The Case Against Capitalism
By Matthew Green at Jun 17, 2008
The Case Against Capitalism
Even before I officially "converted" to anarchist political philosophy, I thought that there was something terribly wrong with capitalism. As much as I liked the idea of the "free market" and economic freedoms, there seemed to be something wrong with capitalism itself. The idea of market competition, of letting businesses do whatever they wanted in the name of profits, with practically no restraint or regulation, and the ethics of egoism as underlying classical capitalism made it seem like classical capitalism was more like "social Darwinism" than anything else. Beyond finding the egotistical, "survival-of-the-economic fittest" mentality repugnant, I realized that it was grossly unfair. I didn't know how capitalism was exploitative but it struck me as unfair, and the free-market of the classical capitalists turned me off because the idea of competition struck me as being repugnant.
It took me some time to realize why capitalism was not just repulsive but also exploitative. Here goes: "exploiting" is defined by the Merriam-Webster online dictionary as "to make use of meanly or unfairly for one's own advantage" (http://www.merriam-webster.com/dictionary/exploiting). This is exactly what capitalism does. Here's why:
Capitalism is based on the private ownership of capital for the purposes of making a profit. The private ownership of capital introduces class division and income stratification in the political economy. This stratification is hierarchical and the owners of private capital are economically remunerated for the contribution of their property. The problem is that those who introduce private capital benefit from an unfair explicit relationship as they are unfairly benefiting from how workers contribute their labor to the market. The problem of the genetic lottery, as exemplified in Hahnel's discussion of the "doctor-garbage collector problem" is that not everyone can contribute equally in terms of what they contribute. There will always be some people who are faster, stronger, taller, better at calculation and concentration abilities than others due to a host of genetic, developmental, and environmental factors. These genetic, developmental, and environmental factors give people an unfair advantage over other people.
It is unfair to reward these people because they have an advantage that they were born with. Unfair is not the same thing as exploitation, however. Even if we abolished private capital and rewarded people solely according to the contribution of their labor, it would still be inequitable, not being based, properly, on effort and sacrifice. But when there is an explicit relationship involved, namely between the employer and the employee, in which the employer benefits from the contribution of the labor of the employer, it is not only unfair because those with the genetic, developmental, and environmental advantage are rewarded but the owners of private capital get unfairly rewarded for it. Robin Hahnel in his paper "Exploitation: A Modern Approach" writes:
"Employers who make no further sacrifices can enjoy ever larger profits by capturing the increased productivity of more and more employees. Lenders who make no further sacrifices can enjoy ever larger interest payments by capturing the increased productivity of more and more borrowers. We could say that employers expropriate the increased productivity of their employees' labor. Or we could say that employers capture the efficiency gain from the employment relationship. Similarly, we could refer to lenders as either expropriating the increased productivity of their borrowers' labor or capturing the efficiency gain from the credit relationship. This choice, I believe, is merely a matter of semantics. How we choose to define the word exploitation, however, can be more than mere semantics."
After discussing a simple hypothetical "corn-model" in which people are given seed to plant and discussing different possible maxims for economic remuneration based on this model, Hahnel argues that the explicit social relationship between those who have corn seed to give and those who will employ it productive, is exploitative. He writes:
"If asked if the seedy can "exploit" the seedless if they never enter into any relationship with them whatsoever, I believe most would be inclined to say, "No." Under the rules of autarky, our 1,000 people could literally live on 1,000 separate islands. Nonetheless, if the 100 seedy acquired their extra seed corn through no greater sacrifice on their part, the radical maxim criticizes their shorter workweek as unfair.10 Yet even if we think the advantages of the seedy are unfair, under autarky most would hesitate to say the seedy are exploiting the
seedless. We can preserve this useful difference in common usage by reserving the word exploitation for unfair economic outcomes that result from explicit social relationships. In this case the unequal outcomes in autarky are unfair, but we do not say the seedy are exploiting the seedless; whereas the unequal outcomes resulting from the employment relationship and the credit relationship are not only unfair but we say employers are exploiting employees and are exploiting borrowers.11 Although this is a semantic choice, we can define rigorous
rules of usage making it possible to draw meaningful distinctions among different kinds of economic injustice."
This, thus, fits with the definition of "exploiting" adopted above. I encourage readers to read Hahnel's paper "Exloitation: A Modern Approach" or his book The ABCs of Political Economy: A Modern Approach for an discussion and illustration of this simple "corn model" and the illustration of exploitation that is shown to be the case.
This is the reason why capitalism is exploitative: the private ownership of capital results in an economic hierarchy. The hierarchy is the in the form of employers who own capital and the workers who work for wages. This hierarchy is an explicit socio-economic relationship that results in unfair economic outcomes since the capitalist employers are expropriating the increased productivity of their employee's labor and capture the efficiency gain from it. It is unfair to reward capitalists for the contribution of their capital/property and the contribution of their labor and it is unfair to reward the employees for the contribution of their labor because of the genetic, developmental, and environmental differences that underlie different contributions of labor.
If we chose to abolish the private ownership of capital, and hence economic hierarchy that results in the unfair economic outcome, this would end exploitation but it would not be equitable as people are still being rewarded according to the contribution of their labor and not for effort and sacrifice. Effort and sacrifice should be rewarded as people have complete control over the duration, intensity, and onerousness of conditions under which they work. Economic hierarchies that result in employers expropriating the increased productivity of their employee's labor or capturing efficiency gains from it, are exploitative and need to be abolished. Because capitalism necessarily results in an economic hierarchy in which this exploitation happens, capitalism is inherently exploitative and should be abolished.
Capitalism rewards employers according to the contribution of their property and labor and rewards workers according to the contribution of their labor. People who are stronger, faster, smarter, have more accurate or faster calculation or concentration abilities have an advantage that is unfair through no fault of their own and it is not only unfair to reward them according to the contribution of their labor, but rewarding them because of "superior traits" by offering them greater wages or income, is to reward "superior traits" thereby inflating the sense of worth of these individuals over others who cannot contribute as good. The inflated sense of worth, due to no fault of the people who posses "superior traits" gives rise to an ethic of egoism and a sense of sense of unfair economic entitlement. When workers are taught to compete against each other, some workers will win and some will lose, giving winners a sense of unfair economic entitlement and reward, making them feel valued because of what they are able to contribute because of socially desired traits.
Competition is unhealthy because it results in reduced sense of worth of individuals who cannot compete as effectively as those who do because they don't possess the same traits as those who do and can provide results that are more desired. People who are rewarded unfairly in terms of economic entitlements are given access to more consumption and commodities than people who cannot compete as well, which will lower the sense of worth and entitlement that people who do not possess the "superior traits" have. This results not only in economic inequality, it results in social inequality as it damages worker's senses of self-worth and produces psychological problems as they will experience more difficulties in forming healthy relationships with other human beings. Only with equitable cooperation, in which all human beings are treated as political, social, and economic equals, all entitled to equal rights of life, liberty, and happiness, can all human beings be fairly rewarded in terms of economic outcomes.
Yet it is only through the market that capitalism can succeed. It is only through the market mechanism of price signals that capitalists can accurately take stock of how much capital and labor is to be employed to produce given commodities and in what quantity and at what price to sell given commodities and other products at. Without markets, capitalism cannot succeed because the lack of an efficient feedback mechanism for knowing how best to allocate resources. Capitalism is flawed on moral grounds because it is inherently exploitative. Economic hierarchies are inherently exploitative and therefore should be abolished and to exploit people is morally wrong.
Thomas Jefferson wrote in the Declaration of Independence: "We hold these truths to be self-evident, that all men are created equal, that they are endowed...with certain unalienable rights, among them the right to life, liberty, and the pursuit of happiness".
If are all equal and have certain unalienable rights, then it stands to reason that all men and women have equal unalienable rights and if these unalienable rights include the right to life, liberty, and the pursuit of happiness, then it stands to reason that all men and women have equal rights to life, liberty, and the pursuit of happiness. The most crucial, hence, the most important question of all for progressives of all stripes, capitalist or socialist, is simple: to what extent are each of us entitled to these rights? The problem is that in a market capitalist political economy, these unalienable rights only exist on paper. With the private ownership of capital, there is income stratification. Those who employ capital and credit, and expropriate increased productivity of workers and capture efficiency gains from them, have more income and therefore enjoy more liberty, have greater freedom in life, and can pursue happiness to a better extent than those who do not. The more capital and income one possesses, the more freedom one has to pursue one's happiness and can enjoy the full extent of their right to life and liberty. The lesser capital and income one possesses, the lesser freedom one has to pursue one's happiness and enjoy a lesser extent of their right to life and liberty.
If human beings have the full rights to life, liberty, and the pursuit of happiness, then why aren't human beings entitled to the full extent of these rights? Only if these rights are equal rights then are human beings, man and women, entitled to the full extent of these rights. Do any of us have a right to full entitlement of life, liberty, and the pursuit of happiness? Is this an equal right to full entitlement? If not, why not? If so, then why is it that the extent that each of us enjoys our lives, our liberties, and our individual pursuits of happiness depends on how much capital and income we possess? Why is it that people in the lower income strata don't get to enjoy their rights to life, liberty, and happiness as do those in the higher income strata? Without the right to enjoy the full extent of life, liberty, and happiness, these rights are not equal because all human beings are not equal. All human beings, man and woman, are not equal if we are not social, political, and economic equals, particularly economic equals.
The only way that each of us can enjoy the full extent of our rights to life, liberty, and happiness is if we abolished income stratification by abolishing private capital and credit, because of the economic hierarchy created. Income stratification is a logical consequence of economic hierarchies. Economic hierarchies do not allow for equal rights to life, liberty, and the pursuit of happiness. Since the economic hierarchy of capitalism results in an income stratification and since an income stratification results in class divisions, it follows that not only does the economic hierarchy of capitalism result in class divisions, but it follows to that those who have greater capital, credit, and/or income can enjoy their right to life, liberty, and the pursuit of happiness than those who do not. Therefore the extent that one enjoys these unalienable rights and the full entitlements of these rights is a matter of class privilege and sometimes through chance such as in lotteries.
Capitalism is not only economically unfair because of its intrinsic exploitation but is also socially unfair because of the class privileges that result from income stratification. Those with more capital, credit, and income not only enjoy greater economic consumption than those who are without them, but they also have greater freedom to enjoy life, liberty, and have greater opportunities at fulfilling their happiness because they don't have to work as hard, don't have to apply or employ themselves that much, regardless of how much or how little they consume. Thus there is basic social inequality as well as economic inequality. The rights to life, liberty, and happiness are not equal due to class divisions and income stratification, but, rather are a consequence of class privilege.
The case against market capitalism could not be clearer. The private ownership of capital results in an economic hierarchy, with those employing capital and contributing their labor expropriating increased productivity or capturing efficiency gains from workers, thereby, exploiting them in the process. This results in income stratification, class divisions, and class privileges as rights to life, liberty, and happiness are dependent on how much capital, credit, and income one possesses, with those who possess greater amounts enjoying more freedom, liberty, and happiness than those who don't. Economic exploitation, income stratification, class division, and unfair class privileges can be abolished once the private ownership of capital is abolished. This economic hierarchy generated by the private ownership of capital is best replaced by the worker's social ownership of productive utilities and equitable cooperation among social, political, and economic equals as it will result in classlessness and without class divisions or the consequential class privileges, human beings can enjoy the full extent of their rights to life, liberty, and the pursuit of happiness.