As we saw in the previous posting in this series, the downside of the tremendous industrial, commercial, and agricultural expansion in the United States during the 19th century — falling prices that caused hardship in the agricultural and labor sector as industry and commerce became more productive — could have been avoided had ownership of the new industries and commercial enterprises been democratically and directly owned.
Lack of widespread ownership led to the disruption of Say's Law of Markets, for Say's Law presumes that there are no barriers or obstacles to anyone who wishes to do so employing his or her labor, capital, or both in producing goods and services to generate income and enter into exchanges with other producers.
This in turn led to the rejection of the "Real Bills" doctrine and the massive monetary confusion that developed during the 19th century. Say's Law assumes that people realize we don't really purchase what others produce with "money," but with what we ourselves produce. The Real Bills doctrine maintains that "money" represents goods and services that have been produced, or the present value of future production.
All that is necessary for a free and just market to operate is for people to have the ability to turn their current or future production into "money" (promises to deliver wealth on demand) so that they can carry out exchange easier. This also allows new capital to be financed by trading the present value of a project for a promise to repay the "money" out of future profits instead of by cutting consumption, saving, then investing, as Keynes assumed must be done.
If, however, people are prevented from turning their current or future production into "money," especially through the extension of bank credit, a serious problem results. As we saw in the 19th century, as technology became more productive than human labor, it became increasingly difficult for workers who had only their labor to sell to make ends meet. They simply could not compete with the ability of capital to produce more goods and services at a lower cost than was possible with human labor — nor did they have democratic access to the financial system that would allow them to finance the acquisition and formation of new capital so that they, too, could become owners instead of being limited to suppliers of labor.
To some commentators, the solution was obvious. Because of the natural right of private property, the owner of capital has the right to receive the income generated by what he or she owns. That being the case, so certain reasoning went, property itself must be evil, because it prevents the worker from gaining a fair share of production. Since having a few owners of the means of production is clearly bad, there should be no owners of the means of production. Private property must be abolished, and control vested in a presumably benevolent and (because power naturally and necessarily follows property) all-powerful State.
Unfortunately, as Lord Acton observed, power corrupts, and absolute power corrupts absolutely. The State may start out as benevolent, but once it becomes the sole owner of the means of production (and, because "control" is property in all codes of law, the State doesn't even have to take actual title, just force nominal "owners" to obey the State's orders), it necessarily becomes absolutely corrupt. Having the State own or control the means of production is called "socialism" or "communism," the differences between the two being merely semantic and political. Socialism, however, in addition to fostering absolute State corruption, is contrary to human nature, as it abolishes the natural right of every human being to own the means of production.