Marx vs Smith: The randomized evaluation

The laborer receives means of subsistence in exchange for his labor-power; the capitalist receives, in exchange for his means of subsistence, labor, the productive activity of the laborer, the creative force by which the worker not only replaces what he consumes, but also gives to the accumulated labor a greater value than it previously possessed.

The laborer gets from the capitalist a portion of the existing means of subsistence. For what purpose do these means of subsistence serve him? For immediate consumption.

But as soon as I consume means of subsistence, they are irrevocably lost to me, unless I employ the time during which these means sustain my life in producing new means of subsistence, in creating by my labor new values in place of the values lost in consumption.

But it is just this noble reproductive power that the laborer surrenders to the capitalist in exchange for means of subsistence received. Consequently, he has lost it for himself.

That is Marx’s rather pessimistic view of wage labor. It is from <S>1891</S> 1847, in Wage Labor and Capital, his precursor to Das Kapital.

Marxists ever since fear wage labor means earnings are lost, enslavement to capital emerges, and with it a loss in humanity.

There are plenty of unsavory factories to worry about in the world. But the Marxist view is difficult to reconcile with the thousands of Africans that line up for the chance at a factory job (when they’re available). A good number of people—maybe most—already farm or have small businesses. Perhaps the lineup simply illustrates the paucity of other options and the ravages of global capitalism.

Another view is that farming and small business are hard work, risky, unrewarding, and unpleasant. Factories give a steady wage and less risk, at possibly monotonous tasks. But at what cost? Ill health? Or the noble reproductive power lost?

I’m in Ethiopia with Stefan Dercon partly to see if we can figure that out. An industrialist will be opening a dozen businesses this year: commercial farms, mines, tool factories, and the like. There will be thousands of applicants for several hundred unskilled jobs. Which unskilled workers they hire is often practically random, so we’re seeing if we can make it perfectly so. The result (if we can make it happen): the effect of wage labor on incomes, health, aspirations, and happiness. Also, if I can figure out what it is, that noble reproductive power.

Here’s an alternative view of self-employment versus factory labor. Farmers and micro-entrepreneurs seldom specialize in the activity that brings the highest return. Earnings get invested in new, often less productive activities–maybe some goats, maybe a shop, maybe bricks or charcoal production. This spreads the risk, but lowers average returns. Give a woman a micro-loan or a small grant and she’s likely to add a new activity to her portfolio rather than put it in her current, highest return one. All perfectly sensible under the circumstances.

So what happens when one family member suddenly gets a steady, fairly riskless stream of income? Quite possibly the other members start to specialize too. Land gets concentrated in, and worked by, fewer fewer hands. Perhaps they add capital investment to make up for the lost laborer, or hire a neighbor. Productivity in the household rises by a tenth, or a quarter, or maybe more. This is Adam Smith’s specialization at work.

That, at least, is the theory. Look for updates on the test. Today I am off to the an herb farm and a plastics factory on the outskirts of Addis.