Benefits Derived from the Means of Production under Capitalism

One of the most common charges against the classical-liberal program of elevating the respect of private property into the first principle of human cooperation is that private property benefits the haves at the expense of the great mass of have-nots. As the word “private” insinuates, the have-nots are deprived of the benefits of the goods that are under exclusive control of the haves, who are happy and few. Mises addresses this charge head-on in the opening pages of Socialism, by demonstrating the “social” function of private property.

To “have” a good in the economic sense, Mises argues, means to enjoy the benefits derived from this good. There are benefits that can only be enjoyed by one person at a time. This is most notably the case with certain personal services such as haircuts, as well as with a great number of consumer goods, such as foodstuffs, of which a given unit can only be consumed—that is, enjoyed—by one person. Things are somewhat different in the case of durable consumer goods such as TV sets or sofas, which can be enjoyed by several people, though not always at the same time.

But things are fundamentally different once we turn to production goods such as factories, plantations, machine tools and so on. The benefits derived from these goods do not exclusively accrue to their owner, that is, to the person who controls them in the narrow legal sense. Rather, they accrue to the consumers of the final consumer goods that are produced with the help of those production goods. By the very nature of things, therefore, the benefits derived from factors of production cannot be limited to their legal owners. It is therefore not these legal owners who “have” them in the economic sense. The economic “haves” of production goods are all the people who enjoy the consumer goods produced with their help.

Now the crucial point is that this is truly independent of the prevalent social organization. Consumers “have” the factors of production not only in a socialist system, in which they are the (collective) legal owners of those factors, but also in capitalism. Mises explained:

To have production goods in the economic sense, i.e. to make them serve one's own economic purposes, it is not necessary to have them physically in the way that one must have consumption goods if one is to use them up or to use them lastingly. To drink coffee I do not need to own a coffee plantation in Brazil, an ocean steamer, and a coffee roasting plant, though all these means of production must be used to bring a cup of coffee to my table. Sufficient that others own these means of production and employ them for me. In the society which divides labor no one is exclusive owner of the means of production, either of the material things or of the personal element, capacity to work. All means of production render services to everyone who buys or sells on the market. Hence if we are disinclined here to speak of ownership as shared between consumers and owners of the means of production, we should have to regard consumers as the true owners in the natural sense and describe those who are considered as the owners in the legal sense as administrators of other people's property.⁵

Ever wary of terminological innovations, Mises stressed that he would not henceforth refer to consumers as the “true” owners of the means of production, but use the accepted terminology according to which the owners of the means of production are those who have immediate legal control over them.

But of course this terminological decision could not alter his findings. Mises had delivered the explanation of the fact—recognized by all serious opponents of classical liberalism, from Marx to Philippovich—that capitalism was not just a rip-off to benefit the happy few at the expense of the great majority. It was no accident that capitalism had incomparably improved the living conditions of the broad masses. It was in the very nature of capital accumulation that its ultimate benefits accrued to the community of consumers, that is, to all members of society.⁶ The only question was whether socialistic schemes could enhance the living conditions of the working classes beyond what capitalism had in store for them. And Mises had already answered this question. In the light of his 1920 article on socialist calculation, the promise of greater productivity under socialism looked rather vacuous.