“Advocates of capitalism are very apt to appeal to the sacred principles of liberty, which are embodied in one maxim: The fortunate must not be restrained in the exercise of tyranny over the unfortunate.” – Bertrand Russell
“Labor is prior to, and independent of, capital. Capital is only the fruit of labor, and could never have existed if labor had not first existed. Labor is the superior of capital, and deserves much the higher consideration.” – Abraham Lincoln
“Possession is 9/10 of the problem.” – John Lennon
I think we should stop referring to the socio-economic system we live under as “capitalism.” This implies a rule by capital, which buys in (as it were) to the idea that the structure is impersonal, impartial and inevitable. I think we’d have a much clearer picture of reality if we started calling it “capitalist-ism.”
They call their system “the free market,” when in fact it has little to do with markets and even less to do with freedom. The system, which is as much political as economic, is about maintaining the power of the uber-rich, who treat the rest of us as pawns to be moved about and sacrificed at will. Mind you, there is some turnover in exactly who constitutes the elite — the concept of social mobility isn’t a complete fiction — but the structure of the model itself goes on, unbroken since feudalist days.
Modern elites see the world through the lens of marginal utility. That, in a nutshell, says that a thing is worth whatever you pay for it. If it wasn’t, you wouldn’t have paid. Same goes for wages: they’re paid out and accepted, hence they are what they ought to be. Whatever you can get away with is all right, by virtue of the fact that you’re getting away with it. There’s no denying the elegance of this logic… except that it ignores the power imbalance between the owner of the means of production and the worker.
What it means is that the owner sets the terms of employment. That’s what it is to be a capitalist: he (as it usually is) has a monopoly on the capital, the means of production, and hence all the leverage in the negotiation of wages. Thus, he has the power to only employ those who will provide him with surplus labor — that production which is above and beyond the value of the employee’s wages. This constitutes a subsidy, even a kickback, to the capitalist, whose only contribution to the production is the possession of the capital.
In contrast, the labor theory of value says that it is the work that workers do that gives products their value, and thus workers, not capitalists, are the sine qua non in the economy. This idea is attributed to Marx, but in fact predates him by well over 100 years. Adam Smith accepted it, but only for a society of small producers: “The whole produce of labour does not always belong to the labourer. He must in most cases share it with the owner of the stock which employs him.”
This invites the question of why the laborer should not own the stock. If the worker must share the produce of his/her labor with the owner, then, effectively, the worker is renting his/her job from the owner. The only reason for this is the ownership of the means of production. This is why the philosophers of the capitalist class are so focused on the idea of property rights: so that the divine right of capitalists to imbalanced negotiations will not be examined too closely. They know that if workers were collectively self-employed — mutually employed — they would have no need to sponsor a capitalist. Profits would belong to those who created them.
Marx himself said that workers do not create wealth alone: nature contributes a lot to the process. I would take this a step further, and say we should understand economics not as apart from ecology, but just the reverse — economics is a subset of ecology. However, within that understanding, it is safe to summarize matters by saying that labor creates all economic value. Indeed, it’s difficult to conceive of anything else. If we consider each other important, what apart from each other’s labor could we value?
(There are exceptions — historical treasures, an aged wine, and a young child’s crayon drawing are not valued for the labor in them — but these exceptions really only serve to prove the rule.)
So, the labor theory of value expresses our mutual appreciation in a material way. The best way to do this sincerely and concretely is face to face, but this is not always, or even often, possible. But paying a fair price for fair labor still lets the echoes of that appreciation ring.
That’s why, in the face of considerable cognitive dissonance, I stand by the idea that markets are the fairest economic tool. The highest form is Adam Smith’s conception of a market, the actual marketplace that you walk to and walk through, haggling fair prices with the producers themselves. When we abstract “the market” away from this personal meeting, its advantages are diluted, though not gone entirely. The interference of either the government or a capitalist also defeats the purpose and nature of a marketplace. Left to its own devices, a market will distribute wealth and power (but I repeat myself) more or less evenly. Both the government and the capitalist will unbalance the equation, to their own respective advantages.
There are three pieces to production: capital, labor, and raw materials. As buyers, we should value raw materials by buying products that use them conscientiously and sustainably, and we should value labor by buying from enterprises where labor owns and manages capital, not the other way around. We can choose products with not only value, but values.