The Capitalist and The Worker: A Distortion of Intuitions

Capitalism has always held a strong place in my attention span not only for its implications within our economic system (as it continues to play out in our ever-growing consumerist culture) but with how the dynamics work between the intricate relationship of “the worker” and “the capitalist”. I want to dive into arguments validating those with capital, through the lens of freedom, within the context of the liberal values our country was founded on. I want to answer questions such as: What exactly is the relationship between “the capitalist” and “the worker” and what specifics hinder the argument centered on our individual liberty. However, before I move towards an explanation of this relationship, I want to cover who I mean when I say, “the capitalist and “the worker”. 

Capital essentially means financial assets most often in the form of cash or liquid assets (to be used for expenditures). Financial assets are categorized to fall in between “real” and “intangible” assets. A real asset is a tangible asset with value placed on an actual item such as raw materials (steel, wheat, etc.), while an intangible asset is more in the realm of patents and intellectual property. Financial assets flow between these two categories because tangible and intangible are both interwoven in a supply and demand market[1]. Housing is a prime example of how this works. A house is a tangible asset, but the value of the home is done through a complex system in which the potential capital of a house is influenced by intangible factors such as location of the home, what other homes are being sold for in the area, etc. These intangible factors increase or decreases the overall value of a home on paper. Capital is seen normally as the main difference between money and wealth. Those with capital (the capitalists) work to continue to grow their capital by making investments in all facets of our economy hoping for a return on their investment and any return beyond what was initially invested is seen as capital gain. While capitalists make money primarily through investment, the worker makes a deal with the capitalist to trade their time for money. 

As I understand it, (focusing primarily on the hourly pay structure here) the capitalist pays an hourly wage to the worker equating to the value of productivity from said worker within said hour. Workers’ wages are scaled to match their added value to the business. The value of a worker becomes directly correlated with amount of money they are paid[2]. This arrangement connects monetary value with human value. The danger of this connection inevitably blurs the lines between monetary value and egocentric self-worth. This misconception distorts our intuitions of how we interrupt our capitalist system. Since monetary value and egocentric self-worth have blurred to mean one in the same, the idea of all capitalistic struggles falls entirely on the worker establishes a narrative of laziness, lack of work ethic, and a sense of entitlement; while attributes of success in capitalism equates to nothing but hard-work, sacrifice and self-resilience. Although there is some truth to this, it isn’t the complete truth as so many seem to believe. The world isn’t black and white. People who succeeded in capitalism haven’t all done so by hard work and sacrifice alone. 

The family you happen to be born into often plays a role in succession. The Guardian published some statistics on nepotism back in March of 2017 stating, “By age 30, about 22% of American sons will be working for the same employer at the same time as their fathers.”[3] CNBC published an article looking into fortune 500 companies and found that 40% of people on that list inherited a sizable asset from a spouse or family member[4]. While, on the other side of the coin, there is an over exaggeration at the sheer number of people believed to be “free-loading” on our social welfare programs. To make my point I decided to look at some statistics put together by UC Berkeley’s Labor Center. They found and I quote “73% of enrollees in America’s major public support programs are members of working families and Inflation-adjusted wage growth from 2003 to 2013 was either flat or negative for the entire bottom 70% of the wage distribution.”[5]. The reality isn’t as simple to just claim those who haven’t achieved success in a capitalist system was entirely due to laziness or entitlement, and anyone who has succeeded was due entirely to hard word, dedicated and sacrifice.

To break this black and white thinking it’s important to call out the initial false premise, in such as, wages being the direct representation of one’s worth of productivity. The Washington Post investigated this connect in their article titled: Productivity and wages: What’s the connection? Where they show that between 1948 and 1973 the relationship between wages and productivity were healthily correlated averaging an overall productivity of 95.7% with hourly compensation at 90.9%. Where we start to see the shift is from 1973 up until 2017. Productivity during this period is at 77%, while the hourly compensation has decreased to a staggering low of 12.4%. To understand these numbers in a different context, since 1973 productivity growth has outpaced hourly compensation by a factor of six[6]. These numbers paint a very different picture to the “wage equals productivity” argument which is why gauging an economy based on a scale such as GDP (Gross Domestic Product) isn’t a direct representation of how our economy is doing in the context of the worker. Let’s take a look at the increasing cost of living.

Our economy continues to ramp up mass consumerism. Money is now necessary to have access to anything we would need in our lives and those costs of needs should be added into the equation of capitalistic success. My Budget 360 published an article showing not only has the cost of living dramatically increased, but it’s increasing at a substantial rate above inflation. They compared the average cost of living from 1975 to 2015 and what they found was abysmal at best. The average price of a house in 2015 was 29% above what inflation states it should be from 1975. The average price for a new car has double on top of accounting for inflation and lastly the cost of higher education has increased by 160% beyond adjusted inflation cost[7]. To quote the article here:

“US households overall are simply poorer. They have less to spend relative to the cost of goods and services. Money is only as good as what it can purchase. You can’t eat hundred dollar bills. This is part of the reason why many people feel like they are poorer. It is also a big reason as to why the homeownership rate continues to fall.”

The other pro-capitalist argument of simply cutting out luxury spending (such as Starbucks coffee for example) to navigate the rising cost of goods and services also is built on false intuitions. Not only are necessity costs scaling above wage compensation but families not receiving government assistance spend quite a deal more on luxury items than those who do. Lexington Law touches on this point with their article titled 45 Important Welfare Statistics for 2019 when they show how American families not receiving welfare spend almost 4 times the amount on entertainment than families receiving assistance[8]. Another article I found published by The Atlantic in 2016 titled The Surging Cost of Basic Needs found (looking within the past 30 years of data) that: “low-income and middle-income households now spend roughly 80% of their budget on housing, food, transportation, health care, and clothing”[9]. Again, here we have the numbers strongly suggesting a different narrative but where are these false premises originating from and how does it link back into individual liberties?

In order to move forward I'm going to break down exactly what individual liberty means in the context of freedom. Isaiah Berlin wrote an essay in 1958 tilted Two Concepts of Liberty breaking the ideology of liberty into two separate understandings of positive and negative[10]. Negative liberty means the freedom from outside inference. Which is the default basic understanding of liberty in which our country was founded on. Pro-capitalists justify their narrative of sacrifice, a strong worth ethic and determination alone to achieving success in this vein of non-interference by making claims such as “If you don’t like your job, then quit and get a better one” or “Nobody is stopping you from working hard to get where I am”. Although these claims have an element of truth in them, they don’t paint the full picture on the causes of economic struggle and that becomes clear once we move into the concept of positive liberty. Positive liberty isn’t about the freedom from interference but more of the freedom to act upon one’s will. The freedom to execute the choices we have. Although this type of freedom isn’t as well known or understood by the majority, it is vital to understanding how “freedom from” is only as powerful if one’s “freedom to” is also present. It also changes the relationship on what constitutes as interference. I would agree a capitalistic system is great in the negative liberty sense but causes large amounts of interference within the positive liberty sense. Take college as an example: if we already established college is 160% more expense today than it was 40 years ago and the average lower to middle class household today is spending 80% of their budgets on basic needs, the price tag of a degree combined with only 20% allowed to anything beyond basic needs hinders the choice within the capability of attending college. As I stated in the stats I shared above, increasing cost of goods and services added together with the rapid decline in the relationship between wages and productivity combined with the primarily consumeristic economy revolving around money leads to the infraction of many American’s positive liberties. Most anti-capitalism arguments aren’t geared towards arguing against a lack of freedom from bettering their lives, but when money is needed for all aspects of modern day living the lack thereof prevents the worker from making decisions to better their lives such as quitting a job, or buying a house essentially infringing on their positive freedom.

The trouble here is I’m sympathetic to the notion of economic success through hard work and sacrifice alone because we aren’t technically interfered to do so. I understand the intuition to blame oneself (and others) level of self-commitment when struggling economically because (on a basic level) if I don’t like my situation, I’m at liberty to change it but the idea of hard work and sacrifice is only a part of the pathway to capitalistic succession, but that doesn’t make it the sole factor in capitalistic failure. We do have the negative liberty to change our situation, but a lot of us don’t have the positive liberty to execute change. When we connect monetary value with egocentric self-worth we interpret “Freedom from” and “Freedom To” as equal when they are not. When pro-capitalists make claims such as “we all have the same opportunity for success” it’s true within a negative freedom context but isn’t the same within the positive freedom context. To illustrate my point lets view capitalism as a skyscraper and the very top floor of this skyscraper represents capitalist success. In the negative freedom context, nobody is stopping anyone from making it to the top floor and on the surface seems fair. However, with a further inspection of the building you start to notice there are different pathways to reach the top. Some have taken helicopters and have flown right to the top floor, others had access to the elevator to take them right to the top, some can take the stairs up, and others have to scale the building with minimal to no climbing equipment to do so. In each example none of these people where technically interfered from trying each respected method to get to the top and it could also be true each method had gotten someone to the top, but the pathways up are by no means equal in opportunity and shouldn’t be judged as such. The difference in each of these pathways are broken down into differing scales of capability. The different pathways represent how each method to the top is the same in its lack of interference, but very different within the scale of capability. The determining factors of each pathway can be linked back to many different factors in such as the family one is born into, the genetics one inherits, the environment they were raised in, the amount of money one’s parents had when growing up, the education one gets access to growing up, etc. Those who’ve taken the helicopter to the top refers to those given their success by either inheritance or gifted by a family member. Those who’ve taken the elevator up came from those who grow up in in a household which allowed them access to top level education. People taken the stairs came from a middle-class family, with average education. Lastly, the people scaling the side of the building represents most people raised in the lower-class without the knowledge or tools to navigate the complex system we have, and the lack of climbing equipment is symbolic to lack of money.

The system we have regarding the relationship between “the worker” and “the capitalistic” has shifted to benefit those with capital well beyond the benefit of the worker. Those who’ve made it to the top of the capitalism skyscraper judge those who fall, while convincing those who’ve fallen their failure is 100% on themselves while completely neglecting the differing levels of capability. As for those who notice the difference in capability, they are automatically judged and labeled entitled and/or lazy. The constant judgment and capitalistic connection to egocentric self-worth has influenced an environment of extreme selfishism. The link of monetary value and egocentric self-worth through the context of individual liberty has cultivated a moral taboo against helping others. Pro-Capitalism rhetoric spins the picture of helping those not giving the skills or having the means to navigate our economy by judging situations without context while labeling any form of social help as a “a handout” expressing fear of people needing help as wanting to take to what we've worked hard to build essentially increasing individual greed and demonizing compassion.

My goal here isn’t to convince you to lose the belief of taking personal responsibility for improving one’s own life (because that is an important part) but to see through the distortion of our system to understand most people aren’t necessary failing because of lack of personal responsibility but more so from a lack of economic capability. A quote I remember hearing expressing in a nutshell what I’m meaning is “The main different between wealthy families and poor families is wealthy families have the luxury to learn and grow from economic failure, while poor families simply do not.” The relationship between “the capitalist” and “the worker” shouldn’t be an extortion of laborers, but a balance of give and take. We simply need to judge a little less, help each other out a little more and I sincerity believe we'll all be better for it or am I the only one? 

Bibliography

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[1] Hargrave, Marshall. “What Is Capital?” Investopedia. Investopedia, November 18, 2019. https://www.investopedia.com/terms/c/capital.asp.

[2] Strain, Michael R. “Https://Assets.aspeninstitute.org/.” https://assets.aspeninstitute.org/. , American Enterprise Institute (AEI) and Institute for the Study of Labor (IZA), January 2019. https://assets.aspeninstitute.org/content/uploads/2019/01/3.2-Pgs.-168-179-The-Link-Between-Wages-and-Productivity-is-Strong.pdf.

[3] Chalabi, Mona. “Measuring Nepotism: Is It More Prevalent in the US than in Other Countries?” The Guardian. Guardian News and Media, March 24, 2017. https://www.theguardian.com/us-news/2017/mar/24/nepotism-data-ivanka-trump.

[4] Frank, Robert. “Did the Forbes 400 Billionaires Really 'Build That'?” CNBC. CNBC, September 25, 2012. https://www.cnbc.com/id/49167533.

[5] Jacobs, Ken. “The High Public Cost of Low Wages.” http://laborcenter.berkeley.edu/. UC Berkeley Labor Center, November 6, 2019. http://laborcenter.berkeley.edu/the-high-public-cost-of-low-wages/.

[6] Bernstein, Jared. “Perspective | Productivity and Wages: What's the Connection?” The Washington Post. WP Company, April 1, 2019. https://www.washingtonpost.com/news/posteverything/wp/2018/08/14/productivity-and-wages-whats-the-connection/.

[7] “Comparing the Cost of Living between 1975 and 2015: You Are Being Lied and Fooled When It Comes to Inflation Data and the Cost of Living.” My Budget 360, August 2015. http://www.mybudget360.com/cost-of-living-compare-1975-2015-inflation-price-changes-history/.

[8] Lexington Law. “45 Important Welfare Statistics for 2019.” Lexington Law, August 15, 2019. https://www.lexingtonlaw.com/blog/finance/welfare-statistics.html.

[9] Lam, Bourree. “The Surging Cost of Basic Needs.” The Atlantic. Atlantic Media Company, January 5, 2017. https://www.theatlantic.com/business/archive/2016/06/household-basic-spending/485330/.

[10] Richey, Tom. “Positive and Negative Liberty (Isaiah Berlin - Two Concepts of Liberty).” Youtube.com. Youtube, February 29, 2016. Positive and Negative Liberty (Isaiah Berlin - Two Concepts of Liberty).