Tuesday, 22 June 2010

Who generates wealth?

It's not actually a very easy question to answer. Marx took three very thick volumes (well, two extraordinarily thick and one ordinarily thick) to try and answer it, and having waded through it (turgid, to say the least) when I was still at school, I've never been entirely certain that he succeeded.

The common belief seems to be that the private sector creates wealth whilst the public sector merely uses (or even worse, destroys) that wealth. That's an oversimplistic assertion which needs to be challenged more robustly than usually happens, not least because it's an assertion which is a factor in the round of cuts we're about to suffer.

Firstly, we have a whole host of people in Wales (myself included) who work in the private sector for largely public sector clients. Does that make us wealth creators or not? And if I did exactly the same job for a salary in the public sector, would that change my status?

Secondly, the government recently effectively nationalised some banks. Does that mean that they moved from the private sector into the public sector? Does it change their status as wealth creators?

Two simple examples which show that it's actually a rather more complex question than it can sometimes appear.

The hang-up over the relative size of the public and private sectors is another one of those hidden ideological differences. There are a number of reasons why the private sector may do some things better or more efficiently that the public sector, but it ain't necessarily so. And there's no reason why wealth cannot be created by public sector bodies and enterprises.

We'd be better off discussing that we want to achieve and how than getting hung up on arguments about the relative size of economic sectors.


marc said...

Spot on. Do all those public sector bashers realise how many contractors in the private sector rely on local councils, health boards etc for work?

They will be the ones hit hardest by these cuts.

Old_Miwl said...

Spot on. The analogy I used was that a bus driver for Arriva (private but mostly on public subsidy) wasn't "creating" any more wealth than a bus driver for Cardiff Bus (public). In UK terms, this received wisdom has a lot to do with the fact that governments have privatised many parts of the public sector which had the potential to be wealth creating - leaving only public services which can then be portrayed as a drain on the wealth created by the private sector.
In reality, you have to ask how much wealth was really created by the private sector in the last 20 years and how much of it was smoke and mirrors. Governments at both ends of the M4 need to concentrate on getting us actually producing something of use to others, be they ipods or ideas. The public sector (especially universities and government laboratories) have a role to play - slashing and burning is a big mistake

Illtyd Luke said...

One other point is that wealth creation is not possible if there aren't any roads, if the workforce can't read or write, or if the workers aren't healthy or fall ill at work. What if somebody breaks into the vehicles parked outside your business? You're going to call the public sector police.