Saturday, December 25, 2010

Surplus Value and Exploitation

Modern day "liberals" or social democrats tend to want to regulate businesses based on principles found in the works of Karl Marx. I'm not going to say most of these people are Marxists, if for no other reason than because they do not know Marx's thought well enough to identify with his theory. They do, however, pick up a number of the basic ideas. These ideas are wrong and are therefore dangerous.

One of the more common complaints against capitalism and the free market is that workers are not paid the full worth of the products being produced by the company. It is assumed that the money made by the owner is exploited from the work of the wage earner. The capitalist does nothing but steals surplus value from the worker. This is seen as a form of theft and immoral; if a revolution to overthrow the capitalists is extreme, than at least the government should regulate pay to ensure a more fair distribution of wealth away from capitalists (who do not work for their money) and to the workers (who do).

I am not an expert on Marx; while I've read a few of his works, by large and away they were too dry for even me to really read and comprehend. As far as I know, however, Marx never worked a day in his life. He was an academic. This is unfortunate for Marx, as he would have learned a great deal spending time with actual workers. I have spent time with such people. I will use this experience to show why Marx (and those using the surplus value theory today) are wrong.

For the better part of a year, I worked in a factory that produced printed circuit boards for computers and servers and such. For multiple reasons, I'm going to describe only the fairly obvious aspects of the production method (I signed a waiver preventing me from describing the process in any real detail beyond the obvious, and I doubt I could do so even if I wanted to, not to mention my reader would be confused to no end). The point is this, however: the worker is benefited by the capitalist rather than exploited.

The average worker, not having much more than a high school education, would bring home about $300 a week, more if they worked overtime.

The price of one of the most common boards we sold was roughly $300.

If the capitalists are truly exploiting the worker, than the worker's labor needs to be worth more than $300 a week. Their labor needs to be worth about one finished circuit board.

Here's the rub: if the capitalist is exploiting the worker, why does the worker continue going to work? Why not work on their own? That's fairly obvious: the worker with the high school education could not produce $300 worth of circuit boards in a million years, much less in a week. The worker would have to collect the copper needed, the machinery to make that copper acceptable, would have to design the plans for the board, would have to make connections with potential buyers, would have to build the machines that would etch the proper patterns the within a nanometer (along with buying and processing the material needed to do that), would have to have the machinery and skill to put on proper finishes, would need to have all of the proper chemicals, and would need the packaging and transporting equipment to move the finished product. This, mind you, is the simplified version.

As I said, the worker will never make a single board. The worker's labor, by himself, is worth a fraction of a penny per week, if he is lucky.

All of the necessary tools come from the capitalists. They invest their money rather than enjoying it in the short run; this is a sacrifice of time and a gamble in that the investment may not pay off. Once they have assembled the proper workforce and machines, they can produce enough goods to give the worker $300 a week and still make money for themselves. The value of the worker's labor has been multiplied by an astronomical figure by the investments of the capitalists.

How, exactly, is that exploitation? The worker is better off and the capitalist is better off; this is win-win.

Marx bemoaned the fact that the capitalists own all of these "means of production." Well, they created them! It was an engineer who put in the long hours of graduate school and nights and weekends at his desk to produce the proper etching machine, not the worker. It was the capitalist who put off enjoying the fruit of their labor in the immediate time frame in hopes of having more wealth down the line. If the workers want to make their own means of production, they are free to do so. It would require the sacrifices made by the capitalists and the most talented elements, sacrifices most workers are not willing to make.

The worker is not being exploited; instead, his ability to produce is magnified exponentially. This magnification is occurring because the capitalists have put off their own enjoyment by investing wealth and because the most talented have worked hard to create the tools needed. I fail to see how this is an "evil" that needs to be remedied. If anything, workers should be more thankful for the capitalists rather than screaming about how they are exploited.

There is no surplus value being milked off by lazy capitalists. All plans to redistribute wealth supposedly gained by surplus value is therefore wrong, morally and factually. While not the only justification used to redistribute wealth, it is a common one and persuasive to unthinking minds (equating capitalists, who are not currently working with their hands, to thieves). Other arguments will be dealt with at another time.


  1. When did "exploit" become something you shouldn't do to people? The notion that you can't benefit and be exploited in the same interaction is... well, I'm probably making my objection louder than it morally warrants, but it's sloppy use of language to call benefit and exploitation mutually exclusive. (Grouchy grouch grouch, English is dead, whine, lightning and the lightning bug, grumble mumble.)

    Hope the holiday weekend's been a blast!

  2. Exploitation has multiple meanings. To the economist is has a value neutral meaning, but to most people it has a negative connotation on par with theft. If you ask people on the street if we should "exploit" other people, they will likely say no because they have that second idea in mind.