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Doesn't capitalism lead to exploitation?

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Max

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Let me just preface this by apologizing in advance fore two things a. I am still a novice when it comes to Objectivism, and my knowledge on the subject is far from complete (though I have read her fiction and almost all of her non-fictional books). B. While the questions I am about to pose may appear to be assertive in nature (though I feel they are backed with sound logic) I do not intend to be standoffish. Please believe that I only ask these things to gain a better understanding of the Objectivist philosophy.

Not so long ago I had a conversation with an old friend who had adopted the philosophy of Objectivism. I had previously only read a small amount of Ms. Rand’s work (namely Atlas Shrugged, We the Living, and Anthem) and as such was by and large ignorant with regards to the philosophy’s core principles. I argued with him for a few hours on the subject before he convinced me to take a deeper look at the Ms. Rand’s ideas. The very next day I purchased everything she had written and devoted myself to reading her work. Admittedly when I began reading I did so with the intention of finding loopholes in her arguments so that I might better argue with my friend. However, I found that for the most part she made a cogent, well supported argument which I could not help but agree with—for the most part anyway. There still remain one or two sticking points for me particularly on the subject of her economic ideas.

Question #1: Ayn Rand points out that the closest the world ever came to true laissez faire capitalism was during the years of (and immediately following) the industrial revolution. While significant advancements were indeed made during this period (which was arguably one of the, if not the most, ridiculously prosperous eras in human history) the actual conditions under which the laborers lived was horrendous. In my understanding the wealth was controlled by an immensely small elite who treated the workers poorly, supplying them with scant salary and forcing them to work in poorly equipped and often dangerous areas. The massive lower class lived in cramped tenements under conditions which were scarcely better than those under which the serfs and debt-slaves of old lived. The factory owners forbid the workers from forming unions or in any way protesting their condition, and this lead to riots and outbreaks of violence. It was only when the plight of workers was recognized and labor laws were introduced that the discontented lower class was mollified. My question is this, why advocate a system which leads inevitably to such a gap between the classes. I do not mean to assail the capitalist system (of which I am a firm supporter) but is it not necessary to avoid such a disproportionate distribution of wealth if only for the sake of avoiding dissent?

Question #2: (this one is shorter) In the event of absolute capitalistic freedom what is to prevent companies from selling extremely harmful products. (Ex: The placement of addictive narcotics in food or other such products, in order to create a more urgent demand. Or perhaps medicines and drugs, which have not yet been tested)

Once again, I apologize and hope that I didn’t come across as belligerent (or as too idiotic either).

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In my understanding the wealth was controlled by an immensely small elite who treated the workers poorly, supplying them with scant salary and forcing them to work in poorly equipped and often dangerous areas ...

Who told you that?

It is my understanding that the wealth was being created by those who had the idea to produce something valuable. Employees were treated as people with certain rights, and they were free to work under harsh conditions or find a different way of making a living.

As a step to understanding capitalism fully, I suggest you re-examine the premise which led you to the above conclusion. Capitalism, you see, rests on the principle that man has a right to his own life and property. Nobody, in a free society, can "force" you to work for them.

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Question #1: Ayn Rand points out that the closest the world ever came to true laissez faire capitalism was during the years of (and immediately following) the industrial revolution.  While significant advancements were indeed made during this period (which was arguably one of the, if not the most, ridiculously prosperous eras in human history) the actual conditions under which the laborers lived was horrendous.

Study history. Capitalism did not create poverty, it INHERITED it ... and ABOLISHED it.

Which countries are the most prosperous, the capitalist ones or the socialist ones. Which have offered the greatest upward mobility for people to rise from poverty to the middle class or even great wealth?

In my understanding the wealth was controlled by an immensely small elite who treated the workers poorly, supplying them with scant salary and forcing them to work in poorly equipped and often dangerous areas.  The massive lower class lived in cramped tenements under conditions which were scarcely better than those under which the serfs and debt-slaves of old lived.  The factory owners forbid the workers from forming unions or in any way protesting their condition, and this lead to riots and outbreaks of violence.  It was only when the plight of workers was recognized and labor laws were introduced that the discontented lower class was mollified.
That is factually wrong. It didn't happen that way. For the facts, see books like T.S. Ashton's The Industrial Revolution available from Amazon by clicking here.

My question is this, why advocate a system which leads inevitably to such a gap between the classes.  I do not mean to assail the capitalist system (of which I am a firm supporter) but is it not necessary to avoid such a disproportionate distribution of wealth if only for the sake of avoiding dissent?

In a free country you will always have disparities in wealth because people differ in ability, how hard they work, etc. But observe in this country, there is a disparity between the extremely wealthy and the poor -- who are richer and have more real wealth and opportunity than even the richest men had just 100 years ago.

Question #2: In the event of absolute capitalistic freedom what is to prevent companies from selling extremely harmful products.

Would you willingly buy a harmful product? Few people would, and the company selling the product would have few customers and would go broke. A company is more likely to make bigger profits by selling good, reliable, honest products because that's what people want to buy.

If a company lies and says its product is harmless when it's not, that's fraud which is a crime under laissez faire. Someone who engages in fraud will not only go out of business, but he'll also go to jail.

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It is my understanding that the wealth was being created by those who had the idea to produce something valuable. Employees were treated as people with certain rights, and they were free to work under harsh conditions or find a different way of making a living.

As a step to understanding capitalism fully, I suggest you re-examine the premise which led you to the above conclusion. Capitalism, you see, rests on the principle that man has a right to his own life and property. Nobody, in a free society, can "force" you to work for them.

As to your first statment, I agree with you to a point. Yes those who had wealth certainly had earned it through the production of desireable goods. However, the blue color workers in thier employ were only nominally free to find different ways of making a living. If a person only makes enough money per month to (barely and for the most part inadiquatly) support his needs for that month then that person is financially in no position to quit his job and search for a new one. In this way the employ is bound inextricably to the employer, he lacks the monetary resources to leave and his employer sees no reason to provide him with any more money than is absolutly nessesary. As a result said person is forced to work rediculous hours at low wages.

As to the alternatives, working conditions were for the most part universally poor as such there weren't really any "better" alternatives and if there were many people lacked the financial freedom to remain unemployed for a protracted period of time during which they could find better alternatives. True, it is imposible to actually force someone to work at a certain place but there circumstance made it so the majority of the alternatives were similar.

That is factually wrong. It didn't happen that way. For the facts, see books like T.S. Ashton's The Industrial Revolution available from Amazon by clicking here.

Actually, I have read that book (and enjoyed it immensly) though I was refering to the American Industrial Revolution not the one in England.

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#1 - The Industrial Revolution immediately followed from the Feudalist system, which was highly agrarian. Under the feudalist system, land (which was wealth) was controlled by a small noble class. Economic changes rarely happen overnight. As this noble class (the owners of capital) began to lose their political power, they were forced to use their economic power. Since the state could no longer enforce class distinctions, wealthy and poor entrepreneurs began to compete on politically-level ground, with the best product and lowest cost winning. This competitiveness allowed for many new inventions and methods to become employed -- since it was money that mattered in the end, not political power. Under the feudalist system, all people lived under a poor standard of living. But the Industrial Revolution started to raise that and the free market has continued to raise the standard of living ever-higher. It is foolish to compare the standard of life during the Industrial Revolution to that of today and claim that the free market caused their ills. The standard of life then was an improvement upon its precedents, and the standard of life today is an improvement upon the one before.

Perhaps it depends on personal values-choices, but being free to leave the land and work where I choose is much better than being a serf in a feudal society regardless of pay. The machinery then was often dangerous compared to the machinery of today, but what I said above about comparisons over history also applies here.

#2 - The market does not prevent anyone from selling dangerous products (not counting fraud, which is another topic). But wherever there is profit to be made in deceiving the public, there is also profit to be made in educating the general public. For example, the ADA certifies toothpastes. The ADA profits by getting their organization's name out, and the toothpaste benefits by being certified as legitimate. Of course you can buy toothpaste that isn't ADA-certified. But as a consumer, which would you choose -- a product recommended by professionals in a given field or one that is not? Thus the market deters the sale of dangerous products indirectly and without coercion.

I definitely suggest _Capitalism: The Unknown Ideal_, there are essays in there that cover your questions more thoroughly than I do at this time of night. ;)

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#1 - The Industrial Revolution immediately followed from the Feudalist system, which was highly agrarian.  Under the feudalist system, land (which was wealth) was controlled by a small noble class. 

#2 -  Thus the market deters the sale of dangerous products indirectly and without coercion.

1: the American Industrial Revolution took place a long time after the one in Europe. The European initial industrial followed the comercial revolution which helped set up a monetery system and established a middle class.

2: Fair enough, you have convinced me.

As to "Capitalism" I am already in the process of reading the book (it actually provoked my questions).

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However, the blue color workers in thier employ were only nominally free to find different ways of making a living. If a person only makes enough money per month to (barely and for the most part inadiquatly) support his needs for that month then that person is financially in no position to quit his job and search for a new one.

In fact, the poor were totally free to find different ways of making a living.

One example. My own father emigrated from Russia with LITERALLY only the ragged clothes on his back. He and his family didn't have meager wages. They had NO wages -- and they couldn't get any. They belonged to a despised minority and nobody would hire them.

But they were free.

They were free to start their own businesses, and they did. They were free to trade among themselves, and they did. They were free to educate their children, and they did. In one generation, these penniless, despised immigrants went from the tenements to their own homes in the suburbs, and these uneducated foreigners who couldn't even speak English sent their children to law schools and medical schools.

They were free and nothing could stop them.

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1: the American Industrial Revolution took place a long time after the one in Europe.  The European initial industrial followed the comercial revolution which helped set up a monetery system and established a middle class.

2: Fair enough, you have convinced me.

As to "Capitalism" I am already in the process of reading the book (it actually provoked my questions).

1: the American Industrial Revolution took place a long time after the one in Europe.  The European initial industrial followed the comercial revolution which helped set up a monetery system and established a middle class.

The Industrial Revolution in the Americas followed the one in Europe and was largely funded by Eupopean capitalists. And at the time of the IR, the American continents were mostly virgin forests and rich in natural resources. Europe also had the advantage of people and capital in the form of labor that the Americas did not. But eventually Europe regulated itself from competition, but by then the US was a global economic superpower. :)

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Alright, It is no longer possible for me to further argue my point rationally, therefore I must be wrong. I thank everyone who took the time to answer me and I apologize once again for appearing confrontational, it was not my intent. I wished merely to see the reason behind the principle defended.

As to the subject of the industrial revolution, I suppose it is possible my chronology is incorect, it has been a while since I last thought about it.

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The massive lower class lived in cramped tenements under conditions which were scarcely better than those under which the serfs and debt-slaves of old lived.  The factory owners forbid the workers from forming unions or in any way protesting their condition, and this lead to riots and outbreaks of violence.  It was only when the plight of workers was recognized and labor laws were introduced that the discontented lower class was mollified.
Yes, I was taught this "robber baron" bunk in my state funded high school education, too (and my public high school is #1 in the state!). Just remember that they chose to seek employment from those factories, and were not forced to remain employed there if they did not agree with the conditions. The common counter-argument to that is that they had nowhere else to work - however, how is that of any concerned to the factory owner? and why should it be? If the conditions continued to be that bad then who would work for them? In the end it is in the employers best interest to improve the conditions so that he will actually be able to have and retain workers.

In the event of absolute capitalistic freedom what is to prevent companies from selling extremely harmful products.  (Ex: The placement of addictive narcotics in food or other such products, in order to create a more urgent demand.  Or perhaps medicines and drugs, which have not yet been tested)

People, rational ones anyways, won't buy them and if they do they will have to deal with the consequences. If companies were to mislead consumers into believing these products are not harmful (in order to create a false demand) then the government would have the responsibility of stepping in to protect individual rights. But really, it just comes down to supply and demand for that question.

And from one fledgling to another - you didn't come across as belligerent or idiotic and the only stupid questions are the ones you don't ask at all (out of fear). This is a great place to learn so ask away!

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...I do not mean to assail the capitalist system (of which I am a firm supporter) but is it not necessary to avoid such a disproportionate distribution of wealth if only for the sake of avoiding dissent?

The first thing you need to do is reject the idea of the "distribution of wealth." Under capitalism, wealth is not distributed--it is created. If anyone in a capitalist society is dissatisfied with the amount of wealth he has, it is his responsibility to create it, and he is free to do so. He is not free to expropriate the wealth that others have created without their consent, even through a government intermediary.

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Alright, It is no longer possible for me to further argue my point rationally, therefore I must be wrong. 

That doesn't follow. It sounds like you are in a state of some understandable confusion and in the midst of challenging many of your basic political/economic assumptions, some of which you probably absorbed at an early age and took as almost "axiomatic". So you never really thought they even required argument. You assumed they were just "givens", i.e that workers are exploited under capitalism and/or that inherited wealth is frequently unearned so is therefore unjustified and/or that capitalists/industrialists contribute relatively little to the economic process and are therefore superfluous, etc. Now suddenly you are confronted with some serious challenges to those assumptions, requiring you to re-think them. If you are conscientious and honest about it, it may take you some time to fully accept the alternative view (assuming even that you do).

When I was first introduced to Ayn Rand, I was a sophomore in college. Previous to that I was a committed *communist*! While I went for the philosophy immediately and read everything about it I could get my hands on, it actually took me a number of years before I fully grasped the argument for capitalism and was able satisfactorily to answer in my own mind most of the typical objections (some of which you are raising here).

I'll just add that in addition to Ayn Rand - who most importantly will give you the proper *philosophical* presuppositions for the defense of capitalism - there are many valuable and important works by professional economists which you will find helpful, if not even indispensable, to really getting it. Works by men like Von Mises, Hazlitt, Bastiat, and others.

To the Objectivists in the group, I'll mention that one of the most valuable resources I discovered was reading good biographies of the leading industrialists - and there is a growing number of such good biographies, of such men as Carnegie, JJ Hill, DuPont, and others. These biographies enabled me to really grasp the essential and necessary role of the entrepeneur in the industrial process.

Grasping that role enables you to understand why when they are disposed of in socialist/communist regimes, those economies immediately sink into chaos and impoverishment (that in itself disproves the Marxist "exploitation theory" which would predict the exact opposite). It is also of course the fundamental thematic concept in "Atlas Shrugged".

Fred Weiss

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...Yes those who had wealth certainly had earned it through the production of desireable goods.  However, the blue color workers in thier employ were only nominally free to find different ways of making a living. If a person only makes enough money per month to (barely and for the most part inadiquatly) support his needs for that month then that person is financially in no position to quit his job and search for a new one.  In this way the employ is bound inextricably to the employer, he lacks the monetary resources to leave and his employer sees no reason to provide him with any more money than is absolutly nessesary.  As a result said person is forced to work rediculous hours at low wages.

This is not the case. Actually the exact opposite is true. Ironically, Marxists often decry the very mobility of workers which capitalism makes possible. They attack the alleged "instability" of capitalism and the manner in which people are constantly uprooting themselves to move on to other work or other geographic areas, creating what they decry as the "rootlessness" of modern life. As you know, 10's of millions of people came to this country, often with nothing more than the clothes on their backs. Others managed to traverse the continent in rickety wagons subjecting themselves to the most horrendous conditions and dangers to make new lives for themselves. All of this would have been impossible under feudalistic serfdom.

Something like a million new businesses are started every year in this country, often by people of relatively modest financial backgrounds operating on "shoe strings". Many of them do fail, but it is hardly a picture of people unable to try and improve their lives through their own efforts.

But even the average worker of relatively modest ability and limited ambition has enormous resources at his disposable. He inherits, if you will, an industrial civilization with highways, schools, automobiles, telephones, - and now the Internet - which opens up virtually the entire world to him to pursue his dreams, if he chooses to pursue them. How many people fail at this endeavor, not because the opportunity is not there, but simply because they lack the willingness to take the risks involved or to undertake the hard work required?

Capitalism is simply not the caricature of it which Marxists have portrayed for over a 100 years. Maybe instead they should look instead at the *reality* of what they themselves advocate and the absolute disaster which it has caused when its ideas have been implimented.

Fred Weiss

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To the Objectivists in the group, I'll mention that one of the most valuable resources I discovered was reading good biographies of the leading industrialists - and there is a growing number of such good biographies, of such men as Carnegie, JJ Hill, DuPont, and others. These biographies enabled me to really grasp the essential and necessary role of the entrepeneur in the industrial process.

Grasping that role enables you to understand why when they are disposed of in socialist/communist regimes, those economies immediately sink into chaos and impoverishment (that in itself disproves the Marxist "exploitation theory" which would predict the exact opposite). It is also of course the fundamental thematic concept in "Atlas Shrugged".

Fred Weiss

First of all, welcome Fred!

Really, though, I just wanted to second your comment. Even good economists seem to fall into the "floating abstraction" realm much of the time. It's helpful to concretize what capitalism is, and you can't do that without looking at individual producers.

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First of all, welcome Fred!

Really, though, I just wanted to second your comment. Even good economists seem to fall into the "floating abstraction" realm much of the time. It's helpful to concretize what capitalism is, and you can't do that without looking at individual producers.

Thanks.

Actually, even "good Objectivists" sometimes fall into the "floating abstraction" realm in defending capitalism. It is not enough to say, "capitalism is the only moral system since it is based on individual rights and it doesn't matter even if under capitalism the rich got richer and the poor got poorer, and vast monopolies were formed able to charge whatever they wanted, and people could buy up all the land around you and charge you a toll to leave your house, and....etc,etc. <fill in whatever absurd fantasy nightmares people have about capitalism>. The reason is that if that were the case, then capitalism *wouldn't be* the most moral system. There would be something fundamentally wrong with it.

Ayn Rand once said that she doesn't think she could have come up with her system of ethics except for the evidence provided by the Industrial Revolution, i.e. that an economic system could exist which benefited and potentially enriched *everyone*, i.e. that in fact there were no "conflicts of interest" among rational men and that one could pursue one's (rational) self-interest without sacrificing others -of which in the political/economic realm capitalism is the embodiment.

Capitalism was the first economic system in history in which in order to get rich you have to *produce*, and specifically to produce values which people were willing and able to purchase. So that the rich get rich not by impoverishing (or looting) others but by increasing their standard of living, by producing a vast abundance of goods at ever lower prices. So you have the examples of Rockefeller who built an enormous fortune by dropping the price of oil by 90% and in that way and by that process came to dominant the market for oil - or Carnegie who cut the price of steel in half - or Ford who made the automobile affordable for average buyers. And so on...one could give 100's of examples on up to Bill Gates and Sam Walton today. In contrast in former eras, one got rich by conquest, looting, and enslavement.

Fred Weiss

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Would you willingly buy a harmful product?  Few people would, and the company selling the product would have few customers and would go broke.  A company is more likely to make bigger profits by selling good, reliable, honest products because that's what people want to buy.
Apart from tobacco, this is of course true, at least of rational people, if they know the true merits and demerits of the product. Which leads to the next subject.

If a company lies and says its product is harmless when it's not, that's fraud which is a crime under laissez faire.  Someone who engages in fraud will not only go out of business, but he'll also go to jail.

There is a very serious danger here. If you want government (eg FDA) to tell people what is fraud and what is not fraud, that is a mistake.

http://www.whale.to/vaccine/fda2.html

"The thing that bugs me is that the people think the FDA is protecting them. It isn’t. What the FDA is doing and what the public thinks it’s doing are as different as night and day."—Dr Ley former Commissioner of the FDA.

This is the history of the FDA. Corrupt as 773H.

http://www.swankin-turner.com/hist.html

The solution is to get FDA out of the way and let consumers protect consumers, just as janitors can take care of janitors (as Rand said). Also get rid of the Food Disparagement Act and any similar law.

Howard Lyman on the Oprah show told some millions of people that cattle are fed "protein concentrate" which includes manure etc. This is true. The audience was shocked. Oprah swore off hamburger. The sales of beef went down. Howard and Oprah were sued by the cattle industry under the Food Disparagement Act. They won because the judged ruled that we have freedom of speech. But ever since, Oprah was reluctant to do shows that criticize food.

In a completely free world, there would be no such thing as a food disparagement act, and there would be freedom to criticize the gajabors out of products and there would be no need for the FDA.

Whatever FDA may have started out being, now it is about politics in the dirtiest sense of the word and has nothing to do with health and nothing to do with science and there is no justification for its existence..

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There is a very serious danger here. If you want government (eg FDA) to tell people what is fraud and what is not fraud, that is a mistake.

The only danger is of your own making. You, for some reason of your own, are introducing the FDA and then arguing against it, when the explicitly stated context was laissez faire. Under laissez faire there is no FDA, so why quote these words and argue against something which those words do not entail?

Anyway, in a free society the government will tell people "what is fraud and what is not," and that is not "a mistake." The way it is done, however, is not through the FDA or any other alphabet agency, but by the establishment of objective laws which clearly define legal fraud. Do you have a problem with that?

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