MARCELL DAREUS POWER

ill be there with marx!!!!!!!

there is risk relative to wealth. so if your worth millions and billions, there is little/no risk. risk gets smaller as you get richer. its proportional... risk relative to banking is zero. " there is no consideration "... the money is made out of thin air. as ive already explained, capital is not productive. so while the raw materials must be paid for, (only raw materials should be paid for). so take the land example. obviously the land owner bought the land. in some cases they didnt, but lets not deal with inheritance for now. assuming this, to make it simple, this land cost 100,000$. the profits generated by actual work will quickly take over this price. it will happen fast depending on demand. this non-labor income is systematic and is taking advantage of unpaid labor. as far as the risk in buying the land, 1- the loan from the bank- the real source is no risk. the money is made up... 2- the loan taken out by the person is taking potential risk, not actual risk. actual risk belongs to labor because that work can never be gained back. whereas, the person taking out the loan has not done anything except take out fake money. 3- assuming the person takes acutal risk and owns the land and just has to pay property taxes, im not sure this is great either. that person would just stop farming. but since the land is already theirs, it cant be taken, unless they cant pay property taxes. again, this risk would belong to labor and only labor after that land value was surpassed by labor production. 4- assuming this is a building, and is owned. it would be harder to pay and illogical to pay property taxes on a restaurant that nobody goes to. but of course this could be sold at some point. this wouldnt be irrational. no matter how you look at it, labor after a quick period, swallows all risk, because the labor they put in is never "owned", and they are losing more each day not geting paid for work. this is where surplus value comes from. in fact, the longer a business is operating, and the longer that person works there, the higher the risk each day. rent has the same concept if you want a more salient example.... its simply a structure to allow non-labor income. ie, welfare for the capitalist.

i dont see a problem with this. as long as someone isnt getting a free ride. we dont live in a utopia, but we should avoid this.

the poor already did centuries ago.... :wallbash:

this is only because of authority, not actual capital.

in simplistic terms, people should have a say based on the proportion they are affected by someone else. some examples might be 50+1, another example might be just 1 person, and some examples might envolve consensus. this doesnt have to be anal. in theory, if you want to blast a boombox down the street, others are affected, and should have some say. note* not every decision affecting others should be democratic. that would be anal. it really just depends on the example. if you want, listen to michael albert on youtube. or read his books. he explains this...

Who says you can sell all your wheat at any price? When the land owner's risk does pay off you say the profits should be shared, but when the land owner takes a loss, he should eat it? Profit is far from certain, but the laborer still gets paid on Friday. If the laborer wants a share of the profits then they should also take a share in the losses. You can't have it both ways. How many unskilled workers do you think will sign on for that level of fairness? I think more people would prefer the current model and mitigate their earnings risk. It seems to me that your beliefs are only applicable, and loosely at that, to those who have inherited profitable enterprises or the career investor. I'm not going to even attempt to explain how active investors are integral to efficient markets until you can comprehend the basic assumptions of your marginal productivity model. land and capital are not deserving of profits. they are non-productive. ( the land will just sit there)..... this is permission, not work. ie, non labor income. and all the external cost or overhead you just explained can be paid by what labor produces. and i never said investment was wrong, rather getting non-labor, free wealth was unjustified....

i literally never said any of this.

:sick:

this is controversial, but eric moulds was the bills greatest wr ever. jmo

its sad when people like you cant handle reality hitting you in the face. you now realize capitalism is a pyramid scheme. its a welfare state for the rich. its to shocking to your system that the poor this whole time were giving welfare to the rich. lending is not work. you only deserve your hammer back. Actually, you mean "I could buy a candy bar and own all of M&M Msrs." You're already confused enough with the fractional distinction between consumer and producer, don't confuse yourself further by introducing a retailer into the mix to broker the consumer-producer relationship. And even then...the only person claiming anything remotely like that is you. The rest of us would simply claim that you own a candy bar that you bought at a retailer who was supplied by M&M Mars.

its an illustration to point out that capital is not productive and does not deserve profit... ie the creation of a pencial is not the creation of a drawing. the labor,time, market value, etc is all different. and when capital, ie the pencil, claims profits from the drawing, that is stolen labor.

different materials in different association have different value, ie labor. a pencil is different from a drawing. the reason the plywood cost more is because it takes more labor and is more valuable on a market than just a tree. cutting down a tree and selling it is different than cutting down a tree and turning it into plywood. and a house is different than plywood because of labor and the market. the person cutting down the tree owning the end result of a house while not doing the labor is absurd. the idea of risk here makes no sense since the initial value of capital is nothing compared to the end result. in other words you are ignoring the larger risk from labor. you first need to show capital is productive in order to say risk, which we already proved capital is not productive, its simply an object separate from labor. also risk is proportional to wealth. if i own millions and billions, i have no risk. fundamentally initial loans from banks carry no risk,( one reason being there is no consideration as this money is created out of thin air), at least not in reality. if the loan is not paid back, then the property( or building is seized) the bank is simply transforming money into material. since the loan is protected by the state, the bank has no risk. they will get their money or the building. the person borrowing has taken ( potential risk). this is an important distinction. 1- he doesnt own the building. 2- hes borrowing based on a potential gain or loss from labor/demand. in other words there is no risk in actual reality. if he fails, hes just where he is now, without the borrowed money or building. 3- in order for that risk to become actual, labor is needed. so if that person didnt borrow, but actually worked for that money, then its actual risk, not potential. thats a real stake in the game. sorta... you see, if that person owns that building and the business fails, he can always sell back the building and gain at a minimum some of his labor/value back. maybe all of it depending on what the capital is. or, he could live there. etc. in the above example, labor will not be where it started out. it started out with a job, and has actual risk of losing that job. thas a true plus or minus... the labor put in, can never be gotten back. it is a true actual risk in reality.

Now you're claiming otherwise. So again...which is it? no. i did not say previous labor was worthless. i said when person a makes raw materials and sells them, that is his reward, value. the raw materials and its value was not ignored because i paid for it! *And that right there demonstrates the fallacy of your "reasoning". When you get paid $80 for your labor, and generate $1000 in revenue, resulting in $920 in profit "extracted" from you, you're claiming your labor has an intrinsic worth of $1000. When the price of a bike goes up to $150, as you said in your example, the worth of your labor goes up to $1500, and you're now having $1420 stolen from you? The worth of your labor has increased, without any change in the labor you're performing? Isn't that gaining value without doing any work - I mean, you just gained $500 in value, doing no extra work for it? You're bull **** is subject to the same failures that you claim marginal productivity has. Dumbass. no.......................................... the raw materials are the reward when the person bought them. ie, person a pays 100$ for raw materials. he then needs labor to create the final product. person a then builds the bike and sells it for 200$ his reward is now what the bike was sold for. the person creating raw material did not create the bike, do you get it? its the division of labor.... i dont know why this is so hard for you to understand. its called division of labor. person a gets compensated for work. person b then takes what he bought from person a and then creates x. person c who bought x then gets compensated for creating and selling y. you,(the capitalist), is saying person a should own all of this, esentially ignoring the division of labor.... the person creating raw materials was compensated and different from the person who created the bike... again, if i do 50 pushups, and you do 100, do i get to claim i did 150?

since you are not working, nothing. i simply give the hammer back. permission is not a productive act. its simply a position of power/hierachy. Actually, you mean "I could buy a candy bar and own all of M&M Msrs." You're already confused enough with the fractional distinction between consumer and producer, don't confuse yourself further by introducing a retailer into the mix to broker the consumer-producer relationship. And even then...the only person claiming anything remotely like that is you. this is the equivalent of me lending you a pencil, and then you draw a wonderful bob ross drawing. do i now own the drawing? i worked for the pencil, NOT THE PAINTING! permission is not work.

Never took an economics class in college, but I do know that you know squat. all of that gets paid with labor...lol

no, your effort was the 100$, not my labor. when you loan me a hammer, and i create a house, you do not deserve or own the house. your reward was the hammer you created. or the 100$ you got from working, not my work. if this were valid, i could buy a candybar at walmart and therefore own all walmart.

oh god.......... let me try and explain this again. person a creates raw materials for a bike. the materials are sold. that labor is rewarded with what person a got in return. say 100$ person b who bought the materials, builds the bike. person b then sells the complete bike. the reward is what the bike was sold for. say 200$ the person who sold the raw materials gets a reward for his raw materials created, not the bike. do you understand now? this is why marginal productivity fails. becasue it means you dont have to work in order to gain value... ( you are stealing labor)

Another defence of surplus value by capitalist economics is also based on time. This argument is related to the "time preference" one we have discussed in the last section and is, likewise, rooted in the idea that money now is different than money later and, as a consequence, surplus value represents (in effect) an exchange of present goods for future ones. This argument has two main forms, depending on whether it is interest or profits which are being defended, but both are based on this perspective. We will discuss each in turn. One of the oldest defences of interest is the "abstinence" theory first postulated by Nassau Senior in 1836. For Senior, abstinence is a sacrifice of present enjoyment for the purpose achieving some distant result. This demands the same heavy sacrifice as does labour, for to "abstain from the enjoyment which is in our power, or to seek distant rather than immediate results, are among the most painful exertions of the human will." Thus wages and interest/profit "are to be considered as the rewards of peculiar sacrifices, the former the remuneration for labour, and the latter for abstinence from immediate enjoyment." [An Outline of the Science of Political Economy, p. 60 and p. 91] Today, the idea that interest is the reward for "abstinence" on the part of savers is still a common one in capitalist economics. However, by the end of the nineteenth century, Senior's argument had become known as the "waiting" theory while still playing the same role in justifying non-labour income. One of the leading neo-classical economists of his day, Alfred Marshall, argued that "f we admit [a commodity] is the product of labour alone, and not of labour and waiting, we can no doubt be compelled by an inexorable logic to admit that there is no justification of interest, the reward for waiting." [Principles of Economics, p. 587] While implicitly recognising that labour is the source of all value in capitalism (and that abstinence is not the source of profits), it is claimed that interest is a justifiable claim on the surplus value produced by a worker. Why is this the case? Capitalist economics claims that by "deferring consumption," the capitalist allows new means of production to be developed and so should be rewarded for this sacrifice. In other words, in order to have capital available as an input -- i.e. to bear costs now for returns in the future -- someone has to be willing to postpone his or her consumption. That is a real cost, and one that people will pay only if rewarded for it: "human nature being what it is, we are justified in speaking of the interest on capital as the reward of the sacrifice involved in waiting for the enjoyment of material resources, because few people would save much without reward; just as we speak of wages as the reward of labour, because few people would work hard without reward." [Op. Cit., p. 232] The interest rate is, in neo-classical economic theory, set when the demand for loans meets the supply of savings. The interest rate stems from the fact that people prefer present spending over future spending. If someone borrows £200 for one year at 5%, this is basically the same as saying that there would rather have £200 now than £210 a year from now. Thus interest is the cost of providing a service, namely time. People are able to acquire today what they would otherwise not have until sometime in the future. With a loan, interest is the price of the advantage obtained from having money immediately rather than having to wait for. This, on first appears, seems plausible. If you accept the logic of capitalist economics and look purely at individuals and their preferences independently of their social circumstances then it can make sense. However, once you look wider you start to see this argument start to fall apart. Why is it that the wealthy are willing to save and provide funds while it is the working class who do not save and get into debt? Surely a person's "time preference" is dependent on their socio-economic position? As we argued in the last section, this means that any subjective evaluation of the present and future is dependent on, not independent of, the structure of market prices and income distribution. It varies with the income of individual and their class position, since the latter will condition the degree or urgency of present wants and needs. So this theory appears ludicrous to a critic of capitalism -- simply put, does the mine owner really sacrifice more than a miner, a rich stockholder more than an autoworker working in their car plant, a millionaire investor more than a call centre worker? As such, the notion that "waiting" explains interest is question begging in the extreme as it utterly ignores inequality within a society. After all, it is far easier for a rich person to "defer consumption" than for someone on an average income. This is borne out by statistics, for as Simon Kuznets has noted, "only the upper income groups save; the total savings of groups below the top decile are fairly close to zero." [Economic Growth and Structure, p. 263] Obviously, therefore, in modern society it is the capitalist class, the rich, who refrain from expending their income on immediate consumption and "abstain." Astonishingly, working class people show no such desire to abstain from spending their wages on immediate consumption. It does not take a genius to work out why, although many economists have followed Senior in placing the blame on working class lack of abstinence on poor education rather than, say, the class system they live in (for Senior, "the worse educated" classes "are always the most improvident, and consequently the least abstinent." [Op. Cit., p. 60]). Therefore, the plausibility of interest as payment for the pain of deferring consumption rests on the premise that the typical saving unit is a small or medium-income household. But in contemporary capitalist societies, this is not the case. Such households are not the source of most savings; the bulk of interest payments do not go to them. As such, interest is the dependent factor and so "waiting" cannot explain interest. Rather, interest is product of social inequality and the social relationships produced by an economy. Lenders lend because they have the funds to do so while borrowers borrow because without money now they may not be around later. As those with funds are hardly going without by lending, it does not make much sense to argue that they would spend even more today without the temptation of more income later. To put this point differently, the capitalist proponents of interest only consider "postponing consumption" as an abstraction, without making it concrete. For example, a capitalist may "postpone consumption" of his 10th Rolls Royce because he needs the money to upgrade some machinery in his factory; whereas a single mother may have to "postpone consumption" of food or adequate housing in order to attempt to better take care of her children. The two situations are vastly different, yet the capitalist equates them. This equation implies that "not being able to buy anything you want" is the same as "not being able to buy things you need", and is thus skewing the obvious difference in costs of such postponement of consumption! Thus Proudhon's comments that the loaning of capital "does not involve an actual sacrifice on the part of the capitalist" and so "does not deprive himself. . . of the capital which be lends. He lends it, on the contrary, precisely because the loan is not a deprivation to him; he lends it because he has no use for it himself, being sufficiently provided with capital without it; be lends it, finally, because he neither intends nor is able to make it valuable to him personally, -- because, if he should keep it in his own hands, this capital, sterile by nature, would remain sterile, whereas, by its loan and the resulting interest, it yields a profit which enables the capitalist to live without working. Now, to live without working is, in political as well as moral economy, a contradictory proposition, an impossible thing." [interest and Principal: A Loan is a Service] In other words, contra Marshall, saving is not a sacrifice for the wealthy and, as such, not deserving a reward. Proudhon goes on: "The proprietor who possesses two estates, one at Tours, and the other at Orleans, and who is obliged to fix his residence on the one which he uses, and consequently to abandon his residence on the other, can this proprietor claim that he deprives himself of anything, because he is not, like God, ubiquitous in action and presence? As well say that we who live in Paris are deprived of a residence in New York! Confess, then, that the privation of the capitalist is akin to that of the master who has lost his slave, to that of the prince expelled by his subjects, to that of the robber who, wishing to break into a house, finds the dogs on the watch and the inmates at the windows." Given how much income this "abstinence" or "waiting" results in, we can only conclude that it is the most painful of decisions possible for a multi-millionaire to decide not to buy that fifth house and instead save the money. The effort to restrain themselves from squandering their entire fortunes all at once must be staggering. In the capitalist's world, an industrialist who decides not to consume a part of their riches "suffers" a cost equivalent to that of someone who postpones consumption of their meagre income to save enough to get something they need. Similarly, if the industrialist "earns" hundred times more in interest than the wage of the worker who toils in their workplace, the industrialist "suffers" hundred times more discomfort living in his palace than, say, the coal miner does working at the coal face in dangerous conditions or the worker stuck in a boring McJob they hate. The "disutility" of postponing consumption while living in luxury is obviously 100 times greater than the "disutility" of, say, working for a living and so should be rewarded appropriately. As there is no direct relationship between interest received and the "sacrifice" involved (if anything, it is an inverse relationship), the idea that interest is the reward for waiting is simply nonsense. You need be no anarchist to come to this obvious conclusion. It was admitted as much by a leading capitalist economist and his argument simply echoes Proudhon's earlier critique: "the existence and height of interest by no means invariably correspond with the existence and the height of a 'sacrifice of abstinence.' Interest, in exceptional cases, is received where there has been no individual sacrifice of abstinence. High interest is often got where the sacrifice of the abstinence is very trifling -- as in the case of [a] millionaire -- and 'low interest' is often got where the sacrifice entailed by the abstinence is very great. The hardly saved sovereign which the domestic servant puts in the savings bank bears, absolutely and relatively, less interest than the lightly spared thousands which the millionaire puts to fructify in debenture and mortgage funds. These phenomena fit badly into a theory which explains interest quite universally as a 'wage of abstinence.'" [Eugen von Böhm-Bawerk, Capital and Interest, p. 277] All in all, as Joan Robinson pointed out, "that the rate of interest is the 'reward for waiting' but 'waiting' only means owning wealth . . . In short, a man who refrains from blowing his capital in orgies and feasts can continue to get interest on it. This seems perfectly correct, but as a theory of distribution it is only a circular argument." [Contributions to Modern Economics, p. 11] Interest is not the reward for "waiting," rather it is one of the (many) rewards for being rich. This was admitted as much by Marshall himself, who noted that the "power to save depends on an excess of income over necessary expenditure; and this is greatest among the wealthy." [Op. Cit., p. 229] Little wonder, then, that neo-classical economists introduced the term waiting as an "explanation" for returns to capital (such as interest). Before this change in the jargon of economics, mainstream economists used the notion of "abstinence" (the term used by Nassau Senior) to account for (and so justify) interest. Just as Senior's "theory" was seized upon to defend returns to capital, so was the term "waiting" after it was introduced in the 1880s. Interestingly, while describing exactly the same thing, "waiting" became the preferred term simply because it had a less apologetic ring to it. Both describe the "sacrifice of present pleasure for the sake of future" yet, according to Marshall, the term "abstinence" was "liable to be misunderstood" because there were just too many wealthy people around who received interest and dividends without ever having abstained from anything. As he admitted, the "greatest accumulators of wealth are very rich persons, some [!] of whom live in luxury, and certainly do not practise abstinence in that sense of the term in which it is convertible with abstemiousness." So he opted for the term "waiting" because there was "advantage" in its use to describe "the accumulation of wealth" as the "result of a postponement of enjoyment." [Op. Cit., pp. 232-3] This is particularly the case as socialists had long been pointing out the obvious fact that capitalists do not "abstain" from anything. The lesson is obvious, in mainstream economics if reality conflicts with your theory, do not reconsider the theory, change its name! The problems of "waiting" and "abstinence" as the source of interest becomes even clearer when we look at inherited wealth. Talking about "abstinence" or "waiting" when discussing a capitalist inheriting a company worth millions is silly. Senior recognised this, arguing that income in this case is not profit, but rather "has all the attributes of rent." [Op. Cit., p. 129] That such a huge portion of capitalist revenue would not be considered profit shows the bankruptcy of any theory which see profit as the reward for "waiting." However, Senior's argument does show that interest payments need not reflect any positive contribution to production by those who receive it. Like the landlord receiving payment for owning a gift of nature, the capitalist receives income for simply monopolising the work of previous generations and, as Smith put it, the "rent of land, considered as the price paid for the use of land, is naturally a monopoly price." [The Wealth of Nations, p. 131] Even capitalist economists, while seeking to justify interest, admit that it "arises independently of any personal act of the capitalist. It accrues to him even though he has not moved any finger in creating it . . . And it flows without ever exhausting that capital from which it arises, and therefore without any necessary limit to its continuance. It is, if one may use such an expression in mundane matters, capable of everlasting life." [böhm-Bawerk, Op. Cit., p. 1] Little wonder we argued in section C.2.3 that simply owning property does not justify non-labour income. In other words, due to one decision not to do anything (i.e. not to consume), a person (and his or her heirs) may receive forever a reward that is not tied to any productive activity. Unlike the people actually doing the work (who only get a reward every time they "contribute" to creating a commodity), the capitalist will get rewarded for just one act of abstention. This is hardly a just arrangement. As David Schweickart has pointed out, "Capitalism does reward some individuals perpetually. This, if it is to be justified by the canon of contribution, one must defend the claim that some contributions are indeed eternal." [Against Capitalism, p. 17] As we noted in section C.1.1, current and future generations should not be dominated by the actions of the long dead. The "waiting" theory, of course, simply seeks to justify interest rather than explain its origin. If the capitalist really did deserve an income as a reward for their abstinence, where does it come from? It cannot be created passively, merely by the decision to save, so interest exists because the exploitation of labour exists. As Joan Robinson summarised: "Obviously, the reward of saving is owning some more wealth. One of the advantages, though by no means the only one, of owning wealth is the possibility of getting interest on it. "But why is it possible to get interest? Because businesses make profits and are willing to borrow." [Collected Economic Papers, vol. 5, p. 36] This is the key. If ones ability and willingness to "wait" is dependent on social facts (such as available resources, ones class, etc.), then interest cannot be based upon subjective evaluations, as these are not the independent factor. In other words, saving does not express "waiting", it simply expresses the extent of inequality and interest expresses the fact that workers have to sell their labour to others in order to survive: "The notion that human beings discount the future certainly seems to correspond to everyone's subjective experience, but the conclusion drawn from it is a non sequitor, for most people have enough sense to want to be able to exercise consuming power as long as fate permits, and many people are in the situation of having a higher income in the present than they expect in the future (salary earners will have to retire, business may be better now than it seems likely to be later, etc.) and many look beyond their own lifetime and wish to leave consuming power to their heirs. Thus a great many . . . are eagerly looking for a reliable vehicle to carry purchasing power into the future . . . It is impossible to say what price would rule if there were a market for present versus future purchasing power, unaffected by any other influence except the desires of individuals about the time-pattern of their consumption. It might will be such a market would normally yield a negative rate of discount . . . "The rate of interest is normally positive for a quite different reason. Present purchasing power is valuable partly because, under the capitalist rules of the game, it permits its owner . . . to employ labour and undertake production which will yield a surplus of receipts over costs. In an economy in which the rate of profit is expected to be positive, the rate of interest is positive . . . [and so] the present value of purchasing power exceeds its future value to the corresponding extent. . . This is nothing whatever to do with the subjective rate of discount of the future of the individual concerned. . ." [The Accumulation of Capital, p. 395] So, interest has little to do with "waiting" and a lot more to do with the inequalities associated with the capitalist system. In effect, the "waiting" theory assumes what it is trying to prove. Interest is positive simply because capitalists can appropriate surplus value from workers and so current money is more valuable than future money because of this fact. Ironically, therefore, the pro-capitalist theories of who abstains are wrong, "since saving is mainly out of profits, and real wages tend to be lower the higher the rate of profit, the abstinence associated with saving is mainly done by the workers, who do not receive any share in the 'reward.'" [Robinson, Op. Cit., p. 393] In other words, "waiting" does not produce a surplus, labour does. As such, to "say that those who hold financial instruments can lay claim to a portion of the social product by abstaining or waiting provides no explanation of what makes the production process profitable, and hence to what extent interest claims or dividends can be paid. Reliance on a waiting theory of the return to capital represented nothing less than a reluctance of economists to confront the sources of value creation and analyse the process of economic development." [William Lazonick, Competitive Advantage on the Shop Floor, p. 267] This would involve having to analyse the social relations between workers and managers/bosses on the shop floor, which would be to bring into question the whole nature of capitalism and any claims it was based upon freedom. To summarise, the idea that interest is the "reward" for waiting simply ignores the reality of class society and, in effect, rewards the wealthy for being wealthy. Neo-classical economics implies that being rich is the ultimate disutility. The hardships ("sacrifices") of having to decide to consume or invest their riches weighs as heavily on the elite as they do on the scales of utility. Compared to, say, working in a sweatshop, fearing unemployment (sorry, maximising "leisure") or not having to worry about saving (as your income just covers your out-goings) it is clear which are the greatest sacrifices and which are rewarded accordingly under capitalism. Much the same argument can be applied to "time-preference" theories of profit. These argue that profits are the result of individuals preferring present goods to future ones. Capitalists pay workers wages, allowing them to consumer now rather than later. This is the providing of time and this is rewarded by profits. This principle was first stated clearly by Eugen von Böhm-Bawerk and has been taken as the basis of the "Austrian" school of capitalist economics (see section C.1.6). After rejecting past theories of interest (including, as noted above, "abstinence" theories, which he concluded the socialists were right to mock), Böhm-Bawerk argued that profits could only by explained by means of time preference: "The loan is a real exchange of present goods against future goods . . . present goods invariably possess a greater value than future goods of the same number and kind, and therefore a definite sum of present goods can, as a rule, only be purchased by a larger sum of future goods. Present goods possess an agio in future goods. This agio is interest. It is not a separate equivalent for a separate and durable use of the loaned goods, for that is inconceivable; it is a part equivalent of the loaned sum, kept separate for practical reasons. The replacement of the capital + the interest constitutes the full equivalent." [Capital and Interest, p. 259] For him, time preference alone is the reason for profit/interest due to the relative low value of future goods, compared to present goods. Capital goods, although already present in their physical state, are really future goods in their "economic nature" as is labour. This means that workers are paid the amount their labour creates in terms of future goods, not current goods. This difference between the high value of current goods and low value of future goods is the source of surplus value: "This, and nothing else, is the foundation of the so-called 'cheap' buying of production instruments, and especially of labour, which the Socialists rightly explain as the source of profit on capital, but wrongly interpret . . . as the result of a robbery or exploitation of the working classes by the propertied classes." [The Positive Theory of Capital, p. 301] The capitalists are justified in keeping this surplus value because they provided the time required for the production process to occur. Thus surplus value is the product of an exchange, the exchange of present goods for future ones. The capitalist bought labour at its full present value (i.e. the value of its future product) and so there is no exploitation as the future goods are slowly maturing during the process of production and can then be sold at its full value as a present commodity. Profit, like interest, is seen as resulting from varying estimates of the present and future needs. As should be obvious, our criticisms of the "waiting" theory of interest apply to this justification of profits. Money in itself does not produce profit any more than interest. It can only do that when invested in actual means of production which are put to work by actual people. As such, "time preference" only makes sense in an economy where there is a class of property-less people who are unable to "wait" for future goods as they would have died of starvation long before they arrived. So it is the class position of workers which explains their time preferences, as Böhm-Bawerk himself acknowledged. Thus capitalism was marked by an "enormous number of wage-earners who cannot employ their labour remuneratively by working on their own account, and are accordingly, as a body, inclined and ready to sell the future product of their labour for a considerably less amount of present goods." So, being poor, meant that they lacked the resources to "wait" for "future" goods and so became dependent (as a class) on those who do. This was, in his opinion the "sole ground of that much-talked-of and much-deplored dependence of labourer on capitalist." It is "only because the labourers cannot wait till the roundabout process . . . delivers up its products ready for consumption, that they become economically dependent on the capitalists who already hold in their possession what we have called 'intermediate products.'" [Op. Cit., p. 330 and p. 83] Böhm-Bawerk, ironically, simply repeats (although in different words) and agrees with the socialist critique of capitalism which, as we discussed in section C.2.2, is also rooted in the class dependence of workers to capitalists (Bakunin, for example, argued that the capitalists were "profiting by the economic dependence of the worker" in order to exploit them by "turn[ing] the worker into a subordinate." [The Political Philosophy of Bakunin, p. 188]). The difference is that Böhm-Bawerk thinks that the capitalists deserve their income from wealth while anarchists, like other socialists, argue they do not as they simply are being rewarded for being wealthy. Böhm-Bawerk simply cannot bring himself to acknowledge that an individual's psychology, their subjective evaluations, are conditioned by their social circumstances and so cannot comprehend the class character of capitalism and profit. After all, a landless worker will, of course, estimate the "sacrifice" or "disutility" of selling their labour to a master as much less than the peasant farmer or artisan who possesses their own land or tools. The same can be said of workers organised into a union. As such, Böhm-Bawerk ignores the obvious, that the source of non-labour income is not in individual subjective evaluations but rather the social system within which people live. The worker does not sell her labour power because she "underestimates" the value of future goods but because she lacks the means of obtaining any sort of goods at all except by the selling of her labour power. There is no real choice between producing for herself or working for a boss -- she has no real opportunity of doing the former at all and so has to do the latter. This means that workers sells their labour (future goods) "voluntarily" for an amount less than its value (present goods) because their class position ensures that they cannot "wait." So, if profit is the price of time, then it is a monopoly price produced by the class monopoly of wealth ownership under capitalism. Needless to say, as capital is accumulated from surplus value, the dependence of the working class on the capitalists will tend to grow over time as the "waiting" required to go into business will tend to increase also. An additional irony of Böhm-Bawerk's argument is that is very similar to the "abstinence" theory he so rightly mocked and which he admitted the socialists were right to reject. This can be seen from one of his followers, right-"libertarian" Murray Rothbard: "What has been the contribution of these product-owners, or 'capitalists', to the production process? It is this: the saving and restriction of consumption, instead of being done by the owners of land and labour, has been done by the capitalists. The capitalists originally saved, say, 95 ounces of gold which they could have then spent on consumers' goods. They refrained from doing so, however, and, instead, advanced the money to the original owners of the factors. They paid the latter for their services while they were working, thus advancing them money before the product was actually produced and sold to the consumers. The capitalists, therefore, made an essential contribution to production. They relieved the owners of the original factors from the necessity of sacrificing present goods and waiting for future goods." [Man, Economy, and State, pp. 294-95] This meant that without risk, "[e]ven if financial returns and consumer demand are certain, the capitalists are still providing present goods to the owners of labour and land and thus relieving them of the burden of waiting until the future goods are produced and finally transformed into consumers' goods." [Op. Cit., p. 298] Capitalists pay out, say, £100,000 this year in wages and reap £200,000 next year not because of exploitation but because both parties prefer this amount of money this year rather than next year. Capitalists, in other words, pay out wages in advance and then wait for a sale. They will only do so if compensated by profit. Rothbard's argument simply assumes a class system in which there is a minority of rich and a majority of property-less workers. The reason why workers cannot "wait" is because if they did they would starve to death. Unsurprisingly, then, they prefer their wages now rather than next year. Similarly, the reason why they do not save and form their own co-operatives is that they simply cannot "wait" until their workplace is ready and their products are sold before eating and paying rent. In other words, their decisions are rooted in their class position while the capitalists (the rich) have shouldered the "burden" of abstinence so that they can be rewarded with even more money in the future. Clearly, the time preference position and the "waiting" or "abstinence" perspective are basically the same (Rothbard even echoes Senior's lament about the improvident working class, arguing that "the major problem with the lower-class poor is irresponsible present-mindedness." [For a New Liberty, p. 154]). As such, it is subject to the same critique (as can be found in, say, the works of a certain Eugen von Böhm-Bawerk). In other words, profit has a social basis, rooted in the different economic situation of classes within capitalism. It is not the fact of "waiting" which causes profits but rather the monopoly of the means of life by the capitalist class which is the basis of "economic dependence." Any economic theory which fails to acknowledge and analyse this social inequality is doomed to failure from the start. To conclude, the arguments that "waiting" or "time preference" explain or justify surplus value are deeply flawed simply because they ignore the reality of class society. By focusing on individual subjective evaluations, they ignore the social context in which these decisions are made and, as a result, fail to take into account the class character of interest and profit. In effect, they argue that the wealthy deserve a reward for being wealthy. Whether it is to justify profits or interest, the arguments used simply show that we have an economic system that works only by bribing the rich! no, i agree with paying back the 100$, NOT INTEREST! that is a reward for doing nothing.

how can investors be !@#$ed over when capital does not deserve profits? their reward was their money they got from working, not what others create and work for... money does not create new money. just like a hammer does not magically make a hammer on its own...lol if you created the hammer, the hammer is yours. you cant give the hammer to someone else and then take all their ****... again, the reward for doing nothing. capital is not productive! !@#$ THE INVESTMENT CLASS!

OMG, you keep proving my point. that is what capital does in capitalism.... assuming this is a single transaction. i buy the raw materials to build a bike. the amount i paid for the raw materials is the proper reward to those who made those raw materials. not the extra labor i do when the bike is complete and sold. and then, when i sell the bike, my reward is for that bike, not what the random person does with that bike, and so on and so on. this is why capital is not productive. if you dont understand this, well. idk... again, if you dont get this... if you do pushups, can you take credit for another person doing pushups...?? if capital is productive, then yes, you can take credit for those pushups you did not do. this is absurd. this is why the term "reward for doing nothing" applies here...

He clearly didnt understand the topic. so he needs to read this...

oh god.... geeezzzz... when you do pushups, can you take credit for the other person doing pushups? think about this and capital... here read this- DOES CAPITAL JUSTIFY PROFITS? No, it does not. To understand why, we must first explain the logic behind this claim. It is rooted in what is termed "marginal productivity" theory. In the words of one of its developers: "If each productive function is paid for according to the amount of its product, then each man get what he himself produces. If he works, he gets what he creates by working; if he provides capital, he gets what his capital produces; and if, further, he renders service by co-ordinating labour and capital, he gets the product that can be separately traced to that function. Only in one of these ways can a man produce anything. If he receives all that he brings into existence through any one of these three functions, he receives all that he creates at all." [John Bates Clark, The Distribution of Wealth, p.7] Needless to say, this analysis was based on the need to justify the existing system, for it was "the purpose of this work to show that the distribution of income to society is controlled by a natural law, and that this law, if it worked without friction, would give to every agent of production the amount of wealth which that agent creates." In other words, "what a social class gets is, under natural law, what it contributes to the general output of industry." [Clark, Op. Cit., p. v and p. 313] And only mad people can reject a "natural law" like gravity -- or capitalism! Most schools of capitalist economics, when they bother to try and justify non-labour income, hold to this theory of productivity. Unsurprisingly, as it proves what right-wing economist Milton Friedman called the "capitalist ethic": "To each according to what he and the instruments he owns produces." [Capitalism and Freedom, pp. 161-162] As such, this is one of the key defences of capitalism, based as it is on the productive contribution of each factor (labour, land and capital). Anarchists as unconvinced. Unsurprisingly, this theory took some time to develop given the theoretical difficulties involved. After all, you need all three factors to produce a commodity, say a bushel of wheat. How can we determine that percentage of the price is due to the land, what percentage to labour and what percentage to capital? You cannot simply say that the "contribution" of each factor just happens to be identical to its cost (i.e. the contribution of land is what the market rent is) as this is circular reasoning. So how is it possible to specify contribution of each factor of production independently of the market mechanism in such a way as to show, firstly, that the contributions add up to 100 percent and, secondly, that the free market will in fact return to each factor its respective contribution? This is where marginal productivity theory comes in. In neo-classical theory, the contribution of a specific factor is defined as the marginal product of that factor when the other factors are left constant. Take, as an example, a hundred bushels of wheat produced by X acres of land being worked by Y workers using £Z worth of capital. The contribution of land can then be defined as the increase in wheat that an extra acre of land would produce (X+1) if the same number of workers employed the same capital worked it. Similarly, the contribution of a worker would be the increase that would result if an addition worker was hired (Y + 1) to work the same land (X) with the same capital (£Z). The contribution of capital, obviously, would be the increase in wheat produced by the same number of workers (X) working the same amount of land (Y) using one more unit of capital (£Z+1). Then mathematics kicks in. If enough assumptions are made in terms of the substitutability of factors, diminishing returns, and so forth, then a mathematical theorem (Euler's Theorem) can be used to show that the sum of these marginal contributions would be a hundred bushels. Applying yet more assumptions to ensure "perfect competition" it can be mathematically proven that the rent per acre set by this perfect market will be precisely the contribution of the land, that the market wage will be the contribution of the worker, and the market interest rate will be the contribution of capital. In addition, it can be shown that any monopoly power will enable a factor owner to receive more than it contributes, so exploiting the others. While this is impressive, the problems are obvious. As we discuss in section C.2.5, this model does not (indeed, cannot) describe any actual real economy. However, there is a more fundamental issue than mere practicality or realism, namely that it confuses a moral principle (that factors should receive in accordance with their productive contributions) with an ownership issue. This is because even if we want to say that land and capital "contribute" to the final product, we cannot say the same for the landowner or the capitalist. Using our example above, it should be noted that neither the capitalist nor the landowner actually engages in anything that might be called a productive activity. Their roles are purely passive, they simply allow what they own to be used by the people who do the actual work, the labourers. Marginal productivity theory shows that with declining marginal productivity, the contribution of labour is less than the total product. The difference is claimed to be precisely the contribution of capital and land. But what is this "contribution" of capital and land? Without any labourers there would be no output. In addition, in physical terms, the marginal product of, say, capital is simply the amount by which production would decline is one piece of capital were taken out of production. It does not reflect any productive activity whatsoever on the part of the owner of said capital. It does not, therefore, measure his or her productive contribution. In other words, capitalist economics tries to confuse the owners of capital with the machinery they own. Unlike labour, whose "ownership" cannot be separated from the productive activities being done, capital and land can be rewarded without their owners actually doing anything productive at all. For all its amazing mathematics, the neo-classical solution fails simply because it is not only irrelevant to reality, it is not relevant ethically. To see why, let us consider the case of land and labour (capital is more complex and will be discussed in the next two sections). Marginal productivity theory can show, given enough assumptions, that five acres of land can produce 100 bushels of wheat with the labour of ten men and that the contribution of land and labour are, respectively, 40 and 60 bushels each. In other words, that each worker receives a wage representing 6 bushels of wheat while the landlord receives an income of 40 bushels. As socialist David Schweickart notes, "we have derived both the contribution of labour and the contribution of land from purely technical considerations. We have made no assumptions about ownership, competition, or any other social or political relationship. No covert assumptions about capitalism have been smuggled into the analysis." [After Capitalism, p. 29] Surely this means that economics has produced a defence of non-labour income? Not so, as it ignores the key issue of what represents a valid contribution. The conclusion that the landlord (or capitalist) is entitled to their income "in no way follows from the technical premises of the argument. Suppose our ten workers had cultivated the five acres as a worker collective. In this, they would receive the entire product, all one hundred bushels, instead of sixty. Is this unfair? To whom should the other forty bushels go? To the land, for its 'contribution'? Should the collective perhaps burn forty bushels as an offering to the Land-God? (Is the Land-Lord the representative on Earth of this Land-God?)." [Op. Cit., p. 30] It should be noted that Schweickart is echoing the words of Proudhon: "How much does the proprietor increase the utility of his tenant's products? Has he ploughed, sowed, reaped, mowed, winnowed, weeded? . . . I admit that the land is an implement; but who made it? Did the proprietor? Did he -- by the efficacious virtue of the right of property, by this moral quality infused into the soil -- endow it with vigour and fertility? Exactly there lies the monopoly of the proprietor, though he did not make the implement, he asks pay for its use. When the Creator shall present himself and claim farm-rent, we will consider the matter with him; or even when the proprietor -- his pretended representative -- shall exhibit his power of attorney." [What is Property?, pp. 166-7] In other words, granting permission cannot be considered as a "contribution" or a "productive" act: "We can see that a moral sleight-of-hand has been performed. A technical demonstration has passed itself off as a moral argument by its choice of terminology, namely, by calling a marginal product a 'contribution.' The 'contribution = ethical entitlement' of the landowner has been identified with the 'contribution = marginal product' of the land . . . What is the nature of the landowner's 'contribution' here? We can say that the landlord contributed the land to the workers, but notice the qualitative difference between his 'contribution' and the contribution of his workforce. He 'contributes' his land -- but the land remains intact and remains his at the end of the harvest, whereas the labour contributed by each labourer is gone. If the labourers do not expend more labour next harvest, they will get nothing more, whereas the landowner can continue to 'contribute' year after year (lifting not a finger), and be rewarded year after year for doing so." [schweickart, Op. Cit., p. 30] As the examples of the capitalist and co-operative farms shows, the "contribution" of land and capital can be rewarded without their owners doing anything at all. So what does it mean, "capital's share"? After all, no one has ever given money to a machine or land. That money goes to the owner, not the technology or resource used. When "land" gets its "reward" it involves money going to the landowner not fertiliser being spread on the land. Equally, if the land and the capital were owned by the labourers then "capital" and "land" would receive nothing despite both being used in the productive process and, consequently, having "aided" production. Which shows the fallacy of the idea that profits, interest and rent represent a form of "contribution" to the productive process by land and capital which needs rewarded. They only get a "reward" when they hire labour to work them, i.e. they give permission for others to use the property in question in return for telling them what to do and keeping the product of their labour. As Proudhon put it, "[w]ho is entitled to the rent of the land? The producer of the land, without doubt. Who made the land? God. Then, proprietor, retire!" [Op. Cit., p. 104] Much the same can be said of "capital" (workplaces, machinery, etc.) as well. The capitalist, argued Berkman, "gives you a job; that is permission to work in the factory or mill which was not built by him but by other workers like yourself. And for that permission you help to support him for the rest of your life or as long as you work for him." [What is Anarchism?, p. 14] So non-labour income exists not because of the owners of capital and land "contribute" to production but because they, as a class, own the means of life and workers have to sell their labour and liberty to them to gain access: "We cry shame on the feudal baron who forbade the peasant to turn a clod of earth unless he surrendered to his lord a fourth of his crop. We called those the barbarous times, But if the forms have changed, the relations have remained the same, and the worker is forced, under the name of free contract, to accept feudal obligations." [Kropotkin, The Conquest of Bread, pp. 31-2] It is capitalist property relations that allow this monopolisation of wealth by those who own (or boss) but do not produce. The workers do not get the full value of what they produce, nor do they have a say in how the surplus value produced by their labour gets used (e.g. investment decisions). Others have monopolised both the wealth produced by workers and the decision-making power within the company. This is a private form of taxation without representation, just as the company is a private form of statism. Therefore, providing capital is not a productive act, and keeping the profits that are produced by those who actually do use capital is an act of theft. This does not mean, of course, that creating capital goods is not creative nor that it does not aid production. Far from it! But owning the outcome of such activity and renting it does not justify capitalism or profits. In other words, while we need machinery, workplaces, houses and raw materials to produce goods we do not need landlords and capitalists. The problem with the capitalists' "contribution to production" argument is that one must either assume (a) a strict definition of who is the producer of something, in which case one must credit only the worker(s), or (b) a looser definition based on which individuals have contributed to the circumstances that made the productive work possible. Since the worker's productivity was made possible in part by the use of property supplied by the capitalist, one can thus credit the capitalist with "contributing to production" and so claim that he or she is entitled to a reward, i.e. profit. However, if one assumes (b), one must then explain why the chain of credit should stop with the capitalist. Since all human activity takes place within a complex social network, many factors might be cited as contributing to the circumstances that allowed workers to produce -- e.g. their upbringing and education, the contribution of other workers in providing essential products, services and infrastructure that permits their place of employment to operate, and so on (even the government, which funds infrastructure and education). Certainly the property of the capitalist contributed in this sense. But his contribution was less important than the work of, say, the worker's mother. Yet no capitalist, so far as we know, has proposed compensating workers' mothers with any share of the firm's revenues, and particularly not with a greater share than that received by capitalists! Plainly, however, if they followed their own logic consistently, capitalists would have to agree that such compensation would be fair. In summary, while some may consider that profit is the capitalist's "contribution" to the value of a commodity, the reality is that it is nothing more than the reward for owning capital and giving permission for others to produce using it. As David Schweickart puts it, "'providing capital' means nothing more than 'allowing it to be used.' But an act of granting permission, in and of itself, is not a productive activity. If labourers cease to labour, production ceases in any society. But if owners cease to grant permission, production is affected only if their authority over the means of production is respected." [Against Capitalism, p. 11] This authority, as discussed earlier, derives from the coercive mechanisms of the state, whose primary purpose is to ensure that capitalists have this ability to grant or deny workers access to the means of production. Therefore, not only is "providing capital" not a productive activity, it depends on a system of organised coercion which requires the appropriation of a considerable portion of the value produced by labour, through taxes, and hence is actually parasitic. Needless to say, rent can also be considered as "profit", being based purely on "granting permission" and so not a productive activity. The same can be said of interest, although the arguments are somewhat different (see section C.2.6). So, even if we assume that capital and land are productive, it does not follow that owning those resources entitles the owner to an income. However, this analysis is giving too much credit to capitalist ideology. The simple fact is that capital is not productive at all. Rather, "capital" only contributes to production when used by labour (land does produce use values, of course, but these only become available once labour is used to pick the fruit, reap the corn or dig the coal). As such, profit is not the reward for the productivity of capital. Rather labour produces the marginal productivity of capital. This is discussed in the next section. In a word, no. As Proudhon pointed out, "Capital, tools, and machinery are likewise unproductive. . . The proprietor who asks to be rewarded for the use of a tool or for the productive power of his land, takes for granted, then, that which is radically false; namely, that capital produces by its own effort -- and, in taking pay for this imaginary product, he literally receives something for nothing." [What is Property?, p. 169] In other words, only labour is productive and profit is not the reward for the productivity of capital. Needless to say, capitalist economists disagree. "Here again the philosophy of the economists is wanting. To defend usury they have pretended that capital was productive, and they have changed a metaphor into a reality," argued Proudhon. The socialists had "no difficulty in overturning their sophistry; and through this controversy the theory of capital has fallen into such disfavour that today, in the minds of the people, capitalist and idler are synonymous terms." [system of Economical Contradictions, p. 290] Sadly, since Proudhon's time, the metaphor has become regained its hold, thanks in part to neo-classical economics and the "marginal productivity" theory. We explained this theory in the last section as part of our discussion on why, even if we assume that land and capital are productive this does not, in itself, justify capitalist profit. Rather, profits accrue to the capitalist simply because he or she gave their permission for others to use their property. However, the notion that profits represent that "productivity" of capital is deeply flawed for other reasons. The key one is that, by themselves, capital and land produce nothing. As Bakunin put it, "neither property nor capital produces anything when not fertilised by labour." [The Political Philosophy of Bakunin, p. 183] In other words, capital is "productive" simply because people use it. This is hardly a surprising conclusion. Mainstream economics recognises it in its own way (the standard economic terminology for this is that "factors usually do not work alone"). Needless to say, the conclusions anarchists and defenders of capitalism draw from this obvious fact are radically different. The standard defence of class inequalities under capitalism is that people get rich by producing what other people want. That, however, is hardly ever true. Under capitalism, people get rich by hiring other people to produce what other people want or by providing land, money or machinery to those who do the hiring. The number of people who have became rich purely by their own labour, without employing others, is tiny. When pressed, defenders of capitalism will admit the basic point and argue that, in a free market, everyone gets in income what their contribution in producing these goods indicates. Each factor of production (land, capital and labour) is treated in the same way and their marginal productivity indicates what their contribution to a finished product is and so their income. Thus wages represent the marginal productivity of labour, profit the marginal productivity of capital and rent the marginal productivity of land. As we have used land and labour in the previous section, we will concentrate on land and "capital" here. We must note, however, that marginal productivity theory has immense difficulties with capital and has been proven to be internally incoherent on this matter (see next section). However, as mainstream economics ignores this, so will we for the time being. So what of the argument that profits represent the contribution of capital? The reason why anarchists are not impressed becomes clear when we consider ten men digging a hole with spades. Holding labour constant means that we add spades to the mix. Each new spade increases productivity by the same amount (because we assume that labour is homogenous) until we reach the eleventh spade. At that point, the extra spade lies unused and so the marginal contribution of the spade ("capital") is zero. This suggests that the socialists are correct, capital is unproductive and, consequently, does not deserve any reward for its use. Of course, it will be pointed out that the eleventh spade cost money and, as a result, the capitalist would have stopped at ten spades and the marginal contribution of capital equals the amount the tenth spade added. Yet the only reason that spade added anything to production was because there was a worker to use it. In other words, as economist David Ellerman stresses, the "point is that capital itself does not 'produce' at all; capital is used by Labour to produce the outputs . . . Labour produces the marginal product of capital." [Property and Contract in Economics, p. 204] As such, to talk of the "marginal product" of capital is meaningless as holding labour constant is meaningless: "Consider, for example, the 'marginal product of a shovel' in a simple production process wherein three workers use two shovels and a wheelbarrow to dig out a cellar. Two of the workers use two shovels to fill the wheelbarrow which the third worker pushes a certain distance to dump the dirt. The marginal productivity of a shovel is defined as the extra product produced when an extra shovel is added and the other factors, such as labour, are held constant. The labour is the human activity of carrying out this production process. If labour was held 'constant' is the sense of carrying out the same human activity, then any third shovel would just lie unused and the extra product would be identically zero. "'Holding labour constant' really means reorganising the human activity in a more capital intensive way so that the extra shovel will be optimally utilised. For instance, all three workers could use the three shovels to fill the wheelbarrow and then they could take turns emptying the wheelbarrow. In this manner, the workers would use the extra shovel and by so doing they would produce some extra product (additional earth moved during the same time period). This extra product would be called the 'marginal product of the shovel, but in fact it is produced by the workers who are also using the additional shovel . . . [Capital] does not 'produce' its marginal product. Capital does not 'produce' at all. Capital is used by Labour to produce the output. When capital is increased, Labour produces extra output by using up the extra capital . . . In short, Labour produced the marginal product of capital (and used up the extra capital services)." [Op. Cit., pp. 207-9] Therefore, the idea that profits equals the marginal productivity of capital is hard to believe. Capital, in this perspective, is not only a tree which bears fruit even if its owner leaves it uncultivated, it is a tree which also picks its own fruit, prepares it and serves it for dinner! Little wonder the classical economists (Smith, Ricardo, John Stuart Mill) considered capital to be unproductive and explained profits and interest in other, less obviously false, means. Perhaps the "marginal productivity" of capital is simply what is left over once workers have been paid their "share" of production, i.e. once the marginal productivity of labour has been rewarded. Obviously the marginal product of labour and capital are related. In a production process, the contribution of capital will (by definition) be equal to total price minus the contribution of labour. You define the marginal product of labour, it is necessary to keep something else constant. This means either the physical inputs other than labour are kept constant, or the rate of profit on capital is kept constant. As economist Joan Robinson noted: "I found this satisfactory, for it destroys the doctrine that wages are regulated by marginal productivity. In a short-period case, where equipment is given, at full-capacity operation the marginal physical product of labour is indeterminate. When nine men with nine spades are digging a hole, to add a tenth man could increase output only to the extent that nine dig better if they have a rest from time to time. On the other hand, to subtract the ninth man would reduce output by more or less the average amount. The wage must lie somewhere between the average value of output per head and zero, so that marginal product is greater or much less than the wage according as equipment is being worked below or above its designed capacity." [Contributions to Modern Economics, p. 104] If wages are not regulated by marginal productivity theory, then neither is capital (or land). Subtracting labour while keeping capital constant simply results in unused equipment and unused equipment, by definition, produces nothing. What the "contribution" of capital is dependent, therefore, on the economic power the owning class has in a given market situation (as we discuss in section C.3). As William Lazonick notes, the neo-classical theory of marginal productivity has two key problems which flow from its flawed metaphor that capital is "productive": "The first flaw is the assumption that, at any point in time, the productivity of a technology is given to the firm, irrespective of the social context in which the firm attempts to utilise the technology . . . this assumption, typically implicit in mainstream economic analysis and [is] derived from an ignorance of the nature of the production process as much as everything else . . ." "The second flaw in the neo-classical theoretical structure is the assumption that factor prices are independent of factor productivities. On the basis of this assumption, factor productivities arising from different combinations of capital and labour can be taken as given to the firm; hence the choice of technique depends only on variations in relative factor prices. It is, however, increasingly recognised by economists who speak of 'efficiency wages' that factor prices and factor productivities may be linked, particularly for labour inputs . . . the productivity of a technology depends on the amount of effort that workers choose to supply." [Competitive Advantage on the Shop Floor, p. 130 and pp. 133-4] In other words, neo-classical economics forgets that technology has to be used by workers and so its "productivity" depends on how it is applied. If profit did flow as a result of some property of machinery then bosses could do without autocratic workplace management to ensure profits. They would have no need to supervise workers to ensure that adequate amounts of work are done in excess of what they pay in wages. This means the idea (so beloved by pro-capitalist economics) that a worker's wage is the equivalent of what she produces is one violated everyday within reality: "Managers of a capitalist enterprise are not content simply to respond to the dictates of the market by equating the wage to the value of the marginal product of labour. Once the worker has entered the production process, the forces of the market have, for a time at least, been superseded. The effort-pay relation will depend not only on market relations of exchange but also. . . on the hierarchical relations of production -- on the relative power of managers and workers within the enterprise." [William Lazonick, Business Organisation and the Myth of the Market Economy, pp. 184-5] But, then again, capitalist economics is more concerned with justifying the status quo than being in touch with the real world. To claim that a workers wage represents her contribution and profit capital's is simply false. Capital cannot produce anything (never mind a surplus) unless used by labour and so profits do not represent the productivity of capital. In and of themselves, fixed costs do not create value. Whether value is created depends on how investments are developed and used once in place. Which brings us back to labour (and the social relationships which exist within an economy) as the fundamental source of surplus value. Then there is the concept of profit sharing, whereby workers are get a share of the profits made by the company. Yet profits are the return to capital. This shatters the notion that profits represent the contribution of capital. If profits were the contribution of the productivity of equipment, then sharing profits would mean that capital was not receiving its full "contribution" to production (and so was being exploited by labour!). It is unlikely that bosses would implement such a scheme unless they knew they would get more profits out of it. As such, profit sharing is usually used as a technique to increase productivity and profits. Yet in neo-classical economics, it seems strange that such a technique would be required if profits, in fact, did represent capital's "contribution." After all, the machinery which the workers are using is the same as before profit sharing was introduced -- how could this unchanged capital stock produce an increased "contribution"? It could only do so if, in fact, capital was unproductive and it was the unpaid efforts, skills and energy of workers' that actually was the source of profits. Thus the claim that profit equals capital's "contribution" has little basis in fact. As capital is not autonomously productive and goods are the product of human (mental and physical) labour, Proudhon was right to argue that "Capital, tools, and machinery are likewise unproductive . . . The proprietor who asks to be rewarded for the use of a tool or for the productive power of his land, takes for granted, then, that which is radically false; namely, that capital produces by its own effort - and, in taking pay for this imaginary product, he literally receives something for nothing." [What is Property?, p. 169] It will be objected that while capital is not productive in itself, its use does make labour more productive. As such, surely its owner is entitled to some share of the larger output produced by its aid. Surely this means that the owners of capital deserve a reward? Is this difference not the "contribution" of capital? Anarchists are not convinced. Ultimately, this argument boils down to the notion that giving permission to use something is a productive act, a perspective we rejected in the last section. In addition, providing capital is unlike normal commodity production. This is because capitalists, unlike workers, get paid multiple times for one piece of work (which, in all likelihood, they paid others to do) and keep the result of that labour. As Proudhon argued: "He [the worker] who manufactures or repairs the farmer's tools receives the price once, either at the time of delivery, or in several payments; and when this price is once paid to the manufacturer, the tools which he has delivered belong to him no more. Never can he claim double payment for the same tool, or the same job of repairs. If he annually shares in the products of the farmer, it is owing to the fact that he annually does something for the farmer. "The proprietor, on the contrary, does not yield his implement; eternally he is paid for it, eternally he keeps it." [Op. Cit., pp. 169-170] While the capitalist, in general, gets their investment back plus something extra, the workers can never get their time back. That time has gone, forever, in return for a wage which allows them to survive in order to sell their time and labour (i.e. liberty) again. Meanwhile, the masters have accumulated more capital and their the social and economic power and, consequently, their ability to extract surplus value goes up at a higher rate than the wages they have to pay (as we discuss in section C.7, this process is not without problems and regularly causes economic crisis to break out). Without labour nothing would have been produced and so, in terms of justice, at best it could be claimed that the owners of capital deserve to be paid only for what has been used of their capital (i.e. wear and tear and damages). While it is true that the value invested in fixed capital is in the course of time transferred to the commodities produced by it and through their sale transformed into money, this does not represent any actual labour by the owners of capital. Anarchists reject the ideological sleight-of-hand that suggests otherwise and recognise that (mental and physical) labour is the only form of contribution that can be made by humans to a productive process. Without labour, nothing can be produced nor the value contained in fixed capital transferred to goods. As Charles A. Dana pointed out in his popular introduction to Proudhon's ideas, "[t]he labourer without capital would soon supply his wants by its production . . . but capital with no labourers to consume it can only lie useless and rot." [Proudhon and his "Bank of the People", p. 31] If workers do not control the full value of their contributions to the output they produce then they are exploited and so, as indicated, capitalism is based upon exploitation. Of course, as long as "capital" is owned by a different class than as those who use it, this is extremely unlikely that the owners of capital will simply accept a "reward" of damages. This is due to the hierarchical organisation of production of capitalism. In the words of the early English socialist Thomas Hodgskin "capital does not derive its utility from previous, but present labour; and does not bring its owner a profit because it has been stored up, but because it is a means of obtaining a command over labour." [Labour Defended against the Claims of Capital] It is more than a strange coincidence that the people with power in a company, when working out who contributes most to a product, decide it is themselves! This means that the notion that labour gets its "share" of the products created is radically false for, as "a description of property rights, the distributive shares picture is quite misleading and false. The simple fact is that one legal party owns all the product. For example, General Motors doesn't just own 'Capital's share' of the GM cars produced; it owns all of them." [Ellerman, Op. Cit., p. 27] Or as Proudhon put it, "Property is the right to enjoy and dispose of another's goods, -- the fruit of another's industry and labour." The only way to finally abolish exploitation is for workers to manage their own work and the machinery and tools they use. This is implied, of course, in the argument that labour is the source of property for "if labour is the sole basis of property, I cease to be a proprietor of my field as soon as I receive rent for it from another . . . It is the same with all capital." Thus, "all production being necessarily collective" and "all accumulated capital being social property, no one can be its exclusive proprietor." [What is Property?, p. 171, p. 133 and p. 130] The reason why capital gets a "reward" is simply due to the current system which gives capitalist class an advantage which allows them to refuse access to their property except under the condition that they command the workers to make more than they have to pay in wages and keep their capital at the end of the production process to be used afresh the next. So while capital is not productive and owning capital is not a productive act, under capitalism it is an enriching one and will continue to be so until such time as that system is abolished. In other words, profits, interest and rent are not founded upon any permanent principle of economic or social life but arise from a specific social system which produce specific social relationships. Abolish wage labour by co-operatives, for example, and the issue of the "productivity" of "capital" disappears as "capital" no longer exists (a machine is a machine, it only becomes capital when it is used by wage labour). So rather that the demand for labour being determined by the technical considerations of production, it is determined by the need of the capitalist to make a profit. This is something the neo-classical theory implicitly admits, as the marginal productivity of labour is just a roundabout way of saying that labour-power will be bought as long as the wage is not higher than the profits that the workers produce. In other words, wages do not rise above the level at which the capitalist will be able to produce and realise surplus-value. To state that workers will be hired as long as the marginal productivity of their labour exceeds the wage is another way of saying that workers are exploited by their boss. So even if we do ignore reality for the moment, this defence of profits does not prove what it seeks to -- it shows that labour is exploited under capitalism. However, as we discuss in the next section, this whole discussion is somewhat beside the point. This is because marginal productivity theory has been conclusively proven to be flawed by dissident economics and has been acknowledged as such by leading neo-classical economists. Before discussing how surplus-value exists and the flaws in capitalist defences of it, we need to be specific about what we mean by the term "surplus value." To do this we must revisit the difference between possession and private property we discussed in section B.3. For anarchists, private property (or capital) is "the power to produce without labour." [Proudhon, What is Property?, p. 161] As such, surplus value is created when the owners of property let others use them and receive an income from so doing. Therefore something only becomes capital, producing surplus value, under specific social relationships. Surplus value is "the difference between the value produced by the workers and the wages they receive" and is "appropriated by the landlord and capitalist class . . . absorbed by the non-producing classes as profits, interest, rent, etc." [Charlotte Wilson, Anarchist Essays, pp. 46-7] It basically refers to any non-labour income (some anarchists, particularly individualist anarchists, have tended to call "surplus value" usury). As Proudhon noted, it "receives different names according to the thing by which it is yielded: if by land, ground-rent; if by houses and furniture, rent; if by life-investments, revenue; if by money, interest; if by exchange, advantage, gain, profit (three things which must not be confounded with the wages of legitimate price of labour)." [Op. Cit., p. 159] For simplicity, we will consider "surplus value" to have three component parts: profits, interest and rent. All are based on payment for letting someone else use your property. Rent is what we pay to be allowed to exist on part of the earth (or some other piece of property). Interest is what we pay for the use of money. Profit is what we pay to be allowed to work a farm or use piece of machinery. Rent and interest are easy to define, they are obviously the payment for using someone else's property and have existed long before capitalism appeared. Profit is a somewhat more complex economic category although, ultimately, is still a payment for using someone else's property. The term "profit" is often used simply, but incorrectly, to mean an excess over costs. However, this ignores the key issue, namely how a workplace is organised. In a co-operative, for example, while there is a surplus over costs, "there is no profit, only income to be divided among members. Without employees the labour-managed firm does not have a wage bill, and labour costs are not counted among the expenses to be extracted from profit, as they are in the capitalist firm." This means that the "economic category of profit does not exist in the labour-managed firm, as it does in the capitalist firm where wages are a cost to be subtracted from gross income before a residual profit is determined . . . Income shared among all producers is net income generated by the firm: the total of value added by human labour applied to the means of production, less payment of all costs of production and any reserves for depreciation of plant and equipment." [Christopher Eaton Gunn, Workers' Self-Management in the United States, p. 41 and p. 45] Gunn, it should be noted, follows both Proudhon and Marx in his analysis ("Let us suppose the workers are themselves in possession of their respective means of production and exchange their commodities with one another. These commodities would not be products of capital." [Marx, Capital, vol. 3, p. 276]). In other words, by profits we mean income that flows to the owner of a workplace or land who hires others to do the work. As such returns to capital are as unique to capitalism as unemployment is. This means that a farmer who works their own land receives a labour income when they sell the crop while one who hires labourers to work the land will receives a non-labour income, profit. Hence the difference between possession and private property (or capital) and anarchist opposition to "capitalist property, that is, property which allows some to live by the work of others and which therefore presupposes a class of . . . people, obliged to sell their labour power to the property-owners for less than its value." [Malatesta, Errico Malatesta: His Life and Ideas, p. 102] Another complication arises due to the fact that the owners of private property sometimes do work on them (i.e. be a boss) or hire others to do boss-like work on their behalf (i.e. executives and other managerial staff). It could be argued that bosses and executives are also "workers" and so contribute to the value of the commodities produced. However, this is not the case. Exploitation does not just happen, it needs to be organised and managed. In other words, exploitation requires labour ("There is work and there is work," as Bakunin noted, "There is productive labour and there is the labour of exploitation." [The Political Philosophy of Bakunin, p. 180]). The key is that while a workplace would grind to a halt without workers, the workers could happily do without a boss by organising themselves into an association to manage their own work. As such, while bosses may work, they are not taking part in productive activity but rather exploitative activity. Much the same can be said of executives and managers. Though they may not own the instruments of production, they are certainly buyers and controllers of labour power, and under their auspices production is still capitalist production. The creation of a "salary-slave" strata of managers does not alter the capitalist relations of production. In effect, the management strata are de facto capitalists and they are like "working capitalist" and, consequently, their "wages" come from the surplus value appropriated from workers and realised on the market. Thus the exploitative role of managers, even if they can be fired, is no different from capitalists. Moreover, "shareholders and managers/technocrats share common motives: to make profits and to reproduce hierarchy relations that exclude most of the employees from effective decision making" [Takis Fotopoulos, "The Economic Foundations of an Ecological Society", pp. 1-40, Society and Nature, No.3, p. 16] In other words, the high pay of the higher levels of management is a share of profits not a labour income based on their contribution to production but rather due to their position in the economic hierarchy and the power that gives them. So management is paid well because they monopolise power in the company and can get away with it. As Bakunin argued, within the capitalist workplace "administrative work . . . [is] monopolised . . . if I concentrate in my hands the administrative power, it is not because the interests of production demand it, but in order to serve my own ends, the ends of exploitation. As absolute boss of my establishment I get for my labours [many] . . . times more than my workers get for theirs." [Op. Cit., p. 186] Given this, it is irrelevant whether those in the hierarchy simply control (in the case of managers) or actually own the means of production. What counts is that those who do the actual work are excluded from the decision making process. This is not to say that 100 percent of what managers do is exploitative. The case is complicated by the fact that there is a legitimate need for co-ordination between various aspects of complex production processes -- a need that would remain under libertarian socialism and would be filled by elected and recallable (and in some cases rotating) managers (see section I.3). But under capitalism, managers become parasitic in proportion to their proximity to the top of the pyramid. In fact, the further the distance from the production process, the higher the salary; whereas the closer the distance, the more likely that a "manager" is a worker with a little more power than average. In capitalist organisations, the less you do, the more you get. In practice, executives typically call upon subordinates to perform managerial (i.e. co-ordinating) functions and restrict themselves to broader policy-making decisions. As their decision-making power comes from the hierarchical nature of the firm, they could be easily replaced if policy making was in the hands of those who are affected by it. As such, their role as managers do not require them to make vast sums. They are paid that well currently because they monopolise power in the company and can, consequently, get away with deciding that they, unsurprisingly, contribute most to the production of useful goods rather than those who do the actual work. Nor are we talking, as such, of profits generated by buying cheap and selling dear. We are discussing the situation at the level of the economy as a whole, not individual transactions. The reason is obvious. If profits could just explained in terms of buying cheap in order to sell dear then, over all, such transactions would cancel each other out when we look at the market as a whole as any profit will cancel any loss. For example, if someone buys a product at, say, £20 and sells it at £25 then there would be no surplus overall as someone else will have to pay £20 for something which cost £25. In other words, what one person gains as a seller, someone else will lose as a buyer and no net surplus has been created. Capitalists, in other words, do not simply profit at each other's expense. There is a creation of surplus rather than mere redistribution of a given product. This means that we are explaining why production results in a aggregate surplus and why it gets distributed between social classes under capitalism. This means that capitalism is based on the creation of surplus rather than mere redistribution of a given sum of products. If this were not the case then the amount of goods in the economy would not increase, growth would not exist and all that would happen is that the distribution of goods would change, depending on the transactions made. Such a world would be one without production and, consequently, not realistic. Unsurprisingly, as we noted in section C.1, this is the world of neoclassical economics. This shows the weakness of attempts to explain the source of profits in terms of the market rather than production. While the market can explain how, perhaps, a specific set of goods and surplus is distributed, it cannot explain how a surplus is generated in the first place. To understand how a surplus is created we need to look at the process of value creation. For this, it is necessary to look at production to see if there is something which produces more than it gets paid for. Anarchists, like other socialists, argue that this is labour and, consequently, that capitalism is an exploitative system. We discuss why in the next section. Obviously, pro-capitalist economics argues against this theory of how a surplus arises and the conclusion that capitalism is exploitative. We will discuss the more common arguments below. However, one example will suffice here to see why labour is the source of a surplus, rather than (say) "waiting", risk or the productivity of capital (to list some of the more common explanations for capitalist appropriation of surplus value). This is a card game. A good poker-player uses equipment (capital), takes risks, delays gratification, engages in strategic behaviour, tries new tricks (innovates), not to mention cheats, and can make large winnings. However, no surplus product results from such behaviour; the gambler's winnings are simply redistributions from others with no new production occurring. For one to win, the rest must lose. Thus risk-taking, abstinence, entrepreneurship, and so on might be necessary for an individual to receive profits but they are far from sufficient for them not to be the result a pure redistribution from others. In short, our discussion of exploitation under capitalism is first and foremost an economy-wide one. We are concentrating on how value (goods and services) and surplus value (profits, rent and interest) are produced rather than how they are distributed. The distribution of goods between people and the division of income into wages and surplus value between classes is a secondary concern as this can only occur under capitalism if workers produce goods and services to sell (this is the direct opposite of mainstream economics which assumes a static economy with almost no discussion of how scarce means are organised to yield outputs, the whole emphasis is on exchanges of ready made goods). Nor is this distribution somehow fixed. As we discuss in section C.3, how the amount of value produced by workers is divided between wages and surplus value is source of much conflict and struggle, the outcome of which depends on the balance of power between and within classes. The same can be said of surplus value. This is divided between profits, interest and rent -- capitalists, financiers and landlords. This does not imply that these sections of the exploiting class see eye to eye or that there is not competition between them. Struggle goes on within classes and well as between classes and this applies at the top of the economic hierarchy as at the bottom. The different sections of the ruling elite fight over their share of surplus value. This can involve fighting over control of the state to ensure that their interests are favoured over others. For example, the Keynesian post-war period can be considered a period when industrial capitalists shaped state policy while the period after 1973 represents a shift in power towards finance capital. We must stress, therefore, that the exploitation of workers is not defined as payment less than competitive ("free market") for their labour. Rather, exploitation occurs even if they are paid the market wage. This is because workers are paid for their ability to labour (their "labour-power," to use Marx's term) rather the labour itself. This means that for a given hour's work (labour), the capitalist expects the worker to produce more than their wage (labour power). How much more is dependent on the class struggle and the objective circumstances each side faces. Indeed, a rebellious workforce willing to take direct action in defence of their interests will not allow subjection or its resulting exploitation. Similarly, it would be wrong to confuse exploitation with low wages. Yes, exploitation is often associated with paying low wages but it is more than possible for real wages to go up while the rate of exploitation falls or rises. While some anarchists in the nineteenth century did argue that capitalism was marked by falling real wages, this was more a product of the time they were living through rather than an universal law. Most anarchists today argue that whether wages rise or fall depends on the social and economic power of working people and the historic context of a given society. This means, in other words, that labour is exploited not because workers have a low standard of living (although it can) but because labour produces the whole of the value created in any process of production or creation of a service but gets only part of it back. As such, it does not matter if real wages do go up or not. Due to the accumulation of capital, the social and economic power of the capitalists and their ability to extract surplus-value can go up at a higher rate than real wages. The key issue is one of freedom rather than the possibility of consuming more. Bosses are in a position, due to the hierarchical nature of the capitalist workplace, to make workers produce more than they pay them in wages. The absolute level of those wages is irrelevant to the creation and appropriation of value and surplus-value as this happens at all times within capitalism. As an example, since the 1970s American workers have seen their wages stagnate and have placed themselves into more and more debt to maintain an expected standard of living. During this time, productivity has increased and so they have been increasingly exploited. However, between 1950s and 1970s wages did increase along with productivity. Strong unions and a willingness to strike mitigated exploitation and increased living standards but exploitation continued. As Doug Henwood notes, while "average incomes have risen considerably" since 1945, "the amount of work necessary to earn those incomes has risen with equal relentlessness . . . So, despite the fact that productivity overall is up more than threefold" over this time "the average worker would have to toil six months longer to make the average family income." [After the New Economy, pp. 39-40] In other words, rising exploitation can go hand in hand with rising wages. Finally, we must stress that we are critiquing economics mostly in its own terms. On average workers sell their labour-power at a "fair" market price and still exploitation occurs. As sellers of a commodity (labour-power) they do not receive its full worth (i.e. what they actually produce). Even if they did, almost all anarchists would still be against the system as it is based on the worker becoming a wage-slave and subject to hierarchy. In other words, they are not free during production and, consequently, they would still being robbed, although this time it is as human beings rather than a factor of production (i.e. they are oppressed rather than exploited). As Bookchin put it: "To the modern mind, labour is viewed as a rarefied, abstract activity, a process extrinsic to human notions of genuine self-actualisation. One usually 'goes to work' the way a condemned person 'goes' to a place of confinement: the workplace is little more than a penal institution in which mere existence must a penalty in the form of mindless labour . . . We 'measure' labour in hours, products, and efficiency, but rarely do we understand it as a concrete human activity. Aside from the earnings it generates, labour is normally alien to human fulfilment . . . [as] the rewards one acquires by submitting to a work discipline. By definition, these rewards are viewed as incentives for submission, rather than for the freedom that should accompany creativity and self-fulfilment. We commonly are 'paid' for supinely working on our knees, not for heroically standing in our feet." [The Ecology of Freedom, p. 308] Almost all anarchists seek to change this, combat oppression and alienation as well as exploitation (some individualist anarchists are the exception on this issue). Needless to say, the idea that we could be subject to oppression during working hours and not be exploited is one most anarchists would dismiss as a bad joke and, as a result, follow Proudhon and demand the abolition of wage labour (most take it further and advocate the abolition of the wages system as well, i.e. support libertarian communism).

tom, seriously man. you are giving the very definition of capitalism. you just did it again. this is exactly why i said capital is unproductive.

you dont need the bible. its called what i work for belongs to me. wow, you just proved my point. ive never done that...lol you just explained why marginal productivity theory is false and absurd... you literally just crushed your own argument. in a nutshell you just defined and therefore crushed capitalism thankyou, thankyou!