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Capitalism is Legalized Robbery

Gary Sudborough | 05.01.2004 05:14 | Analysis | World

An analysis of capitalism illustrating that not only are there periodic examples of large, conspicuous thefts by capitalists, but also there exists an everyday, subtle, disguised theft of value created by the working class.

There are occasions in the history of capitalism when robbery by capitalists becomes conspicuous to even the casual observer. Enron came to the deregulated electricity market in California and manipulated the electricity market with clever schemes having names like Death Star, Ricochet and Fat Boy. Enron and other energy companies stole billions of dollars from consumers, and then when the state of California stepped in, they stole billions more from the taxpayers and forced the state to sign long term contracts with energy producers at very high prices. The Federal Energy Regulatory Commission under the Bush administration acted as coconspirators in this episode by stalling on mandating price caps, refunding only a pittance of the amount stolen, and refusing to let the state out of its long term contracts.

Withholding power at critical moments to drive electricity prices sky high, these energy companies caused rolling blackouts, which resulted in numerous accidents and some deaths. In a just world they could be indicted for murder, as well as grand theft, because they must have known what the consequences would be of these blackouts.

In addition, Enron stole the life savings of many of its employees by fraudulent accounting practices and encouraging its employees to buy more stock, when the top executives had already sold out near the peak price and knew a precipitous decline in stock price was coming because of serious financial difficulties.

Slightly more than a decade earlier, there was another massive theft by corporate America called the savings and loan scandal. The amounts stolen here were staggering-on the order of 500 billion dollars. Instead of trying hard to retrieve the money from the thieves, the average American taxpayer was saddled with the bill, roughly five thousand dollars per family.

The corporate media like to pretend that these occurrences are aberrations which happen infrequently and that those responsible are punished adequately. Actually, they occur quite often, and the people responsible usually get only a slap on the wrist because they are respected businessmen, rather than common street criminals.

The history of American capitalism is one continuous series of these scandals and thefts. Capitalists like Rockefeller, Morgan, Mellon, DuPont and others got the name "robber barons" because of their many nefarious schemes to enrich themselves. The Populist movement arose in the late 19th century because farmers were being robbed by the banks and railroads. As an interesting aside, the Wizard of Oz was a symbolic fable written by a populist named Frank Baum. The wicked witches represented the banks and railroads.

However, there is a much more subtle and less noticeable form of theft by the capitalist system. One can comprehend this theft by examining Marx's Labor Theory of Value. The theory is that all wealth comes from labor and that the more labor that goes into a product, the more valuable it is. Profit is that part of the price of a product which rightly belongs to the worker, but is siphoned off by the capitalist due to his ownership of the means of production, also a result of theft.

I think the validity of this theory can best be visualized by thinking back to a primitive time when little of value existed. In order to provide food, clothing, shelter and other basic human needs, energy had to be expended as work to extract things of value from the natural world. The more energy that was expended, the more things of value came into existence. At a certain point in time with increased efficiency a surplus came into existence allowing a leisure class to develop, which lived off the labor of others. This leisure class then created an ideology which justified and legitimized their existence, sometimes using religion as in the divine right of European kings to rule their subjects. Of course, capitalism has also created a whole mythology to justify the existence of its ruling class.

When skilled craftsmen of various kinds developed, one can easily see how something they expended a lot of work to produce would be worth more than one requiring less effort. Then, mass production lines arose with capitalism and one can comprehend that cheaper products would result because with machinery the amount of labor required per item produced is much less. The leisure class that arose previous to capitalism had the land and the capital to build factories and purchase mass production machinery and exploit the labor of others, paying them only a fraction of the value their labor created.

Some people try to poke holes in the labor theory of value by pointing out all the other factors involved in the price of a product like the price of raw materials, utilities like electricity and water, transportation, etc. However, these things are all the result of past labor, so there is no contradiction here.

A good indicator of the validity of a scientific theory is if it can predict a future result. The labor theory of value predicts depressions. Since workers are paid only a fraction of the value they create and profit is taken by the capitalist, then workers should be able to buy back only a fraction of the goods and services they produce. This is indeed true. Capitalism always results in overproduction, inventories increase, workers need to be laid off and a depression occurs.

So capitalism results in glaring examples of robbery like Enron and the savings and loan disaster, but also is a continuous every day robbery of the working person. This is not discussed by the corporate media because the last thing they would want you to know is that capitalist society is based on theft. That might cause a revolution.

Gary Sudborough
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Hide the following 4 comments


05.01.2004 15:25

I didn't think that anyone seriously believed in the Marxist labour theory of value any more, asserting that labour is the sole determinant of value. For example, how can some comedians be worth £20 for an hour's show and another get £10,000 when the labour exerted (one hour of their time) is exactly the same? Is it possible that it is actually supply and demand that is the primary determinant of value, and that furthermore, Marx ignores factors such as context, position, time preference and the value-effort fallacy? With this simple analogy, I have exploded the primary hypothesis behind Marxist economic thinking, paving the way for the victory of capitalism.

Paul Edwards

An interesting but incomplete analysis

05.01.2004 15:32

The institutionalised theft you describe is a symptom of a debt-finance based capitalist system (see Michael Rowbotham - 'Goodbye America!' and 'The Grip of Death') and the artificially maintained scarcity of the means of exchange, money (some interesting examples can be found in Bernard Lietaer's 'The Future of Money').

Marx's Labour Theory of Value is important but neglects other determinants of value such as environmental scarcity . . . a tree in the Amazon rainforest has a greater value than the labour required to fell it, and this will increase with atmospheric CO2 levels.

An extrapolation of both Marx and Adam Smith's theories would lead to a description of some kind of value-based (social/environmental?) capitalism rather than the current, destructive, debt-financed, price-based one. I have not seen any real work on this as most people with a conscience have given up on all forms of capitalism, but a I believe such dismissal is as inaccurate as portraying Stalinism as defining all possible forms of socialism.

Capitalism need not even be hierarchical, co-ops can be a form of capitalist organisation (they are owned by workers, as opposed to owned by the state (communism) or collectively by society (anarchism)).

By all means be 'anti-capitalist', but if choosing to define yourself by what you are against it is important to understand as much about what you are opposed to as possible.

Paul Edwards - The Supply and Demand mechanism / Market forces determine PRICE, not VALUE. These are distinct concepts, a major blindspot in debt-financed industrial capitalism is to amalagamate these two separate economic concepts into one, logically eliminating the concept of exploitation from the contemporary capitalist paradigm.




Reply to Paul

05.01.2004 18:09

I didn't think that anyone with a reasoning mind could possibly think that value is determined solely by a relationship between inanimate objects like commodities or supply and demand. Let's face it. We are born into this world with a lot of demands, but there would be absolutely no supply unless human labor acted on the natural world to produce that supply of essential items for our survival like food, shelter and clothing. A skilled craftsman producing something for sale would naturally think that the value of something he had spent twice as much time on would be worth twice as much. Mass production machinery lowers the amount of labor spent on each article and therefore the price.

Your examples of actors, comedians or sports stars getting enormous sums of money are simply aberrations in the functioning of capitalist society. Marx realized capitalists could spend money on things which were not commodities. For instance, he mentions that people's conscience or honor could be bought or in other words politicians could be bribed or there could be other forms of corruption. This in no way alters the fact that an expenditure of human energy is necessary for anything to come into existence that is not already a part of the natural world like air, sunlight, water, etc. Capitalists now are not content with merely profiting from human labor, but would like to privatize things like water and even the DNA of our cells and profit from that also. The ownership of the means of production in no way entitles capitalists to exploit the labor of others. They got control of the means of production by theft and not hard labor. A coal miner works extremely hard all his life and all he gets is deeper in debt and a case of black lung. There is no logical justification for a few people to control most of the world's wealth.

Gary Sudborough
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see The Negative Outcome of Economics

08.01.2004 00:02

Paul Edwards seems to miss the main point of Marx. What Marx showed was an internal contradiction in Capitalism so it has to change to Socialism, or impose barbarism (fascism) to survive.

Keynes showed how to avoid the internal contradiction. Political and Economic idiots misused Keynes theory and have destroyed the efficacy of his remedy. Monetarists turned out to be cowards. So the World is going Fascist. And no one notices - because they are shouting at the distraction of the BNP while secret real Fascists have taken control of the Labour Party.

Proudhon tells us that Property is Theft. Moslems tell us to chop the hands off thieves.
That is not quite as radical as the solution proposed by Lucy Parsons, perhaps her answer is better because we must stop this industrial commercial military madness very soon if there is to be any chance that Life on Earth will be here in another Century.

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