Myths About Socialism: Redistribution of Wealth?

Probably one of the most common right-wing arguments against social welfare spending is that it constitutes “redistribution of wealth” or “sharing the wealth,” and is thus a road to socialism. Indeed, “socialism” is often defined by these reactionaries as the redistribution of wealth, which is seen as the ultimate evil because it leads to socialism, which is evil, and it’s evil because it entails the redistribution of wealth – you get the idea.

There are a few notable problems with this. First, socialism is far more than simply the “redistribution of wealth.” Second, redistribution of wealth happens all the time under capitalism, yet strangely the right-wing only complains when some hypothetical redistribution favors the working class as opposed to the capitalists. To understand why socialism does not equate to redistribution of the wealth, we must first ask what distribution means.

Distribution in economics refers to the manner in which total output or wealth is distributed among individual people or various factors of production. For the purposes of this article, distribution among individuals is the most relevant.

Human beings in a given society produce wealth, in various forms, and this wealth is distributed among the members of society via various institutions, laws and mechanisms. However, to speak about how and to whom wealth is distributed inevitably leads to asking questions as to who produced that wealth in the first place. Speaking about distribution without mentioning production is simply useless. Thus we must go deeper.

In the capitalist mode of production, commodities are produced socially by workers. Even commodities which are still produced by skilled individuals, such as works of art, require inputs which are produced socially. A single artist may create a painting, but who manufactured the paint, the canvas or the brushes? One of the peculiarities of capitalism is that the socialization of production, meaning commodities are produced socially by many people, leads to a world in which the commodities we buy appear disconnected from the people who produced them. We look on a shelf and see an MP3 player from “Sony,” a large corporation. We understand that Sony made this product,’ but who is Sony anyway? If we buy the MP3 player, it appears as though we have engaged in a monetary transaction with the retailer and the seemingly faceless Sony Corporation. There has been an exchange; money for an MP3 player which you now own. What is not so apparent is the relationship between you and the people that actually produced the MP3 player. In fact this would include not only workers in Sony’s manufacturing plants, but also those workers who build the individual components, who mine or extract the resources necessary for their production, and of course those who transport all these commodities, to name a few. This is in stark contrast to past modes of production, where the few material commodities which existed were often supplied by skilled workers whom everyone in the community knew. When you bought something from a blacksmith, for example, you knew that blacksmith and understood that you were buying the products of his labor. This is not the case under capitalism.

So here we have one MP3 player out of tens of millions manufactured and sold worldwide. And of course Sony and its competitors make not only MP3 players but all kinds of products, the sales of which lead to the creation of wealth in money form. So how is that wealth distributed? If we go back to our pre-capitalist society where skilled craftsmen produced certain commodities, the answer is simple. The master craftsman, owning his own tools and having performed the labor necessary to produce the commodity, appropriates whatever value he can exchange for it. He appropriates that value not simply because he did the work or he owns the tools, but because he also owns any commodity he produces. Now think about all those workers, in several different countries, who produce MP3 players, and think about the amount of money the sales of these products earn. To whom will the large portion of that money, including profit, go?

Under capitalism, private ownership of the means of production such as factories, machines and raw materials is what determines the ownership of not only the commodities produced via those means of production, but also the proceeds of the sales of the commodities. In other words, shareholders and proprietors appropriate commodities they did not produce, and pocket the profit from their sales.

What about the workers’ compensation? How is that determined? Another peculiarity of capitalism is that one’s wages are generally not linked with productivity. Most Americans are aware that many of their products are produced by workers in foreign countries for extremely low wages. In other words, these people work hard, and are extremely productive, yet are compensated with what amounts to crumbs from the table.

Once we factor production into the equation, we can now examine distribution. Under capitalism, the majority of the means of production are owned privately by a minority of people. The majority of people are deprived of their own means of production, meaning they do not have the means to support themselves either directly via the land or by the production of commodities which they can sell for money. They possess only one commodity – their capacity to do labor. The capitalist has a huge pool of labor to choose from; as workers are ultimately compelled by the threat of homelessness and starvation, there will always be someone desperate enough to accept a lower wage. If they don’t find such people in their own country, they can move their production operations elsewhere. Since they own capital, and means of production, the deck is stacked in their favor. The workers produce wealth, but it is distributed primarily to the capitalists. This is true whether we look at the world as a whole, or the wealth of one particular country.

In the case of the United States, productivity rose sharply along with the introduction of computer and other digital technology in the 1970s, creating a massive amount of wealth. Prior to this point in history, Americans’ real wages rose steadily alongside productivity. Afterwards, distribution changed; real wages stagnated or even fell, Americans started working harder and longer for less pay, while at the same time CEOs and owners started appropriating a vastly larger share of the wealth. That is to say, the wealth they did not produce in the first place. Thanks to this process, the United States has an income inequality ranking on par with several developing nations.

So what does this all mean? Simply, it means that redistribution of wealth, from the producers to those who do not work, occurs under capitalism.

Of course, when forced to admit to this, the right-wing will raise various objections in an attempt to distract from the obvious exploitation that is occurring here. Fox News, and the rest of the right-wing noise machine has recently started referring to America’s capitalists as “job creators,” the implication being that these multi-millionaires and billionaires deserve their massive wealth simply because they “create jobs,” even if they personally did not produce anything.

This argument fails right out of the gate. For one thing, “jobs” are “created” out of necessity. If any of us found ourselves dropped onto an island somewhere, we would go about laboring to produce the means for our survival without the intervention of another party to “create jobs.” Next, we could apply this term “job creator” to all kinds of individuals throughout history, including slave-owners, feudal lords, pimps and Nazi concentration camp commanders. If one chooses to limit the discussion to modern industrial nations, one might find it difficult indeed to explain how socialist nations such as the U.S.S.R. or Albania managed to have full employment without the existence of “entrepreneurs” to create jobs. If lower taxes and higher profits inspire “entrepreneurs” to create jobs, one has to wonder why the official unemployment rate is over 9% at the time of this writing. As an attempt to justify the massive distribution of wealth to those who don’t produce it, the “job creators” argument falls flat on its face.

Other justifications abound. For example, entrepreneurs “take risks,” and thus deserve their massive compensation. This fails for a number of reasons, but the most obvious being that human labor, not risk, is what creates wealth. Risk is not a commodity, it does not have a price, and we do not buy and sell risk. Corporations and investors actually prefer to avoid risk as much as possible, often spending a great deal of money to minimize their risks. Does a company which goes to great lengths to avoid risks necessarily end up poorer than those that don’t? Usually this is not the case; wise investments pay off. If one wants to get rich with risk, go to Vegas.

Lastly, another justification is that investors, bankers, top managers, etc., earn their massive compensation with their own “hard work,” not only in business but in university when they were younger. This argument fails just as hard as the others. For one thing, we know that “hard work” and productivity do not determine wages. If they did, we would have no explanation for the past thirty years of stagnant real wages in the U.S., for one. Second, we have no way of knowing exactly how hard these people “worked” through college, and this is irrelevant because these companies are selling commodities, not their “hard work” in college. Lastly, while all these individuals may perform daily tasks, which may indeed be stressful or require great intelligence or talent, it does not mean that this work is actually productive, that is to say that it produces wealth. Lastly, investors and bankers are entitled to profits merely by their ownership of stocks, bonds, loans, etc; they will derive wealth from these assets regardless of what they do or do not do.

So if “redistribution of wealth” inevitably goes on under capitalism, and socialism isn’t necessarily the redistribution of wealth, what then, is socialism?

Socialism, in its most basic form, entails not the redistribution of wealth, but the expropriation, that is seizure, of the means of production by the working class. If capitalism is a system where production is socialized, meaning commodities are produced socially by many people, while the products and the value from their sales are privatized, socialism merely balances out the equation. That is to say that production is still socialized, but the appropriation of the value that is produced, including surplus value, is also socialized. Thus society benefits as a whole.

Why this system is better than capitalism is a matter for another article, but what the reader can conclude from this is the following: “redistribution of wealth” occurs under capitalism, and when it results in massive inequality, standards of living and society suffer. Socialism is something far more comprehensive than a simple redistribution of wealth.



Categories: Albania, Economic Exploitation, Economics, Economy, History, Imperialism, International, Labor, Myths About Socialism, Revolutionary History, Soviet Union (USSR), Theory, U.S. News, United States History, Workers Struggle, World History

6 replies

  1. You are missing the entire point of capitalism here. Lets look at the mp3 player. Suppose it sells for $200. That $200 is not how much the device costs, it is how much society values it, specifically how much a typical individual is willing to give up to own one. It does not cost $200 because of some money grubbing CEO’s greed. When someone buys it, they are implicitly placing value on every economic input of that device: the labor, the parts, the labor to produce those parts, the intellectual property of the inventor of those parts, the organizational skills and business savvy of the CEO of the producing company, and yes, the risk born by those who invested capital in the entire endeavor. By purchasing it, they are saying “yes, I would prefer this over a few hours of community college credit. I would prefer this over 200 loaves of bread. etc.”
    Think back just ten years when the iPod was first introduced. The commitment of economic resources to the production of iPods was a risk. A risk you seem to take for granted. Capital does not come about in a vacuum. It is obtained through the labor of individuals. Then those individuals put it to efficient use, producing more wealth.

  2. Jay Mueller; the blatant ignorance of the material reality of both capitalism and capital needs no rebuttal, but nevertheless…

    If the price of a luxury good is lets say $200 dollars that does not mean that is the actual price that society values it at. Naturally a loaf of bread when your starving has a more important value to society than all the ipods in the world. Naturally the gas that you take to and from work has more importance when you are broke and have an empty gas tank. What society values is decided by the capitalist class; the totalitarian plutocracy that you serve. If you believe that a luxory good that serves absolutely no fundamental necessity of life is more important than the material goods necessary to sustain life than you are absolutely insane.

    Capital is produced through the labor of individuals however 99% of the time it is never the individuals of which are the ones using the capital to invest. Capital is produced by the labor of the workers, who are exploited day in and day out. Be it in the United States or one of our dozens of neo-colonies overseas. How much wealth is produced for the children slaves in the Congo who extract the gold…? How much wealth is produced for the abused laborer working in a Chinese factory to assemble and create the parts…? How much wealth is produced for the salesman working at the store of which you purchase the product? How much wealth is produced by the capitalist who more often then not is paid next to infinite amounts of money to sit on his ass all day while working class people around the world can barely make ends meet (if they can at all).

    Jay, you want to talk about the point of capitalism… open your closed eyes and take a look at where the products are being built… take a look at where they are being distributed… take a look at where the resources are being extracted. I’m sure you are more than content to sit in your ivory tower and revel in your ignorance; but the fact of the matter is your blind ignorance to the material reality that the world faces every single day is detestable and stupid to say the least.

  3. Once again we see the failure of mainstream economics, and higher education in general, in the comments of Jay Mueller. First of all, nowhere in this article will you see anything remotely resembling the claim that products cost a certain amount due to “some CEO’s greed.” Congratulations on taking college-level economics courses without managing to attain basic literacy. How you managed to do that I’ll never know.

    Second, the claim that the price of commodities is due to the price the average individual is willing to pay is a tautology. First, people’s purchasing habits in the real world(as opposed to the fantasy models dreamed up by neo-classical economists) are not based on personal preference scales. Second, and far more important, is the fact that before one CAN actually make a judgement about price, utility, etc., there needs to be a price there. I have to look at the price, among other attributes, and determine if the qualities are worth parting with the amount of money which is denoted in its price.

    Supply and demand cause price to fluctuate but prices will fluctuate around a certain inherent value which is determined chiefly by the amount of abstract labor necessary to produce the good. Ironically you basically support this concept yourself with this statement: “the labor, the parts, the labor to produce those parts,” Nearly supported a labor theory of value there, your economics professor would be a sad panda if he found out.

    Luckily he’d cheer right up and beam with pride upon seeing you cock it up with this:

    “the organizational skills and business savvy of the CEO of the producing company, and yes, the risk born by those who invested capital in the entire endeavor. ”

    Nope,. we trade commodities and services, not business savvy and risk. Without the labor of those who produce the commodities or their raw materials, you have no commodity to sell. Labor can create wealth, business savvy and risk do not. Drop a man onto an island and he can create “wealth” via his labor. His business savvy and “risk-taking” won’t do a damned thing.

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