Peter,

I can see you believe that without the machinations of government and its accompanying coterie of hangers-on, that those at the bottom of the pile would would be looked after - or even have their lot improved.
But, at the risk of going around in a huge circle, that's not what happened when capitalism streaked out of the box. What happened was that that those on the lowest socio-economic rung in many cases were exploited literally to within an inch of their lives. The same thing goes on today in third world countries where governments don't have appropriate regulations in place to protect, even to a minimum standard, the welfare of workers - where profit is the only language spoken.
If you give free reign to a system that places profit above all else - what could one realistically expect to happen?
And do you not suppose that people would somehow be unable to resist the temptation to arrange themselves into hierarchies and pseudo-governing bodies if an official government was not in place? I think that is exactly what they would do.
I realise that I'm repeating myself here - don't mean to have a closed view, but this is how it seems to me.

Even if all your premises were conceded (theory of exploitation), and even ignoring all questions of ethics, still the intervention has to produce a result that is better than worse for the masses.

Government interventions don’t satisfy any of these conditions. At best they make particular beneficiaries visibly better off, by a corrupting process that makes everyone much worse off.

Let us assume temporarily for the sake of argument that the interventions made the masses worse off. Then obviously they wouldn’t be justified.

Whether they made the masses worse off cannot be judged just by looking at the benefits that are seen. We have to also consider the detriments that are not seen.

This cannot be done with the standard statist spectacles because, somewhat like a religion, they assume that in the state we have found a superbeing that can suspend the scarcity of nature, and confer benefits without corresponding costs. Once we adjust for the costs, the claims of the state to provide net benefits for society are always disproved – otherwise they wouldn’t need violence to achieve them!

The process by which capitalism raises the living standards of the masses is an unequal process.

At the most basic level, if you buy milk for $1, it means you value the milk more than the $1, and the seller values the dollar more than the milk. Otherwise no exchange would take place. So it is precisely the *inequality* between the parties that motivates them to trade up.

(But you might say, people shouldn’t be unequal in the first place. However:
a) it’s a universal fact
b) it’s caused by nature, not capitalism
c) it can’t be made to just go away, and
d) the least inequality between the state and the individual is greater than the greatest inequality between individuals under capitalism, because the state claims a monopoly of aggressive violence.)

Remember since violence and threats are illegal under capitalism, we are talking about *voluntary* transactions. Since profit is what is left over after the costs have been subtracted, the necessary implication is that the buyer valued the product higher than he valued the factors of production that went into it. Combining the factors of production was the work of the entrepreneur.

Since inequality is what motivated the parties to trade, therefore the greater the profit, the greater the maladjustment of the factors that has been removed, the greater the inequality removed, the greater the creation of value, the greater the satisfaction of the wants of the masses.

(Remember, the profits continuously disappear; but the benefit of knowing how to combine the factors that way accrues to the masses. And this is to say nothing of the further creation of value by reinvestment of profits to satisfy still other human wants.)

I repeat, Marx’s theory that profit is an immoral waste is wrong, and employers are not exploiting employees. If it was true, the condition of the working class would have got worse under capitalism as he predicted. The opposite happened.

One man’s profit is not another man’s loss. It’s not a zero-sum game, it’s a win/win. The rise in the standard of living was not the work of the state restricting production, confiscating property and forced redistributions. The rise in the standard of living is the result of a system based on profit and loss.

You might say, but why can’t we take some of the profit, and give it to the workers at subsistence level? You can. But what you can’t do, is provide a net benefit in this way. The capitalists are themselves in competition, and cannot operate on the basis of losses or the masses will send them broke. The intervention can’t and doesn’t make society as a whole better off. It makes us worse off.

And it doesn’t make the allegedly “exploited” workers better off. If it imposes costs *above* the market rate, it makes them unemployed. And if it imposes costs *below* the market rate, it simply means you’re forcing the employee to take money as *conditions* when they would prefer it as *wages*, that is all.

Although you might like to think you could adjust it to make things more equal, you can’t, because the process of adjusting things itself has unavoidable economic consequences.

People placing themselves under hierarchies is not the problem. It’s people being forced under hierarchies that they don’t want to be under that’s the problem.

Charity is good, but the entrepreneurs of India have done far more to raise the living standards of the poor than Mother Theresa ever did. But why should coercion be the preferred way of helping the poor? Why not voluntary help?

And that is to say nothing of the ethics, on which the following discussion is thought-provoking
http://mises.org/rothbard/ethics/hoppeintro.asp