The second great transformation

© GERET 2015

Alan Freeman

The strange non-disappearance of labour

30%

40%

50%

60%

70%

80%

90%19

4819

5219

5619

6019

6419

6819

7219

7619

8019

8419

8819

9219

9620

0020

04

UK US Japan Germany

USA

UK

Japan

Germany

Share of employment 1948-2007

0%

5%

10%

15%

20%

25%

30%

1946

1950

1954

1958

1962

1966

1970

1974

1978

1982

1986

1990

1994

1998

2002

2006

2010

Retail+Wholesale InformationFinancial Activities Leisure and HospitalityGovernment Health and EducationBusiness services

GovernmentRetail and Wholesale

Business Services Health and Education

Leisure and Hospitality

Financial Activities

Information

Share of employment in US services

What’s really been happening to consumption?

1976

1980

1984

1988

1992

1996

2000

2004

2008

0%

5%

10%

15%

20%

25%

30%

Leisure goods and servicesFood and Non-alcoholic drinksServices

Source: UK Family Expenditure Survey, author calculations. Reproduced from Freeman, A. 2014. Twilight of the Machinocrats: Non-substitutable labour and the future of production. In van der Pijl (ed). The International Political Economy of Production. Routledge

-2% -1% 0% 1% 2% 3% 4%

Leisure goods and services

Transport

Household goods andservices

Dwelling costs

Personal goods andservices

Food and non-alcoholicdrinks

Clothing

Alcohol and Tobacco

Annual Growth Rate of Major Categories of Family Expenditure,

1976-2008

Proportion of major Categories of Family Expenditure, 1976-2008

Do industries still exist? If so, what are they?

• Smith: and industry is a branch of the division of labour• Universal concept in economics

• Physiocrats ‘town and country’• Marx Schemes of Reproduction (consumer goods and means of

production)• Victorian “Production Accounts” (measuring output of various

industries)• National accounts ‘sectors’• SIC/NAICS codes in the national accounts• Leontieff input-output• Sraffa system

• Etc etc etc

Taken as obvious, but it’s not

• Is a grain elevator part of the agriculture sector?

• Is forestry an agricultural activity and if not, why not?

• What do a ship and a train have in common?• What is the ‘industry’ that produces shirts, tractors, chairs and nuclear power plants?

The problematic concept of service• Smith: “The labour of the manufacturer fixes and realises itself in some particular

subject or vendible commodity, which lasts for some time at least after that labour is past”

• ‘Service’ or ‘intangible’ really has not advanced beyond ‘not a vendible commodity which lasts’. Beyond this, definitions differ wildly

• Actually feudal in origin! (it is what a servant does)• What is the use value of a tape recording? Is it the same use value as a CD? Or are

these merely bearers of the same service as a performance?• One extreme: ‘services of capital’ refers to any use delivered over time. So a

toothpaste tube is a service provider• Petit 1987: service requires the direct and simultaneous presence of a human

consumer and a human producer• Both definitions are in common use in statistical circles and nobody points out the

contradiction!

So what’s left of the concept?• Specialisation is a constant of capitalism• It’s driven by competition• It works as Smith describes, by increasing the

productivity of labour• It’s the most ‘primitive’ mechanism for this• But it’s still operative• So we need to ask ‘what do modern capitalists

specialise in?’

The working definition (ISIC manual)

• Resource in common• Process in common• Product in commonNote 1: specialisation in any of these will bring economies of

scaleNote 2: almost no modern industry specialises in all three

• We can therefore begin with the empirical question • Where do we find enterprises that use common resources?• Where do we find enterprises that use common processes?• Where do we find enterprises that produce common products?

A methodological note: on the interaction of empirical

reality and theory in the production of definitions

Freud on culture“[C]ulture, by which I mean everything in which human life has risen above its purely animal circumstances…

includes on the one hand all the knowledge and skill that humanity has acquired in order to control the forces of

nature and obtain from it goods to satisfy human needs, and on the other hand all the institutions that are

required to govern the relations of human beings one to another and in particular the distribution of such goods

as can be obtained.”

Symbolic texts model

“processes by which the culture of a society is formed and transmitted are portrayed in this model via the

industrial production, dissemination and consumption of symbolic texts or messages, which are conveyed by

means of various media such as film, broadcasting and the press”

Concentric Circles Model“This model is based on the proposition that it is the

cultural value of cultural goods that gives these industries their most distinguishing characteristic. Thus the more pronounced the cultural content of a particular good or

service, the stronger is the claim for inclusion of the industry producing it (Throsby, 2001).

The model asserts that creative ideas originate in the core creative arts in the form of sound, text and image and that

these ideas and influences diffuse outwards through a series of layers or “concentric circles”, with the proportion of cultural to commercial content decreasing as one moves

further outwards from the centre. UNESCO, op cit

Intellectual Property Model“This model is based on industries involved directly or indirectly

in the creation, manufacture, production, broadcast and distribution of copyrighted works (World Intellectual Property

Organization, 2003). “The focus is thus on intellectual property as the embodiment of

the creativity that has gone into the making of the goods and services included in the classification. A distinction is made

between industries that actually produce the intellectual property and those that are necessary to convey the goods and services

to the consumer.”

The concept of non-substitutability• In discussion of automation it is universally assumed

that all labour can be replaced by a machine• So why isn’t all labour mechanised? What happened to

‘post-industrial society’• We must question the assumption that machines and

people are universally substitutable• In fact particular new forms of labour are rising to

dominance whose characteristic is that they are not replaced by machines

Why wouldn’t you replace a human?• Type 1: because there is a social preference

• Care• Child-raising• Performance

• Type 2: because the labour by its nature cannot be mechanised

• Church-Turing theorem• Syntax-Semantic distinction• Tasks which cannot be achieved by repetition• Design is such a task: it works from a partial semantic

description “what the consumer wants”

Non-substitutable labour as a productive resource

[1] [2] [1]/[2]

Group' (creative sector)Creative Jobs in this group

Total jobs in this group

Creative Intensity

Growth 2011-2013

Architecture 65 94 69% 9%Music, performing and visual arts 167 243 69% 16%Design: product, graphic and fashion design 75 122 61% 9%Film, TV, video, radio and photography 141 231 61% 12%Crafts 4 7 57% -2%Advertising and marketing 83 153 54% 3%Publishing 102 198 52% 12%IT, software and computer services 236 576 41% -3%Museums, galleries and libraries 17 85 20% -9%Total Creative Industries 890 1,708 52% 18%Non-creative industries 907 28,027 3% 0%

Source: DCMS January creative industry estimates table 3 and figure 1, pages 9-10, author calculationsAll job numbers in thousandsYear: 2013

Creative Industry Density0.178 to 0.5830.12 to 0.1780.078 to 0.120.046 to 0.0780.003 to 0.046

The production process of creation

• Open Innovation (Chesborough)

• Motley Crew (Caves)• Pre-market selection

(Caves)• Geographical micro-

clusteringCaves, R. 2002. Creative Industries: Contracts between Art and Commerce. Cambridge, Mass.: Harvard University Press.Chesbrough, H.W. 2008. ‘Open Innovation: A New Paradigm for Understanding Industrial Innovation’. In H. Chesbrough, W. Vanhaverbeke and J. West, eds. Open Innovation: Researching a New Paradigm, Oxford: Oxford University Press.

Revenue from recorded music

Revenue from Live music

Music as share of consumer spending

The paradox of live performance

Source: Page, W.; Carey, Chris; Haskel, Jonathan, and Goodridge, Peter. 2011. ‘Wallet Share’. Economic Insight 22, 18 April . http://prsformusic.com/creators/news/research/Documents/Economic%20Insight%2022%20Wallet%20Share.pdf

What is the use value of culture?• Throughout the age of mechanisation, culture takes the form of human

interactions that are excluded from the production process• But actually, it is the ‘hidden’ component of all product innovation• The industrial revolution might equally be termed ‘the clothing

revolution’• Now, cultural products are becoming ‘vendible’ as such• So what, actually, is sold?• The most characteristic feature of cultural commodities is differentiation

– eg fashion, art, performance• Differentiation is now spreading to more and more sectors of the

economy (consider the car)• Reduced to the most abstract, what is sold is distinction itself

The class function of distinction• The ‘use’ of aesthetics is to demarcate class position• Classes reproduce through culture – society does not reproduce itself ‘classlessly’ but in

and through the reproduction of classes• The most important requirement of class is to be distinct.• Inheritance is becoming less and less the key mode of class reproduction (and with it,

the bourgeois family dissolves)• Thus the markers of class – the ‘kind of person you are’ becomes ever more important• This is on the one hand the characteristic feature of the age• And the greatest obstacle to a further great transformation• To realise fully the potential of the new technologies, capitalism would need to abolish

class distinction. This is a central contradiction

If this is an industry, what is it doing?

Source: DCMS January 2015 estimates, figure 5 and table 6

The engine of creation

UK Department of Culture Definition

…those industries which have their origin in individual creativity, skill and talent and which

have a potential for wealth and job creation through the generation and exploitation of

intellectual property

– DCMS Mapping Document 1999