Thoughts on Exploitation Theory

by Ben Best

Exploitation Theory is the cornerstone of the attack on capitalism. This fact was acknowledged by the Austrian Economist Eugen von Bohm-Bawerk who devoted a major chapter of his opus CAPITAL AND INTEREST to a critique of the theory as developed by Rodbertus and Marx. Bohm-Bawerk's argument is almost entirely a refutation of the labor theory of value. While I intend to draw on his conclusions, I believe the question of exploitation has psychological ramifications which should not be ignored.

In essence, Exploitation Theory asserts that the institution of private property allows the privileged few to reap the benefits of the labors of others without needing to contribute anything by way of effort, ability or labor. The privileged few referred to would be the landowners and the capitalists. Although the arguments might be most forcefully applied to landowners, especially those who live off sharecroppers, Marx focused almost the entirely of his argument against capitalists. History may have more wisdom than the philosopher because it has been in agricultural Russia, China, Vietnam and Cuba that the Marxist revolution was most successful.

To Rodbertus and Marx, all value derives from labor. Rodbertus discounts natural resources by defining "economic" in such a way that the word can only be applied to labor. In Volume One of DAS KAPITAL Marx makes the statement, "If we disregard the use value of objects that can be classified as commodities, then they retain only a single quality, that of being products of labor". One could as easily say that if we disregard gravity it would be possible to jump to the moon. One critic has taken Marx's argument to mean that a nugget requiring much labor to extract from a mine should be worth more than one found lying on the ground.

Marx does seem to be regarding value as deriving automatically from labor. He does not seem to consider the possibility that labor may be expended to produce something of no value. To produce coal one must not only dig, but dig in the right place with the proper equipment and enough supervision to direct and co-ordinate the labors of the individual workers toward the desired result. Of course, the workers want payment, not in coal, but in a suitable medium of exchange. And they want payment shortly after their labors, not in six months time when the coal is finally sold at whatever price is reflected by supply and demand at the time.

These considerations indicate that it is not as easy to demonstrate exploitation in the case of the capitalist as it is with the landlord. The costs of production include not only the wages of labor, but the costs of equipment and raw materials. Moreover, the entrepreneur is a laborer who must co-ordinate the energies of others, take responsibility for cost/benefit decisions of what projects to attempt and what equipment to buy, take the risk that his/her decisions will be wrong and must also in many cases tie up his/her own capital in the project. I've heard employers complain that they were being exploited by their employees to the extent that they bore the brunt of all these headaches and uncertainties. (In ATLAS SHRUGGED it is the creators, the initiators, the innovators who go on strike against the parasites who expect others to create "jobs" for them). That the "wages" of the capitalist are fair, or at least equitable, is dictated by the fact that any business which has a disproportionately high yield (above the amount of invested capital, effort and ability) will tend to attract other investors until yields are in the same proportion to the costs as they are elsewhere in the economy.

Lenin acknowledges the labors of the entrepreneur and proposes that they must be incorporated into communism. In THE STATE AND REVOLUTION he asserts, "Accounting and control -- that is mainly what is needed for the "smooth working", for the proper functioning of the first phase of communist society...We are not utopians, we do not "dream" of dispensing at once with all administration, with all subordination... No, we want the socialist revolution with people as they are now, with people who cannot dispense with subordination, control and "foremen and accountants"...It is only a necessary step for thoroughly cleaning society of all the infamies and abominations of capitalist exploitation, and for further progress ... Then the door will be thrown wide open for the transition from the first phase of communist society to its higher phase, and with it to the complete withering away of the state".

Marx also acknowledges the importance of skilled and mental labor (such as is done by technicians and supervisors) as well as the unequal abilities of ordinary workers. In DAS KAPITAL he asserts, "More complicated labor counts as simple labor raised to a higher power". Marx more fully elaborates on his attitude in the CRITIQUE OF THE GOTHA PROGRAMME where he states, "But one man is superior to another physically or mentally and so supplies more labor in the same time, or can labor for a longer time...equal right is an unequal for unequal labor... In a higher phase of communist society, after the enslaving subordination of the individual to the division of labor, and with it also the antithesis between mental and physical labor, has vanished, after labor has become not only a livelihood but life's prime want, after the productive forces have also increased with the all-round development of the individual, and all the springs of cooperative wealth flow more abundantly -- only then can the narrow horizon of bourgeois right be crossed in its entirety and society can inscribe on its banners: From each according to his abilities, to each according to his needs."

Thus, the end to exploitation does not mean equality for Marx in either the lower or the higher phase of communism -- either in terms of contribution or return. Note also that Marx evidently regards the division of labor as somewhat exploitative insofar as the advantages and disadvantages of different kinds of work are unequally shared.

Marx even tries to equate exchange value with labor value by drawing on Aristotle's statement, "There can be no exchange without equality" and claiming the existence of an equal labor value for objects exchanged. Paradoxically, such an analysis would imply that (contrary to the belief of many socialists) exploitation cannot occur in an exchange. Subjective value theory dictates that a transaction will only occur when both parties prefer the benefits of the exchange over the costs. Where there is equality, there is indifference and no transaction.

Although Marx's analysis is an economic analysis, it is an analysis heavily biased with a view as to what is economic justice. Marx claims to be defending the natural rights of the workers against those who benefit from the privileges of private property. To be fair to Marx, one should allow that all the labors of decision-making which fall upon capitalists and entrepreneurs would be duly paid for, as Lenin asserted.

The power of the capitalist to exploit is viewed as a consequence of the hunger of the worker. To socialists exploitation of hunger is a power equivalent to the power of fascism. What these socialists rarely consider is that hunger is a fact of nature which creates vulnerability to the power of any source of food. In an open society one has many choices of how to deal with the problem of hunger. But in socialism one is totally at the mercy of the power of the state as a source of food. Moreover, by equating freedom with "freedom to starve", socialists miss the fact that a free economy is far more productive than a coercively centralized one.

The sense of being exploited can be very emotionally impactful. The person owning the capital, historically "born with a silver spoon in his mouth" is the boss, gives the orders. The fruits of the worker's labor accrue to the capitalist, giving him yet more advantage. The capitalist has the pride and the worker has the humiliation. National pride can be offended when rich foreigners bring in capital and use the labors of local workers to extract natural resources for export. That capital deserves to be rewarded for its very existence seems confirmed by the presence of interest rates, regarded as the "reward" of deferring present consumption (although most capitalists have far more than they require for present consumption). Subjective value theory must acknowledge the subjective sense of exploitation, of injustice, even if its monetary quantity is difficult to calculate.

Given that the existence of exploitation based on the privilege of private property cannot be disproved, it would be well to ask, what is to be expected from the abolition of private ownership of the "means of production"? For all the claims of private owners rapaciously exploiting natural resources, one fact must be acknowledged. Private property means responsibility. An owner is not likely to fritter away his/her capital and will take very seriously any likelihood of waste. By contrast, abolition of ownership opens the door to the public goods problem. The self-interest of all communal owners may dictate a wasteful exploitation of resources. Responsibility for private property must be supplanted by the discipline of statist threats.

If bureaucrats replace entrepreneurs or managers answerable to investors, their sense of responsibility is less tied up with maximizing efficiency and averting loss and more concerned with evading blame and not "rocking the boat". Ludwig von Mises, in "Economic Calculation in the Socialist Commonwealth" declared, "because no production-good will ever become the object of exchange, it will be impossible to determine its monetary value". Thus, not only do socialist managers lack the incentives for efficient cost/benefit analysis for the ends and means of production decisions -- they also lack the very basis for any calculation.

But managers aren't the only ones to lose incentive under communalization of the "means of production". Marx's admonitions that workers will be rewarded in proportion to their work in the initial phase of communism is not so easily enforced. Workers are faced with incentives to do the least amount of work without being caught. And if they are to be motivated at gunpoint, it will be by those who also wish to minimize the work and danger of their jobs. Many years ago Soviet premier Brezhniev took the trouble to go on national radio to admonish the workers on collective farms that manure must not simply be dumped in the fields, but must be spread. Soviet wheat production continued to be a disappointment to the regime.

Many disestablished Leftists have claimed that in most Socialist countries the exploitation of the workers by the capitalists has been supplanted by an exploitation by the Party Elite or the state itself. They should ask themselves if this is not an inevitable consequence of any attempt to abolish private ownership of the means of production.

In so-called capitalist countries, few business partnerships last more than a few years. What usually begins as a proposal of mutual co-operation for mutual benefit most often ends in acrimony when one or both partners begin to feel that the benefits they obtain are not commensurate with the work they are doing. Many marriages meet the same fate. And quite frequently roommates or housemates will break up when one of them begins feeling exploited because he/she is doing a disproportionate amount of cleaning (while, in fact, the other party may not derive the same value from cleanliness).

It is certainly not my desire to denigrate those marriages or partnerships that do achieve success. My point is simply that if attempts at cooperative relationships between two people so often fail, what can be expected of an entire nation seeking a communist order?

"Exploitation" plays the same role in Marxists ideology that "coercion" plays in libertarianism. It is the ultimate evil that social change must eradicate. For the Marxist, "exploitation" usually means an unfair advantage conferred by the privilege of private property. But it would be well to explore other uses of the word "exploitation".

In general, "exploitation" refers to one person or group taking "unfair" advantage of another. The capitalist takes advantage of the hunger of the worker. The computer salesmen takes advantage of the ignorance of the customer. The priest takes advantage of the stupidity and superstition of the lay person. The military officer takes advantage of the patriotism of his/her soldiers. The monopolist takes advantage of the absence of competition to charge what the market will bear. The advertiser takes advantage of the impressionability of the masses.

In the so-called capitalist countries, despite all claims of exploitation of the public by corporations, the government -- more than any other person or group -- is by far the major beneficiary of corporate revenues. And it is through the instrument of government that businessmen, welfare-frauds and others exploit the public at large.

Sheer circumstance can make anyone vulnerable to exploitation. The American individualist anarchist (and Mutualist economist) Laurence Labadie describes the case of a man having fallen into a water-well in a remote area. A second man happens along who is in a position to charge an "exploitative" high price for throwing a rope down the well. Labadie is also responsible for the argument that every occupation has a vested interest in the ill that it is designed to cure. Dentists have a vested interest in cavities, repairpersons have a vested interest in malfunctions, psychiatrists have a vested interest in emotional upset, teachers have a vested interest in ignorance, etc. This could form the basis for exploitation were it not for competition.

There has been an increasing interest in the subject of exploitation of women by men. Women are said to be particularly vulnerable to economic exploitation because of their physical weakness, the burdens of child-bearing & child-rearing and because of a history of discrimination by men. Of physical weakness and child-bearing it must be admitted that these handicaps make women less reliable as employees and therefore less likely to command as high a wage. Physical weakness, however, has become less important with growing automation.

The reputed vulnerability of women to economic exploitation, however, has been linked to women's vulnerability to exploitation as sexual beings. Women are held out of the workforce by husbands who seek to "own" them and restrict their circulation (or who do not want to see their wives sexually vulnerable to male employers). But aside from the vulnerability to sexual advances by employers upon whom they are economically dependent, women are deemed to be vulnerable to more outright sexploitation in the forms of pornography, strip-dancing and prostitution. Many men view sexuality entirely in terms of conquest. The word "fuck" is used to mean "exploit" or "ruin" and is therefore the token of macho prowess.

Children, being ignorant, physically small and economically/legally dependent, are the most obvious potential victims for sexual exploitation. This is in contrast to women who may claim to be economically dependent, but are actually failing to acknowledge the choice between a higher standard of living by staying with an otherwise intolerable mate, and the lower standard of living associated with leaving him.

While many of the cases I have cited are reprehensible examples of the physically, politically and economically strong taking advantage of weakness and vulnerability, I would like to add a qualifier. Women can often gain a high return for a small amount of work by taking off their clothes. Although this may involve humiliation for some, many models and dancers take pride and pleasure in their work. It is men who must spend money earned from hours of toil to allay the pressures of an onerous sexual frustration -- and experience the humiliation of being seen as base and carnal. Who is being exploited, the person who receives money for stripping off clothes (perhaps even enjoying the strip-tease) or the person who "must" pay to watch a strip?

Exploitation is highly subjective -- in terms of both quality and quantity. In most cases it has a psychological component as well as an economic one. Who is to make judgements of exploitation, the so-called exploited victim (who may not feel exploited... purportedly by being duped), or a third party? If so, who?

Feelings of being exploited (or undervalued) and feeling of resentment can arise in every human relationship. For people who can take accept the costs&benefits of the accidents of circumstance, who can negotiate acceptable terms and who can take full responsibility for choosing the relationships they have, there should be no need for such poisonous feelings. Choosing to end a fruitless relationship -- or to change it -- is far more responsible than blaming others.