My ninth lecture: labour and capital, talking about the distribution of newly created wealth, the way to conceptualise this, the political stances deriving from this and the light these shed on ethical perspectives about economic and financial issues.
An English translation of my post QUESTIONS À RÉSOUDRE (I) TOUS CEUX QUI SONT RÉMUNÉRÉS LE MÉRITENT-ILS VRAIMENT?
There is a question that neeeds to be answered at all costs; 19th century thinkers have devoted much thought towards its solution. Here it is: when we consider rent obtained by a landowner or by the owner of mineral ore extracted from the ground, interest obtained by the owner of capital also known as capitalist, the profit gained by an industrialist or entrepreneur, and the wages paid to a worker, is one of these incomes unjustified and thereby undeserved?
The only point of agreement reached so far is the following: wage-earners truly deserve their earnings, without a shred of a doubt in any case for that part of those wages needed for mere survival. Workers provide their labour and it goes without saying that they should for their own good turn up at work the following day; they therefore deserve without any dispute wages sufficient to survive until tomorrow. For all other types of earnings unfortunately, the answer to that question remains desperately out of reach.
Karl Marx (1818-1883) took up this question from the same point of view as David Ricardo (1772-1823). He simplified the problem radically by asserting that the only justified income are wages: value is created by work and by work only, therefore any other income allocated to other interested parties, such as land owners, “capitalists” as holders of capital, or industrialists as entrepreneurs is undeserved. Marx calls “spoliation” any payment to participants other than workers.
Other 19th century authors, essentially socialist and anarchist thinkers such as Sismondi (1773-1842) or Proudhon (1809-1865), following on the tracks of 18th century economists such as Richard Cantillon (1680s-1734), François Quesnay (1694-1774), or Adam Smith (1723-1790), were of a different opinion. For them several types of advances participate in the production process and each of them deserves as its reward a part of the newly created wealth (*). Thus income ensuing from property rights was according to some authors a reward for work previously performed – sometimes several centuries prior – by some forefather of the current beneficiary; profit accruing to the entrepreneur was a reward for management and supervision of the production process; lastly, interests and dividends collected by the capitalist were compensation for relinquishing control of the loan amount until later.
A solution to such a baffling conundrum remains far from obvious: newly created wealth obviously results from the combination of a number of elements but how can one assess the true contribution of every one of them? The only sure thing is that lacking an unambiguous answer to this question, throughout the ages and until now only the power balance between parties has determined how much every party ends up getting at the end of the day.
(to be continued…)
(*) See for example what I have to say about the splitting of “parts” in the case of an african dugout canoe used for sea fishing in Le prix 2010 : 145-149