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Taking all of this into account, what moral evaluation can we make of present-day American free enterprise? Is it inherently immoral? If not, does it contain any immoral aspects that can and should be remedied? We have already noted that many Marxists claim that capital­ism is immoral, and we shall look at their charges first. A number of non-Marxists have also condemned capitalism and all instantiations, including the American, as being immoral, and we shall investigate their claims next. We shall then look at the positive defense of the American free-enterprise system. Finally, we shall consider, from several points of view, the moral alterna­tives to American capitalism as proposed by critics.

THE MARXIST CRITIQUE

With the demise of communism in Eastern Europe and the former Soviet Union, many of the champions of capitalism have claimed that history has proven the superiority of capitalism over socialism and communism. The claim is an overstatement, since history has only shown that the totalitarian version of socialism that developed in the Soviet Union and that was forced on the Soviet Union's Eastern neighbors was not viable beyond a certain point. It may have been a useful way for an industrially backward country to develop quickly, but centralized planning failed to promote the initiative and innovation necessary for the next stage of development. However, even this does not show that the socialist ideal of equality for all, of absence of great discrepancies among people of a society, and that care for the benefit of all are not ideals to be sought and are preferable to their opposite.

Karl Marx analyzed nineteenth-century capitalism primarily as he found it in the England of his time.6 Though Marx frequently uses the language of morality in describing the ills of capitalism, commentators disagree about whether he actually condemned capitalism from a moral point of view. Capitalism, for Marx, was a necessary stage of economic and social devel­opment, but a stage that was to be superseded by the higher stage of communism. Yet many of Marx's followers have put his condemnation of capitalism into moral form and have thus claimed that capitalism, in all its variations, is inherently immoral.

We shall examine three of the major claims of these Marxists: (1) Capitalism is inherently immoral because it cannot exist without robbing the worker of his due; (2) capitalism is inherently immoral because it necessarily involves the alienation of human beings; and (3) capitalism is inher­ently immoral at the present time because it protects the vested interest of the few and prevents the many from achieving a better, more just, and more equitable society.

Exploitation of the Workforce

The first charge states that capitalism is based on exploitation of the worker-that is, not paying him what he truly deserves. Slavery, we have already seen, is inherently immoral. According to the Marxist critics, capitalism involves wage slavery. Capitalism cannot exist without exploiting the worker. Hence, there is no way of remedying this evil while preserving the system. Because capitalism is inherently immoral, it should be replaced by socialism, and eventually by full communism.

6 The classical attack on capitalism comes from Karl Marx, Capital, 3 vols. (Moscow: Foreign Languages Publishing House, 1959). For more recent attacks, see Richard C. Edwards, Michael Reich, and Thomas E. Weisskopf (eds.). The Capitalist System: A Radical Analysis of American Society, 2nd ed. (Englewood Cliffs, N.J.: Prentice Hall, 1978).

142 Moral Issues in Business

The basis for the claim of necessary exploitation is Marx's labor theory of value. We noted the heart of the claim in the analysis of Microsoft with which this chapter began. Assume that on the whole products, goods, or commodities are exchanged for products, goods, or commodities of equal value. There may be special situations in which this is not the case (for instance, in a monopoly situation). Overall, however, there is no reason why in a free transaction one would exchange a commodity of greater value for one of lesser value. According to Marx, what all commodities have in common is that they are the result of human labor, and it is in terms of the average human labor time necessary to produce them that we are able to equate the value of one commodity with another. Now introduce money as the medium of exchange. Goods are still sold at their real value. Where then does profit come from? The traditional answer-that one adds a certain percentage of profit to one's cost to get the final price-won't do because, as Marx argues, what one gains in this way as a seller, one loses as a buyer. In general, then, goods sell for their real value, which is equal to the total labor time that goes into producing them (including, of course, the labor necessary to make the machines that produce the commodity, mine the ore necessary for the machines, etc.).

If all items were sold at their real value, there would be no profit. Hence, something must be sold at less than its real value. According to Marx, the only commodity that is sold at less than its real value is human labor power. Because workers are forced to sell their labor power in order to live, they sell it at the best price they can get. But employers will not hire workers to whom they have to pay the equivalent of the value they produce. Why should they? They employ work­ers only if they can hire them at less than the value they produce. The difference between the value the workers produce and the amount they are paid is profit or, in Marxist terminology, surplus value. Because workers are forced to sell their labor power in order to live, the system involves a type of slavery, namely, wage slavery. The workers have the choice of being exploited by employer A or employer B. The system makes all employers exploiters and exploits all employees. If you want to get rich, start a firm that will grow large. Only when it is large and employs many people will it be possible to earn large sums of money. If the cost of labor gets too high, move your production to a place where the cost of labor is less. The less you pay workers, the greater the profit when you sell the product. Marx's formula seems to fit the pattern of most companies.

Because an employer makes his profit by paying his workers less than the value they produce, he will tend to increase his profit by paying them as little as possible. If he pays them by the day, he will wish them to work 12 rather than 10 hours, and 10 rather than 8 hours. If he pays them by the hour, he will wish them to produce during that hour four rather than three objects, or, even better, five rather than four. As long as there is not enough work for everyone who wants it, there will be a buyer's market for labor, and workers will have to work for lower wages than they would otherwise. It is in the interest of the owners of the means of production to have a surplus workforce, or for there to be a pool of unemployed. A high unemployment rate, rather than a low one or no unemployment at all, is to their advantage. The workers, on the other hand, will seek to work shorter hours, or to work less hard during the hours they do work. They will also seek more pay rather than less, so that they can improve their standard of living. The war between manage­ment and labor stems from the fact that management wishes to pay as little as possible for labor in order to increase its profits, and labor wishes to receive as much as possible of what it deserves.

In the nineteenth century, Marx perceived certain trends in capitalism. He described the tendency of the owners to pay workers less and less, forcing women and even children to enter the labor force in order to help support their families. He described a growing army of the unem­ployed and foresaw more and more blatant exploitation, until the workers would finally be forced

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to seize the means of production, take over the factories, put an end to exploitation and capitalism, and form a new social order--communism (the first stage of which he termed "socialism").

The scenario according to the Marxist script has not taken place. The workers united and formed unions, in part, ironically, because of the efforts of Marx. As a result, the workers were able to gain more pay, shorter hours, and better working conditions. The impetus for them to revolt and seize the factories diminished. Their interests became identified with the continuation of the system rather than with its overthrow. Later Marxists asked how this was possible and whether it meant that capitalism was no longer immoral.

Lenin gave an answer to both questions. According to him, the workers in the West were appeased by the increases they received in higher earnings and the goods they were able to buy with those earnings. Their standard of living rose, so that the Western European and American worker lived better than any other large population in human history. But, said Lenin, this does not mean that the worker is no longer exploited. He is still exploited, even if he does not realize it. Profit still comes from paying the worker less than the value he produces. But productive capacities have increased to such an extent that the worker can enjoy the fruits of productivity even while being exploited. Furthermore, the workers are no longer as grossly exploited as they were in the nineteenth century. This is not a result of the generosity of management; it is a result of capitalism's advance to the stage of imperialism. American corporations can pay their work­ers well because the corporations are able to exploit people in other countries, primarily in the underdeveloped countries of the world.

The upshot, for Marxists, is that capitalism still involves exploitation and therefore is still inherently immoral. The American workers are still exploited, even though they have achieved a high standard of living. They could be better off than they are. Part of the reason they enjoy the standard of living they do, moreover, is the fact that American companies are exploiting other peoples of the world. Capitalism, the Marxists claim, necessarily involves exploitation.

What are we to say of the claim? The claim depends on the validity of Marx's labor theory of value. This economic theory attempts to explain not only profit but also prices, wages, economic cycles, and the variety of economic phenomena with which economics deals. Most Western economists have not accepted Marx's version of the labor theory of value. It does not give due weight to knowledge, creativity, and initiative in the productive process, or to the place of invention and efficiency in expanding the economic pie that is to be divided. It fails to take into account the role of risk and the entrepreneur. It is inadequate as an analysis of contemporary American capitalism because that system is vastly different from the system Marx described. Through pension plans and insurance policies, American workers are in fact, to a considerable extent, the owners of the means of production. The workers are not all systematically oppressed. There may be some exploitation, but exploitation consists of paying the worker less than the productivity of a worker at the margin or of taking advantage of groups such as migrant farm workers or illegal immigrants. It is not built into the system.

The claim that the worker deserves all the value he produces is neither obvious nor in accord with Marx's own ideal of just distribution, which requires that each give according to his ability and receive according to his need. Whatever notion of justice we use, moreover, the Marxist analysis of exploitation cannot be applied because, except in a very few cases, we cannot determine the exact value of what each worker produces.

Nor does the claim that American capitalism survives because it exploits the underdeve­loped countries carry much weight. There was a time during which many European countries had colonies; however, this time has passed. Moreover, the less developed countries did not sell the United States goods or raw materials at lower prices than those at which they sold the same

144 Moral Issues in Business

items to socialist countries. American firms also look to the less developed countries to supply large markets as well as resources, and this means that those in the less developed countries must have the disposable income to buy U.S. goods. Workers must therefore receive more than subsis­tence wages. American companies pay workers of a country with a lower standard of living than ours less than American companies pay American workers. Is this exploitation? The question is a complex one, involving comparisons of buying power, skill, and comparative wage structures. We shall examine it in a later chapter. We should note in passing, however, that American multi­national corporations are sometimes criticized for paying workers more than the going rate in less developed countries. But the major point is that there are alternatives for less developed countries. They can refuse American industry, and they can deal with other countries if they think it is not to their advantage to deal with the United States.

The conclusion we can draw from this brief analysis is that there are plausible replies to the Marxist charge of exploitation. The replies have not satisfied the Marxists, nor have attempts at updating Marx's theory satisfied most Western economists. The attack is at least inconclusive, if not definitively refuted.

Alienation of the People

The second Marxist claim is that capitalism is inherently immoral because it alienates human beings. It does not treat them as ends in themselves; it separates them into antagonistic camps and sets one against another; it stultifies the workers; it involves domination of some by others; and it produces other negative effects on all those who live within the system.

"Alienation" is a negative term. It describes the state of a person who is wrongfully sepa­rated from something to which he should be united, or who is dominated by something of his own making. The state or condition of alienation may be a conscious one, as when a person feels alienated; but someone may be alienated in Marx's sense without feeling so.

There are various kinds of alienation. People may feel alienated from their government. Government is something created by people to serve their needs. When they have no control over it, and when government dominates them instead of responding to them and serving them, they are alienated from it. Religious alienation might be described by a believer as being separation from God through sin; by an unbeliever, as mankind being dominated by the idea of God, a crea­ture of man's own imaginative making. Marx claims, however, that basic to a11 the other kinds of alienation is economic alienation. He describes it as the alienation of workers from the product of their labor, from the productive process, and from other people.

Under the capitalistic system, Marx observes, objects come to dominate people. People are judged by what they have, not by what they are. People work and live for possessions. The possessions come to dominate them, rather than being objects that they use to satisfy their needs.

Under capitalism, Marx claims, work is typically stultifying, noncreative, and routine. Instead of expressing oneself through one's work and developing all the sides of one's personality, work limits, cramps, and dulls the worker. People live when they are not working, and when they are working, they can hardly be said to be living. They look forward to their leisure time, weekends, vacations, and coffee breaks-times when they can be themselves. They are separated from their labor, which they have sold to their employer. They are alienated from their labor, which they must sell in order to live.

Finally, the capitalist system, built on competition, separates people from each other. Instead of all humankind living together in harmony and peace, capitalism pits workers against employers. It pits competitors against each other, just as it forces workers to compete against

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American Capitalism: Moral or Immoral? 145

each other for jobs. Capitalism is built on the division of society into classes, the owners of the means of production on one side and the workers on the other. The society is divided, and the state, laws, courts, police, schools, churches, and media are all controlled by the ruling class. The ruling class uses all these social institutions to dominate the workers, keep them subservient, and ensure the continuation of the institution of private property. The workers are thus alienated in many aspects of their lives. The owners of the means of production also live in an alienated society; they are also evaluated in terms of what they have, and they are also separated from other people and dominated by what they have. But, of course, they live much better than the workers.

Marx maintained that capitalism necessarily produces alienation because it is a function of private property and of the division of labor. Alienation cannot be eliminated without eliminating private property, and that cannot be eliminated without at the same time eliminating capitalism. Therefore, capitalism is inherently immoral.

Defenders of capitalism have given various replies. One claim is that the picture Marx drew is a caricature of capitalist society. In America, they say, workers are freer than in any other society in the world. They have a strong voice in government, which frequently protects their rights and defends them against employers. Though there is still dull work to be done, automation has taken over much of it and bas freed people to do more creative work. The dull work that is a function of manufacturing, moreover, is not peculiar to capitalism; it is present wherever there is industrialization. A second response points out that Marx's description of capitalist society as a society of class conflict may have been true of nineteenth-century England. The history of the United States, however, has been one of great class mobility. In fact, it is sometimes difficult for people to know to which class they belong. Classes are not obvious, and the division of people into proletariat and bourgeoisie is not clearly applicable to the people of the United States. Marx's description also ignores the spirit of cooperation that is present in many aspects of American life. The emphasis on goods undoubtedly characterizes many Americans. Yet even this emphasis has been somewhat tempered in recent times by concern for quality of life.

A third approach to the Marxist charge of alienation bas been to see whether alienation has actually been eliminated in those countries that have done away with private property. The Soviet Union was the prime example of such a society. But clearly, the defenders of capitalism argue, during the reign of Stalin the Soviet people were more oppressed and alienated from their government than Americans have ever been. The claim that private property is the cause of alien­ation is therefore disproven.

There are other answers in defense of American capitalism; the ones we have given exemplify the line they take. The rebuttals have not convinced the Marxists; nevertheless they have a certain validity. Marx's description of the alienation of the worker in the nineteenth century is not an accu­rate picture of the worker in present -day America. There are, however, aspects of the Marxist attack that are valid. Some people in the United States complain that government is out of control and that they have no real say in how they are governed; others complain about the emphasis of Americans on material goods; and some speak in terms of alienation. Still, no one has produced an analysis that satisfactorily shows that these ills are inherent in contemporary American capitalism. Once again, then, the claimed inherent immorality of capitalism remains an open question.

Vested Interests

The third Marxist charge is that capitalism defends the vested interests of the few and prevents the vast productive forces of society from truly serving the masses. The natural tendency of the productive process is toward social ownership instead of private ownership of the means of

146 Moral Issues in Business

production. Those in the capitalist class, however, defend their own position and interests by preventing the transformation from private ownership to social ownership. In so doing, they delay the inevitable and prevent the people from enjoying that satisfaction of their needs which, given the great resources and productive capacity of our country, is possible. According to this critique, capitalism may not always have been inherently immoral. But it is immoral now, because it prevents the development of a morally better stage of social development. This analy­sis can be given a utilitarian interpretation. Protecting the vested interests of the rich at the expense of the workers produces less good on the whole than would the adoption of socialism or communism.

The reply of the defender of capitalism is to deny that the American system protects the rich at the expense of the worker. It protects and benefits all in the society, even if some benefit more than others. The defender of the system then usually refers to socialism as it exists or has existed in the world, whether it is democratic socialism, such as existed in England, or commu- · nistic socialism, such as in the Soviet Union. Both are examples of highly productive societies. Yet neither society seems superior to American society, either morally or materially. Therefore, the reply continues, the claim that the American system prevents the development of a better society is a claim without adequate foundation. Moreover, the workers of the United States (the ones whom the Marxist critics say would benefit most by a change to socialism) show no signs of either desiring or supporting a Marxist revolution.

The third criticism of inherent immorality has therefore not been convincingly demonstrated. Capitalism may be inherently immoral, but the Marxists' attacks fail to prove this.

NON-MARXIST MORAL CRITIQUES OF AMERICAN CAPITALISM

Though Marxists have tended to be the most vocal, systematic, and thorough critics of capitalism, they are not its only critics. The non-Marxist critics do not always speak with one voice, nor is it always clear whether the ills to which they point are inherent evils of capital­ism or remediable by-products. We will now consider three criticisms that are symptomatic of others: (1) Capitalism creates waste and false needs, (2) capitalism feeds the military­industrial complex at the expense of the general population, and (3) capitalism creates gross and unjust inequalities.

False Needs and Overproduction

The charge that American capitalism is wasteful takes a variety of forms. It is of course true that Americans have grown up with comparative abundance. They have large expanses of land, a wealth of natural resources, and a high standard of living. As a result of their competitive system, they have worried little about conservation of their natural resources, or about the resources that they could buy from the rest of the world. The waste is evident in many areas. Their use of energy and of gasoline is particularly profligate. They have extended their cities into suburb after suburb without providing adequate public transportation and then relied on large fuel-inefficient automobiles that rarely are fully occupied. They have tended to build obsolescence into most of their products. They have preferred disposable products to those with replaceable parts. The list is endless.

In many instances, the claim goes, Americans could have done much better. Their waste is a national disgrace.

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