Public ownership of the means of production is the distinguishing characteristic of communism. You cannot call yourself a communist unless you want public ownership of the means of production. Socialists and many non-aligned South Africans also claim to support public ownership of the means of production.
Marx coined the term “the means of production” and rendered humanity a great disservice thereby. The confusion he created between the means of production and the means of wealth creation dogs us to this day. Productive capacity – Marx’s “means of production” –is in no way whatsoever the means of creating wealth. You can own all the so-called means of production on planet earth, but they will remain useless and worthless until you find a consumer willing to part with some of their wealth to buy the products you use your machines and factories to produce.
Machines, land, capital and labour are useful but coincidental factors in the creation of wealth. You may want to call them “the means of production”, but - because they do not of themselves create wealth - by doing so you denote little or nothing of value to an understanding of the origin of wealth and - by extension - prosperity for all in societies.
Creative entrepreneurs often invent consumer needs before satisfying them: think of Kellogs corn flakes. When Dr Kellog announced that he would wean Americans off cooked breakfasts of bacon and eggs or flapjacks and corn syrup to an instantly produced bowl of flakes and milk, people laughed. Yet his innovation swept not only the USA but the world. By the 1990s, Kellog owned 40% of the American market and markets in another 150 countries, so it could be said that he owned the means of production of instant breakfast cereals. Armed with this massive productive power, Kellog targeted the continental Indian market consisting of a potential 950 million breakfast cereal consumers. It spent $65-m attacking this market, and then millions more, but by 2010 – nearly 20 years later - its share of the Indian breakfast food market was still well under one percent. The lesson? Do not assume productive power is the pathway to profit.
The myth that productive power is the means of creating wealth is pervasive. Politicians and economists are obsessed with production. Politicians and policy makers think that production “creates jobs”. This is a fiction and a fraud. It is consumption that creates jobs.The words of Adam Smith in the Wealth of Nations sum things up correctly: “Consumption is the sole end purpose of all production; and the interest of the producer ought to be attended to, only so far as it may be necessary for promoting that of the consumer ... “.
If governments really want to see prosperity for all and believe they have a legitimate mandate to formulate policies to achieve it, they would implement policies that have nothing whatsoever to do with production, and everything to do with encouraging consumption. How do you encourage consumption? Easily: by removing obstacles to consumption, inclusive of but not limited to licensing obligations, trade restrictions, and compliance requirements, by removing taxes of all kinds that increase the price of goods, and by reducing income taxes and other taxes that diminish consumer spending power.
Marx’s “means of production” is a red herring. It was dreamed up at a time when the existence of factories, mechanisation and large scale production could easily have been confused with the means of wealth creation. But even in Marx’s time, factories, mechanisation and large scale production only produced wealth by means of trade and consumption. It is easier to see today, in the age of purely intellectual productive capacity, of digitisation, and of the emergence of a virtual universe, that the intrinsic means of wealth creation is human creativity.
But the alchemy of wealth creation is sold short if reduced to a simple factor like human creativity. It is much more than that. It is an amalgam of an infinite array of conditions and human characteristics, among which we can identify consumer behaviour, courage, need, intelligence, geography, circumstance, luck, skill, energy, and a million other conditions and characteristics. When these are all put together, they conspire to produce a person or a group of persons who recognise or create a consumer need and then go on to produce what is required to satisfy that need at a profit. Microsoft is a global company, and it is no exaggeration to say that the entire global history of personkind conspired finally to create a Bill Gates.Nobody can buy or own the means of wealth creation because nobody can buy or own the alchemical process of entrepreneurship.
Communists and socialists who think it important to procure the public ownership of the means of production need to realise that if or when they succeed they will procure for the public nothing worth owning. If they actually pay for those nominal means - as opposed to simply stealing them - they will be buying a proverbial pig in a poke. Moreover, if and when they own the means of production, they are likely to discover that the obverse side of every asset is a liability. Procure the public ownership of all the assets currently productive in a country and it is certain that you will find yourself saddled with a veritable universe of liabilities ranging from taxes, licenses, international and local compliance issues, environmental pressures, debt and consumer common law obligations.
Let those tired, cliché-ridden and obsolete dirigists have the means of production if that’s what they really want. It will only impoverish them. In the meantime, the real wealth creators, who might be kind enough to hire those means as and when they require them, will get on with the real work of creating consumption.
Author Colin Bower is a journalist and former book publisher. This article may be republished without prior consent but with acknowledgement to the author. The views expressed in the article are the author’s and are not necessarily shared by the members of the FMF.