Alasdair MacIntyre is a very important contemporary moral philosopher whose works have fundamentally transformed our understanding of morality. But recognizing his brilliance does not imply accepting all of his conclusions without examination. In particular, MacIntyre’s uncritical embrace of Karl Marx’s theory of how capital is created leads him to a demonstrably false moral critique of capital. 

MacIntyre’s Understanding of Capital 

MacIntyre, as a close student of Aristotle, strives to reach the essence of phenomena he studies and to separate that essence from accidents that may or may not accompany it. For instance, the essence of what makes something a dog would be bound up in its DNA and the type of form that produces as the organism grows. An accident of “dogness” would be that something is wearing a dog collar. It is foolish to rely on the accidents of a substance to identify it: We don’t want to conclude that a stray threatening to bite us is not a dog because it has no dog collar, nor should we conclude that a cat is actually a dog because someone happened to put a dog collar on it. 

As MacIntyre points out, Marx himself was deeply influenced by Aristotle and also was seeking to achieve this separation of the essence of some phenomenon from its accidents. So when MacIntyre seeks for the essence of capital, he argues, following Marx, “neither capitalists nor productive workers were able to recognize that capital is ‘unpaid labor.’” As such, “There must . . . be a class of owners of the means of production—land, tools, machines, raw materials—who as employers pay out . . . wages that are sufficient to sustain the needed labor force in being, but that are less than the value that those workers produce. That surplus value is appropriated by the employers, for their own economic purposes” (emphasis mine). 

MacIntyre is hardly alone in this understanding of the essence of capital. To give a recent example, Leighton Woodhouse writes in Compact: “The owners depended for their profits, and therefore their social power, upon the exploitation of the workers, which meant extracting more monetary value out of their labor than that labor was worth on the open market . . .” 

It would be foolish to deny that there are many historical circumstances in which employers have been able to exploit their workers and garner more than their fair share of the output of their joint efforts. When and where that has been the case is an empirical question. But MacIntyre’s essentialist analysis of the relationship of capital to labor is seriously misguided, and a better Aristotelean analysis of capital demonstrates that fact. 

The Genesis of Capital 

So what is “capital,” and where does it come from? A useful definition of “capital” that helps get at the essence of a fundamental economic reality is this: “capital” is whatever goods a person, family, community, tribe, society, or nation might possess that enable it to produce some “consumer” goods at some future time. 

Consumer goods are those valued for their ability to directly satisfy some desire: if I’m thirsty, a glass of water will directly quench my thirst. (Naturally, I might be mistaken about a good’s ability to satisfy a desire I have: I might buy a book by Paul Krugman, thinking it will help satisfy my desire to learn economics, only to be sorely disappointed when I read it.) Capital goods, on the other hand, are not valued for the immediate satisfaction of some want, but as intermediate steps on the path to acquiring some immediate satisfaction. For example, if I own a log splitter, I don’t achieve any immediate satisfaction of my wants from that ownership. (At least most people don’t: someone might collect log splitters and just enjoy looking at them!) But it enables me to produce firewood in the future, which when burned can satisfy my need for warmth on a cold day. If my community clears brush to create some shared allotments, it enables us to produce vegetables at a later date, which will satisfy our hunger. 

Following the great Aristotelean-Austrian economist Carl Menger, we can look to the simplest situations involving the origin of capital goods in order to get at their essence. As Menger described his procedure: “In what follows I have endeavored to reduce the complex phenomena of human economic activity to the simplest elements that can still be subjected to accurate observation . . . [and] to investigate the manner in which the more complex phenomena evolve from their elements according to definite principles.” 

So let us go to the “simplest elements” and consider Alasdair MacIntyre stranded by himself on a tropical island. Each day, he goes down to the beach and tries to catch some fish. One day it occurs to him that, if he can build some sort of spear, he could catch more fish in less time than he can catch by hand. 

Since in each day’s work he has been able to catch more than enough fish to survive, he decides to spend a day sharpening a wooden branch into a spear while eating his leftover fish from the previous day. The spear he fashions becomes a capital good, since it is part of a plan to produce more consumer goods (fish) in the future. It is an example of what Menger’s student, Eugen von Böhm-Bawerk called “roundabout” production: by this he meant that, rather than immediately trying to grab a fish, MacIntyre has instead approached the task in a more roundabout fashion, by making a spear, an intermediate step, and then using it to fish. 

Once MacIntyre has produced this spear, he is in possession of a capital good, but it would obviously be ridiculous to claim that he had “exploited” anyone to come into possession of it: who was there for him to exploit? 

Turning to a more realistic example, imagine witnessing ancient humans early in our species’ development of tools. The hunter-gatherer band uses obsidian to make tips for spears, which involves chipping away at pieces of obsidian until one achieves a sharp point. Note that these spear points are capital: no one in the band directly satisfies any want with the points; they are an intermediate step on the way to some tasty mammoth burgers. 

It so happens that this group contains one member who is especially adept at making spearheads, and she can make them at double the rate of her fellow members. This being a hunter-gatherer band, social life is probably very egalitarian, and she will most likely share her “extras” with anyone who needs them. 

But let’s say that instead she keeps her extra spear points for herself, or uses them to trade for something else. Her fellow band members might accuse her of selfishness, but they could hardly claim she had “exploited” their labor to account for her accumulated capital. After all, 100 percent of the labor that produced those spear points was her own. 

Now shift forward in history to an early farming community. In this village, while there is still a great deal of social solidarity, each farming family is thought to be entitled to the product generated on their own farm. In a crisis, those with food are expected to share with those without, but otherwise the figs, olives, grapes, lentils, and wheat the family grows are their own. The amount of capital in this community is far greater than that in the hunter-gatherer band: The capital goods present include plows, fences, threshing tools, millstones, oxen, hoes, scythes, earthenware for storing food, and so on. Again, imagine a particularly skilled (or energetic) family in this village that is able to produce more food than any other family. Over time, they can trade their surplus food for any of the capital goods used in the village. Has this family exploited the labor of the other villagers to acquire their capital?  

Once again, it is hard to see how this charge could stick. Since in this community, it was understood that everyone was entitled to the production of their own farm, barring serious emergencies, the highly productive family could have simply eaten their own higher production or fed it to their pigs to fatten them. The other villagers willingly traded capital goods for food to enhance their own diets. How were they “exploited”? 

Moving on to an even more complex economy, we can see that the Marxist theory of exploitation takes no account of technical innovation: if an early industrialist invents a new method of, say, spinning cotton, which is more efficient than any existing method, and thus accumulates more capital as a result, who was exploited in this process? What “unpaid labor” resulted in this capital accumulation? 

Indeed, even in an ideal communist society, if the workers at, for instance, a shoe factory are paid the total value of the shoes they produce, the factory will soon be in serious trouble. The total value of the output is not solely due to the workers: it comes from the workers in combination with the capital goods they make use of, such as the factory building itself (which protects them and their materials and machines from the weather), and all of the machinery within it that aids in making shoes. If the value of the total output is paid to the workers, they will soon find themselves working with broken machinery in a crumbling factory, since the capital goods must be maintained.  

If the communist regime wants the factory to keep up with technological developments, even more of the value of the output must be set aside for research and for buying new equipment. The category of capital in no way disappears even under theoretically pure communism. In fact, actual communist economies typically invested a large amount of the output of their current workforce into industrializing their society in the interest of future output. And a problem that has plagued businesses organized as worker cooperatives has been that the workers sometimes have tried to pay themselves the full value of their entrerprise’s output, and failed to maintain and enhance their capital stock. 

These examples should suffice to demonstrate that, contra MacIntyre and others following Marx in this regard, the essence of capital is not “unpaid labor” or “exploitation.” MacIntyre’s error lies in mistaking the value produced by any enterprise employing both capital goods and labor as stemming from labor alone. That is obviously false: just consider the output of our shoe factory if, instead of providing the workers with a building and tools to produce shoes, we just sent them out to a field with a herd of cows and told them, “Make leather shoes.” And this fact has nothing to do with any “capitalist mode of production”: as we have seen, returns to capital are no less mandatory in a communist society than in a capitalist society. 

Understanding the Source of the Mistake 

Marx was, and MacIntyre is, very intelligent. So how could they come to such a demonstrably false understanding of capital? A plausible explanation is that they were distracted from penetrating to the essence of capital by the multitude of historical circumstances in which capital (accidentally rather than essentially) was accumulated by the exploitation of unpaid labor. An obvious example would be the slave economy of the American South: Plantation owners built up large amounts of capital through the forced labor of their slaves. Short of outright slavery, colonial empires often coerced native populations to work at a wage set by diktat and really did build wealth based upon “unpaid labor.” And a more subtle, though perhaps even more common instance of exploitation is when a dominant capitalist class in some society has shaped the legal environment to favor their own interests at the expense of the workers, by, for instance, banning strikes or collective bargaining, or by rent seeking to lock in profits for their own business at the expense of competitors who would have been willing to pay workers more. 

In light of all of the genuine exploitation of workers that really has occurred in history, we can comprehend how even someone as brilliant as Alasdair MacIntyre could mistake this exploitation as the essence of capital. Nevertheless, while understandable, it is still a mistake. And it is a damaging mistake because the setting aside of current consumption, with an eye to the future, is essential for any prosperous economy. We should seek to eliminate social structures that unjustly advantage capital at the expense of labor without embracing the falsehood that all capital is simply “unpaid labor” and that it arises from “exploitation.”