Classical Marxist Theory
Wealth cannot be created by buying low and selling high. Everyone buying low and selling high will not make our society progress. Assuming that everyone is an honest man and is trading by exchange of equal values, then only the use of labor can create more value than the value used to buy it. This is the most important discovery by Karl Marx. The use of labor creates surplus-value, and labor is a commodity in the capitalist society.
In a simplified model of capitalist society, there are two classes: capitalists and proletariats. Capitalists own the means of production, proletariats sell their labor to capitalists to work on resources to produce commodities and create wealth.
Because capitalists own the means of production, proletariats are in an inferior position in the negotiation of salary. As a result, capitalists get all the surplus-value. So capitalists can accumulate wealth while proletariats cannot. This is a form of exploitation: labor creates wealth, the surplus-value, and capitalists get the wealth.
Since proletariats are in an inferior position in the negotiation of salary, capitalists can suppress the salary to the minimum survival level to squeeze more surplus value. This causes absolute poverty for the proletariats. Or with the advancement of technology and increased production efficiency, a business operation can generate increase surplus value while keeping the living standard of proletariats unchanged. This causes relative poverty for the proletariats.
Classical marxism regarding the private ownership of the means of production is the root cause of exploitation, causing absolute poverty and relative poverty. Abolishing private ownership become the sole goal for many schools of Marxists.
Although China is a market economy and has private ownership, yet both absolute poverty and relative poverty do not happen. The salary level tripled in a decade. This is because China is a socialist country that people are in power. Government regulations prevented exploitation. Businessmen have profit, the surplus value, but a small portion of the surplus-value is shared with labor by increasing their salary so as to increase their living standard. The rich-poor gap is still large as the businessmen can improve their own living standards more than employees. A large portion of surplus-value is reinvested to extended reproduction, reproduction in advanced technology, and reproduction or more skilled and educated labor.
In perfect market competition, a business will lower the price of products to expand its market and raise the salary to attract talents, especially in the high-tech sector. Modern microeconomics concludes that perfect competition will lead to near-zero profit. So profit exists in the market that there are barriers to entering the market. The extreme barrier is a monopoly. Since China entered the WTO, whatever made in China become cheap because of the competition. Yet the US is doing all it can to maintain its technology hegemony so as to have its monopoly profit. That’s why the US is using all its power to crash Huawei as Huawei is a threat to its technology monopoly. On the other hand, China is crashing monopoly in the dot-com sector and fintech sector to maintain market competition, reducing the profit, the exploitation of surplus-value. China makes the ideal of Adam Smith’s invisible hand come true. China has a faithful market economy, while the US is destroying market competition by maintaining a market monopoly.
Interest, Profit, and Rent
In a financial statement of a business, interest to the debt and rent are itemized as cost. This gives an appearance that only the profit is the surplus-value. However, in Marxist theory, only labor worked on production materials creates exchange value. Banks profit by interest spread, give low interest to customer savings and get high interest for loans. Or banks operate in buy-low-sell-high. There is no labor working on production materials. Landlord profit by owning the resources. Their collect rent with no labor working on production materials. Therefore, interest and rent are portions of the surplus-value.
In a market economy, surplus value comprises three parts: profit, rent, and interest. European imperialist in the last five hundred years colonized almost the whole world, occupied territories that used to belong to indigenous people. Even after WWII that most nations are independent, many of their resources are still controlled by companies of developed countries, the former imperialist powers. The Middle East as perpetual wars, for the resources of petroleum. Imperialist wars pop up here or there after WWII for the control of resources, or for the power to cut a share of surplus value within the global economic system.
The world financial system is dominated by the US after WWII. It is the hegemony of the Dollar. The businesses of developed countries can finance cheaply because they are more “creditable” while businesses in developing countries will finance costly because they are more “risky”. The business in developing countries is riskier because the US keeps making wars and regime changes in those areas, making the business riskier. As a result, developing countries are funneling more surplus-value into Wall Street. That’s a way the developed north, the former imperialist powers, exploit the developing countries, the former victim of imperialism and colonialism.
In China, all lands and mines belong to the state or collectives. So the portion of surplus-value, the rent, belongs to people of the state or people of the collectives. Banks are run by the state, so the portion of surplus value, the interest, belongs to the people. When a disaster happened, the Chinese government will resecure and settle the people affected so that they can resume normal production and life all at the cost of the government. The Chinese government has the capability because it accumulated surplus value from the people and for the people. The grid, pipeline, highway, communication, and other infrastructure are state-owned in China. This is very economical as government should provide public goods so to prevent capitalists to run these natural monopoly sectors for their monopoly profit at the expense of the public welfare.
The socialist market economy with Chinese characters still has private ownership. Yet only a tiny portion of the surplus-value is collected by private ownership. The People’s Bank of China, the central bank that prints money, belongs to the state so most of the interest, the portion of surpluses value, belongs to people. The lands and mines belong to the state of collectives, so most of the rent, another portion of surplus-value, also belongs to people. The infrastructure belongs to the state so the monopoly profit, the largest portion of the profit, a portion of surplus-value, belongs to people too. The only profit that belongs to private owners is in competitive sectors of the market. When an industry evolves from competitive to monopoly, China will regulate it, as we have witnessed China crackdown some fintech and dot-com companies.
Marx used the dialectical philosophy of Hegel in his works, The Capital. It is a deductive inference that things behavior due to their intrinsic characters. The first chapter of The Capital is Commodity. That chapter is the foundation of the whole book of The Capital. Marx in his time knew money as a commodity assuming the universal equivalent form. In all history before Marx, money are silver or gold, the commodity that condensed labor work. Money has all the characters of a commodity, utility value, and exchange value, at that time.
In 1971, the dollar as the world trade hard currency ceases to convert into gold. Currency from then on is no anymore a commodity or a commodity-backed paper note. As a result, some conclusions by Marx in his works The Capital are not valid anymore as the conclusions are deducted from the characters of money a commodity at his time. Especially, the conclusion, that to eliminate exploitation has to abandon the private ownership of the means of production, may not be valid. As we see that China eliminates most of the exploitation without abandoning private ownership.
Exploitation in the Era of Monopoly Financial Capitalism
Because of the fiat money, exploitation of employers to employees in the individual firms is insignificant. Many small business owners work harder and longer time than workers in unionized trades. Exploitation in the production process is insignificant than the exploitation in the transaction processes in the world trade.
The significant exploitations are in the form of monopoly profit. It raises prices in the market so the living cost of consumers worldwide. The technology monopoly does not exploit at the employer-employee level. The main production force in tech firms is engineers who are well paid. If they are well paid so they can afford high-priced consumers goods, they are not exploited. Consumers in developing countries that have no advanced technology are working on labor extensive industry with low pay are exploited. In other words, developed countries exploit developing countries with their monopoly position in technology. That’s why the US and its allies are using all they can to destroy Huawei because Huawei is breaking through the monopoly of the developed countries.
Another monopoly is the dollar monopoly in international trade and capital flow. Every country that conducts international business has to convert its currency into the dollar. So Wall Street charges a foreign exchange fee. If you want to change the Indian rupee into the Japanese yuan, you use the rupee to buy a dollar and then the dollar to buy yuan. And there is a buy and sell spread and service fee. All this profit is not generated on labor working on production materials. It is the US using its dollar monopoly to siphon surplus-value worldwide. When one takes a loan for international business, the loan has to be denominated as the dollar and the US earns interest through these loans. When the EU launched the EURO to eliminate transactions in dollars among European countries, the US launched Kosovo War that drove the eurodollar into the NASDAQ market. When the dot-com bubble burst, all eurodollar in the NASDAQ market vanished, and the US assumed the throne of the dot-com economy. When EURO was launched, Eurozone was a larger economy than the US. Now Eurozone is a smaller economy than the US. The US had similar economic assassination in developing countries such as the Asian financial crisis in 1998 and many debts crises in Latin-America countries. When Saddam Hussein wanted to trade Iraqi oil with Euro, the US destroy Iraq with the Iraq War. When Gaddafi wanted to launch Africa's central bank and Africa currency, Libya was bombed by the No-fly-zone. Geopolitics is dollar politics.
So the exploitation today is insignificant in the production domain between employers and employees. Most exploitation is systematic. Just like controlling the Suez Canal and the Banana Canal can levy fees from the world trade, the US monopoly the trade clearance so to collect surplus values worldwide. This is the era of monopoly financial imperialism.
The finance industry used to serve the real economy and the real economy is labor working on production materials. Today finance industry controls the real economy. The real economy is outsourced to developing counties, and developed countries profit from fintech. For example, less than 20 cents of one dollar of made-in-China really become revenue for Chinese manufacture. More than 80 cents is loyalty for Japanese patens, loyalty for European brands, fees for American engineering, cost of American retail and logistic. The 20 cents are real labor working on materials, with probably 1 cent of surplus-value. While the 80 cents are not labor working on materials, with probably 60 cents of surplus-value. That’s why for a decade from Obama to Trump, the US tried to take back the manufacture from China but have been not successful. Half of the health care cost in the US will go to insurance companies, the financial service sector, and another half cover the cost of medicines and hospitals. If we buy a car for $20,000, in ten years, we will pay $20,000 for insurance. Our living cost is high because about half of our cost is to pay for financial services such as mortgage and credit cards interest.
The developed countries have a better economy than the developing countries not because their economy generates more wealth, but because of their monopoly in finance and resources that they can live on interest and rent. China is the largest source of surplus-value and the US is the largest sink of surplus value in the world economic system.
Manufacture in the US is 10.8% of GDP, while wholesale 5.8% + retail 5.7% +transportation and warehousing 2.8% = 14.3%, meaning that the US economy is busier in distributing wealth than creating wealth. The US is the number one economy by GDP but is not the number one wealth created. The finance, insurance real estate, rental, and leasing is 22.3% of GDP, almost double that of manufacture. In 2021, the US household debt is $15 trillion and government debt is $28.8 trillion, thanks to the easy money of the US financial hegemony. This means that the US economy consumes more wealth than it creates. The US is abusing its hegemony power of the dollar.
Uneconomical of the Financial Hegemony Imperialism
The US hegemony is uneconomical in that it destroys wealth rather than creates wealth in order to collect the surplus value worldwide. The first is the military-industrial complex. This vested interest group profits from wars. The more it profits the less the world is in peace. So its interest is in direct conflict with the well-being of humans as a whole. The second is the financial hegemony. It gets its monopoly profit by squeezing the real economy, raising the cost of production and cost of living. It parasites in the world economy like cancer, suffocating the real economy. The third is the healthcare industry. It increases its market by creating more sickness. When people feel they are ill, they usually are diagnosed as a reason unknown and prescribed pain killers. So the small illness will develop into crisis or drug dependence. The more the illness, the worse the illness, the more profit it the system. A profit-driven health care system destroys public health. Obama knew the healthcare system is one of the problems of the US economy and wanted to reform it. Yet he is serving the interest groups more than serving the public. Obamacare had to satisfy every interest group and ended up more costly for the healthcare of people and less healthy of the people. All these are linked to financial monopoly. The dollar hegemony funds the Pentagon and the military-industrial complex wages wars to support the dollar hegemony. Insurance, the financial service, shares the interest of the healthcare industry. For capital, men are just resources for profit. If it can make more profit, let people die of wars and sick of illness.
What’re the Present Tasks of Socialists and Communists in the World
When the exploitation is systematic on a global scale, many socialists and communists are still focusing on the employer-employee level affairs. Some unions have become vest interest groups in the economic system so that they support the imperialist wars to exploit the developing countries. The US has H-2 visas for temporary workers in agriculture and construction, exploiting the people of the third world, and is a modern slavery system. Temporary workers are not covered by the welfare system and are not protected by unions. Especially those unions of public sectors, they are bargaining not against exploiters but the exploited. The result of their bargaining increased the overall cost of educations and healthcare in the form of more tax to the people and less public service to the people. The most exploited workers are temporary, on-call, short-term contract workers and they are not protected by unions. They are the marginalized population who easily fall into homeless.
The foremost task today for communists is against the US hegemony. It is not only the largest exploitation machine in the world, but also the system hinders the progress of human society as it wage wars destroy wealth, and blocks technology advancement by interrupting the technology supply chains. People of the world, including people of the US, should unite together against the military-industrial complex, the interest group that destroys wealth and hinders economic development. People of the world, including the capitalists in the real economy, should unite together against the dollar hegemony. The dollar hegemony is siphoning and squeezing surplus value from the world economy that suffocates the world economic development. People of the world, including all economists, should unite together against a variety of monopolies that squeezes surplus-value for its monopoly profit at the expense of the economic development and living standard of the world. It is, like the military-industrial complex and the financial hegemony, one of the systematic exploitations.
In the financial hegemony era, exploitation is systematic and the unions and labor movement should have a new paradigm against exploitation.