Commentary on Political Economy

Thursday 21 April 2016

Inequality, Exploitation and Capitalism

To say that capitalism is yet again “in crisis” is both to state the obvious and to understate the matter. As we have argued repeatedly here, after all, crisis, in a specific sense, is of the very essence of capitalism – something that Marx and Schumpeter above all others understood too well. The problem then is not to tarry on this latest crisis of capitalism but rather to try and understand what is new in this fresh bout of difficulties that are besieging not just the economic and financial machinery of capitalist systems but also and above all their political institutions, from the nation-state to global economic, financial and military co-operation.

If we look around at the latest attempts to deal with these pressing issues, from those who denounce “the 1 per cent” of top income earners to illustrious authors such as Piketty and Bourguignon and Milanovic, the universal emphasis is on “global inequality” of incomes as the worst, albeit avoidable, defect of capitalism. The problem with these studies of capitalist economies is that they are exclusively empirical in orientation: they tell us what is happening in terms of income distribution across capitalist economies – but they do not tell us why it is happening because they view the solution to this type of capitalist crisis to require the re-distribution of income from high to low earners. Even when they attempt to go beyond simple empeiria to some form of analysis, these studies tend to concentrate on classic Keynesian explanations of capitalist crises – and that is on a lack of aggregate demand brought about by growing inequality in the distribution of income, leading to a liquidity trap, if not across national economies, then at least within them. In the perspective presented by this empirical research, the distribution of income is the overriding and avoidable problem to be addressed so as to reform the capitalist system and bring it back onto the right path of economic growth.

These studies turn out to be misguided and inadequate to the extent that they fail to address the fact that inequality of incomes itself cannot amount to a valid criticism of an economic system such as capitalism that founds its vaunted economic efficiency on that very inequality. Of itself, and in the absence of proven exploitation, inequality is not sufficient to form the basis of a valid critique of any economic system. Granted that incomes are distributed unequally, why and how does this constitute a defect in the system? Clearly, such distributive critiques of capitalism must rely on some legal unfairness in the operation of the system such as inadequacies in the tax system or on other forms of unequal exchange or even outright cheating in trade and commerce. What they fail to advance are reasons why the essence of the capitalist system involves the exploitation of those whose incomes are inferior on the part of those whose incomes are superior.

The essential point that they miss is that the problem with capitalist industry is not and has never been one of unequal distribution or unequal exchange – as if capitalism depended essentially on economic exchange. This flawed approach to the analysis and critique of capitalism resembles the dated and in truth quite pathetic approach of the “terzomondisti” (Third World theoreticians), from Immanuel Wallerstein to Samir Amin, that flourished in the 1970s. (I say “pathetic” not because these were poor studies but rather because they appeal to “pathos”, to an ethical aversion to capitalism rather than present a rigorous analysis of its operation as a mode of production of social wealth. Our critique of capitalism must always be aimed at how it is exploitative on its own terms, not because of some extrinsic abuse of the system.)

The proper critique of capitalism must move from the inequality of distribution of incomes to the causes for the necessity of this inequality: we must attempt to prove that exploitation is at the very core of capitalist production and that it is not just an accident of the distribution of the social wealth it produces. To establish such causes, then, we must move from the sphere of distribution to that of production. Put differently, we must move from complaining that the distribution of wealth in capitalism is unfair to the fact that such inequality is founded on the very system or mode of production of social wealth that capitalism has instituted. This is a crucial step because, once we can establish that capitalism is not just “unfair” due to some epiphenomenal, adventitious and inessential flaws in the distribution of the social wealth it produces, this unfairness is then also shown to be in fact the intrinsic factor in the manner or mode or process whereby capitalism controls and directs the production of social wealth.

This includes an analysis of how capitalist industry determines (a) how the factors of production enter the process of production; (b) how the product is produced; and also (c) what products are produced. Finally, we must inquire about how inequality of distribution is a necessary outcome of this system of production and also how this inequality is vital to the reproduction of the system. Understanding how the reproduction of the system of production also reproduces its manifest inequality is vital to developing a political assault on the capitalist mode of production and on its political foundations.

We all know or ought to know that capitalism involves disparity in the distribution of incomes or social wealth. But is this just an accidental matter involving some form of illegal or unfair abuse of what is otherwise a “fair and efficient” system of production, or is there rather some essential intrinsic feature or property of capitalist production that necessitates not just unfair distribution but also particular forms and processes of production and distribution that perpetuate the inequality of incomes and the seemingly “unfair” or “unequal” distribution of social wealth in capitalist societies?

This is the correct way of stating the problem of capitalist crises and of seeking a solution to their troubling persistence. Without this crucial operation, however commendable and justified the efforts of the aforementioned authors may seem, we will be limited to stating the effects of our present predicament without even remotely being able to address its root causes except perhaps superficially or piously or even sanctimoniously – a bit as Pope Francis would. However welcome these repeated calls for justice and fairness may seem, they are woefully inadequate for the simple reason that they fail to address the operation of the capitalist system of production and therefore of distribution itself, and not merely the “accident” or “injustice” of its unequal distribution. To insist with the religious analogy, blaming capitalism for social inequality is a bit like accusing the devil of heresy! We must be able to enucleate the nature of this “heresy”.

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