Ask a Scholar: Class Warfare

Walter Block

Dear Ask a Scholar,

Where can I find information that explains the facts about the class warfare in the United States?  Something that shows the true reasons why the rich are getting richer other than the old "they’re just greedy" arguments.
- Robert Carmack

Answered by Walter Block, the Harold E. Wirth Eminent Scholar Endowed Chair in Economics at Loyola University. Block is an Adjunct Scholar at the Mises Institute and the Hoover Institute. He has previously taught at the University of Central Arkansas, Holy Cross College, Baruch (C.U.N.Y.) and Rutgers Universities. He earned a B.A. in philosophy from Brooklyn College (C.U.N.Y.) in 1964 and a Ph.D. degree in economics from Columbia University in 1972. He is an author, editor, and co-editor of many books which include Defending the Undefendable and Labor Economics from a Free Market Perspective  

There are not one, but, rather, two, theories of the ruling class. First, the Marxist, which everyone has heard of. Here, the capitalist employer necessarily exploits the worker victim. For, according to the labor theory of value, the worker creates the entire product, or GDP. How, then, do you explain that he gets only some 75% of it in the form of wages, while the capitalist receives the other 25% in the form of profits, rents, interest, dividends, etc? Why, exploitation, that's how. The fallacy, here, is that the labor theory of value is incorrect. When the worker makes a mud pie, instead of a cherry pie, he puts in as much labor, but creates NO value whatsoever. When he picks up a diamond from the ground as big as his fist, with very little "labor," he creates GREAT value. So, labor is not proportional to value, let alone equal to it. The best refutation of this is:

Bohm-Bawerk, Eugen. 1959 [1884]. Capital and Interest, South Holland, IL: Libertarian Press, George D. Hunke and Hans F. Sennholz, trans., see particularly Part I, Chapter XII, "Exploitation Theory of Socialism-Communism."

The second theory of the ruling class is the libertarian one. Here, the bad businessman, who makes his money not by satisfying consumers but rather on the basis of government subsidies financed through compulsory taxes, exploits not the laborer, but the taxpayer. This in my view is a correct theory. For a bibliography on this see:

Domhoff, 1967, 1971, 1998; Hoppe, 1990; Hughes, 1977; Kolko, 1963; Mises, 1978; Oppenheimer, 1975; Raico, 1977; Rockwell, 2001

Domhoff, G. William. 1967. Who Rules America? Englewood Cliffs NJ: Prentice-Hall.

Domhoff, G. William. 1971. The Higher Circles: The Governing Class in America. New York: Vintage Books

Domhoff, G. William. 1998. Who Rules America? Power and Politics in the Year 2000, Third Edition, Santa Cruz: University of California

Hoppe, Hans-Hermann. 1990. "Marxist and Austrian Class Analysis," The Journal of Libertarian Studies, Vol. 9, No. 2, Fall, pp. 79-94;

Hughes, Jonathan R.T. 1977. The Governmental Habit: Economic Controls from Colonial Times to the Present. New York: Basic Books, 1977.also shows US ain’t laissez faire in 19th cent)

Kolko, Gabriel. 1963. Triumph of Conservatism, Chicago: Quadrangle Books

Mises, Ludwig von. 1978. The Clash of Group Interests and Other Essays. New York: Center for Libertarian Studies.

Oppenheimer, Franz. [1914] 1975. The State, New York: Free Life Editions

Raico, Ralph. 1977. "Classical Liberal exploitation theory: a comment on Professor Liggio's paper," The Journal of Libertarian Studies, Vol. 1, No. 3, Summer, pp. 179-184

Rockwell, Jr. Llewellyn H. 2001. “Liberty and the Common Good” December 31;

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