A response to a reactionary video by anarcho-capitalist Jacob Spinney,
by Klaas Velija (a good friend and a great teacher of Marxism)
“So what exactly do people mean when they say that workers are being exploited?”
Exploitation is defined as “making use of some vulnerability in another person in order to use them to attain one’s own ends at their expense”. Following from this, wage labor is a form of exploitation in which the working class is exploited by capital. This vulnerability is the lack of ownership in means of production of workers, who are forced to sell their labor power to the capitalist. Marx defined the “rate of exploitation”, or rate of surplus value, as the proportion of unpaid labor a worker performs for the capitalist to the necessary labour workers perform, producing the value equivalent of the wage they are paid.
“Well let’s say someone’s a worker at a shoe factory and they are paid 1$ per pair of shoes they produce let’s also say the capitalist is able to sell those shoes at 50$ a pair, and let’s also say that the cost of tools, raw materials and so on comes out to 5$ for a pair of shoes. This means that the worker is producing 45$ in profits per pair of shoes, yet they are only being paid 1$ in compensation”
Before we delve into economic theory, I wish to address this scenario initially from a moral viewpoint. How can anyone consider it moral to have a inequality of wealth ratio of 45 to 1 with the capitalist robberer not doing even remotely the same amount of work? One might argue on an idiographic principle that the freedom to means of production, be it land, machines, resources or even slaves, is a liberty, however from the nomothetic principle, that is, looking at it in a general form, it means that the majority of the population is robbed of even the opportunity to pursue their own goals and wishes, and a system that only cares about the idiographic conception of freedom is nothing else but oppression by the privileged decorated with flowers of freedom. Capitalism results from the actions of people in a historical development, causes harm to others and is avoidable. The actions of people in the past have created a monopoly on means of production, which is used by capitalists in an exploitative manner. Capitalism causes harm because the daily exploitation deprives the worker of part of his work’s value, and the environment that forces him to obey to the rule of capital is the initial theft of the means of life, the land, workplaces and housing by the capitalist class. Due to the dispossession of the vast majority of the population from the means of life, capitalists are in an ideal position to charge a fee for the capital they own, but neither produced nor use. Having little option, workers agree to contracts within which they forfeit their autonomy during work and the product of that work. This results in capitalists having access to commodified form of labor that can produce more value than it gets paid for in wages. I wish to quote a passage from volume one of Das Kapital, which seems relevant to the topic: Then follows a splendid example of Mill’s method of handling the different historical forms of social production. “I assume, throughout, the state of things which, where the labourers and capitalists are separate classes, prevails, with few exceptions, universally; namely, that the capitalist advances the whole expenses, including the entire remuneration of the labourer.” Strange optical illusion to see everywhere a state of things which as yet exists only exceptionally on our earth. But let us finish — Mill is willing to concede, “that he should do so is not a matter of inherent necessity.” On the contrary: “the labourer might wait, until the production is complete, for all that part of his wages which exceeds mere necessaries: and even for the whole, if he has funds in hand sufficient for his temporary support. But in the latter case, the labourer is to that extent really a capitalist in the concern, by supplying a portion of the funds necessary for carrying it on.” Mill might have gone further and have added, that the labourer who advances to himself not only the necessaries of life but also the means of production, is in reality nothing but his own wage-labourer. He might also have said that the American peasant proprietor is but a serf who does enforced labour for himself instead of for his lord. After thus proving clearly, that even if capitalist production had no existence, still it would always exist, Mill is consistent enough to show, on the contrary, that it has no existence, even when it does exist. “And even in the former case” (when the workman is a wage labourer to whom the capitalist advances all the necessaries of life, he the labourer), “may be looked upon in the same light,” (i.e., as a capitalist), “since, contributing his labour at less than the market-price, (!) he may be regarded as lending the difference (?) to his employer and receiving it back with interest, &c.” In reality, the labourer advances his labour gratuitously to the capitalist during, say one week, in order to receive the market price at the end of the week, &c., and it is this which, according to Mill, transforms him into a capitalist. On the level plain, simple mounds look like hills; and the imbecile flatness of the present bourgeoisie is to be measured by the altitude of its great intellects.”
“Some people consider this to be surplus labor, otherwise known as EXPLOITAAAATIONNN!!!”
Yes, very dramatic indeed.
”The problem with this argument is that it only recognizes the value of capital and labor and it completely rejects the value of the investment of capital and the dramatic improvement in productivity that the capital brings.”
The “value” of the “investment of capital” is simply a play on words. The maker of the video is replacing the initial meaning of economic value with philosophical value. When a Marxist refers to value he is talking about the magnitude of value is determined by the average quantity of human labour which is currently socially necessary to produce a given commodity. Spinney replaces this meaning with “how much we value something” in general. The dramatic improvement of productivity is not overlooked by proponents of exploitation, in fact, he considers means of production part of the labor process. For a Marxist, the value of labour (w) = c+v+s, where c is constant capital, or means of production, v is variable capital, or the cost of wages and s is the surplus value, or the new value created by workers in excess of their own labor cost. As should be obvious, capital does not work on its own, but becomes part of a labor process.
”It’s simply absurd that the 45$ in value was derived solely from the factory worker and not by any contributing factor. This assertion is simply wrong.”
This is a straw man argument as Marxists don’t claim wages are the only determinant factors in prices, but instead argue that value only comes from living human labor. It was not until the 1980s that a serious scientific effort was made to test whether or not the labour theory of value actually held in practice. Anwar Shaikh (1984) and his collaborators (Petrovic, 1987; Ochoa, 1989) provided a considerable body of econometric evidence supporting the proposition that relative prices and relative labour values are highly correlated, or in other words, in favour of the LTV. The key to testing the labour theory of value has been the use of input–output tables. An input–output table is a way of showing the structural interaction of different industries. Thus, Shaikh and others used an input–output table to work out how many hours of labour go into producing the total output of each industry and then to see how closely the aggregate money value of sales from each industry matches their total labour content. The following table shows some results from Shaikh and his collaborators:
As you can see, the average error when predicting prices in the USA using the labour theory of value is about 9 per cent, against the “experience” of the proponents of subjective theory of value like the Austrian economist Eugen von Böhm-Bawerk that “the exchange value of goods stands in proportion to that amount of labour which their production costs only in the case of one class of goods, and even then only approximately.” (Eugen von Böhm-Bawerk, Capital and Interest: A Critical History of Economic Theory, trans. William A. Smart (London: Macmillan, 1890), ?. 254.) This has proven to be the case across many industries and several decades.
“Let’s break this down in a simpler example. Let’s say that you and I are stranded on an island and we have no advanced technology whatsoever.”
Of course, the bourgeois ideologue will always point at ideal abstractions to justify his viewpoint. Here I simply wish to quote Nikolai Bukharin from the Economic Theory of the Leisure Class in reply to Bohm-Bawerk’s usage of similar abstractions: “The starting point of the analysis is evidently not the individual member of a given society, in his social relations with his fellow men, but the isolated “atom,” the economic Robinson Crusoe. […] Society (as is consciously or unconsciously assumed) is not an arithmetical aggregate of isolated individuals; on the contrary, the economic activity of each specific individual pre-supposes a definite social environment in which the social relation of the individual economies finds its expression. The motives of the individual living in isolation are entirely different from those of the “social animal”. The former lives in an environment consisting of nature, of things in their pristine simplicity; the latter is surrounded not only by “matter” but also by a peculiar social milieu. The transition from the isolated human to society is possible only by way of the social milieu. And indeed, if we were dealing only with an aggregate of individual economies, without any points of contact between them, if the specific milieu which Rodbertus has so appropriately termed the “economic community” should be absent, there would be no society. Of course, it is theoretically quite possible to embrace a number of isolated and remote economies in a single conception, to force them into a “totality” as it were. But this totality or aggregate would not be a society, a system of economies closely connected with each other with constant interaction between them. While the former aggregate would be one we had artificially constructed, the second is one that is truly present. Therefore the individual economic subject may be regarded only as a member of a social economic system, not as an isolated atom.”
“So we spend our days fishing with our hands and because of this we are each able to catch only 1 fish a day. One day you decide to take a risk, you decide to go a day without eating anything but build a net instead, which will make you able to catch more fish. So tomorrow, thanks to your net, you are able to catch 3 fish.”
Key words: take a risk. We can see where this is going, a justification of the disproportionality of wealth by attributing it to the “risk” the capitalist takes. There are several problems with this argument, which we’ll proceed to enumerate:
1) There is little or no relationship between income and the risk that person faces.
In reality return is inversely proportional to the risk the capitalist undertakes. Let’s make an example between a small and a big capitalist: the small capitalist is taking a real risk, for his business may be his only source of income, but the big capitalist investor with billions of dollars on his bank account could easily spread his money so as to make risk practically non existent.
2) Virtually all human activity involves risk.
Workers could risk their health in the workplace, and often the most dangerous workplaces are those associated with the lowest pay. Moreover, providing safe working conditions can cut into profits and by cutting health and safety costs, profits can rise. This means that to reward capitalist “risk”, the risk workers face has to increase. Let us assume that a company is polluting a local area. It is usually the case that capitalist owners rarely live near to the workplaces they own, unlike workers and their families. This means that the decision makers do not have to live with the consequences of their decisions.
3) Only successful risks are rewarded and what constitutes success is dependent on exploiting labor.
Should failed investments be rewarded for the “risk” undertaken by the capitalist? Few, if any, would argue this. This means that successful risks are what counts and this means that the company has produced a desired good or service, i.e. a use-value.
4) Most “risk” related non-labor income today plays no part in production.
Looking at the typical “risk” within capitalism, putting money into the stock market and buying shares, one will easily forget the idea that “risk” plays any part in production. Most investment is simply the “risk” associated with buying a potential income stream in an uncertain world. The buyer’s action has not contributed to producing that income stream in any way whatsoever yet it results in a claim on the labor of others. For instance, it has recently come out that in some cases investment banks requested that specific employees of the rating agencies be removed from rating their mortgage-based securities because of the “excessive diligence” of these employees, and these requests were generally granted. The securitization of mortgages was a process that was filled with perverse incentives to ignore the credit risks of the borrowers, and to make as much money as possible on volume and processing fees.
5) The unequal distribution of means of production in capitalism provides different risk-taking abilities from person to person.
Property owners can spread their risks by putting small bits of their property into a large number of concerns, a worker cannot easily put small bits of his effort into a large number of different jobs.
“Now you only have to fish one out of three days and you can spend the other days having fun and doing whatever you want.”
Because this is a completely fair representation of reality, right?
“I look at this position with envy, I want to improve my living standards as well, but I don’t want to go through the self sacrifice of going hungry for a day to build my own net. Realizing that this is an opportunity to increase both our living standards you offer to lend me your net under the condition that I give you one fish a day. Now you don’t have to go fishing at all and I’m able to make two fishes a day rather than one. But some people would say fool, they would argue that you’re exploiting one fish per day for me, that I’m producing 3 fish a day using your net and that you would be exploiting me demanding any of the 3 fish.”
That is so. From a logical viewpoint, this makes sense too. Why would someone who spent just one day building a net be rewarded with someone else’s labor every single day? Is this fair? If so, on what grounds?
“The problem is a misunderstanding of who owns what. You own your net, I own my labor. My labor alone can only produce 1 fish a day, but with your capital it can produce 3 fish a day. Therefore my labor is producing one fish a day and your net is producing the two extra fish, you’re not exploiting me because my labor is not what is producing the extra fish.”
This is completely nonsensical. If the net is thrown in the water, it will not catch any fish on its own. What happens in reality is that the net now partakes in the labor process. What is producing the two extra fish is not the net, it is rather a more efficient labor process. Then again, we all know that Spinney only really produced one video and his camera produced hundreds.
“But you are willing to have 2 fish a day instead of one, and give me rights to use your net. Therefore you’re paying more than the labor is worth, not less…”
The labor process as a whole is worth 3 fish. The labor on its own, without capital, would only produce 1 fish, but this less efficient labor process has not been used.
“…and thanks to the capital, I am now able to produce my own net without having to go hungry like you did.”
Another completely fair representation of reality?
Let’s go back to the shoe factory. Although the exploitation proponent recognizes the nominal value of capital insofar as what you have to pay for it they refuse to recognize the real value of that capital insofar of its effect of multiplying the productivity of the labor.
This is because, as explained earlier, the value of labour (w) = c+v+s, where c is constant capital, or means of production, v is variable capital, or the cost of wages and s is the surplus value, or the new value created by workers in excess of their own labor cost. The capital is part of the labor process and is unable to produce anything, not physically nor in value terms. Spinney like the vulgar economist J. B. Say babbles that machines render the “service” of creating value which forms a part of “profits.” The rate of profit is the total surplus value produced (s) divided by the cost of producing that value (c+v). The surplus value is produced by labor. The cost of production is the cost of buying materials (c) and labor power (v). The fact that machines are in the denominator of the equation doesn’t make them productive of value. The organic composition of capital is the ratio of living labor to dead labor in production. Because this ratio is a determinant of the profit rate doesn’t mean that the ratio itself creates value. Let here also David Ricardo: “Adam Smith nowhere undervalues the services which the natural agents and machinery perform for us, but he very justly distinguishes the nature of the value which they add to commodities… as they perform their work gratuitously, the assistance which they afford us, adds nothing to value in exchange.” (Ricardo: „Principles etc.“). Why the English mathematician, machinist and economist Charles Babbage estimates that in Java the spinning labour alone adds 117% to the value of the cotton and at the same period (1832) the total value added to the cotton by machinery and labour in the fine-spinning industry, amounted to about 33% of the value of the cotton, explains Marx to us: “The less labour it contains, the less value it imparts to the product. The less value it gives up, so much the more productive it is, and so much the more its services approximate to those of natural forces. But the production of machinery by machinery lessens its value relatively to its extension and efficacy. An analysis and comparison of the prices of commodities produced by handicrafts or manufactures, and of the prices of the same commodities produced by machinery, shows generally, that, in the product of machinery, the value due to the instruments of labour increases relatively, but decreases absolutely. In other words, its absolute amount decreases, but its amount, relatively to the total value of the product, of a pound of yarn, for instance, increases. The reader who is imbued with capitalist notions will naturally miss here the “interest” that the machine, in proportion to its capital value, adds to the product. It is, however, easily seen that since a machine no more creates new value than any other part of constant capital, it cannot add any value under the name of “interest.” It is also evident that here, where we are treating of the production of surplus-value, we cannot assume a priori the existence of any part of that value under the name of interest. It is evident that whenever it costs as much labour to produce a machine as is saved by the employment of that machine, there is nothing but a transposition of labour; consequently the total labour required to produce a commodity is not lessened or the productiveness of labour is not increased. It is clear, however, that the difference between the labour a machine costs, and the labour it saves, in other words, that the degree of its productiveness does not depend on the difference between its own value and the value of the implement it replaces. As long as the labour spent on a machine, and consequently the portion of its value added to the product, remains smaller than the value added by the workman to the product with his tool, there is always a difference of labour saved in favour of the machine. The productiveness of a machine is therefore measured by the human labour-power it replaces.”
(Marx, Capital, volume I)
Conclusion: The portion of the value that a machine transfers to the product is the labor spent on a machine.
For example, let’s say the worker produces 10 pairs of shoes every hour. What if the capitalist didn’t offer any capital? How many shoes would the worker be able to produce per hour? Obviously less than 10 pairs every day. Yet the exploitation proponent does not take this into consideration, but they choose to maintain that once the nominal cost of the capital is deducted the rest of the value produced is derived solely from the labor. This is false.
It may sound repetitive, but capital is part of the labor process, and Spinney probably never saw a workplaces since he probably thinks nets can fish on their own.
Another aspect that is completely ignored is the investment. The capitalist is putting a huge sum of money on the line to pay for the immediate cost in the hope that future consumers will want to buy the product that is being created. They are taking the risk that the consumers wouldn’t want to buy the product, in which case they’ll lose all the money invested in the business.
The capitalist is going to lose the money invested in the business and be knocked back into the proletarian class. The workers, instead, will lose their jobs and means of subsistence.
This could very well be their entire life savings, that they spent decades building up.
Or this could very well be their entire life savings, just like it could be loaned money from a bank which siphoned surplus value from the workers, just like it could be money acquired through exploitation, just like it could be money inherited or won at the lottery.
“The capitalist is the one taking the risk of losing their investment if the business fails, so they deserve the reward of the profit if the business succeeds.”
This is a completely arbitrary statement. Why do they deserve the profit extracted from other people’s labor because of a “risk”? What gives more value to the risk of one person than to the labor of several people? Nonetheless, the risk argument has been dealt with previously.
“The worker on the other hand rather than agreeing to work for a percentage of the potential future profits, he decided to work for an immediate set guaranteed wage that is not dependent upon whether the product will be sold in the future. This fact alone should discount the argument that the worker should have a claim on the percentage of the profit.”
The worker is not in a position of free choice as wage contracts are determined not by the worker but by the capitalist. The agreement is idiographically voluntary, but nomothetically anyone can realize the agreement only exists because the worker, deprived of means of production, is forced to give up his autonomy and labor to a capitalist. To quote Adam Smith and Linguet:
“Whenever the legislature attempts to regulate the differences between masters and their workmen, its counsellors are always the masters”, says Smith.
“L‘esprit des lois, c‘est la propriété”, “the spirit of law is property”, says Linguet.
“No, the worker has decided to be compensated a wage rather than a percentage. They keep their wages even if the product fails. The worker has no more rights to the percentage of the profit than the business selling the electricity, raw materials etc.”
The two are entirely different. Electricity is not a living being, nor does it create any new value for the capitalist. Labor, on the other hand, comes from living beings and is value producing. Moreover, the labor process is what is creating the products, not electricity or raw materials on their own. Unless it’s Jacob’s fishing net, that works on its own.
“If the worker doesn’t like this, they can unite with other workers and take out a loan or spend decades accumulating money so they can start their own business where the workers will be paid no wages but a percentage of the profits.”
Or if the workers don’t like this, they can overthrow the system and stop this exploitative mode of production.
Anyway, allow me to quote Engels from Anti-Duhring: “Even if we exclude all possibility of robbery, force and fraud, even if we assume that all private property was originally based on the owner’s own labour, and that throughout the whole subsequent process there was only exchange of equal values for equal values, the progressive development of production and exchange nevertheless brings us of necessity to the present capitalist mode of production, to the monopolisation of the means of production and the means of subsistence in the hands of the one, numerically small, class, to the degradation into propertyless proletarians of the other class, constituting the immense majority, to the periodic alternation of speculative production booms and commercial crises and to the whole of the present anarchy of production.”
“Perhaps this worker self management model will be the most widespread in a REALLLL free market, or maybe they will prefer a guaranteed wage over the risk of a percentage that may never come. But in either case, there is no exploitation. To put it simply, it’s impossible for the capitalist to pay lower than the value that the worker’s labor is producing because he has to pay higher than the value that the worker’s labor was producing before they started working for the capitalist.”
We already went over this.
Otherwise the worker would decline the job offer and continue doing whatever they were doing previously.
The worker can’t simply decline job offers because he needs a source of income. Moreover, unemployment is a reality in capitalism, there is no infinite set of jobs that one can take at any given moment. Needless to say this benefits capitalism as widespread unemployment has the effect of driving down wages, as unemployed workers compete for a limited number of jobs, accepting even sub-poverty wages to get them. Many promoters of the free market forget, or probably exploit, the fact that the labor market is like any other market: dictated by the laws of supply and demand. To see how this works, imagine a land where the supply of workers perfectly matches the employers’ demand for them, and everyone gets paid $10 an hour. What happens if we add a few more workers to this economy? To quote Paul Krugman:
“The way that a freely functioning labor market ensures that almost everyone who wants a job gets one is by allowing wages rates to fall, if necessary, to match supply to demand…”
And the more unemployed workers we add to this economy, the more wages fall. An example of this correlation can be seen in the U.S. recession of 1982, when unemployment nearly hit 11 percent in the fourth quarter, and real hourly wages fell nearly 50 cents from three years before. The flip-side to this example is the 1980s “Massachusetts Miracle,” when unemployment fell to a phenomenally low 2.7 percent, and McDonald’s began offering twice the minimum wage ($7 an hour) trying to attract workers.
But let’s say that increase in productivity is derived solely from the worker’s labor itself and has nothing to do with the capital mixed with it.
This is an obvious straw man. No communist would argue that means of production don’t increase productivity. What we argue is that means of production are part of the labor process, not autonomous producers.
Karl Marx from Capital volume 3, page 179: “No capitalist ever voluntarily introduces a new method of production, no matter how much more productive it may be, and how much it may increase the rate of surplus-value, so long as it reduces the rate of profit. Yet every such new method of production cheapens the commodities. Hence, the capitalist sells them originally above their prices of production, or, perhaps, above their value. He pockets the difference between their costs of production and the market-prices of the same commodities produced at higher costs of production. He can do this, because the average labour-time required socially for the production of these latter commodities is higher than the labour-time required for the new methods of production. His method of production stands above the social average. But competition makes it general and subject to the general law. There follows a fall in the rate of profit – perhaps first in this sphere of production, and eventually it achieves a balance with the rest – which is, therefore, wholly independent of the will of the capitalist.”
“Let’s also say they have a right to 100% of the profit. Okay. Let’s say that a capitalist is renting a boat for 10 fish per hour and he pays you 10 fish to go fishing with a boat and produce 50 fish per hour. Thus the evil greedy capitalist is exploiting 30 fish per hour from you since your labor is producing 40 fish per hour and he only gives you 10. What happens when you’re taken away from the boat and dropped on an island, all by yourself with no capitalist in sight and you’re no longer able to produce 50 fish per hour. Who are you going to blame for exploiting you then?”
What if the worker, instead, expropriates the capitalist of his exploitative property and changes the rules of the game, producing for need instead or profit? Or, instead, what would a fishing net do without the worker using it (unless it’s Spinney’s net)?
On the labor theory of value:
Anwar Shaikh – The Empirical Strength of the LTV