"Exploitation? That only happens in sweatshops!"
This is a common misconception about the nature of capitalism. But how is this possible? "Surely, the average Joe at G.M. is not being exploited! He is well paid, has benefits and is not being whipped by his boss! So where's the exploitation?"
Exploitation is the foundation of all class societies.
Under slavery, the exploitation is direct and obvious. The master owns the means of production (tools, fields, anything that aids in production) and he owns the laborer, and therefore owns all the products that the slave produces. While the slaves toil ceaselessly in the fields, under the whips of the overseer, the master reclines in comfort, accumulating all the wealth the slaves produce minus what's needed to maintain them (i.e. food, shelter).
Under feudalism, the exploitation is little better than slavery. The peasants work on the lord's land, producing enough to feed themselves in addition to the lord - in exchange for rent. The peasants produce a surplus which goes to the lord, and the lord has many peasants, so he controls enough surplus to feed his knights, horses and to store some in the grain house. The peasants are tied to the land because if they leave, they will starve to death because they have nowhere else to go.
Under capitalism, the exploitation is hidden. It appears that a worker works for 10 hours and receives $100 as his daily wage, and the capitalist receives $100 profit and the two shake on it and everything is fair. "A fair day's work for a day's wage," as the saying goes.
But just as the sun appears to revolve around the Earth, capitalism appears to be a class society (that much they must admit) without exploitation. The opposite is true.
The worker mentioned above, works in a car factory (this is a hypothetical situation used to prove a point and applies to retail workers, office workers, and to a certain extent government workers). This worker, Joe Shmoe, works 10 hours a day, and receives $100, or $10 for each hour of labor he completes. Joe works and works, producing 1 car per hour. After 5 hours he produces 5 cars, each costing $20 a piece (again it's hypothetical). 5 cars x $20 = $100 worth of cars. The amount of work Joe has completed after only 5 hours has replenished the cost of his wage! So what about his other 5 hours of labor? The capitalist pockets the difference. This is the secret of where profits come from. Profits are derived from unpaid labor, and therefore, are a symptom of a system based on exploitation. The raw amount of exploitation, in this case $100, Marx called surplus value.
"But no one forced Mr. Shmoe to work at the factory! He doesn't have to work there if he doesn't want to. He can leave at any time and find a better job!"
This is what the apologists for capitalism say when confronted with the fact of capitalism's inherent exploitation.
True, no one forced Joe Shmoe to work at GM. There was no master standing above him, whip in hand, forcing him to take this job. But in the hands of the capitalist class, there is another whip; the threat of starvation and homelessness. The physical whip of the slave-driver or feudal lord has been done away with and been replaced with the economic whip.
There is no rule that the wage-slave must work for this or that capitalist; indeed, one of the very characteristics of capitalism is that the laborer is "free" to choose his employer. But the subtle subtext in that phrase is that "the wage-slave must work for this or that capitalist". The compulsion to labor for the benefit of another still exists because workers have no other means of survival since they don't own their own means of production (farmland or factories). Workers under capitalism are free to choose their exploiter, but they have no choice but to be exploited by someone.
Since the capitalist class owns the means of production, all the products and wealth it produces belong to them, whereas the people who do not own the means of production, the "have-nots", the proletariat, must sell the one thing they do own, their labor power, to the capitalists in order to survive. This explains the huge inequalities in income distribution that mainstream newspapers and economists talk about once in a great while.
Like everything under capitalism, labor power is a commodity. Labor power is the ability to work. But labor power, unlike any other commodity, has this special characteristic: it has the ability to create wealth. Exploitation is built into the very sale and consumption of labor power.
But Joe does not work in a factory all by himself. He works with other workers, say 1,000 of them. So while Joe Shmoe has made $100 at the end of the day (most of which will go to bills, buying food, paying rent/mortgage), Bill Yates has made $100 x 1,000 workers, or in other words, $100,000! So those who toil the most receive the least, and those who toil the least receive the most. This analysis explains the persistance of the enormous gap in income between the "haves" and the "have-nots" that existed from the birth of capitalism and which will continue until its well-deserved death.