Moratorium on Brains

For years, socialists (and some sloppy capitalists) have operated under the assumption that production only requires labor and capital.  Socialists assume that if a government steals both, it can produce just as well as any of those greedy private companies.  Hugo Chavez has been operating under this assumption, but he has run into a problem:

The companies ceding control included BP Plc,
ConocoPhillips, Exxon Mobil Corp, Chevron Corp, France's Total SA and
Norway's Statoil ASA. All but ConocoPhillips signed agreements last
week agreeing in principle to state control, and ConocoPhillips said
Tuesday that it too was cooperating.

While the state takeover was planned well ahead of time, the oil
companies remain locked in a behind-the-scenes struggle with the

Chavez says the state is taking a minimum 60 per cent stake in the
Orinoco operations, but he is urging foreign companies to stay and help
develop the fields.

They have until June 26 to negotiate the terms.

The companies have leverage with Chavez because experts agree that
Venezuela's state oil company, Petroleos de Venezuela SA, cannot
transform the Orinoco's tar-like crude into marketable oil without
their investment and experience.

In other words, beyond their workers and plant and equipment, he needs their brains.  And I hope the American companies refuse to give in to him.

I made this point earlier in this critique of socialism:

Hanging out at
the beach one day with a distant family member, we got into a
discussion about capitalism and socialism.  In particular, we were
arguing about whether brute labor, as socialism teaches, is the source
of all wealth (which, socialism further argues, is in turn stolen by
the capitalist masters).  The young woman, as were most people her age,
was taught mainly by the socialists who dominate college academia
nowadays.  I was trying to find a way to connect with her, to get her
to question her assumptions, but was struggling because she really had
not been taught many of the fundamental building blocks of either
philosophy or economics, but rather a mish-mash of politically correct
points of view that seem to substitute nowadays for both....

picked up a handful of sand, and said "this is almost pure silicon,
virtually identical to what powers a computer.  Take as much labor as
you want, and build me a computer with it -- the only limitation is you
can only have true manual laborers - no engineers or managers or other
capitalist lackeys"....

replied that my request was BS, that it took a lot of money to build an
electronics plant, and her group of laborers didn't have any and
bankers would never lend them any....

told her - assume for our discussion that I have tons of money, and I
will give you and your laborers as much as you need.  The only
restriction I put on it is that you may only buy raw materials - steel,
land, silicon - in their crudest forms.  It is up to you to assemble
these raw materials, with your laborers, to build the factory and make
me my computer.

She thought for a few seconds, and responded "but I can't - I don't know how.  I need someone to tell me how to do it"

that is the heart of socialism's failure.  For the true source of
wealth is not brute labor, or even what you might call brute capital,
but the mind.  The mind creates new technologies, new products, new
business models, new productivity enhancements, in short, everything
that creates wealth.  Labor or capital without a mind behind it is

I offered more critiques of state-run companies here and here.  My more complete post on this topic his called wealth creation and the zero-sum fallacy.


  1. CRC:

    Excellent post. Exactly right.

  2. David Z:

    One of the destructive myths perpetrated by the socialists, is the idea that there is a certain type of property (i.e., capital) that is capable of creating property. Some socialists will tell you, for instance, that they don't want to abolish private property - your case of beer, eggs, televisions, etc., - they only want to abolish privately held capital, which "produces" other property.

    The disconnect here is quite simple - say we look at a television manufacturer, and we see that his labor expenses are only a fraction of his gross revenue. Marx says that this is evidence that the labor is being exploited, because labor only receives a fraction of the sales revenue. And what stumps most people is that this statement is *mostly* true: present laborers only receive a fraction of the sales revenue.

    Who nets the rest of it? Past labor, which was utilized to construct those capital assets, source the raw materials, harvest the fruits, design the factory, the machinists, etc.

    but I'm probably preaching to the choir :)

  3. Zoran Lazarevic:

    "And I hope the American companies refuse to give in to him."

    Would you "refuse to give in"? I assume BP and Exxon will still make a profit (or reduce their loss) if they stay. I don't think it is in their interest to boycot Chavez. "Boycotting" Fidel did no good, and you often said that we should open the borders to Cuba (, and I agree.

  4. Bob:

    A few years ago the engineers at The Boeing Company walked out on strike -- for the first (and, I suspect, last) time ever. Someone put a slogan on some of the pickett signs that is at the heart of your post: "No nerds = no birds".

    The point being that although engineering was on the order of 5% of the company's cost in building airplanes, it was responsible for 100% of the company's revenue: all the mechanics and machinists in the world cannot build a single airplane without an engineer somewhere to tell them how to do it.