13
Jul
09

Exploitation

One argument for wealth redistribution is utilitarian in nature. Due to the decreasing marginal utility of wealth — the argument goes — we can make people happier by shuffling around the total resources in society. There are some losses due to the shifted labor incentives and the transaction costs of moving money, but these are outweighed when the people receiving the money are destitute enough because their gains in utility are really big.

There is another argument for wealth redistribution though. This argument, often advanced (usually by Marxists of some sort), is that capitalism is exploitative. There are many ways to interpret this claim, but here is an analogy that helps show one way that capitalism might be exploitative. Imagine you are in the ocean with no way to reach land. You will die of thirst or drowning. A ship comes up to you and the captain says to you “I will save your life if you give me all of your money and work for me as my indentured servant.” It’s true that this offer makes you better off, but its exploitative. It takes advantage of the fact that your current option (death) is so bad, that anything looks better by comparison, even offers that you would never accept in any other situation.

According to Marxists, capitalism works the same way for someone with no skills. If the alternatives are starving or working many hours at a low paying job, most people choose the latter, but only because the former is so bad. Of course there is the question of whether capitalism’s offers are so bad that they should be deemed exploitative. I think in at least some cases, they are.

Minimal wealth redistribution avoids this problem by guaranteeing at least one tolerable (though not great) fall back option: government support. The question of where to set this level of government support is an open one, but the point is just that at some level, a person will not be forced to accept exploitative offers if they can instead up to accept government money.

Notice though that this has nothing to do with who controls the means of production. Laborers can be exploited by owners of capital if they have no skills, but owners of capital can be exploited as well. If I own a steel mill, but all the steel laborers refuse to work for me except for exorbitant wages, then I am exploited since I cannot eat my steel mill. I will starve without workers to produce steel, who take advantage of me by saying that they will only work for outrageous wages, leaving with almost no profit. In principle, labor as well as capital can make exploitative offers.

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