Socialist Nonsense on The Evils of Wage Labour

A lot of socialists on Twitter still cling to Marx’s labour theory of value and see all employers as exploiting the employee.

The argument runs that any increase in the value of raw materials has been created by the labour of the employees and they should be entitled to that increase in value. Paying them a wage deprives them of what is rightfully theirs, the excess being taken as unearned surplus profits by the exploiters.

Unfortunately because it is very hard to understand economics and remain a socialist,  most people putting forward this view are economically naive.

Here is a simple common sense argument that helps demonstrates the error of this view.

Exactly the Same Labour Activity Can Produce Products With
 Very Different, Even Negative Values

Consider two workers in the non exploitative socialist Utopia, let’s call them Murray and Friedrich. They are both skilled labourers and make widgets.

Murray works for Tescopoly Plc and his widgets are painted blue.
Carl works for Leylandus Plc and his widgets are painted red.

In the market Blue Widgets are very popular they command a high price and sell in large numbers. Tescopoly makes large profits and the increase in wealth is shared between all the workers in the business. For each hour spent making widgets Murray is rewarded with £50.

Unfortunately, Leylandus misread the market and nobody wants red widgets. Despite making thousands of them, none were sold and Leylandus made a huge loss. This loss must be shared equally between the workers in the business. For each hour spent making widgets Carl must contribute £50 of his savings.

Both workers did exactly the same thing, they made widgets. In one case the widgets made a profit and in another they made a loss. Despite containing the same amount of labour, one product was worthless to consumers while the other was highly valued.

If socialism is all about equality how can its own system of reward give one man £50 an hour while costing another £50 an hour for doing the same thing?

It should be plain that the relative value of the products and performance of the two businesses was determined, not by the labour hours spent, but by the decision of the entrepreneur to produce one type of product or another and meet the demands of the market most effectively.

The idea that wage labour benefits the capitalist and not the employee is also a myth.

The benefits to the employee are:

1. Capitalists take on the risk of business failure. The workers are paid wages for the time they spend working on the job, they no longer have to take the risk that their work will yield no reward. They have certainty of income which enables them to plan their lives.

It is no different to the way that some people choose risk and invest their life savings in shares, others prefer security and invest in savings accounts. One accepts risk in return for the chance of high reward, the other accepts a lower reward in return for security. Nobody claims the holder of a savings account is being exploited, particularly during a stock market crash!

2. Capitalists provide cash flow for employees during the production process. A Christmas decorations business may operate at a loss all year, only to make enough profit in December to make the business very profitable for the year. The capitalist provides the money to pay the workers during the period that the business is paying out for materials, etc and not receiving any money in.

Most workers do not want to run the risk that they could work all year and end up having to pay out for losses. They do not want to wait until the end of the year when the production has been sold and the accounts worked out before they have money to buy groceries.

Far from exploiting workers, the wage system gives them security and meets their time preference requirements for quick payment, which is why so many of us are employees and quite happy to be so.

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  • SovietUnit

    Marx talks about ‘socially necessary labour’ to manufacture widgets, not the labour necessary to one specific manufacturer, who, as you correctly say, can get the market right or wrong. As for wages, you still take the single-business view. Given the amount of public money that is being pumped into the private sector to keep it from falling apart, coupled with raising unemployment and credit restrictions, I can’t see capital taking on more risk than waged labour.

    • Blackham

      I believe that unemployment is falling and the government is at least trying to ease credit restrictions. As for public money being pumped into the private sector, none is being pumped into my employer’s business nor any others that I know of…quite the reverse, the tax man is all over them to try and extract as much money for treasury coffers as possible.

      • Maybe I’ve been too symplistic in my response – sorry. In the UK unemployment is falling thanks to workers being forced into less secure / lower pay jobs (such as forced part-time, pseudo-self-employment and workfare-style programs). But in much of the rest of Europe (I write from Italy) this shift towards flexible employment is happening ALONGSIDE rising unemployment. In EU27 the rate went from 7 to 11 from ’07 to ’12. In both the UK and the overall European cases, I think I can say that business risk is increasingly transferred to workers. As for the private sector bit, I should have been more precise. You’ll remember European governments’ debts skyrocketed in six months in 2008 because of bank bailouts – it was THEIR debts (which is still far larger than public debt) that was masked as sovereign debt – and now, the whole fiscal havoc is about the single objective of keeping the (rather private) banking sector afloat. That’s what’s sucking your (and your and my employers’) money out. In response, private companies lock down hiring, tighten contracts, postpone pay raises, use public benefits (at least in my country) to shed workforce temporarily, or lay off people. The owner of the business, before the business fails entirely, will have been paid back a lot of her or his own risk in terms of workers losing their jobs. I’m sure this discussion complicates if you factor in the size and type of business: a global corporation is different from a local shop, and McDonalds’ is different from a manufacturer of microchips – in terms of the relations between the owner (the capitalist) and the workers. But I won’t go deeper lest I write a supplemental post to yours…

        • Unitedstatesisacorporation

           Seems to be certain businesses are profiting from government protection. What we’re seeing is government approved racketeering – the state acting as the thugs. If any bailouts were to occur I’d rather it be to the people who didn’t get their money out in time from these corrupt state-protected banks instead of the banks themselves receiving huge sums of money which they then loan back to the state, enslaving the population even further through debt. Removing them from the market would be the best thing for us as a people and letting new banks emerge.

  • Naive

    Your blog needs to acknowledge the extremely high level of complexity of the issues you deal with. From what I’ve read so far, you use very general terms (a lot of socialists, the left…). I would really appreciate more intricate and specific points, otherwise your arguments sound naive.

  • Theoretical, bourgeois nonsense. This all sounds pleasant in theory.

  • @simonr916

    I said on twitter that I can appreciate (to an extent) the logic of
    Libertarianism but that I didn’t think that it would work in the real
    world. You challenged me on this and asked what real world issues
    libertarianism fails to deal with.

    I’ll share my thoughts here, but want to start by saying that I
    haven’t studied libertarianism in depth. Some of the issues here you
    may have covered in depth on your blog in the past, but I have either
    not seen them or I have read them and my doubts remain. Please feel
    free to answer my questions by directing me to previous postings, if
    you think I’m asking something you’ve adequately explained in the

    My understanding is that the central tenant of libertarianism is
    freedom. In particular, it considers that each person should have the
    right to enjoy their property and the products of their labour, and
    that the state is a criminal structure which uses force or coercion to
    take your property from you (as tax) and redistribute it to those who
    have not earned it. Libertarians hold that people should be allowed to
    freely trade their labour, and the products of their labour, and are
    strongly opposed to the initiation of violence, to theft and to the
    restriction of another person’s freedom. I hope that’s about right.

    My first question then relates to the defence of property. My
    understanding here is that Libertarianism allows the use of force in
    self-defence and in the defence of one’s property. From what I can
    see, some Libertarians advocate a limited ‘state’ with a role
    restricted to the protection of freedom and property and the defence
    of trade.

    In this state, the ‘government’ would provide a police force and
    (maybe) army, laws and courts, and would punish offenders. Since
    honest men will be protected by this government, they will pay for it
    with voluntary subscription and there will be no need for taxation.

    Question 1: How would such a government come into being and who would
    run and administer this organisation? How would decisions on spending
    money be made? Who would draft the laws, choose the judges, appoint
    the police officers and so on?

    Any form of government throws up some practical questions.

    Suppose the government passed a law against the fraud inflicted
    through false advertising (making claims against a product in the
    knowledge that they are false). One man may say that this is a fair
    law, necessary to protect free and honest trade, another may say that
    this law is a restrictive regulation of free trade and that ‘buyer
    beware’ should be the rule. How would such a conflict be resolved?

    I genuinely don’t understand how this government would be established,
    or how it could be prevented from progressively impinging further and
    further upon individual freedom.

    Question 2: An alternative is to have anarchy – no government at all.
    In such a country, each man would be left to defend his own property
    and rights. You’d live in constant fear of a larger, or better armed,
    group taking your property by force. If you choose to have no
    government, how does the honest man protect his property from those
    who wish to take it?

    I guess you’ll only need to answer one of those first two questions.

    You did send me a link to your blog on Individual Freedom v Democratic
    Freedom. In that blog you give an example of 10 people on an island
    and point out how democracy could be used to legitimize and facilitate
    rape, theft, cannibalism and so on.

    It is perfectly right that democratic societies have done some
    horrendous things. For centuries, rape was institutionalised as
    ‘conjugal rights’ (a woman could not refuse her husband), marriage
    laws institutionalised theft (a woman’s property became her
    husband’s), slavery was permitted, and various groups disenfranchised.

    “Democracy is the worst form of government”, as Churchill said “apart
    from all the others”.

    My point here is that a democratic state is not the same as 10 people
    on an island. Democracies grow and mature over time. Minority voices
    come to be heard, change opinion and change the law. Slavery is
    abolished, universal suffrage is established, marriage laws reformed
    and so on.

    This is not a painless process. People have to take a stand against a
    wrong and are often imprisoned, or worse. Look at how many died in the
    cause of overthrowing apartheid in South Africa.

    Question 3: If Libertarians hold that it is morally wrong for the
    state to take their money in taxes, why do they not take the
    principled stand against this moral wrong and refuse to pay tax in the
    full knowledge of the consequences? Why do they not refuse to use
    services paid for through immoral means?

    I suspect that most libertarians are not living in such desperate
    circumstances, or lack the necessary capacity for such absolute self
    sacrifice, required to take the drastic action required to bring about
    social change in the face of a moral wrong.

    Moving on…

    Question 4: In a Libertarian world, how would infrastructure items
    such as roads, rail lines, power networks etc get built?

    Such infrastructure is vital to trade and industry, but it is hard to
    see how a road between, let’s say, Edinburgh and London could be built
    (if such a road did not already exist).

    I assume that the road would be funded by a collection of individuals
    and companies that would benefit from the use of the road, but it
    would have to pass through the property of countless landowners and,
    presumably, there could be no question of compulsory purchase.

    There would be a significant incentive for property owners in the
    Midlands to block the building of our road, if doing so would give
    them an advantage over competitors in the North. Or each landowner may
    want to set up toll booths. Holders of even small parcels of land
    could hold the whole project to ransom. Or some would simply refuse to
    sell – forcing significant diversions, delays and extra cost. In these
    circumstances, the logistics and costs of such an enterprise would
    seem to be prohibitive.

    Question 5: Returning to the issue of self-defence – how would the
    Libertarian world restrict the proliferation of nuclear weapons and
    keep them from the hands of madmen?

    You previously sent me a blog which argued that nuclear weapons could
    legitimately be outlawed on the basis that they could only ever be
    used for aggression. It strikes me that any theoretically-possible
    example whereby a nuclear bomb is the only practical form of self
    defence would invalidate this argument.

    Consider this
    credible (if unproven) evidence that a Japanese cult with a history of
    terrorism may have undertaken a private nuclear test in the Australian

    Suppose this cult had covertly developed dozens of nuclear devices and
    planted them in major cities around the world. They could then start
    remotely detonating them from a heavily fortified bunker in the
    outback, where they were practically invulnerable to conventional

    In such a situation, an individual with a nuclear bomb could drop it
    on the bunker, with minimum risk to innocent lives, and save millions.

    If such a scenario is possible, can any person in Perth (who can
    afford it) buy a nuclear bomb – just in case? Can anyone in the world
    with an airplane and enough money also have a bomb? How about the
    Muslim cleric in Finsbury Park who preaches about a fatwa against
    Western civilization but has never committed a crime?

    My next questions are about the effects of unfettered capitalism.

    If we start off with a society of people, all with equal resources,
    and allow them to engage freely in labour, production and trade, some
    will work harder, be smarter, be luckier and do better. This is
    reasonably fair.

    Those people who have been successful will naturally wish to give
    their own children advantages and protections in life. They will pay
    for education, help their children develop networks of useful
    contacts, give them resources to use as capital and so on.

    Those who were not successful will not be able to do things. Their own
    children – through chance of birth and no fault of their own – will
    have much less chance of success, even if they are hard working and
    clever. They will, of course, have no state education or welfare

    Question 6: Will a Libertarian world not become more and more unequal
    as each generation further entrenches the privilege of the few?

    As it does, it seems to me that the pool of those who the opportunity
    to innovate and create will shrink (and many of those with
    opportunity, safe in the knowledge that they can coast through life
    with little threat to their own privilege, will lack the necessary

    Many of the most successful people in society have ‘pulled themselves
    up by the bootstraps’. Poverty is a great motivator. These people do
    this through hard work and ability, but they also require opportunity
    – whether that be a state education (which may allow them to shine and
    achieve a bursary for higher education), or a public library for
    research, or a small amount of capital to start their own business, or
    welfare support so that every moment isn’t dedicated to base survival
    and they can sit down and write the book which makes them a

    Equally, some of those at the top will feel driven to further increase
    their wealth and power.

    Question 7: Without regulation, what is to stop companies from acting
    in amoral or immoral ways to the detriment of all?

    Let’s look at some examples.

    For decades, tobacco companies hid research evidence which showed a
    clear link between smoking and cancer. Worse still, they deliberately
    created false and biased research to muddy the water, paid experts to
    testify that tobacco was safe, and sought to discredit scientists
    whose studies showed a link. Much the same thing is happening today
    with the pharmaceuticals industry who distort research findings in
    order to protect their massive investments.

    Yes, this has happened in a world with regulation – but my view is
    that it is inadequate regulation that requires tightening, in the face
    of stiff lobbying from industry.

    Or we could look at the 19th century cotton industry. In a world
    without meaningful regulation or controls – and with a large
    percentage of the population lacking any significant chance of
    escaping grinding, lethal poverty – they operated factories using
    child labour (some of whom were practically kidnapped, and all but
    slaves) in appalling conditions.

    Or we could look at the modern gun industry, which vigorously
    campaigns against all forms of gun control. They want a world where
    they can sell an assault rifle (a weapon with only one purpose) and
    ammunition to anyone who walks in off the street without background
    checks because, hey, a customer is a customer (and if the bad guys
    have guns, then it’s an incentive for the good guys to buy them too).

    This isn’t an argument against private enterprise by the way. I’m all
    in favour of private companies creating and innovating and selling us
    things, it’s just that I don’t share your faith that unrestricted
    capitalism will ultimately serve the common good.

    Taking a step back a moment, my next question is about deception.

    Question 8: Without regulation and controls, how can we avoid being
    deceived and make meaningful choices?

    A libertarian world would permit snake-oil salesmen to tour from town
    to town, making fantastical claims to the poorly educated citizenry
    (no state education remember) but would also allow big companies to
    say what they liked.

    So tobacco companies could still be telling us that smoking cures
    asthma, and we’d have no way of knowing how much fat, salt and sugar
    there is in a happy meal.

    If your answer is to use Google and work it out for yourself, think
    back to our discussions on gun homicide. How easy is it to find
    relevant data, never mind interpret and understand it? And how much
    harder will it be if companies have no barrier to distortion and

    Question 9: Without the state, how will money work?

    I’m not an economist so this is genuine musing here but the monetary
    system, as it currently works, relies upon states to under-write and
    guarantee currency, set interest rates and control supply. I have no
    idea how this whole system would work in a libertarian world.

    It does seem though that some libertarian arguments equate money with
    productivity, as if the two were the same or interchangeable when they
    are not.

    Anyway, from what I can see, a libertarian world would be one of ever
    more entrenched inequality, a Dickensian world where the privileged
    few stand separate from the impoverished masses. As wealth buys
    greater protection of privilege, the means for social mobility will be
    shrinkingly small.

    Without a minimum wage, welfare benefits, or protections to health and
    safety the poor will be forced to exchange their labour (or their
    bodies, or their children) for subsistence wages if they’re lucky
    enough to find a job at all.

    The sick and disabled, or the most unlucky, will depend upon charity.
    History tells us that, in such circumstances, many would starve.

    The rich would get richer, and the poor would get poorer. So, here’s
    my final question…

    Question 10: In such circumstances, how long do you think it would be
    before the masses rise up and kill you in your beds?

    • @simonr916

      After I posted my comment with 10
      practical questions about libertarianism, you sent me a link to Walter Block’s The
      Privatisation of Roads and Highways. Thank you for this.


      My original question on roads
      related to the difficulty of road building in a libertarian society, but reading
      Block I quickly came to the realisation that maybe road building is a bit of a
      red herring, or at least not the biggest issue in relation to roads.


      We’re talking real-world issues
      here, so we’re starting off with an existing road network. Block addresses the
      issue of how to transfer government owned roads into private hands:


      most just and hence best means of dispersal of governmental holdings to the
      private sector is to give the property in question, with no strings attached
      whatsoever, back to the rightful owners, i.e., the persons from whom it was
      stolen in the first place […] If the property was built with tax revenue or
      purchased on that basis, as is true in the case of roads and highways, then it
      should be given back to the people in proportion to their tax payments (or tax
      burden, if this cannot be ascertained). That is, the rich should get the lion’s
      share since they were forced to pay the most, and the poor the short end of the
      stick since relatively little was plundered from them in order to first erect
      the edifice in question. It is only if, for some reason, the rightful owners cannot
      be identified, and the property can reasonably deemed to have fallen into a
      state of nonownership, that the principles of homesteading or syndicalism
      should be brought to bear” – (Page 282)


      If we accept this premise, this
      would give us 3 possible scenarios for the existing roads and the land that
      they stand on.


      The road was built on un-owned
      land, or land for which previous, legitimate ownership is lost in the
      midst of time. It should be shared amongst tax payers or, in extremis,


      The land upon which a road
      (or part of a road) was built was freely sold or gifted to the government,
      without force or duress, from a landowner who (through legitimate transfer
      by inheritance, gift or trade) had legitimate ownership. Again, it seems
      that this land should be shared amongst tax payers or, in extremis,
      homesteaded; and


      The land upon which the road
      was built was compulsory purchased, or otherwise taken by force, from its
      previous owner by the government and we are in a position to identify that
      former owner (or their rightful heir).


      In the UK, many roads follow
      ancient paths – Roman roads and the like – many of which were never private
      property. In most cases though, these roads have been widened and/or diverted
      using land obtained (at least in part) through compulsory purchase. Many other
      roads, especially the more modern A roads and Motorways, have been created
      almost entirely from such compulsory purchases. In general, these will be parcels
      of land of varying sizes, with a single road crossing multiple such parcels,
      each with a different owner.


      Where this is the case, these
      parcels of land must be given back to those owners who can then do what they
      wish with them. It seems that the fact that taxpayer funded roads have been
      built upon that land does not matter. So for roads where scenario 3 applies,
      the decision is easy, but the result is difficult – ownership of the road will
      be fragmented amongst those who previously owned the land on which it was built.


      Following Block’s argument,
      above, land upon which roads have been built which fall within scenario 1 or 2
      become the shared property of tax payers, with those who pay the most tax
      receiving the greatest share.


      However, Block states that:


      “For surely it is an uncontroversial premise (at
      least within the libertarian community) that the only just source of
      private property rights is homesteading” – (Page 217)


      This suggests a different
      approach to sharing out these pieces of land, one which Rothbard himself
      advocates. In chapter 9 of The Ethics of Liberty, he discusses this very
      question using the analogy of ownership of a stolen watch. For our purposes,
      consider that ‘Jones’ is the government:

      “Suppose […] that we know
      that Jones’s title is criminal, but that we cannot now find the victim or his
      current heir. Who now is the legitimate and moral property owner? The answer to
      this question now depends on whether or not Jones himself is the criminal,
      whether Jones is the man who stole the watch. If Jones was the thief, then it
      is quite clear that he cannot be allowed to keep it, for the criminal cannot be
      allowed to keep the reward of his crime; and he loses the watch, and probably
      suffers other punishments besides. In that case, who gets the watch? Applying
      our libertarian theory of property, the watch is now— after Jones has
      been apprehended — in a state of no-ownership, and it must therefore become the
      legitimate property of the first person to “homestead” it — to take
      it and use it, and therefore, to have converted it from an unused, no-ownership
      state to a useful, owned state. The first person who does so then becomes its
      legitimate, moral, and just owner.

      But suppose that Jones is not
      the criminal, not the man who stole the watch, but that he had inherited or had
      innocently purchased it from the thief. And suppose, of course, that neither
      the victim nor his heirs can be found. In that case, the disappearance
      of the victim means that the stolen property comes properly into a state of
      no-ownership. But we have seen that any good in a state of no-ownership, with
      no legitimate owner of its title, reverts as legitimate property to the first
      person to come along and use it, to appropriate this now unowned resource for
      human use. But this “first” person is clearly Jones, who has been
      using it all along. Therefore, we conclude that even though the property was
      originally stolen, that if the victim or his heirs cannot be found, and
      if the current possessor was not the actual criminal who stole the
      property, then title to that property belongs properly, justly, and ethically
      to its current possessor.

      If we follow this argument, the
      land will become the property of the first person who acts to take possession
      and ‘homestead’ it.


      In this case, a company wishing
      to take on ownership of, let us say, the M69 between Coventry and Leicester is
      likely to have to negotiate with dozens – or even hundreds – of owners of
      individual sections. In this case, these owners will have taken possession of
      sections of the road either by demonstrating that they were the last legitimate
      owners (or the heirs of such), or by being first to homestead sections of the
      road for which no rightful owner can be found.


      But if we
      follow Block’s line of reason – accepting that the road has been created using
      the money taken in taxes, and therefore is the property of the tax payers – how should the roads be divided
      up amongst so many claimants?


      Block offers the suggestion that
      we should consider how it is likely that private roads would have developed in
      the absence of government intervention, and ownership should be apportioned
      accordingly to those that we deem would have been the likely owners in such


      From this, he draws the
      conclusion that ownership of any given street should be assigned to owners of
      property abutting the road, with shares allocated in accordance with the value
      of that abutting property.


      In any case, how do we manage
      multiple owners of the same property? Block rejects the notion of dividing the
      street up and giving sections to individual owners, on the basis that this
      would permit individuals to establish a choke-hold on the street and block it
      from the use of others. Instead, he suggests:


      the best way would be to accord with the practice of ancient road enterprises:
      to set up a joint stock company composed of these 1,000 people, who together
      would control the entire venture.” – (Page 244)


      But how would these joint stock
      companies make decisions? By democratic vote? If we apply the same principle to
      motorways and such, who will own shares of which motorway?


      In the end, Block concludes:


      have no hard and fast conclusions as to the best way to privatize streets and
      highways. It is perhaps more important that they be privatized than how this
      task is accomplished. Once in the private sector, these important elements of
      our economy will be managed in the same rational manner as all other goods and
      services subject to the consumer check of profits and loss.” – (Page 253)


      This seems a completely
      unsatisfactory resolution. He has created a fudge whereby ownership of any
      individual street will be shared between many people, but with no clear idea as
      to how decisions will be made and how that street could then be developed and
      exploited as a commercial venture. In any case, this approach does not do
      anything to resolve the fragmentation that will be caused by returning land
      that was obtained through compulsory purchase back to its rightful owners.


      Block offers no indication as to how
      unclaimed portions of connecting roads, such as A roads or Motorways, would be
      divided up. If the land, and roads, are simply sold, with the proceeds being
      returned (in proportion) back to tax payers this appears to be little more than
      a new version of compulsory purchase.


      I can see no way in which
      significant parts of the UK road network could, following libertarian
      arguments, be passed into private sector ownership in such a way as that commercially
      viable sections would be easily available to one private operator. It seems
      unlikely that a company would be able to develop, innovate and profit from
      ownership of a few miles here and there – especially in circumstances where
      other sections of the same road are not maintained appropriately and kept passable.


      Gaining ownership of a single road
      may require negotiation with dozens of owners of fragments of that road, with
      the significant risk that any owner who wishes to use the land for a different
      purpose could block the road and render the remaining section unviable. In some
      places, it will be possible (though costly and disruptive) to divert around the
      blockage. In other places – especially in a .crowded island such as ours – it will


      Block offers the suggestion of
      bridging over blockages in the road. Firstly, and least importantly, this is a
      costly exercise. Secondly, where the ‘blockage’ is a stretch of land hundreds
      of meters wide (and where it is not permitted to place legs) this may not be
      possible. Thirdly, Block concedes that any bridge must be high enough so as to
      not interfere with the property rights of the landowner below – so any bridge
      would need to be considerably higher than modern motorway bridges.


      So, to my original 10, let me


      Question 11: How could geographically huge
      and/or dispersed, government-owned infrastructure – such as existing roads – be
      transferred to private ownership in such a way as to avoid catastrophically destroying
      their existing value (e.g. their usefulness as roads)?