Tuesday, February 23, 2016

About That Labor Theory of Value, III: How Ownership Helps a Free Market

Yesterday we noted that to make the bargaining positions of “labor” and “capital” equal, it is only necessary to turn owners of labor into owners of capital as well.  Obviously, simply turning propertyless workers into capital owners isn’t the only thing that has to be done, of course.  There must also be equality before the law.

Duke of Sutherland, large landowner in the UK and the US.
That is, legal benefits or protections enjoyed by someone who owns a great deal of capital must be commensurate with those enjoyed by someone owning a little capital.  Someone is not entitled to protection of 150% of his or her property just because he has a lot, while only half of the small owner’s property is entitled to protection.
For example, a large landowner is not entitled to take half the land belonging to small landowners just because he or she is a large landowner and they are small landowners.  It also goes the other way.  The small landowners cannot take half the land of the large landowner just because they are small and the other is large.
Hilaire Belloc
It is therefore not necessary, as Hilaire Belloc advocated in An Essay on the Restoration of Property (1936), to institute barriers to prevent the “large man” from taking advantage of the “small man.”  Instead, the proper course of action in social justice is to remove the barriers preventing the “small man” from bargaining on equal terms with or being in competition against the “large man.”
Given true equality of opportunity — that is, equal access to institutions and equal enforcement of the law — equality of wealth is not necessary to implement and maintain equality of bargaining position.  All that is needed is enough to ensure that no one can be coerced or forced to act against his or her will in economic matters for fear of not being able to maintain an adequate standard of living.
Alexis de Tocqueville probably gave the best description of the sort of power that capital ownership vests in the owner.  In Democracy in America he illustrated his point with the following to show how private property ownership supports democracy:
Alexis de Tocqueville
“Most of the remarks which I have already made in speaking of servants and masters, may be applied to masters and workmen. As the gradations of the social scale come to be less observed, whilst the great sink the humble rise, and as poverty as well as opulence ceases to be hereditary, the distance both in reality and in opinion, which heretofore separated the workman from the master, is lessened every day. The workman conceives a more lofty opinion of his rights, of his future, of himself; he is filled with new ambition and with new desires, he is harassed by new wants. Every instant he views with longing eyes the profits of his employer; and in order to share them, he strives to dispose of his labor at a higher rate, and he generally succeeds at length in the attempt. In democratic countries, as well as elsewhere, most of the branches of productive industry are carried on at a small cost, by men little removed by their wealth or education above the level of those whom they employ. These manufacturing speculators are extremely numerous; their interests differ; they cannot therefore easily concert or combine their exertions. On the other hand the workmen have almost always some sure resources, which enable them to refuse to work when they cannot get what they conceive to be the fair price of their labor. In the constant struggle for wages which is going on between these two classes, their strength is divided, and success alternates from one to the other. It is even probable that in the end the interest of the working class must prevail; for the high wages which they have already obtained make them every day less dependent on their masters; and as they grow more independent, they have greater facilities for obtaining a further increase of wages.
“I shall take for example that branch of productive industry which is still at the present day the most generally followed in France, and in almost all the countries of the world--I mean the cultivation of the soil. In France most of those who labor for hire in agriculture, are themselves owners of certain plots of ground, which just enable them to subsist without working for anyone else. When these laborers come to offer their services to a neighboring landowner or farmer, if he refuses them a certain rate of wages, they retire to their own small property and await another opportunity.”  (Alexis de Tocqueville, “Influence of Democracy on Wages,” Democracy in America, II.3.vii.)

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