Chatting With a Marxist - Part 2

Shortly after I posted Chatting With a Marxist an annonimous comment appeared with a few interesting remarks and questions. I wanted to address them briefly but the amount of words written in response hinted it might be better to post it in a new blog post. Unfortunately I haven't had the time to do so until now. I'm reproducing the whole comment here and my remarks below:

You say you have a choice, be employed or be self-employed, that is not true. If you are born in a poor family you cannot start your own bicycle factory or any other business, you just have no money to do it. If you saw hardworking honest men waiting for months to get their lousy paychecks, without any other option but to starve or keep working, you wouldn't be saying so.

When you say supply of labor is not limited, that would be true for a country with a really low unemployment rate. 3-5, or even lower. You are not talking about my country. In Serbia, around 30% are unemployed, average working class pay is 150-200 euros a month, you work 10-11 hours, have one week of holiday if ur lucky, there are no workers unions in private sector, cose when you complain you get fired, and trust me, supply of new labor to replace you is limitless.

And one important thing is that proletariat is not only in factories. I had a job selling sneakers, and i had to stand for 11 hours every other day, for 200 euros a month, and sitting was strictly forbidden even if a store is empty. You have a 15 minutes break for lunch and that's it. I saw a guy get shouted at and fired for leaning on a wall while talking to a customer.

This version of capitalism is what happens when the state is not interfering to protect the worker with social programs, and minimum wage, and to protect them from being fired for trying to organize a union. That's what a truly free market does.

Interesting comments, but erroneous, in my opinion. Here's my response to a few particular statements:

You say you have a choice, be employed or be self-employed, that is not true. If you are born in a poor family you cannot start your own bicycle factory or any other business, you just have no money to do it. 

This would, incidentally, also be true for a person born in a middle class or even a rich family. It's very hard to start and run any successful factory. You have to sacrifice a lot, save and work hard and have unique skills. But a lot of successful companies, some of which became mega-big, were started out of a garage by what were then poor people, including Microsoft for example. Think about it this way... You are very much accustomed today that people work for their employers. This was not always the case. Before mass production was possible people were more or less self-employed and produced for themselves. They were very poor as a result. When factories started popping up in the industrial revolution, people now had a choice. They could stay self employed farmers doing back-breaking work 15 hours a day or find employment in a factory and work perhaps 12 hours a day in mildly better conditions and receive a slightly higher income. These were the only choices (similarly these are the only choices people have today in poor third world countries). Today we are much better off than that but the choices are similar. I used this hypothetical example to illustrate how much harder it is to make a living without capital (machines, tools, infrastructure etc.), so let's be careful condemning people who actually work hard, save and invest in it. Furthermore, anyone can become a capitalist, even a poor person. You find a job, save a portion of your income and make an investment when you are ready. As I said, it doesn't have to be much, you can start a business with very little capital these days.

When you say supply of labor is not limited, that would be true for a country with a really low unemployment rate. 3-5, or even lower. You are not talking about my country. In Serbia, around 30% are unemployed, average working class pay is 150-200 euros a month, you work 10-11 hours, have one week of holiday if ur lucky, there are no workers unions in private sector, cose when you complain you get fired, and trust me, supply of new labor to replace you is limitless.

I said the supply of labor is limited, but I figure that's what you meant. The unemployment rate is irrelevant here, the supply of labor is always going to be limited by the number of persons. When people are out of work, they are not working because they either chose to do so or because someone is preventing them from working. In either case, this has nothing to do with the employer-employee relationship and the exploitation that is presumably going on. My point was that if the worker is going to work voluntarily and is not forced to do so, to label this exploitation is absurd. I'll give an example. Say me and you get stranded on a tropical island. At first we both fish with our hands and manage to catch two fish a day each. In a few days I figure that it might be easier to catch fish with the aid of some tools. So I start saving fish I've caught and only eat one per day while saving the other. When I have saved up enough fish, I start working on fish nets and spears. I invest the saved fish in fishing equipment production, so to speak. Because I am working hard on these tools (what we call capital) for a few full days I can't engage in fishing so I need to eat the saved fish. Finally I am finished and with this equipment it is possible to catch 6 fish a day. Suppose I now give you this proposal: Please borrow my tools and catch 6 fish a day. Give me five and keep one for yourself. You might not agree, this could be worse for you (depending on how much time it takes), because you can catch 2 fish per day on your own. Now if I forced you to accept these terms, that would indeed be exploitation. But suppose I then change my proposal and say OK, you catch the fish and give me 3 while you can keep the other 3. You might accept that because now you are better off. I am also better off. But who is exploiting whom? I saved, invested and worked hard to produce capital equipment and am now employing you and paying you a salary of 3 fish a day. The truth is that there is no exploitation, we are both better off. Also, you write that salaries in Serbia are low and this is true, though not quite as much as you stated. But why is this so? Are you saying there are no wicked capitalists in Germany? Or do they all have a better conscience? Or is government reining in their exploitative ambitions? Of course not. Capitalists in Germany are plentiful, their ambitions are similar and it is certainly not government who enables high wages in Germany. Germany doesn't even have a minimum wage. The reason wages are much higher in Germany is that the amount of capital invested per capita is much higher than in Serbia, rendering the productivity of labor much higher as a result. Companies compete for scarce labor on the market and one of the ways they attract workers is to offer them a higher wage than the next company. 

Another useful way of thinking would be how to improve the conditions of this person who is receiving low income and is working in what we would deem poor conditions today. It would be to make sure he has plenty of options to choose from, and not to condemn the person who actually gave this person the job he thought at the time was the best option. And the greatest number of options arises in an environment where businesses are allowed to invest and hire employees, while government regulation always only poses costs which diminish the demand for labor and the incentive to invest.

This version of capitalism is what happens when the state is not interfering to protect the worker with social programs, and minimum wage, and to protect them from being fired for trying to organize a union. That's what a truly free market does. 

It is interesting that you write "this version of capitalism". I don't like to use this word because pretty much every person has a different definition for it. For mine, please look at my post on this subject. Government, of course, does not protect workers at all. Social programs always come with tax increases, which means companies are going to employ fewer workers and pay them less. Many very prosperous countries have no minimum wages, including Germany, as stated above. And if the minimum wage really did the trick, as you seem to think, we would have a moral duty to impose a 5000 EUR minimum wage per hour instantly. Or double that. How much would be enough? Of course then no one would have a job. As for the unions, historically the US was the least unionized but paid the highest wages in the world. The US economy grew very rapidly in the 18th century with no minimum wage laws, which were enacted only in the 1930s, very little unionization and practically non-existent labor legislation. Wages grew to the highest levels in the world. You can also find a few of my thoughts on this topic at the end ofthis post.

For more information on the topic of labor, labor unions and how wages naturally rise on the free market I recommend these two videos:

Matej Avsenak Ogorevc