Easy Way to
Developing the Concept of Value
To understand the economy, one must understand the concept of value. All of economics is the study of people thinking of their own self-interest, and then responding to it. It is how people interact with each other to satisfy their own personal desires; why someone chooses one job over another, one product over another, one investment over another. All of these actions drive back to how we understand the concept of trade value.
When an economy fails and jobs become rare, there is no inherent failure in humanity's productivity. Depressions do not happen because machines produce less, harvests bring less, and mines dry up. These are events that can both cause a boom or a bust in the economy. Overall, there has been no real connection between the productive output of the people and their wealth; there is no direct relationship between how much one produces and how much one receives.
For the surest proof of this, we know that a single person working today, with the aid of machinery, can produce a thousand times as much as anyone working three or four centuries ago. We know that the amount of food produced by a single working family has risen from enough to feed itself to enough to feed ten thousand. It is similarly a fact in manufacturing, mining, transportation, and all essential sectors of our economy. A person who is fired for "underproductivity" today is a thousand times more productive than the European peasant -- potentially they have better living conditions, but it is arguable how much better.
There are some economists who talk about improving the economy by "producing more," by "production and supply," by outworking our competitors. They must not have noticed that human, productive power has been exponentially increasing since 1800.
The question of unemployment does not rely on trends of technology, industrial development, or productive output. Rather, the question of unemployment relies on the human conception of value. Employment depends on two things: the person providing the employment, the capitalist proprietor, and the conditions which influence and effect the capitalist's decision-making. Such conditions include the public's buying patterns, which relies on the valuation of the workers-turned-into-consumers; and, similarly, the valuation of the employer in setting wages or prices enters into this equation, as well.
Overall, the real question is how human beings decide to value commodities; and then, how this relates to the workers and the bosses, those who labor and those who live off the labor of others.
The Marginal Theory of Utility provides us with an accurate understanding of how humans value commodities. Developed by William Stanley Jevons, Carl Menger, and Léon Walras, it is an economic outlook that balances quantity with quality. The more an individual possesses of a single product, the less enjoyment that individual gains from receiving an additional one of those products. If someone has a bowl of rice, and another person has fifty sacks of rice, which person would gain more pleasure from a pint of rice? It would certainly be the poorer of the two. As Jevons perfectly explained in 1860...
When it comes to seeking our own desire, we always come to the market, or some type of market; whether we are buying food or selling hours of labor. There are two trends of society's overall market that are easily noticeable: the boom and the bust. The boom occurs when the public's ability to consume and purchase more increases at a greater rate than the growth of new, luxury products and services to buy. The bust occurs when industries produce too much to satisfy human needs, the people cannot consume it all, and affected businesses lay off their employees. Eugene V. Debs, the Socialist and union organizer, clearly explained the latter...
The boom leads to the bust. An excess of consumption spending leads to new businesses, and new businesses lead to new employment. That means new capitalists and new profits, or at least, the same amount of capitalists with more profits. This means that a greater section of wealth is being channeled towards the pockets of a few -- whether they're "technically employed" CEO's or shareholders in a corporation. And the wealthy have a very low value of marginal utility. A house for a homeless family would be a home, but to a wealthy family, it would be a vacation home.
The boom leads to a situation where money starts to become idle. There is no use in extravagant spending on behalf of the high class, if they feel fully satisfied by their current consumption of the market's goods. This means that wealth piles up, in bank accounts, under beds, and in bonds, wherever, it amasses and withdraws from circulation. A slow, money starvation of the public. In this respect, the wealthy cannot do the one thing that would get the economy moving again: overconsume.
It is a monument not to the limits of human luxury, but to the ability of the people to produce more than their masters can eat. And, it is to our own detriment, because there is no use in feeding slaves, when they can offer no useful or productive work to their owner, since they already have everything that they need.
The boom leads to a bust: it leads to overproduction on the part of the workers, and underconsumption on their part as consumers. There are two interpretations of the cause: either, it is because the wealthy have no interest in consuming more of the market, thus leading to loss of industry and jobs. Or, it is because of the difference of the prices in stores versus the wages of the workers. Those who work and have very little would have every interest in spending their income on serving their personal needs, and maybe to even taste new types of luxury and art.
Those are the two things that might save a failing economy: if the wealthy would consume more, and spur on industry, or if the poor would earn more, and spur on industry. The wealthy have the power to consume, but they are too fully satisfied to take more; the workers have the desire to consume, but they are disempowered by economic exploitation and miserable wages. The boom leads to a bust, but the bust does not lead to a boom. Knowing the causes and the potential solutions of an economic depression, what is the ready and easy way to end it?
Worker Self-Management Fits the Form
Upon seeing the difficulties of this Capitalist economy, one might suggest that we should take a piece of land, and allow the workers to labor upon it, earning what they can from their production. This does not change the fact that other laborers are not in this position; it does not change the fact that these previously unemployed workers, now making a profit, will lead to the unemployment of workers in their competitors' businesses. And so, it is not a viable solution to expropriate just a small piece of land for a tiny margin of workers. Everything must be made free and available; everything must be taken. To quote Peter Kropotkin..."We are afraid of not going far enough, of carrying out Expropriation on too small a scale to be lasting. We would not have the revolutionary impulse arrested in mid-career, to exhaust itself in half measures, which would content no one, and while producing a tremendous confusion in society, and stopping its customary activities, would have no vital power--would merely spread general discontent and inevitably prepare the way for the triumph of reaction." [*1]
The worker has the desire, but not the ability to consume, and the wealthy has the ability, but not the desire to consume. The most easy and ready way of remedying this solution is to give the wealthy's ability to the poor, and the poor's desire to the wealthy. That is to say, both classes should be abolished, so that there are none who want to produce, but cannot, and none who are so wealthy that they do not want to produce. Every industry should be managed, operated, and owned by those who labor there. It is the only way to drive profit to those who want to consume and push economic growth.
Consider the two direct causes of a depression within the market economy: those who have the wealth do not have the desire to spend it, and those who have the desire to consume more have no opportunity for making wealth. The problem is in the separation of wealth from those who can use it. Put plainly: it is because those who labor do not earn their full production, and those who do not labor are overpaid and overfed.
Worker management, when it is extended over the full economy, completely remedies these two difficulties. There are no longer investors or capitalists, proprietors or stockholders; there are no longer those whose cunning and exploitation can slowly drain society of its gold and wealth. And, those who have a great, marginal utility in their purchases receive that extra wealth. Instead of purchasing-power becoming monopolized by a few, and then remaining idle, it will become the life-force that feeds new industries and new employment.
What could be the reactions and changes that take place in such a worker-managed economy? The same trends that have happened for thousands of years will continue: people deciding to buy more or less, luxury and non-necessity production to rise and then to fall, desire for new products to rise and then again, to decline.
The worker economy handles such evolutions gracefully. If a worker wants more, they only need work more, in which case, they both produce more and earn more; for a new commodity that hits the market, a new wage hits the pocket of a consumer. And if a worker wants less, they only need work less, in which case, they produce less and earn less; the market does not become flooded, business did not overproduce, and their job does not become at risk. Workers would not be threatened by the unemployed trying to "steal their job" -- each laborer's productions would match the income they earned.
Society would function in a far more organic way than it has ever before. No longer would entire masses be enslaved to an eight-hour standard that binds them to some monotonous and useless labor. Everyone could choose the hours they wanted to work, and could sustain themselves with the basic necessities with only one hour of labor per day.
There is no longer a situation where those who possess wealth have no interest in spending it; and no longer a situation where those who desire new commodities have no opportunity to satisfy their interests. The mechanism that produces an economic depression has been removed. The solution was the abolition of the Capitalist class, and an economy that is completely managed by the working classes.
So many complain that our economy simply needs more people buying. They advocate consuming more, to get the industries producing more, to get more jobs for more people. They will say things such as, "Buy more! The economy depends upon it!" Their thought is never sophisticated enough to ask more important questions, like, "Why is it that those with wealthy do not buy?" and "Why are there those who do not have enough opportunity to buy what they want?"
Think about the method currently being used by the United States government in "fighting the recession." Wealth is not pouring out onto the poor, who could fund the industries with consumption and labor; but it is pouring onto the wealthy who are now as afraid to spend as they are to work. This is the complete opposite of what is necessary to provide jobs and employment for all, let alone to provide opportunities that pay fairly. But with the wrong tactic comes the wrong result.
The law was drafted as "the Emergency Economic Stabilization Act of 2008," though it is just called "the bailout." In an attempt to stabilize the economy, that is provide jobs and incomes, money was loaned to the biggest businesses facing bankruptcy. If these businesses can survive, they will provide the jobs to the people that will make a healthy economy. However, the result proved how fruitless and mindless this task was.
As of late 2009, banks were already repaying significant amounts of the money that they had borrowed. [*4] And, according to CNBC, as of November of 2009, the real jobless rate in the United States was 17.5%. [*5] The wealthy capitalists are back on top of the game, and this is all that was needed for there to be jobs for everyone willing to work. At least, that was the reasoning of the United States government. Any reasoning that completely ignores centuries of economic thought is going to meet disastrous results.
And so now, the United States is at an exceptional level of joblessness. As of 2008, 18% of the nation's children live in poverty and 39% in "low-income families." [*6] There are 39.8 million people living below the poverty level in the United States, as of 2008. [*7] Of course, according to poverty level guidelines, those who are homeless and starving can still be technically "above the poverty level." The real poverty level, like the real unemployment level, is rarely reported, because it always indicates a false picture. Similarly, if the real poverty rate were taken, it could be expected to be as much as twice the reported poverty rate: 80 million Americans, or almost a third of the nation.
The banks and corporations are paying back their loans; they are floating just fine in this economy. But everyone else is suffering. Wealth did not "trickle" down. In fact, it is become even more isolated into the hands of a few. Now the most incompetent industries are firmly attached to the economy, these tyrannical monarchs of economy. The bailout did not just fail in doing anything to help the poor; it forced us into a situation where we have no choice of ever escaping a failing economy, since the state will always prop it up.
An Economy of Workers, not an Economy of Capitalists
Imagine the solitary instance: a single factory or industry that is owned, managed, and directed by the workers laboring upon the machinery. No matter what they produce, we know it is possible for this industry to sell enough to maintain its operating costs, and then to provide its workers with the remaining product. For the one instance, it might be furniture and office equipment, which the workers can only have so much personal interest in. Again, we see the law of Marginal Utility: after someone has one desk, a second desk would be less valuable, and after someone has two desks, a third desk would be even less valuable than a second desk, and so on.
Imagine now that we expand this hypothetical model to two industries that are managed and operated by the workers themselves. This new business might be a bakery. Just as the furniture makers would have an excess of furniture, so would the bakers have an excess of bread; and a trade would naturally develop between the two. In a single instance, the workers are receiving the total product of their labor, physical, because it is an industry producing just to serve its workers. But where two worker-managed industries are trading, the worker doesn't receive the actual product of their labor -- but something of an equivalent value.
This means that the worker is still consuming as much as before. Even with the influx of trade, each worker will still be consuming the amount that they are responsible for producing; whether that is furniture, bread, or a combination of the two. There is no overstocking of the market, because for the worker's overproduction, they overconsume; and there are no barren markets, because for everything the worker produces, something of value is made that is available for consumption. The situation of a boom or a bust does not appear in prospect for this economy. It has produced a situation as though each individual were laboring by themselves, and consuming the exact value that they have produced, without sacrificing the benefits of modern, industrial society.
Like a subsistence farmer, by themselves and a hermit from civilization -- for any want they have, there is nothing that can step from laboring to satisfy their need, whether it is furniture, food, housing, or alcohol. There is no person to step in and say, "This land is a private possession, you cannot use it; you cannot construct a home without inspection by the state; that wine recipe is copyrighted, and you need permission of its holder..." That is, there is no barrier to production, and it flourishes in equal proportion to the need of its solitary laborer; that is, it never starves itself because of its hunger, but it never becomes gluttonous because of the distaste for extreme labor. Such a person remains fit, active, ready, and fully prepared to satisfy themselves and their every need. This is how a worker-managed economy would function, since every labor consumes in equal proportion to the amount that they contribute. It provides a stable model of self-sufficiency.
This is not self-sufficiency in any typical sense of the phrase. This example of two worker-managed industries trading, for instance, would probably be expanded significantly; the laborers of any single business would probably consume products from at least ten thousand different industries. Instead of just picking products from furniture and bread, there would be unlimited array from every type of production. Since each worker is spending a value equal to the amount they produce, this puts self-interest within every industry to meet the new demand. And trade, where is done between free partners, tends towards the improvement of participants. Naturally, within Capitalist ownership, only a few percent of the economy participate; the great, vast majority are driven by threats of starvation and poverty to labor. In obtaining self-sufficiency, the worker economy does not drive itself towards isolationism -- rather, it drives itself towards the best way of satisfying the needs of everyone.
The Revolution Against Poverty
Do not expect to see these positive changes accomplished through the law, the political party, or the government. The revolution against poverty will not be carried by those who benefit from poverty, but from those who live in it. These plans of worker self-management will not be legislated and ordered; they will be organized and defended by the workers. Only those who have something to benefit from ending poverty can be expected to organize against it -- only the people, the common workers, suffer painfully for the social order they live in, and similarly, must be the ones who overthrow this system. If an economy based on peace and fairness disempowers the few on top, then it must be the many on the bottom who make it a reality.
Some may suspect that my explanations are too simplistic to adequately describe all of the functions and motions of a real economy. This is true, but my purpose has not been to describe entire economy -- only the part of economics concerned with depressions and recessions within a market economy. The Atomic Theory, as complicated and involved as it may be, can be stated within only two or three sentences. And if the conclusions of Economics cannot reach such a perfect solution to human problems, it is because it is not in its scientific stage yet.
When looking at popular economics, which includes increasing or dropping interest rates on loans to get jobs, we see a contortionist; we see someone who will change and remold themselves to fit a bizarre form, just so that they can leave the system of Capitalism untouched. "Increase the interest rate during the boom, and it'll slow growth, and drop it during the bust, and it'll reduce the bust." It is such an indirect, distanced approach to the economy. And yet, it is the policy that has brought us to our current situation in global unemployment.
The public is often found asking, "But is this all that economics can be reduced to? Is it just increasing and dropping rates of interest on loans to industries? Is there no other outlook someone can take for guaranteeing jobs?" There are real options for improving the economy, like direct worker-management. But none of these are ever presented and discussed within the public sphere. The mere presence of such a thought is a threat to those who live off of the labor of others -- of those who experience mountains of wealth while the millions beg for jobs.
Such a revolution against poverty will resemble the Anarcho-Syndicalist Revolution in almost every respect. In terms of Anarchism, it will refuse the exploiters and murderers into our organizing efforts -- the struggle will not be waged by politicians, bankers, landlords, and presidents. The struggle will be carried by the common people. And in terms of Syndicalism, it will be the organization of the working class against the property-owning class. Its end, too, will similarly the management and ownership of businesses by the workers themselves.
Anarcho-Syndicalism provides the key, social organization to avoid depressions, as well as a plan of social organizing that fits the problems of Statist Capitalism. Worker self-management is an ideal economic organization, and all that is necessary to provide jobs in an economy. Proving this has been the purpose of this paper. But so far, it is has only been Anarchist Syndicalism that was able to make worker self-management a reality.
A revolutionary path is necessary. The cost of government, capitalism, and authority is poverty. And our masters will see that we pay it. It is not so much a problem of developing an economic theory that surpasses the plan of those in power; rather, it is a question of organizing the people so that they can become a threat to the system that starves their children.
*1. Letter to his brother (1 June 1860), published in Letters and Journal of W. Stanley Jevons (1886), edited by Harriet A. Jevons, his wife, p. 151 - 152.