In the
science of Economics, is there any way to measure the difference between
take-advantage and exploitation, a demarcation between the two, a way of
knowing when take-advantage turns into exploitation? I have never seen the
articles that mark where the difference is. Yet we know that exploitation goes
on in the economy. How do we know when it happens?
We can define take-advantage. The entire market economy works on a basis of take-advantage. When I go to the grocery, I could buy all the ingredients to bake my own loaves of bread. Those loaves would probably cost me $5 each, with my own efforts, my own kitchen, my own dishes to be washed, etc. They would never be as consistently sliced and good as those available from the grocery bakery aisle. The grocery sells loaves of bread for $3.50 each. So I take advantage of the grocery every time I buy a loaf a bread. The loaf of bread that is worth $5 to me sells for so much less than that.
In that same transaction, the grocery
takes advantage of me, the customer, and in a sense every customer. The grocery
buys loaves of bread from a bakery, possibly at $2.50 per loaf. So the grocery
is making a dollar of revenue greater than the cost of the loaf of bread. This is not profit, just revenue over cost. The grocery still needs to pay for rent,
equipment upkeep, employees and their benefits, utilities, and more to keep the
business going. Eventually, when all the sales of a week or year are measured
against all the costs, the grocery does need to record a profit. If there is no
profit, the grocery will go out of business. The point is that throughout the market
economy, every transaction is possible when both the buyer and seller can
expect to take advantage and come away with an economic benefit. Think of it,
even the bakery takes advantage of every grocery because the loaves of bread
they sell might cost them $1.50 each to produce.
Even with employment, the market economy works because both employers and employees take advantage of each other, otherwise the relationships would not be formed. The employees provide their labor, skills, connections, loyalty and so many other possible qualities while creating value for their employers. They receive pay, but pay that is less valuable than what the employer measures as each employee creates.
for each employee:
paycheck < value created
For the employers, each employee needs to create enough value to justify the
paychecks they receive. In fact, if an employer sees that an employee is not
pulling ones weight, not creating enough value, then the employer could be
expected to fire that employee. An employer can not expect to lose money from
an employee not contributing enough, not creating enough value for the business' success.
If the economy were that simple, based only on take-advantage transactions, then we would not expect to ever have recessions or busts or contagion bank failures? Exploitation happens when a person takes home pay excessively greater than the value one creates for their employer without any consequence for that exploitation. The results from systems of exploitation are those economic failures that are occurring so many times within one lifetime. Yet again, how do we measure where the line is crossed between take-advantage and exploitation?
Exploitation happens when:
individual paycheck >>> value created
There are
extreme cases we could identify as exploitation. If those examples can lead
science and society to identify the systems of exploitation then ways could be
found to possibly reduce the number of economic disasters, or they could be less
severe, or . . . how much better?
Here is an
example. When all the parts are gathered at the start of a truck assembly line,
there are fantastic amounts of value in the parts themselves. All the metallic
alloys, all the tinted, tempered glass, the wiring and electronics, the different
forms of plastic, the leather and other materials are all valuable, each on
their own. Then think of the design and coordination required between all the
parts, think of the engineering value to make the precision parts that
integrate into so many systems in the truck. There is value in the designs, for
the interior of the truck cabin, for the exterior lines and aero dynamics, for
the powerful engine, for the dependability of the braking systems, etc. So
many people have contributed their employment in creating value in the safety
tests and in the inspections before the parts go into the assembly line.
Remember too that modern truck models have variations to make them more
attractive to different segments of the buying public. All of those and more considerations
go into the value of the parts before the assembly begins. The assembly process
itself can take as long as 25 hours for each truck, 25 hours of effort from all
the diverse, coordinated and highly skilled teams, robots, automated paint
sprayers, more inspectors, plus the utilities required by the assembly plant.
In the end, a new pickup truck could cost as much as $50,000 to simply roll off
the assembly line. (This is not a reference to the sales price, which would
include transportation costs for the final product, and mark ups by the manufacturer
and by the auto sales company.) The cost of producing the new pickup truck
stands for all the contributions from so many sources, laborers and history,
resulting in a $50,000 valuation.
What if there was a person who expected to be paid more than the value of a new pickup truck every working day of a year? Could any of those assembly team members, or anyone who sees the true value of their combined efforts in making a truck, could any such person stretch their imaginations to believe there is anywhere a person who creates more than the value of a new pickup truck, creates more than $50,000 for one’s employer and for the whole economy, every working day of the year?? The comparison is difficult to grasp.
Could there be a situation where:
paycheck > $50,000 per day = value created by individual per day ??
Let’s be generous. Let’s imagine that a person works so hard and with
such talents for 10 hours in each of 300 days a year. That would be an
extraordinary, even superhuman effort! Such a person would get two weeks of
vacation and only one day off each weekend, but work all the other days. That
would allow for 300 days of work in a year. And if deserving of that level of
pay, that person would take home more than $15 million per year. Does that
level of pay then seem to fit the take-advantage level of market transactions?
Or does accepting pay greater than $15 million per year sound like
exploitation? Does such an paycheck mean that the individual is exploiting other employees, or exploiting earth systems, or exploiting the financial systems of banking or stock exchanges or some other community system?
In the vocabulary of some Economic theories, people may earn wages or may earn rent. In a sense, if a person invests in publicly traded stocks, and then sells the stock for a profit, those Economic theories might label those profits as rent. And if those profits are highly excessive, they would still be labeled as rent. The definitions offered by this essay are to suggest that maybe there is exploitation if pay rates and incomes for an individual actually total to more than $15 million per year. If the individual did not create value for the economy on levels in excess of $15 million per year, then that person is not participating in the economy through take-advantage transactions, but is exploiting some system or systems, and expecting other people to create enough value to allow for excessive pay rates and not allowing those who did create the value to be compensated for what they created.
If that
conclusion is possible for profits from the sale of stocks, then similar
arguments can be made about salaries in excess of $15 million per year, and for
those who are paid by multiple companies to combine different sources of pay to
exceed $15 million per year. If an executive for one corporation receives more pay by sitting on three boards for other corporations, could there be
exploitation? With one set of knowledge, that person is assisting four
corporations to garner value from extensive numbers of employees who are not
being paid for all the value they create. Instead the value from underpaid
employees is synergized and siphoned up to be paid to board members and
executives and individual investors, adding to systems of exploitation.
To be more
specific, John Munkirs studied and wrote about the Interlocks between Western
corporations and industries that create organically operating Central Planning
Mechanisms. The Interlocks result from every corporate board needing members
who are aware of some facets of the suppliers and their plans, and of the
customers and their plans. So customer corporations and supplier corporations offer
the most strategically valuable members to have on a corporate board. Not only
do those corporations have relationships with each other, their very decision
models require that they interlock with each other, coordinate to ensure that
each corporation around those Interlocks is succeeding. If one corporation
starts to fail, it could mean an interruption in the supplies of other
corporations. So if there is exploitation occurring, the Interlocks work to
ensure all are creating exploitations and benefiting financially.
If some chain
of morality could start to question the exploitation, then could the interlocks
start a process where more and more corporations agree to work against exploitation?
An
influential enough customer could possibly start this questioning of the
exploitation. The governments of self-governing societies could require a cap
on individual incomes from among those who sell to the governments. If defense
contractors, and utilities, and state-sanctioned monopolies, and medical
providers, and other industries that rely so heavily on government contracts
and purchases could be brought to accept individual income caps, then their
interlocks with other corporations and industries could reach some critical
mass and start to undermine the systems of exploitation.
This does not
suggest that corporate boards and executives give up any fiduciary responsibilities.
The corporations and industries should continue to compete in the market
economy and collect revenues greater than costs and demonstrate their capacity
for profits at the same level as before any individual income caps. But since
those corporations will not be paying their board members and executives and
individual investors as much money, the corporations will have to find other
uses for those funds. Simply put, those funds could be used to investigate
where exploitation had been occurring, leading to stopping most forms of and systems
of exploitation. Gender pay gaps could be ended. Greater safety, accident
prevention and advanced training could be sought. Innovations could be
developed. Those funds that use to line the pockets of top executives, or that
were destined for overseas tax havens, could be repurposed as the
corporations and business sense sees as profitable and beneficial to the
long-term life of their companies. The emphasis would not be so heavily focused
on short-term profits, but rather on long-term sustainability of the companies.
Those executives who hit the income ceiling have no incentive to exploit right
away in gaining another million dollars personally. They do have the incentives
to ensure that for years to come they reliably reach that earnings ceiling
every year. That in itself would be a systemic change to benefit individuals
who are no longer in a “rat race”, benefit their peers, companies and the
larger societies. Plus, we might see less volatility in the macro-economy.
