::n t en the JCO!'lcmic surplus provià.eci by the >wrk,Jrs enga€ed. in material

::':•._,ci.'..:;_c,-ti cm. :F'r ,..'fll this point of vicw5 all t h.,;se activi t ius aùd cons-Llillp-

t i on.:; car: 1.K~ reg arded as "financed" by the eurre nt e corwr.:ti c surplus.

Of courso9 a cGrtain part of t hese activit ios and ccnsum:pt icns

.. .L"

J.1l.C • Oth.::rs a:re net . But at this lovel of

é~Yl:11-:v.sL; the pr-obl em is not ess,;;ntial.

It i s iL:port o.nt t o notG that th;:: curr\.:nt .:;cono:;üc sur:/lus i-:. .. .:_s ne. 01ü;y 11fi.n:..r.ce" àcti vi t i os and consumption:'" outs id8 th:; sphoro of TJ&.ijori <.:l pr oduction9 i t is also t he source of investment finanoing. Thiz financing can also cerne at l8ast in part? froE: the indi-ridual saving of work(jr s in tL..:: production sphere. Hmwver 9 this sa,vinc re- pr8stmts a vory suall fraction of t otal investn;t:nt. That is wb.;r tl1e id0a h2.s afton b(len J.ofondod that? in ord.t:Jr ~o mc:,ximi2ling .th<.J rato o:f invostnont (with tho aiL of uarimizing tho growtl:. of the nTtional inoco;:;), i t would 'bo noccssü.ry t o max+nizo t~i.:J rate of formation of. tl::e curr.:;nt oconomic surplus.

..

(17)

=

IDEP /REPRODDC'IT N /31'1 .· · Page 15.

ill!Q and if ry = rate of growth of national PSD

incarne, ;ve ;vould hc:.ve ~- in lino wi th this conception, ry max. for s0 max.

The maximization ·of s0 can be obtained in various ways, fpr

exampla, in a fairlyhighly monetized economy, by a f'all in the real '·

wagea or real incarnes of the peaaants? i.e. by a certain relative evo- lution of priees and wages.

The tendency for workers' incarnes to be reduced is a spontaneous trend of the capitalist ecoriomy7 at least at certain times. This trend . partly explains. t.:Oe relativ:ely high growth rates which capitalism mana-

ged to achieve at various times in i ts his tory, but .. it also explains the

':( .

periods of economic,depression and stagnation and the particular form of capitalist economie developmen~.

However, it is very .important to point out that s0 can be in- creased in another way, without a fall in the real incarnes of productive workers. This occurs when labour productivity increases more quickly than real wages. In this case there can be bath an increase in the rate of formation of the economie surplus (a0) and an incr~ase in the level of living of the workers. This is obvicusly the only positive solution, the one which socialist planning should aim at.

It is obvious that a solution of this kind is only feasible with- in the context of an investment yolicy geared to a progressive technology, i.e. a technology which increases labour productivity.

· That is why the idea has been supported that any development

policy should 2-im at increasing the current economie surplus through tech- nical prog·ress.

In a way this idea corresponds t o an oversimplified view. As Joan Robinson has rightly point0d out, it is not true that in any eco- nomie and social structure the additional economie surplus will effec- tively be used for productive investmont. In sorne circumstances this surplus mey.b~ wholly or:partially wasted from the point of vicw of development.

(18)

\

IDEP/REPRODUCTION/311 Page 16.

This remark leads us to stre, ss how important

Ff.

is to dist in- guish between the current economie surplus and .tb:e current surplus

available for development (SCDD). It is the current surplus availahle for development and~ even more so7 the surplus used for dcvel opmont

(SUD) which may have an effect on the rate of ·growth of tho economy.

I will therefore now try to define these two concepts, beginn- ing with the current surplus available for devel opment.

b) The current surplus availabl~ for development.

The concept of current surplus available for devolopment is ver,y close to Paul Baran's "effective economie surplus11 But it is wider than that concept i since it covers what is available for devel opment and not me rely what is used for th at purpose; ·

The current surplus aviülable for development can be calculated by deducting from the current economie surplus 1·rhat I cal l the "social

overhead costs", i.e . the e:xpenditure connected with the functioning of society in the same conditions and at the same level as be~ore (FGR).

This is a normative concept. It must be distinguish0d fr om the (perceived) size of the éffective ovorhead cos~s (FGE) • .

vie . will defino the effective overhead costs as the , suru of all the expenditu.re which doos not serve either productior: or c,leveloprr~<:mt

directly.

Under the system of definition I have adoptecl, we will consider that the effective social overhead costs of one period (FGE) become the social overhead costs necessary for simple reproduction (FGR) of the following period.

Th us we c an wri te :·

~R

(t

+ 1) = FGE (

t)

( 4)

:,..· '

and consequontly:

SCDD ( t +

1)

SEC ( t + 1) FGR (t + 1) (5)

- ..

....

(19)

...

... _:~ .. , .

I:bEP

/REPR()DÜC~iôN/311 Page

17. ··

By this. syster.1-~of definitions we arrive at what I call the con-

-.• : ..•• :.:..:.":~.: .. -. ... ..:. •. :.:..'·~~-:.. ... '·.·~_.,;.:~: .. :.:~ ... '._"· ...... ,...,;....\... ;_· __ , . . ~ ·,. . : . . -.f ·. __ :_~ •. •·

cept of "consumption necessary for simple reproduction" ,(Q~R) which

. ·--~ ~:-· ...

oa::.1 be expressed by the following equation: ''i'.' . :·

. .

~ ;,,

CNH-·

= FG R

+

CF

'• :,,,,,~ -~" .... ,,.,.,. ____ ,,,,,.,, •••,M' .''.\! ' ( 6) \!"' ... :' '

This consumption necessary for simple -rep.rod~~t~on, ... as I de-

_, . . . ..

fine i t ~ is wider than 'the consumption of prod~ctive '1-lOrke·r·~ al one or th~· î1essè-nti.éil cohsumption" as defined by

PaUl ·

Baran i_n .his book quoted aboire (op. ci t. pp.13

arid

24) since · it includes tho c6s-t of tnaintene..nce of the idlo or ·paras t'tic ;.classes .

--· . ..)

It is the counter_par~ ~ a t consumption leval of vrhà.t renGvml is

... ' ," •, •w ' ' ' -

at invostmen~ l evel. Thétt is~ i t includes all the consumptions which \ ensure the maintenance of the yconorn;y and the s~;;ietY at the leval pre-

-.. ·. .. ····- . . . . . '

viously reached. If con~u.'Jption thus defined is r<?garded as 11necessary11 ij; must. be stressed th~t i ~ is nece~sai'y f?r the maintenance of 2. cer- tain . E?ta~:u,s quo and not for effecti:ng fu~th0r economie development.

; __ ··.: · If we now observe that not .all. of . the ou.rront surplus available for. development:; (SCDD) . is automatically u.sed :for -development ~ we have to • definé the conc.ept of the surplus used for devo;).o.pmel:lt (SUR).

c) Surplus used for developme'nt ... :, ..

I shall define the concept of SUD by_saying that the surplus is .· ·.1sad for economie devel 0pmont when i t is "earmarked for expendi ture

.. · intonded .fo~· increasing the society 1 s production co,paci ty". Hhere the

vïOrkers are not rr.asters of the moans of production and their use, economie 'de~lopment 'r.ms-t~~b-e-·'·.fristinguished , frcm ~ocial dèvelopment.

Social developp1e:nt • ~s, definGd as the incroase in the workers 1

. . ' ; ..

l(?vel, of l~:y;Lne; .but this does not result from_ eveq kind of economie dove 1 opL'Kmt

"" . . . -~ ·~ ., .!·-

I f th3 .tBrm. "d.evelopment" without an <;ldjoctive is used to in-

:.~:~.: ..... :-~, .--z.~~: ;'1: ... ~-.... ..:~--~-~-"~; ·: ·.

dicate economie ci0velopmen~,. we will class.ify t:b.e following uses of thp

; ·'. ... '.: ~ ' .. ~

surplus as coming under the category of surplus used for davelopmont:

(20)

;·· ., , .. ·.-

··. \

IDEP/REPRODUCTION/311 Page 18.

(·;:,~I) ·_Naw-.p.r oductive_ i..l'lvestment. The porti.. on_ of the surplus

used for this

h

purpose w:;Ll;J.. be called the "new. productive investm.:mt fund (FIUP) •

. . i

II) The new unproductive invcstmerits whicli' indirectly contribute to developuent., ,,T4? portion of ~h~ surplus used for this purpose will

· -!;Je,. call~d the .. '~ne•·r un:productive investmont fund contributing to ·de- V:~~opme.nt';: (FUT Ci) •: _: .

This ·ca-teg·ory inGlUdes ir;tv.estqént in so4oo1f:i~ Ul!iversit~<;.s and

laboratories as wall as certain .in.:vestnents in.,hcusing ~ ho spi tals etc. •

1vh~ch help t o increase . the available capaci ties in educa~ion~ rose arch~

h~;using, public he al th services etc. insofar as the se invostments r;my

...• • •• ...:. .. :~;.: ... ~ ... : •.•• .u... •.. ... .... ' .• ·." ... ...... -~--.::.:..,~·:·.

help to i~creaso production subsequently; otherwise these invostmcnts

··· ...

~:. ' -~- ··-;;~; ~~;-th '-w;:P ; ~~d:~9t ~i;o· ;;nd_·-'wi'tho ûi; ê · :r·!e· a · f

'on sèonbinic develovm6nt·. In-

-.,,~stiJül+t s of that ki~d (for example ~ mili tary acad-e-trrïe·s-<:)I< poli-ce ,,f.:;tcni,t ios} vïill be. symb~lized by (FINs) • . Of course~ sorne of the se

•· ·' ' " J ·'• ., ,.,, r . ' ..

__ unproductivo invostmcnts without cffùct on economicdevélopmènt may

i .: .. . ,. 1 '1 . ,·,• . . .

contrïbute .tc sbcie.l dcvaloplllent ~ i.e. hel'p t o contribute to the im- p~o-.r?ment cf t h1s lGvel of l ivirig of' the workors Wi thout entailing •JVO!l ind.irectly~ ·a· subsequ0nt incro6.se ·in production (for vxample9 iirn:st- ment in cultural or s:port:s, facilitiüs or the improvemcmt of tho housi~::

of .a 1-rorking population <1l.ready rolatively well housed). Conceptuc.:.lly i t is: easy to r.1aJœ a distinction bctween the se vari0us typos of in- -·: vestmen~ ~, but st.:.tisticé\~ly ,i t is not so easy. Neverthel~ss i t is ~c,;-;.­

portc.mt to try to make a classification of this' kind if we wa:ht to

. ·' .

,_as certain th.-:; natu.I·o of thç; usa which is m2,do of tho oconomic surplus. "~,

Tho distinction botHoen productive and unproà,uctive invostment . rosts on -th0 --~ollm-v~,ng _basis: tho former serves d.iroètly to increase

p::;:•ocluction or l abour productivity or t o .r0dUCG production COStS in the branches

_of

the oconcmy 1-rhich su:pply material production~ the Unpro- ductivo invostments are constit~t0d. b;y- 'B:ll

tho

oth0r investmcmts.

Natul"ally~ the more o~ loss considorable dovolopment· eff-ect of

·. .

a p<.rticuL,r invostment must DO distinguished from tho· nàtiire of that

(21)

IDEP /REPRO:bUCTIGN/311 Pag(;l 19.

investment. This affect depends on tho specifie conditions in which tho invostmcnt is mado 1 both from the tcchnic.al point· ëf vi.JW éil'ld the socio-cconomic point of viow.

From the point of view of an economie development policy, the productivè invcstments must bo given priority •. This is well known and does not roquiro a long analysis. Howovor, I would like to make the following remark hore:

The incre~se in productive investment makès necessary anothor catogory cf use of the economie surplUs which also constitutos one of tho forms of use of tho surplus used for dcvelopment. I refcr fo developmont expenditure.

III) We therefore come to a third fraction of tho SUD1 i.e. the dovelopmant expenditure (DD). I shall call "dovelopiJWnt expend,i- ture" all expendl.turE:J ether than ·investment which aims ' . . either at .

directly ensuring tho incroaso of know-how or at increasing the disse- mination or the usu of know-how.

In principlG thoso increases· raise tho capacity of soci8ty to

. ..

producc goods and ·eervices.Tho expenditure considered here represents the sum of the incomos paid to those whose main function is to help to increase kno~-how or to incroase the dissemination or us0 of know-how and t~9 sum of current cxpenditure nocessary for thuse activities.

In practice, we will regard as development .axpendi ture (DD) ex-

• penditure intonded for scientific and technical resoarch and for in- creasing the number of engincers, technicians, skillod workers, par- sons able to re'ad arld writc, etc. As in the case of invostments,. wc have to make a distinction betwoen the nature of tho .axpenditure and its more or less large or rapid offect.

It follows from th•3 ab ove definitions that the expendi tures nocessary for maint.aining the number of e'nginoers 0tc. ~t the ... ~

leval are not· developmc_~t expEmdi tures P,rt. fcrru1 part of the consump- • tion necessary for simple reproduction. Tho same a].l:pli0s t.o ._,xrxandi tll.NJ

intended for maintaining public health at the same level.

(22)

IDEP/REPRODUC~ION/311 Page 20.

We have to make the fol-lowing observation here: the inérease of know-how may·be the "by-product" of the activity of those who are oainly engaged in other sorts of work. In this case the incarnes received by

-those persons are not resarded as development cxpenditure.

I:n: fact9 -a rion-negligible portion of new technical knowladge re- presents such a ''by-product" of current product-ion and does not cost society anything. Similarly, among those who participate in the main- tenance of simple .:r:eproduction outside the productive sphere, there are always a number of persons vrho contribute to the incraase of know-how or to its increased dissemination; the expenditure corresponding to the incarnes of these persons is already attributed to the overhead costs of simple reproduction9 and so it is not regarded as development expendi- ture.

That is why only the expenditure solely intended for the increase of know-how or the use of k:now-how is called 11developm0nt ecpenditure".

This explains why~ in sorne societies9 there h~s been an increase of know-how without "development expenditure" in the precise meaning given to this expression above.

Actually ~ in pre-capi talist social formations~ a pq;rtion of the incarnes of the so-called "idle" classes was used9 directly.or indirectly, in the development of scientifio or technical knowledge or·in the disse- mination of th at k:nowledge. Ife do not propose to examine this problem here9 but it is worth painting out that these idle.c::lasses have played (at a high cost ~ i t is true) a non-negligiblc rôle in the progress of scientific and technical knowledge. It is enough to recal,l that a number of great physicists, mathematicians and chemists have been members of the se "idle" classes.

The possibili ty of what we may call an "autonomous growth'' of knowledge explains why this growth has very often been regardod by economists as "given" and "free". That is probably the r<Sason why it has been considered until very recently that the strategie factor of growth was investment and riot the progress of scientific and technical knowleà.ge.

(23)

••

IDEP/REPRODUCTION/311 Page 21.

Even in the context of a developed capi talism, i t is 'only re- Ïati'vely recently that .the pro(>ress _of scientific knowledge has been

. . ~ . -

:the

re

suit

of

relàtive'l;y high specifie ~xpendi t1~e ~ ..

In the developed socialist countries, particularly the ·Soviet -·Union, the depondonce' of 1:rcienti-fic and technical progres~ on a speci-

~ ~~pe of expenditu~e is a phenomenon still more common than in

nc-J."='rn capi talism •

. Of COUJ?~o:3, j,n the end, we find that ecàncimic growth has alweys

clup,:n~btt on the progress of scientific and ·technical kné>wledge. . If

mankind.had only been able to invest in tools such as those known in

the stoneago.? thore wouid not have be en any economie :progress even if there hàd been a relatively high rate of investment.

A really new fact is that, ·just b0causo of the progress of

knowl.3dge, the iiseif-sustained" advancernent of scientific 9-nd technical know-how is today insuffici0nt to enablù the maintenance of a high rato

of

growth. Cons""quently development expenditure has now had to be in- stitutionaiized and it is bq:und to grow. Only ten years ago, this ex- penditure represented about 1% of the national· incarne· of the developed countrias (i.e. the equiva],ent of sorne 8 to 1~o of their net investment.

Today the research expenditure for the 5 main industrial countries re- pre-sents botween

1.4%

(France) and 3.

7%

{USSR) of the national incarne. ' This proportion can rise to 10 to 3o%of net output for ~leading in- dustries such as the aircraft or precision instrument indust,rie~.

Thus this type of use of the surplus clearly becomes

a ·

~strategie

. . '

fact·dr in the process of economie growth.

This can also b0 seen if we start from a different point of view.

If ï-I"G ocnsider th0 structure ·of ·t'he balance o:f payments; of certain

- .

::::cunumically develop3d countriés, we see that à rapidly growing:· propozo-;·

t ion of thoir foreign earnings is the dir0ct or indirect r0sult of sorne cf th0ir ddvolopment:

o xpen~itW:-e ~s ·

d·e'fihéd above. This m0ans that a gro-vring share of these foraign earnings. is derived from resources such

as: export of advanced commodi ties, particularly export of advanced

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