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In political economy, economics, and sociology, exploitation usually does not include simple theft, since the latter is not a persistent economic or social relationship, as when a pimp "exploits" his prostitute. Rather, exploitation involves some persistent aspect of the socioeconomic system, an institution. This corresponds to one ethical conception of exploitation, that is, the treatment of human beings as mere means to an end — or as mere "objects". In different terms, "exploitation" refers to the use of people as a resource, with little or no consideration of their well-being.
There are two major types of theories here:
- organizational or "micro-level" exploitation: in the broad tradition of liberal economic thinking, most theory of exploitation centers on the market power of economic organizations within a market setting. Some neoclassical theory points to exploitation not based on market power.
- structural or "macro-level" exploitation: "new liberal" theories focus on exploitation by large sections of society even (or especially) in the context of free markets. Going off the liberal spectrum, Marxist theory points to the entire capitalist class as an exploitative entity, and to capitalism as a system based on exploitation.
The focus of most assertions about the existence of exploitation is the socio-economic phenomenon where people trade their labor or allegiance to a powerful entity, such as the state, a corporation or any other private company, or a trade union.
In this line of thought, there are two primary viewpoints on the reality of exploitation in capitalism:
- organizational exploitation is an inherent feature of capitalism.
- organizational exploitation cannot coexist with capitalism. (in the absence of criminal activity)
On the theoretical level, these two different viewpoints are diametrically opposed, and irreconcilable; much of this article reflects that fact, by presenting the two opposite viewpoints on the various issues. Also, since many people see "capitalism" or "free markets" as existing in some parts of the world but not others, it can be argued that both viewpoints may be valid in different places at different times.
Though this obviously involves over-simplification, the first view will be termed the "anti-capitalist" theory while the second view will be termed the "pro-capitalist" theory.
The anti-capitalist school, e.g., social-liberals, progressives, populists, anarchists, and Marxists, argue that — even in the absence of physical compulsion to work (slavery or serfdom) — there are inherent power imbalances between some or all employers, on the one hand, and some or all workers, on the other. This line of thought goes back at least as far as Adam Smith's Wealth of Nations. He wrote:
- "The masters [i.e., employers], being fewer in number, can combine much more easily; and the law, besides, authorises, or at least does not prohibit their combinations, while it prohibits those of the workmen. We have no acts of parliament against combining to lower the price of work; but many against combining to raise it. In all such disputes the masters can hold out much longer. A landlord, a farmer, a master manufacturer, or merchant, though they did not employ a single workman, could generally live a year or two upon the stocks which they have already acquired. Many workmen could not subsist a week, few could subsist a month, and scarce any a year without employment. In the long-run the workman may be as necessary to his master as his master is to him, but the necessity is not so immediate." (volume I, ch. 8, paragraph 12)
The use of the word "exploitation" goes far beyond Smith. It is a characterisation of the work for pay system (wage labor), when it is applied with cruelty, or with compulsion, or on terms that are objectionable to the employee. Besides notions of "corporate exploitation" (developed below), neoclassical theories of exploitation follow in this tradition. Furthermore, Marxist theories of exploitation are probably the best known of this category. They are also discussed later in this article.
The pro-capitalist school, e.g., conservatives, classical liberals, libertarians, Austrian-school economists, Chicago-school economists and anarcho-capitalists, argue that — absent physical compulsion — the only way that an employer may hire a worker is by offering a basket of goods (wages, working conditions, and benefits) sufficient to "bribe" him or her away from existing work options and leisure, and that therefore any employment relation that does not involve physical force or threats is – ipso facto – not exploitative. They argue that any exchange in the absence of physical compulsion is voluntary, and therefore both sides gain from it.
Further, the spread of free market competition is seen as destroying any existing market power over individuals. If exploitation of this sort is successful, the exploiters will earn excess (above-normal) profits. This in turn attracts entry by entrepreneurs in search of profits. Such competition (assuming it can gain a foothold) is believed to end the market power, the exploitation, and the profits. Furthermore, the pro-capitalists argue that technological change can also abolish monopoly and monopsonistic power, as with the shrinkage of the Western Union corporation and its power.
Organizational exploitation in developing nations
The empirical existence of organizational exploitation depends on the social context. The 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.
To the anti-capitalist viewpoint, the main kind of organizational exploitation is "corporate exploitation ", which is seen as prevailing in the "third world". This school of thought points to cases of corporations such as Nike and The Gap, which are alleged by some to use child labor and sweatshops in order to manufacture their products cheaply 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 much less safe 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 pro-capitalist faction, as well as corporate spokespeople, argue that, in the absence of compulsion, the only way that corporations are able to secure adequate supplies of labor 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 ).
The anti-capitalist viewpoint responds 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. This viewpoint also argues that if a company intends to sell its products in the first world, it should pay its workers by first world standards.
Anti-capitalists 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.
The pro-capitalist viewpoint responds that the workers do have other options besides starving: all of the options that existed before the corporations arrived, and which continue to exist (e.g. if workers feel exploited soldering motherboards, or sewing jackets in a factory, at given levels of salary, safety, etc., they are free to return to farming, fishing, or other traditional occupations). This ignores, of course, the way in which the commercialization of agriculture and other traditional sectors has led to the expulsion of much labor from these sectors, and the fact that increasing numbers of people are driven to the cities by the population boom, so that the option of returning to previous conditions is no longer available.
In the pro-capitalist view, the promotion of a greater scope for markets and competition (as advocated by the International Monetary Fund and World Bank) would solve any problem of corporate "exploitation". The argument that first-world wages should be paid to third-world workers is often countered by pointing out that if such wages were mandated, the corporations in question would have no incentives to export factories to the developing world, and would keep the factories in the developed world, which would deny third-world workers the option of working for these corporations. The anti-capitalist school replies in one of two ways: The first answer is that corporate incentives could be preserved by paying third-world workers wages that are not exactly the same as the first-world standard, but are a sizable fraction of it (e.g. 80%). The second, and perhaps more common, answer is that moving jobs to the third-world is a bad thing in the first place, and it would be good to remove incentives for such behaviour.
The anti-capitalist viewpoint also argues that corporate wealth can be a strong incentive in governments with weak human standards and rampant corruption, to persuade such governments to give various privileges to various corporations. Thus, the case is often made that a corporation shares complicity in human rights abuses when it enters into a working partnership with a tyrannical and abusive political government, to exploit the people for their labor. Such partnerships have involved the suppression of independent labor unions, the military suppression of strikes, and the torture of union activists.
Some theories of exploitation (Marxian, new liberal) are structural, while others are organizational (neoclassical). Meanwhile, the pro-market school sees not only organizational exploitation by labor unions but also structural exploitation by the state.
The pro-market school postulates that exploitation can only exist where physical force is used as a tool of coercion. They deny that inbalances of power, concentration of wealth, unequal knowledge or lack of any alternatives for the workers can lead to exploitation. Following this train of thought, they argue that because only criminals and states arrogate to themselves the use of force as a tool of coercion, then only criminals, governments, and states are exploitative (in their view, labor unions are either criminal or sponsored by the state). The pro-market advocates claim that a state is a monopoly run by a special interest group, regularly interfering with markets and other processes which they see as free and natural, thus being a "parasite" on society. Their proposed solution is to move to a minimal state and absolute free market; that is, giving a totally free reign to private companies and corporations.
Strangely, there is sometimes convergence between "pro-capitalist" and "anti-capitalist" thinkers. The view that the state is an exploitative organization run by or for a special-interest group is shared by Marxists and anarchists (also known as libertarian socialists). They see the state as being operated either for the capitalist class or in coalition with it, while capitalists are seen as a special interest group, exploiting the working class both through economic means and through their control of the state.
In Marxist theory, corporate exploitation is usually called "superexploitation" — exploitation that goes beyond the normal standards of exploitation prevalent in capitalist society. While other theories emphasize the exploitation of one individual by an organization, the Marxist theory concerns the exploitation of an entire segment or class of society by another. This kind of exploitation is seen as being an inherent feature and key element of capitalism and free markets. In fact, in Das Kapital, Karl Marx typically assumed the existence of purely competitive markets. In general, it is argued that the greater the "freedom" of the market, the greater the exploitation. The perceived problem is with the structural context in which free markets operate (detailed below). The proposed solution is the abolition of capitalism and its replacement by a better, non-exploitative, system of production and distribution (first socialism, and then, after a certain period of time, communism).
In the Marxist view, "normal" exploitation is based in three structural characteristics of capitalist society:
- the ownership of the means of production by a small minority in society, the capitalists;
- the inability of non-property-owners (the workers, proletarians) to survive without selling their labor-time to the capitalists (in other words, without being employed as wage laborers);
- the state, which uses its strength to protect the unequal distribution of power and property in society.
Because of these human-made institutions, workers have little or no choice but to pay the capitalists surplus-value (profits, interest, and rent) in exchange for their survival. They enter the realm of production, where they produce commodities, which allow their bosses to realize that surplus-value as profit. They are always threatened by the "reserve army of the unemployed". In brief, the profit gained by the capitalist is the difference between the value of the product made by the worker and the actual wage that the worker receives; in other words, capitalism functions on the basis of paying workers less than they earn through their labor, in order to enable the "parasitic" capitalist class to turn a profit. For more on this theory, see the discussion of Marx's labor theory of value.
Some Marxian theories of imperialism extend this kind of structural theory of exploitation further, positing exploitation of poor countries by rich capitalist ones (or by transnational corporations). Some Marxist-feminists use a Marxian-style theory to understand relations of exploitation under patriarchy, while others see a kind of exploitation analogous to the Marxian sort as existing under institutional racism.
In neoclassical economics, exploitation is organizational, explained using microeconomic theory. It is a kind of market failure, a deviation from an ideal vision of capitalism. The most common neoclassical exploiter is a monopsony or a monopoly. These exploiters have bargaining power. This kind of exploitation is supposed to be abolished by the spread of competition and markets.
Other neoclassical theories go beyond simple organizational exploitation. First, another type of exploiter is the hired "agent" (employee) who takes advantage of the "principal" (employer) who hires him or her, under conditions of asymmetric information (see the principal-agent problem). For example, an individualistic clerk may be able to "shirk" on the job, secretly violating the labor contract. Similarly, a greedy top executive may embezzle or pad his or her "perks" contrary to the interests of the stockholders. This kind of exploitation is beyond the scope of markets, within corporate or governmental bureaucratic organizations. It is often extremely hard to solve using competition and markets but is instead addressed using monitoring of employees and management, hierarchy, risk-sharing agreements, bonding, and the like.
A final type of neoclassical exploiter is the free rider who takes advantage of others who pay for the production of public goods. For example, someone may refuse to pay for national defense or the protection of property rights even though he or she benefits from these public goods. This kind of exploitation is encouraged by free markets because those institutions encourage individualism. The solution, in the aforementioned example, is to introduce taxes to pay for public goods, rather than rely on voluntary (and unreliable) donations.
New liberal theories
For others, i.e., a minority of "new liberals", exploitation naturally coexists with free markets. As in Marxist theory, the problem is structural rather than organizational and can coexist with free markets: given their special position in society (controlling an important asset), an interest group can shift the distribution of income in its direction, impoverishing the rest, even though their role serves no reasonable purpose. While Henry George pointed to land-owners, John Maynard Keynes saw rentiers (non-working owners of financial wealth) as fitting this picture. The first receive land-rent while the second receive interest, even though, according to the proponents of this theory, they contribute nothing to society. They merely own a certain asset and have the ability to make money from that asset without actually doing any work themselves. While George argued for a "single tax" on land-rent to solve this problem, Keynes hoped that interest rates could be driven to zero.
In some ways, these theories are similar to the Marxist one discussed above. However, they deal with the power and influence of special interests in society (and within the capitalist class) rather than dealing with a structural difference in class position of the Marxian sort. Further, while Marx saw exploitation as raising the total amount of production in capitalist society, in these theories exploitation represents a form of waste or inefficiency, hurting growth under capitalism. Therefore, according to this view, abolishing rent or interest would make capitalism operate better.
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