The Question of Alternatives

The theory of economic exploitation as it has been developed in this chapter up to this point is significantly incomplete. The discussion has proceeded on the presumption (indirectly supported by a variety of considerations) that a failure of reciprocity is a necessary condition for exploitation; the challenge has been to explain where and how reciprocity can fail in market exchanges.

The standard Marxist account has it that the workers are forced to par­ticipate in the lopsided transaction that results in their contributing more value than they receive. The apparent problem with this claim is that on the face of it, it just does not seem to be true. The relation between the worker and the capitalist is not coercive. Indeed, Marxists would be unable to dis­tinguish capitalist relations of production from those of slave societies unless they could distinguish the tie that binds the worker to the capitalist from the tie that binds the slave to his master.

There have been a number of responses to this problem from the Marx­ist community. G. A. Cohen (1983) has argued that while individual prole­tarians are free to leave the ranks of the exploited, the proletariat as a class is not. This means that the proletariat as a class is forced to participate in the system (and presumably that they are exploited in virtue of this fact). George Brenkert (1985) has called attention to a richer conception of freedom that is implicit in Marx’s writings and that proletarians lack. On this view, positive freedom is not an absence of coercion; thus, the workers can be unfree (forced) even though they are not coerced.

Since workers in capitalism do not own means of production, they can be forced in a different way. Because access to means of production is access to the means of producing a living at all, those who own means of produc­tion have enormous leverage over those who do not.... The very structure of property ownership itself provides the force by putting the worker in a position in which he has no real choice but to sell himself of his own free will. (1989, 309)

My purpose is not to resolve this dispute within the Marxist community about how to understand the claim that the worker is forced to work for the capitalist; nor is it even to address the question of whether or not the work­ers really are forced to work for the capitalists. (These two questions are repeatedly conflated in the secondary literature on Marx.) Rather, this dis­pute can serve as a heuristic device to gain some insight into the concept of exploitation.

To that end, suppose that there is a systematic failure of reciprocity between the capitalist and the worker in the sense that the capitalist is get­ting—and the worker is not getting—some of the value of the worker’s con­tribution. Notice that what all of the aforementioned accounts of forcing (or some analog of forcing) have in common is that if they were true, they would explain why the workers would accept this lopsided arrangement; that is, they explain why the workers would accept exchanges that systematically fail to be reciprocal.

This provides some insight into what the other necessary condition for economic exploitation must look like: it must explain why someone who is both rational and usually acts in his own self-interest would accept less than the value of what he gives up. In short, one necessary condition for economic exploitation must explain why the other necessary condition holds, when it does hold. The assumption of rationality on the part of the exploited person directs one’s attention to the alternative course or courses of action that are open to her to pursue. For a person to put up with a chronic failure of reci­procity, it must be that she does not have a significantly better alternative open to her; otherwise, she would not agree to this lopsided arrangement.¹⁸ This means that the alternatives open to her are either significantly worse than, or about the same as, the one she chooses. As it is sometimes said, she had no real alternative to the option that she chose. This is encapsulated in the following schema, which shall be called the no real-alternatives-condition (for the record, the other condition can be called the failure-of-reciprocity condition):

DEFINITION. X economically exploits Y in exchange e only if (1) given Ps end in view, the next best alternative available to Y is significantly worse than e or (2) given Ps end in view, the alternatives to e available to Y (e.g., the deals that X’s competitors are offering) are about the same as e.

Both conditions 1 and 2 require some elucidation. The Ideabehind (1) is this: in entering into any exchange, a person has some goal or purpose in mind beyond that exchange. FollowingJohn Dewey, this can be called an end in view to distinguish it from the larger or more remote plans and purposes that an action may serve. In entering into an exchange, what Y would receive in the exchange is a means to that end in view.

Notice that if she has the resources to cover the costs of searching for a better alternative and if there really is a better alternative out there that she would find, then neither of the two disjuncts is satisfied (i.e., her next best alternative is not significantly worse and it not about the same as the exchange she accepts), and therefore she is not exploited by the company. Moreover, notice also that if she is getting the value of her contribution (i.e., her labor), then it also follows that she is not being exploited. This is so even if her next best alternative is significantly worse than working for the company. She might be getting the value of her contribution because other employees at the company are more mobile, and the company has to pay a wage to everyone that reflects what is required to retain these more mobile workers.

Disjunct (2) is intended to take care of exploitation that takes place when someone is not getting the value of what he is giving up, and the reason is traceable to one of two general causes: (1) artificial restrictions on alterna­tives, such as monopoly or state-imposed price controls, and (2) improperly functioning markets due to collusion, laziness, stupidity, and the like among potential competitors. As an illustration of cause (1), suppose that the state requires all farmers to sell their export crops to a state-owned marketing board at a fixed price that is less than the commodities are worth (i.e., what they would fetch in the world market, assuming the world market is compet­itively efficient).

As an illustration of cause (2), suppose that there are only two firms in a market—say, two airlines in the Bozeman, Montana to Fargo, North Dakota market—and they are charging people more than the value of the service. This might be because they collude or because they have simultaneously and independently settled into uncompetitive routines. (Suppose that the people in charge are former Civil Aeronautics Board bureaucrats.) The reason why passengers are regularly paying more than the value of the service is because the only two firms serving that market are offering about the same deal. Whichever of the two exchanges is chosen, the alternative would have been about the same. If all of this is true, it follows that the passengers are exploited by whatever airline they fly. The market is not competitively effi­cient; although there is an opportunity for successful entrepreneurship in

this market, no one has seized it, and there is no guarantee that anyone will. Those in a position to do something about it may have other things to do with their resources, and those who want to do something about it may not have access to the resources needed to compete in that market. Some defenders of the free enterprise system make the unwarranted assumption that if a profit opportunity exists, it will always be seized—if not tomorrow, then at least by next month. But of course, it may not, and people will get exploited as a result.

On the other hand, note that except for cases like these and cases where there are state-enforced terms of exchange, if disjunct (2) holds, then the fail- ure-of-reciprocity condition for exploitation is probably not met. In other words, if all competitors are offering about the same exchange rate, then bar­ring the sort of explanations just adverted to, the market is competitively effi­cient, and people are receiving the value of their respective contributions; that is, reciprocity holds, and they are not being exploited.

The failure-of-reciprocity condition and the no-real-alternatives condition together are singly necessary and jointly sufficient conditions for economic exploitation. This definition and the supporting discussion constitute the the­ory of economic exploitation to be used in the rest of this book. It is time to consider some objections. One objection that comes readily to mind is that it seems that an unfair exchange (in the sense of ‘unfair’ employed here) must be exploitative. In other words, it seems that the failure-of-reciprocity con­dition is not just a necessary condition for economic exploitation but a suffi­cient condition as well. For example, suppose that Sally sells a family heir­loom for much less than its true value—perhaps out of ignorance—to an antique dealer who knows about how much it will fetch at the next antique auction. By that fact alone, has the antique dealer not exploited her?

Not necessarily. To see why, it is necessary to fill out the story in a such a way that the no-real-alternatives condition is not met (i.e., she does have a real alternative). Suppose that this is not one of the usual sob stories philosophers like to tell. In other words, she is not selling this heirloom because she des­perately needs some drug for her child with cancer or because she is starv­ing, and no one else is willing to buy it. Sallyjust does not care enough about her family for this item to have much sentimental value, and she would like to have the extra money. Further suppose that some of the dealer’s competi­tors would be willing to pay significantly more for the item.

The question is whether Sally is being exploited by the antique dealer. The answer is no. Although there is a definite sense in which she is getting less than the item is “really worth,” she is nevertheless not being exploited. After all, she could look around a little more, go to some antique shows and flea markets—in short, pay some of the search costs to find out the market value of this item. She took a chance that this dealer would pay about what the item is worth and lost. This is not exploitation; this is just not being smart. However unfair the exchange is, it is not exploitative.

This example and the one about the woman working in the company town illustrate something about what is required for someone to have a “real alternative” to an exchange, that is, an alternative that defeats a charge of exploitation. Both examples suggest that for there to be such an alternative, not only must there be an alternative course of action that is both a satisfac­tory means to the particular end in view and “out there” to be found, but also, it must make sense for the person to pay the costs—in this case the search costs—associated with that course of action. If those costs, together with what it costs to purchase the item, significantly exceed the cost of the alternative chosen, then the person really had “no real alternative” to the exchange she made.

For example, if someone is working for next to nothing in Central Amer­ica and could make considerably more as an illegal migrant laborer in the United States, that alternative may or may not be a real one, depending on the search costs involved in finding work in the United States. For many of these individuals, the search costs (pecuniary and nonpecuniary) involved in Hnding anything noticeably better than their current lot are so high that they have no real alternative to their existing situation. Such people may or may not be exploited, however, depending on whether or not they are getting the value of their contribution in their current situation.

A second objection begins with the observation—explicitly recognized earlier—that a fair exchange in the product markets is compatible with unfair exchanges in the factor markets. Suppose that Jose, a migrant farm worker who picks lettuce, is getting less than the value of his contribution and has no real alternative but to work for a particular grower. (Competing grow­ers are colluding in offering about the same deal, and there are no Otherjobs around.) Accordingly, he is exploited. Suppose, further, that the farmer who hires him sells his lettuce for $6 a box in the wholesale produce market, instead of the $8 a box it would cost if he were paying Jose and the other workers what their labor was really worth, that is, what it would fetch in a competitively efficient market. The wholesale produce market is competi­tively efficient, so this latter transaction is fair and thus nonexploitative. But—so the objection runs—this is the problem. There is a temptation to say that the farmer is not the only one who is exploiting Jose. The wholesaler, the retailer, and the consumer are also exploiting him; it is just that some are more directly involved than others. Certainly, this is what the United Farm Workers Union wants people to believe. But is this really so?

In part, this possibility is ruled out by the way exploitation has been con­ceived in this discussion. Exploitation has been understood in terms of exploitative exchange, which means that an exploiter must be a party to the exchange with the exploited. Of course, this does not count as a reason for rejecting the objection, except insofar as the account provided here has other advantages over alternative accounts.²⁰ Nevertheless, there is an independent reason to reject the suggestion that Jose is exploited by those who are down­stream in the production-distribution-consumption chain. It is quite possible to distinguish between being a beneficiary of exploitation and being an exploiter. For example, as part of some attempts to justify affirmative action, it has been claimed that existing white males have all benefited indirectly from slavery. Assuming that is true, it would be nonetheless quite odd to say of them that they are exploiting long-dead slaves, assuming that the latter were exploited. While benefiting from a situation may well be a necessary condition for exploitation, it is certainly not sufficient.

To return to the example of Jose, it is useful to distinguish the truth con­ditions for exploitation from the explanation for exploitation. It may be that there is something about a free enterprise system (e.g., private ownership of the means of production) that encourages the exploitation of Jose; but if that is so, the relevant facts explain why Jose is exploited by the farmer or even why exploitative exchanges are widespread or common in such a system, but they do not constitute the exploitation. By hypothesis, Jose is exploited by the farmer who hires him, but those further down the production-distribution chain are not the exploiters; they are simply the beneficiaries of the farmer’s exploitation of Jose.

In the interest of conceptual clarity, it is important not to expand the boundaries of the concept of exploitation to encompass all or most of the ills one wants to attribute to a society. This applies even to the issue of distribu­tive justice and injustice. Even if exploitation is a form of distributive injus­tice, it does not follow that all forms of distributive injustice are instances of the exploitation. Someone might want to argue, for example, that distribu­tivejustice requires that each person’s basic needs be met; if those needs are not met, someone would thereby have a legitimate complaint of distributive injustice against society. But that complaint is not one of exploitation. Though it is plausible to conceive of exploitation as a form of distributive injustice, this book offers no general theory of distributive (injustice. That must be left for another time.

The theory of economic exploitation developed in this chapter suggests (though it does not logically imply) that any market economy is going to play host to at least some economically exploitative exchanges. Though it is logi­cally possible for there to be a market economy in which there are no eco­nomically exploitative exchanges, a little reflection on what that would require makes it evident that this is highly unlikely. Each and every transac­tion in such a system would meet one or the other of the following two con­ditions: (1) it would be in a competitively efficient market or on the leading edge of a market in transition, or (2) there would be a noticeably better alter­native available to any person who fails to get the value of what she has to offer.

That seems unlikely. What is more likely is that in any market economy, some markets will be neither competitively efficient nor in transition and will, in fact, be stagnant. This entails that there will be some unfair transactions, that is, transactions in which people are not getting the value of their contri­butions. And in some of those markets, one of the parties to the exchange will have no real alternative but to accept the terms that person or organization does accept. The same will be true of some parties who make exchanges not on the leading edge of markets in transition. In short, it is likely that there will be exploitative exchanges in any market economy.

This means that it is likely that there will be some exploitative exchanges in any market socialist economic system. If this is so and if there is no viable socialist alternative to market socialism, then the socialist dream of a society without economic exploitation is a purely utopian fantasy. This does not mean that one must give up on market socialism, however. Itjust means that the dream, that is, the socialist vision of the good society, must be revised. The most obvious revision, in light of this discussion of exploitation, would be to maintain that the favored type of market socialist economic system would minimize exploitation, or at the very least, do better than a free enterprise system on this score. Indeed, it would be difficult to find a socialist who would deny this or even express any skepticism about it.

The main purpose of chapters 5-7 will be to show that this is not the case. Specifically, I shall argue that in point of fact, it is a free enterprise system that tends to minimize the incidence of economic exploitation, whereas the type of market socialist system identified in chapter 2 both permits and encourages forms of exploitative exchange that a free enterprise system pre­cludes or minimizes. This argument depends crucially on some recent devel­opments in economics. Over the past twenty years or so, the new economics of contracts and organizations, or transactions cost analysis (as it is sometimes called), has endeavored to explain some distinctive efficiencies of the various types of economic organizations found in a free enterprise system. Given the conceptual connection between inefficiency and exploitation established in this chapter, this has obvious relevance for the question of exploitation in market economies. The next chapter will provide an overview of these devel­opments and indicates their relevance for the general thesis of chapters 5-7. Chapter 5 will explain the distinctive efficiencies of the characteristic organi­zational forms found in a free enterprise system and will indicate how these organizational forms preclude or tend to minimize the incidence of exploita­tive exchange. Chapters 6 and 7 will apply the principles of the new eco­nomics of organizations to the organizations of market socialism, notably, the self-managed cooperative and the associated state organizations that control new investment. The discussion in chapters 6 and 7 will be more explicitly comparative. The main argument of these two chapters seeks to establish that the characteristic organizations of a market socialist system permit—and indeed encourage—a range of exploitative exchanges that are prevented, precluded, or minimized by the characteristic organizations found in a free enterprise system. In short, market socialism is more exploitative than capi­talism. Chapter 8 will consider some alternatives types of economic systems that look attractive from a socialist perspective. It argues that these alterna­tives are also inferior to a free enterprise system on the issue of exploitation or are not really forms of socialism, or both.

A traditional question of comparative economic systems, namely, the rel­ative efficiency of socialist economic systems in comparison to free enterprise systems, has long been a matter of contention between the opposing sides in the capitalism/socialism dispute. One of the main points of this chapter has been to argue that there is an important conceptual link between inefficien­cies (understood in terms of vulnerability to successful entrepreneurship) and exploitation. If an economic system suffers this sort of inefficiency and if it systematically prevents people from taking steps to remedy it, that system can be termed exploitative. This means that the debate about the relative effi­ciency of different types of economic systems takes on a new significance. The issue is no longer merely one of who can best deliver the goods; it is now con­nected with the question of exploitation—and ultimately the question of dis­tributivejustice—in economic systems.