Friday, July 27, 2012
Labor, Capital, & Dependents.
This is a topic i've been trying to get a simple view of for many years. It is a basic concept, but seems to get lost in complex layers of confusing counter points. Honest Abe got me thinking about it quite a while back in it's most basic terms.
"And, inasmuch [as] most good things are produced by labour, it follows that [all] such things of right belong to those whose labour has produced them. But it has so happened in all ages of the world, that some have laboured, and others have, without labour, enjoyed a large proportion of the fruits. This is wrong, and should not continue. To [secure] to each labourer the whole product of his labour, or as nearly as possible, is a most worthy object of any good government." ~Abraham Lincoln
Now on the surface, this sounds like it could have been written by an early 1900's labor leader. He extols the virtues of labor, & decries those who profit from that who have not labored. The goal of good govt is to try to see that each laborer should receive as much of the production of his labor as possible. Laborers have been exploited throughout history, & Abe is saying this is wrong, & workers should get a full return on their labors.
He is not arguing for wage fixing or collective bargaining, but neither is he arguing against them. His statement is much deeper.. a philosophical one that sees labor & capital in its most basic forms. He says that the laborer should receive 'as nearly as possible', 'the whole product of his labor'.
For labor to be truly productive, a real value must be derived from it. Abe talks about this, too.
"Upon this subject, the habits of our whole species fall into three great classes---useful labour, useless labour and idleness. Of these the first only is meritorious; and to it all the products of labour rightfully belong; but the two latter, while they exist, are heavy pensioners upon the first, robbing it of a large portion of it's just rights. The only remedy for this is to, as far as possible, drive useless labour and idleness out of existence." ~Abraham Lincoln
The earlier concept of a laborer receiving 'the whole product of his labor' depends on the value of the labor. A man can labor uselessly, working for something that has no profitable result. Labor does not automatically have value. It is not meritorious in & of itself. To have value, it must produce something of value.
This 'value' we define as 'capital'. It is a means of exchange for the results of true, productive labor. It can be goods, services, food, or anything of value. But the labor is foremost. Here's abe again:
"Labor is prior to, and independent of, capital. Capital is only the fruit of labor, and could never have existed if labor had not first existed. Labor is the superior of capital, and deserves much the higher consideration." ~Abraham Lincoln
Abe is not singing the virtues of capitalism, here! He says that labor, not capital should be given preference, as labor produces capital. He is not condemning capitalism, or the concept of investing for a return. But he is putting labor in it's rightful place as superior to capital. A capitalist investor cannot get a return if there is not labor to increase the value of the investment. But to abe, the laborer should get a larger return from his labors than the investor who has not labored, but profits from the labors of others. He considers that the goal of good govt.
"The prudent, penniless beginner in the world, labors for wages awhile, saves a surplus with which to buy tools or land, for himself; then labors on his own account another while, and at length hires another new beginner to help him. This, say its advocates, is free labor---the just and generous, and prosperous system, which opens the way for all---gives hope to all, and energy, and progress, and improvement of condition to all." ~Abraham Lincoln
This kind of productive labor is essential for economic growth. It is the reason for the growth & success of America. We are the land of opportunity & free markets, where you could labor, & receive the fruits from it. Oppressors were restricted, & capitalists had competition. Anyone could save their money, build a farm or business, produce something of value & increase the production & standard of living for all. It was LABOR that did this, not capital. The hard work of the citizens brought a return & raised the nation into the most prosperous country in history, with an industrious middle class.
Abe also talked about those who do not engage in 'useful labor'. These are 'useless labor & idleness'. They are dependents on the former. They do not produce anything useful or productive, but are 'pensioners' of the producers, robbing them of their increase.
Some companies hire efficiency experts to help them identify areas & workers who are not productive, but decrease production, waste the resources of the company & increase costs. The goal is increased production, which increases value for the business investors & those who labor. But when a business or farm increases those who are not productive, or are idle or performing useless labor, the fruits of labor are decreased, as they are shared with a larger base of consumers.
This is the reason for the failures of collectivist experiments over the years. Those who labor become outnumbered by those who only consume. Soon the producers cannot make enough to support all of the dependents. Any collective entity, business, farm, govt, or society as a whole, must have a large productive base of those who labor usefully. If it does not, it will collapse. That is the lesson from history, & it will repeat itself often, until we learn it.