Making the state sector more profitable

One area of reform proposed by post-neo-liberals such as Skilling and Weldon which has the potential to involve some serious upheaval is the state sector.

A problem for capitalism is that all kinds of activities – some standard industrial and commercial activities as well as ‘public good’ activities like health and education – require a significant state-owned sector within the economy.  In New Zealand, the state has been a major player since capitalism first arrived here in the nineteenth century.  Without the state, little of the infrastructure would have been built, for instance.  The inability of private capital alone to create a modern capitalist economy, complete with infrastructure (from banking to railways to mass communications), meant the state had to pick up the slack.  The state could do this because it had access to chunks of surplus-value through direct and indirect taxation, could borrow on a massive scale and did not need to make a quick and substantial profit.  The state could, in fact, produce goods and services outside the operation of the law of value – in other words, it could produce and provide goods and services without profit being built into the price; in fact often goods and services were produced and provided below cost.  Private capital could make use of these goods and services without paying a price which reflected their actual value.

When the postwar boom came to an end, however, private capital needed as much surplus-value as possible to be converted directly into company profits to offset the fall in the rate of profit.  This meant reducing drains on surplus-value, such the share the state takes to run its operations.  Government spending became a major object of neo-liberal assault and thousands of state sector jobs were shed on the railways and in the offices of government departments.

In a capitalist economy, there are two key types of labour – productive and unproductive labour.  Both are forms of paid labour – ie work such as domestic and voluntary labour fit neither category.  The productive labour also may be socially destructive – like making weapons of war – and the unproductive labour may be thoroughly socially constructive – like teaching or nursing in the public sector.  The difference between the two is, essentially, that productive labour creates new, expanded value (surplus-value) whereas unproductive labour doesn’t and has to be paid out of the surplus-value created by productive labour.

In the 1984-1993 period both Labour and National governments tried to alter the balance between these two forms of labour by privatising parts of the state sector (eg selling off Telecom and so on) and by commodifying other state services – turning them into profit-making, or at least break-even, enterprises.

The post-neo-liberal thinking suggests that the state has a significant economic role to play in stimulating and regulating capitalism, thus ensuring successful outcomes for individual firms, the economy as a whole and the general society.  At the same time, they don’t want the state to be a drain on the mass of surplus-value, so they propose making state enterprises much more like regular businesses.  However, it is difficult to see how this could be done without shedding more state sector jobs and it certainly requires more user-pays and more public-private partnerships in which the state sector essentially provides a substantial boost to private capital.

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