Paleomarxist thought had several fatal flaws. That’s why leftists finally gave it up and switched to a slow cultural assault on liberty conducted under a media fog of war. This clues one in that their agenda is not so much about principle, but about power.
But the residue of musty marxist thinking can still be whiffed whenever leftists start preaching about labor issues. The two recurring memes, since disassociated from their nomenclature, the Labor Theory of Value and the Iron Law of Wages, are now so thoroughly debunked that socialists are engaging in a kind of economic seance when channeling these dead ideas.
The Labor Theory of Value postulated that under capitalism the rich get richer at the poorer’s expense. But in a free market economy with sound money the rich get richer, and the poorer get richer. And The Iron Law of Wages, now looking more like the Pig Iron Law of Wages, insisted that workers’ wages under capitalism tend towards subsistence. Both are wrong for technical economic reasons that can be found elsewhere, so I will give a more prosaic rebuttal to these theories.
The rich get richer by providing products that people want to buy, and the poorer get richer by getting paid to produce them. If the poor are getting paid to produce wealth to be redistributed through market demand, isn’t this superior to the poor being given “wealth” through redistribution of what has already been created or promised to them in terms of wealth yet to be created?
This point accounts for the dynamism of capitalism: people are paid to produce, not to receive what they are supposedly due. People who work live well, and this is the bottom line. When someone working at the lowest of low skill jobs, McDonald’s for example, can make enough money to feed himself on the dollar menu sixty times over in an eight hour shift, there’s not really anything wrong with the system. And the fact that the manager drives an SUV is a motivator to work harder, not a matter to be dejected about or to cry to government to remedy.
And if it only takes a few days for a low skill worker to earn enough to buy a nice television set, can the economy be as much a travesty as the socialists claim? After all, how could this supposedly exploited worker possibly acquire the resources and put together the components needed for a television set? So it appears that the laborer is actually gaining by working in a capitalist economic system; it takes less time for him to acquire goods in terms of work input than would otherwise be required, because of market efficiencies and scales of production.
So wealth disparity does not matter as long as there is a free economy, but rather overall wealth gains. When 95% of those who want to work can find jobs in a free market economy, one cannot really fault the economic mechanism. After all, social scientists rarely get a 95% confidence interval on anything but the most rudimentary theories.
Certainly those capitalist countries from Marx’s day to now that have most embraced the free market have had a standard of living increase across the board. The socialist exceptions are small, resource rich, export-driven economies dependent on foreign, consumer-driven, more capitalistic markets, and additionally have lower corporate taxes than the U.S. (Sweden – corporate tax of 28%, U.S. is second highest in the world at almost 40%; e.g.). Not to mention America pays most of Europe’s security bill – that frees up between 5% to 10% of GDP.
So to sum up, laborers in a capitalist system greatly benefit relative to non-participation; and thus they are not being exploited merely by the fact of working. Profit is not an example of exploitation, but a sign that the instruments that labor is being applied to greatly amplify the value of that labor. Those people who come up with and own those instruments of labor value amplification drive the economy, not the mere fact of human exertion. The converse argument that people are born into this world owned or owed by society can be dismissed out of hand as a mischievous, if not a malevolent assumption tantamount to advocating slavery.
There is also a misconception that capitalism is “out of control” or “harms the environment.” Socialist and communist countries tend to degrade their country’s habitats much more egregiously than capitalist ones, because there is a major difference in approach. Socialist countries misconceive economy as a “pie to be redistributed,” and capitalist ones see it as labor transforming resources and materials to add utility, or facilitating “production.”
Scarcity of resources is inherently a part of the capitalist system through pricing (as opposed to command economies), and most resources are not “consumed” but redistributed or transformed (oil being a notable exception: the restriction of oil production is largely unnecessary, since solar, wind and geothermal will replace oil as prices go up). You remove pricing and you remove a barrier to state action and exploitation. The U.S. has gotten around this barrier by producing imaginary currency, which is not “money” or what Mises defined as a “store of value.”
The point is, that to support their welfare systems, countries need to stimulate real production, not just print out paper currency to be redistributed. Of course, those who see this as a great way to “break” the capitalist system, from which a miraculous and necessarily state-dominated socialist paradise will rise as if a phoenix from the ashes, will be greatly disillusioned.
The appropriate response to poverty is not to penalize producers or employers for providing products that people want to buy, but by allowing success to flourish and opportunities to open up for people. For those who cannot work, special consideration is warranted. We can address this issue firstly by cultivating a charitable inclination, which Americans, on the whole, tend to have. As Dennis Miller says, “we’ll gladly help the helpless, just not the clueless.”
As far as the gap between the “haves” and the “have-nots” this can more accurately be described as a disparity between the “dos” and the “do-nots.” You cannot reward idleness and expect the economy to grow the wealth needed to sustain everyone’s lives, let alone luxuries. The person with the most vested interest in his own affairs is the individual in question himself; it should be up to him to care for himself, and to what extent he chooses. If a person does not go through the trouble of taking care of himself, why should society?