Any government expenditure in wages and salaries, and pensions in the public sector, is automatically recorded as part of national income. This is an accounting convention partly justified by the need for consistency between various methods of reckoning national income as: the sum of value-added in all sectors, the value of production for final uses of consumption investment and net exports, the sum of factor incomes, ie., wages and profits.
But when employment and wages in the private sector are collapsing, the stability of public sector wages and employment gives an illusory picture of the health of the economy. Of course the classical economics of Smith, Ricardo, and Marx regarded all services as unproductive labour, not least those provided by government. The distinction between productive and unproductive labour has become increasingly relevant now that a bloated public sector including bloated public sector pensions feeds on a shrinking private sector.
There is no point in monitoring the current economic situation under the pretence, by definition, that public employees have a value equal to their salaries. A glance at the 'jobs' pages of the Guardian makes it blatantly obvious that they don't. Soldiers, judges, opera dancers, even priests are worth having - I leave the reader to fill in their own bete-noir of waste and jobsworth client state creation that is not.
Purging headline GDP figures of this ludicrous padding could and should be done in addition to the traditional presentation of measurements of economic performance.
UPDATE (See this morning's Herald)
Half of the civil servants in Whitehall could be sacked and government would still be able to operate efficiently, according to a former business leader who served as a minister for New Labour
Lord Digby Jones of Birmingham said that during his 16-month spell as trade minister he was "amazed" at the number of civil servants who deserved the sack but kept their jobs or were moved sideways. Taxpayers would get better value for money if many of them lost their jobs, he told the House of Commons Public Administration Committee yesterday.
Although Lord Jones said the civil service was "honest and stuffed full with decent people who work hard" he felt that the civil service could be more productive, more efficient and deliver a lot more value for money. "Frankly, the job could be done with half as many," said Lord Jones.
His comments were branded "narrow-minded and naive" by the PCS public sector union, which said they betrayed a "complete lack of understanding of what the civil service does".
Which is pad out GDP.
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There are bucketloads of jobs in the private sector which are substantially unproductive, too. But that is up to the shareholders and directors!
Angels have a banner on which are emblazoned the words:
Believe in Capitalism. It works.
Shareholders and directors choose who, where, and why to employ (and ditto but 'what', to invest). If they are getting what they want - and shareholders can get tricky about poor returns, then some jobs or investments have more obscure returns or belong on even more obscure agendas than others.
There is nothing like the market for imposing economic efficiency. Look at the glories that are past - the Union of Soviet Socialist Republics (and hinterland), and England (and hinterland).
Pity we are caught up in the horrors of the Transition.
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