Extracting the Surplus

Those in the exploitative sector must somehow get control over a portion of the goods produced by the productive sector. As exploitation is unproductive economic activity, they cannot do this through the usual means, exchange of goods. To emphasize this difference, we use the term extraction. We use the term surplus (above subsistence) to emphasize that there is a limit to the amount that can be taken without at least some of those exploited dying.

Though this has certainly happened with exploitation, we do not want to suggest that it is the only or even the most important possibility.

From before the beginning of recorded history to the present, conquest has been a clearly important form. While the role of the "profit motive" in conquest may have been played down for many reasons (e.g. because the conquerors supervised the writing of the histories, because they wanted to justify themselves, which cannot be done by appealing to such a base motive, because the facts are complicated and we do not want to accuse someone unjustly) there can be little doubt that it has been important.

Exploitation by the government has been another important way of extracting the surplus.[vi] The government is clearly suited to undertaking exploitative activity. It is a rule making body with resources at its command and with the power to enforce its rules. The rules may be exploitative, as may the allocation of resources. The possibility of governmental exploitation is obscured for a number of reasons including the following (seeming) paradox. When people face the possibility of being exploited, by crime or conquest for example, they may react individually (e.g. by purchasing a gun) or they may collectively "provide for the common defense." Counter-exploitative activity is frequently in the hands of the government, composed of a subset of the individuals in society. Governments, not individuals, protect against the possibility of foreign invasion and make and enforce laws that provide for at least certain types of exploitative behavior.[vii] This counter-exploitative function has been a major function of government readily observable historically. It is in no way contradictory for a government to act exploitatively at the same time that it undertakes counter-exploitative action against certain types of exploitation or against certain people. In fact, the logic of an exploitative government's position requires it tot undertake counter-exploitative action as a source of legitimation, as a 'cover" for its exploitative activities, and to protect its 'turf" against the depredations of other exploiters.

Though productive activity is typically considered to be carried on by a substantial number of units that act independently of one another, there is less scope for independent action in undertaking exploitative (and counter-exploitative) activity. One very important reason (others are considered below) is that to a great extent it is might that makes not right but the rules concerning the allocation of income. Stronger mights require coordination and, other things being equal, more resources that weaker mights, and are likely to curtail the exploitative activity of those less powerful. With "economies of scale" in exploitation, an exploitative sector that is unable to act collectively at critical junctures may well find itself replaced by one that can.

As mentioned, the government is clearly in a position to act exploitatively. Al that really needs to be done is to show that a relative few typically have had differential access to the government. The logic of their position should establish, at least for an economist, that they would employ the government in a profitable and hence exploitative way. They will use the government to restrict others' alternatives for their benefit. In Pareto's words, "within a given nation, it is by means of laws, and, from time to time, revolutions, that the strong still despoil the weak" [1971, p. 341].

Unrepresentative governments have been the norm both historically and in the present. It has been estimated, for example, that only 2 to 4 percent of the male population in Latin American nations participated in the political process in the nineteenth century [Stein and Stein, 1970, p. 171]. Indeed for most of history it was thought proper by those in a position to have their views recorded that government should be controlled by a few.

Representative governments may exploit as well. This is true, and to the extent that it is true supports the agreement that we are making. Many however, hold the view that a government truly of the people offers some possibility of reducing or ending what is here termed exploitation.

The difficulties in mandating (let alone establishing) a government truly of the people are well known. Such difficulties permit exploitation to exist in governments nominally of the people. Consider representative democracy for example. Is one political party sufficient? Many have thought not. Even in states with two or more parties, there is again no guarantee that basic democratic principals will prevail. The two parties may act oligopolisticaly. Indeed, if political parties are rational profit maximizers, "will" should be substituted for may, and the question is really one of establishing the circumstances under which their oligopoly power is so limited that a reasonable approximation to government of the people iss established.[viii] A clear illustration of oligopolistic behavior occurred in Colombia where the Liberal and Conservative parties made an agreement to alternate in office.[ix] Economic power may obtain undue influence to the financial requirements of the political process, or the simple desire of those in it for money. The implicit requirements for political office may be such as to favor those with ruling class characteristics (such as, for example, wealth and whiteness) who will then "unconsciously" incorporate their viewpoint in the definition, selection, analysis and solution of political problems. Elections can be rigged. If people are poor enough and/or the elections farcical enough, their votes can be bought. If they are afraid of the government, or someone else, their votes may be coerced. Serious opposition leaders, those who go beyond being 'tweedledee," can be murdered, imprisoned, exiled and smeared. The information apparatus is typically either in the hands of the rich or the state, neither of which are neutral observes of the political process. To the degree that such factors weaken control by the people, they strengthen control by the few, and result in exploitation.

Similarly with revolutionary governments. By freeing the masses from exploitation they can fairly be said to be truly governments of the people. But this description and praise is not a title granted in perpetuity, and it certainly maybe that those in control of the state apparatus use it for their ends. M. Djillas pointed out the existence of a "New Class" in Yugoslavia and received from the same group several years in prison for his pains, a far from singular event even in Eastern Europe. In China, the strictures against bourgeois ideology and "capitalist roaders” and the implementation of cultural revolutions can be viewed as attempts to keep those in positions of power from turning this power to their own use.

One of the major ways in which governmental exploitation has occurred has been allocation of the means of production--land, natural resources and capital, as well as certain other money making opportunities, such as the right to import. Consider, for example, what Glade and others have to say about the allocation of land in Latin America. Glade observes that in colonial Latin America, "the fortunes of the groups contending for land were largely conditioned by their relative access to the machinery of state" [1969, 119]. In Republican times, he notes the distribution of land (in large blocks) through the "spoils system" and that the distribution of land had as an advantage "pacifying the military" [p. 239]. The basic pattern has continued to the present. According to Barraclough, recent settlement programs (which are not the most desirable way to obtain land) in Latin America have benefited retired army officers, politicians, extension agents, large farm administrators, and foremen [1973, p. 52]. The government allocated money making opportunities and thus influenced the allocation of capital through assignment of the right to open banks, through inflation, through charters for such entities as railroads, through its import and export duties and licensing. To be sure, such activities do not involve the accumulation of capital in the primary meaning that it has in economics of physical capital. Unlike land, capital was not there, preexistent in its final amount, to be allocated. What was there to be allocated were opportunities. Once these were dispensed, the accumulation of physical capital proceeded as a relatively straightforward consequence. With a bank to borrow from, for example, it is a relatively easy matter to obtain physical capital.

Such allocation of land and capital may be called "alienation of the means of production." Two points deserve mention. The payment to these factors can be considered both productive, since they are factors of production, and exploitative, since control of the factors of production was obtained by exploitative means. Secondly, when such alienation occurs, the marginal product of the means of production is typically higher and of labor typically lower than it would be in the absence of such alienation. Consider what happens in a standard two factor general equilibrium model, when, after being distributed relatively equally, the means of production fall into the hands of a few. (To simplify the analysis, so few that they could be disregarded as a contribution to the work force.) The workers' adjustment to the loss of their means of production will be to work harder, increasing total output, decreasing the marginal product of labor and increasing the marginal and total return to the owners of the means of production.[x] For both these reasons exploitation can exist even when conventional economics sees only factors of production and their marginal products.

Labor power has also been allocated to the few by the government. Slavery, of course, is the classic example of how the fruits of an individual's labor can be allocated to another by the government. Other techniques that more or less directly may result in the exploitation of labor are mandimiento, debt peonage, indentured labor, head taxes, the importation of labor and vagrancy laws. Governmental exploitation may also occur through the use of taxes and other sources of current governmental income. Taxes may be used to overpay or overstaff or both. Waterston says that, in spite of very substantial outlays for the purpose, "most traditionally independent nations failed to build up efficient government administrations, even for collecting taxes, preserving law and order, or providing basic services" [1965, p. 250]. Such situations occur even in spite of a typical excess of public employees. For instance, in Iran, "the High Council for Administration estimated that from a total of 260,000 government employees, 60,000 were superfluous" [p. 253].

Two "non-governmental" (the dividing lire is blurred and relatively arbitrary) forms of exploitation which have been important historically, but which will only be mentioned here have been monopoly‑-oligopoly and monopsony‑oligopsony. A third important form has been discrimination, as by racial characteristics. We prefer not to use this term, but to consider such characteristics as establishing "barriers to entry" for individuals and groups in the same way that, in the typical usage, barriers to entry keep firms from entering markets. In a productive economic system, productive characteristics are rewarded. In an exploitative economic system, productive characteristics are rewarded, though not as highly, in part because some return must go to reward the "barrier to entry" characteristics. Thus, for example, Myrdal [1944] observed that Negro typists made more money if they could pass for white. The other function of these barriers to entry will be discussed below.

Organized labor, or some segment of it, can succeed in fixing wages above market levels by market power or state intervention. Since however the "market wage" is lowered by exploitation by an amount which is not easily calculated it is not clear that the wage that organized labor gets is in fact greater than it would be in a non‑exploitative situation. Even though organized labor may be receiving a wage below what it would be in the absence of exploitation, the wage differential that exists between it and the rest of the workers can provoke action that makes organized labor appear more like the rearguard of the exploitative sector than the vanguard of the proletariat. Allende's problems with the Chilean copper workers may be recalled in this connection. We will not consider foreign benefits from exploitation, because in part they are obvious (simply consider previous types of exploitation as being done by foreigners), there exists a considerable body of literature on the subject, and because of space considerations. There are certain other forms of exploitation that deserve inclusion, we believe, but which have not been because their explanation would require greater discussion than appropriate here.

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