Exploitation

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The Current Situation

            This is just a little thing everyone should know. Don’t worry about the numbers—you don’t actually have to do math, and yes I know enough about economics to know these numbers are inaccurate and there are a bunch of other costs, this is all just a simple example. Before the industrial revolution, when you bought something like a coat it was made by one person, a tailor usually. They alone would have paid for all the things needed to make the coat, and would put all the work into fabricating it. When someone bought it, the tailor would have gotten all the money the coat was worth. This is fair, because it was his labour that created that profit.

Now let’s say for a moment that you own a coat making factory after the industrial revolution. You have to pay $10 for enough material to make one coat. You have to pay $1000 for the equipment to make coats. And, of course, you need people to actually make the coats, so you hire 10 people at $8 per hour and they work eight hours a day, and with the equipment you bought they can each make about one coat in an hour. Now you sell those coats at $40 a piece, so when the day is over, 80 coats have been made and you have made a net profit of $3200. But, of course, you did have to spend $800 for materials, $1000 for equipment, and $640 on those people you hired, but that still leaves you with a respectable $760. After the first day you don’t have to pay for the equipment anymore, so you make $1760 a day. Pretty nice eh? But think about it—you just bought supplies, you didn’t do any work. The people you hired did all that work that earned you $1760 and all they got was $8 an hour ($64 a day). Is it fair that they did all the work but you made $1696 more than them?

This is of course how almost every product in the world is made, from your shoes to your doorknobs. Is it fair?

Fair Wage

            So what is fair? Well, let’s look at our coat factory from a consumer’s perspective. Each coat costs $50 (there’s a $10 mark up by the retailer). Where does that money go? Well, first, $10 go to the retailer. Another $10 goes to pay for materials. $10.21 per coat purchased is used to pay for the equipment, and $8 goes to the people who made the coat. That leaves another $11.79 that goes to the factory owner. Where does that $11.79 come from? Is it the materials? No, they were $10. Was it the equipment? No, it cost $10.21, and again, the retailer only gets the mark up of $10. So it must come from the labour.

            As you can easily figure out, the more people working, the higher the profit is, and yet the workers still make the same amount of money even though they’re creating a larger and larger profit. But, you say, without the owner the factory wouldn’t exist and no one would be making any money. That’s right, but that doesn’t mean he deserves to take the entire profit for himself, he has organized the factory and paid for materials, equipment, etc. But he hasn’t created the profit, he has only catalyzed it. In fact, unless he hires more than 5 workers, he isn’t going to make a penny. So if they create the profit but the owner is the reason the factory exists, what’s to be done?

Pay everyone at the company a fair wage based on the profit they create.

 It is easy to measure how much profit each worker creates in this circumstance, but it is much more difficult to find the profit created by the manager. A general standard of labour value at the company must be created.

Let’s look at the coat factory: A $2400 profit is created daily after the equipment is paid for (labour cost isn’t being counted because that’s what we’re calculating). In a day each worker puts in 8 hours of labour making the coats and the owner spends about 6 hours working out a deal with the retailer, doing taxes, lining up repairmen, advertising, etc. a different type of work but still work, so 86 hours of labour went into creating that $2400 of profit. Everyone at the company made $27.91 worth of profit for each hour they worked. Therefore, each worker has made $223.28 and the owner has made $167.46, in this example. That is fair based on the profit they created.

Distribution of Power

            Now, if people are being paid fairly, what changes? When people are being treated equally economically it makes no sense to treat them unequally in the distribution of power. A company must be run by everyone involved in making the company work, that’s everyone getting paid. So hiring and firing must be done democratically. Let’s go back to our coat factory example.

            Mr. Doe one of the workers has been slacking off and hanging around the factory. He’s been avoiding punching out for as long as possible, thereby decreasing profit by not helping to create it and decreasing every ones wages by “working” longer hours. Instead of having the manager simply give Mr. Doe his 2 weeks’ notice and hiring someone else, this should be done by everyone his slacking is affecting, i.e., everyone who is working. So in the group of 11 people, if 6 agree that he has to go, then that’s the way it is. And of course they would have a say in who gets hired in Mr. Doe’s stead, hopefully someone who is going to do their job. This, of course, extends beyond dealing with slackers or people you just can’t stand around the workplace. This decentralization of power means that all these rules extend to management as well as labour. So owners now have job security no higher than the workers, who can now fire and replace their bosses as well as each other.

Insurance, Retirement and Rewards

            Things are now bubbling along fairly well at our little coat factory. People are paid and treated fairly, everyone can support themselves and their family, and the people buying these coats haven’t had to deal with the price hike of “fair trade” goods. But what if something should go wrong like a fire in the factory, or a worker needing maternity leave, It’s for unforeseen events like these that a company fund must be created as insurance for the company, for the company members, and for benefits like a pension for those who work at the company for a particularly long time. 10-30% of the profit being saved daily would make sense for these circumstances, the amount should always be decided on democratically. This would mean a 10-30% cut in pay for everyone, but they’d still be making 3 or more times what they were before the reform, and there would be something to keep their livelihoods secure in case of the unforeseen. In fact, after 2 weeks, there would be enough in the fund to start an entire second factory.

            But before we get to that, we should deal with a driving force among human beings, greed. Even though people all make the same hourly wage based on the profit they all helped create, there’s nothing wrong with a few rewards for particular service. This would appear in the form of a pay bonus. What should be rewarded and how should the amount and duration be determined? It should always be determined democratically but for our example, let’s say the manager works out a new deal with the material supplier so that the factory buys more materials at a time but at only $9 for enough to make 1 coat, this creates an additional profit of $80 a day ($1 saved on each coat). That profit was undoubtedly created by his bargaining skills and so for 3-6 months it makes sense to give him the new $80 a day, until it ceases to be a novelty. Another thing to be rewarded is a chance that anyone can make the factory run greener and be more environmentally friendly, the 3-6 month bonus for which would have to come from the company fund.

Expansion

            What if the company decides that it’s time to expand? Let’s say it’s been about a year since the factory was started. 20 more workers have been hired and thanks to them the factory is working 24 hours a day making a profit of $7200 daily resulting in pay around $26.34 an hour, assuming the manager is working six hours a day and the company fund is 10%. After a working year (200 work days) of this the company fund should have about $144 000 in it, but of course some of that has to go to things like advertising, injuries, repairs, etc. so let’s assume it’s been reduced to $108 000. This is the perfect time to expand the company. So the manager can decide, keeping in mind he can be fired and replaced by the workers if he screws up, to start a second factory in a second city, so after buying the building equipment, materials, hiring the new workers, etc. some sort of new management structure must be found. A manager must be hired for the new branch and someone has to oversee both factories, so how does that change the pay structure? Well there are now 30 workers at each factory creating a profit of $14 400 a day and there’s also one manager keeping things straight at each factory working about 6 hours a day and now there is someone organizing both factories. How is this new position paid? Each factory is able to control its own finances for the most part, but taking the new position’s pay out of only one factory makes little sense so the new position should receive a half pay check from each company resulting in one full pay check, and if there were 3 factories it would be a third of a pay check from each. And to fire and replace this person fairly it would take a majority vote between both factories as opposed to the managers who can be simply fired by their own factories.

            Why would the company want to expand? Before the expansion wages were about $26.34 an hour, but now with the additional tier of management it’s $26.02 an hour because there’s another manager working, so of course it would make sense to just stay the course of one factory, but on the other hand the company fund now expands by $1440 daily instead of just $720 daily, so there’s more money for benefits and the like. It’s a give and take situation, so it’s very important that everyone at the company knows what they’re gaining and losing in an expansion so they can all decide together.

*Non-Profit Businesses*

Non-Profit Businesses would operate, much as they do today working continually in the red, depending on grants, donations and loans. Of course to keep up with other industries their costs would run higher, but with the economic kick in the teeth of a highly circulating economy, (the more equal a country’s distribution of income the better off it is economically in most circumstances), more money wouldn’t be hard to find.

**Inflation**

Inflation created by equality could be combated in many ways on the macro-economic level, one of the easiest ways to do this would be the reintroduction of a real gold standard.

What if it Happened?

            How does all this change things? This policy can be applied to any profitable group from Wal-Mart to a family owned diner. What if companies were normally run like our little coat factory, with fair wages and fair treatment? People would make more money in general, spend more, buy more, and in general move the economy around a lot more, this also means that to save up for retirement or start their dream job, such as owning their own restaurant, taking up sailing, or whatever, people wouldn’t have to spend as long in the jobs they don’t necessarily like to get the funds to pursue their vocations. Won’t that deplete production power? Yes, but there will always, always be those willing to take undesirable jobs if they see a personal profit in them and with fair wages that profit is very easy to see.

            Why then are people continuing to start companies if they can’t see themselves earning massive profits from their creation? Well people can always start them out of vocation, which is probably a much better reason than money to do most things, or small companies made by and worked by a single family or group could come into existence, and of course there’s the possibility of making companies based on investments such a bonds and considering paying them back as simply a cost of production.

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