Exploitation of labour is the act of treating one's workers unfairly for one's own benefit. It is a social relationship based on a fundamental asymmetry in a power relationship between workers and their employers. When speaking about exploitation there is a direct affiliation with consumption in social theory. Traditionally, this would label exploitation as unfairly taking advantage of another person because of his or her inferior position, giving the exploiter the power.
Karl Marx, who is considered the most classical and influential theorist of exploitation, did not share the same traditional account of exploitation. Marx's theory explicitly rejects the moral framing characteristic of the notion of exploitation, and restricts the concept to the field of labour relations.
In analyzing exploitation, many political economists are often stuck between the explanation of the exploitation of labour given by Marx and Adam Smith.
Marx's exploitation theory is one of the major elements analyzed in Marxian economics, and some social theorists consider it to be a cornerstone in Marxist thought. Marx credited the Scottish Enlightenment writers for originally propounding a materialist interpretation of history. In his Critique of the Gotha Program, Marx set principles that were to govern the distribution of welfare under socialism and communism; these principles saw distribution to each person according to their work and needs. Exploitation is when these two principles are not met, when the agents are not receiving according to their work or needs. This process of exploitation is a part of the redistribution of labour, occurring during the process of separate agents exchanging their current productive labour for social labour set in goods received. The labour put forth toward production is embodied in the goods and exploitation occurs when someone purchases a good, with their revenue or wages, for an amount unequal to the total labour he or she has put forth. This labour performed by a population over a certain time period is equal to the labour embodied to the goods that make up the net national product (NNP). The NNP is then parceled out to the members of the population in some way and this is what creates the two groups, or agents, involved in the exchange of goods: exploiters and exploited.
The exploiters are the agents able to command goods, with revenue from their wages, that are embodied with more labour than the exploiters themselves have put forth- based on the exploitative social relations of Capitalist production. These agents often have class status and ownership of productive assets that aid the optimization of exploitation. The exploiters would typically be the bourgeoisie. Meanwhile, the exploited are those who receive less than the average product he or she produces. If workers receive an amount equivalent to their average product, there is no revenue left over. Thus, these workers cannot enjoy the fruits of their own labours and the difference between what is made and what that can purchase cannot be justified by redistribution according to need. The exploited are the proletariat.
Surplus labour and labour theory of value
Exploiters appropriate another's surplus labour, which is the amount of labour exceeding what is necessary for the reproduction of a worker's labour power and basic living conditions. In other terms, this entails the worker being able to maintain living conditions sufficient to be able to continue work. Marx does not attempt to tie this solely to capitalist institutions; he notes how historically, there are accounts of this appropriation of surplus labour in institutions with forced labour, like those based on slavery and feudal societies. However, the difference he emphasizes is the fact that when this appropriation of surplus labour occurs in societies like capitalist ones, it is occurring in institutions having abolished forced labour and resting on free labour. This comes from Marx's labour theory of value which states that value is intrinsic in a product according to the amount of labour that has been spent on producing the product.
In a capitalist economy, workers are paid according to this value and value is the source of all wealth. Value is determined by a good's particular utility for an actor, if the good results from human activity it must be understood as a product of concrete labour, qualitatively defined labour. Capitalists are able to purchase labour power from the workers, who can only bring their own labour power in the market. Once capitalists are able to pay the worker less than the value produced by their labour, surplus labour forms and this results in the capitalists' profits. This is what Marx meant by "surplus value", which he saw as "an exact expression for the degree of exploitation of labor-power by capital, or of the laborer by the capitalist". This profit is used to pay for overhead and personal consumption by the capitalist, but was most importantly used to accelerate growth and thus promote a greater system of exploitation.
The degree of exploitation of labour power is dictated by the rate of surplus value as the proportion between surplus value/product, and necessary value/productproduct. The surplus value/product is the materialized surplus labour or surplus labour time, while the necessary value/product is materialized necessary labour in regard to workers, like the reproduction of the labour power. Marx called the rate of surplus value an "exact expression of the degree of exploitation of labour by capital". These theories ultimately demonstrate Marx's main issue with capitalism: it was not that capitalism was not an institution where the labour exchange is coercive, but that in this institution one class still becomes significantly more rich while the other becomes impoverished.
Critique and rejection
Many capitalist critics have pointed out that Marx assumes that capital owners contribute nothing to the process of production. They suggest that Marx should have allowed for two things: permit a fair profit on the risk of capital investment, and allow for the efforts of management be paid their due.
David Ramsay Steele argues that marginal utility theory renders Marx's theory of exploitation untenable. According to this theoretical framework and assuming competitive market conditions, a worker's compensation is determined by his or her contribution to marginal output. Similarly, owners of machines and real estate are compensated according to the marginal productivity of their capital's contribution to marginal output. However, Steele notes that this does not in any way touch the ethical argument of socialists who acknowledge non-labour contributions to marginal output, but contend that it is illegitimate for a class of passive owners to receive an unearned income from ownership of capital and land.
The theory has been opposed by, among others Eugen von Böhm-Bawerk. In History and Critique of Interest Theories (1884), he argues that capitalists do not exploit their workers; they actually help employees by providing them with an income well in advance of the revenue from the goods they produced, stating: "Labor cannot increase its share at the expense of capital." In particular, he argues that the theory of exploitation ignores the dimension of time in production. From this criticism it follows that, according to Böhm-Bawerk, the whole value of a product is not produced by the worker, but that labour can only be paid at the present value of any foreseeable output.
John Roemer studied and criticized Marx's theory by putting forth a model to deal with exploitation in all modes of production, hoping to lay the foundations for an analysis of the laws of motion of socialism. In his works published in the 1980s Roemer posits a model of exploitation based upon unequal ownership of human (physical labour skills) and non-human property (land, means of production). He states that this model of property rights has great superiority over the conventional surplus labour model of exploitation, therefore rejecting the labour theory of value. In his attempt to put forward a theory of exploitation that also includes feudal, capitalist, and socialist modes of production he defines exploitation in each of the modes in terms of property rights. Roemer rejects the labour theory of value because he sees that exploitation can exist in the absence of employment relations, like in a subsistence economy, therefore backing the model of exploitation that is based on property rights. He tests his theory of exploitation using game theory to construct 'contingently feasible alternative states' where the exploited agents could improve their welfare by 'withdrawing' with their share of society's alienable and inalienable assets. Feudal, capitalist, and socialist exploitation all come from the theory of exploitation on the basis of inequitable distribution of property rights. There has been a range of agreement and disagreement from various economists, neo-classical economists favoring the model the most.
Some theorists criticize Roemer for his entire rejection of the labour theory of value and the surplus labour approach to exploitation, for they were the central aspects of Marxist thought in regard to exploitation. Others criticize his commitment to a specifically liberal, as opposed to a Marxist account of the wrongs of exploitation.
Many assume that liberalism intrinsically lacks any adequate theory of exploitation because its phenomenon commits itself only to the primacy of personal rights and liberties and to individual choice as the basic explanatory datum. Hillel Steiner provided an argument to refute the claim that liberalism cannot supply an adequate theory of exploitation. He discusses interpersonal transfers and how there are three types: donation, exchange, and theft. Exchange is the only of the three that consists of a voluntary bilateral transfer, where the beneficiary receives something at a value greater than zero on the shared scale of value, although at times there can be ambiguity between more complex types of transfer. He describes the three dimensions of transfers as either unilateral/bilateral, voluntary/involuntary, and equal/unequal. Despite these types of transfers being able to distinguish the differences in the four types of transfers, it is not enough to provide a differentiating characterization of exploitation. Unlike theft, an exploitative transfer is bilateral and the items are transferred voluntarily at both unequal and greater-than-zero value. The difference between a benefit and exploitation despite their various shared features is a difference between their counterfactual presuppositions, meaning that in an exploitation there's a voluntary bilateral transfer of unequally valued items because the possessors of both items would voluntarily make the transfer if the items to be transferred were of equal value, but in a benefit the possessor of the higher-value item would not voluntarily make the transfer if the items were at equal value. Put simply, the exploitation can be converted to an exchange: both exploiters and exploited would voluntarily become exchangers when benefactors would not.
In an exploitation both transfers are voluntary, but part of one of the two transfers is unnecessary. The circumstances that bring out exploitation are not the same as what brings about exploitative transfers. Exploitative circumstance is due to the factors other than what motivates individuals to engage in nonaltruistic bilateral transfers (exchanges and exploitations), they are not sufficient circumstances to bring about exploitative transfers.
To further explain the occurrence of exploitative circumstances certain generalizations about social relations must be included, to supply generalizations about social institutions. He says 'if (i) certain things are true of the institutions within which interpersonal transfers occur, and (ii) at least some of these transfers are nonaltruistic bilateral ones, then at least some of these transfers are exploitative. Steiner looks at the institutional conditions of exploitation and finds that in general exploitation is considered unjust, and to understand why it is necessary to look at the concept of a right, an inviolable domain of practical choice, and the way rights are established to form social institutions. Institutional exploitation can be illustrated by schematized forms of exploitation to reach two points:
- Despite the mode of deprivation in exploitation isn't the same as the mode involved in a violation of rights, it does result from such violations and the two deprivations may be of the same value.
- Rights violation (theft) is a bilateral relation, but exploitation is trilateral one. There are at least three persons needed for exploitation.
On a liberal view exploitation can be described as a quadrilateral relation between four relevantly distinct parties; the state, the exploited, the exploiter, and those who suffer rights violations. However, it can be argued that the state's interests with the exploiters action can be viewed as unimpeachable because you cannot imply that the exploiter would ever withhold consent from exploiting due to altruistic concerns. So this trilateral conception of exploitation identifies exploited, exploiters, and sufferers of rights violations.
In terms of ridding exploitation, the standard liberal view holds that a regime of laissez-faire is a necessary condition. Natural rights thinkers Henry George and Herbert Spencer reject this view and claim that property rights belong to everyone; all land to be valid must belong to everyone. Their argument aims to show that traditional liberalism is mistaken in holding that nonintervention in commerce is the key to non exploitation; they argue it is necessary but not sufficient.
The majority of neoclassical economists only would view exploitation existing as an abstract deduction of the classic school and of Ricardo's theory of surplus-value. However, in some neoclassical economic theories exploitation is defined by the unequal marginal productivity of workers and wages, such that wages are lower. Exploitation is sometimes viewed to occur when a necessary agent of production receives less wages than its marginal product. Neoclassical theorists also identify the need for some type of redistribution of income to the poor, disable, to the farmers and peasants, or whatever socially alienated group from the 'social welfare function.' However, it is not true that neoclassical economists would accept the marginal productivity theory of just income as a general principle like other theorists do when addressing exploitation. The general neoclassical view sees that all factors can be simultaneously rewarded according to their marginal productivity, this means that factors of production should be awarded according to their marginal productivity as well, Euler's theorem for homogeneous function of the first order proves this:
- f(K,L)= fK(K,L)K+fL(K,L)L
The production function where K is capital, L is labour. Neoclassical theory requires that f be continuously differentiable in both variables and that there are constant returns to scale. If there are constant returns to scale there will be perfect equilibrium if both capital and labour are rewarded according to their marginal products, exactly exhausting the total product.
The primary concept is that there is exploitation towards a factor of production if it receives less than its marginal product. Exploitation can only occur in imperfect capitalism due to imperfect competition, with the neoclassical notion of productivity wages there is little to no exploitation in the economy. This blames monopoly in the product market, monopsony in the labour market, and cartellization as the main causes for exploitation of workers.
In developing nations
Developing nations (commonly called "third world countries" or "poor countries") are the focus of much debate over the issue of exploitation, particularly in the context of the global economy.
Critics of foreign companies allege, for instance, that firms such as Nike and Gap Inc. resort to child labour and sweatshops in developing nations, paying their workers wages far lower than those that prevail in developed nations (where the products are sold). This, it is argued, is insufficient to allow workers to attain the local subsistence standard of living if working hours common in the first world are observed, so that working hours much longer than in the first world are necessary. It is also argued that work conditions in these developing-world factories are more unsafe and much more unhealthy than in the first world. For example, observers point to cases where employees were unable to escape factories burning down—and thus dying—because of locked doors, a common signal that sweatshop conditions exist. The Triangle Shirtwaist Factory fire of 1911 was another example, but it occurred in the US, so the first world of then is the equivalent of the third world of today.
Others argue that, in the absence of compulsion, the only way that corporations are able to secure adequate supplies of labour is to offer wages and benefits superior to preexisting options, and that the presence of workers in corporate factories indicates that the factories present options which are seen as better—by the workers themselves—than the other options available to them (see principle of revealed preference).
A common response is that this is disingenuous, as the companies are in fact exploiting people by the terms of unequal human standards (applying lower standards to their third world workers than to their first world ones). Furthermore, the argument goes, if people choose to work for low wages and in unsafe conditions because it is their only alternative to starvation or scavenging from garbage dumps (the "preexisting options"), this cannot be seen as any kind of "free choice" on their part. It also argued that if a company intends to sell its products in the first world, it should pay its workers by first world standards.
Following such a view, some in the United States propose that the U.S. government should mandate that businesses in foreign countries adhere to the same labour, environmental, health, and safety standards as the U.S. before they are allowed to trade with businesses in the U.S. (this has been advocated by Howard Dean, for example). They believe that such standards would improve the quality of life in less developed nations.
According to others, however, this would harm the economies of less developed nations by discouraging the U.S. from investing in them. Milton Friedman was an economist who thought that such a policy would have that effect. According to this argument, the result of ending perceived 'exploitation' would therefore be the corporation pulling back to its developed nation, leaving their former workers out of a job.
Groups who see themselves as fighting against global exploitation also point to secondary effects such as the dumping of government-subsidized corn on developing world markets which forces subsistence farmers off of their lands, sending them into the cities or across borders in order to survive. More generally, some sort of international regulation of transnational corporations is called for, such as the enforcement of the International Labour Organization's labour standards.
The Fair Trade Movement seeks to ensure a more equitable treatment of producers and workers, thus minimizing exploitation of labour forces in developing countries. The exploitation of labour is not limited to the aforementioned large scale corporate outsourcing, but it can also be found within the inherent structure of local markets in developing countries like Kenya.
Main article: Labour economics
Wage labour, as institutionalized under today's market economic systems, has been criticized, especially by both mainstream socialists and anarcho-syndicalists, utilising the pejorative term wage slavery. They regard the trade of labour as a commodity as a form of economic exploitation rooting partially from capitalism.
As per Noam Chomsky, analysis of the psychological implications of wage slavery goes back to the Enlightenment era. In his 1791 book On the Limits of State Action, classical liberal thinker Wilhelm von Humboldt posited that "whatever does not spring from a man's free choice, or is only the result of instruction and guidance, does not enter into his very nature; he does not perform it with truly human energies, but merely with mechanical exactness" and so when the labourer works under external control, "we may admire what he does, but we despise what he is." Both the Milgram and Stanford experiments have been found useful in the psychological study of wage-based workplace relations.
Additionally, Marxists posit that labour-as-commodity, which is how they regard wage labour, provides an absolutely fundamental point of attack against capitalism. "It can be persuasively argued," noted one concerned philosopher, "that the conception of the worker's labor as a commodity confirms Marx's stigmatisation of the wage system of private capitalism as 'wage-slavery;' that is, as an instrument of the capitalist's for reducing the worker's condition to that of a slave, if not below it."
THE TERM "exploitation" often conjures up images of workers laboring in sweatshops for 12 hours or more per day, for pennies an hour, driven by a merciless overseer. This is contrasted to the ideal of a "fair wage day's wage for a fair day's work"--the supposedly "normal" situation under capitalism in which workers receive a decent wage, enough for a "middle class" standard of living, health insurance and security in their retirement.
Sweatshops are horrific examples of exploitation that persist to this day. But Karl Marx had a broader and more scientific definition of exploitation: the forced appropriation of the unpaid labor of workers. Under this definition, all working-class people are exploited.
Marx argued that the ultimate source of profit, the driving force behind capitalist production, is the unpaid labor of workers. So for Marx, exploitation forms the foundation of the capitalist system.
All the billions in bonuses for the Wall Street bankers, every dividend paid to the shareholders of industrial corporations, every dollar collected by capitalist landlords--all of this is the result of the uncompensated labor of working-class people. And because exploitation is at the root of capitalism, it follows that the only way to do away with exploitation is to achieve an entirely different society--socialism, a society in which there is no tiny minority at the top that rules.
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EXPLOITATION IS not unique to capitalism. It has been a feature of all class societies, which are divided into two main classes, an exploited class that produces the wealth and an exploiter class that expropriates it.
Under slavery, exploitation is naked and obvious to exploiter and exploited alike. The slave is forced by sword and lash to work for the master, who provides just enough to keep the slave alive--all the rest of the fruits of their labor are forcefully appropriated by the slaveowner.
Similarly, under feudalism as it arose in its classical form in Europe, the serfs work on a plot of land that belongs to the lord. They work for part of the time for themselves, producing their means of subsistence, and the rest of the time, the product belongs to the lord. The terms of exploitation are clear to serf and lord alike--the serf labors for the lord, and receives nothing from the lord in return.
Capitalism is different among the chief forms of class societies Marx examined in that the exploitative nature of labor is hidden by the wage system. Except in cases of outright fraud, workers are hired, labor for a given amount of time and receive a wage in return. It appears on the surface that an equal exchange has taken place--but this isn't the case.
Why not? The capitalist, in addition to purchasing various inputs into the productive process--machinery, raw materials, etc.--also buys what Marx called "labor-power," increments of workers' time during which the capitalist controls the workers' creative and physical energies.
Under capitalism, most needs are met, at least for those who can afford them, by commodities--commodities being goods and services produced for sale on the market. Working-class people, who don't own the means to produce and sell commodities, have one commodity they can sell: their labor-power, their ability to work. In this way, workers are forced to sell themselves to some capitalist piecemeal in order to acquire money to buy the necessities of life.
Labor-power, according to Marx in writing his first volume of Capital, is "the aggregate of those mental and physical capabilities existing in the physical form, the living personality, of a human being, capabilities which he [or she] sets in motion whenever he [or she] produces a use-value of any kind." In other words, labor-power is the capacity to work, to create value, which the worker sells to the capitalists in increments for a wage.
Labor, on the other hand, is the actual process of work itself. Like the buyer of any commodity, the capitalist claims the right to consume the commodity they purchase. In this case, the consumption of labor-power consists of the control of the labor process and the ownership of the products workers create during it.
According to Marx's analysis, unlike machinery, raw materials and other inanimate inputs that pass on their value to the product but create no new value, labor-power is a "special commodity...whose use-value possesses the peculiar property of being a source of value." In other words, workers produce new value contained in the final product, which belongs to the capitalist.
The distinction between "labor-power" and "labor" is the key to understanding exploitation under capitalism.
When a capitalist pays a worker a wage, they are not paying for the value of a certain amount of completed labor, but for labor-power. The soaring inequality in contemporary society illustrates this--over the past three decades of neoliberalism, the wealth that workers create has increased, but this has not been reflected in wages, which remain stagnant. Instead, an increasing proportion of the wealth produced by workers swelled the pockets of the superrich, who did not compensate the workers for their increased production on the job.
It appears that the capitalist pays the worker for the value produced by their labor because workers only receive a paycheck after they have worked for a given amount of time. In reality, this amounts to an interest-free loan of labor-power by the worker to the capitalist. As Marx wrote, "In all cases, therefore, the worker advances the use-value of his labor-power to the capitalist. He lets the buyer consume it before he receives payment of the price. Everywhere, the worker allows credit to the capitalist."
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CAPITALISTS PURCHASE labor-power on the market. In general, the wage--the price of labor-power--is, like all other commodities, determined by its cost of production, which is in turn regulated by struggles between workers and capitalists over the level of wages and benefits, and by competition between workers for jobs.
As Marx wrote in Wage Labor and Capital, the cost of production of labor-power is "the cost required for the maintenance as the laborer...and for his [or her] education and training as a laborer."
In other words, the price of labor-power is determined by the cost of food, clothing, housing and education at a given standard of living. Marx adds that "the cost of production of...[labor-power] must include the cost of propagation, by means of which the race of workers is enabled to multiply itself, and to replace worn-out workers with new ones." So, wages must also include the cost of raising children, the next generation of workers.
So in Marx's generalized analysis, the level of wages depends on what it takes to keep workers and their families (who represent the next generation of workers) alive and able to work--with their standard of living affected by the outcome of class struggles between workers and capitalists.
The crucial point is that the cost of wages or labor-power depends on factors completely independent of the actual value produced by workers during the labor process. This difference is the source of "surplus value," or profit. So let's compare the price of labor-power to the value, expressed in price, of the commodities that workers creates through their labor.
To take a simple example, let's assume that a worker is able to produce in four hours new value that is equivalent to the value of their labor-power for the day--to, say, $100 in wages. Marx called this "necessary labor," because it is the amount of labor required to replace the wages paid by the capitalist, and because if the worker labored independently and not for a capitalist, it would be "necessary" for them to work four hours to maintain their standard of living.
If it was a matter of "a fair day's pay for a fair day's work," workers ought to be able to go home after four hours of labor. In our example, the capitalist is paying them $100 for the workday, and the worker produced $100 worth of new value in the form of products that belong to the capitalist, which they can sell on the market to recoup what they spent on wages and other costs of production.
But things don't work this way under capitalism. As Marx wrote in a pamphlet called Value, Price and Profit, "By buying the daily or weekly value of the laboring power of the [worker], the capitalist has, therefore, acquired the right to use or make that laboring power during the whole day or week."
Hence, the worker, in order to receive a wage equivalent to the value they produce in four hours, is forced by the capitalist to work longer--a total of, in our example, eight hours. The value created during the additional four hours, embodied in the products produced by the worker during that time, is what Marx called "surplus value."
When this surplus product is sold, the capitalist pockets the proceeds--this, according to Marx, is the secret to the source of profits. And it's not only industrial capitalists whose profits derive from surplus value, or unpaid labor. The "rentier" classes, such as finance capital and landlords, take their cut from the wealth extracted from the labor of workers in the form of interest on loans to the industrial capitalists and to others in society, rent for factories and homes, and so on.
Exploitation forms the basis of all the profits shared among the entire capitalist class. It is not simply the case that the wealthy have a lot while workers have little; capitalists accumulate wealth through a system of organized theft from the working class.
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AN UNDERSTANDING of the basics of Marx's theory of exploitation helps to explain the different forms of struggles between workers and capitalists. To take a few examples (although there are many more):
One of the earliest such struggles was over the length of the working day, which Marx discusses at length in the first volume of Capital. So long as everything else remains the same, capitalists can increase the amount of "surplus labor" over and above that needed to produce the value of wages by extending the length of the working day. This increases the rate of exploitation, as workers spend a greater portion of the working day performing unpaid labor for the capitalist.
In the 1880s in the U.S., workers, led by anarchists and socialists, waged heroic struggles to limit the working day to eight hours. These workers were struggling to decrease the rate of exploitation. By fighting for a shorter working day, they were fighting to decrease the amount of unpaid labor they were forced to perform for the capitalists.
Similarly, struggles over wages and benefits are struggles over the value and price of labor-power, which is an expression of workers' standard of living. Capitalists seek to lower wages and slash benefits, decreasing the price of labor-power in order to increase the accumulation of surplus value, to maximize their profits.
This is evident in the current wide-ranging attack on workers' living standards, from public-sector workers' wages, pensions and health benefits to private-sector workers such as those at Verizon. The 45,000 union workers who went on strike at Verizon and the public-sector workers and their allies who rose up in Wisconsin were fighting to defend the price of labor-power.
Most importantly, Marx's theory of exploitation reveals that because the source of capitalists' wealth is the unpaid labor of workers, the interests of workers and capitalists--like slave and master or serf and lord before them--are diametrically opposed and are impossible to reconcile. The two will always come into conflict since capitalists can only increase their share of the wealth at the expense of workers, and vice versa.
Workers have to struggle to decrease the severity of the exploitation they face under capitalism. But as long as the capitalist system exists, workers will be exploited, and their unpaid labor will remain the source of the profits that are the lifeblood of the system.
Therefore, Marx concluded that the only way for workers to control the wealth they create and use it to meet their needs was under a different system altogether. As he wrote in Value, Price and Profit, "Instead of the conservative motto 'A fair day's wages for a fair day's work!' they ought to inscribe on their banner the revolutionary watchword: 'Abolition of the wages system!'"
According to Marx, only when workers control the means of production for their own benefit can exploitation be abolished--only then will "the expropriators [be] expropriated."