In the neoliberal picture of economics, it is a common assumption that workers are indirect beneficiaries from the saving and reinvestment of capitalists in their privately owned businesses. Capitalism thereby provides these laborers with jobs, income, and indeed their very lives. This notion can be found from Bernard de Mandeville (The Fable of The Bees: or, Private Vices, Publick Benefits) to Friedrich Hayek (The Fatal Conceit), and popularized in the war cry of Gordon Gekko, “Greed is… good. Greed is right, greed works.” Of course, we are not really talking about “greed” here but “savings and investment”. Put simply, the idea is that by following their own self-interests the capitalists, inadvertently and out of necessity, provide for an army of workers who would otherwise be unable to survive. This all sounds straightforward enough, but there is a problem. This argument is curved three hundred and sixty degrees.
The neoliberalism assumes that the act of saving for new capital expenditures must be the product of the lone action of the enterprises’ owners. Part of the reason for believing this is cultural. The law and most people have–without good reason, mind you–assumed that the product of an enterprise’s efforts belongs exclusively to the owners of its capital. This is the fundamental assumption of capitalism. It is from this assumption that it seems to follow that the reinvestment in an enterprise’s capital is an act of its “owners”. Another reason, more classist and derogatory, comes from a long history of intellectual’s belief that lowly wage-workers were incapable of managing money. The stereotype of the drunken field hand or dock worker embodies the sentiment. Given them more money, according to this classist logic, and they would thoughtlessly spend it on gambling games, booze, and prostitution. This prejudice lingers on centuries later the wreck of capitalist poverty created such desperate people for whom a minutes entertainment was the best they could hope for, and despite overwhelming evidence to the contrary. This is nevertheless the source but not the problem with the neoliberal argument. To see why we’ll need to examine the process of profit from sales.
The neoliberal’s capitalist model looks something like this: the owner of the capital (material components) of an enterprise is assumed to be “owner” of the enterprise itself, and this is true whether or not they work for the company or have ever even laid eyes upon it. As the “owner” of the enterprise, they have rights that extend to the products of the enterprise’s industry. The owners of capital then, own the fruits of labor’s efforts based squarely on the strength of the assumption. As “owners”, they are at liberty to sell these items, (including service labor) for any price they can get and keep all of the profits thereof for themselves. The labor of workers has been assumed to have been contracted out, paid in advance, through fair and just negotiations, before the manufacture and sale of the “product”. The risk of a failure at the market is assumed also to belong entirely to the capitalist and is often invoked as the justification for their keeping the “surplus-value” or profit from sales, over and above the costs of production. If you accept this model, then it does follow that capitalists are saving for the future good of all of society and therefore what is good for the capitalists is the best anyone, capitalist or otherwise, can hope for.
I, obviously, do not accept a neoliberal capitalist model. Against it, I offer the following alternative: when a “product” is sold at the market the price is fixed by the consumers, that is the proceeds of the sale are ultimately set by demand for the product and have nothing whatsoever to do with the way the product was brought about. Consumers lack knowledge of production methods and set price based on relative utility over the cost of a product or service to themselves (this is the Austrian theory). But from the manufacturers’ point of view, the profit of sale comes back somewhat mysteriously, set entirely by the market, with little (including advertising) they can do to change it. It is impossible to tell from this perspective whose productive contributions made the product profitable. The labor of one person and the materials of another are so combined that both were equally necessary for there to be realized any profit at all. If we don’t just assume the capitalist tradition of arbitrarily favoring the material owners of the things in an enterprise as the legal owners of the enterprise itself (and hence its products), we would have to ask ourselves how the profits, set by the market, ought to be divided among the respective contributors to production.
If we make the uncontroversial assumption that the rewards of group efforts ought to be shared evenly with respect to individual effort then there seems to be no reason to accept the fundamental assumption of capitalism. What gives capitalists the priority claim except for mere arbitrary tradition? And if we reject their claim, then the notion that workers owe their lives and livelihoods to capitalist’s self-interest goes right out the window; for if the profit is evenly shared then so too would be any saving and reinvestment in the capital of the enterprise. Worker’s can be seen to have been forced to save, so that money could be invested into the capital of an enterprise which they will benefit from only in the sense that the grist mill benefits from laboring because then its owners’ oil its parts. In short, if the profits are evenly shared, the savings are also.
But the stereotype persists, so that were the workers not “forced” to save, they would be very unlikely to reinvest, choosing instead to drink away their profits. I find this notion laughable, as I think of all the sodden millionaires, slurping Moet & Chandon, at some gala or another; no one accuses them of monetary impropriety. The fact is that laborers have more reason to invest in a company they own and work at than either an investor or an employee. The point here is that seen my way, the saving-act is really just as or even more legitimately an effort of laborers. We could view and should view laborers as the legitimate owners of the product, and so they either should have been paid more for their labor or they forwent the enjoyment of that income to invest it in the enterprises’ capital. It’s the assumption that capitalists should be considered the rightful owners of the products of industry and not all the members of that company that makes the neoliberal argument circular. The neoliberal cannot both assume the ownership of the products and use that assumption to justify the ownership of the means of production. This argument fails to prove that it is the capitalist who is really providing for the livelihood of the workers. It may just turn out that it is the workers who are really saving the money thus providing not only for themselves but all of the capitalist’s excessive wealth in addition.
It would surprise few on the left to learn that a similar kind of argument was used in defense of slavery in antebellum America. The idea was that slaves, being nearly as dumb as animals, couldn’t be expected to provide for themselves outside their native habitats. Being now caught up in an “extended order” (to use Hayek’s term for a society where almost none provide everything for themselves a bit anachronistically) they would not be able to survive without the slave-masters to provide for them. They owe their livelihoods and their very lives to the master’s efforts. So, the well-intended sympathies of intellectual elites and moralists who would abolish slavery can’t see that they would destroy the very material foundations that made the slave’s lives possible in the first place. But we know better today! It was not the slaves who depended on the masters’ benevolence for their livelihood, it was the masters who depended on the slave’s labors for theirs. It was mere contrivance that–like a funhouse mirror–makes it appear upside-down. Sadly, the “funhouse” is the “courthouse” and the “mirror of distortion” is the “law”.
The neoliberal argument pits an ideological morality against a supposed material economic necessity but is itself a reversal of the truth. The ideological morality is an empty vision that all too conveniently enables the mechanisms of economic oppression. The material economic necessity is built with the sweat of labor. The laborers provide the material necessity and the capitalists appropriate the excess with ideological morality.
To save money is exactly the same thing as to earn money, profit is savings and savings is profit, from an individual point of view. It is only when we consider society as a whole that we can see that the two are not the same. This Keynesian insight has largely been forgotten, but it plays a role both in the need to establish a guaranteed income and in arguing against the neoliberal conception of capitalism.
Marx wrote: “Political economy, the science of wealth, is, therefore, at the same time, the science of renunciation, of privation and of saving, which actually succeeds in depriving man of fresh air and of physical activity. This science of a marvelous industry is at the same time the science of asceticism. Its true ideal is the ascetic but usurious miser and the ascetic but productive slave… The less you eat, drink, buy books, go to the theatre or to balls, or to the public house, and the less you think, love, theorize, sing, paint, fence, etc. the more you will be able to save and the greater will become your treasure which neither moth nor rust will corrupt–your capital. The less you are, the less you express your life, the more you have, the greater is your alienated life and the greater is the savings of your alienated being. Everything which the economist takes from you in the way of life and humanity, he restores to you in the form of money and wealth.” (Marx’s Concept of Man, 144)
If the saving that enables both the reinvestment and the profits of the wealthy is, in fact, a forced saving on labor, then they are the “ascetic but productive slave” Marx mentions. And as I said above, the strength of the neoliberal argument for savings is carried entirely by assumption. We need only ask ourselves, by what right can capitalist’s claim ownership if we do not accept the neoliberal argument from tradition? Here I think is where the argument for private property ownership laid out in Locke, based on both a need for exclusive use and expenditure of labor to acquire comes into play. It is from this justification that we can see the neoliberal assumption to be false. And what is more, it not only reveals the assumption to be false but proves that it is laborers that are or could be the true owners of the means of production. They alone could meet both of the necessary conditions for private property ownership.
I’ve written more and more in-depth on the problems with libertarianism before, but in this post, I’d like to delve into a specific absurdity of libertarianism. Let me start by summarizing Nozick’s understanding of why he feels there is no exploitation in economics. He argues that people cannot be faulted for taking actions that limit the opportunities of others even beyond the point that some of those others have intolerable lives. The implication is that, while unfortunate, these people’s misery is justly derived and nothing should be done to alleviate it because any form of redistributive justice would assault the rights of the beneficiaries and thereby, be unjust.
In a section of his magnum opus, Anarchy, State, and Utopia, where Nozick discusses capitalism and force, he claims that what limits the choices determines whether or not an act is voluntary. He further claims that when choices are limited by other peoples’ rightful actions, the remaining choice is “voluntary”, even if it is limited to a single option. He helpfully provides a concrete example of his position: imagine 26 pairings of marriage partners A-Z and A1-Z1, so that A1 is the most desirable for all letters and A is the most desirable for all primes, B1 and B are the second most desirable, and so on through the list, so that Z1 and Z are the least desirable in each group. Naturally, we could assume that A and A1 would get together, thus delimiting the options of all the rest by removing themselves as available options. Sure, B1 would like to get with A, and B would like to get with A1, but they simply do not have that option. The actions of A and A1 getting together limits the actions of all the others but is just. By rational extension, B and B1 get together, C and C1, etc., until we reach Z and Z1. In this case, Z and Z1 have no choice but to marry each other or remain single. Nozick asks, have they been forced to make this decision or is it still voluntary on the part of Z and Z1?
Nozick’s point is not that the situation is not unfortunate for Z and Z1, but that the only alternative, forcing one of the other couples to not get married or give up their chosen partner to make the situation of Z or Z1 better, is worse. In this Nozick is right, however, that’s not the whole story. Nozick has chosen a rather disanalogous example. Z and Z1 are of course free not to marry without being harmed. Would the situation be different if they would be killed if they did not marry? Would a threat of death be enough to change the ethics of the analogy?
Imagine the same situation except for this time a dictator threatens each couple with execution if they do not agree to choose any mate. Would there be a violation of rights? I imagine Nozick would say yes, it is the dictator who violates the rights of the couples. But let us tweak the situation slightly again, and this time say that the dictator will only provide food to those individuals who agree to marry so that if they do not, they will starve to death. Here, you are free to choose the harm, but the question becomes is it within the rights of a dictator to choose how food is distributed? Again, Nozick would probably argue it is not. However, if the dictator choosing how food is distributed is a violation of individual’s rights then would it be less so for the dictator to decide to distribute food on the grounds of who worked to produce it? If the dictator doesn’t have the right to choose the one method, they do not have the right to choose any. Let me try one more tweak before we quit this example: imagine this time instead of a dictator, we imagine an incredibly wealthy individual, who gained his wealth through entirely justified means. This individual has had his love rejected by you and as a result, he has made it his life’s goal to revenge himself on your romantic endeavors. Towards this end, every time you have fallen in love, he has paid off your would-be lover to quit you so that you are never able to marry. Would this still be just according to libertarianism?
I think it must be! It meets all the libertarian criteria for “voluntary” action. The spurned suitor has the right to spend their money as they like, and the would-be lovers have the right to break off with you in exchange for his money. It may seem unfair to you, but it is not unjust according to libertarianism. It would be a breach of justice to protect your happiness by interfering in the rights of the spurned suitor. But if this is justice, would it be different if the actions were deadly? This time imagine the same rich individual, except now he’s decided to escalate matters and take your life. In this case, every time you go to buy food to feed yourself, he offers the food purveyors more money to sell it to him instead. This is well within his rights. He is simply buying food. Since he has a right to do with his money as he pleases and the money is indubitably his, and purveyors have every right to get the best price for their food, all the transactions are therefore legitimate. Through the exercise of his rights, the spurned suitor is able to prevent you from buying any food, effectively and willfully starving you to death.
The Nozickian libertarian must conclude that it would be perfectly just for the rich man to starve you in this manner. This reductio ad absurdum comes about because libertarianism insists that the government cannot take any action to prevent your death as long as the agent of your death were legitimate in their actions preventing you from getting any food for a long enough period of time to intentionally cause your death. The fact that this scenario is highly unlikely is immaterial. The point here is that libertarianism allows such absurdities as part of its ethical ideology.
The fact that the spurned suitor is not buying the food to use, but merely to prevent you from having it is also immaterial. This could only be seen as a violation of your rights if and only if we observe something like the troublesome Lockean proviso that forbids ownership in the event that there is not “as good and enough left over” for others. I will spare the details of Nozick’s treatment of this proviso, except to say that he doesn’t explicitly reject the proviso; he merely points out the unsatisfactory nature of it as a solution. Sadly for libertarians, there seems to be no alternative. They are forced into a dilemma between accepting a dangerously unsatisfactory proviso or uncomfortably admitting that there are ways in which it is permissible to intentionally murder another individual under the ethical framework provided by libertarianism.
If you accept my argument, it is but a small step to the idea that there are other places where libertarianism leaves gaping holes in its ethics. I am perfectly willing to suggest that at least one such hole is its treatment of owner/laborer negotiations under capitalism. It’s entirely keeping with Nozick’s premise that if the situation is unacceptable in an individual instance it is equally unacceptable at larger scales so that the reductio ad absurdum given above is sufficient to condemn libertarianism altogether.
However, as I do not agree with his premise, I will not offer such an argument here. Instead, I would want to show that the situation is no better on a large scale. The ultimate condemnation of libertarianism comes from the fact that it can be found absurd both individually and socially. Imagine a situation in which a rich man, goes on accumulating through legitimate means until the whole of the Earth is their exclusive property. This, when combined with the minimal state and without the Lockean proviso, would create an autocratic libertarian nightmare. Such leverage would make all life entirely dependent on the will of this libertarian autocrat, annihilating the possibility of free choice since one would have to “voluntarily” agree to whatever the autocrat asks of them or die or watch their family die, or both, or worse. At this point the difference between the worst kind of authoritarianism and libertarianism vanishes and the two become identical. Libertarianism requires only that the autocrat has derived his total leverage via “legitimate” means. So on this scale too, libertarianism could justify absurdities.
I obviously believe that it is a failing of libertarian ideology that it can be used to justify totalitarianism. A zealot of the ideology could always argue that libertarianism is correct despite such arguments and the unlikeliness of such extreme situations reinforces this view. But I am not one to follow absurd ideas. On the other hand, this condemnation of libertarianism should not be read as a suggestion that governments can or should dictate all aspects of individual life. It only suggests that there are times when society has the right to intervene in the lives of its members. Freedom is not always the best policy, although it is generally the best policy. There are the places where we slip beyond the ethical into the political, and such places are blind spots for libertarians. It is in these places, however, that libertarianism must give way to libertarian socialism if it is to retain the aspect of justice.
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.