Tuesday, June 1, 2010

More On Exploitation Theory And The Chinese Labor Market

I wanted to follow up my last post on calls for the unionization of the Chinese labor force by delving a bit further into free market labor theory (ie, reality) versus Marxist exploitation theory (ie, fantasy).

In the Marxist world view, the value of goods and services is objective. Therefore one can determine before a market transaction, such as a labor exchange, what a laborer should earn in exchange for his labor and when he doesn't earn enough -- according to this objective standard of value -- it is clear that he has been exploited. His exploiter is always his employer, the capitalist, and the value of his labor that has been stolen from his consists of the entirety of the capitalist's profit.

In the free market (I'm not calling it a world view because it's not a world view, it's reality) value is subjectively determined by each individual economic participant. This necessarily rules out "exploitation" in voluntary transactions such as laborer and capitalist because the laborer would never agree to work for the capitalist if he felt that the terms of the exchange were exploitative to begin with. That means that the only way exploitation can occur in a free market is if a.) the capitalist is in fact a slaver and is literally assaulting/stealing from his employees, which would be considered a violation of the employees' natural rights and therefore an inexcusable crime or b.) it is not in fact a free market but a regulated market whereby the capitalist has some advantage provided to him by the government which forces laborers to accept these exploitative conditions under penalty of law.

These last two considerations are, of course, inconvenient truths for socialists everywhere, because the first is not something systematic and the latter is all due to the State, which in their view is the savior rather than the oppressor.

But there's more worth considering than just the role of the objective-subjective value debate.

First, and this point gets made often by advocates of the free market, if the laborers in the Chinese tech factories really felt they were being given a raw deal, they are always theoretically free to take other jobs or to return to their rural communities and farm duties (assuming that is where many of them ultimately came from). They're even free to become voluntarily unemployed, which would certainly seem like a preferable option to being routinely exploited if that's how they feel they are being treated.

The second point, made much less often, is that if anyone is exploiting the Chinese laborer, it is the end consumer of the laborer's product, NOT the capitalist employing him. The LATimes articles linked to made numerous mentions of the fact that these workers were being "exploited" in order that the manufacturer could cut costs as much as possible. Yet, the manufacturer is only working so diligently to cut costs because he is dealing with the competition of other manufacturers who are selling the same or similar items to the end consumer market. Ultimately, the end consumer marketplace will purchase the cheapest product available, everything else (quality, durability, capability, etc.) being equal.

No one seems to stop and blame the consumer for being such a penny-pincher and putting the Chinese laborer through so much stress he feels like he must jump off the top of the factory to his death to escape the mindless exploitation. Instead, it's the profit-collecting capitalist intermediary (the employee of the end consumer!) who is blamed for the plight of the laborer.

Now, when the Chinese labor market is eventually unionized, which it likely will be as most countries seem to go through this phase of politicization of markets after finishing the birth of markets phase, it will be the end consumer that loses out, not the capitalist employer. Even in unionized labor markets there are still capitalists and the capitalists are still profitable. What nobody pays attention to is the way in which the now unionized labor market produces less goods, of lower quality and at higher prices for the end consumer.

This is the fattening of the Chinese laborer at the expense of the relative impoverishment of the end consumer. It is assumed that the end consumer worked for his wages with which he buys the product of the Chinese laborer-- left unexplained is why the unionized Chinese laborer is entitled to more purchasing power than the lowly end consumer.

And let's not forget that if it costs more to hire Chinese laborers once they're unionized, less of them will ultimately be hired as a result! How many of the soon-to-be-unemployed Chinese laborers would prefer involuntary unemployment to voluntary "exploitation" by capitalist manufacturers?

Ludwig von Mises and the Austrian school teach economists that it is the voluntary, harmonious exchange of the division of labor that produces all the world's material wealth. This system of production is most effective when it is most voluntary, that is, when the various participants, laborer and capitalist alike, are most satisfied with the terms of exchange. In the long run, no business gains anything from creating an environment of hatred and animosity amongst laborers and managers, which is why the reference to punching bags with photos of the faces of the bosses of the Chinese laborers is so mysterious.

Socialists will be quick to take this particular example and try to twist it into an emotional denunciation of the caustic and belligerent nature of the free market and the profit-motive. In reality, this sounds like a case of poor management practices within specific enterprises in China along with the ignored contribution of an authoritarian socialist state and its labor and production policies only further complicating the matter in ways in which many observers are simply choosing to not to pay any consideration.


  1. I too think the real story is the elites here think that targeting the arbitrary metric of exports through Yuan revaluation will lead us out of recovery. Never mind that targeting arbitrary metrics usually creates distortions that subvert the goal anyway.

  2. Taylor,

    Who do you think is behind the media blitz? It is US labor unions, US politicians, the banksters? How do they get the stories published? can you clarify their end goal?

    Great post!

  3. by the way, is it ironic that i read this post with an ipod touch, that was probably made in the same chinese factory?

  4. Tom,

    I don't have any specific evidence for you but I will point out that somehow these news stories never seem to promote the free market but rather government intervention, and that for every government intervention there is a related interest group that benefits while society at large suffers. So I leave you to draw your own conclusions about whether these occurences are accidental or purposeful.

    And yes, it's highly ironic that you're reading this post from an iPod Touch.