Karl Marx claimed that, to realize their profits, capitalists must exploit workers. However, by his definition of the word, every society – capitalist or not – depends upon exploitation. According to Marx, workers are exploited when they do not keep or control all the value created by their own labor. The problem is that, if a laborer received the full value of his product, why would anyone buy it? The only reason for buying something is for the value it provides, but if the price is so high that customers receive no net gain from its purchase, no purchase will take place. If no one buys anything, laborers will be left with products that they can neither use nor sell, and production will be of no benefit to anyone. Clearly, no society can survive under such conditions.
Marx tried to deal with this and other problems inherent in the Labor Theory of Value (LTV) by theorizing two different values:
Use value: The benefits – as subjectively determined by a product’s user – realized by utilizing the product.
Exchange value: The amount of socially necessary labor that can be obtained by exchanging a product (or service) or for another product, where “socially necessary labor” is the average amount of time that the average laborer takes to produce a given socially useful product. Exchange value is objectively determined by the amount of socially necessary labor contained in a product.
Using these different definitions of value, Marx could argue that the laborer could receive the full exchange value of his product while still leaving surplus use value for the purchaser.
But his theory of an exchange value that can be objectively determined implies that nearly any exchange must result in exploitation. In the exchange of any two goods, X and Y, there are only three possibilities:
- X and Y contain the same amount of socially necessary labor and, therefore, have the same exchange values.
- X contains more socially necessary labor than Y.
- Y contains more socially necessary labor than X.
In cases 2 and 3, no exchange will occur because no one will offer a good in exchange for one of lesser value. But neither would an exchange occur in case 1. Who would pay the transaction costs of taking goods to market to exchange them for goods that are of no more value? If exchange offers no gain, there is no point in making an exchange. Marx, perhaps recognizing that exchange must, according to his theories, entail exploitation, proposed a society in which exchange is prohibited.
In Marx’s utopia, factories would produce for use rather than for exchange. In practice, finished goods would be sent to warehouses from which they would be distributed to consumers. Workers would, in Marx’s formulation, produce according to their abilities and receive according to their needs. In practice, however, workers are far more likely to produce according to a quota set by central planners and receive according to the planners’ assessment of their needs.
Even assuming an ideal distribution of goods, though, the only way in which a worker can receive the full exchange value of his production is in the unlikely event that his needs exactly match his abilities. Most workers will either produce more than they receive or receive more than they produce. The former are exploited according to Marx’s own definition of the word. Moreover, if the society is to survive, most workers will have to produce more than they consume and, therefore, most must be exploited.
On the other hand, if exchange is prohibited, then the exchange value of any good or service is, legally, zero. Therefore, by definition, anything that a worker receives exceeds the exchange value of that which he produces. Problem solved – at least to the satisfaction of a Marxist theoretician. One wonders whether such verbal legerdemain will satisfy a laborer equally well.
Richard Fulmer worked as a mechanical engineer and a systems analyst in industry. He is now retired and does free-lance writing. He has published some fifty articles and book reviews in free market magazines and blogs. With Robert L. Bradley Jr., Richard wrote the book, Energy: The Master Resource.
READER COMMENTS
Richard W Fulmer
Feb 2 2023 at 11:33am
Chat GPT weighs in on my thesis and grudgingly admits that socialism would exploit workers. On the other hand, it also suggests that capitalism could meet socialism’s goals.
If goods are distributed from each according to his ability, to each according to his need, people with abilities that are much greater than their need would not receive the full exchange value of their output. Would that mean that they are exploited by Karl Marx’s definition of exploitation?
Chat GPT:
Karl Marx’s theory of exploitation is based on the idea that workers are not compensated for the full value of their labor, and that the surplus value created by their labor is appropriated by the capitalist class. In his view, the capitalist system is inherently exploitative because it allows capitalists to extract profit from the labor of workers.
In the context of the distribution of goods according to need, if goods are distributed from each according to his ability, to each according to his need, people with abilities that are much greater than their need may not receive the full exchange value of their output. This is because the emphasis is on fulfilling the needs of all members of society rather than on maximizing the exchange value of goods.
This distribution system can be seen as an attempt to address the exploitation of workers under capitalism by ensuring that everyone’s needs are met regardless of their ability to contribute to production. It’s worth noting that the idea of distribution of goods according to need is a theoretical concept that has been proposed by various socialist thinkers, but it is not implemented in any real-world economy.
If we want to distribute goods according to the rule, “from each according to his ability, to each according to his need,” what practical methods could be used to determine ability and need?
Chat GPT
Determining ability and need would be a crucial step in implementing a distribution system based on the principle “from each according to his ability, to each according to his need.” There are several practical methods that could be used to determine ability and need in such a system, but each method would have its own set of challenges and limitations.
One method would be to use a market-based system to determine ability and need. Under this system, individuals would be free to work in any field they choose, and their wages would reflect their ability and the demand for their skills. However, this system could be seen as problematic as it is still based on capitalist principles and might not be suitable for a socialist economy.
Another method would be to use a centrally planned economy to determine ability and need. Under this system, the government would decide what goods and services are produced, and how they are distributed. However, this system could be seen as problematic as it can lead to inefficiencies and shortages, and it would be difficult to make decisions that are in the best interest of all members of society.
A third method would be to use a combination of the above two methods, with a mix of market-based and government-determined factors. Under this system, the government would set certain parameters, such as minimum wages and maximum prices, but would allow market forces to determine the prices of other goods and services. The government would also be responsible for ensuring that basic needs are met for all members of society.
Ultimately, determining ability and need would be a complex task, and any system that is used would need to be adjusted and refined over time to ensure that it is as fair and efficient as possible.
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