Nearly all managers believe in the theories of Adam Smith; and nearly all trade unionists believe in the theories of Karl Marx. The problems with the theories are the following: they are very similar, and they are completely wrong. Summarised, they are:

For every economic gain there is a corresponding loss

'Labour' behaves like a single entity

Economies are systems

Interests of different constituencies are automatically opposed

It is difficult to root out these myths, because they are so much part of our everyday assumptions.

An example: it is common for redundant workers or trade unionists, when hearing of a lay-off plan, to complain that “It’s profits first, not people.” The research we quote above indicates that only some cases of redundancies help the business succeed; and that in all cases the managers making the plan have absolutely no idea whether it will help the business or not. They are guessing.

So when the workers or trade unionists say that “It’s profits first” they are giving the executives plaudits that they do not deserve. They also want to pretend that managers are succeeding. The roots of this lie in the theories of Karl Marx, as we shall discuss more below.

Thus in the mid 1800s we find Karl Marx writing: “In handicrafts, the workman makes use of a tool. In the factory, the machine makes use of him.” ⁱ Wrong! It is a person forcing other people to work at the pace of the machine. It is exploitation; but done by people, not machines. Marx goes on to refer to the factory as “a lifeless mechanism independent of the workman”. Here is a myth at its genesis. The truth is that factories are made, designed and run by people. Exploitation is the result of bullying; a dysfunctional relationship. It is simply passing the buck to blame some lifeless machine called Capitalism.

Here's a summary:
What Karl Marx says	Profits come from reducing the hourly pay rates for the worker.
What Adam Smith says	Workers lumped together represent 'labour', the only important thing of which is cost, and profits come from reducing costs.
What actually happens	Profits come from customers buying stuff. Whether they want to buy depends exclusively on employees, the cost of whom is often relatively unimportant.

You may well ask: if these theories are so wrong, why are they so popular? Good point. But we are only dissecting the economic theories here. Look at the philosophical themes these two thinkers addressed: Adam Smith called for freedom; Karl Marx for justice. These are two precious babies to keep hold of as we throw away some mucky bathwater. (Notice how the myths pit these values against one another).

Campaigning groups
The other point about exploitation being a form of bullying, not an arithmetical formula, is that it explains why it goes on charities, trade unions and pressure groups, some of which exploit staff and volunteers, taking too much advantage their willingness to help the cause. Many who have been involved in such organisations cheerfully discuss, in private after a long, poorly paid day, how ironic it is that it is actually nicer to be working for MacDonald's or Cisco - where you have career progression and better pay.

This is a big deal! If employee organisations treat their own staff worse than multi-nationals then we need to think hard. Are we trying to change a machine with a machine? Are we are trying to unshrink the world with shrunken people? Are we assuming that good intentions are better than good results? What does the anti-capitalist want to replace the hated machine with?

Organisations, political movements and economies comprise people. The way we treat each other can never be reduced to the status of being a means to an end; how we treat each other is the only thing that matters.