Restoring the Republic’s Productive Power - Part 2

Free Labor versus Oligarchy and the Political Economy of Value

This next essay is a deep dive into one of the oldest and most decisive struggles in human history — the fight between free labor and oligarchy. It is a battle not only over who works and who rules, but over the meaning of value itself: whether wealth is born from productive effort or from the power to extract.

In 2015, over a weekend at the Civic Center in Silver Spring, Maryland, I filmed an econothon — six lectures on political economy exploring how value is created and destroyed framed with philosophy, psychology, and physical production. Despite studying economics and public policy, I encountered an equation I had never seen before — one that revealed whether a nation was expanding its capacity to create or merely living off what it had inherited (see previous essay).

For the past decade, I’ve sought to explain that equation and use it to reframe public policy discussions about value, wealth creation and how to determine the direction of an economy toward the latter.

With the help of tools like NotebookLM and ChatGPT, I’m building a foundation for the Political Economy Project: an effort to revive the moral and productive principles of the American System — a system of free labor and production that stands opposed to the domination of speculative finance and economic rent.

Free Labor: The Moral Foundation of a Republic

For Abraham Lincoln, free labor meant far more than the right to work. It meant the right to rise — to advance by industry, thrift and intelligence. It was both an economic principle and a moral law rooted in natural rights.

In his 1859 Address to the Wisconsin State Agricultural Society, Lincoln wrote:

“The prudent, penniless beginner in the world labors for wages awhile, saves a surplus with which to buy tools or land for himself, then labors on his own account another while, and at length hires another new beginner to help him.”

It was Lincoln’s model of social mobility through productive reinvestment — an economy where capital is not inherited privilege but accumulated labor. The farmer becomes an employer. The worker becomes a craftsman. The economy continually reproduces independence rather than dependency and subjugation.

Frederick Douglass, who escaped slavery and became one of its fiercest critics, called this principle the “philosophy of free labor.” He argued that labor, not capital, is the foundation of civilization, and that slavery in its ancient or modern forms exists wherever one class lives by the toil of another.

In his 1863 address “The Mission of the [U.S. Civil] War,” Douglass declared:

“Free labor means that every man has a right to work and to enjoy the fruits of his own labor. It means intelligence, self-reliance and a fair start in the race of life.”

Both men understood that free labor is not just an economic arrangement but a moral covenant. It depends on access to education, land, credit and opportunity; all of which require deliberate public policy.

In contrast, the oligarchical system, whether in the form of slaveholding plantations, colonial monopolies, or modern insider speculative finance, seeks to separate labor from property and reduce the worker to dependence. Its purpose is not to elevate, but to control.

The Equation of Free Labor: S′ / ((C + V) - S)

The conflict between free labor and oligarchy can be expressed in a single equation:

Rate of Profit = S′ / ((C + V) - S), where:

• Variable Capital (V): The labor that produces essential goods and services (food, housing, clothing and health care) that sustain the workforce itself.

• Constant Capital (C): The labor that maintains and repairs the nation’s tools, factories and infrastructure. Neglecting this category leads to the slow rot of the productive base.

• Overhead (S): The non-productive but sometimes necessary work that keeps the system running, such as bureaucracy, finance, defense, law enforcement and care for the unemployed. When this category grows beyond proportion it becomes a parasitic burden.

• Absolute Surplus (S′): The reinvestable surplus, the part of the workforce and resources devoted to building new productive capacity—new factories, railways, research and innovations. This is the true engine of growth.

When S′ divided by ((C + V) - S) rises, the nation grows stronger. It creates the means for upward mobility, scientific discovery and shared prosperity. When the ratio declines, the nation consumes its past and increases debt, allowing inherited wealth and speculation to dominate creative labor.

This simple formula measures the vitality of the republic’s moral and productive life — whether we are building a future or strip-mining our past.

Free Labor versus Oligarchy: Two Economic Systems

The Free Labor System

The free labor system depends on the creative power of the human mind. It organizes credit and policy to unlock that creativity — to expand science, industry, and infrastructure. The goal is progress through production, where every worker can rise by contributing to something that lasts beyond himself.

Free labor economies invest their surplus (S′) in the labor force and tools of advancement, which Lincoln called “improvements” and what Douglass called “the dignity of toil.” Public credit flows into roads, schools, power systems and machine tools. Government serves as the guarantor of opportunity, ensuring that speculation does not devour production.

The Oligarchical System

The oligarchical or rentier system extracts without producing. It organizes finance not for creation but for control, thereby concentrating wealth through speculation, debt and monopoly.

Its emblem is not the workshop or the foundry but the trading floor. It channels surplus into extractive asset bubbles, privatized rents and unproductive overhead. Labor is commodified, the producer is subordinated and progress is replaced by consumption.

Under oligarchy, the rate of profit S′ / ((C + V) - S) collapses. New productive investment shrinks while the cost of maintaining the old order rises. The nation survives by liquidating its past — selling assets, consuming savings and importing goods it no longer knows how to make.

When Empires Strip Their Colonies—and Themselves

Under oligarchy, the S′ / ((C + V) - S) ratio collapses not only within a nation’s borders but across the system. The same pattern that drains a domestic economy of productive power governs the logic of colonial conquest. The empire does not expand to create—it expands to extract.

When the productive base of the civilization stagnates, its financiers and monopolists seek fresh sources of tribute abroad while channeling maintenance into “profit.” Instead of reinvesting surplus (S′) in domestic industry, infrastructure and the workforce, this system seizes raw materials and cheap labor from weaker nations. The illusion of prosperity is maintained through inflow of plundered resources with a runaway shop race to the bottom. And the internal productive ratio (the capacity to build the future) continues to decline.

The Mechanics of Imperial Decline

In the colonial model, real surplus (S′) shrinks because investment is redirected from long-term productive projects to short-term imperial profit.

Capital that might have built factories, railways or research institutions at home is instead spent maintaining fleets, military garrisons and financial cartels and syndicates abroad. These are classified politically as “assets,” but economically they are overhead—pure S masquerading as growth.

Meanwhile, C, the cost of maintaining the imperial system, soars. The bureaucracy of empire (armies, administrators, and debt service) consumes the surplus that once could have renewed domestic capital stock. The infrastructure of the homeland deteriorates even as the imperial network expands.

V, the portion of labor devoted to sustaining the workforce, also weakens. Domestic industries dependent on cheap colonial imports collapse, wages stagnate and the working population becomes detached from productive skills. In effect, an imperial system promotes the ruling class to outsource both labor and production while importing short term wealth and exporting poverty.

Thus the real profit contracts. What appears as global dominance is in fact internal decay. For instance, look at the Dow Jones at 40,000 while the nation’s means of production is collapsing. The empire lives off the creative labor of others until it can no longer reproduce its own productive base.

Historical Patterns of Asset Stripping:

• Rome, once a republic of engineers and farmers, degenerated into a rent-collecting empire. Its citizens ceased to labor productively, relying on conquered provinces for grain, slaves, and tribute. The productive ratio inverted—surplus turned into maintenance—and collapse followed.

• Venice and the Dutch Republic, masters of early finance capitalism, used maritime empires to extract wealth from trade routes while neglecting domestic industry. When the flow of tribute faltered, their economies contracted rapidly.

• Britain, after industrial ascendancy, converted its surplus into imperial rents. The East India Company drained India’s textile and steel industries to sustain London’s finance houses. By the late 19th century, the City of London had become a global money market detached from British production—its profits depended on lending to others rather than building at home.

• The United States, the inheritor of the American System, began to repeat this imperial pattern after World War II. As financialization grew, productive investment declined. Industry was offshored, infrastructure aged and national wealth was maintained by liquidating assets, privatizing commons and consuming inherited capital. What had been a producer republic has drifted toward a consumer economy.

From Empire to Republic Again

To reverse this collapse is to return to the moral and physical economy of the republic—to restore the link between labor and capital, between surplus and progress. The lesson of every fallen empire is the same: nations cannot live forever on the labor of others or the savings of the past.

Only by dedicating surplus to creation—by raising S′ faster than C + V—can a people remain both prosperous and free.

The Path Forward: Reclaiming the Republic’s Productive Power

Rebuilding a free-labor economy today requires conscious reorganization of national priorities:

1. Restore Public Credit for Production: Create a modern Reconstruction Finance Corporation or National Investment Bank to fund infrastructure, industry and innovation.

2. Rebuild the Productive Base: Invest in manufacturing, energy production, regional agriculture and essential goods production to expand real surplus and profit.

3. Limit Speculative Finance: Reinstate structural separations like Glass-Steagall to confine credit within productive channels.

4. Raise Real Wages and Education: Strengthen labor’s share of value creation through higher union wages and equip the next generation for technological leadership.

5. Promote Scientific and Cultural Investment: Direct surplus into the creative faculties of society like research, art, and discovery.

These are not partisan policies. They are the economic architecture of a free people.

Epilogue: The Words of Lincoln and Douglass

Lincoln’s Annual Message to Congress in 1861 warned that “labor is prior to and independent of capital. Capital is only the fruit of labor, and could never have existed if labor had not first existed.” He knew that if the nation ever allowed capital to rule labor, the republic would revert to monarchy in everything but name.

Frederick Douglass carried that warning into the industrial age. In his Speech on Self-Made Men (1859), he said:

“We may explain success mainly by one word, and that word is work... Work that uplifts humanity has dignity and importance and should be undertaken with painstaking excellence.”

Both men believed the same truth: freedom is creation and production. To labor freely, to build, invent, and improve, is to participate in the divine act of progress itself.