What is Exploitation?

There is one word that has befuddled all talk of political versus economic power. It is a word that is used by "social reformers" to mean a kind of "injustice" perpetrated by the moneyed class on the poor. The word goes as far back as Marx himself, who used it to characterize capitalism.
In simplest terms, the communist definition of exploitation is paying somebody to perform some service. You are exploiting me if the only reason I would do something for you is because you are or will be paying me for my services. By this definition, exploitation exists by the mere fact that you have more money than I have, and the only way to get rid of exploitation is to equalize our wealth. Indeed, the goal of communism is an egalitarian society, a society whose ideal is equality of outcome. Communism aims to establish a non-competitive race in which participants are constrained to reach the finish line at the same time.
Capitalism (the free market) recognizes that both inequality of outcome and competition are a given in nature. The only constraints in the race for wealth or any advantage are that the participants follow simple rules: we all start at the same point, but by competition we are allowed to reach the finish line at different times. We are only equal in how the rules are applied, but there can be winners and losers.
Capitalism prescribes the freedom to enter into open transactions, and by "open" is meant that all information relevant to the transaction is available to both parties. A transaction can be as simple as you hiring me to perform services. Every transaction involves an exchange of value: you give me money in exchange for what I do for you. Exploitation can only occur if some information was not available to a party when the transaction was consummated. Exploitation can occur both ways: you can exploit me by withholding information about another party who is willing to pay more for the same service (you pay me below market price), and I can exploit you by hiding my intention to perform less than you expected.
Anybody can allege exploitation for almost any transaction. A company that sells building materials to victims of a storm at higher prices than other customers can be accused of exploitation. Multi-national companies like Nike can be accused of exploiting cheap labor in third world countries. Offshore outsourcing companies are no less immune to such accusations. All of these accusations are an emotional cry against the law of supply and demand. In the case of storm victims, building materials naturally go up in storm-ravaged areas because supply is quickly depleted in such areas, and extra cost of distribution is incurred by suppliers. In the case of Nike and the outsourcing companies, the cry is against the reality of supply and demand of labor.
It is not obvious to most people that salaries are very low in third world countries because the supply of labor far exceeds the demand from businesses, and this is mainly because it is not easy to start a business in these countries. Also, once started, a business is subject to all kinds of laws that discourage hiring (one being a minimum wage law). In some countries, political instability and rampant crime and corruption are valid excuses for the low demand for labor; but I suspect that even these twin maladies of political instability and rampant crime are a result (and not a cause) of low demand for labor. (In this blog I discuss the relationship between government benevolence and corruption.)
Citizens suffer because of low demand for labor. The Philippines prides herself in exporting labor, but wouldn’t it be much better for any family that the breadwinner comes home every day? The current situation is deplorable and is nothing to be proud of. Meanwhile, those who remain in the islands are still subject to the suffering of the unemployed. In the absence of any other viable work, multitudes of college graduates are left with nothing but the option of working as house servants, for a very low salary (about US$40 a month) and harsh conditions. One measure of demand for labor in a country is the salary of house servants: the higher that salary, the better the demand must be for labor.
I have a dream, a dream that someday nobody will be able to afford house servants in the Philippines because there would be other career choices: people will be working in much better conditions and much better salaries in factories and knowledge-based industries all over the islands. (At the moment I will be hiring house servants myself, because I can still afford to. This is one of the main reasons for going home, in fact. By hiring help, I can have more time for my creative passions: programming and writing this blog.)

About Carlos C. Tapang

I run a company called Rock Stable Token Inc. I am the leader of the team behind the stabletoken called ROKS. ROKS is a cryptocurrency (digital money) and its value is tied to the U.S. dollar (USD). We are initially targeting it to overseas Filipino workers (OFWs) with two great benefits: it costs almost nothing to send it, and it is fast. I am also involved in a movement (http://correctphilippines.org) to correct the Philippine constitution. It's an ambitious undertaking in itself, and there's no guarantee that improving our constitution will improve things. However, one thing is certain: if we don't establish a rational constitution, we will continue on our path of self-destruction. What kind of government is best? For me the best government is that which governs the least. We need the government not because it can provide for us but because it keeps us from running into each other. The proper function of government is that of a traffic light: it prevents us from bumping each other, but it does not tell us where to go.
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