Creative work

Creative work is labor that creates new, different, or interesting products. Sometimes it is intellectual work but often that of craftsmen. The value added may be substantial, sometimes astronomical. Integrating creative labor into production, managing it, and compensating it has not been subject of much discussion among Marxists and thus has posed some problems for socialist countries in the past. However, both communes and socialist countries have made important breakthroughs in all fields, and this is historical proof that the pursuit of profit is not the only possible incentive for technological progress.

Innovation in capitalism
Mainstream Western economics gives capitalism high marks for innovation. The pursuit of profit is supposed to assure a strong incentive to engage in the invention, development, and production stages of innovation, while also inducing investors to provide potential innovators with the necessary financial means. Free entry into markets compels rapid diffusion of innovations. An optimal contribution to human welfare is assured, given the assumption that profitability reflects the ultimate value to society of any economic activity. While capitalism does promote a certain kind of rapid technological change, the above account has serious flaws. The pursuit of profit does not play such a big role at the important invention stage of innovation. Studies show that a large majority of economically important inventions come from university scientists, government researchers, and independent inventors, for whom pecuniary considerations are not typically dominant. At the development stage, the still-high risks, plus the sometimes substantial external (and hence uncapturable) benefits from innovation, lead to (successful) demands for government subsidization.

The profit incentive for innovation is profoundly contradictory. For the profit incentive to operate, innovators must be able to gain monopoly control over the innovation and bar competitors, or else the first innovator’s profit will be small and fleeting. However, the legal and extra-legal means that capitalist innovators use to gain such monopoly power (patents and predatory tactics) prevent the rapid diffusion of new products and processes. The greatest flaw in the capitalist innovation process has to do with the third question, that of the contribution of innovative activity to human welfare. As capitalist innovators follow the guide of profits, the following problems arise:


 * 1) Innovations are disproportionally directed at upper income consumers.
 * 2) Public goods are largely ignored in the innovation process.
 * 3) External benefits and costs of innovation, which may loom very large, are not taken into account in innovation decisions.
 * 4) The monopoly power required to stimulate innovation leads to high monopoly prices for the resulting product, limiting the use of the new innovation and hence reducing the benefit from it.
 * 5) Much innovation activity is pure waste, as firms devote innovation resources toward the end of defeating rivals rather than benefitting consumers.

While capitalism does promote the development of the forces of production, it does so in a manner that is severely flawed. Capitalism can promote innovation only if the state and other non-capitalist institutions play an active role in organizing and financing the innovation process, particularly the invention stage. It can do so only with significant monopoly power and barriers to entry that simultaneously promote and hinder technical progress. And it produces a severely distorted innovation process that, after a certain stage of development, may subtract as much from human welfare as it contributes, or even more.

Innovation in socialism
Despite great achievements in nuclear engineering, aeronautics, rocketry, and others (see ), adequate utilization of innovation in computer engineering proved difficult.

The Rand hero
Difficulties are not limited to Marxist theorists and economies. Close analysis of the work, and theories, of shows a series of heroes and role models whose essential characteristic is creative work. Rand thus conflates creative workers with capitalist investors constructing an elaborate economic and philosophical theory on a false premise. "Check your premises" was always one of her favorite expressions.

External links and further reading

 * "Theoretical Analysis and Reflections on the “Middle-Income Trap” article by Lu Wenqiang, English Edition of Qiushi Journal Vol.4 No.1 January 1,2012 (Originally appeared in Qiushi Journal, Chinese edition, No.21, 2011) Lu Wenqiang is a Research Fellow of the Development Research Center of the State Council of the People’s Republic of China.