Why is it so hard for Economists to make a substantial critique of the LTV?

Brad DeLong takes a swipe at the Marxian Labour Theory of Value and falls hopelessly off target and wrong to boot.

From a drawing of André Castaigne. The starvin...
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Or: Brad DeLong tries and fails to refute the (Marxian) LTV.

I won’t go into the details on why Brad didn’t attempt to argue against the LTV but rather against the moral basis of Marx’s theory of exploitation as Kapitalism101 already skewered that particular misunderstanding. What I would like to do is to point out why even then example chosen, in all it’s rigged splendor is misguided in providing us even with clear moral insights into the ethics of capitalist production.

First, lets start deconstructing the example put forth. One might wonder why we should be doing that of course and the reason is that there is a fine line between rigged examples and unrealistic examples which are so goddamn popular within economic circles. It’s quite important to expose the unrealistic expectations and ignored inconsistencies which make up so much of such scenarios so as to point out why they can’t be used to describe reality in any meaningful sense.

In fact, I’m going to digress towards a small rant on this particular subject as it annoys the hell out of me when I see it. Dear Economists please stop doing that! Stop imagining scenarios, perfect, clear cut scenarios, with no ambiguity at all, which can fit into perfect mathematical models and then try to describe reality from those conclusions! It is not reality. It has nothing to do with reality. It’s as absurd as a physicist trying to explain reality by positing a scenario starting with “Imagine a man flying by flapping his arms”. You can’t model reality in your heads and then use those fantastical examples to describe the real world. As such, your examples have as much accuracy to the reality of economics as Democritus Atomic Theory has to the reality of chemistry. It sounds alike and seem on the surface to approximate reality, but is nevertheless quite wrong.

Marx, for all his errors at least started the right scientific way by looking at how the capitalist mode of production worked and then writing a theory to describe it. You know, like a proper scientific theory. That doesn’t necessarily mean that his initial theory was perfect any more than Darwin’s initial theory of evolution was perfect. It was nevertheless based on empiricism rather scholasticism. /rant

So from the get-go, Brad’s example starts on the unrealistic foot.

Now suppose that ten of these families starve themselves for a decade–living on little more than half-rations–to raise the cash to buy farm machinery, irrigation systems, fruit trees, et cetera from the cities.

Which automatically means that A) Those farms were not subsistence and they were producing already more than they could consume as nobody can keep on starving for 10 years and B) There is already a working industrial production which provided them with the research and capital to buy. Under what circumstances this was bought it is not said as that production might be based on exploitation as well. But lets for the sake of the example assume that people starving for 10 years instead put their labour in researching and building all that capital and see where it leads us.

As a result of their sacrifice, saving, and investment, thereafter their farms require four times as much labor each year to operate, but also produce crops worth eight times as much because of the capital investment.

Now we see that all those abstained consumption of those families was used to create capital which can only be used by more than their current manpower. This is weird to put it mildly as one would expect them to simply improve their own processes rather than build capital requiring more manpower. It points in fact to the idea that those starving families had a plan to hire other workers or to put it shortly, to rent out their capital rather then selling it or using it themselves. Keep this in mind as we proceed.

They then hire thirty additional families’ worth of workers, leaving the remaining ninety original farmsteads to be worked by sixty families.

And this is the sticking point for me. What Brad casually assumes would happen easily and without much fuss is, in fact quite complex, when one looks at things realistically and with an anthropological perspective. Why would 30 families of workers agree to be hired as wage-workers?

This may not sound as much of an issue for someone who takes the current world as given and the current human mentality of passively accepting wage-labour but it is quite important to analyze. Lets take the things we know. Those 30 families currently can produce enough food to fill their current needs and then some extra to sell and buy luxuries (otherwise, those entrepreneurs wouldn’t be able to “starve” themselves). Those 10 families that “starved” themselves for 10 years on half-rations, we can assume that they consumed only half as much of their product right? So if they produced 3000 pounds of wheat per year, this means that they saved 1500 per year. So 10 x 10 x 1500 = 150.000 pounds of wheat, or 75 tons, in order to buy/build the capital right? Right.

At this point one might ask, why didn’t those families pool their resources together and buy capital that is small enough that they can work themselves? Lets assume that the smallest unit of capital they could buy was this, requiring a minimum of 40 families. Again this raises questions on why this is the minimum unit of capital and this is not a neutral question. Kevin Carson would have a lot to say about the purpose of capitalist technology and which interest it represents.

So we have unit of capital which was bought by 10 families who can’t currently use it. At this point, one starts to question their sanity. It’s like a blind man buying a truck. “Why did you just do that?”, one expects everyone else to ask. “You just starved for 10 years in order to buy something you can’t use? What’s the point”. At which point those brilliant entrepreneurs say “Ah but my plan is to hire you guys to work in it and give you a share of the profits while I keep something for myself for all our starvation.” At which point general laughter occurs. For you see, there’s no reason for anyone to accept such a plan. And I’m going to explain why:

  1. The Entrepreneurs are now left with something they cannot use. They are at a severe bargaining disadvantage to everyone else, having wasted 5 years of money’s worth on machinery which will degrade if not used and maintained. As such, they are now at a pressure to use it. It is not in anyone else’s interests to hire themselves out as wage workers when they can instead buy the capital at the far lower second-hand price.
  2. It is not explained what the bargain is for everyone else to hire themselves out as wage-workers. It is assumed that the extra money (an increase of 1500 pounds of wheat-per-year, per family) would be enough to make them take this job. But this is counteracted by the loss of freedom. Whereas those 30 families had control over their own work hours, they will now lose it and will have to work under a boss. This may not sound as much but looking at historical examples of where such scenarios played out, we can see that almost nobody (and I use “almost” only because I can’t speak with absolute certainty, not because I’m aware of any counter-examples) during the migration from farming/artisan production to industrial production, chose to leave their own self-controlled work in favour of factory wage-work. Quite the opposite in fact. People preferred to spill blood rather than choose this.

It is therefore highly unlikely that those 10 families with the capital would find anyone to hire as wage-worker when people had the alternatives to either keep working self-employed which was both traditional (and we know how hard that is to change) and trouble-less, or to buy the capital second-hand or new buy banding 40 families together and amassing the same amount of capital in “2.5” years by starving or 3.3 years by “tightening the belt”. Then, they would both get the increased production AND keep their freedom AND keep all the profits at equal shares.

So in the end, the only way that Brad’s scenario could play out would be for one or more of these reasons

  • The 30 other families are stupid: This is the only way they would not realize that the “entepreneurs” have put themselves at a disadvantage and they can now buy the decaying capital at bargain price.
  • The 30 other families are terminally lazy: They’re not willing to abstain from even one pound of their current lifestyle, even if it means 50% increase in wealth 4-5 years down the line.
  • The 30 other families are made up of submissives: Only those would enjoy all loss of freedom during work hours that they enjoyed until now.
  • There is something else in play which took the previous means of subsistence from those 30 families, leaving them with no other option than hiring themselves out to those 10 entrepreneurs as wage-workers.

Brad, and most mainstream economists and economic examples such as the above, quite strongly imply that the poor and working class are lazy, while the truth is that historically (even continuing to this day) it’s the last option that has happened. Those 10 families bought the capital and then put their friends in the state to enclose on all the property of the 30 other families so that they have ample wage worker who “volunteer” to hire their labour out.

This example thus is no different. It simply posits a reality and assumes away all those embarrassing natural reactions humans would have. No, let’s just assume that 30 families agreed to hire their labour out with not a lot of fuss. It’s the voluntaryist fallacy all over again where the argument assumes a scenario where a bad situation is accepted voluntary from one party and then wonders where all the moral condemnation comes from.

Let me exemplify this by taking Brads example and using slavery rather than wage-slavery.

Lets take the same scenario with the 10 families starving and whatnot to build/buy capital that can only be worked by 40 families. Now lets assume that those 10 families  take 30 of the other families as voluntary slaves in the new plantations to work them for 4800 pounds of wheat per year instead (an increase of 300 over wage-work). As voluntary slaves it means that they get to live and work whenever their masters tell them and get beaten if they do not follow orders. According to Brad’s logic, there’s nothing wrong with that is there? After all, they slaves now get more money than before and everyone is better off. Aren’t they?

What? You object to the assumption that people would just like that voluntarily sell themselves into slavery for more money given other alternatives? If so then you understand why I object to the assumption that people would voluntarily sell themselves into wage-slavery for more money, given other alternatives.

This is the flaw in Brad’s scenario. This is the flaw in all economic scenario. They are unrealistic and suffer from hoards of inconsistencies. They only work as long as we play along with the author and avoid thinking too much about what they’re really implying. It can justify wage-slavery. It can justify slavery. It can justify goddamn Cannibalism if we really want it to. As long as we’re assuming, we might as well assume anything voluntary we want.

I can take my above example with wage-work and make it worse for the slaves. I can make it better for the slaves as well. Since it’s a rigged example I can do whatever the hell I want! I can make a scenario where someone would be offered 10 times more money if they accepted to be a slave. I can make a scenario where someone accepted to be a slave for a meager 1% increase. It’s my assumptions and I can do what I want. And this is precisely what Brad is doing. He’s simply built a scenario where it looks like an improvement for the wage-workers and assumed nobody would be willing to look close enough to challenge wage-work itself. It bases itself on people already having a mentality which accepts wage-work and thus going along with it without too much fuss or thought.

As soon as someone asks “Why did those people accept to be hired as wage-workers?” his whole scenario tumbles down like a house of cards.

As for his “critique” of Marx’s theory of exploitation, it could be just as well surmised in one sentence: “It’s voluntary so it’s not exploitation. Therefore the LTV is false.” And it’s as convincing as that.

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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.

This image of :en:George Reisman is taken from...
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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 Mises.org, 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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Exploitation cannot be obscured in time

Hans-Hermann Hoppe tries to prove that Marxian exploitation is impossible because of the concept of time preference. This is a refutation.

In my recent travels in the Anarchist reddit, more and more I stumble on Anarcho-Capitalists who insist on pointing to articles in their classic haven, Mises.org. Apparently, the place to be is you’re a progressive capitalist. Due to the quantity of such links I obviously cannot read all of them (indeed I still have quite a lot of Marxist material to go through) but now and then I’m pointed to an article that just challenges.

So I have decided to start a little series which will contain all the refutations I write on mises.org articles. I hope to eventually have a nice collection of posts I can instantly post as counters to such links.

Today I was pointed to a rebutal from some guy called Hans-Hermann Hoppe on why the Marxian concept of exploitation is wrong and how the consequences of movements based on marxism are also wrong and disastrous. I will not attempt to refute the whole analysis but rather I will try to attack the central small core concept it is all based.

After a few paragraphs providing a short introduction of “the hard-core of the Marxist belief system”, and then a brief explanation of the Marxian exploitation theory, Hoppe finally goes to the offensive

Now what is wrong with this analysis? The answer becomes obvious once it is asked why the laborer would possibly agree to such a deal. He agrees because his wage-payment represents present goods, while his own labor services represent only future goods, and he values present goods more highly. After all, he could also decide not to sell his labor services to the capitalist and then reap the full value of his output himself. But this would of course imply that he would have to wait longer for any consumption goods to become available to him. In selling his labor services, he demonstrates that he prefers a smaller amount of consumption goods now, over a possibly larger one at some future date.

On the other hand, why would the capitalist want to strike a deal with the laborer? Why would he want to advance present goods — that is, present money — to the laborer in exchange for services that bear fruit only later? Obviously he would not want to pay out for instance $100 now, if he were to receive the same amount in one year’s time. In that case, why not simply hold on to it one year, and receive the extra benefit of having actual command over it during the entire time? Instead, he must expect to receive a larger sum than $100 in the future, in order to give up $100 now in the form of wages paid to the laborer. He must expect to be able to earn a profit — or more correctly, an interest return.

Now this immediately falls afoul of an assumption: That the worker does indeed value present goods more than future goods. This however is begging the question: “Why is the worker valuing present goods more?”. The answer is of course need. The only reason a person would prefer to have less money now rather than more later (and that “later” can be as short as 1 hour from now) is because they have an urgent need that they cannot ignore until later. That urgent need can only ever be food or shelter.

If the worker has the capability to feed and shelter himself until he could reap the future value of his product, he would certainly do so. Indeed, when people have enough money to survive, very often they invest their money as well or start their own business. The problem however is that not everyone has this luxury. The vast majority of humans can never leave the working class and move to the capitalist or petty-bourgeois because they start at the condition where their basic needs are not fulfilled and because they do not own any means of production.

This is not an voluntary choice. This is a choice based on passive coercion. It is beneficial for the Capitalist who can select a low wage for the starving worker, but it is not beneficial for the worker who might only get a present value enough to simply sustain himself until the next day.

But lets look at this another way. Hoppe claims that a worker benefits because he receives present goods which he values more, in return to losing future value goods. There is another function in society which does the same however: Credit.

With credit, I can receive current goods in return of losing goods in the future. The difference of goods I lose is not too large usually but is enough to put me back a bit, making me poorer in the long run. True, I only get credit when I have such a need where current goods are more valuable in utility.

Now consider a hypothetical human who enters adulthood without any wealth. The only way for him to survive to the next day is to take 10$ credit for the food he will eat and the place he will live. That does not give him any real value other than his continued existence to the next day, where he will be actively poorer by the 2$ interest he was charged. So once again he has to get 10$ credit for the next day and so on, yet becoming more indebted as his debt increases by about 2$ per day.

Notice that I said, that this is the only way he can survive as well. That means that he has no choice but to fall more and more in debt daily until eventually it’s time to pay the piper. This situation should immediately strike us as wrong. Is it fair that our sample human’s only choice is to put himself more and more into debt without a way out? Of course not.

Lets take this example and apply to a worker’s position. The worker comes out to the society and has no other way to survive but to get a job from a Capitalist. The capitalist will, as Hoppe claims, provide him with 10$ upfront in order to create for him a widget he sells for 12$. The worker uses his money to survive until the next day, where he again has to make another widget, enriching the capitalist by another 2$, and so on.

What is the difference between our hypothetical human and the worker? In both cases, they only get to survive from day to day, while the creditor or capitalists becomes richer, without doing anything, by 2$ per day. The only difference between them is that the workers settles his debt daily by producing a 12$ widget and giving it to the capitalist, while the hypothetical human accumulates debt. But the end result is the same. At the end of 10 days, the human will have to come up with 20$ (the creditor does not care how. Perhaps sell his organs) to pay back. The end result is a 20$ richer debtor/capitalist.

But like the situation we put our hypothetical human was unfair, so is the situation we are putting workers every day. The scenarios were simple but the basic premises remain no matter the wage. Time-shifted or not, Capitalism is exploiting the worker by putting them in the unfair situation where they have to take the “credit” or starve. This “mutually beneficial” relationship assures that the worker will always remain poor while the Capitalist will enrich himself without doing anything. Indeed, this continued exploitation, will only ensure the Capitalist will be able to put more future workers in the same exploitative situation by taking control of the means of production so that they have no choice but to work for him.

Hoppe also asks why would the Capitalist borrow his money to the worker if he’s not going to become richer in a year? Why indeed. By himself the capitalist would not become any wealthier than his original 100$ and  as time passed, if he did not labour himself, his 100$ would decrease as he fed and sheltered himself. But the capitalist is not content to work like everyone else, he wants to become richer and not work at all, a societal parasite. He will look towards the immoral way of exploitation.

The “clean capitalist” who is mentioned in the article, does not escape this moral stigma simply because he didn’t get to inherit his fortune like most capitalists. Once you have capital, you always have 3 options.

  • Do nothing. Use the money that you saved to retire or have a luxurious life
  • Become a capitalist and exploit workers.
  • Bring other workers to your business without exploitation. As long as they work with you, they own what they make and they get an equal share of the surplus value. This is the only mutually beneficial way.

Hoppe continues:

Now what is wrong with Marx’s theory of exploitation, then, is that he does not understand the phenomenon of time-preference as a universal category of human action. That the laborer does not receive his “full worth”, so to speak, has nothing to do with exploitation, but merely reflects the fact that it impossible for man to exchange future goods against present ones except at a discount.

And this is simply untrue. First of all, the capitalist does not give the worker present goods. How many times have you been paid on your first day of work for what you’re going to do in the coming month? Never of course. The wage always comes at the end of the working period where the surplus value has already been created, even many times over. But yet, you do not gain the full value of your work even though you gave the capitalist “present goods” each day in the previous month in exchange for “future goods” at the end of the month.

But this has nothing to do with present of future goods nonsense. It’s all about who controls the means of production and who is starving. The only reason the worker cannot make surplus value for himself is because the Capitalist controls the way to make it and will not let him use it unless he agrees to be exploited. And the more people that are exploited, the wealthier the Capitalist becomes and the more means of production he gets to control, turning yet more people to exploitation and concentrating the wealth to the few.

I will not bother to counter the rest of the speech as it basically rests on the assumption that it has demolished Marx’s theory of exploitation. I hope I have adequately shown you how it has simply tried to obscure exploitation behind concepts of time and avoid the hard moral questions that undermine capitalism.

I’m not an economist expert or even a Marxist scholar so it’s quite possible that I am missing some fine point or argument from either side. However if this is indeed the only argument they have to declare Marx’s theories obsolete, then it’s no surprise that their system sounds so hollow.

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How much are we all to blame for the situation in the 3rd world?

The developed nations are living the good life while billions are starving and homeless. This article explains why we share part of the blame.

Countries fall into three broad categories bas...
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Another day, another argument. This time a socialist from reddit is taking exception to my previous article where I explained how the developed nations have taken summarily the role of the bourgeoisie against the 3rd world which is becoming the world’s proletariat. Specifically his argument seems to be that workers do not share any of the blame for the situation in the world but that it’s rather only the fault of the Capitalists.

He then asks for proof to the contrary and this is what I hope to tackle today.

Because you are accusing me and millions upon millions of other workers of exploiting other workers. I think its quite understandable that you prove to me that a link exists between the poverty of the oppressed workers in the third world and the relative prosperity of those in the first.

Alrighty then. Here we go.


There is ample evidence today to know that the nations we call “the 3rd world” today, did not become so by themselves. If you look at any of those nations’s history, all of them have been at some point in their past colonized by an imperialistic nation. Those nations that engaged in Imperialism as the ones we call today “developed”. The cost of this “development” was the supreme exploitation of others through slavery, taxation and outright theft. This not only slowed down the development of these nations but it outright put them quite a bit back, paving the way for the miserable people living within to be used as cheap labour by our current breed of exploiters.

But what does this have to do with workers? I claim that any person who benefited immensely from the atrocities of his ancestors, shares a moral responsibility to make up for it. To deny this is to claim that the son or grandson of a brutal dictator who plundered his way to wealth, deserves all his inheritance.

Our standard of life is high because our ancestors ruthlessly plundered the wealth of whole nations for their own benefit. This wealth through inheritance and supply-side economics eventually enriched the whole society.

This is not to induce guilt. I see no point in feeling guilty for the sins of the fathers since there was nothing one could do to stop it, neither does guilt invoke action. However our moral responsibility remains and will remain as long as those nations remain woefully inferior to ours. I wish to dispel the unbased notions that the western nations deserve their superior standing because we’re somehow better than everyone else.

The exploitation trickles down

The Capitalists of today prefer to outsource their factories and other means of production to undeveloped nations so that they may get the biggest surplus value possible. This surplus value, created with the labour of the extremely exploited nations does not even have a chance to improve their own lives even a bit through supply-side economics, but rather it is transported across the world.

The developed world nations are thus getting all the surplus value created by the exploited nations and then use that extra material wealth to create yet more exploitation and wealth. The definition of a Capitalist. And summarily, that is what we are. Our western societies as a whole have the wealth (initially achieved through imperialism), which they invest in order to make more wealth for themselves.

The worker that lives in that society gets to enjoy to surplus value along with everyone else. He may still be exploited but in a much smaller degree than any other time in history. This is why the Capitalists can successfully argue how you can just get a better job, or get retrained to a more lucrative position and whatnot. In our society, Capitalism retains the impression of functionality only because it floats on the foam of the blood of everyone outside it.

So what does this have to do with the worker? The fact that we are participating in this scheme means that we are at least partly responsible. By consuming the products created by such exploitation we are endorsing the continuation of this tactic. The Capitalist would not make a profit when people refused to buy shoes made by 13 year old girls and thus such a practice would eventually stop. Same for horrible conditions, wages and whatnot.

This would have two possible results

First, the capitalist would increase the working conditions and payment of his workforce to a point comparable to us if he wanted to sell in this market, at which point it cannot be considered exploitation from a national scale. This would have the effect of course that the prices of those goods would not be able to remain as low for everyone. Is this a worthy price to pay for equality and a clean conscience?. I say yes, but our friend has a different opinion.

Why should workers suffer in any way, to let the boss profit? Should not the workers in the importing nation demand to the government that only products produced by unionized workers earning an acceptable wage be imported? Yes I say, and let the capitalists take the cost! Not the workers!

But such an action would have the same effect. The only difference in the second case is that you involve the government (with all it’s impotence and protectionism of the Capital) to do what you should and could have done yourself. The end result will be the same though. The prices will raise and the “workers will suffer”.

The second option would be that since the Capitalist cannot make a profit from transporting and selling the cheap products to the developed nations anymore, he would instead attempt to sell them to the local population. To be fair, this option would probably be a possible outcome of the first scenario since the cost of transportation would decrease the profit too much.

So what happens then? First of all, the wealth that this nation produces does not leave it. It means that, at least, the lives of those societies are enriched, in a similar way that a worker reaps the rewards of his own labour. Certainly, the money goes mostly to their capitalist bosses but, at the very least, supply-side economics guarantees that the wealth which is kept in that nation is at least spread around.

Then, it also means that local businesses for the developed nations will start popping up again. Since the profit margin drops when having to transport and the worker costs in the developed nations are as high as here, Capitalists will prefer to invest in local businesses. This will boost the production of each nation in turn (as opposed to the current system where all the factories are outside) and increase the proletariat.

And finally, the last effect will be, unfortunately, increased exploitation. Once Capitalists cannot buy cheap labour in China and sell it expensively in Germany, the natural course of Capitalism will assert itself. Exploitation will increase. Wages will drop. More working hours will be demanded etc. The standard stuff with which Capitalism undermines itself and raises the awareness of the working class.

With one difference from the current situation. It will be universal. The workers of the world will be exploited at an equal degree. No more will the Indian see the American earn 10 times as much by doing half the work. No more will the French consider his countrymen superior because they happen to have a much better lifestyle than the Egyptian and thus “must be doing something right”. The workers of the world will go through the same struggle and become for once, internationally, comrades.

And when that happens, Capitalists of the world beware!

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Why "our way of life" is not deserved

Mendicant outside the Kizhaperumpallam templeRecently, after my last argument on immigration, I ended up having a similar discussion with my girlfriend. While she is much more resonable in these debates, nevertheless she too had taken a protectionist stance on the whole issue of immigration. Most of the arguments were similar to the ones I mentioned before but there was one more thrown to the table that I think deserves refutation.

Mendicant outside the Kizhaperumpallam temple
CC License - credit: calamur

Recently, after my last argument on immigration, I ended up having a similar discussion with my girlfriend. While she is much more resonable in these debates, nevertheless she too had taken a protectionist stance on the whole issue of immigration. Most of the arguments were similar to the ones I mentioned before but there was one more thrown to the table that I think deserves refutation. It went as thus:

These immigrants, they know that in their own countries and under their own laws, the crimes they do here would be severely punished and this is why they come to our Germany and Europe. They know that here they will just get a “slap on the wrist” compared to where they come from.
If they commit crimes then it is only fair that we send them to the backward country they came from for we (Germans) have worked hard to have the kind of society we do and it’s not fair that they enjoy all the benefits we have achieved and ruin our system.[1. This is not an exact quote but rather the main gist of the argument as I understood it.]

On first take, one would be inclined to agree. Why should we tolerate immigrants who come to our developed countries in order to avoid the horrible societies they live in but yet they cannot respect our laws?

The answer is that this is begging the question. When one asks this, it is presupposed that the 3rd world society people live in is deserved and of their own fault and that when we, as Europeans or North Americans, have a good society, it’s because we are such great and hard-working people and we deserve our way of life.

This is false.

One has to have a very short memory or an ignorance of recent history to believe that the western or developed nations achieved this status by simply being more hardworking than the rest. The nasty truth is that the first world nations have achieved this through imperialism and shameless exploitation of other countries.

Similar to an Objectivist who deludes himself that his status in life is completely self achieved, without taking into account all the societal benefits and luck that allowed him to be who he is, so do the people who express such views completely fail to see that their nation’s status is intertwined irrevocably with the rest of the world and their history.

Great Britain would not have been so great if it didn’t have an India, Australia and Ireland to exploit. US America would not have been so united if the Indigenous population had not been systematically exterminated etc. and this of course does not stop just with history.
Even now wars are being waged by the first world nations, devastating whole societies just because the natural resources are too valuable. Brutal Dictators are being put into power just because they are friendly with the policies of the people in charge and agree to screw over their own countrymen so that first world nations can get the goods. Megacorporations are outsourcing their labour to 3rd world nations so that production, and thus costs, will be cheaper for us. I could go on…

When people from these nations flee their countries in search of a better life, we have to realise that their situation is not their own fault and our countries are partly to blame. Nobody lives in a vacuum and nobody deserves a bad life just because he has been born into it.

The only thing one can say is that they are partly responsible for their own status in life. I say “partly” because this is 90% luck as the where, how and when you were born plays the biggest role and you have no choice in this matter. Still, we have a modicum of control over our own life choices so one can feel at least a bit proud and deserving on what themselves have achieved.

But to extrapolate that and consider that one is deserving of the society one lives in is simply absurd. To further request that people who were not lucky enough to be indigenous in a western nation deserve to be treated worse (i.e. ostracized) is outright wrong.