EXPLOITATION: Capitalism = Theft

by Bill Sacks

April 8, 2021

            The essential feature of class-divided societies, including capitalism, is exploitation – exploitation of one (very large) class of people by another (much smaller) class. It is the one thing that absolutely prevents the reforming of capitalism to turn it into an equitable system. (This analysis is based on Capital, Vol. 1 by Karl Marx)

Exploitation in capitalist society is the exchange of money for labor in which the money is less than the value of labor’s product – uneven exchange. Exploitation is the bedrock on which two economic (and social) classes exist, with a third group comprising people who may exhibit features of each class, such as small business owners who work alongside their employees or people who are self-employed, independent professionals, or managers.

To communists (and Marxists in general) social class is not then a quantitative concept measured in income or wealth, but rather a qualitative concept based on either extracting work in exchange for money or goods (exploiters) or providing work in exchange for money or goods (exploited). Or as communists/Marxists say, which class you belong to is based on your relationship to the means of production or large service industry (factories, machinery, tools, private hospital, computer marketer) – either owning them (exploiters) or working with them (exploited).

The capitalist class – those who own the means of production (the factories or service industries) – exist and survive by means of extracting profit from their enterprises. Profit is the difference between what the capitalists pay the workers in wages plus what they pay for raw materials and to establish and maintain the plant – that is, the costs of production – and the money received by the owners when the product is sold, which is always more than the costs of production or the enterprise goes out of business.

Marx realized that the secret of profit lies in the difference between the wages that workers are paid in any time interval (a day, a week, a month) and what the workers are able to produce in that same interval. He realized that the value of the raw materials and deterioration of the plant is a part of the sale price that is merely transferred from cost paid by the capitalist to money received by the capitalist, while the difference between what the workers produce and what they are paid is the entire source of profit – and that profit is entirely owned by the capitalist and not by the workers.

That is, in order for the capitalists to make any profit, it is necessary that they pay the workers less than the value of what those workers produce. The baseline of wages is determined not by the value of what workers produce, but rather by what workers need to survive. However, the actual wage, above or below baseline, is determined by the conflict between the workers and the capitalists. The workers struggle to increase their wages to keep their families alive, while the capitalists are forced to keep wages as low as they can in order to increase their profits. Their profit is not merely something the capitalists find to their liking; rather their profit is the ticket to their survival in the face of competition with rival capitalists. Greed is the result of this competition, not its cause.

Thus, wages and profits are forced, by the conflict between the two classes, in opposite directions, with wages the means of survival for the workers and profits the means of survival for the capitalists. Wages and profits are the two components of the value produced solely by workers and not at all by capitalists; a rise in one entails a fall in the other – a life-and-death tug of war between the two classes. The interests of each therefore lie in maximizing their component, and minimizing the other. There is no pathway to equality between these two classes, as their interests are in direct opposition to each other. It is not incidental or accidental that, throughout the pandemic that has tremendously worsened the bargaining position of the workers, a number of US billionaires have already doubled, tripled, and quadrupled their billions, while countless workers have nearly starved or became homeless, if they have managed to survive the virus.

Nor would dividing the total value produced by workers into two equal halves be equitable either, because only the workers produce the entire value, even though capitalists own it – an ownership protected by law in a capitalist system.

Capitalism necessarily generates inequality between the two classes, and to strengthen their own hand and weaken that of the workers, the capitalists are forced to generate as much social inequality and enmity within and among the workers as they can. Even when workers come to realize that the rich get richer by making the poor poorer, and try to resist, it is the rich who have the power to maintain their position of authority, through their control over the means of coercion – police and the military, along with their ability to withhold jobs, the workers’ only means of survival (apart from the few who prey on other workers).

In capitalism the existence of two opposed classes remains hidden

            The Marxist (and accurate) explanation of class is obscured by the claim by capitalists and their ideologues that a person’s class is based on their income rather than on their relation to the process of production. Well paid workers, with an income high enough to buy a home, car, vacations, and some luxuries, are called “middle class.” The term “working class” is reserved for blue collar workers, who often earn only enough to barely get by – and often not even that much. This forces many workers into ever-growing debt and poverty, and dependency on government supplementation of their incomes.

Unemployed workers are in a despised category among the poverty stricken, as if they had landed there through some insufficiency of their own. Some very well paid workers, like surgeons or high-level administrators, are even called “upper class,” but they, too, are dependent on the permission of the profit-making owning class for their situation. The relatively small owning class is enabled to decide how the society is run, by means of their control over the means of production. Since access to the means of production is the sole path to survival for the vast majority of the society (the working class), control over these means enables the owners to withhold that access when they choose, thus disabling and coercing the working class. Thereby, the owning class becomes the actual ruling class, with the façade of democracy-through-voting serving to hide this political reality.

Of course, there is also a quantitative difference between the conditions of the working and owning classes, but it is determined by the qualitative difference between their respective relationships to the means of production, with the relatively small class of exploiters becoming increasingly richer at the expense of the large class of workers, who on average become increasingly poorer. Some workers, like doctors or lawyers, who used to operate primarily in independent offices and employ other workers, are now predominantly paid employees of large academic institutions or profit-making healthcare or law corporations, a process Marxists call proletarianization – despite their wages being much higher on average.

The coercion of labor, and the theft of what the laboring class produced, were immediately apparent under slavery and feudalism. Capitalism, rather than abolishing the coercion and theft, as the capitalists and their elected and appointed officials claim, instead merely renders these features invisible. The theft is hidden behind the claim that workers are paid the value of what they produce. But the baseline of wages is not the value of the product of their labor, but rather the amount of product they require to survive.

What workers produce is always more than they require to live on, as that product has to also support the other half of the population, that is the non-working portion – children, elderly, disabled persons. And in capitalism the product additionally comprises tremendous wealth for the capitalists – something that in a system without exploitation would go strictly toward social needs, including education, sanitation, fire control, healthcare, infrastructural features like energy, roads, bridges, ports, and countless other things that could ease the existence of the working class.

The exploited working class, who feel more or less oppressed, is nevertheless unaware for the most part of the nature of the uneven exchange of money for labor. And even the capitalists willfully blind themselves to this underlying reality. The appearance is that of fair and equal exchange of money for work, but its essence, if properly understood from the point of view of the working class, is theft. Profits are the portion of value produced by workers that is appropriated by the capitalists – in short, stolen.

Why is this form of theft legal?

            How does it come to be legal for a capitalist to pay a worker $100 less than the value of what she or he produces when it is a crime for a worker to steal $1 from the till? This arrangement arises because those who make the laws and determine what is legal and what is illegal, are dedicated to the preservation of capitalism. This is true whether the lawmakers are themselves members of the ruling class or simply believe that the system is the fairest that can be achieved. Some liberal and social democratic office holders try to legislate fairness, by limiting “excessive” profits and permitting only “fair” profit. But all profit, by definition (though understood as such only through Marx’s discovery), is excessive, and no profit is fair, since all profit is theft. It is the workers who produce all the value in society and receive only a portion of it – whether in public services or wages – while the capitalists, through their ownership, are enabled to steal the rest.

            Nor is the portion that goes into profit a matter of choice or morality on the part of the owning class. Because of life-and-death competition among businesses, no boss can afford to decrease his/her profits by any significant amount below the general rate of profit in an industry. If a business’s profits are not maximized, then banks and investors will migrate away from the business and deprive it of the capital needed to maintain itself or grow. And the business will inevitably fail. Profit is the lifeblood of capitalism, but it is the blood of the working class that is pumped through the veins and arteries of the system.

            In Marxist terms, “surplus value” is the difference between the value of the worker’s product and her/his wage, what capitalists call profit. Rather than depending on market forces, as capitalist economists believe and proclaim, profit is produced not in the market place, but rather in the place where the product is made or the service is provided. It revolves around the difference between the value of what workers are forced to produce and the value of what they need to survive (if they can force the boss to pay that much). And value is measured in terms of the hours of labor needed to produce the goods or services.

            To the extent that the wages of some workers are more than the bare minimum needed for survival, this has resulted from organization and struggle. The eight-hour day, health insurance, paid vacations, maternity leave, safety standards – all these werewon through long, hard, massive union strikes. However, unions have now shrunk to only 10.7% of the workforce in the US (and most of that portion is government or public workers), and as a result the level of struggle has markedly diminished (https://tinyurl.com/u7uyzf5s). Not only have there been no recent gains in the wage portion of business revenue, but many of the former gains are being taken away by the owners, backed up by their essential control over the government.

            As a result, many employed, let alone unemployed, workers do not even earn enough to live on. The minimum federal wage of $7.25, or even the current goal of $15 an hour, is not enough to live decently, or live without going into ever-increasing debt. For unskilled work, or work for which there is a surplus of workers (i.e., high unemployment), then the capitalists have less need to maintain any given workers for long, and they can be easily replaced. While 5% unemployment was said by capitalist economists, before the pandemic, to be the level at any moment in time that necessarily reflects the movement of workers among various geographical locations and jobs and cannot fall below that level – a contention that is partly true – the 5% minimum also functions to maintain this wage-lowering extra supply of labor. But that figure hides the fact that many jobs are only part-time and many are only temporary and insecure. Settling for this situation is the best that many struggling workers can do, which forces them to work more than one job. Besides, the claim that 5% is a natural level due to worker choice and mobility, leaves unexplained why so many workers cannot find a job. And this condition has become far worse with the pandemic, leaving some 10% fewer jobs available than before (https://tinyurl.com/yw7s5nf6). Adding insult to injury, the twin threats of hunger and exposure are disguised as the fault of the unemployed workers. Marxists use the term “wage slavery” to describe capitalism, distinguishing it from chattel slavery.

            Skilled workers, like computer programmers, require more investment and are also in shorter supply. Thus they are able to command higher wages and more services, like health care, and are better able to insure more job security. However, in general, the costs of maintaining the working class as a whole, through social services like education, sanitation, hospitals, and even the costs of controlling workers with the military and police, are paid for in taxes disproportionately taken from workers’ pay rather than from corporate profits or taxes on the highest incomes – just another form of theft.

How much theft does profit represent?

            Total annual profit stolen from the 160 million (pre-pandemic) US workers was some $2.25 trillion (https://tinyurl.com/w39sy3an) – an average of about $14,000 stolen from each US worker per year – with another $665 billion stolen from workers abroad (https://tinyurl.com/2nt6e924). Since the median US wage in 2019 was $34,000 (https://tinyurl.com/4bkpum64) over 40% ($14,000/$34,000) of what workers produced was stolen by the capitalists, and the rest was paid in wages. That is, workers were paid roughly 60% of the value of what they produced.

There are complicating issues, such as job insecurity, temporary work, and part-time jobs, in addition to the difference between a mean wage and a median wage (the mean is somewhat higher), but this gives a rough idea. Additionally, the 40% that is stolen by the small owning class is concentrated in many fewer hands than the 60% that is retained by the much larger working class, and in 2019 CEOs of large companies were paid approximately 320 times as much as the average worker (https://tinyurl.com/2y7un9j8). At this ratio, their protests that they work harder or that their work is more valuable fall on deaf ears.

Superexploitation is not merely more intense but is qualitatively different from exploitation

            For workers in imperialized countries (euphemistically called the “third world,” “developing nations,” or “global South”), wages often fall below what they need to sustain themselves and their families (without going into ever-increasing debt), though many workers in the older imperialist countries of Europe and the US experience the same. The wealthy northern imperialist nations have, through centuries of invasion and conquest, established a world order in which resource extraction and very low-paid assembly work is all that is allowed in third world countries, leading to a situation  of “superexploitation.” This is a qualitatively different degree of exploitation, in which workers are paid less than the value of what it takes to survive, and have to borrow in order for their families to eat and maintain shelter, thereby sinking into debt.

Debt only multiplies as time goes on, and workers are submerged deeper and deeper, never able to pay it all back, and remaining tied to whatever work or income can be achieved. This would happen even in the absence of interest, but lending in a capitalist system (except from friends or family) is never without interest, which makes this condition far worse and the deepening even quicker.

Automation and the expansion of worldwide production networks have caused a growth in unemployment of over 200 million workers around the world that results in massive poverty, ever-increasing debt, hunger, and homelessness. Millions are forced to migrate to escape starvation or abuse. All this misery accompanies and is directly caused by the ever-growing stolen wealth, and consequent dominant power, of the capitalists, who alone control workers’ access to the means of survival.

            Even within wealthy capitalist/imperialist nations like the US, a growing number of workers are superexploited. In particular, the wages of many black, Latin, Native American, and immigrant men, and of many women workers of all ethnicities, fall below the survival level. Women workers are paid lower wages on average than white men, one third less on average.* This is mainly due to job discrimination, with a lesser role played by lower pay for equal work. But countless white workers are also superexploited, even in the imperialist nations, albeit in lower proportions. Thus, racism reinforces sexism, and vice versa – both increasing the profits of the capitalists, which is the reason they persist despite massive struggles against these forms of division.

*On average, women earn 82 cents for every $1 men earn, with the earnings of most women of color on the low end of the variation around this average. Compared to average male wages, while Asian women earn 87 cents (above the average for women), Latinas earn 55 cents, Pacific Islanders, Native Hawaiian, and black women earn 63 cents, and Native American women earn 60 cents for every dollar that men earn (https://tinyurl.com/pw9jvsuw).

Black men earn 87% as much as white men and Latin men 91% (see chart, from https://tinyurl.com/33ud89c2).

Racist and sexist ideas are propagated by ruling class culture, through the education system and mass media, to ensure that workers believe that this extra degree of exploitation is a result of the inferiority of the lower-paid and unemployed workers, rather than an inevitable product of a system of exploitation and the profit needs of its ruling class. A great degree of effort and planning goes into segregating types of work, housing, and schooling in an effort to ensure that members of different ethnic groups do not get to know each other, do not come to trust one another, and have difficulty uniting in struggle. The goal of this effort is division and weakening to hold down disruptive resistance.

None of the recent media attention that the countless massive demonstrations against the murder of George Floyd in May 2020 have received, even dares to raise the question as to why the deadly disease of racism is so persistent in the US (and the world). The elephant in the living room, as difficult to perceive as it is, traces its hidden roots to the profit needs of the class that rules, both to enable maximization of exploitation for profit enhancement as well as to preserve their system.

            Divisions among workers weaken and victimize those on both sides of the gap, which means that white workers are also victims, despite the appearance that the targeting is confined to non-white workers. And despite the appearance that white workers are privileged, they are merely victimized to a somewhat lesser extent. (See the many articles on this blog which delve into the ways racism and sexism divide and injure both non-white and white workers.)

Why do workers submit to exploitation?

            The coercion by threat of unemployment, which can lead to starvation and homelessness, is accompanied by the deception of the appearance of equal exchange. The coercion and deception are inseparable and crucial for the maintenance and undisrupted daily routine of the capitalist system. Coercion without deception would risk rebellion and possibly the overthrow of the entire capitalist system.

            While workers see that capitalism is unfair to them in many ways, and various groups strike from time to time for higher wages and better working conditions, the combined coercion and deception encourage the conclusion that there’s nothing that can be done about it in the long run. The need for abolition of the entire system, through revolution, only becomes clear through exposure of the deception.

            Capitalism succeeded feudalism through violent revolutionary events such as the French revolution, and through the outright theft of land and the massive theft of persons, taken by the millions from Africa and enslaved in order to produce the commodities that the colonists traded: cotton, sugar, tobacco, metal ores, spices, and more. The cumulative wealth of the capitalists increasingly gave them control over all other institutions of society, including the state – i.e., the government with its means of force and violence, including the police and military, the courts and prisons. Consolidated control of the state enabled them to accumulate even greater mountains of wealth.

            Thus, violence was not only needed to introduce capitalism to the world, but it is ever-present to maintain it when deception falters. The ruling class much prefers to keep violence in the background and to rely on deception for most of the working class, but for the most rebellious portions, who are the most oppressed on average and who are (as a group) least easily deceived, violence is unleashed on a daily basis in the form of ubiquitous police brutality, including frequent murder.

Conclusion: the key deception – the grand illusion of fairness

            Capitalist economists “explain” that profits come from simply selling a product or service for more than it costs to produce. But on average they sell products and services for their actual value, as measured in the labor hours that go into their production. It is their costs that are less than the value embodied in the product, measured in what it takes to keep the worker alive rather than in the hours they work. To put in Marx’s terms what we explained above: when Marx first unearthed the hidden inequality of exchange between exploiter and exploited more than 150 years ago, he explained it in terms of the difference between labor power (what it takes to keep the worker and family alive), for which the exploiter nominally pays money, and labor time that gives value to the product of the labor – a product owned legally by the exploiter and not by the exploited worker who produced it.

            In any system, as mentioned above, workers produce more than it takes to keep them alive. In a communist system that is collectively owned and controlled by the working class, this additional product would go not to profits for the exploiters (because there would no longer be any exploiters), but rather toward social needs, things that are necessarily shared – schools, hospitals, electricity, roads – in addition to individual daily necessities for non-workers, and the amenities that make life pleasurable.

            Exposure of the theft and inequality of exchange, as the hidden secrets of exploitation, will spell capitalism’s doom when enough of the world’s working class comes to grasp the deception, and the coercion. If capitalism were to be replaced by a worker-run society, which will take a massive and violent struggle – a revolution – then all would be freed to work in order to produce the goods and services that are needed to maximize the quality of all workers’ lives, rather than to make profits. Then there will be no capitalist class. And any former or newly aspiring members of this class, who do not integrate into the new society, will be suppressed. It will require a very long struggle for the working class to learn how to suppress the capitalists’ selfish ideas and motivations, that even infect the working class to an extent. There will inevitably be ups and downs, progress and regress, victories and losses.

            As is evident in Russia and China today, this long struggle does not always lead to permanent transformation. There are many lessons to be learned from the reversals of these revolutions, though before these reversals emerged, their many areas of progress render the term “failure” inapplicable. There are at least as many lessons to be learned from their successes as from their shortcomings – including most importantly that workers can take power and society can be run in their collective interests as a class.

The rapid conquest of many diseases and the increase in the standard of living, the rapid industrialization, the defeat of the Nazis in World War II, and the countless examples of democratization in work and education, are examples of the potential of workers to build a better and egalitarian world – one that eventually lasts for the remainder of humanity’s life on earth.

The takeaway points in a nutshell

• There are two major classes, defined in relation to each other.
• The capitalist class owns the means of production, while the working class uses them to produce goods and services.
• The value of goods and services is measured only in the hours of work by the workers.
• Profit essentially comes from paying workers less than the value of the product, not from charging more than that value, though prices can fluctuate somewhat due to supply and demand.
• It is the underpayment that is the essential feature of exploitation and the central feature of capitalism.
• To end exploitation will require abolishing capitalism, through an organized revolution by millions of workers.
• To prevent revolution and to enhance profits, capitalists resort to divisions that weaken the working class – racism, sexism, patriotism.
• These divisions weaken the position of all workers, white and non-white, male and female, even though they are more intensely applied to non-white and women workers.
• Hence the need of all workers for multiracial unity in the struggle to improve our lives and to eliminate exploitation.
• Communism will eliminate exploitation and any need to divide, promoting equality among the different artificial groupings and genders.

Recommended further reading:

Karl Marx’s Capital, Volume 1.

Susan Rosenthal’s Power and Powerlessness, Trafford Press, 2006.

Hadas Thiers’ A People’s Guide to Capitalism, Haymarket Books, 2020.