exploitation (was: Mandel and Keynes, spell-corrected)

James Devine jdevine at popmail.lmu.edu
Mon Sep 21 14:24:15 PDT 1998

Bill Lear wrote: >>>To get a concrete grasp of this, you must understand not only what exploitation means (all other things equal, a person is exploited if they must labor more than the average amount people work in the economy) but also the relationship between inegalitarian distribution of resources ("capital") and the potential for exploitation.<<<

I wrote: >>Instead of working more than average (which suggests that all those _below_ the median aren't exploited), there's got to be a better definition. First, exploitation is a society-wide phenomenon (the capitalists exploit the working class as a whole), obviously with implications for individuals. The sign that exploitation occurs is that the average real wage rate (averaging across society) is below the average product of labor. Though it doesn't work exactly, for the individual the sign of exploitation is that the worker's wage is below the average product of his or her labor. (It doesn't work exactly, because some labor is purely redistributive.)<<

Bill replies: >I think you meant to say "below the median" rather than "above".<

right. I've corrected it above.

On this subject, Jeffrey Levin writes: > The notion that workers should somehow receive the full product of their labor was rejected by Marx himself, and for good reason. Part of the social product is used to support the aged, the young, and the infirm. Another portion is used to replace the means of production that have been used up in the production process. Part might be reinvested for future production. This will be true independent of whether exploitation exists. <

This is a quibble, but quite a useful one. It's true that a _surplus product_ will be produced in almost every modern society (while replacement costs will always exist). But that's different from exploitation. With socialism in place, individual workers wouldn't get their share of this surplus product. (This is what Marx was arguing, IMHO.) But it would go to them as a class: they would collectively and democratically decide how to use it. They would decide how much of the surplus-product would go to the aged, the young, the infirm, reinvestment, etc.

What makes this different from capitalism, and what makes the capitalist production of a surplus product into "exploitation" (with that word having some kind of ethical force) is that under capitalism, it's a matter of _taxation without representation_. The capitalists take advantage of the societal power that monopolizing money capital and capital equipment gives them (endorsed by state power) to "tax" the workers. Then they can use their profits+interest+rent in any way they wish, e.g., to buy luxuries or to accumulate more power.

Bill continues: >I did say "all other things equal", and I meant that quite broadly. Comparing across industries is not really possible (how do you compare two workers, one of whom works X hours and the other works Y hours?), but comparing workers to owners is easy. That's what I meant by my cet. par. remark, vague as I was with it.<


>But, accepting your expansion, perhaps you could give us a very simple
example of, say, a two-good economy in which exploitation occurs, using to your terms. So, let's assume we have the standard corn and steel economy. Set it up so you have 100 people and 2 of them have X dollars, where X is (more than) enough to run a factory, and 98 have X/Y dollars where Y is large enough to leave X/Y far below the amount necessary to run (own) a factory. Suppose those working in the steel industry work an average of S hours, and those in the corn industry work C hours. Could you lay out the "real wage rate" within and across industries, and the "average product of labor".<

the average product would be (p*q for the steel industry + p*q for the corn industry)/the total number of hours worked. If you assume that prices are proportional to hours worked, then it would be (S*q for the steel industry + C*q for the corn industry)/(S*the number of workers in steel + C*the number of workers in corn). That would be compared to the average wage.

But I don't see the point of such an exercise. You hardly provided a complete model of an economy (even of the sort that Roemer provides). I think that it's better to be empirical: simply take the real GDP of a country and notice that wages only get 70% or so of that total. Then present an explanation of why workers don't get 100%. Or, if you don't like GDP, state it in terms of labor time, the way the people who push the notion of "tax freedom day" do: it's only some time in April that workers have stopped paying "taxes" to the capitalists and are able to pay for their own subsistence.

The folks who push TFD willfully ignore the benefits that government gives to us; for some, these benefits might push TFD back to January 1st (or earlier). But the "benefits" of capital's tax on labor are abstract, promised in the future. I don't want to discuss them here, but the point is that the idea of "freedom from capital" day would push people to debate the plusses and minuses of capitalism.

Bill writes: >What I would like to see, ultimately, is an example which allows me to point to one person and say "See, this person in the economy is screwed --- they are exploited", and not to say that only for a group of people.<

Individual's aren't exploited as individuals, only as occupants of "slots" in the social structure.

If you want an individualized theory of exploitation, check out Roemer's work. But I think that his work shows the severe limits of such a theory. (He gets into stuff like: do sick people who are getting help from their relatives "exploit" those relatives?) If you want a Marxian theory of exploitation stated in mainstream neoclassical terms that allow for an individualistic interpretation, see my article in Bill Dugger's book, INEQUALITY. I had to leave out the ethical dimensions, but it's still pretty interesting (IMHO). It's more readable than Roemer's stuff.

Oh yes, Robin Hahnel has a book out that talks about these issues. I don't remember its title and I haven't read it, so I can't comment on it.

>>>Unequal distribution of resources allows some to hire others to work for
them, to produce profit for them. This is exploitation, and it is also the very definition of a working capitalist economy. Note that exploitation need not mean horrific working conditions, etc. --- it is something quite specific, and quite simple...<<<

>>It's more than unequal distribution of resources (as Gary Dymski and I
successfully argued against John Roemer in ECONOMICS & PHILOSOPHY a few years ago). Among other things, capital (both money-capital and means of production) must be scarce and the capitalists must control production and accumulation. <<

>But, unequal distribution must occur, correct?<

Right; that's why I used the phrase "more than" above. The problem with talking simply about distribution is that it ignores the structure of power.

>Imagine that capital is not scarce, but it is unequally distributed
(above, let X grow as large as you want, but also let Y keep pace to keep the 98 out of the ownership game). Doesn't that just mean that capital is scarce to some but not to others?<

BTW, it's always best to use the word "capital" as part of a compound phrase ("capital funds," "capital goods," etc.) The word is very tricky, perhaps the trickiest in political economy. Many interpret it a short for capital goods. Marxists see the word standing alone to stand for the organized power of the bourgeoisie.

If there is no scarcity value to capital goods, that means that the price of those goods is zero. Looking at if from the demand side, the price of such a durable good would also equal the present value of its future profit stream, right? if that equals zero, so does the profit received. There's no exploitation in that situation.

Let's tell this story in terms of Roemer's more complete story. Here, capitalist profits represent a scarcity rent. Workers are "free to lose": some of them voluntarily choose to work in the capitalist factories rather than working on the farm, which he sees as an ever-present option (having been replaced by unemployment insurance and other welfare-state programs in his book). The amount that workers get paid on the farm determines their wage overall: wage = agricultural productivity. Since the factory is more productive than the farm, the capitalists get a profit (factory productivity minus farm productivity). (Though he doesn't cite it, his basic theory is straight out of W. Arthur Lewis' theory of the unlimited supply of labor in underdeveloped countries. Plagiarism? I doubt it. It's simply the standard ignorance that characterizes High Theorists, based on the view that nothing that hasn't been stated in mathematical terms is relevant.)

Among other things, his theory doesn't explain why workers can't simply copy the capitalist technology and set up their own factories (after all, they can use their labor time to do so). (The possibility of entry into the capitalist class is assumed away without any explanation.) He also doesn't have any explanation for why factory productivity is high.

But getting back to the issue at hand, the fact that their profits are based on the scarcity of capital goods means that capitalists are getting "something for nothing." Each capitalist thus has an incentive to accumulate, accumulate with a vengeance. Since they are assumed to be competitive, they can't stop themselves. The problem is that accumulation abolishes the scarcity of capital goods that is the basis of the capitalist class' power in Roemer's story. Here, the rate of profit doesn't just fall. It reaches an equilibrium at _zero_.

For Marx on the other hand, profits do not simply reflect the scarcity of capital goods. It also reflects the fact that labor can no longer simply "go to the farm" when thrown out of work. They're unemployed and UI benefits are usually less than half of what one gets when employed. So there's a reserve army of labor and it hurts to be in it. That motivates labor in the factories, raising productivity there.

When profit rates fall, capitalists find that the source of funds for accumulation dries up. The motivation to accumulate is undermined, too. This causes a recession, which makes labor-power abundant, helping to boost profit rates.

On top of that, capitalists control the process of technical change and can thus introduce labor-saving technical change, which makes capital goods relatively scarce.

Again, my article with Gary Dymski or my solo article in Bill Dugger's book are more complete.

Jim Devine jdevine at popmail.lmu.edu & http://clawww.lmu.edu/Departments/ECON/jdevine.html

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