With the rise of the new “progressive” movement in US Politics, there has been a new rising sentiment against the wealthy, especially billionaires. Specifically, these attacks claim that billionaires cannot earn their mountains of money without exploiting workers. Alexandria Ocasio Cortez expressed this sentiment succinctly when she recently stated that “No one ever makes a billion dollars. You take a billion dollars.” Here is a good example of this sentiment on Twitter.
This begs the question: do billionaires really engage in mass exploitation in order to earn their wealth? No, they do not.
To start, one cannot help but wonder what is so special about one billion dollars specifically that makes it unobtainable except through exploitation? If one billion dollars cannot be earned ethically, what about nine hundred and ninety-nine million dollars? Proponents would probably say no, as there is little substantial difference between the two. What about nine hundred million? Five hundred million? Two hundred million? One million?
I would imagine that many “progressives” would not say that one million dollars can only be found through exploitation of others. However, this begs the question: what exactly is happening between one million and one billion that makes a billion exploitation while a million is not?
Furthermore, why is the net worth of an individual tied to his treatment of workers? A business owner might start off with a very small net worth, but grow his company and net worth to be very large. If his employees received the same wages and working conditions throughout the growth of the business, would their labor now be exploited when it was not exploited before?
To illustrate this point, we can imagine a single worker who starts off working in a start-up company. The company continues the grow and grow, but our worker retains the same position, pay, and benefits. If the company grows to be very large, and its executives rich, while his pay remains the same, is our worker now being exploited while working under a large company when he was not exploited while working under a start-up?
Perhaps this is a case of Schrodinger’s Exploitation, whereas we do not know the current salary of the CEO, we have to consider him both exploited and unexploited at the same time?
The core concept at the heart of the “progressive” attacks is the concept of “exploitation”. However, what does “Exploitation” even mean? Despite its widespread use, the word is rarely, if ever, defined. Generally, the word is used to be a rough synonym for “unfair treatment”. Of course, whatever is fair or right will change depending on the context the word is used in. In this context, the closest definition we can enumerate is that “Exploitation” means the chronic underpayment of workers relative to what they actually produce.
There are two components present: the underpayment of actual wages and the “real” or “true” productivity. Both of these concepts misrepresent economic realities. First, wages always have a tendency to equal the value of the worker’s production. Anytime profits are earned from an underpayment of wages relative to the worker’s product, other businessman will enter the market in an effort to take advantage of the profits to be made. Because of the higher demand for the worker’s labor, this will push up wages. This process continues until profits are eliminated and wages are equal to the actual value of the worker’s productivity.
This does not mean, of course, that wages are always equal to the actual market value, but there is always a tendency to reach this point and wages will not be constantly and consistently underpaid while markets are able to freely operate.
The second concept is the “actual” or “true” productivity. The problem is how exactly do we define what wages ought to be? If we stray away from the market processes of equilibrating supply and demand, what objective measure do we have? One might want wages to be higher, but how much higher? What criteria can be used to determine the “true” wage? Any wage chosen would be completely arbitrary and based on personal and subjective opinion.
Exploitation is an empty concept, used to illicit an emotional response rather than illuminate economic realities.
The most important and fundamental aspect of free markets is freedom. Any individual is free to partake in any trade or exchange, as long as it does not harm others. No one is compelled to contract with anyone that they do not wish to contract with. This flies in the face of the concept of exploitation. If two individuals come to an agreement, how can a third-party claim that one individual is exploiting the other? Even if an individual does not find the agreement as lucrative as they wish, this is not a result of exploitation, but of scarcity. Our desires are infinite, but our means are not. This is not exploitation, but a fact of nature.
When the voluntary nature of the market economy is recognized, the case for billionaire exploitation falls apart. As long as agreements come about voluntarily, exploitation does not take place. Exploitation only makes sense within the context of coercion and force. A billion dollars is certainly an astronomical figure, but its enormity does not imply that it cannot be earned ethically.
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Originally published at https://www.thejwrich.com on May 30, 2020.
