The Mechanics of Exploitation

Where does exploitation come from?

The anarchist Peter Kropotkin is among history’s most insightful critics of capitalism and the exploitative relationships that define it. Kropotkin did not believe that human freedom and capitalism could be reconciled, and he sought to explain the modern world’s extremes of wealth and poverty:

Poverty, the existence of the poor, was the first cause of riches. This it was which created the earliest capitalist. For, before the surplus value, about which people are so fond of talking, could begin to be accumulated it was necessary that there should be poverty-stricken wretches who would consent to sell their labor force rather than die of hunger. It is poverty that has made the rich.

Kropotkin’s pointed reference to Karl Marx’s theory of surplus value is worthy of remark: Kropotkin followed anarchist pioneer Pierre-Joseph Proudhon in putting a fine point on the causal question—the question of exactly how it is that exploitation becomes possible. This was and is no small thing to anarchists, whose political theory posits a symbiotic and mutually dependent relationship between capital and the state. Capital accumulates—and so dominates labor—precisely due to a foundation laid by state power. And capital maintains its power and dominance through the active, coercive intervention of the state on its behalf. Kropotkin is clear that the state is the ultimate source of capital’s power and that ending capitalism must mean abolishing the state.

Kropotkin’s critical insight is the anarchist one: that the conditions necessary for an economic system defined by extractive unequal exchange must be tended to with great attention and care. They are not “natural,” nor do they represent the freedom. Everywhere we find it, the set of social practices we have come to call capitalism has reposed on societal-scale land theft, with attendant massacres and cultural erasures. This process, still ongoing[1], has meant an enormous shift of wealth to the United States and Western Europe. Colonialism’s constellation of crimes is a defining feature of the modern period and the development of capitalism. The ideological veneer of global “free trade” has been a way to regulate and normalize “the violence of the law and the law of violence,” the forcible expropriation of the land and exploitation of its people.[2]

What is capital privilege?

The capitalist marketplace is one bleached of local diversity, tightly controlled by a small group of state-aligned multinationals. It is an economic system defined fundamentally not by some abstract notion of “voluntary exchange,” but by extractive privilege. Capitalism, as an economy of privilege, is one in which the primary competition is in the uses of state power. A privilege in this context is a coercive legal instrument, created by the state, that confers an unfair competitive advantage on its holder. Privileges need not create full legal monopolies to restrict natural opportunities to compete in the much-vaunted marketplace—or, importantly, to live freely outside beyond its reaches. There are countless privileges and monopolies benefitting capital. Benjamin Tucker famously highlighted four[3]—the money, land, tariff, and patent monopolies—but today, through a vast complex of non-competitive contracts, loan guarantees, tax credits, direct grants, and bailouts, the federal government funnels trillions into big business. State actors routinely intervene to impose arbitrary liability caps in favor of connected sectors and companies. Corporate limited liability, and indeed corporations themselves, were and remain creatures of government special treatment and unfair, unfree competition.

Throughout the last century, organized monopoly capital used the administrative state as one of its tools to consolidate market power. Capitalists captured regulators and used their access to outlaw or severely handicap small and local competitors, in particular those doing business in cooperative models. Even as needed reforms were adopted, access to regulators and the rule-making processes became an increasingly important mechanism of erecting entry barriers and thus reducing competition. In the new millennium, perhaps no anti-competitive privilege more shapes the world than intellectual property. The intellectual property regime today imposed by multinationals based mostly in the U.S. gives new urgency to Proudhon’s famous declaration that property is theft. It has played a central role in the recreation of exploitative colonialist relationships, by consolidating decision-making control and ownership in rich Western corporations. The legal institutionalization of global “free trade” has meant treaty terms that enshrine strict American IP protections, undermining the sovereignty of countries in the global South. Like workers under capitalism, many of these nations are not in a position to bargain fairly with imperial powers like the United States, entering the world of 21st century global capitalism weakened by centuries of extractive colonial enterprises.

What is role of the State?

The relationship between the state and capital must be understood: the state is the power that enables the exploiter to extract labor power. It does this using a range of more and less subtle tools, but they all ultimately rely on violence and very credible threats thereof. Discussing his 2022 book, Work Work Work: Labor, Alienation, and Class Struggle, Michael D. Yates observes, “We should never underestimate the control mechanism of force and violence and threat.” Exploitation arises in this context; it is one of extreme concentration and centralization of capital, one of fierce competition between landless, penniless workers, one of duress. But it doesn’t arise accidentally, and it doesn’t arise without violence and injustice. As Proudhon points out, exploitation—“the exercise of the right of increase, the art of robbing the producer”—ultimately depends on “physical violence, murder, and war.” Proudhon blames private property, which he defines in terms of monopoly privilege, for “the accumulation and immobility of capital of all sorts.” In opposition to the coercive, monopolistic force of property, Proudhon places individual possession and commerce. Keen to divide and balance power, Proudhon sees no need (indeed no possibility) for the state to oversee the transition to a free, equitable, stateless future, and he prefers a genuine marketplace of small cooperatives with cheap, easy access to credit and land.

If his confrontation with “Saint Max” in The German Ideology was “Marx’s first extended critique of an anarchist theory,”[4] then his tense exchanges and eventual fall-out with Proudhon hinted at the deep and developing differences between libertarian and authoritarian socialisms. What most miffed Marx, perhaps, was Proudhon’s confident dismissal of Marx’s critical step, violent power grab and, before that, the increasing power and influence of a vanguard elite leading this revolutionary seizure of power. Proudhon believed that this kind of violent overnight change would be in vain, doomed again by hierarchy, violence, and centralization. To be clear, Marx does underscore the role of the state in “the process of primitive accumulation,” in “providing legal backing for the expulsion of peasants [from the land]” and repressing “the newly forming working class” and their pay.[5] But he sees history as traveling inevitably through a period of time in which the power of the state must be seized and used by this new class of workers. Leopold Kohr argues, alongside the anarchists, that Marx seems to have missed something important about the nature of hierarchical, dominative social power. In a fascinating footnote to the eighth chapter of his underappreciated Breakdown of Nations, Kohr buries a brilliant insight, contending that Marx failed to see the most logical and important implication of his diagnosis: the problem is systemic overgrowth—economic scale, not the economic system. Kohr showed that the self-contradictory nature of capitalism and its definition of growth were natural results of institutional size, and that they would therefore reemerge in giant-scale industrial communism.

And what of the labor theory of value?

Many early anarchists held Proudhon’s skepticism toward the state and attempts to take hold of it through violent revolution. The “first American anarchist” Josiah Warren attempted to address exploitative arrangements by locating the most fundamental unit of value. Warren did not mince words in his opposition to violent revolution and workers’ expropriation of the land and means of production. Warren’s socialism instead took the shape of a scientific commitment to the idea of equality in exchange, to be quantified in terms of amounts of labor. He was in fact so committed to the idea of labor hours as the fundamental source of value that he owned and operated Time Stores, retail shops in which customers paid with a currency of labor time. At this point it may be important to note that a theory of exploitation does not necessarily require the acceptance of any labor (or cost more generally) theory of economic value. Structural conditions, founded on historical and ongoing violence, force people to part with their dignity, autonomy, and time regardless of whether it is labor or something else that is the ultimate source of economic value. And though it always involves coercion or compulsion of some kind, exploitation need not take the shape of or require overtly violent, aggressive, or threatening actions.

The point is to obscure the threats and aggression on which the social and economic system rests. One needn’t make any claims about the inherent value (or lack thereof) of the human labor hour to notice that the global corporate marketplace has consolidated and that wealth has concentrated. That the old dichotomy between marginalism or subjectivism on one side and labor or cost theories of value on the other is a false one should be clear. The socialist left is not “economically illiterate,” a popular charge of American conservatives and right-wing libertarians, and our worries about exploitation do not depend on backward economic ideas. No one seriously denies that individuals judge value and utility differently, that we have ultimately irreducible economic preferences and predilections. The truism that everything is worth what someone will pay for it is worth as much as most truisms. The fact is that exploitative conditions have arisen and continue to arise, and that this requires a positive social response. These repeated charges of economic illiteracy from capitalism’s apologists serve an important propaganda function; the material reality of exploitative monopolies does not depend for its existence on any particular theory of value, whether regarded as subjective or objective.

Is capitalism really freedom?

Moreover, several of the most seminal anarchist figures demonstrated beyond any doubt that the economists defending capitalism were betraying their own free-trade doctrines in the effort. This was clear as early as there was an emerging independent field of economics. The anti-capitalist, though distinctly pro-market, thought of Thomas Hodgskin is an apt example. Like Proudhon and Tucker later, Hodgskin has often been treated by the left and professional historians as accepting much of the bourgeois thinking on economic relations. Yet these thinkers were fierce critics of exploitation and the wage system. To appreciate Hodgskin’s theory of exploitation, it is necessary to understand his conception of capital; for Hodgskin, capital is discussed not as a factor of production, but “as a means of consolidating particular power relations.”[6] Hodgskin refuses to hide these power relations in language that underplays the causal connection between them; central to Hodgskin’s project is the idea that there can be no neat separation between capital and the state, and no way to suppose that exploitation simply exists absent power. In his thought, capital is treated as “the by-product of power,”[7] and his theory of exploitation anticipates Proudhon’s critique of private property and systemic economic privilege. Hodgskin locates exploitation in capitalists’ power to “enhance” the natural price of a thing to yield streams of “unearned income to landlords and idle capitalists.”[8] Attacking this “increase without service”[9] becomes central to the anarchist message of economic transformation and freedom. For “Boston anarchists” like Tucker, the exploitative practices of capitalists were tantamount to theft.[10] In their left-libertarian critique, it is clear that the “takers” living parasitically on the labor of others are the lords of capital, who use state-created privilege to fleece labor. Thus the first order of business—and the way to undermine exploitation—is to attack “the power of legally privileged capital to increase without work.”

Notably, the tools and the foundations of the analysis were all there in Adam Smith himself. Smith, for example, “anticipates all three types of alienation identified by Marx. Namely, Smith suggests various ways in which labourers are powerless, isolated, and self-estranged by the working and class conditions of advanced commercial/industrial society.”[11] If Smith gives us a critique of a mercantile system in which the state played the central role in structuring the economy, then his insights also apply to the successor of the system to which he bore witness. A picture of capitalism begins to develop: multiple layers of positive state intervention, the compounded effect of which is a global system of monopoly whereby corporate power is created and preserved by government actors. Capitalism is no “free market” in any worthy normative sense—it is, as Warren remarked, “cannibal commerce,” in which capital’s growth and concentration coincide with the dispossession of the people.

Where are we going?

To foster economic relations that are more human and less exploitative requires us to relocalize economies and reconnect people with the land. There can be no move away from the alienating and exploitative relationships of monopoly capitalism unless ordinary people have real access to the land at scale, meaning practically the repatriation of the land to the people, the distribution of the land. Human social institutions, like the people of whom they’re made, adopt different lifestyles and patterns of behavior. Anarchists’ criticisms of capital and the state are not anti-social rebellions against peace and order, but are themselves recognitions of anti-social and abusive behaviors. These behaviors are based on toxic thinking that organizes people using coercive, hierarchical models and treats them as means to others’ ends. Relationships under capitalism are extractive precisely because the agreements that define them were not freely assented to, but were born of violence and domination.

Changing our thinking by embracing new categories.

Happily, an available option is to refashion our interactions with one another in ways that actively both interrogate and discard tradition categories such as “market,” “state,” “public sector,” “private sector,” “economic freedom,” “economic development,” and “growth,” among others. Here, we can draw upon the notion of “free-market communism” to further clarify the distinction between capitalism and authentic economic freedom as an ideal or desired future state.[12]

The concept of free-market communism is designed to show how nomad markets free(d) from the command and control of capital operate differently (emphasis added). We know what the potential benefits of free markets are; communism in this context simply designates the elimination of the distortions, constraints, and excesses inflicted on markets by the domination of capital.[13]

This conceptual repositioning echoes arguments of the individualist anarchists. A complex of legal privileges allows idle capitalists to live parasitically on others, holding workers in a trap of infinite debt and wage slavery.[14] The world will continue to change, and with it our economic relations and taxonomies of language. A transition away from monolithic globe-choking capitalism requires the patience nurturing of robust and reasonably self-reliant communities. This social transformation cannot mean mere representation within existing systems, however necessary in the meantime. It must entail fundamental class-based changes to the systems themselves, predicated on an awareness of alternatives to capitalism.


[1] “Colonialism is not just about taking Land, though it certainly includes taking Land. Stealing is a manifestation, a symptom, a mechanism, and even a goal of colonialism. But those are the teeth of colonialism, and I want to look at its bones. Stealing Land and dispossessing people are events with temporal edges, but ongoing Land theft requires maintenance and infrastructures that are not as discrete, given that ‘colonization is a continuing process, not simply a historical event.’ Colonialism is a set of specific, structured, interlocking, and overlapping relations that allow these events to occur, make sense, and even seem right (to some).” – Max Liboiron, Pollution Is Colonialism (Duke University Press 2021).

[2] Mariano Zukerfeld, Knowledge in the Digital Age of Capitalism, page 117.

[3] The anarchist essayist Charles W. Johnson in his article “The Many Monopolies.”

[4] “Max Stirner and Karl Marx: An Overlooked Contretemps” in Saul Newman, Ed., Max Stirner page 113

[5] Anthony Brewer, Marxist Theories of Imperialism: A Critical Survey, Second Edition (Taylor & Francis 2001).

[6] Alberto Mingardi, Classical Liberalism and the Industrial Working Class: The Economic Thought of Thomas Hodgskin (Routledge 2021).

[7] Id.

[8] E.K. Hunt, History of Economic Thought: A Critical Perspective (M.E. Sharpe 2002), page 169.

[9] Ezra Heywood, The Word

[10] Many contemporary leftists may be surprised to learn that these socialists no less agreed with the right-libertarian mantra “taxation is theft.”

[11] Robert Boyden Lamb, Property, Markets and the State in Adam Smith’s System (Routledge 1987).

[12] Eugene W. Holland, Nomad Citizenship: Free-Market Communism and the Slow-Motion General Strike (University of Minnesota Press 2011), p. xi.

[13] Id. at 135.

[14] Id.

David S. D’Amato is an attorney, businessman, and independent researcher. He is a Policy Advisor to the Future of Freedom Foundation and a regular opinion contributor to The Hill. His writing has appeared in Forbes, Newsweek, Investor’s Business Daily, RealClearPolitics, The Washington Examiner, and many other publications, both popular and scholarly. His work has been cited by the ACLU and Human Rights Watch, among others.