It’s been a century and a half since Karl Marx published Das Kapital and a century since the Soviet revolution. I think it’s time to consider class and labor exploitation outside the shadow of Marx’s economic system. Central to Marx’s social and economic theory was his theory of exploitation. His theory, in a nutshell, proposed that capital siphons off the value labor produces allowing the owners of the means of production to self-validate their property. More specifically, the contribution of the owners in providing the means of production was already reflected in the value of the commodity at market. So, the commodity’s profit was entirely owing to the contribution of labor. Any profit taken by the owners of the means of production, i.e. the capitalists, was an exploitation of the workers’ labor efforts. Marx’s entire positive economic theory was an attempt to expose how the system generated exploitation and, assuming Marx’s determinism, would eventually succumb to its own contradictions and give way to scientific communism.
There are many arguments against Marx’s account, but the most notable is a lack of capitalism’s demise. I’m no proponent of determinism, but even if capitalism is determined to fail, the lack of failure despite reoccurring economic collapses, seems to paint a picture of capitalism as a flawed, perhaps even contradictory, system that nevertheless, humankind is willing to support and sustain indefinitely. Contradiction is not enough to overthrow a failing system, a new system must be ready in the wings to takes its place. Communism itself seems contradictory as it seems to suggest that humans, who may produce and “own” in common, may consume in common as well. This last is not possible and without it neither is communism. Private property it seems is here to stay. The question for this century is how to affect private property without exploitation and without contradiction.
To take a step in that direction, I want to challenge Marx’s account and give an alternative theory of capital’s exploitation of labor. My alternative is based on the labor theory of private property, like that proposed by John Locke. If I’m right, the justification establishing private property rights also implies that capitalism, as it is generally understood, is exploitative of labor efforts. Whereas Marx saw the exploitation of labor as a result of his theory of value–one based exclusively on labor–this theory insists that labor is exploited because the ownership of the means of production is only justified by those doing the labor of producing. Labor alone justifies ownership and this ownership is necessary to claims of entitlement to profit. Like Marx’s theory, this theory sees the fractionation and distribution of profits from the sale of commodities as the method that exploits labor. The theory differs from Marx’s solely as to why the mechanism of exploitation is unjust.
The labor theory of private property is not itself without controversy. For the sake of expediency, however, I will leave arguments against the labor theory of private property aside for now and simply assume that it is the best available justification for establishing private property rights. The goal here is not to argue for labor theory but to show that if labor theory is the best justification for private property then capitalism must be exploitative. Aside from Marxists, we might all agree that private property needs some sort of justification. As Locke observed, there is no natural justification why this or that thing might be privately owned. Thus, we seek some social justification to exclude all others from the use of a thing that cannot be consumed except exclusively. Like Locke, we seek a method for individuating the common world that we might all agree is fair. The result of this fair method would be a justified scheme of private property ownership.
Labor theory satisfies this method by asserting that by laboring to acquire a thing for the purpose of exclusively consuming it one ought to have the right to fulfill that purpose. Labor thereby justifies ownership. Ownership here, it is important to note, is limited to those things one intends on using one’s self. Without this boundary, labor cannot be applied to anything, and this renders any labor theory of property uncogent, as Robert Nozick has pointed out. For example, we might say that a crafter who sews bags is entitled to the use of the bag unless they transfer that right by some legitimate method. They are neither entitled to do whatever they wish with the bag nor is the scope of the bag indeterminable. What is important here is that labor theory requires a background right, namely the assumption that since one must exclusively use certain goods if one is to use them at all then one must of some means of legitimately gaining exclusivity. Also important is the fact that the labor theory of property implies that labor has a stronger claim to ownership than mere nominal claims. In other words, a claim to private property is only as good as the labor claim supporting it. For example, in the case of the means of production, the mere owners of capital have no labor claims and thus have no legitimate claim to either the means of production or the products that are produced with them.
Before moving on, I wish to be as explicit as possible about what I mean as my labor theory of property. For the most part, I will follow Locke’s reasoning; however, I am making a few modifications or making explicit what is implicit in Locke. Firstly, Locke’s theory applies only inside a society and that as such, it is not a universal theory of individual rights, but a theory for individual rights as a need of society. Civilizations, if they hope to remain stable, must solve the problem of the individual consumption of the common world, and this is what the labor theory of property does. Secondly, I link labor to use far more explicitly than Locke, although it is both present and essential in Locke’s argument. Labor acquisition operates only under the assumption of personal use in a labor theory of property. Thirdly, the link between labor and use is bridged by intention; thus, intentionality serves, in lieu of actual use, to justify exclusive ownership in this labor theory of property. I acknowledge that these are no minor modifications and that each should be argued for; however, I feel this paper is not the place for those arguments and I hope my reader will grant these assumptions until such time as they may be questioned directly.
Ironically perhaps, this theory is positioned in opposition to both the dominant western economic paradigm, which merely assumes the nominal ownership of the capitalists, as well as the reigning critique of that paradigm, viz. Marxism. Thus, I have two arguments to make here: (1) that capitalism is exploitative and (2) that it is not for the reasons Marx claimed it is. Naturally, I will structure what follows in two parts. The first part is why an economic critique based on Marx’s labor theory of value fails to prove exploitation. The second part will hopefully show why a theory of exploitation based on a labor theory of property works.
Part 1: Contra Marx
It is no easy task to critique and condemn a thinker whose conclusions one feels to be more or less all correct. The reason is quite simply that the argument continues to feel right even where it is wrong. Marx’s folly was not that capitalism is actually just, but that he misidentified how and why capitalism is actually unjust. Marx rested his critique of capitalism by trying to identify all value with labor, specifically the labor in a commodity. The labor that went into making the commodity and delivering it into the hands of the consumer is, for Marx, the sole source of all its value. This is Marx’s labor theory of value. My critique of Marx begins right here with his positive economics. I want to show that Marx’s positive economics is missing some key elements, which render value-judgments questionable. I will argue that labor does provide all the value of the commodities, as Marx claimed, but that labor only has value in concert with use and further that labor-use only bestows value because it justifies a claim to ownership. In other words, labor provides a value to commodities precisely because it justifies private property rights, or the right to exclusively consume a commodity.
Marx, I fear, got off on the wrong foot and everything went wrong from there. In the first section of the first chapter of the first volume of Capital, he makes the dubious assumption that use is purely qualitative and so can be summarily dismissed from any further talk of value. There is nothing like an argument to critique here. Marx simply assumes use plays no part in value determinations and moves on to what he believes does. This doesn’t present a problem, Marx thought since he was only concerned with a commodity’s value on the market and not as it is consumed. He believes that the price (exchange-value) hovers around what he called the socially-necessary abstract labor required to produce the commodity. In short, how much human labor time society needs to invest in bringing a commodity to market given current technological capabilities. Since Marx’s interests in commodities values end at the moment of acquisition, use-value is indeed superfluous. But it appears that rather than letting his assumptions imply his theory, Marx let his theory imply his assumptions. Use-value was an inconvenient truth for political economists, one that Marx had to explain away rather than explain and incorporate into his theory, and he did just that.
Despite Marx’s assumption, use’s relationship to value is just as pivotal as labor’s. Primarily, use provides the desire for an object in the first place. Marx too admitted as much, but use is not just qualitative. We can measure how useful a commodity is or estimate how useful a commodity is likely to be in similar terms of abstract labor that Marx employed. Only here we’re not speaking of the labor embodied in an object, but the labor saved to us by employing an object at a given task. For example, we might claim that the use-value of a phone is the labor it saves us from having to travel to speak with someone. If use-value can be quantified in this way, then Marx’s theory has a gaping hole in it. This is significant because it adds another value into the equation that results in exchange-value or price. Now instead of saying exchange-value simply equals the amount of socially necessary abstract labor involved in a commodity’s production, we must fit use-value in somehow.
Marx looked at the situation too closely from the point of view of the producer of commodities and not nearly enough from the point of view of the consumer of commodities. From the point of view of the producer, the question of value is nebulous, but from the point of view of the consumer, it is much more concrete. The consumer simply estimates the use-value of the object in question relative to themselves and then subtracts the cost of acquiring it. This is necessarily an individual estimation since objects can only be consumed individually. Interestingly, the cost of acquiring it is the consumers attempt to guess the quantity of socially necessary abstract labor they would have to expend to achieve the acquisition. In other words, the consumer looks around for the best deal (socially averaged labor cost) and then determines if the commodity will ultimately save them more value in use, if so it is worth buying, if not, then your interests are best served by leaving it on the shelf. If this sounds a lot like the market place to you, you’re right. The market determines the price by allowing consumers to weigh use-values against production costs in relations to their needs. Just determining the costs, as Marx did, is insufficient to determine value. Value is not socially abstract in the way Marx claimed, that is as an abstraction of production efforts. Instead, value is socially abstract as an averaging of consumer’s demands.
This means that neoclassical positive economics is much closer to the truth than Marx’s. Neoclassical models adequately describe the actions of values in the volatile market place. But before western economists break open the champaign, a great irony should be noted: the values these western economic models describe purely quantitatively are in fact units of labor-use. Neoclassical economics is describing the labor consumers estimate they will save by purchasing a commodity against the labor they must expend to acquire it. Consumers, and never producers, set the value on all commodities. These facts are highly problematic for both Marxists and neoclassical economics alike. Simply put, Marxist economists can’t actually describe how value is generated because Marx’s positive economic model doesn’t take consumer’s needs into consideration, and neoclassical economists can calculate values, but can’t tell you what it is they are calculating because they don’t have a phenomenological model of what value is. For a normative economic system hoping to be fair, we’re going to need a model that can both calculate value and understand what that value consists of.
Part 2: Exploitation Through Property
The labor theory of property as I have described it reveals exploitation in capitalism that does not rely on value. Values factor in only afterward and reveal only how much exploitation is going on. The exploitation itself is based on the justifications for the way we come to own property and what rights are conferred as we come to own it. A need for personal use is the necessary background right for an act of labor to make something exclusively ours. It is not enough merely to labor, but to labor for something we must use individually for private property rights to be conferred. As Locke maintained, it is unacceptable to deprive others of that which one has no intention of using in a civilized society. One is free to claim goods through labor for personal use and even exchange, which is also a form of personal use. But there are other uses which violate the principle which made the property exclusively yours and this family of special uses are what we must examine to understand the exploitative nature of capitalism. This family of special uses go by the name of rent and consist of rent, interest, and profit.
To illustrate why rent is problematic we should return to Locke who conceived of the labor theory of property as an argument purporting to show that the tenant farmers were more entitled to the land and produce of that land they worked than the landlords who nominally owned it. The landlords claim to the land was purely political, often as a grant from the monarch. This feudal system perpetually kept the tenant farmers in a state of perpetual poverty despite the fact that they worked ceaselessly and at the same time kept their lords, who produced nothing, very wealthy. Locke, like Marx, recognized this as exploitation and struggled to both explain and condemn it. While I feel Locke got closer to the truth than Marx, he nevertheless failed to successful eradicate exploitation with his pro-capitalist theory. Instead, the feudalism against which Locke argued was replaced by a capitalist system, which, while initially radical, grew more and more conservative over time, eventually coming to resemble the feudalism it replaced. By the time Marx began his critique, capitalism had gone from undermining the landlords’ claim to exclusive ownership to reinforcing their position. While landlords under feudalism relied on ancestry and royal grants, landlords under capitalism relied on their socially agreed-upon right, through labor, to private property to justify their wealth.
The capitalist’s claim, as it comes to us from Locke, is simply that as the owner of the property they have the right to use that property as they will, including lending or leasing it. Now no one holds this position absolutely. For example, no one is going to claim that private property ownership of a handgun gives one the right to use it on anyone you want. However, rent it could be argued is a much more reasonable use of property; at least that is until we consider what conditions are necessary to grant property to owners in the first place. As we saw, labor theory asserts that labor and an intention of personal use are both necessary for a legitimate claim to exclusion. Even if we assume that an owner justly acquired their property through labor, the moment the intention to personally use that property is removed, the legitimacy of their claim falls away. They simply no longer meet the prior condition. By definition, there cannot be an intention of personal use in the act of renting.
The use of rent does not require exclusivity. Rent requires a dual use, as an object of rent is only rentable when someone else has a need to use it exclusively but cannot acquire it themselves. During rent, the object is released to the person with a need for the exclusive use of it, but the nominal ownership is retained. Thus, during rent a second use is created for private property beyond the one that requires exclusive use. The problem of rent can be seen as making what is private, common again. When the property is shared it cannot by definition be private. What we end up with is two individuals, each with a partial claim to the same property: the renter and the rentee. The renter has a claim to ownership through the labor of acquisition to the object, but at the point of lending the object for rent, the renter lacks a need for exclusive use. The rentee has the right through the need and intention of exclusive use, but when renting lacks the labor of acquisition to legitimately possession of the object. This seeming impasse is not insurmountable, however. The right granting power of labor, it must be recalled, rests on wholly on the background right for the need for exclusive use. The rentee, it seems, ultimately has the stronger claim.
Before moving on, let us consider a few objections. First, we might ask, but what of lending without charge? If renting is a problem, wouldn’t lending be a problem too? The short answer is no, lending is not a problem because there is not a second use in play with lending. The ownership may remain with the lender because the lender is not able to use the object while it is being lent. It is the dual use of “private” property that defeats its own justification.
Second, rent, our capitalist friends might suggest, is not the same thing as profit. In some ways this is true, but as far as what is at stake here, it is not. The question for the laborer and the capitalist is merely a question of who owns the product at the end of the production line. The laborer has the need for the means of production to produce, just as the owner of the means of production requires labor to produce. Just like the rented object we can see that labor has a stronger claim to ownership under a labor theory of property. So it is that under a labor theory of property ownership of the product is legitimately labor’s to use or sell. In fact, the claim to the ownership of the means of production is most legitimately that of the laborers. Under a fair economic system then, all businesses should actually be owned by the workers and not by capitalist investors. This is just like saying, as Locke did, that farms ought to be owned by the farmers and not the landlords. The landlord–or capitalist as it may be–should be incentivized to sell the land they are not using themselves by disallowing a profit to be generated from it. As with the land, the same holds true of the means of production.
Finally, what about incentives? What incentive can there be for lending, which we might readily admit is useful and necessary to an economy, without rent, interest, or profit? Incentives don’t really change. What changes are how those incentives get expressed. People will still have reasons to lend, just not to make more money. In fact, the incentive to make more money is at the root of much of the world’s sorrows. The unending desire for more, that is the ethos of capitalism is an evil that pits all against all in perpetual economic warfare. But that is the structure of the system, not the incentive to acquire, nor the incentive to be economically secure and comfortable. Everyone might want infinitely more money, but barred for the uses of rent, interest, and profit, they’ll have to labor for every cent they make. My hunch is that this will create a disincentive to acquiring more and more wealth. Without the endless desire to accumulate, resources can be distributed more equally both inside society and between societies. Without the fierce competition for resources, we might slow down our mad rush to strip the Earth and foul our nest. We might all breathe a little easier, live a little better, and smile at one another. The goods of economic peace to too great to be counted, and that is the only incentive we ought to be concerned with.
To reiterate, the goal of an economic system based on private property must be to get the property that needs to be used exclusively into the hands of those who need to use it, i.e., to make it their exclusive property. Measuring capitalism by that standard we can see that capitalism fails because it does not distribute private property to those who are most entitled to it, that is those who are going to actually, physically use it. The fact that capitalism allows for rent sets it at odds with the economic advantages of a system based on private property. Make no mistake, I am forcing capitalists into a rather unpalatable dilemma with this argument. Either private property is justifiable or rent (and profit and interest) are justifiable, but not both, and capitalism as it currently defined requires both. Rent, obviously, requires private property, but we might have a private property based system that does not permit rent. But the capitalist, who lives by rent or interest or profit, as opposed to labor, is necessarily eliminated from economic consideration. With the capitalist, goes capitalism as we know it. What is left is a private property based economic system that deals in free markets, utilizes money, and places ownership of the means of production squarely in the hands of those who will use it best, the workers. Surely such a system is not capitalist, but neither could it be considered communist or even particularly socialist. Whatever name history chooses for it, let us have it.
There are many pragmatic problems to overcome in implementing such a system, but these problems are neither innumerable nor insurmountable. Such as system is not only feasible it is efficient. It is more efficient than the perpetual cycles of boom and bust, of welfare and austerity, of liberalism and conservatism that cost millions of dollars and hours, every time we have to stop and reverse direction. This simple system will go farther to end economic exploitation with less effort, and at the same time achieve a fair and balanced economic situation that is at the same time more stable and more flexible than either capitalism or communism or any hybrid could possibly hope to be.