Capitalism must work for Labor

 "Six days shalt thou labour, and do all thy work."
Moses, Exodus 20:9 

"The annual labour of every nation is the fund which originally supplies it with all the necessaries and conveniencies of life which it annually consumes."
Adam Smith, Wealth of Nations 1776

Balancing Labor and Life

There is something fundamental about human labor ... at least in the story of mankind ... and for most of the world, human labor continues to be a primary component in maintaining mankind's material well being. And so we find it reasonable to assume that, if there is to be social stability, there must be a sustainable balance between the fruits of our labors and the needs/wants of our lives ... our wages and our cost/standard of living ... both collectively and individually.

The sociological arrangement by which this balancing act is to be conducted is an endlessly debated subject of history and philosophy which appears to morph [with great degrees of adulteration during the transitions] among three basic alternative forms:

• oligarchic empire,
• commercial capitalism and
• national socialism.

But, whatever form the arrangement takes at a given moment in time, the debate always continues and turns on what appears to be man's innate aversion to labor itself:

"Now since [each individual] man is naturally inclined to avoid pain—and since labor is pain in itself—it follows that [individual] men will resort to plunder whenever plunder is easier than work. History shows this quite clearly. ... When, then, does plunder stop? It stops when plunder becomes more painful ... than labor." Bastiat, The Law, 1850

Thus any successful arrangement must consistently deal with this human tendency ... employing justice or compulsion to do so. Let's examine how this is done under an arrangement of commercial capitalism.

Labor works for Capital

In a brief 1958 summary of his praxeology concerning commercial capitalism titled "Liberty and Property", Ludwig von Mises responds to the nagging fear any honest person will have when considering a sociological arrangement in which a relative few [the Capitalists] are permitted to own the tools Labor uses [Capital]:

"Private [ownership] of the material factors of production [Capital] is not a restriction of the freedom of all other people [Labor] to choose what suits them best. It is, on the contrary, the means that assigns to the common man [Labor], in his capacity as a buyer [and consumer], supremacy in all economic affairs. It is the means to stimulate [by appealing to their needs/greed] a nation’s most enterprising men [the Capitalists] to exert themselves to the best of their abilities in the service of all of the people." [excerpt from the end of Part V]

Of course, the dense phrase "the means that assigns to the common man in his capacity as a buyer" immediately [if implicitly] conveys Mises' notion that Labor is justly entitled to wages but not to the actual things produced which belong entirely to the Capitalist as the owner of the Capital and the employer of Labor. With just wages in hand, Labor is able to choose [or not] to purchase from the Capitalist the things produced which Labor needs/wants to sustain/improve life. Indeed, this notion of Labor as the ultimate Consumer in the economy lies at the heart of modern macroeconomic theory which is continuously seeking deviant new ways to stimulate an ever increasing aggregate consumption by Labor.

But does Capital work for Labor?

How else does Labor in a capitalist arrangement differ from Labor in a master-slave arrangement? Mises goes on to define another attribute of Labor which he boldly claims is unique to capitalism and without which capitalism cannot be said to exist at all ... the accumulation and investment by Labor of a surplus [real savings] which Mises immediately and astoundingly equates with Capital.

"However, one does not exhaustively describe the sweeping changes that capitalism brought about in the conditions of the common man if one merely deals with the supremacy he enjoys on the market as a consumer and in the affairs of state as a voter and with the unprecedented improvement of his standard of living. No less important is the fact that capitalism has made it possible for him to save, to accumulate capital and to invest it.

"The gulf that in the pre-capitalistic status and caste society separated the owners of property from the penniless poor has been narrowed down. In older ages the journeyman had such a low pay that he could hardly lay by something and, if he nevertheless did so, he could only keep his savings by hoarding and hiding a few coins. Under capitalism his competence makes saving possible, and there are institutions that enable him to invest his funds in business. A not inconsiderable amount of the capital employed in American industries is the counterpart of the savings of employees. In acquiring savings deposits, insurance policies, bonds and also common stock, wage earners and salaried people are themselves earning interest and dividends and thereby, in the terminology of Marxism, are exploiters. The common man is directly interested in the flowering of business not only as a consumer and as an employee, but also as an investor.

"There prevails a tendency to efface to some extent the once sharp difference between those who own factors of production and those who do not."

Mises' answer to our last question is a clear and resounding YES !!! Capital works for Labor to the extent that Labor is able, through diligence and prudence, to accumulate a surplus from its wages [ie. real savings which Mises equates with Capital] in excess of what it consumes which can then be made available to the Capitalist who needs/wants to consume it in the act of creating/maintaining new/existing Capital for Labor in turn to use to advance/continue production.

What a wonderful symbiosis Mises sees in capitalism ... a marriage seemingly made in heaven ... Labor works for Capital and Capital works for Labor ... each serves and is served by the other in an exquisite balancing act.

The Interlopers ... and the inevitable divorce

But if two's company, then three's a crowd ... and the introduction of Finance and Government into our happy couple's shared economic life has had an adulterous and disastrous impact on the marriage of Capital and Labor known theoretically as capitalism.

As in any divorce, there are conflicting accounts about who did what to whom first ... but Mises leaves no doubt about the identity of the threats to marital stability ... the central bank and the welfare state.

"But, of course, this trend [of effacing the differences between Capital and Labor] can only develop where the market economy is not sabotaged by allegedly social policies. The welfare state with its methods of easy money, credit expansion and undisguised inflation continually takes bites out of all claims payable in units of the nation’s legal tender. The self-styled champions of the common man are still guided by the obsolete idea that a policy that favors the debtors at the expense of the creditors is very beneficial to the majority of the people. Their inability to comprehend the essential characteristics of the market economy manifests itself also in their failure to see the obvious fact that those whom they feign to aid are creditors in their capacity as savers, policy holders, and owners of bonds." [Part VI in its entirety]

The central bank ... or the welfare state ... which came first ... and which must go first ... if this marriage called capitalism is to have any chance of recovering its footing in the modern world? Both common sense and history make it abundantly clear that central banking preceded the welfare state [and made it inevitable]. But the important point is to understand that these interlopers are two sides of the same coin ... they eventually arrive together and they must leave together.

• The central bank stimulates Capital's animal spirits by offering abundant fiat credit to replace Labor's sometimes scanty supply of real savings ... while it assures Labor of enough credit [often at high interest rates] to fill the gap between wages and the cost of living.
• The welfare state tempts Labor by promising public benefits to supplement the private wages that Capital is paying ... while it promises to relieve Capital of any obligation to pay wages that actually permit Labor to live and accumulate a surplus.

Is it any wonder that capitalism ... as a monogamous relationship between Capital and Labor ... is in trouble? And is it a shock that these interlopers appear to be leaving Capital opulent and Labor impoverished?

Any financial substitute for real savings ... whether it arises from the unbacked entries of printing-press liabilities on central bank balance sheets or from non-self-liquidating fractional reserve lending by individual banks [emboldened by the central bank as a fallback "lender" of last resort] ... subverts LABOR's unique privilege under real capitalism as the vital supplier of real credit to [and thus the powerful co-participant with] both CAPITAL and GOVERNMENT in any legitimate capitalistic arrangement ... and promotes a widening GULF between classes as it weakens democracy.

Any sociological substitute for just wages ... regardless of the intentions of the "do-gooders" ... perverts the actual practice of capitalism in which private wages are a critical element in maintaining the balance between Capital and Labor. However, it is critical to note that thoughtful acts of real mercy by individuals [whether Capital or Labor] who are otherwise just must always be welcomed and need not result in any damage to the sustainable practice of capitalism.

What happens when Capital and Labor divorce?

The economic and political implications and ramifications of Mises' simple statement of the truth about Capital's and Labor's roles and privileges under capitalism are so vast in both scope and magnitude as to be the primary [if not exclusive] explanation for 99.9% of the domestic and foreign sociological ills that are afflicting America [and in turn the world] today ...

... and yet 99.9% of people today [including sociologists] are IGNORANT of this truth. So it is no wonder that capitalism [falsely so-called for the reasons stated above] is rapidly being proclaimed as a failure in balancing labor and life ... and as such is in an existential battle with the two other major forms of sociological regulation ... oligarchic empire and national socialism.

Do you understand what is happening and what is at stake? If not, educate yourself ... for the time to make a difference is short ... hoping and assuming we have not already passed the point of no return.

The proof IS the pudding 

Mises ends his thoughts with some startling conclusions that evidence his conviction that "liberty and property" ... or what Bastiat might have called "labor and property" ... must eventually serve the real lives of everyone ... whether Capital or Labor.

"The case for capitalism ... rests, apart from other considerations, also upon the incomparable efficiency of its productive effort. It is this efficiency that makes it possible for capitalistic business [CAPITAL and LABOR] to support a rapidly increasing population at a continually improving standard of living. The resulting progressive prosperity of the masses creates a social environment in which the [few] exceptionally gifted individuals are free to give to their [many] fellow-citizens all they are able to give." [excerpted from Part VII]

Unless you can honestly say these are the generally acknowledged results our current sociological arrangement is delivering, you should immediately begin, as Bastiat in The Law warned, to search for institutionalized plundering ... and I am confident you will find it in FINANCE and GOVERNMENT which are systematically enriching themselves as they conspire and manipulate CENTRAL BANKING and the WELFARE STATE ...  to plunder unwitting LABOR and to co-opt crony CAPITAL.

"When the sociologist views society from the seclusion of his office, he is struck by the spectacle of the inequality that he sees. ... the deprivations which are the lot of so many of our brothers, deprivations which appear to be even sadder when contrasted with luxury and wealth. Perhaps the sociologist should ask himself whether this state of affairs has not been caused by old conquests and lootings, and by more recent legal plunder."