Making matters worse, the so-called “labor theory of value” hides the fact that it is essential that most people become capital owners. As Pope Leo XIII said, “The law, therefore, should favor ownership, and its policy should be to induce as many as possible of the people to become owners.” (“Quamobrem favere huic iuri leges debent, et quoad potest, providere ut quamplurimi ex multitudine rem habere malint.” Rerum Novarum, § 46.) This is because as technology becomes far more productive than any human being can hope to be and displaces people from wage system jobs, it also becomes more expensive than people without past savings can afford.
Proponents of the Great Reset and similar proposals fail to acknowledge this or admit that if people cannot be productive with labor alone, some way must be found for them to become owners of the technology that is displacing them. Instead, they make one or all these five fatal errors:
· Sovereignty and thus natural rights to life, liberty and private property are not inherent or effective in every actual human person, but only in an abstraction such as a capitalist elite or a socialist collective,
· Private property in capital is irrelevant if the fruits of ownership such as income and control can be distributed “equitably” among non-owning stakeholders (i.e., where the enjoyment of the fruits of ownership does not depend on ownership),
· People do not need to have production power if they have consumption power (i.e., the power to consume is more important than the power to produce),
· Only past savings can be used to finance new capital formation (i.e., the only way to increase production is by reducing consumption), and
· Human labor alone is productive; technology and land at best only enhance human labor.
|Human beings are persons with rights, not just suppliers of labor|
Perhaps what is most baffling about these errors is that at first glance they do not appear to have anything in common. On reflection, we see that they all share a certain orientation away from the human person, but there is no necessary correlation among them, e.g., what does reliance on past savings have to do with the idea that labor alone is productive? (The labor theory of value is a shift away from the human person because the capacity for labor is inherent in each human as a fact of being, while the capacity for ownership of capital is inherent in each human as a right of personality.)
Nevertheless, and although this does not apply in all cases, we see that people who make one of the errors also tend to make the others. Further, because the weaknesses of each flawed assumption complement the others and seem to validate them, the combination — not to exaggerate — is cataclysmic in human terms.
Having looked at the first four flawed assumptions earlier in this chapter, we now turn to “the labor theory of value.” Immediately we run into problems.
First, in classical economics there are two very different theories, both of which are called the labor theory of value. For Adam Smith, a thing is valued according to its utility to the consumer. Someone will value what he wants to purchase in terms of the effort (“labor”) it cost him to obtain what he offers to the seller in exchange for what the seller offers. To Smith, in this context “labor” was a general term for cost, whether effort, time, trouble, or even “sentiment.” (Smith’s “labor theory of value” is more subtle than is generally believed. Smith distinguished between value to the producer, and value to the consumer, with both being valid (thereby confusing later economists), where Ricardo and Marx attempted to assert that value to the producer is the only things that really matters. Read carefully, Smith did not mean that things are valued to the consumer in terms of the labor that went into producing them (Ricardo’s notion), but that things are valued in the market in terms of the effort (“labor”) that went into obtaining what the consumer exchanges for the thing. Smith, Wealth of Nations, op. cit., I.v.1-7.)
Believing he was correcting Smith, David Ricardo declared that labor alone is productive. All things, therefore, are valued according to the labor that went into producing them, not for their utility to the consumer. Technology is accumulated or congealed labor, so the owner of capital is due only what it cost him in terms of labor to obtain the capital. (David Ricardo, The Principles of Political Economy and Taxation (1817), Ch. I, § vii.)
The implications of Ricardo’s labor theory of value are devastating, especially when it comes to the basis of economic activity. By shifting the basis of value from what the consumer wants, to what the producer wants, Ricardo nullified Smith’s first principle of economics: that the only reason to produce is to consume, i.e., create value for the consumer. In this way, Ricardo transformed economics from the science of satisfying human need at the lowest possible price and highest possible quality, to that of fueling human greed at the highest possible price and lowest possible quality.
Further, by assigning all production to labor, Ricardo denied that non-human factors are truly factors of production. Non-human factors of production are secondary because — according to Ricardo — human labor created them in the first place.
Ricardo’s labor theory of value raised two difficulties that he failed to resolve. One, how does it account for land and natural resources? Two, what if immense labor is expended yet nothing of use is produced? We will address these in the next posting on this subject.