The question of who constitute the wealth extractors then becomes clear. It is all those who extract, a stream of revenue (value) out of the economy, greater than the value they contribute to the economy, and thereby diminish the economy's potential to accumulate capital so as to create additional wealth and revenues. We might want to accommodate some of those, in that they perform necessary functions, because they are children, aged or infirm, and so unable to contribute, but the wealth extractors that social democrats are concerned with are those who extract such wealth on a grand scale, way beyond the needs of an average citizen. Adam Smith, in The Wealth of Nations, had no problem whatsoever, in making that distinction, which is why, in the book he rails against all those hangers on, such as the landlords, the clergy, the attenders at the Royal Court, the money lenders, and so on, who contribute no value to the economy, but who draw large revenues from it.
Adam Smith's successor, the bourgeois economist David Ricardo, also had no problem in making that distinction, and in his theory of rent, he showed the way private landed property drained value that could have been used for capital accumulation, simply to keep the old landed aristocracy living in the comfort they had come to expect, whilst contributing nothing productive whatsoever to the economy. Its what led some of Ricardo's followers to demand the nationalisation of the land, so that all those rents could be used instead to cover the expenses of the state, thereby reducing taxes on profits, so as to facilitate greater capital accumulation and wealth creation.
So, who then are the wealth creators? If we turn to Adam Smith again, he describes in The Wealth of Nations, that value is labour, and so the creators of value are those who perform labour. He describes the way that once private landed property, and privately owned capital come into existence, a portion of the value, created by the labourers, a surplus value that previously the labourers would have appropriated themselves, as a surplus product, is appropriated by the owners of landed property, and the owners of capital.
As Marx puts it,
“In the same Chapter XIII “Taxes on Gold”, Ricardo speaks of
“rent being not a creation, but merely a transfer of wealth” (l.c., p. 221).
Is profit a creation of wealth, or is it not rather a transfer of the surplus-labour, from the workman to the capitalist? In fact wages too, are not a creation of wealth. But they are not a transfer. They are the appropriation of part of the produce of labour by those who produced it.”
So, when Neill asked Dromey, “Is Google, a wealth extractor?” This is rather a meaningless question, again indicating a lack of understanding of basic economic categories. Google is a corporation. That is it is a legal entity in its own right. It is what Marx describes as socialised capital, as opposed to privately owned capital. As with any company, it comprises means of production and labour, as parts of its productive-capital. The means of production have value, which has been previously produced by labour, and this value of the means of production is merely passed on to, and thereby reproduced in, the value of the output of the company - it is why Marx refers to it as constant capital. It is only the labour that creates new value, and from this new value, is thereby not only reproduced the value of the labour-power employed, but is also created a surplus value, which is why Marx calls this part of the productive-capital, variable capital.
If we ask the question, if Google a wealth creator, the answer is that the workers, including the managers, and all others who undertake productive labour within the company, are most definitely wealth creators, and only a portion of the wealth they create, is returned to them in the form of wages and salaries. If we ask, who are the wealth extractors, in relation to Google, it is all those share and bondholders, who derive value out of the wealth created by the workers and managers that comprise Google the legal corporate entity, in the form of interest and dividends, whilst taking no part in creating any additional value. It would also be any landlords, who extract rent from Google, that otherwise would have been available for investment in additional capital, so as to create additional wealth. Finally it would be the capitalist state, that extracts taxes from the company to finance its own activities, whether that be the central state, or the local state in the form of Business Rates, etc.
That is why, in the same way that Smith attacked all of the unproductive leeches that drained surplus value, and thereby restricted capital accumulation, a modern social-democratic programme, should attack the modern day leeches who in addition to the landlords, and the bloated state bureaucracy, also includes all of the share and bondholders, whose extravagant lifestyle is perpetuated without them needing to lift a single finger to contribute anything productive to society, but who simply extract massive amounts of potential wealth, by sitting back and simply “clipping-coupons”. In other words, it includes all of the rentiers, and their representatives who sit on company boards, and are paid huge stipends, way out of proportion to any actual labour they might perform.
If we want to deal with issues of inequality in society, it is not affluence, or high levels of income that needs to be addressed – certainly not levels of income as low as £70,000 p.a., as John McDonnell had suggested – but the question of wealth. As Marx put it, in the Critique of the Gotha Programme,
“Any distribution whatever of the means of consumption is only a consequence of the distribution of the conditions of production themselves. The latter distribution, however, is a feature of the mode of production itself. The capitalist mode of production, for example, rests on the fact that the material conditions of production are in the hands of nonworkers in the form of property in capital and land, while the masses are only owners of the personal condition of production, of labor power. If the elements of production are so distributed, then the present-day distribution of the means of consumption results automatically. If the material conditions of production are the co-operative property of the workers themselves, then there likewise results a distribution of the means of consumption different from the present one. Vulgar socialism (and from it in turn a section of the democrats) has taken over from the bourgeois economists the consideration and treatment of distribution as independent of the mode of production and hence the presentation of socialism as turning principally on distribution. After the real relation has long been made clear, why retrogress again?”
In fact, today, we would say, that although the material conditions of production, in their vast majority are no longer in the hands of “nonworkers”, because they have become socialised capital, the control over those material conditions of production, is exercised by “nonworkers”, in particular, it is exercised by Boards of Directors, who act as the representatives of those “nonworkers”, and against the interests of the company itself. It is that, which allows those “nonworkers” to extract vast amounts of wealth in the form of interest and dividends, and capital gains, without contributing any additional value to society.
If we want to address the question of inequality in society, it is not taxes on incomes that should be the focus, but first of all the removal of the control of socialised capital, by those who do not own it, i.e. the rentiers. In Germany, the co-determination laws enable workers to elect 50% of the members of the supervising boards of company's. The 1975, Bullock Report, in Britain proposed something similar, and so did the EU's Draft Fifth Directive on Company Law. But, there is no reason that shareholders should have any right to elect or appoint Boards of Directors, any more than do bondholders, or a bank that makes a loan to the company, or a car leasing company that leases cars to the company! Shareholders simply lend money to the company, as do all these other categories.
This point was made in an article by John Kay and Aubrey Silbertson, for example,
“But none of this means that the owners of BT shares own BT – after all, investors own BT bonds, landlords own BT premises, and lessors own BT equipment, but no-one would suggest that BT itself is owned by these investors, landlords or lessors. The claim that BT is owned by its shareholders implies that there is something special about their contract with the company which means that they are owners, not just of that contract, but of the company itself.”
A radical social-democratic government, following in the logical footsteps of Adam Smith and David Ricardo would nationalise land, so that rents were used by the state to defray its costs of operation, and thereby reduce taxes on capital; it would nationalise credit, so that interest payments were also used by the state to defray its costs, and thereby reduce taxes on capital; and would then utilise these revenues to facilitate faster capital accumulation and wealth creation. But, it would also remove the current unwarranted privileges that a miniscule percentage of shareholders have in exercising control over companies that, as Kay and Silberstson show, they do not own. A radical social-democratic government, would change company law so that shareholders had no right to elect company boards, and instead to ensure that company boards are democratically elected by the workers and managers – the “associated producers”, as Marx calls them – who actually comprise the company.
That would end any question of wealth extraction and the need to tax it, and by putting ownership and control of the means of production into the hands of the vast majority, in the hands of the creators of that wealth, it would rapidly deal with the question of the inequality of income. It would, in the process, be the biggest possible contribution, to real capital accumulation, and wealth generation that any government could undertake.
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