Profit, Wages, and the Human Good

In his work What is Property? Pierre-Joseph Proudhon famously declares that “property is theft.”[1] In particular, Proudhon has in mind the products of labor, which, under capitalism, the worker produces but does not own. Nor can she afford to buy them, Proudhon says, “Because the right of increase does not permit these things to be sold at the cost-price, which is all that laborers can afford to pay.”[2]

In a capitalist system, the means of production (i.e., land, factories, tools and machinery, as well as stocks and bonds, etc.) are privately owned in order to maximize profit (and these privately owned means of production are what we refer to as “private property”). Workers are hired to produce with these means of production commodities that can be sold on the market. In order to ensure profit, these products must be sold for more than the cost of producing them. Furthermore, most of this consequent surplus value does not go to the workers but rather to those who own the means of production. A fraction of surplus value is then returned to the workers in the form of wage.

What this means is that, quite literally, the value produced in the workers’ labor is stolen from them and only partially returned (an objection which, as it happens, sounds rather similar to capitalist anti-taxation arguments). And the owners have a vested interest in keeping the workers’ wages as low as possible, so that profit is maximized as much as possible. As Milton Friedman insists, businesses have no social responsibility whatsoever other than the maximization of profit.[3]

Karl Marx writes in the Economic and Philosophic Manuscripts of 1844:

For [political economy], therefore, the worker’s needs are but the one need – to maintain him while he is working insofar as may be necessary to prevent the race of laborers from dying out. The wages of labor have thus exactly the same significance as the maintenance and servicing of any other productive instrument . . . Wages, therefore, belong to capital’s and the capitalist’s necessary costs, and must not exceed the bounds of this necessity.[4]

In other words, wages, according to Marx, are literally a maintenance fee.

Human beings are seen (whether implicitly or explicitly) solely in terms of potential profit. Unemployed persons, then, are not producing profit and therefore needn’t be afforded the maintenance fees of wages. Capitalism, in other words, annihilates the possibility of thinking of persons or things as intrinsically valuable – all value is externalized and measured against capital, which is the sole and absolute measure of value.

This is readily apparent when we consider the fact that we must purchase the things that keep us alive (i.e., food, shelter, healthcare, etc.) – which is to say that our very lives are commodities to be purchased. And the only way that we can afford to do this – speaking in the hypothetical absence of a welfare state, which is continually derided as “socialist” and therefore fundamentally anti-capitalist – is if we have jobs, which is to say if we are producing value. And “value,” of course, means capital. If I am not profitable to the capitalist, then I have no standing in relation to capital, the absolute measure of value. And, therefore, quite literally, I have no value and do not “deserve” food, shelter, healthcare, etc. Marx is once again helpful on this issue: “The worker exists as a worker only when he exists for himself as capital; and he exists as capital only when some capital exists for him. The existence of capital is his existence; his life[.]”[5]

What is often forgotten, it seems, is that it was anarchists, socialists, and other labor activists who were fighting against capitalists in favor of such basic worker protections as an eight-hour day, forty-hour week, minimum wage, and child labor laws. All of these cut into profits, and, furthermore, in the case of unskilled labor, if one worker demands a living wage, the capitalist can fire the worker and have a new one, who is willing to work for low wages, hired and trained by the end of the day. Workers are utterly expendable and, as human beings, have no value in and of themselves. Their value is literally a question of how much profit they bring to the capitalists.

On its own, capitalism ignores externalities, such as damage to the environment or the implications for the well-being of society. Frans de Waal points out another telling quotation from Milton Friedman, who says, “few trends could so very undermine the foundations of our free society as the acceptance by corporate officials of a social responsibility other than to make as much money for their stockholders as possible.”[6]

As social creatures, our well-being as individuals directly correlates to the well-being of the whole. We are not atomistic individuals who make totally free, totally isolated market choices, which have no effect on society as a whole (an assumption upon which capitalism, as a product of Enlightenment thought, rests). Individual choices have implications for society at large. It’s no mystery why societies in which everyone has access to the basic necessities of food, healthcare, and education are generally happier, healthier, and safer.

I’m not talking about utopia. I’m not saying all our problems will be solved if we just tax the rich a little more and redistribute wealth more equally. I’m talking about how to make things better. Hell, it doesn’t take a rocket scientist to figure out that healthy, happy, and safe workers are better workers. True, ensuring this might cost more in the short-term, but if capitalism were capable of considering long-term impacts – which, granted, I don’t really think it is or ever will be – then increased worker protection and social welfare would be a no-brainer. To be sure, this is an argument for what I take to be a relatively morally neutral “Enlightened Self-Interest” (i.e., I do what’s good for others because it is also what’s good for me), but it’s a hell of a lot better than the straightforward egoism of free market capitalism.

Ann Jones recently published an article in which she praises the social-democratic system of Norway. Now, again, I’m no social democrat (I’m much more strongly anti-capitalist than that), but I do think that Jones makes some important points regarding the superiority of a system that protects more than just the profitability of corporations. She writes, for example:

In the Nordic countries, on the other hand, democratically elected governments give their populations freedom from the market by using capitalism as a tool to benefit everyone. That liberates their people from the tyranny of the mighty profit motive that warps so many American lives, leaving them freer to follow their own dreams—to become poets or philosophers, bartenders or business owners, as they please.

Putting aside the question of whether and to what extent this truly happens in Norway (I’m not the one to ask), Jones is making a point here that I have often tried to make before: The world needs folks who are doing what they are passionate about. Why? Well, for one thing, there is the Enlightened Self-Interest argument that folks who are passionate about what they are doing will obviously do better than folks who are not, and that excellent work will benefit society as a whole.

Another angle on this is that it helps reaffirm the inherent value of work. Socialism is often misunderstood as the position that it doesn’t matter how much work you do, you should still be paid the same at the end of the day. Putting aside the fact that the presence of any form of monetary remuneration is altogether rejected by many socialists, this is not quite the argument.

Marx, for example, made a point of arguing that human beings need meaningful labor, but that capitalism denies most of us this basic human good – something like 80% of Americans hate their jobs – in the name of greater circulation of cheap commodities (implying that “freedom” is fundamentally “freedom to consume”). Labor has become totally instrumentalized – a mere means to the end of having food to eat. Socialism, then, wants to reclaim the inherent value and goodness of labor.

For some socialists, such as communists, this may indeed mean the total abolition of any and all forms of currency and remuneration. For others, such as collectivists, a labor theory of value (i.e., the value of a product is determined on the basis of the labor required to make it) would guide a labor note system, wherein remuneration would be relative to one’s work, but with the crucial difference from capitalist forms of remuneration that the inherent value of life and labor would be affirmed such that even those who do less skilled or less dangerous forms of work would have their needs met just because they are human beings and as such do not need to “earn” the “right” to live.

The capitalist threat of destitution may ensure that most of us work, but work at what? Convincing people to buy cheap clothes they don’t need made by slave children in Bangladesh? Knowingly selling electronics – also made by slaves – that are intended to break in three years to ensure the next model sells? Selling fast food products that are ridiculously unhealthy? What social goods are being promoted with these kinds of jobs? And yet, these are the kinds of jobs that low-wage workers typically have. Do we really need to make sure this kind of labor endures? Just because consumers have been manipulated by advertisements into providing “demand” for these “services”?

Individual persons do not exist in vacuums and neither, by extension, do their market choices. We need to recognize ourselves as intimately bound up with the social whole. Noam Chomsky enquires after the human good in his most recent publication, and ultimately argues that a form of libertarian socialism is the answer. I am inclined to agree, but I do not claim to know. I’m not interested in drawing up blueprints for the perfect society of the future. I’m interested in how well we look after each other right now, and I have to say, free market capitalism seems to me to be one of the worst ways of doing so.

As I’ve argued before, capitalism is inherently and necessarily plutocratic, and therefore anti-democratic by its very nature. Socialism, on the other hand, is not only the position that we need democracy, but that democracy should go all the way down into the workplace, where the wheels of society truly turn. Accordingly, if we want democracy, we need socialism.


 

Notes

[1] Pierre-Joseph Proudhon, from What is Property?, in Anarchism: A Documentary History of Libertarian Ideas, Volume One: From Anarchy to Anarchism (300CE to 1939), edited by Robert Graham, (Montreal/New York/London: Black Rose Books, 2005), 34.

[2] Ibid., 35.

[3] Milton Friedman, “The Social Responsibility of Business is to Increase Profit,” The New York Times Magazine, 13 September 1970, available from: http://www.colorado.edu/studentgroups/libertarians/issues/friedman-soc-resp-business.html.

[4] Karl Marx, Economic and Philosophic Manuscripts of 1844, trans. Martin Milligan (Amherst: Prometheus Books, 1988), 86.

[5] Ibid.

[6] Frans de Waal, The Age of Empathy: Nature’s Lessons for a Kinder Society, (Three Rivers Press: New York, 2009), 38.

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If We Want Democracy, We Need Socialism

In my experience, the basic difference between capitalism and socialism is often missed. Capitalism, it is thought, represents free markets, consumer choice, personal liberty, etc. And socialism represents “big government,” state intervention, and a utilitarian sacrifice of the individual in favor of the “greater good.”

At bottom, however, the distinction is much simpler: It comes down to the question of who owns the means of production. Capitalists advocate private ownership of the means of production, whereas socialists advocate collective ownership. As I argued in the previous post, collective ownership is democratic and private ownership is plutocratic.

Some time ago, I offered an overview of the Marxian critique of alienated labor and I think it gets to the heart of this issue. Private ownership of the means of production goes like this: A capitalist, seeking to make profit, purchases a factory and the equipment necessary to make a product which can then be sold in the marketplace. The capitalist then hires workers to come in and use this equipment to make said product. The capitalist repays the workers in the form of wages, but, in order to ensure the maximum amount of profit possible, he [the capitalist] drives the workers’ wages down as much as possible so that he can extract the surplus value of their labor and keep it as profit. This is what we call exploitation.

The long and short of it is that the workers are selling themselves to the capitalist in exchange for wages, which will then (hopefully) allow the worker to purchase life’s basic necessities (i.e., food, shelter, healthcare, etc.) on the marketplace. But to say that one’s basic necessities must be purchased is to say that one’s freedom must be purchased. It is after all undeniable that someone who has good food, is healthy and well-educated has greater access to opportunity than someone who does not.

The private ownership of the means of production, in other words, turns everything — including human lives — into a commodity. It is said that workers are free, but of what does this freedom consist? The freedom to sell oneself to this capitalist or that one? Either way, one can expect low wages, for not only does the capitalist seek profit for himself, but must also be competing with other companies, which means products must be sold at the lowest price possible (thereby cutting into the workers’ wages even more) and strategically planned obsolescence ensures that consumers will continue to purchase new products in the years to come.

All the while, Marx argues, the worker is alienated from herself, from her labor, from the product of her labor, and from her fellow workers, all of which have been turned into commodities. Contrary to popular belief, socialists maintain that human beings need meaningful work, which capitalism all too often denies us. We are forced to work mindless, meaningless jobs, creating and selling worthless, mass produced products, and competing with our fellow workers to make sure that, if anyone is going to be hungry tonight, it will not be me. It is therefore hardly surprising that we need external incentives to work these jobs!

What we need instead, I argue, is a world in which people can freely choose work that is meaningful to them without having to worry about whether or not it will put bread on the table. And who can do better work in any given field than someone who is doing it because they are truly passionate about it? (It is true that this model would likely result in the demise of the fast food industry, but something tells me we will find the strength to carry on.)[1]

And here we find another fundamental difference between capitalism and socialism: individualism versus social holism. Socialists maintain that human beings are always and already social creatures. The cinematic, atomized, asocial, rugged individual is, according to this view, simply a fiction. This is important because it means that things are better for everyone involved when everyone has access to life’s basic necessities (crime rates, for example, drop significantly when everyone has access to food, education, and healthcare).[2] It is not forced “charity”; it is living together as social creatures. And despite the fact that we are indoctrinated from day one with “rugged individualism” and talk of the evils of “human nature,” I think that the evidence overwhelmingly favors social holism.[3]

The common notion, then, that I begin as a “private individual” who can “freely choose” to enter into contracts with other private individuals to exchange goods and services is, I think, deeply flawed. On this line of thinking, social interaction is nothing more than enlightened self-interest, rather than a fundamental part of being human. And if this individualist model is correct, it is easy to see why I should think I have no necessary responsibility to my fellow human beings.

And this detached individualism is precisely what capitalism requires. Altruism does not maximize profits — not directly, at least. Maximization of profit is, after all, the single and fundamental law of capitalism. And whether it is altruism or egoism that best serves this purpose seems to be utterly irrelevant. So while it is true that the “free market” may at times decide to favor the well-being of the people, it is only insofar as this course of action can be shown to be the most profitable. Placing inherent value in anything — including human beings — other than profit is fundamentally anti-capitalist. I see no way around this conclusion.

It is also commonly objected that the radical egalitarianism of socialism forces equality upon society. But exactly what unnatural equality is being enforced by ensuring that everyone has access to life’s basic necessities? Can one be more or less equal in regard to needing food? It seems to me that this is to say that human beings are not inherently valuable. After all, how can we affirm the inherent value of human life while requiring that one “earn” the things required to sustain said life? If we are not naturally equal in our deserving access to these necessities, we are not naturally equal in value as persons.

This is not to say that “everyone gets a trophy just for showing up.” Food is not a trophy. And to say that ensuring that all have access to life’s basic necessities is to “force equality” seems to be tantamount to affirming Social Darwinism (i.e., the strong, naturally unequal insofar as they are able to easily access life’s necessities, and bearing no responsibility to the weak, will succeed, while the weak, naturally unequal insofar as they are unable to easily access life’s necessities (whether through physical or mental disabilities, socioeconomic situation, etc.) will perish or be “weeded out”).

In the end, I see capitalism as deeply immoral. And while individual cases of its success may be presented (I do not deny that capitalism works perfectly well for some people — and not just greedy schmucks, but some honest, hardworking folks as well), an examination of the philosophical ideas that underpin capitalism demonstrates (quite conclusively, in my view) that the harms far outweigh any benefits. To reject capitalism is not to reject liberty and free choice, but instead exploitation, hierarchy, and otherwise anti-social, anti-democratic values.

Contrary to popular belief, socialism can offer a morally legitimate alternative. Personally, I do not advocate “state socialism,” but rather libertarian socialism, for I believe that worker-ownership of the means of production should mean just that — worker-ownership, not state ownership. In fact, “state socialism” is essentially capitalistic, in my view, insofar as the means of production are privately owned by a single entity (i.e., the state).

If we want democracy, we need socialism — libertarian socialism to be precise.

For further reading on contemporary experiments in collective ownership, check out Mondragon and Marinaleda.


 

[1] I, for example, am currently pursuing a career in professional philosophy. I am fully aware of the fact that this is a risky endeavor, but I would rather take a risk to do something I love and am good at than to simply take a job that I know guarantees a steady paycheck. If this does not work out for me and I am unable to find a job, there are many who will say that it is my own fault for choosing such a difficult profession. In other words, it is my fault for foolishly choosing what I love over what pays well. Apparently I am to submit to the demands of the market first and foremost. Unfortunately, the instrumental rationality of the market places little value in things such as philosophy, and literature, so I suppose I am simply out of luck if my passions and talents lie in the humanities. A free market indeed!

[2] See, for example, this study.

[3] See, for example, the work of Frans de Waal.

Notes On Anarchism: Plutocracy or Democracy

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Capitalism is antithetical to democracy. The choice between socialism and capitalism is, to my mind, a choice between democracy and effective plutocracy (i.e., rule by the wealthy). Socialism, as the collective ownership of the means of production, implies the most radical form of direct democracy. Under capitalism, on the other hand — particularly as advocated by modern-day libertarians and so-called “anarcho”-capitalists — one votes with one’s dollar, which is to say, the wealthier one is, the more power one has. Money literally is power. Being heard, just like everything else (i.e., safety, healthcare, education, food, shelter, etc.), is a commodity to be purchased in the market place. One is only as free as one can afford. And because capitalism is not meritocratic, as I have argued before, I take this to be a pretty damning problem.