The Cooperativist Manifesto

CHAPTER 3: RECONSIDERING THE PRODUCTION AND DISTRIBUTION OF WEALTH

Our existing economic system does not distribute productive wealth in a just manner because it undervalues the contribution of labour and ignores the contribution of laws and other state mechanisms in the production process. The market's determination of returns on capital and on labour are greatly influenced by elements of infrastructure.

As its name suggests, capitalism attaches considerable significance to capital resources. Laws of commerce and market mechanisms allow most business profits to be treated as return on capital, even though capital has no inherent right to the fruits of production. We need to recognize that the same factors that artificially influence the market value of labour also contribute to the allocation and distribution of economic profits. It is extremely difficult, if not impossible, for the market to allocate a "just value" to the productivity of any factor of production. Therefore, we cannot expect the marketplace to distribute productive wealth in an equitable manner.

The market may be an efficient mechanism for economic exchanges. However, the marketplace cannot be relied upon for a just determination of the true value of labour. Where the value of labour is competitively determined through collective bargaining or otherwise, the amount of wages paid for labour input services is affected by non-production factors such as implicit taxes, minimum wage laws, union power, labour supply restrictions, full employment policies and by a host of legal and other determinants.

The theory of capitalism fails to acknowledge that the basic factors of production, labour and capital, are complemented by a systemic factor, which can be referred to as "infrastructure". Under capitalist theory part of the value of labour and capital can be attributed to the appropriation of unpaid factors such as accumulated scientific knowledge, social environment, political stability, public health and education and property laws and rights. Capitalism is based on the belief that such matters are within the public domain and that all men and women have an equal right to use and appropriate such societal benefits for their own production. Since capitalism does not treat these matters of infrastructure as an independent factor of production, there is no need to determine the value of its share of the distribution of productive wealth.

Once we acknowledge that infrastructure constitutes a significant contributing factor to the production of goods and services, we will also begin to appreciate how traditional capitalist theory incorrectly attributes economic profit as capital's share of distributive wealth. Nominal rates of return on capital investments vary as a result of matters extraneous to the production process such as inflation, interest rates, macroeconomic policy and other matters in the nature of infrastructure. The capital owner has an inherent claim only to the repatriation of his or her capital investment. Market determinations of normative returns for labour and capital are largely influenced by "infrastructure", which is evident when transnational comparisons are utilized. For instance, the wages paid to a factory worker in Canada are far greater than the wages received by an industrious Korean worker even though the Korean worker may expend similar or greater resources of labour than her Canadian counterpart. Due to the significance of systemic elements, markets do not correlate fair or just values to the respective factors of production.