I presented two papers to the 1997 conference of the excellent Radical Statistics journal. This, the main paper, dealt with what I still consider to be the primary difference between the National Accounts as currently presented, and as they should be presented . two corrections are required. The first, not dealt with in this paper, is the presentation of all magnitudes in terms of labour time, or alternatively (which is the same thing) money terms with a constant MELT (Monetary Expression of Labour Time). I addressed this in a later paper. The present paper deals with the second necessary correction which is to eliminate the distortions that arise from treating finance and exchange as sources of value. In fact, these merely redistribute value between existing owners and add no new value.
It is not as simple as sometimes though to make the second correction. In particular, when finance is treated as productive (as in SNA from 1995 onwards in the UK, and in the USA throughout its history), the expenditure of this sector on its inputs (constant capital) is treated as a cost like the iron which is used to produce steel or, in Marx’s terminology, an expenditure out of capital. Actually, it is not a cost of production but a deduction from profits and should therefore be included in profits properly recorded. At the same time, therefore, profits (and of course, surplus value) are understated in the national accounts by an amount equal to the non-labour expenditure of the financial and commercial sectors. I believe that other writers on productive/unproductive labour (Moseley, Mohun, Shaikh) have not addressed this particular aspect of the needed correction though I may be maligning them – when I come to the second volume of Principia Economica I intend to render the historical record correctly.
All authors do recognise that the wage costs of the unproductive sectors are wrongly counted as productive of value, which also are, when correctly stated, an expenditure out of profits.
In general these errors work in two opposed directions. On the one hand, surplus value (profits) are understated; on the other, wage costs are overstated. The final correction is, it turns out, significant, but not as significant as might be thought. It is nevertheless important when it comes to understanding the fallacies arising, as Assa notes, from imputing to finance the role of producing value, and in particular, distorts the comparison between highly financialised economies such as the USA and UK, with other less financialised economies.
In this paper I broached this topic. I returned to it in my chapter for Paul Dunne’s Quantitative Marxism.