The Capitalist - the Boss - pays workers to produce products for them to sell. In exchange for this, they pay the workers a wage. However, the wage is always less than the product is worth. This is the only way profit can be produced. The workers can never receive the full value of what they produce. This is the inherent inequality of capitalism.I would be lying if I said I never bought into this line of reasoning. It made perfect sense to me in my Marxist/Anarchist days, while in my early 20s. But it has been a long time since I've bought into this line of reasoning.
Don't get me wrong. Capitalism can be, and usually is, exploitative. But I don't think it necessarily has to be. The problem with it is not that the workers on the shop floor do not receive all of the company's revenue in the form of compensation. The problems occur when most of the capital - ownership of the means of production, to use the Marxist jargon - is concentrated into relatively few hands and the bulk of the population is reduced to propertyless proletariat with no real bargaining power. At that point, excessive profits become a form of rent seeking, meaning generation of revenue due to leverage in the marketplace rather than through actual production. Not surprisingly, this happens a lot in this day and age.
The Marxist notions of surplus value go too far the other way, though. It's also important to note that Marx developed many of his theories at a time when capitalism was almost feudal in its nature. The vast majority of wealth was inherited, or extorted from the land, or more aptly, the people who worked the land. Either at home or from indigenous peoples in other parts of the world. Property, plant and equipment were owned outright by someone who had wealth sufficient to come into possession of them. The rise of joint-stock corporations, themselves still novel things in the early 19th century, changed this somewhat. I say somewhat because only the wealthy could afford to invest. But it also made a non exploitative form of capitalism possible.
The theory of surplus value, strictly applied, ignores the fact that not all "profit" - revenue generated above and beyond what the workers are compensated - ends up in the pocket of some top hat and coat tails tycoon. Though even if some of it does, is some degree of compensation for the risk that the capitalist took in staking venture capital on the company not warranted? Plus, much of the "surplus value" is reinvested in the company with the intent, at least, of making it more productive. Libertarian arguments against taxation run up against a similar flaw: sometimes the taxation is invested in infrastructure and other capital projects that can't or won't be provided by the private sector for whatever reason, but nonetheless are vital for the productivity and ultimately the profitability of the private sector.
Lack of capital markets, meaning a lack of means of investing today to make a profit tomorrow somehow, is the achilles heel of socialism, or at least the 19th century conceptions of socialism that romantic leftists ever since then, seem enamored with. Whether a system of universal state ownership or an interlinked network of producer's, consumer's and tenant's co-operatives, the inability to 'go public' and raise capital to increase or expand operations hamstrings economic growth and development. Some or another system of capital accumulation seems essential to a successful economy, and seems contradictory to most popular conceptions of revolutionary socialism.
Which isn't to say that the objectives of socialism: greater equality and reduced alienation of labor, need to be abandoned. Indeed they would seem to be essential. Left to its own devices, capital accumulation in a capitalist economy would have the opposite sort of effect through overinvestment and eventual downturn. So what can be done?
Better ideas for our time would include one or more sovereign wealth funds. This is state investment in capital markets, with growth and dividends contributing to public finance. From this a citizen's dividend or a social dividend, either in the direct form of a guaranteed income or a non transferrable share in said sovereign wealth fund could be issued all citizens. Employee stock ownership can achieve a similar kind of effect at the workplace level.
My preference is for these kinds of market socialist ideas. Classic social democratic proposals: progressive taxation, strong unions, loose money policies, higher minimum wages and so on are fine, but face resistance in the form of investment strike and capital flight. Businesses pass the cost increases onto consumers, and begin well funded and professional PR campaigns to discredit the government attempting to implement said policies. This is done frequently and effectively by corporate lobbies intent on resisting a regulatory and redistributionist clampdown. The Tea Party movement in America, for instance, was largely health insurance industry astroturf cooked up to resist Obamacare.