40.3 – Class
Learning Objectives
By the end of this section, you will be able to:
- Define class
- Explain the difference between workers, rentier, and business owners
Prior to the advent of what came to be orthodox economics, political economists from Adam Smith to Karl Marx all constructed their theories in terms of the various classes that existed in their times. Today, many heterodox economists continue to utilize a class-based method of understanding how people are organized in actual economies.
Class, here, simply refers to a group of people who are similar in the way they earn a living. That is, people in different classes make their incomes in qualitatively different ways. Notice, then, that class means something different from just rich versus poor, or middle- versus upper-class, as the term is usually used. Two landlords, for example, may be on opposite sides of the income spectrum but still belong to essentially the same class in that they both make their money by collecting rent–which is to say, by owning property.
Traditionally, economists have broken down the structure of capitalist economies into three classes: workers (the ‘proletariat’), landlords (the ‘rentier’), and business owners (capitalists, or the ‘bourgeoisie’). The way a capitalist earns his income, which again is what defines the class, is by owning the means of production (the machines, computers and software, and so on with which products are produced) and controlling the marketing and eventual sale of the product. In contrast, the worker, strictly speaking, does not have access to the means of production except by agreeing to work for the capitalist.
The events that have populated these two classes in their modern forms with actual people–the haves and the have-nots, as it were–are unavoidably historical in nature. For now, let’s focus on the concepts of class itself. Workers and business owners are related in that they are both involved in producing products for sale; yet, they are different in terms of the control over that process that property affords the capitalist as opposed to the worker. Similarly, capitalists and the rentier class (landlords is really too restrictive a term here) are similar in that they both earn their income, ultimately, from ownership of something; but they’re different because the capitalist must always be concerned at some point with selling a product, whereas the rentier is strictly concerned with extracting some sort of rent or dividend.
Comparing orthodox and heterodox theories
In chapter “The Orthodox Theory of Labor Markets” it was argued that income is derived from ownership of assets or ‘the means of production’. Workers, for instance, own their labor from which they earn wages (salaries, and so on), landlords own land and earn rent, stockholders own shares of businesses and earn dividends, and so on. That argument may sound quite a bit like the class-based approach laid out in this section; however there are subtle but important distinctions that must lead us to conclude that the orthodox and heterodox approaches are really nothing alike here.
The key distinction comes down to recognition of power (and not just the power associated with noncompetitive markets). Take for instance the notion that a worker owns her labor as an asset and that her employer owns the business assets (maybe, the computer and software the worker uses to do her job). Orthodox economists treat these as essentially the same: productive assets owned by individuals.
But, in treating everyone involved in producing as owning productive assets, what orthodox economists have really done is remove the notion of class altogether. Since everyone is an owner of one variety of assets or another, then everyone is essentially a member of the same class, the owner class. This puts everyone on the proverbial level playing field in the eyes of orthodox economics. And from there we can argue that competition will ensure there is no power of one group over another, only the market system assigning incomes based on contribution.
Heterodox economists don’t make this logical leap. Classes, they argue, are distinct, but not isolated. That is, each class is in part defined by its connection to other classes–the worker uses the computer, the employer owns it. And since we’re talking ultimately about how much each group gets paid, there’s bound to be conflict. Indeed, as the beginning of this chapter suggests, that conflict can sometimes become violent.
a group of people who are similar in the way they earn a living