On Inequality, Environment, Malnutrition, and Labor Exploitation

QUESTION: “Wish to hear your ideas about the widening income gap, how to solve the environment issues and malnutrition among the poor, lack of sanitation… 
Besides, also wondering to hear what you think about labor exploitation (not the ones in sweatshops, but the one in large scale companies, with psychological aspects too)” — Deniz Durmus

The widening income gap isn’t so much a result of capitalism as it is a result of it’s evil twin brother, cronyism. In a freely operating market with cost and profit incentives at the helm of things, innovation and competition keep the costs down. However, the fact of the matter is that when companies grow unnaturally large, they do so by way of lobbying for favorable legislation resulting in a distortion of markets and consequently, competition. This allows CEO’s in banks and other industries (who more often than not benefit from regulation and often lobby in favor of it) to take in larger revenues, and the price of their relationships with industry leaders both from a production standpoint and a legislative one consequentially appreciates from the perspective of the shareholder. This artificial “appreciation” of both the company’s stock and the executive officer’s network manifests itself in the form of an increased salary or “bonus”.

Now what do we do about the poor getting poorer? Though metrics suggest that they are, insofar that fewer people are capable of affording what many consider “basic goods”, what the data often fails to address is the rate of inflation for many of these goods caused by poor fiscal policy (food among other commodities rising in price by 40% outpacing the 2% average expected inflation per year) which effectively robs people of the purchasing power of their dollars.

It goes without saying that higher degrees of affordability allows for larger numbers of people gaining access to food.

In many countries with severe problems in sanitation and environment, the biggest barrier to improvement is that a majority of these properties are not available for private ownership. It’s a textbook tragedy of the commons. Most areas that experience littering are publically owned. Private property owners have a much higher incentive for maintaining their property as they stand to lose more from littering (lowered property price, decreased return on investment, lower standard of living). Littering on private property is also effectively an infringement of private property and is thus prohibited by law. In terms of emissions, if a factory emits too much smog, he necessarily under this system, needs to avoid having it contaminate surrounding private property.

This can take the form of it purchasing large parcels of land around itself, or striking contracts with surrounding property owners in the form of negotiable settlements. If they cannot reach an agreement, then in order to mitigate cost and satisfy his profit incentive, the plant-owner is necessarily forced to reduce emissions or completely move.

To address labor exploitation from a psychological aspect, let us consider the axiom of human action. A human must satisfy three conjectures before he can act:

  1. His action must have direction towards an end, or in other words, his means must have an end. It goes without saying that man perpetually lives in a state of wanting to satisfy some need, whether this need is psychological, physiological or situational. This notion compliments Maslow’s hierarchy of needs.
  2. He must believe his action to be integral to achieving his goal, or in other words, he must believe that his means will help him reach his ends. This means that man will not act if he does not believe that the action will help him satisfy a movement away from the constant disequilibrium that is his existence.
  3. He is capable of effectively valuing his means against his ends, his ends against his means, his means against other means, and his ends against other ends. This means that at any given moment, man is capable of valuing the means he employs against the end he means to achieve with them. (E.g. at this very moment, I am typing because I value satisfying your curiosity about my thoughts on this subject more than I value doing anything else). As a consequence I am choosing to type this to you in this format as I judge it more satisfying to do it via Medium than I do doing it any other way like via pen and paper, or messenger pigeon (which would require me to resurrect an extinct species). My decision to type it to you, is also affected by how much I value answering your question or my end. In this case, the mean that allows me to achieve my end with the most satisfaction is answering your question through Medium at this degree of thoroughness. If your answering your question was more important, then my answer would probably be longer, and in the opposite case, much shorter.

Knowing this, let us now look at the exploitation of man in the workplace. The definition of exploitation is treating someone unfairly in order to benefit from their work. In the case of the workplace in larger, more developed companies, it means that the person is being compensated less than what the “true” value of their work is. This may take the form of lower wages per hour, or the employer leveraging his power to fire the employee against the employee’s need for a job.

From a psychological perspective, if the person stays then his action of making that choice is necessarily derived from the contextual application of these three conjectures. His action to choose is directed at satisfying the need for security (in Maslow’s hierarchy), which necessarily stems from having the lower levels of the pyramid, or the more “primary” needs being satisfied. To decide this, it means he appraises the end of satisfying these needs above satisfying his need for self-actualization, that he effectively evaluated other means to the end of satisfying the satisfaction of this security as less efficient at achieving his end, and lastly that he values satisfaction the end provides more than he dislikes the disincentive of the means required

Unfortunately this often happens in the workplace and is not something that can be solved by capitalism per se, however, this issue can be mitigated (or solved) using properties of property rights (HA).

The employee can draft a contract outlining his terms, and the employer can choose to take it, or leave it. In effect we have a more formal definition of the labor provided, which benefits the employer, and a more formal definition of the price of labor, which benefits the employee. When both agree to the contract, then we have a case of mutual exchange which is never exploitative so long as both sides agree to it without coercion. Regardless of perception, or changes in value, as long as the individual owns his labor and consequently has sovereignty over it, then he is not being exploited.

In cases where the employee has little bargaining power, he must make the decision to accept the job at a higher risk, or to not accept the job. Under the assumption that his private property is not directly under threat from the employer (as that is considered coercion and must consequentially be treated as such) making either decision satisfies our conjectures for human action so no exploitation takes place here.

Of course this contract solution, and this property based solution can only exist in a society that can efficiently arbitrate, and enforce private property law. This however, is an issue to be covered another time.

I hope this answers your question.