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A critique of Marx’s labor theory of value

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The strongest moral and practical critique of laissez faire economics I ever found was Marx’s labor theory of value in “Das Kapital”. In essence; the employer exploits by taking the difference between the value of the goods produced and the salary paid to the laborer; “surplus value”. Implicit is that labor is the foundation of wealth.

In 22 years of self employed computer consulting I’ve entered hundreds of factories and offices.  Typically I’ve found engineers, biologists, chemists, accountants, builders or mechanics who had started a business some years prior; things had gone well, they found they needed assistance and hired employees.

Marx commonly talked of factory production; one example I know well: aluminum tubes are trucked in, unloaded, measured, marked and machined; the tube is heat treated, holes are drilled, parts welded on; much of this done by hired labor.

The owner/manager trains and assists his employees in all this on the shop floor, and then  works on the engineering designs for the projects, arranges for the purchase and  delivery of  raw tubes into the factory, seeks new buyers for completed tubes, designs new applications for the tubes, manages the plant itself, and arranges for the delivery and installation of the finished product.

I’m friends with some of the employees and the manager. In my understanding of the situation the manager is creating an environment where the relatively less skilled laborer is able to be productive and achieve a decent standard of living. I see mutual benefit, not exploitation. The general principle holds over all business and employment on all scales I’ve ever seen. Marx was critiquing the use of capital in larger systems, but if you are the first employee of  Bill Hewlett and Dave Packard or HP’s 10,000’th I see no difference. In even the most abstract situation the  capitalist is acting as manager, assuming risk and responsibility.

Also worth noting is that what was high science in the 1820’s and then fine engineering in the 1880’s that allowed for any of this to happen, as it depends on large amounts of cheap aluminum. What led to all this inventiveness ?

If labor makes wealth how to explain the poverty of populous 19 th   and 20 th  century India and China ?  More to the point:  how to explain their rise to wealth after they embrace freer markets ?  Consider the recent collapse of the command economy of the USSR. Note England’s empire disintegrating  in our lifetime.

Any one of Europe’s major nations had the energy/capacity/wealth to rule the world these last 500 years; now, together, they are close to being politically irrelevant and face monetary collapse from overtaxing, overspending and over borrowing to fund entitlement programs, much as we’ve done here.

To play with Marx; surplus value seems the wage paid to the business owner by labor for the provision of a job. More; markets arrange for people like the manager to compete against other motivated & skilled people to supply us what we wish. Employees benefit with jobs and goods. Efficiency is high as no formal management of the larger economy is needed as with theUSSR.

To further spin Marx around; by letting these rare skilled  people get bigger houses and faster cars than they need, you motivate them to work like dogs, to compete for the privilege of making us what we want.

What percentage of the population are they? How many people do you know who can  run a business well ? Create one from scratch ? Invent a new product and bring it to market ?

All the millionaires I know worked 60 hour weeks for 20+ years bringing us things we bought freely in our own best interest. I’ve seen them and helped them make schools, robots, houses, pharmaceuticals, boats; I’ve seen them bring electricity to people’s homes. They are all better organized and  harder working  than I am or than most people I know. It seems to me their wealth was created legitimately and they are entitled to it.

The West, for 500 years, increasingly got out of the way of these productive people. In theUSwe celebrated them. The problems we see now I suspect are the result of 100 years of increasing interference with them; I see them burdened by incredible amounts of regulation,  paper work and high taxes. When dealing with this crap they can hardly produce or hire more.

As I see it labor does not create wealth in a technical society; it is science, engineering and the management of labor to meet market demands (your demands) that creates conditions where labor has any value at all. After 20 years of practice I’m a decent programmer and systems engineer; worth some money in the right place; out of this place these skills are of no more value than my chess game, and no one ever paid me for that.

This idea of Marx’s is at the current historical root, I suspect, of why some in this society believe private wealth to be morally illegitimate. It’s nonsense.

Equally nonsensical and destructive is the idea of management as villain; to the extent unions interfere with management decisions they destroy their own livelihoods.

I’m a libertarian, and to my old socialist acquaintances: still a hippie; that word meant to me freedom and individualism; on a societal level this translates to  less government, not more regulation and bureaucracy. I want my freedom and know to have it I must grant it to my fellows; I have to assume them to be as competent and decent  a person and  citizen  as I want them to assume I am. I see, from the inside, businesses behaving honorably – in part from inevitable  self interest. For every example of malfeasance you can site to justify control there are 10,000 happening every moment in this economy to justify trust and freedom. Most of the problems I see cited here, environmental or corporate, can be solved with a free press and tort and other law on the books hundreds of years.

You worked well and hard today; what’s my cut ? What do you owe me ? What claim do I have to anything of yours ? Not what might you give me freely if you thought I needed your help, but what right, what  moral claim do I have to literally walk in and take what I say I need  ? Most of you would say “none”; I agree. Are you owed medical care ?  Clothing ? Shelter? Education ?  Pizza ? Owed, by who ? Where does the wealth come from ? From who is it taken and with what justification ?  You are turning a government created to protect individual rights, that supported a culture that created unparalleled wealth of benefit to all here, into an expropriator of private property; what do you expect of the productive in such a society ?  If  Marx is wrong, and 150 years of social experimentation now says he is, is not socialism theft ? How hard would you work for a thief ?  What are the moral and practical effects of basing a society on such a foundation ?

Is there any doubt in anyone’s mind the average Chinese is better fed, clothed and housed, has access to far better medical care, today, in freer markets and with private property rights, than under Mao’s communism ? This is staring us all in the face; no history here, it’s current events; how do you explain it?

Not the answer of course but one advantage the Chinese have; they lack 30 to 40 % of the population opposed to large efficient businesses creating goods and jobs, a group we have here. Perhaps the last communists alive are some old apparatchiks on pension inSevastopol and  many westerners who have never lived under it; I’ve seen it and it’s effects and I ask of you; when you critique western systems and economies;  compare the real to the real and the ideal to the ideal.

You bemoan the weakening of  the US middle class; what do you think created it  but a 19th century economic model with 20th Century technology, not government creating  temp non primary producer “jobs” by taking money from the few who create, and who have the wit to reinvest productively and wisely. Steve Jobs died worth billions; he lived in a rather common house; his money was invested, and as he was not a fool was it not more productive in his hands than confiscated and redistributed ?  If the rich are those who have the wits and capacity to create then are they not exactly the people who we should wish to have controlling the investment of wealth ? Never mind that it’s theirs…

The greatest good for the greatest number is achieved by a free market. (and If government has no place in the bedroom why should it between consenting adults in economics ? )  Look at a picture of NYC in the 1880’s or a movie from anywhere in the US in the `1920’s or ‘40’s ; large buildings in huge cities, sophisticated transportation and communication, a complex economy in the background, more people living materially better than anywhere else in the world, and almost, by today’s standards, no government. Police to prevent coercion and courts to adjudicate contractual issues is generally enough(ah, the start of a long discussion) ;  if you don’t need more of it why have it ? Government always creates inefficiencies in any market it enters; can we afford them ?  What is the real unemployment rate now; 14% ? 18% ? I read of  studies finding $1 trillion + lost productivity from federal regulations, and I see my neighbors losing their homes….

Government  also uses it’s supposed concern for our safety as an excuse for further limiting our freedom of action. Government by it’s nature prefers control and it’s own growth to a citizen’s freedom and success.

Expansions and contractions are part of any free economy; this recent housing collapse was made  the worse for the large number of people in homes they couldn’t afford and shouldn’t have been in, but were, courtesy of govt interference in markets; start by looking at the  Community Reinvestment Act; in many ways banks here have been victims.

I’ve been present at  communist riots in Syntagma Square and know a fair number of Greeks; the country has a strong Party history, and thus many who believe they are entitled to – everything.  Not just Greece is facing collapse  but also Spain, Portugal, Italy;  all these governments  bought votes with lies, with theft from the productive and borrowed money they cant pay back. For years we have heard of the success of European socialism; it is failing now and you can chart it’s collapse in the value of European sovereign debt and  the transitions of it’s governments. Most news outlets hide the reality  with the word  “austerity”  ;  quite a  euphemism;  it simply means you’re getting less of what you didn’t pay for.

Obama didn’t create this recession,  but years of his ideology did, he’s a fitting heir to it,  and his policy and speeches reinforce it.  JFK CUT taxes … and to quote him: ”In short, it is a paradoxical truth that tax rates are too high today and tax revenues are too low and the soundest way to raise the revenues in the long run is to cut the rates now.” It works, it’s obvious; it tells you it’s generally understood govt is ruinous. Obama is too committed a socialist to use the idea or perhaps even understand it; any hot dog vendor in NY has a better sense of productive economics and would be a better steward of this economy. (And that means than any Libertarian or Republican presidential candidate would be better too)

All of the things you wanted were available on the free market, at affordable prices ( because that is how a market must work; in the poorest countries in the world I saw affordable private schools and was able to buy good health care at rates locals could too); good quality maintained through competition; until the state with taxed dollars drove out competitors. Happy with public schools and their cost ? You can still find private pizza; at a wide variety of quality and price; but you have a *right* to free pizza ! Imagine free govt pizza; how many other vendors would be left ? What quality ? What would the real cost per slice be after taxing to pay for it, regulating, bureaucrats managing ?  You are about to do this with health care. What kind of quality care can one expect now in the public health care system ofGreece? Such things are a function of wealth, of general societal wealth.

Wall Street is perhaps the last remnant of the Empire State, once one of the most productive places in the world; socialized govt helped drive out manufacturing, transportation, trade, private education (have you seen Buffalo recently, or Newburgh ? I’ve read tax rates in NY for factory overtime in the 70’s were almost 50%; NY is still one of the most overtaxed places in the world;  “Between 1998 and 2008, a net total of more than 1.7 million New Yorkers chose to  relocate … More  income has left New York than any other state in the nation — $71.7 billion from 1993 to 2008. For every dollar  that migrated intoNew Yorkfrom other states during that period, $1.71 left — the highest of any state.” And this is after decades of flight. ) ; as in London the stock market remained as a marker of  more productive days; information management jobs are harder to kill:  “344,700 workers in the finance industry collect more than half of all the wages paid in Manhattan”;  and thus pay lots of taxes; this industry may be the last thing holding up the city as we’ve known it. Of course this is why rational politicians are backing away from the “Occupy Wall Street” crowd. Wouldn’t it be nice if the “Occupy”  folks tried to help the morale of the district ? Good to see signs like: “Go Team ! Make More Money !”  and “Be alert to wide yield spreads !” or  “Beware of Greeks selling bonds(because they will pay only half back, at best)”  ? In looking at the protesters I wonder what percent have taken a class on economics, or opened a book on the subject.  There will be world scale stock markets in 10 years and 100; would be nice to still have one in NY. In the States for that matter.

To my socialist acquaintances: have you ever tried to create a business ? To do something economically productive ? Have you entered this economy, played with it and learned it or are you attacking free markets merely from theory ?

The left’s warning of “corporate fascism” deserves a book in reply, suffice it to say that fascism is a function of an enlarged state and distorted culture, not businesses trying to sell soda or  cars. 17 percent of the USeconomy is in health care, and much of it is about to be absorbed by the State. This is a form of madness; what tremendous percentage of modern medicine and pharmacology was created here by this system ? it’s foundation is about to be shaken. Simultaneously we are about to be coerced into buying health care; forced. No free choice. Does the precedent  bother you ? What if I don’t want it ? If I’d rather take my chances ? The State knows better for me ?  What if the next young Wozniak and Jobs want to use their money to try to build a computer system ? There are surely times I worry that the same psychology that led 20th century Europeans into stateism is at work in the American left. TheUS was an experiment in limited govt and personal freedom; it’s still rather unique in this, as you can tell if you visitEurope,Asia,Africa,  South America.

England fell for certain starting with Atlee, and Europe is a relative shadow of what it’s been for hundreds of years because they embraced socialism, an ideology that  rewards the unproductive for not producing, and penalizes the productive for working well, a ideology of mediocrity that disparages individual creation; and all creation, artistic, political, scientific and  economic is an individual’s act. Some cultures and societies support it better than others; ours did.


Written by arthurheyman

November 15, 2011 at 6:15 pm

Posted in Uncategorized

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