Reply #45: The real debate is over who creates value

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When I was in high school in the early 60's, we were taught about Karl Marx's labor theory of value -- and were also taught that it was considered basic economic doctrine, apart from whatever opinion you might have of Marx's advocacy of communism.

The labor theory of value, as I recall it, states that value is created by the people who put actual effort into making things -- the labor that turns raw materials into finished product, the creative effort that produces books and movies and music that never existed before.

According to Marx, capitalists and middlemen get their share only by exploiting the workers -- by making sure that workers are paid less than the true value of what they produce and taking the difference for themselves.

I don't think I completely buy that -- there are other things besides the labor involved that add to or detract from the value of a product. But it seems undeniable that the major portion of the value of anything comes from the work that went into it and that neither the people who do the physical labor nor those who supply the creative ideas ever get their fair share.

When I was learning about this stuff as a kid, though, nobody doubted that exploitation was a fact -- and the debates were about how things like the role of unions in enabling workers to obtain a bigger piece of the pie.

But since then -- and specifically since the Reagan presidency -- the entire grounds of the discussion have shifted. Not only does nobody talk any longer about exploitation, the entire labor theory of value has vanished from the public sphere.

Instead, we have been given the noxious term "wealth creation." We have been told that it is the investor class that "creates wealth." And we have had tax cut after tax cut sold to us on the grounds that letting rich people become even richer means they will be free to create even more "wealth" and everyone will live happily ever after.

Wealth, of course, isn't value. It's just money -- and much of it not even real money but on-paper profits that vanish as soon as you look inside the box and see there's nothing there.

Meanwhile, the idea of value has gotten lost. Thanks to productivity gains, workers are creating more value while being paid less. And the environment (among other things) is being degraded because we have a system that sees no problem in destroying things of real value in order to generate the phantom of wealth.

Marx's answer to all this, of course, was communism -- giving the workers complete ownership of the fruits of their own labor. That hasn't ever proved possible to put into practice, and I think there are good reasons why not -- perhaps starting with the fact that in a society of assembly line workers and paper pushers, there simply isn't the personal investment in one's labor to make most people eager to "own" whatever it is they do for a living.

But setting aside communism as an answer, we're still left with the basic problem -- which is one of value, exploitation, and where a society needs to invest its resources and attention in order to create more value (and less on-paper wealth) and to distribute the fruits of that value-creation more equally.