Toward a Libertarian Theory of Exploitation
So what, in general, is exploitation? Broadly, let’s say that Ann exploits Betty when Ann takes unfair advantage of Betty. Harmful exploitation occurs when A unfairly benefits from B at a net expense to B. In contrast, mutually advantageous exploitation occurs when A takes unfair advantage of B, but there is also a net benefit to B. In addition, we can distinguish consensual and nonconsensual forms of exploitation. Let’s say a transaction is consensual when consent is given by a competent adult in the absence of direct coercion or fraud.
Now it would seem uncontroversial that nonconsensual harmful exploitation is wrong. If I’m a business owner and Lefty and Knuckles come by and inform me that something very bad could happen to me if I don’t pay $500 a month to their “protection” organization, then, if I pay up, they are benefiting at my expense against my will. This is a clear case of exploitation. Interestingly, a more widespread form of exploitation of this kind tends to go without much comment. That is, when the government takes a portion of my paycheck each month against my will and informs me that failure to pay up could result in something very bad happening to me, it seems that this too is a form of exploitation. I don’t want their services any more than I want the “protection” services of Lefty and Knuckles, but they benefit at my expense anyway.
At any rate, the interesting cases are those that purportedly involve mutually advantageous exploitation. These are cases where A unfairly benefits from B, but B also benefits. But benefits relative to what? It seems we should say that B benefits relative to a no-transaction baseline. And at this point the libertarian has had enough . . .
“What is all this crap about exploitation? B gives valid consent to A and B benefits from the transaction. Where’s the unfairness here? Is it unfair because B would prefer more, or because s/he thinks s/he deserves more?”....
But as Upaya points out, the exploited party to a transaction may be a net beneficiary compared to no transaction at all, and yet still come off worse compared to how he would have done in a free market. The standard practice of monopolists, of charging "what the market will bear," depends on charging less than the utility of a good or service to the consumer. But thanks to restrictions on market entry, the seller can still sell at a price far greater than his own production cost. Employers, on the other hand, take advantage of statist intervention that enables them to charge as little as the market will bear.
Take a case in which a person in the Third World takes a job in what we in the First World would term a sweatshop. She voluntarily consents to work there and she benefits on the whole because the wages are significantly higher than anything else she could get in the local labor market. Could she be exploited? Let’s add some background details.
The IMF and the government of her country have implemented “structural adjustment” (i.e., crony capitalism in new dress) and as part of this the land that her family has farmed for generations has been sold out from under them to a politically connected corporation. And since the property rights of peasants are not protected in this corrupt legal framework, she has no real choice but to move to the slums of a large city and seek paid employment. The labor market is by no means free (unions are highly legally restricted and labor organizers are regularly hurt or killed).
The factory she works for pays a higher wage because of greater capital investment, and hence greater worker productivity. So while she benefits from employment at the factory relative to both a no-transaction baseline and to her other employment options, she is still arguably exploited by the employer because the employer is able to take advantage of her artificially low bargaining position.
But what to do about it?
We have no right to ban voluntary, mutually beneficial transactions even if they are exploitative. To interfere in this transaction is to interfere with the self-determination and rights of free association and contract of the people involved. Moreover, if this exploitative transaction is currently the best option for our subject, then taking away that option will just make her worse off. Being exploited is bad, but having one’s freedom and autonomy violated is worse....
So while leftists are right to insist that even voluntary transactions can be exploitative, libertarians are right to insist that even exploitative voluntary transactions should not be subject to state interference.
....[T]he appropriate response to globalization is not to increase restrictions on trade, but to fight those conditions that give some the ability to take unfair advantage of others....
B.K. Marcus, in commenting, draws on his "Exploitation" article at Black Crayon, proposing Benjamin Tucker's individualist anarchism as the proper basis for a libertarian-left consensus on exploitation:
Individualist Anarchism sees the exploitation of certain groups or classes as the visible symptom of a deeper problem whose root cause is coercive monopoly. The individualist does not sanction the use of force to fight the symptom, but only to fight the coercive root cause itself. Non-coercive monopolies are to be opposed only through peaceful and cooperative means, such as innovation and education.