Capitalism and the Exploitation of the Working Class

Capitalism is often thought to be immoral because it exploits, cheats and robs its own workers. Probably every adult American has heard this charge some time or other. Possibly many unhappy employees have believed that the claim was true, at least in the case of their employer. No one in his right mind would suggest that examples of money-grubbing capitalists cheating their workers cannnot be found.

But that does not happen to be the question. The problem is whether such exploitation is endemic to the system, whether there is something inherent in the free market system that makes such exploitation necessary and unavoidable. Also relevant is the issue of whether it is possible for the free market to adopt measures that would allow workers to have a greater share of the profits. As we shall see, such policies are available, but frequently dismissed by the workers themselves.

The charge that capitalism entails the exploitation of the worker has been advanced in two different forms. In the first, it appears in classic Marxist thought in the guise of the famous labor theory of value. Many Marxists have believed that the profit of the capitalist results from his paying his workers less than the true value of what their labor produced. The theory has never commanded much respect because of its gross over-simplification of the worker’s true situation. The theory, for example, ignores the extent to which machines multiply the value of that which human beings produce. A solitary worker using only his own raw materials and his own tools might have some justification for believing that he deserved the full value of the labor he expended on the product. But even this claim would overlook the contribution made to a product’s value by the exchange process. 

The laborer could not be paid for his product until it is sold or exchanged. If the worker is forced to take time off from his manufacturing activity (we might suppose he is making the tables) while he seeks a buyer for the table can make only one table a day, or five a week, for which he receives forty dollars. Some people are better at different tasks than others. 

If the worker can entrust the selling of his tables to someone who is a better salesman (who can, let us say, sell the five tables in half a day), a division of labor is obviously to the worker’s advantage. But it also seems clear that the value of the table (that for which it is exchanged) does not result exclusively from the labor that produced it. The exchange process affects the table’s value as well. Therefore, even in the most primitive situations, the labor theory of value is over-simplified because it ignores other factors that affect the value of commodities.

But what about a more complex and realistic situation where a worker, using raw materials purchased and transported to him at someone else’s expense and using machines purchased at some risk by the enterprising entrepreneur, is enabled to make ten tables a day? Does his increased productivity entitle him to ten times more pay? Mark’s labor theory of value ignores the extent to which machines multiply a worker’s productivity.

Certainly, someone had to pay for the machines; someone had to invent them. Someone had to have the initiative to take the risks involved in investing money for the whole enterprise. What is so immoral about the fact that the person who made these investments and took these risks receives a return from the added productivity of the workers who use his capital? It seems clear that if capitalism is to be condemned for robbing its workers, it must be on some basis other than the labor theory of value.

But the claim of worker exploitation might be made in a different way. Perhaps it can be argued that capitalists exploit their workers by claiming excess profits.

That is, even if it is conceded that the capitalist is entitled to some return from his risk and investment, there is a line between a fair return and obscene profits. In most cases )except those in which the intervention of a state has given some corporation a marked advantage over its competition), excessively large profits would be a temporary circumstance. If some company through insight or luck were fortunate to gain such dominance of a market as to produce huge profits, this fact would quickly lead other entrepreneurs to enter the same market. 

The history of American business is full of companies that gained an uncommonly large share of a market for a time, only to lose it. Many of those companies no longer exist.

Perhaps it is only fair that the workers in such a company receive a share of these larger profits. But fairness would also seem to require that they be willing to share in some of the losses and sacrifice that often precede and follow the unpredictable periods of prosperity.

Many businessmen would not object to their employees participating in a profit sharing plan. But it would seem fair to require that if the employees of a particular company want a guaranteed share of the profits, they should be willing to share some of the risks. Robert Nozick has addressed this question.[1] He notes that whatever the lot of the working class in the past may have been, many members of the working class today have access to cash reserves. Large cash reserves also exist in union pension funds. According to Nozick, the fact that large segments of the working force in America could invest “raises the