What is ‘socially useful’ work?

10 09 2009

work[1]Lord Turner of Ecchinswell, an influential figure in the reform of banking rules in London and beyond, said that the City had grown “beyond a socially reasonable size”, accounting for too much of national output and sucking in too many of Britain’s brightest graduates.

“I think some of it is socially useless activity,” he said, adding that the financial sector had “swollen beyond its socially useful size” and seemed to make excessively large profits.

There are actually two distinct things going on in Adair Turner’s statement. Firstly he is saying that the UK financial sector is disproportionally too big for the UK economy, that it is ‘beyond a socially reasonable size’, an issue which we have debated on these pages before.

His second argument, that some aspects of financial services are not socially useful is slightly different. This plays to the idea that there are some kinds of jobs which are socially useful and others which are not. Michael Skapinker took up this aspect of the discussion in a column where he pointed out that

The division of work into “socially useful” and “socially useless” was a particular preoccupation of the post-Woodstock generation. Teaching, trade unions and public interest law were good. The oil industry and investment banking were not.

So should we oppose the financial sector on the basis that it is not socially useful? After all it is hard to see how arbitrage, the ability to shave earnings form tiny changes in exchange rates, for example, contributes much to the health, wealth or happiness of anybody other than the person doing it for a living.

The concept of ‘socially useful’ work is not itself very useful in understanding the nature of work in a capitalist economy. Businesses do not succeed or fail on the basis of whether or not they are ‘socially useful’. They prosper if they make profits and fail if they do not. The question of what specifically they produce is always secondary to the necessity of profit.

Having said that, it is also true that there needs to exist a demand for the products of any business. If there was no demand then the products of that business would be unsaleable. That is why even those  industries and professions which most people would not consider ‘socially useful’, such as the arms trade or estate agents, still do well, because their products are in demand.

Even the most arcane of financial products, such as the derivatives which lay at the heart of the financial crisis, existed because there was a demand from institutions which wanted to derisk their debt. The people who bought them did so because they thought it would make their investments safer. The fact that they failed to do this does not take away the rationality of the original impulse to buy.

Turner may have a point when he says that the UK economy has become too dependent on the financial services industry. As we have argued here before there is a danger that over reliance on financial services could backfire given the ease in which such an industry can be moved around the world. We may also chose as a nation to invest more in exciting new technologies because we think that they are more exciting and future oriented than financial services. But introducing the notion of ‘socially useful’ into the debate does not help to clarify what the real problems are.



Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

%d bloggers like this: