Do workers exploit the capitalists?

A Misoid attempts once more to counter the theory of exploitation, this time using nothing more than equivocations and lack of historical knowledge.

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In today’s Hits & Mises episode I’m going to tackle George Reisman’s attempt to refute the exploitation theory. I was recently linked to it by yet another Misoid on reddit who is trigger-happy in linking to, which seems to be an annoyingly common occurrence in the Anarchist subreddit. This time I am not going to tackle it all at once since this is a huge piece using various tactics to counter the theory of exploitation. Rather I’m going to pick apart it’s distinguishable core arguments one by one until there’s nothing left.

The main thrust of the attack in this case is the argument that in a pre-capitalist society or artisans and farmers, rather than all income being wages, all income was profit and by the introduction of the capitalist mode of production, it wasn’t that the parasite class of the capitalist and landlord started taking a part of the income as profit, but rather that the artisans naturally evolved to capitalists and then gracefully allowed some proletarians (i.e. people with nothing else to sell but their labour) to use their surplus land and capital to survive while they paid them a “fair wage” since they were doing them a favour in the first place. In short, the worker is exploiting the capitalist now since they are getting a wage out of the capitalists profit (which would exist at the same level apparently without the worker’s labour).

Smith and Marx are wrong. Wages are not the primary form of income in production. Profits are. In order for wages to exist in production, it is first necessary that there be capitalists. The emergence of capitalists does not bring into existence the phenomenon of profit. Profit exists prior to their emergence. The emergence of capitalists brings into existence the phenomena of wages and money costs of production.

Accordingly, the profits which exist in a capitalist society are not a deduction from what was originally wages. On the contrary, the wages and the other money costs are a deduction from sales receipts—from what was originally all profit. The effect of capitalism is to create wages and to reduce profits relative to sales receipts. The more economically capitalistic the economy—the more the buying in order to sell relative to the sales receipts, the higher are wages and the lower are profits relative to sales receipts.

I have been unfortunate enough to have had to argue against this position in the past with one particularly obnoxious opponent so this is not a new perspective for me, although it’s nice to finally know where that person got his argumentation points from as this seemed a novel refutation at the time. In short the flaws in this argument are two. One is definitional while the other is historical.

The Definitional Flaw

We see George starting down this path from this quote

This becomes apparent, as soon as we define our terms along classical lines:”Profit” is the excess of receipts from the sale of products over the money costs of producing them—over, it must be repeated, the money costs of producing them.

A “capitalist” is one who buys in order subsequently to sell for a profit.

“Wages” are money paid in exchange for the performance of labor—not for the products of labor, but for the performance of labor itself.

It seems that he is using some fairly interesting definitions here, definitions which in fact have nothing to do with the way such terms were used by socialists. The reason why this change occurred is because it allows the very tricky equivocation fallacy required for one to make within his historical flaw.

So why is this definitional flaw important? First lets take the definition of wages: I do not know if Marx did indeed use the term “wage” to talk about the income of pre-capitalist production but in any case what he was really talking was a mode of production where all the income goes to the person who did the labour. Whether that was in excess or less than the money costs of production is irrelevant. What is important is that those who do the labour get to keep all the income from the trade of the results of this labour, i.e. the commodities produced.

The money costs that an artisan or farmer has to produce any commodity are irrelevant as it’s impossible to define them as this includes the whole cost of living of said worker. Does your cost of feeding yourself count as “money costs?” The cost of feeding your family? Buying new tools? Taking vacation? Buying new luxuries? Which of these is or is not a “money cost of production?” Nothing but feeding and buying tools? But obviously a worker without leisure would not be productive. Is everything a “money cost?” But then it’s ridiculous to talk about “profits” as the way the income is used is indistinguishable from a normal wage.

And that is the problem. The intellectual twist required to make the definitional swap of “wages” to “profits” does not stand up rationally. We call an artisan’s income “wages” because it is in fact indistinguishable from wages functionally. It is income which is directly the result of the sale of one’s labour power. The labour power to create the commodities or perform a service. Profit on the other hand is generally used in a different sense, as the non-labour income which one receives on for owning the capital.  It’s the tribute the owner receives on account of owning.

Even using Reisman’s definition of “wages” above, we still see that it supports the idea of pre-capitalist artisans and farmers are receiving wages, not profit. Why? Because if wage are the money paid in exchange for the performance of labour, then we need to ask what the performance of labour is in a pre-capitalist society. It’s obvious then that the performance of labour is nothing less than the products of labour. The commodities one produces is a direct result of the performance of their labour.

The conceptual mistake that Reisman is doing here then is not so much that he simply mixes his definition dishonestly in order to make an equivocation later on, but that he falsely considers that there is a split between the performance of labour and the products of capital, the combined result of which is the commodities. Thus he assumes that an artisan has some wages that are the result of the performance of his labour and he also has the “wages of capital”, the profit which he also gets to retain since he owns the capital as well. However discovering how much is the performance of the artisan’s labour and how much is the performance of the capital is apparently not important and ignored. The truth is that this is a nonsensical split and is ignored because trying to define it would lead one to figure out the actual role of capital within production.

Furthermore the definition of Capitalist as “one who buys in order subsequently to sell for a profit” is especially wrong as this is the definition of a Merchant. Not a capitalist. This definition has to do with distribution, not with production, as it is by the latter by which one earns the title “Capitalist” or not. In fact this conflation of Merchantilism with Capitalism is quite common among the Misoids for some reason, which I assume is their perverse need to prove Capitalism as a natural human system which has existed for us since the dawn of civilization or something.

The Historical Flaw

This part is what especially gets to my tits for its absolute ahistorical assertions. The idea that capitalism is the natural continuation of peaceful evolution of human societies which “naturally” led to the result of some artisans and farmers owning more land than most while also oh-so-randomly property-less proletarians just happened to be around on the verge of starvation and eager to sell their labour as wage-workers while the artisans, now turned capitalists, graciously agreed to sacrifice part of what was all profit before in order to accommodate their fellow human beings.

It’s as if capital and land was happily working itself, producing all those commodities for the pre-capitalist to sell until that scummy proletarian came about and abused the warm feelings of the capitalist in order to get part of the profit. Or something. I don’t know, this whole rewriting of history is so vile in its crass white-is-black thing that it gets me aggressive just reading it. Seriously.

Reisman seems all to eager to manufacture a history which points to a natural evolution of capitalism that he manages to miss the point that actual reality was nothing of the sort, nor could it. He simply bases it on the equivocation he can make once he calls all pre-capitalist income “‘profit”, from which to claim that it’s not the worker being exploited by the capitalist since wages existed first, it’s just the other way around since “profit” existed first. It’s moronically simple.

First of all, the state of affairs where some people just happened to own all the land and capital while others had nothing to sell, didn’t just come around naturally, nor could it ever as humans by default tended to communal ownerships based on mutual aid. As such, it would have been impossible for some to end up owning more than they can use while others had nothing to sell but their labour. Even in a non-communal setting there would be no way for someone to enclose on more land than he could manage himself without a state to accept this claim and enforce it. There would be no way for someone to purchase a factory and then find willing wage-slaves to work in the inhuman conditions within as there would always be available land around for them to work on as self-managed free workers.

This is in fact why it required extensive state violence for capitalism to take hold. Not only had the farmers to be kicked out of their land and be prohibited from moving to other areas by force of law, not only did economic theft in the form of mandatory poll taxes had to be enforced, but the communal land to be enclosed by the great landlords so as not to allow any other options but to becomes wage-slaves.

In short, the world was engineered in order to facilitate capitalism, to facilitate exploitation.

The funny thing is that I’ve had before an AnCap argue that it doesn’t matter that things did not happen this way. It does not matter that it required extensive violence to achieve the system of production dominant today. It matters that logically it would be possible to achieve it even if no violence was used which simply goes against all we know of human pre-capitalist societies and trends. Much like the free market nonsense, it does not matter if it’s unrealistic; as long as we can imagine it happening in our heads, it’s enough.

Reisman’s fantasies are nothing more than that. Unrealistic fantasies of artisans turning capitalist and willing proletarians happily selling their labour-power for a piece of bread. It is spitting in the face of human history in order to make the Capitalist a progressive hero helping society to advance.

Thus, capitalists do not impoverish wage earners, but make it possible for people to be wage earners. For they are responsible not for the phenomenon of profits, but for the phenomenon of wages. They are responsible for the very existence of wages in the production of products for sale. Without capitalists, the only way in which one could survive would be by means of producing and selling one’s own products, namely, as a profit earner. But to produce and sell one’s own products, one would have to own one’s own land, and produce or have inherited one’s own tools and materials. Relatively few people could survive in this way. The existence of capitalists makes it possible for people to live by selling their labor rather than attempting to sell the products of their labor. Thus, between wage earners and capitalists there is in fact the closest possible harmony of interests, for capitalists create wages and the ability of people to survive and prosper as wage earners. And if wage earners want a larger relative share for wages and a smaller relative share for profits, they should want a higher economic degree of capitalism—they should want more and bigger capitalists.

Quotes like this really make me want to punch someone in the face and further solidify why I want nothing at all to do with “Anarcho”-Capitalists and their disgusting apologetics.

Next part of the refutation takes the approach of profit being the reward of capital intellect which I’ve countered already in the past so that’s two bases demolished already. Once I can grind my teeth enough to read through the rest of the nonsense I’ll continue with anything left.

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4 thoughts on “Do workers exploit the capitalists?”

  1. I was hoping for a long time the Mises people would have the courage to publicly debate, analyze, and argue against the AFAQ and libertarian socialism, but so far nothing. Congratulations for stepping forward to critique their views while giving us insightful commentary. I am not a communist but keep up the interesting analysis.

  2. Nice job. I didn't make it past the first paragraph of "Classical Economics Versus the Exploitation Theory"

    Three sentences in he makes an unlikely assertion attributing a rise in the standard of living to capitalism. Ignoring cheap energy, the exploitation of non-industrialized people by industrialized nations, and the possibility that the standard of living for most people hasn't risen. This is followed by a straw-man in the next two sentences suggesting those that disagree with his original assertion attribute the rise in the standard of living to unions and other "infringements".

    This man is trolling for fools. It doesn't take strong critical thinking skills to recognize that George Reisman isn't a very sound thinker.

  3. This would be my respond to this ..1. Capitalists may not want to pay workers close to the value of what they produce, but they do because competition requires it.

    2. Exchanges in free markets are voluntary. This means that even when “exploitative” transactions take place, the institutions of a free market ensure they are mutually beneficial.

    Markets may not be perfect, but what’s the alternative? Many believe that to prevent exploitation we need more political regulation and control, but Professor Zwolinski explains the problems with this solution. Bureaucrats, lobbyists, and elected officials are tempted to exploit citizens for the benefit of the politically well connected. Transactions between people and the state aren’t voluntary, so they may not be mutually beneficial either. When politics is involved, one party’s gain usually comes at someone else’s expense.

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