Seize the Means of Production!

Marx famously believed that conflicts between the middle-class owners of productive enterprises (the “bourgeoisie”) and the workers in those enterprises (the “proletariat”) would result in the collapse of capitalism. When this happened, the workers would seize control of the government, ban private ownership, and all profits would thereafter accrue to the state, which would redistribute the wealth far more broadly.

Such a revolution actually did occur in Russia, and the state did in fact ban private property. And for a while, this worked magnificently, as Russia evolved from a backward, peasant society into the second most powerful country in the world in less than 30 years (1917–1945). Unfortunately, once the USSR's simple industrial society found it necessary to evolve into a vastly more complex postindustrial society (to compete with the United States), top-down command strategies proved to be no match for bottom-up free market strategies, and the USSR went the way of the dodo bird.

In Western Europe, pure communism in the Marxist sense was never adopted. Instead, Europe found a “middle way.” Socialist governments dominated the landscape for many years after World War II and those governments tended to nationalize not the entire economy but only the most important industry sectors—especially banks, infrastructure (transportation, communications, and energy) and large employers. Smaller enterprises were generally permitted to remain in private hands. The idea was to control the destiny of the economy and capture the profitability of the large enterprises so that wealth could be redistributed.

But Europe found, as the Soviet Union found, that state ownership of a corporation soon converted it from a golden goose into a ward of the state. Instead of enjoying large profits that could be redistributed, the Europeans found that state-owned enterprises misallocated capital so badly that they had to be subsidized to keep them from collapsing. And because they were far and away the largest employers in the countries, subsidized they were, nearly bankrupting their owners.

Eventually, even the most dirigiste Europeans saw the light—partly because Margaret Thatcher shined it vividly into their eyes—and began rapidly privatizing the state-owned enterprises. The first wealth-redistribution strategy, seizing the means of production, had hit the wall.