Karl Marx Was Right: Workers Are Systematically Exploited Under Capitalism
Even among Marx-friendly economists, the labor theory of value has fallen out of favor. But its technical validity is less important than the core message: workers are exploited because the value they create is undemocratically taken by capitalists.
In 1865, Karl Marx filled out a questionnaire. We thus know, for example, his favorite color (red), his favorite food (fish), and his favorite names (Jenny and Laura, those of his wife and daughter). He left the line for “figure in history you dislike the most” blank (my best guess is that he had trouble narrowing down the list) and listed two for “your hero” — Johannes Kepler and Spartacus.
Those latter choices tell you everything about how Marx understood his theoretical project. Kepler assimilated the study of the heavens into mundane physics by discovering laws of planetary motion. Spartacus led a slave revolt.
Marx’s collaborator, Friedrich Engels, called their project “scientific socialism.” The idea wasn’t that social science by itself could tell you that socialism was better than capitalism. The “science” — Marx’s drive to uncover the “laws of motion” of capitalist economies — was an engineering science, one meant to understand how capitalism worked in order to overcome it and thus, in Marx and Engels’ eyes, remove arbitrary economic obstacles to human flourishing.
In his magnum opus, Capital, Marx used the most advanced economic theory of his day to decipher the structure of capitalist exploitation. Like David Ricardo and other previous nonsocialist economists, Marx thought that the value of a commodity was a product of the labor time it took to produce — the “labor theory of value.” Sharpening Ricardo’s analysis with his own insights, Marx conceived of value as the “congealed” result of average socially necessary labor time.
If you think of “value” in this way, the traditional socialist charge that workers are exploited under capitalism is easy to understand: workers produce value but capitalists control how much of it is returned to them in wages.
Like every other area of empirical inquiry, though, economics has changed a lot since Capital was published in 1867. Today, most economists — including many who are committed Marxists — reject the labor theory of value (LTV).
But does the apparent obsolescence of the LTV mean capitalism is innocent on the charge of exploitation? Not quite. As the Marxist philosopher G. A. Cohen demonstrated, Marx’s core insight about exploitation can be reformulated in an even simpler way if you drop his nineteenth-century assumptions about value and prices. The key point is that workers are the source of the products that have value and capitalism systematically forces them to surrender some of that value to the boss.
That’s a complicated proposition. So let’s walk through it, starting with Marx’s original formulation.
Marx’s Analysis of Labor and Capital
Marx spends the first five chapters of Capital analyzing several economic concepts, starting with commodities, money, and value. He then considers them in relation to capital, using his famous three-letter diagrams.
For instance, even a subsistence farmer might sell some of the goods he and his family don’t need to buy products they can’t make — a chain of transactions that Marx renders as C-M-C (commodities-money-commodities). The capitalist does the opposite: M-C-M (money-commodities-money). While a miser simply keeps his money, perhaps filling a swimming pool with gold coins like Scrooge McDuck, the capitalist turns his cash into commodities and turns those commodities into more money (representing an underlying increase in value) — whether by selling them (in the case of the merchant capitalist) or using them to manufacture new goods and selling those (in the case of the industrial capitalist).
Crucially, the capitalist drive to accumulate money isn’t primarily about individual capitalists being bad, greedy people but rather the relentless pressures of the system itself. A capitalist who doesn’t ruthlessly pursue profits will be outcompeted by those who do — as Marx says, the capitalist is a kind of “rational miser” (while the miser is a “capitalist gone mad”).
But, Marx asks, how does the store of value held by the capitalists increase?
To be sure, some people are better at business than others and can buy cheap and sell dear, but how does the supply of value in society as a whole increase over time? Where does the new value come from? Marx’s answer is that a worker’s capacity to work — her “labor power” — is a “c” that has the capacity to turn “m” into more “m.”
At this point in the discussion, any good defender of capitalism will counter that the capitalist provides the physical means of production — the factories, equipment, and so on. Isn’t the capitalist the source of that value? But Marx points out both that the physical means of production are a source of value insofar as they are used by workers and that these are themselves the result of the activity of previous workers — in Marx’s phrase, “dead labor” used by “living labor” to produce more value.
And yet, despite being the source of value, labor is dominated. In a striking passage at the end of chapter six, Marx portrays a stylized exchange between the “owner of money” and the “owner of this peculiar commodity, labor-power,” who meet in a marketplace to exchange their property. They meet as equals to make this exchange, but then:
When we leave this sphere of . . . the exchange of commodities, which provides the “free trader vulgaris” with his views, his concepts, and the standard by which he judges the society of capital and wage-labor, a certain change takes place, or so it appears, in the physiognomy of our dramatis personae. He who was previously a money-owner strides out in front as a capitalist; the possessor of labor-power follows as his worker. The one smirks self-importantly and is intent on business; the other is timid and holds back — like someone who has brought his own hide to market and now has nothing to expect but — a tanning.
As the book continues, turning at last to the key concept of class struggle, Marx writes at length about what the “tanning” looks like and how it works. He describes “half-starved widows” giving up their children to toil in the match-making industry — working all day every day and facing very early death because of the industrial process. He writes about groups of desperate workers and their families petitioning local governments to reduce their worktime to eighteen hours a day.
But Marx’s key analytic point is that mainstream economists who ignore the class antagonism at the heart of capitalism are obscuring a central element. Under feudalism, the direct producers (peasants) are clearly forced into giving up some of their “surplus labor” (the time they spend working but not to meet their own needs) to the ruling class. The coerced transfer is out in the open. Under capitalism, the immediate producers (workers) are legally free to make contracts with anyone or — if they’re willing to simply go hungry — no one. The coercion is disguised.
Yet the underlying reality, Marx insists, is a crude relationship of domination and extraction.
G. A. Cohen’s Analysis of Exploitation
In his 1989 book History, Labour, and Freedom, socialist philosopher G. A. Cohen points out that while most economists (including many contemporary Marxist economists) reject the labor theory of value, rank-and-file socialists often talk as if the LTV is obviously true. What explains the disconnect?
The LTV, as Marx inherited it from Ricardo and sharpened it with his own analytic contributions, may or may not be true, but it certainly isn’t obvious. To begin with, the relationship between value and price that Marx postulated is complicated. A whole series of facts about competition and supply and demand pressures can carry the actual market price of a commodity far away from its underlying value. Nevertheless, Marx thinks, prices are still a kind of distorted reflection of labor-time value.
This view isn’t as easy to refute as many barstool libertarians seem to believe. Marx doesn’t think, for example, that products have more value if they’re made by particularly slow workers. Marx sees value as stemming from the social average in necessary labor time at a particular time and place.
Still, even the non-strawman version doesn’t persuade most contemporary economists. As economist and Jacobin contributing editor Mike Beggs notes, economists today think in terms of supply and demand schedules rather than supply and demand as forces operating on commodities — which makes Marx’s argument that something must account for prices when these forces are in balance much less compelling.
But Cohen believed that rank-and-file socialists who think the LTV is obvious are moved by something other than Marx’s technical claims about value. Instead, what moves them is something like a “labor theory of things that have value,” which is very obviously true! Regardless of what value is, no commodity that has value has ever been the product of anything except some combination of (a) the nonhuman natural world and (b) human labor.
And once that’s in place, the entire analysis in the previous section still applies. I faithfully reproduced several of Marx’s key arguments in Capital there, but nothing I’ve said presupposes the technical details of the LTV.
OK, but Are Workers Really Exploited?
Pro-capitalist economists like to talk about “land, labor, and capital” as independent factors that all contribute to production and say that therefore the disconnect between the part of a firm’s revenues that goes into workers’ wages and the part that isn’t under their control is unobjectionable — after all, workers only supply one of the three factors. But if capital means the share of society’s resources (above and beyond what’s present in unaltered nature) used in production, that’s just the fruit of previous labor. It hardly rebuts the charge that workers don’t control the products of their labor.
Of course, capitalists sometimes do managerial labor themselves, but that doesn’t mean that “manager” and “capitalist” aren’t distinct roles. In a small enough business, the owner might even sweep the place up herself at closing time. But that doesn’t make the role of a capitalist the same as the role of janitor.
Fine, a defender of capitalism could argue, but aren’t capitalists still making an important contribution by hiring the managers that oversee the production process?
While some managerial labor wouldn’t be necessary if workers controlled the means of production and their incentives were different, some would be. But any managers who are performing useful tasks could be hired by a workers’ committee as easily as by a capitalist. As Cohen puts it elsewhere, what’s socially necessary is “what is delegated” — not the capitalist who happens to be empowered by existing social structures to do the delegating.
When it comes to land, the equivocation is even more obvious. Does ownership of land contribute somehow to production? Only in the sense that the owner permits it to take place. (If that counts, in an absolute monarchy where the king has to grant individual approval to every productive act in his kingdom, he, too, is usefully contributing!)
The land itself makes a valuable contribution, but how does that refute the Marxist charge that it’s exploitative for workers not to control the output of their labor? As radical scholar David Schweickart argues in his book After Capitalism, unless the idea is that some of the crops produced by the combination of land and agricultural labor are going to burned as a “sacrifice to the God of Land,” the land’s contribution seems rather irrelevant to questions of distribution.
In the same vein, G. A. Cohen argues that it doesn’t matter for the charge of exploitation whether autoworkers are directly producing value or simply producing cars which have value (and transporting the cars, and selling them). If anything, not routing Marxist analyses of exploitation through nineteenth-century assumptions about equilibrium prices simplifies the issue and sharpens Marx’s original analogy between feudalism and capitalism. As with feudal peasants, workers are deprived of control over the product — and hence whatever price it fetches if the person who does control it sells it.
Cohen’s Analysis of Working-Class Unfreedom
To be clear, neither Marx nor Cohen thought that workers should receive the entire product of their labor. Marx argued that this would be both impractical and wrong for a variety of reasons. For one, what about upkeep of old factory equipment? Or about building new factories? What about “common needs” like schools and hospitals or the consumption needs of those unable to work?
What makes the surrender of some of the value produced by workers or the value of the commodities they produce exploitation is that it’s surrendered not in some democratic process in which the beneficiaries have to make a convincing case but that it’s taken as a result of the power one class has over another.
The real question, then, is whether the part of the value controlled by the capitalist is voluntarily surrendered by the worker. In fact, Cohen argues that the LTV being true would do nothing to strengthen the charge of exploitation. To see why not, assume a simply “marginalist” account of value whereby value is produced by the desire of consumers. Does that somehow give consumers a right to the things they desire? Of course not. The real issue is who produces the goods and services themselves, and whether the arrangements by which those products come under the control of separate capitalists are ones the workers accept of their own free will.
Libertarian philosopher Robert Nozick argued that someone can only be “coerced” to do something if their property rights aren’t respected, but Cohen argues in a brilliant 1983 paper that this gets things backward, and not just because libertarian theories of property rights are deeply implausible. We can and should establish that something is coercive before we ask whether anything could justify that coercion. A serial killer, for example, is forced to stay removed from society — and that’s a good thing.
Nor does it do any good to say that the worker with no realistic ability to start a business of his own has at least some other choices besides going to work for a capitalist — that he can “go on the dole, or beg, or simply make no provision for himself and trust to fortune.” You might as well say a bank teller forced with a gun to her head to give up the code to the safe isn’t really forced because she had the option of wrestling away the gun or giving her life for the bank. When we say that someone was forced to do something, Cohen points out, we don’t generally mean they had literally no other choices — just that they had no acceptable choices.
Cohen thinks the best argument against the claim that workers are forced to submit to the rule of capitalists, and hence forced to give up the part of the product of their labor that isn’t under their control, is the simple fact of upward mobility. Some workers, even some who start in very desperate positions, are eventually able to claw their way up to a higher position in the class structure — for example, by starting small businesses of their own.
But Cohen argues a crucial point: it’s structurally impossible for everyone in a complex modern economy to own their own little business. Either the labor force will collectively control the means of production or they’ll be dominated by capitalists who can then extract their surplus labor — the labor that goes not toward meeting their own needs but toward the remainder of a firm’s revenues, which, whether kept by the capitalists or reinvested, is outside of the workers’ control.
“Capitalism requires a substantial hired labor force,” Cohen writes, “which would cease to exist if more than a few workers rose.” This means that even though there are a few lifeboats, the working class is collectively trapped aboard the wage-labor ship.
He introduces an analogy:
Ten people are placed in a room, the only exit from which is a huge and heavy locked door. At various distances from each lies a single heavy key. Whoever picks up this key — and each is physically able, with varying degrees of effort, to do so — and takes it to the door will find, after considerable self-application, a way to open the door and leave the room. But if he does so he alone will be able to leave it. Photoelectric devices installed by a jailer ensure that it will open only just enough to permit one exit. Then it will close, and no one inside the room will be able to open it again.
There is a sense in which any of those prisoners can escape. But there’s also a clear sense in which they’re collectively unfree. A prisoner in Cohen’s hypothetical room, like a worker under capitalism, might be able to make their individual escape, but they can’t escape with their fellow prisoners.
The only way for workers to be free to all escape together, Cohen says, is for them to achieve a “deeper kind of freedom” — freedom from class society.