3. MARGINALIZATION

Hypertrophy of the TertiarySector

The tertiary sector (commerce, services, administration, etc.) provides between 40 and 50 percent of the product in the advanced capitalist countries, whereas in the underdeveloped ones it repre­sents between 30 and 60 percent: around 30 percent in the countries least integrated in the world market (countries in the interior of Africa, Afghanistan, etc.),, and more than 50 percent (often a great deal more) in those where the degree of integration is high.

sector occupations. Thus, paradoxically, so far as the place held by the tertiary sector in the economy is concerned, the under­developed countries seem to be closer to the United States than to Western Europe, and even more advanced than the United States, if only one pattern of development is recognized.

If, however, we look at the comparative historical evolution of these proportions in the formations of the center and in those of the periphery, we find a very different dynamic in the two cases. In the advanced countries, the movement of transference of the occupied population from one sector to another is not linear: between 1820 and 1880-1890 a transfer took place from agriculture into both of the other two sectors in proportions more or less equal and unchanging.

In the Third World, on the contrary, the occupied section of the nonagricultural population went into the tertiary rather than the secondary sector, and this happened from the beginning of the process of modern urban growth, in connection with integration into the world capitalist system. The proportion of the population engaged in the secondary sector declined, even in this so-called initial stage of industrialization. In Egypt between 1914 and 1958 the percentage of the population employed in industry, building, and construction work generally fell from 34 to 25 percent of the nonagricultural employed population. In the Maghreb, around 1955, industry, the crafts, and building employed 45 percent of all urban labor, as against 55 percent engaged in commerce, transport, services, and administration. In the Ivory Coast, around 1965, the secondary sector employed only 33 percent of non­agricultural labor.

In other words, in the central model, industry, as it develops, provides work for a larger number of workers than the number of craftsmen that it ruins. Industry recruits from declining agriculture and from the natural increase in the population. In the periphery industry employs workers in fewer numbers than those of the craftsmen it ruins and the peasants who are “released” from agriculture. The effect of competition from foreign industry is obvious. Thus, urban growth is accompanied in the Third World by an increase, both absolute and relative, in unemployment, such as did not occur in the West except during brief periods, situated mainly (apart from the time of the great crisis of the 1930s) between 1820 and 1870.

■ The hypertrophy of administrative activities in the underdeveloped countries is now one of the commonplaces of “underdevelopment.” An analysis that seeks to go beyond mere description of the problem needs to answer a whole series of questions in this con­nection. On the general plane, first of all, what are the comparative rates of growth of public expenditure and of the material basis of the economy, at the center and in the periphery? Is the tendency to distortion toward administrative activities a deep-rooted and long-established tendency of the periphery (apparent in the colonial period, for instance) or is it a recent tendency (connected with the political structures that have emerged from decolonization)? Is this distortion more pronounced, in the present period, in the periphery than it is at the center? StiII on the general plane, how is this public expenditure financed: what in particular is the dynamic of its sources of finance (local taxes, local loans and external loans, inflation), as compared with the dynamic at the center? On the sectoral plane, we need to analyze the comparative structure of public expenditure in the periphery and at the center (productive and unproductive expenditure), and also the comparative structure of the way this expenditure is financed (what categories of income ultimately pay for this expenditure?

In Egypt the rate of growth of the administrative services (4.7 percent per annum between 1914 and 1960) was much higher than that of the production base of the economy (1.8 percent). To this expenditure were added very considerable investments in the irrigation infrastructure (especially between 1882 and. 1914). Broadly, it was the demands of the world market, (development of the cultivation of cotton on irrigated land) and extended schooling that were the chief causes of this evolution.

Development, Underdevelopment, and Unproductive Activities

Basing themselves oh the classical division of economic activities into three sectors — primary (agriculture and mining), secondary (industry and building), and tertiary (transport, commerce, services, administration) — Colin Clark and Fourastie formulated a general theory of the phases of evolution, which can be summarized as follows: in the first phase, development of the secondary sector takes place at the expense of the primary sector; in the second phase the tertiary sector takes over from the secondary, and its relative share in economic activity as a whole increases more and more rapidly, reducing the relative proportions of the primary and even of the secondary sector.

Actually, this classification forms a bad instrument of analysis, because it is based on a narrow “positivist-empiricist" approach.

The distinction between the primary and secondary sectors was originally put forward by the Physiocrats. Do primary activities “extract" more from nature than the activities that are described as "processing”? Despite the reply given by Ricardo to Adam Smith, it is possible to consider that there is some truth in this distinction, important position in this activity. The capitalistic nature of pro­duction has been marked from the outset in mining activity, which it seems, for this reason, less artificial to include in the secondary sector, along with the processing industry and building.

But the artificiality of the threefold classification becomes espe­cially obvious when one looks at the content of the tertiary sector. Here we find, along with activities, such as crafts, that produce services (hairdressing, for example), the activities of those liberal professions that have to a greater or lesser extent been turned into “public services” (teachers, doctors and nurses in state hospitals, lawyers, and judges, who all play the same economic role), and the capitalistic production of commercial and banking services, or even the capitalistic production of services similar to those that the crafts and the liberal professions provide (e.g., a hairdressing salon or a barrister’s chambers). A predominant role is not commonly played by labor in all these activities, either from the social standpoint (predominant income) or from that of technique (share of wages in the value of the finished product). In banking and commerce it is capital that predominates, even if this factor does not mainly take the form of machinery, but rather that of monetary reserves or stocks of goods.

This being so, a return to the classical tradition, as deepened by Marx’s analysis, is not so useless as marginalism has supposed. This tradition makes a fundamental distinction between productive and unproductive labor. The sphere of productive activity provides society with material products, in the places where they are to be consumed. It can be subdivided into two sectors: the primary, in which landed property has played, historically at least, the dominant role (agriculture), and the secondary, in which it is capital that plays this historical role (industries in the strict sense, together with mining and transport). In contrast to this, unproductive activity extracts nothing from nature — which does not mean that it is useless. This approach is profoundly sociological:, it corresponds to the fact that, in order to extract a certain amount of wealth.from nature, men are organized in society and are obliged to devote part of their time not to direct production but to social tasks.

was or was not useful for mankind, or whether, in the ideal society of the future, labor-time will be progressively reduced in favor of activities that do not constitute “labor,” because they lack the latter's compulsory character: leisure, education, sport, etc.

An explanation of the rapid and recent growth of the tertiary sector in the advanced capitalist countries must take into account

the internal dynamic of capitalism, the conditions in which surplus value is realized: the system cannot function unless surplus value is spent in its entirety. In order to overcome the fall in the rate of profit, one can try to increase the rate of surplus value. But such an increase — whether at the center or in the periphery — aggravates the inequality in the distribution of income and deprives investment of its outlet: the contradiction is intensified in society between the capacity to save and the possibility of investing new capital profitably. All that remains is to “squander” surplus value.

The changed conditions of competition, associated with the appearance of monopolies, themselves lead to this Squandering- SelHng costs, to which Chamberlin drew attention for the first time in the 1930s, both reflect the sharpening of competition between monopolies and also offer a solution to the problem. Furthermore, competition between states becomes more acute, and militarization, the consequence of this, has, since 1914, brought a valuable contri­bution. State intervention, which Keynes called for, constitutes the third source of waste, even though some of the state’s activities may result in civil expenditure of a useful kind (education, social services). Baran and Sweezy have shown that the amount, both absolute and relative, of this wasted surplus cannot but go on increasing.

Where the underdeveloped countries are concerned, however, neither Colin Clark’s apologetical thesis nor the Marxist analysis of Baran and Sweezy enables us to find the answer to the question presented by the hypertrophy of the tertiary sector. This answer lies in the conditions governing the integration of precapitalist societies into the international capitalist market, an integration that entails three main consequences.

First, competition by the industries of the' dominant centers prevents the local capital that is accumulated from making its way into investment in industry, and diverts this capital into complementary activities connected with the export economy, especially commerce.

Second, the hypertrophy of certain tertiary activities with low pro­ductivity (small-scale retail trade, including itinerant trade, various services, etc.) is a manifestation of concealed unemployment, result­ing from the processes of marginalization that are specific to the development of peripheral capitalism.

Third, the strengthening of the position of ground rent, a characteristic result of the international integration of the peripheral formations, also entails a particular orientation of the spending of income, marked by a distortion in favor of certain tertiary activities (personal services, for example). In the formations of central be invested in the modernization that competition makes necessary, for it is an income derived from monopoly, and can therefore be spent in its entirety. Such spending is a luxury expenditure that is focused, so far as material goods are concerned, upon imported goods and, so far as local products are concerned, upon services (servants, leisure services, etc.).

The hypertrophy of the tertiary sector is therefore merely the manifestation of a specific law of overpopulation of the periphery, which itself results from the extraversion of the peripheral economy and the mechanisms that exclude from-production an increasing section of these countries’ labor power.