The nature and causes of economic inequality and exploitation are widely misapprehended and, consequently, their cures usually miscarry. Those who cry the loudest about exploitation are the very ones whose cures will result in the only true exploitation that exists. All of their claims about exploitation are not only wrong but in fact exactly the opposite to the true exploitation that only their own favored economic system can create or sustain. The inequality that is inherent to political, social, and economic liberty is abhorrent to Socialism, but it is precisely this characteristic of liberty that penalizes the widespread exploitation of one group by another. Simply put, it is Socialism that is inherently exploitative of the members of society, and it is only the inequality that is at the heart of liberty that is its cure.
An individual or group is being exploited when their labor is controlled by others such that it is impossible for them to achieve economic independence. In other words, group A controls the life and toil of group B in such a way that B is unable by any means short of violence to become economically independent of A. There are many ways in which B might be held captive by A. One way might be the denial of access to education sufficient to break the yoke. Another could be to provide so little recompense as to make the acquisition of independence impossible. A method that was once common in the West but is now widely outlawed is for A to own B outright as a commodity. However, the most common means today of preventing the independence of B is the effective exertion of political power to outlaw the various means by which B might break free—or even to outlaw independence itself. This form of exploitation is often expressed as a sort of benign paternal (or maternal) protectiveness as of children not mature enough to look out for their own good. This is the very nature of Socialism. By reserving ownership of the means of production to the state—particularly to include the practical ownership of the persons that produce, whatever the nomenclature that is used—the socialist state makes it impossible for individuals and groups to gain their independence making them practical vassals. Indeed, the fiction of the state being a sort of parental caregiver is a substantial barrier to any individual asserting his independence. Exploitation exists specifically due to the inability of the individual to attain independence because independence itself is not only illegal but in no practical way possible. However, the syrupy words by which the individual is enslaved ensures that he probably will never even perceive his fetters.
Socialism is, at its heart, different things to different people. To some, Socialism is merely a means of a ruler or a ruling class to obtain a desired lifestyle and to perpetuate it to the furthest possible extent. There are various means by which people achieve the standard of living that they wish to have and maintain. Most do so within the framework of the give and take of a community of people all doing the same, but some seek to achieve their desired lifestyle by exerting power over their fellows and draining them of their fullest potential livelihood. In other words, they gain political power to an extent that they can prevent others from realizing their highest possible standard of living. At a minimum, this could be something like the packing of a municipal government to enact “open space” laws to prevent others from building in the same location. At worst, one person or a small group obtain absolute power of an entire nation—or even group of nations—for the acquisition and maintenance of an opulent lifestyle on the backs of the general population. Such a large portion of the fruits of the people's labor is confiscated by the nation's leaders so that only enough remains to sustain the general population at some arbitrary level of “wealth” that is sufficient to prevent an uprising. Socialism is typically advocated by persons whose motives are much more benign, but once it takes hold, those who possess a strong will to power inevitably attempt, at least, to seize absolute power as a practical means of achieving their desired lifestyle. Any concentration of power however benign at the beginning runs the risk of conversion to a totalitarian state.
A great many people, however, possessing very different motives and desires embrace Socialism in spite of its risks. To them, Socialism is a means by which the proceeds of natural and human resources are to be equitably distributed among the members of the society. To this kind of socialist, the greatest evil that exists in the world is inequality of economic station. The existence of social strata along economic lines is regarded as invariably evil, and any economic system that exhibits this tendency is not just undesirable but morally repugnant. Anyone who promotes such a system is not just mistaken but a worker of evil. The inequality that is inherent to private wealth is a social phenomenon that must be stamped out by any possible means—including, in some cases, the use or threat of violence. Private wealth in all its forms, including especially the private ownership of property, is abolished. The greatest society of all to these moralistic socialists is one that purges itself of all inequality of economic station among its members regardless of the level of wealth that is enjoyed by the whole. In other words, equality is an end to be attained even if the entire society as a whole is impoverished thereby. Even dictatorship is to be risked if the concentration of power is necessary to abolish economic inequality.
Inequality as a condition of society to be prevented at all costs is nothing but a red herring. Because inequality is a fundamental characteristic of the free exchange of goods and services, it facilitates positive growth and change for the good of all. What is often misunderstood about the inequality that is fundamental to Capitalism is that this inequality is not just between one person and another at a given time but between one person’s state at one time with the same person’s state at another time. This is due to the incredible class mobility of Capitalist societies. A large and pervasive underclass as a characteristic of Capitalist societies is a falsehood. The simple fact is that only a tiny minority of people in a Capitalist society actually are a permanent underclass, and even these benefit from the greater general wealth that Capitalism produces. The poor of Capitalist societies are wealthier than the general population of a great many socialist nations. Indeed, malnutrition is practically unheard of among the poor of capitalist societies. In America, for instance, the greatest health threat to the poor is not malnutrition from a dearth of food but obesity from an excess. Moreover, the poor in capitalist societies are in possession of a standard of living that would be regarded as extravagant opulence in many socialist ones. But to the socialist, the lavish wealth of America’s poor is irrelevant. The mere fact that these wealthy poor reside in a society in which there are staggering economic inequalities is an outrageous injustice. The socialist does not give a tinker’s damn about the actual conditions in which the poor live in various nations. They care only about whether economic equality exists as a practical matter. Herein lies the error of Socialism. Inequality is not an evil. It is a good that facilitates the very behavior of individuals that raises the general wealth of the entire society including that of the poor. Inequality is to be desired as long as there are no artificial barriers to individuals or groups being economically mobile.
The existence of inequality is the very definition of exploitation to the socialist, but it is the necessary condition by which the individuals of a society may enrich the whole to the greatest possible extent. So powerful is this phenomenon that even the very poorest are materially richer than they otherwise would have been. Exploitation, therefore, must be seen in light of the relative economic power of the various un-equals. If a given group (B) is permanently subject to another (A)—even when that other (A) is just a theoretical abstraction of the group (B) itself—then exploitation occurs, and between Capitalism and Socialism, it is the latter that creates and sustains it. By the power of the rhetorical abstraction of the whole society, the real society becomes merely a vast serfage to the theoretical one. The entire group as well as all individuals within it are slaves to the nonexistent abstraction, and nothing whatsoever will suggest to their masters that any comparison should be made between this desired ideal and the condition of these same individuals and group in other systems—particularly any involving liberty. The imposition of economic equality is only possible by robbing a great many individuals and the entire society of the growth in knowledge and wealth that inequality makes possible. The curious paradox of inequality is that even the least member of a society in which inequality is tolerated is in a better state than if equality had been imposed artificially.
(An honest study of the various economic trials that took place during the last 150 years must recognize the abysmal record that socialist states have produced. Moreover, it reveals that liberty has never yet been given a fair chance. The fiction that the excesses of the 1920s and later the dearths of the 1930s were both due to the failure of economic liberty—of the free market—has so prevailed in the mindset of society that though it has long been abandoned by most economists, it still persists among the masses. The 1920s was due to the easy money policies of the Federal Reserve—an agency of the U.S. Government—and the 1930s was due to 1) the precipitous constriction of the money supply by the Federal Reserve, 2) the precipitous constriction of international trade due to such actions as the Smoot-Hawley Tariff, 3) bank regulations that outlawed regional and national banks in many areas, and 4) the burning of food in an era of widespread starvation in a misguided attempt to artificially inflate the earnings of farmers. (Notice that the stock market crash of 1929 is not mentioned because it needn’t have resulted in the Great Depression had government not interfered.) All of these things were acts of government that precipitated some of the worst economic conditions that have ever existed on a global scale and may have had a part in the causes of the Second World War. Howsoever that may be, the simple fact is that at no time has government allowed economic liberty a fair trial of its own.)
Inequality in various material states promotes the mobility of individuals and whole groups so long as no artificial impediment to mobility exists whether in the form laws or social taboos. It is the inequality of the surface terrain of the earth by various measures, for example, that promotes a widespread voluntary mobility of individuals from one form of terrain to another for one sort of enjoyment or another. It is the inequality of the free market that produces incentives for gaining new heights in standard of living. In the free market, transactions are almost invariably win/win transactions and not win/lose, so growth in economic station occurs for all parties to each individual transaction. Each receives something that he values more than what he exchanged for it so that a tiny advancement is made for both. Exploitation does not exist because neither party is somehow subject to the other but independent and at liberty to arrange innumerable transactions in any way they wish without any force or coercion for those transactions to be restricted to a particular form.
Socialism in its various forms can only “solve” inequality by eliminating mobility thus locking every individual into a static economic condition from which he cannot escape. The Socialist congratulates himself that now everyone has an equal economic station but fails to realize that it is an artificially low one. Economic liberty uses inequality to promote mobility and thereby overcomes the exploitation that is inherent to Socialism. It is the inequality of liberty that unlocks the door to staggering gains in wealth and standard of living in a free society.
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