I had a thought. I’m not really sure which category I should place this post in, but as I don’t have an “Economics” category, I’m stuck putting it in my “Politics” category. Basically, I want to say that, for the most part, I am a capitalist. Capitalism has its faults and weaknesses, but I believe it has lifted more people out of poverty than any other system out there. Is it perfect? No. But I think it is the best economic system our species has developed to date.
That said, I think it is worthwhile to point out … limitations or errors or weaknesses inherent in the system. Back in college I had a friend who was a dedicated socialist. One day, we were just talking and he said something like, “Locke gives you the ‘Labor Theory of Value’ and he takes it away, just like that. And I can show you where, too.” That’s when the light bulb went off for me. As a philosophy major I never studied economics, so the term ‘value’ had a different meaning for me. But after a moment’s reflection, it became apparent to me that my friend wasn’t referring to anyone’s hierarchy of goods or anything like that; instead, he was focused on money. Basically, he was saying that money is backed-up by labor. Money is labor, and labor is money. Or so my friend might say. I don’t think I necessarily agree with that in its entirety for a number of reasons, but it is worth reflecting on at least for a few moments. I call it the socialist point.
Basically (remember: I am not an economist, so I could be flubbing this point entirely), the socialist believes that the real currency that runs our economy is labor. The money you are paid for when you work is meant to compensate you for that labor. Hence, money represents labor. And that does seem to have some merit. After all, it would be exceptionally difficult for the economy to run without any labor. Without labor, nothing is done, and ultimately, everyone starves.
Once you make that connection, the socialist’s problem with capitalism should be easy to recognize. Pick the CEO of any major company. He is paid far, far more than any person in the lower ranks; yet, if you remove the labor from the company, the company ceases to exist: It cannot exist without labor. The socialist says that the company produces only what its labor force produces. Hence, its labor force is responsible for all of the company’s profit. Yet, it is the CEO who reaps the greatest reward.
How is that possible? The simple answer is that the CEO has power. The rank-and-file do not. The CEO benefits from a better strategic position in the company than does the average laborer. As a result, he can fire laborers who complain and there is little the laborers can do about it. So, the CEO—who seeks his own self-interest first—earns a big salary because the laborers produce a valuable product that earns a substantial amount of money. From that money, the salary of the CEO and the laborers is taken, and excess profit is put back into the company or maybe paid out to shareholders (who contribute nothing to the actual product of the company—their only value is that they provide monetary fertilizer to fuel company growth from time to time). The socialist is basically saying that the laborers are directly responsible for the profit the company makes, and yet, they never see a dime of it. Their labor has been stolen to produce it. Since, labor does not constitute a visible thing, such a theft is an invisible one. The labor/money taken from the worker is never seen.
So, the socialist feels fully justified in using the government to “steal” the money back from the wealthy.
I’m not sure I wrote that clearly enough, but I think it encapsulates a critical component of socialist thinking. For myself, I think socialists win a point, but not the argument. There are a number of counter-points to be made, none of which I have space for. Things like money shouldn’t represent labor, but rather accomplishment (I think—and only in a macro-economic sense). Intelligent decision making should be rewarded. Freedom should be promoted. And individual choices have consequences. And I’m sure there are many, many more, but, like I said, I don’t have space for them all.