The Crisis of Labour

According to Adam Smith, there are 3 different types of people:

• labourers, who produce wealth through their own efforts;
• employers, who employ capital to produce wealth, for example through investing in machinery;
• rent-seekers, who don't actually produce any wealth themselves but who seek a return for the use of assets they own, particularly land.

Actually, that is not correct at all: there aren't 3 types of people, but these are different types of behaviour that can be exhibited by people; an individual can take on more than one of those roles at different times, or even at the same time, such as entrepreneurs who typically are both labourers and employers.

Before the industrial revolution, entrepreneurs were rare, or at least not sufficiently numerous nor effective to create a great of wealth, with anything they did produce being vulnerable to predation by the rent-seeking ruling classes, which reduced the incentive for them to make the effort. The vast majority of people worked on the land, with the landowners creaming off any profit produced through rent. Landowners were thus able to exploit their workers to have comfortable lives themselves, but the workers were too busy just surviving to do much about trying to improve their own lot - the times when they did organise collectively, such as the Peasants Revolt, are not remembered for being a great success. To be an agricultural labourer was such a precarious existence that many volunteered for the army, not exactly an attractive proposition if you consider the consequences of battle during, say, the Napoleonic Wars. That's not to say that all landowners exploited their workers; and indeed some noble families propagated a culture of duty to care for their tenants, providing relatively good quality housing. But it's quite clear, leaving aside the middle classes and professionals who inhabited the towns, that in the countryside there were 2 distinct classes, the working lower classes being exploited to a greater or lesser extent by the rent-seeking upper classes, the divisions between the  classes in England exacerbated by the lower classes being Anglo-Saxon in origin, and the upper classes being descendants of the Normans who came over with William the Bastard.

The Industrial Revolution changed things.  It should be noted that many early industrialists did not originate from the landed gentry, but were often non-conformists, who were not accepted into genteel society, and who thus had the incentive to work hard. These early capitalists provided opportunities for the workers; although the lot of many workers was still miserable, and exploitation continued, nevertheless for most it was an improvement on agricultural labouring, and slowly they were able to enhance their lives. Sufficiently indeed that, being based in greater centres of population, and with increasing leisure time. they were able to organise increasingly effectively in various ways, giving rise not just to unions, but to Friendly Societies and other self-help organisations, and eventually the Independent Labour Party. These achieved a great deal, improving the lot of the typical working man and woman substantially over time, enabling them to earn a fairer share of the wealth they had created.

The workers became more self-confident, better educated, and more aware of the possibility of being exploited, whether actual or not. They were thus ripe for seduction by Socialism.

Now Marxism makes no distinction between Employers and Rent-Seekers; it conflates the two categories into one: Capitalists. These are defined as the enemies of the working classes.

In truth, this is a mis-charaterisation: some of the capitalists had actually provided the means to enable the workers to achieve emancipation and therefore were effectively allies of the workers, rather than their enemies. Although there were undoubtedly many conflicts of interest between business owners and workers, by cooperating together they managed to create massive amounts of new wealth, at least some of which went to the workers. It also doesn't take account of the risk undertaken by entrepreneurs - they had more skin in the game than their labourers, and so it is quite fair that should take more of the rewards.

Of course, as noted originally, any one person can play any of the 3 roles, and so entrepreneurs can easily morph over time into rent-seekers. The problem is power: once entrepreneurs become successful, they achieve greater power, and no longer wishing take risks with what they have gained, instead look for easier opportunities to capture wealth.

It all boils down to fairness: clearly it is not fair to a worker to be supporting others better off than themselves who did not cooperate in the wealth creation process. Of course, it is very hard to determine the extent of any exploitation: no one actually knows the intrinsic value of anything - that's why we need markets.

But the point is, it is the predatory, parasitic rent-seekers who are the enemies of working people, not the capitalists. Or rather, it is the predatory rent-seeking behaviour that exploits the workers.

The truth is that free-market capitalism produced so much wealth that even the workers who had not received a fair reward for their labours still enjoyed a standard of living far in advance of their forebears before the industrial revolution. So much so indeed that, these days, those on benefits have a better standard of living than an average worker in the time of their great-grandfathers.

Exploitation of the wealth-creating workers, however, is still present. Rent-seeking parasitic predators are still with us, but have developed new forms. Fat cats of all sorts abound.

How has this happened?

Crony corporatism is a major factor; instead of having to own land in order to seek rent, being an executive in a major corporation is not so different from being a member of the nobility in a medieval principality; it can be a license to prey upon the workers.

Similarly, the growth of the state has provided all sorts of opportunities for parasitic elites to capture wealth. For example, the more laws and regulations there are, the more work there is for lawyers.

The list goes on: banksters, university administrators, local government executives, professionals of various descriptions, even train drivers. All earning substantially more than the workers who actually create the wealth that these modern-day parasites rely upon.

Union leaders, who enjoy cushy lifestyles at the direct expense of their members, are perhaps the ultimate example, especially those that benefit personally from trouble-making because only the activists take part in their appointment.

Ironically, the well-healed professional classes in public service have been successful not just in capturing more than their fair share of the wealth of the workers, but also in capturing the party of the workers; the Labour party is now dominated by university-educated metropolitan elites.

According to Robert Conquest, the simplest way to explain the behavior of any bureaucratic organization is to assume that it is controlled by a cabal of its enemies. In the case of the Labour Party, it really is.