Recently, a meme from one of Twitter’s many socialist denizens got a lot of attention. The message it seemed to deliver was that workers are undervalued, because they are paid for far less than they produce:
The implication is clear, and is reflective of a popular talking point in socialist circles. The worker in this meme produces 3,000 of those plastic rings with each hour labor but is only paid enough per hour to buy 3 of them. That would imply he’s only being paid for one thousandth of the value of what he produces! Surely this is exploitation, right?
Well, no. There are two big points this meme misses that change the picture quite a bit. The first one is that the worker here can’t actually produce 3,000 of those plastic rings per hour. If he could do that, he’d just set up shop in his garage and make them himself, selling them directly and massively improving his income. He can only make 3,000 per hour because he works with machines built by others and paid for by others. His labor, by itself, isn’t sufficient to produce 3,000 per hour. It requires combining his labor with the massive capital investment the company put forth to make his labor more productive, taking place in the context of a business that also provides him with the work environment, raw materials, and tools, that handles the orders and sales, along with innumerable other aspects that are necessary to enable him to do what he does. In order for that worker to claim he specifically produces 3,000 per hour by his own labor, he has to massively discount and dismiss the labor and investment made by so many other people. His labor is important, sure, but it’s one small step in an incomprehensibly complex process involving the cooperation of countless workers that also go into producing those plastic rings.
As is often the case, the flaw in this kind of thinking was pointed out by Adam Smith, in his well-known (but apparently not well-known enough) description of what ultimately goes into the production of a simple wool coat:
In the modern world, the web of activities and labor leading up to the production of those plastic rings is, if anything, incomprehensibly more vast than what Adam Smith describes in the production of a wool coat in the eighteenth century. All of that work, effort, investment, and cooperation is erased from existence by the kind of “reasoning” employed in this meme. While socialists may claim to be the allies of labor, in putting forth claims of this sort, they are ironically devaluing and dismissing the importance of the cooperative efforts of a vast amount of laborers.
READER COMMENTS
steve
Jun 7 2024 at 11:55am
This extends beyond laborers to the professional class. I dont know how many times i had to explain to people that there was a whole network of people that made their jobs possible and large capital expenditures so they could have the equipment to do what they wanted.
Steve
Richard W Fulmer
Jun 7 2024 at 4:36pm
The implication of the socialists’ argument is that there are non-capitalist economies in which workers can afford to purchase the whole of their produce. But surely a cobbler in the pre-capitalist world couldn’t afford to buy all the shoes he made. How would he eat? How would he buy his raw materials? What would he do with all those shoes?
Socialism’s fundamental rule explicitly precludes most workers from receiving the whole value of what they make. “From each according to his ability, to each according to his need,” implies that a person would get the full value of his labor only in the unlikely event that his ability exactly matched his need. If society is to thrive, the vast majority of workers would have to produce more than they receive.
Socialists make a second claim based on the first: because workers can’t afford to purchase all that they make, the system must collapse because demand can never match production.
This claim depends on the socialists’ narrow view of what constitutes a “worker” and, as Dr. Corcoran’s points out, on their limited understanding of the vast network of contributors to the manufacture of even the simplest objects.
It seems to me that it also ignores the fact that money continually circulates through an economy, facilitating the purchase of one good or service after another. So, the value of the goods and services available in an economy can far exceed the nominal value of the currency in circulation.
Money is not wealth; it serves as proof that its possessor has created wealth and has transferred it to others. What a man has produced is what he can bid on the produce of others.
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