Dinesh

Imagine a guy who is valet parking cars at the Ritz Carlton. And this guy is paid, let's say, $15 an hour. And let's say that he works 10 hours a day, so he makes $150. And this guy is now thinking to himself, in those 10 hours, how many cars did I park? Well, I parked, let's say 100 cars. And how much does the Ritz Carlton charge for someone to park their car? $30. So how much is the Ritz Carlton making as a result of me parking those hundred cars? $3,000. I was paid just $150. From the valet's point of view, this is a very unjust system because I'm doing the work and some other guy is taking the cash. The difference between the revenue generated by the sales and the cost is what Marx calls surplus value.

Marx's assumption is that the profit belongs 100% to labour. Why? Because labour made the goods. The capitalists supplied nothing more than the money, which has already been recompensed through interest. This view is, convincing as it is on first glance, is a completely false representation of how businesses actually run. Today the vast majority of capitalists supply a lot of things, but the one thing they do not supply is capital banks do that. The bottom line of it is the capitalist supplies three things that Marx completely ignores that are actually of far greater value than capital and actually entitle the capitalist to a share of the profit. But Marx, in a sense, submerges these three factors completely.

First, the capitalist has the idea for the business. Without the idea, there's no business. Labor doesn't think of the idea. The capitalist does. It's his or her idea.

Second, the capitalist organizes the business. Here you have this valet. He goes, I park the cars, I need all the money. The truth of it is, the reason you're getting $30 to park a car is you're at the Ritz Carlton. Somebody built the Ritz Carlton. Somebody thought of it. Somebody paid all the capital costs. Somebody took out the insurance. You didn't think of that. If you come to my house and want to park my car, I'll pay you $0.50. The reason that you're getting $30 is not because of you. It's not your labour that's worth $30. It's the resort that's worth $30. And you didn't create that. The capitalist had the idea for it. He organizes it.

Third, he takes all the risk. Very important factor. The capitalist gets paid at the end. If the business has a bad quarter, they can’t say sorry guys, I'm not going to pay you for six months. No, he has to pay them anyway. So labour is trading a fixed wage for security, but the entrepreneur is taking the risk that he might get nothing out of it and he could even lose money.

The truth of the matter is that in fairly assessing the just rewards of capitalism, you have to match what the entrepreneur actually contributes. To say it's just capital, is a gross misunderstanding how business is actually conducted.