Karl Marx and Henry George argued that all labor is exploited. Natural resources
ID: 1188278 • Letter: K
Question
Karl Marx and Henry George argued that all labor is exploited. Natural resources and labor produce all products and capital is just a combination of natural resources and labor from a previous period. Any value in addition to natural resources is thus created by labor. Profits are just value created by labor but not paid to labor. This is a powerful critique of capitalism. J.B. Clark developed cost curves and a theory of the firm to disprove this claim by Marx and George. What did J.B. Clark argue instead?
Explanation / Answer
A
According to Clark only if "...the union of capital necessitates the union of labour" just wages will come about and may be fixed by arbitration.[3]
This view on fair wages changed in 1886: "Clark himself, it will be remembered has song down the doom of competition in The Philosophy of Wealth. But now %u2026 he has reversed his position and build[s] up a body of economic laws based on competition"[4] writes Homan (1928) and Everett (1946) finds: "Soon after writing The Philosophy of Wealth, however, Clark started to make defences for the competitive system. What caused the change is unknown. This much we can say. By the time he wrote The Distribution of Wealth he was convinced that pure competition was the natural and normal law by which the economic order obtained justice."[5] One cause that prompted this reorientation could be theHaymarket Riot (1886) in Chicago when some strikers were shot and others hanged. In the US it resulted in a cleansing of higher education from socialistreformers and the ruin of the Knights of Labor.
In 1888, Clark wrote Capital and its Earnings. Frank A. Fetter later reflected on Bates' motivation for writing this work:[6]
The probable source from which immediate stimulation came to Clark was the contemporary single tax discussion. ... Events were just at that time crowding each other fast in the single tax propaganda. [ Henry George's ] Progress and Poverty... had a larger sale than any other book ever written by an American. ... No other economic subject at the time was comparable in importance in the public eye with the doctrine of Progress and Poverty. Capital and its Earnings "... wears the mien of pure theory .... But ... one can hardly fail to see on almost every page the reflections of the contemporary single-tax discussion. In the brief preface is expressed the hope that 'it may be found that these principles settle questions of agrarian socialism.' Repeatedly the discussion turns to 'the capital that vests itself in land,'...
The foundation of Clark's further work was competition: "If nothing suppresses competition, progress will continue forever".[7] Clark: "The science adapted %u2026 is economic Darwinism. %u2026 Though the process was savage, the outlook which it afforded was not wholly evil. The survival of crude strength was, in the long run, desirable".[8] This was the fundament to develop the theory which made him famous: Given competition and homogeneous factors of production labor andcapital, the repartition of the social product will be according to the productivity of the last physical input of units of labor and capital. This theorem is a cornerstone of neoclassical micro-economics. Clark stated it in 1891[9] and more elaborated 1899 in The Distribution of Wealth.[10] The same theorem was formulated later independently by John Atkinson Hobson (1891) and Philip Wicksteed (1894). The political message of this theorem is: "[W]hat a social class gets is, under natural law, what it contributes to the general output of industry."[11]
Clark's conclusion rests upon the productive contribution of the last unit of physical labour %u2013 one hour unqualified labour %u2013 and the last unit of physical capital. To him heterogeneous capital goods have a second, a social form as homogeneous capital[12] (called jelly as a street can be moulded into an engine) and the productivity of the last unit of jelly determines profit. This retakes Karl Marx's view that commodities have a heterogeneous natural form (Naturalform) and also opposed to it a homogenous value-form (Wertform),[13]jelly. Clark might have known this Marxian construction from his German time and was reproached for this similarity.[14]
Clark's capital are not produced means of production each with a different production structure. It is an abstract, always existing and never perishing one great tool in the hand of working humanity[15] similar to a field or a waterfall, also considered capital by Clark.
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