Several of the core premises of Marxist and neo-Marxist progressive economics are mostly wrong. The big problem in capitalist economies is not exploitation of the worker, it is a failure of firms and individuals to take responsibility for anyone but themselves and those that they have contractual relationships with.
The Problem Is Indifference And Not Exploitation
The rich and the big businesses they own, predominantly, don't get rich by exploiting the poor. Instead, the profit for other businesses, from the middle class and from the affluent. They don't share the wealth equitably with their employees but they also often compensate and/or treat their employees and contractors better than the average employee or contractor. Their sin is not exploiting the poor but ignoring them. They don't employ them because the poor don't have the skills, the education and the social skills that they need. They don't seek them out as consumers of their goods, which the poor can't afford. They take no responsibility for the plight of the poor, which they leave to others, and try to avoid having to pay for the needs of the poor. They would prefer a world without poor people, in which a larger share of the population included potential employees and customers. But, they also bear no particular ill will to the poor except the individuals who steal from them or personally disrupt their businesses. So long as the poor leave them alone, they don't care one way or the other about them.
To be clear, there are indeed people who do attain wealth by exploiting the poor. There are bail bondsmen. There are owners of payday loan companies, pawn shops, and rent-to-own firms. There are slumlords who don't deal fairly with their tenants. They run ghetto grocery stores. But these people are often middle class themselves, and at most millionaires, and they aren't politically or economically particularly powerful.
Between the predominant share of the rich and the big business owners, and those who exploit the poor, are those who exploit the more gullible members of the working class. There are people who run for profit colleges that collect lots of tuition subsidized by government grants while turning out few well trained graduates. These are the people who charge to provide services that are available from the government for free. These are the people who own Walgreens and its rural counterpart, Dollar General, that mark up goods by 30% when legitimate grocery stories manage with 3% margins, selling convenience and laziness in comparative shopping. These are the people who run multi-level marketing schemes and try to get people to sell door to door. These are the people who run "pot lots" selling bottom of the barrel used cars with hidden defects. These are fast food franchise owners who hire unskilled marginal workers and pay them a minimum wage that forces them onto welfare rolls despite having jobs. These are the people who sell goods on TV through informercials. Some of these people end up making tens or millions of dollars or in rare cases even more.
This is true even on international scales. Multinational big businesses do shift manufacturing and other jobs that can be diverted to places with lower wages than they have to pay at home abroad. But, they also tend to pay better, to treat workers better, and to show more corporate responsibility and environmental consciousness than the domestic businesses in the places they put their factories and call centers and warehouses. They become major sources of employment and economic development in places that would otherwise have stagnant economies. The create a local working class and middle class where there was once only poverty. When they do behave badly, they are easier to hold accountable with shame and subtle regulations imposed on imported goods. These businesses are sending jobs abroad and undermining the economic well being of the people at home that they ignore instead of turning into employees and consumers. And, those decisions can be catastrophic for the large segments of the domestic economy and work force. But, again, big businesses contribute to economic malaise by leaving people out of their world, not by exploiting the people who are part of their world relative to the context those people find themselves in.
Clothing retailers aren't exploiting poor American textile workers, they are creating a domestic economy without any textile workers while creating an entire textile industry full of manufacturing employees and the managers who supervise them in lower wage markets in China and Southeast Asia. If anything, they help the poor and working class Americans whom they do business with at all as consumers, by making clothing available at unthinkably low prices that even economically struggling Americans can afford.
Big Businesses And The Rich, Generally, Are Not Agitators For War
The vast majority of businesses, large and small, and the vast majority of affluent people profit from peace and trade and are hurt when war breaks out. They are cosmopolitan, globalist and tolerant. They aren't malevolent and don't wish anyone who leaves them alone ill will, but they aren't bleeding hearts either and are content to leave what they perceive as other people's problems alone.
An increasingly isolated handful of businesses are defense contractors who are part of Eisenhower's military-industrial complex. But, even they, for the most part, aren't too concerned about whether or not their wares are actually used. They make money when affluent nations are afraid and feel the need to spend money to defend themselves without regard to whether or not this is actually necessary.
They churn out warships in a world where you can count on your fingers the number of naval battles that have taken place since World War II. They turn out air to air dog fighting aircraft in a world where there are only one or two ace pilots in the world because they are so few instances of air to air combat. They sell amphibious assault vehicles in a world where there hasn't been a significant amphibious assault in sixty years. They produce thousands of massive nuclear missiles that can level a metropolitan area in a single blow despite the fact that it has never made military sense to do so. There are little ones that mass produce bayonets that haven't been used in combat with any regularity in the last hundred years, or as one of my former clients did, or continue raise war horses for the military in the post-Vietnam era that have been obsolete since the charge of the light brigade.
This isn't to say that big business does not influence foreign policy. But, mostly, that takes the form of currying favor from oil rich despots whose resources are needed to fuel the modern economy. They would far prefer a world where Africa was full of prosperous villages and cities, instead of genocidal wars and sprawling slums. But, they have no idea how to make that happen and default to their standard strategy of ignoring the poor instead.
The Real Problem Is Structural Unemployment And Underemployment
Understanding the nature of the problem is critical if we are to find solutions that work.
You can train machinists and tool and die makers all day, but it won't do much good in an economy where a huge share of the manufacturing takes place abroad.
Most of the time capitalism is problematic not because it is exploitive or doesn't work, but because it carries out its tunnel vision objectives too well. Sometimes, big businesses do discriminate and hire and promote workers for unfair reasons. But, the big problem for us as a nation and economic community collectively, is that when capitalism grows too pure, people receive income and wealth solely based upon their own economic productivity.
But, as technology advances, an increasingly small group of people become profoundly productive, while an increasing share of people have skills and abilities that our economy needs less of than we have available.
Robots have replaced assembly line workers. Heavy machinery operators have replaced ditch diggers and grave diggers using shovels. E-filing ad email has put people who printed and copied and mailed and delivered physical paper communications out of work, leaving only the content generators and a few editors. Giant freighters and tankers with skeleton crews have replaced small cargo ships with far more sailors. Self-service gas pumps have replaced gas station attendants. We are on the brink of a self-driving car revolution that will put hundreds of thousands, if not millions, of truck, bus and taxi drivers out of work. Robots answer phones that used to be staffed with receptionists and consumer service agents and operators. Webpages have taken the jobs of many brick and mortar store salespeople. Jobs that can be automated are eliminated, and technologies that make it possible to do the same amount of work more efficiently are reducing employment in those industries. Cheap foreign factories producing often high quality goods, have made new goods so cheap that last so long that it doesn't make economic sense to fix things that are broken, putting repair technicians out of work. Why hire a tailor to fix your dress or sew it yourself, when you can buy a new one for $7 in the time it would take for you to drop it off at the tailor's and pick it up again for about the same price?
The problem isn't mostly individual firms profiting from poverty. It is mostly that these firms, each acting autonomously in their own narrow self-interest, have created an economy that no longer needs unskilled and less skilled labor.
This problem isn't going away. Here and there a state like Oregon, ironically a state with a healthy high tech industry of its own, can preserve some jobs with luddite mandates like the requirement that all gas tanks be filled by gas station employees instead of customers. But, in the long run, technology is going to relentlessly, day after day, find ways to make the people who are still employed more efficient while reducing the size of the work force that the economy once used to produce the same goods.
Fortunately, jobs aren't a fixed resource. The fact that we now employ 2% of the work force (and a smaller percentage each new year) in farming, instead of the 70% of the work force we employed in agriculture in 1819, does not mean that 68% of the population is now unemployed. Greater productivity in farming made it possible to build more homes, produce more things in factories, provide more health care services, and sell more things made in factories.
Unemployment is fundamentally a failure of entrepreneurship, not a shortage of some fixed resource called jobs.
But, as increasing shares of the economy are provided by highly productive, highly skilled individuals assisted by technologies that make them highly productive, in every sector, we are collectively at a loss to know what to do with people who aren't highly educated, aren't highly skilled, aren't exceptionally intelligent, and aren't socially graceful people who play well with others. Our economy hasn't come up with anything useful for people like this to do. Maybe it never will. Certainly, in the short and medium term, we are going to have lots of "structural unemployment", and in the long run, everyone's dead.
This doesn't mean that we are powerless as a society to do anything. The fact that the market economy doesn't have a way to employ someone for money doesn't mean that they have no value or dignity and should be deprived of economic resources.
We haven't employed young children in the market economy for a century. We now have many skilled professionals who are not entering the market economy until their early, or even late, 20s. We are not worse for it. Collectively, our society has the resources it needs to allow lots of parents to opt out of the market economy for a while to raise their own children in a more hands on way, and even to home school them if they wish. Collectively, our society has the resources to let more people retire early in modest comfort, and to provide for people who are unable to be productive because they are disabled. Collectively, we can afford to let some people take time away from the market economy to care for sick and elderly family members. Collectively, we can and do afford to employ lots of people to hold far more people in prisons and jails to keep them away from everyone else because the inmates have mostly been disruptive and anti-social by the standards of the culture that operates that criminal justice system. Collectively, our society has the resources to allow people to produce goods and services as volunteers instead of driven by the marketplace.
While our market economy has little place for many of these people, the non-market part of our society has many ways to utilize there abilities and talents while respecting their dignity (most of the time, although some of the wasted human capital, like mass incarceration, is simply dead weight loss).
This is all well and good as long as we can find a way to cause the remaining workers who are now incredibly productive to share their earnings and wealth with the people whom our economy has no use for in paid employment.
Three Kinds Of Solutions
There are basically three ways that this can be done and in a just economy, we need to do all of them.
Loans, Savings And Insurance
The most capitalist and individualistic of the three is to have people either borrow funds before they work that are repaid while they work, or save while they work for retirement after they work, or pay insurance premiums while they work to cover the possibility that they might not be able to work in the future if certain things happen.
Taxes and Transfer Payments
The most statist of the three is to collect taxes from people who have income and wealth, but no so severely as to cause them to cease engaging in their highly productive work, and to transfer that wealth to people who aren't engaging in or can't engage in highly productive work, or can't work at all.
In kind transfer payments can be subtle. For example, funding for public schools and higher education is basically a form of transfer payment. But, because it isn't means based and is provided in kind rather than with a check, it doesn't feel like a welfare program.
Programs like Social Security are fundamentally tax financed transfer payments, but they are packaged in a way that closely resembles retirement savings and private insurance and the actuarial considerations that go into designing each are quite similar. They have a means based element, but its is muddied with a return on investment element that is based on past contributions rather than on current earnings.
Single payer health care systems like Medicare are also fundamentally tax financed transfer payments. But, again, since they are not means based and involve benefits provided in kind, they don't feel like a welfare program. Also, note that a single payer system like Medicare doesn't mean that the entities receiving the payments have to be governments or government employees. Medical professionals and hospitals are still independent private entities that just happen to get reimbursements from a government agency instead of a private health insurance bureaucracy.
The intermediate possibility is a civil society solution. We can find a reliable way to make people who are engaged in highly productive work responsible economically for people who are not engaging in highly productive work in the market economy.
The classic example is the family. Some members of a family are working age adults who participate in the market economy, while supporting children who haven't yet entered the work force, stay at home caretakers for children, the disabled and the elderly, disabled members of the family, and retirees in the family. And, in the short lived "traditional" modern economy where all able bodied adult men of working age got jobs, married, had children, supported their wives and children and elderly parents and disabled family members, and the elderly parents and disabled family members usually didn't live terribly long because medical care was mediocre, this worked out fine.
But, it doesn't work out fine when a large share of the able bodied adults in a community or social caste can't find work that the market economy will pay them to do without heavy subsidies or artificial regulations.
When the capitalist and individualist approach fails to support someone economically, either the government, or some private individual or firm needs to step up.
In Japan, one of the ways that this was done was with a lifetime employment system that employed a substantial share of the adult population in medium sized to big businesses. Companies that became more efficient couldn't dump employees who had been made obsolete into the society without economic support. If one of these firms found a way to do something with fewer employees it only made economic sense to do so if they could find some other way to gainfully employ the displaced employees. Basically, Japan treated structural unemployment caused by increased efficiency as an externality and required firms to internalize that externality. This no doubt slowed economic growth for these firms (which was tolerable at a time when technology borrowed from abroad assured healthy economic growth even if that growth was not optimized). But, it also greatly mitigated the social upheaval associated with rapid industrialization. And, given the fact that unemployment is a failure of entrepreneurship, placing the responsibility for finding new employment for displaced workers on entrepreneurial business owners, rather than unemployment office government bureaucrats, does seem wise.
Another way this could be done is to create a literal right to a job that is a responsibility of each local community. In India, a government program hires anyone who shows up on a day labor basis to carry out low skilled public works jobs. Unlike private enterprises, who need to make a profit, a program like this has mixed motives. Yes, it wants to get public works like sewer lines and roads built. But, it also wants to provide economic support for people who would otherwise have been unemployed, and to use economic incentives to put employers who are trying to pay less than the minimum wage and/or are offering conditions inferior to the public works program out of business without having to hire a lot of regulatory enforcement agents to punish employers who do. If this approach means that it costs $30 million to complete a project that could have been done with more efficient and skilled private sector workers for $20 million, then the government is implicitly spending $20 million to build the project, and $10 million on an economic support program that preserves the employability and dignity of the recipients while simultaneously keeping them on the job and hence not idle and prone to make trouble, thereby reducing the criminal justice and corrections system budget. And, the government is providing $30 million of economic support to families that would otherwise be unemployed at an effective net cost to the government of $10 million, making it a highly efficient way of providing economic support to families of people who would otherwise be unemployed. But, if the government day labor on demand program only pays the minimum wage and provides only the legally mandated working conditions, then it isn't discouraging people from working for private businesses that can afford to hire workers for a living wage in decent working conditions, which are really the only kinds of businesses we want to have in our society if we can help it.
In the 1950s, medium and big businesses in the United States started a program of what I call neo-feudalism. Your employer provided not just your regular paycheck, but also provided your health insurance, your pension for your old age, your disability insurance, and your life insurance. Medium sized and big businesses were made responsible for the social safety net needs of their employees and their nuclear families. Also, while unlike Japanese companies with lifetime employment, U.S. companies were permitted to have layoffs (although rarely needed in a time period when the economy was growing rapidly and there was a shortage of workers), union-management collective bargaining agreements made unemployment insurance unnecessary in non-layoff situations, by allowing employers to fire employees only for good cause. This neo-feudal system began its long decline, however, starting in the early 1970s, when U.S. firms after 25 years of only briefly interrupted growth and labor demand, started to offshore and automate jobs and laid off workers (often whole factories and devastating entire communities), this fell apart, and a union whose bargaining power for the last quarter of a century had been built on unlimited demand for labor even if it wasn't very skilled was undermined, culminating today in a situation where the demand for less skilled labor is so low that private sector union participation rates are lower than they were when U.S. labor laws were first enacted. Unions now survive only in the public sector, where almost no jobs can be offshored, immigrants cannot compete with native born citizens for employment in most cases, and the service sector functions involved like law enforcement and teaching are not easily automated, thus insulating public sector unions from the economic forces that undermined their private sector counterparts.
The better your society is at making someone responsible for everyone at the most grassroots possible level, the less your society needs to tax people to provide transfer payments.
One can imagine a system in which there are competing "commonwealths" that collect taxes imposed as they see fit from residents in exchange for providing a package of social safety net types needs to its members, with the line between premiums for membership and taxes blurred.
Mixed Solutions and Prospects For Our Future Political-Economy
Of course, it isn't important to be a purist about it. It is perfectly acceptable to provide for some people who are no longer or not currently economically productive through the private sector, to provide for others by allocating responsibility, and to provide for others with taxed and wealth redistribution programs. Indeed, every society does all three of these in different proportions. A country like Sweden is heavy on the tax and transfer payment approach. A country like Japan is heavy on the responsibility allocation approach. And, a country like the United States is heavy on the private sector approach with retirement savings being heavily employer and private account based and education often financed through student loans.
The U.S. doesn't want to go the route of either Sweden or Japan, both of which have drawbacks. But, it is also becoming increasing clear that the U.S. is over reliant on purely private sector contractual arrangements. So, going forward, the U.S. needs to both institute more transfer payments and to find better ways to allocate responsibility.