The idea of unproductive labor is evidently rooted in the way wealth is regarded in the pre-capitalist mindset. This does not mean that at some point, the concept was unambiguous – on the contrary. The moral economy of the pre-capitalist era in Europe (by which I mean, simply, the domination of pre-capitalist economic ties, and not the absence of capitalist enterprise of one sort or another) was organized around an implicitly conflicted notion of temporal and intemporal glory. The royal or noble banquet was, at one and the same time, a symbol of the intemporal glory awaiting the believer in heaven and a display of pride and gluttony that would lead the sinner to hell. Underneath the sumptuary laws that came out of pagan as well as Christian jurisprudence was a strong sense of Fortuna – a sense that there was an equilibrium in the world of goods deriving from the fact that goods were limited by divine and physical law, and he who had a good in a sense took it from he who did not have the good.
In the 17th century, certain thinkers – Petty and Boisguilbert, for instance – and a certain class of merchants and projectors dissolved, theoretically and practically, essential elements in this old pattern of thought. In so doing, they did not utterly reject it, but used parts of it in their own bold suggestions as to how to reform the business of the nation. This reform could not do without the idea that some activities were productive and some were unproductive –and indeed, to an extent, they were bound together. The noble who ate and drank and the peasant who toiled and spinned were part of one economic system, separated, from the point of view of commodities, by the fact that the noble added nothing to the food or drink while the peasant added its essential ingredients. Into this mix, however, one had to add money – with which addition the duality of producer and unproducer became extremely confused.
Adam Smith, of course, developed the notion of unproductive labor in The Wealth of Nations, and was lauded for it by Malthus, who took the notion to be the cornerstone of the work. Another reader, however, Jean-Baptiste Say, disagreed absolutely, and urged the removal of the distinction entirely as one confusing a number of elements: a sort of cult of the material over the immaterial; an incoherence in extending the notion of exchange value to its universal scope within the economy; and a pernicious moral and legal effect on the beneficient speculator, who labors under the suspicion of parasitism when, in effect, he produces the framework of credit inside of which production can flourish.
Schumpeter tacitly awards Say points, and refers to the distinction between productive and unproductive labor as a “dusty museum piece” in his History of Economic Thought. However, he adds that Marx pretty much grasped the important thing in Smith’s distinction, which was not that there is a difference between useful labor and non-useful labor – it is not that the cook for the noble is creating a non-useful pie for his aristocratic appetite – but rather that there are different value addeds:
“He [Smith] had no use, of course, for the physiocratic proposition that only labor employed in agriculture is productive any more than he had use for the 'mercantilist' proposition that only labor employed in export industries is. But pouring away the physiocrat wine, he retained the bottles and filled them with wine of his own: he defined labor as productive that 'adds to the value of the subject upon which it is bestowed' (op. cit. p. 314) and exemplified this by the case of factory workers who, as he adds by way of explanation (ibid. p. 316), live on 'that part of the annual produce of the land and labour which replaces capital' (with a profit); and he defined labor as unproductive that does not add (exchange) value to anything and exemplified this by the labor of the menial servant and that 'of some of the most respectable orders in the society' such as the sovereign 'with all the officers both of justice and war who serve under him' and 'are maintained by part of the annual produce of the industry of other people.' “
Value is evidently the key to the distinction – but value here is defined by value for capital, and nothing else. This is the sense that Marx extracted from Smith – as Schumpeter says.
However, given this definition by way of a system in which production, for the sake of the analysis in Capital, is analyzed in distinction from circulation – which is analyzed in Book 2 – and then analyzed in, one might say, the real synthesis of the two – which is where Book 3 is going – this definition, to row back to where we were, has to be dialecticized (and lyed and dyed) before it becomes useful.