Labour’s economic policies: can socialists support them? – from here to there

This blog presents a view of what socialism would be like by explaining how capitalism works. Ian Wright is British and his examples focus on Britain, but thinking about capitalism and socialism is international. You may not agree with this analysis, but you will be stimulated by it. JEB

Criteria for judgement

To judge the 2017 [Labour Party] manifesto we first should reflect on what it means for a economic policy to be essentially pro-socialist or pro-capitalist.

In theory, the crucial difference between these two political ideologies can be reduced to something extremely simple.

Socialists oppose capitalist exploitation, which occurs when production is organised in firms that have two classes of members: those that own it — and take profit — and those that work for it — and take a wage. Capitalist property rights allow the owners to distribute the firm’s profit to themselves regardless of whether they supply any capital or labour to production.

Yes, owners typically supply initial capital to get businesses started. But initial investments are always eventually paid off, if firms are viable.

And yes, owners may continue to supply their labour in management roles. But supplying labour need only be compensated by a wage, not profit.

The crucial point is that capitalist owners take profits merely in virtue of paper ownership (i.e. by fiat encoded in legal property rights). We can see this especially clearly where firms are entirely profitable and self-financing with absentee owners who extract profits.

But, as we all know, profit is created by actually doing some work, not by simply owning. The very same firm output, which gets sold in the market for a profit, could be produced without the input of capitalist owners and without compensating them.

So capitalists get something for nothing. They get profit for contributing zero to production. And an important consequence of this social fact is that a worker’s wage is never a fair exchange for the value they create.

In summary, under capitalist property rights, workers make, while capitalists take.

Source: Labour’s economic policies: can socialists support them? – from here to there

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