Recently, I have been reading about race relations in the USA.  Caste by Isabel Wilkerson and The Sum of Us by Heather McGhee approach the topic from different angles, but both point out the fact that African Americans have suffered, in large part, as a result of our economic system.  History, indeed, provides an egregious example of how US society has treated certain groups of people; but it is still seen in the putative mistreatment of workers in today’s economy, through the concepts of Striketober and The Great Resignation.  According to CNN, “…it's clear that American workers are not only fed up, but feeling empowered to fight for better wages and working conditions.”

As happens with me, reading these materials provided me with a small epiphany.  From our history of using slave labor to our current income gaps and poverty levels (in the richest country in the world), the question sprang into my mind—does capitalism depend on the exploitation of labor?

Clearly, in theory, the answer to that question is “NO.”  Nothing in Adam Smith, John Maynard Keynes, John Kenneth Galbraith, Milton Friedman, Friedrich Hayek, or other famous economists demand exploitation of workers.  But Karl Marx, perhaps the most noted critic of capitalism, based his work on it.

However, we must recognize that “capitalism” is not a unitary, or absolute concept.  There are widely variant strains of capitalism, from the Social Market Economies in Scandinavian and Western European countries to the highly individualistic version found in the USA.  David Brooks, a columnist with The New York Times, noted this distinction in a recent opinion piece, “The key [Democratic] moderate insight is that we’re America, not Europe. We are mostly an immigrant-fueled, frontier nation. We place a lot of value on individual striving, hard work and mobility. We are hostile to centralized power. These values have made America more unequal and crueler than Europe but also much richer, more innovative and more productive.”

So, my original question of whether capitalism depends on exploitation should be refined to “does the US economy depend on exploitation?”  This version of the question gets a little stickier.  Clearly, our economic history is replete with expropriation (of Native Americans’ land), exploitation (slave labor), and labor unrest (unionization, strikes, violence against workers).

One of the most easily visible outcomes of our economic system is the wide inequality in wealth and income in the USA.  The wealth gap is particularly wide (owing, in part, to the fact that much of the wealth that accumulates is due to the rise in value of assets rather than high annual incomes).  In 2007, the top ten percent of households in the US held nearly three quarters of total wealth.  The top one percent held over one-third of the total.  The current pandemic has only exaggerated this trend, “According to [the] Institute for Policy Studies analysis of Forbes data, the combined wealth of all U.S. billionaires increased by $1.763 trillion (59.8 percent) between March 18, 2020 and August 17, 2021, from approximately $2.947 trillion to $4.765 trillion.”  One example of the wealth and income gap is the recent attempt by Amazon workers in Bessemer, Alabama to unionize.  The company, led by uber-billionaire Jeff Bezos, vigorously opposed that union drive.

Income inequality is also growing.  The Economic Policy Institute analyzed government data to find that during the time period 1979-2013, the real wages (i.e., adjusted for inflation) of workers in the 95th percentile increased by 41 percent.  Workers at the 50th percentile saw only a six percent increase, and low-wage workers (at the 10th percentile) actually saw a drop in their earnings of five percent.

The statistics paint a very clear picture—the US economy does disproportionally reward the wealthy and high-wage earners, while punishing the lower socio-economic classes.  It is relatively easy to define that as exploitation.

Does the fact that exploitation is happening mean that our economic system depends on it?  This brings up the “is/ought” fallacy.  Just because something “is” does not mean it “ought” to be that way, or that it “must” be that way.  As I mentioned earlier, Social Market Economies in Western Europe and Scandinavia show that capitalism “can” be practiced differently than it is in the USA.  But, as David Brooks noted, the USA is not Europe.

So…where does that leave us?  In my opinion, the USA “should” alter its particular application of capitalism to provide a more equitable distribution of income and wealth—equitable, not equal.  We should continue to recognize that some people work harder, have more talent, achieve better results, are smarter, etc., and therefore can justify earning more.  We can provide a more equitable distribution of earnings (is a CEO really “worth” 351 times as much as a typical worker?) and provide a stronger safety net for those who need it, all without damaging the higher achievers.  See John Rawls for an exhaustive examination of Justice as Fairness.

Many will point to the Bible quotation, “The poor you will always have with you…” as a way of acknowledging the supposed futility of helping those in poverty.  Rather than try to make a religious argument (which I am not qualified to do), I will point out the sociological distinction between absolute poverty (income is below a certain level, making it impossible to meet basic needs of life) and relative poverty (not enjoying the same standard of life as others).  Thus, unless everyone has the exact same assets and income, some will always live in relative poverty.  This type of want is not what this argument is about.  Instead, we should be focusing on the alleviation of absolute poverty, and our economy’s role in promoting that.  We have the ability today to eliminate absolute poverty, knowing full well that relative poverty, we will have always with us.  A current example of the choices we can make is the debate over the “Build Back Better” plan in Congress.  Some provisions include universal preschool, child care subsidies, and an extension of the child tax credit; but other investments in human flourishing that have been considered and deleted include paid family leave, free community college, and the lowering of prescription drug prices.

Given our extreme levels of income and wealth inequalities, along with our status as the richest country in the world, it seems to me a moral imperative that we choose to refine our brand of capitalism to make it more inclusive, more equitable, and more supportive of our “least advantaged” (to use a Rawlsian term).  The answer to my question, it seems, is no, the US economy does not depend on exploitation.  But it does seem to still utilize it, and we should choose to make changes so that it doesn’t.