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I have never studiedeconomics, but I am reading the book "The less you know, the better you sleep" by David Scatter and in it, when discussing the period after the fall of the Soviet Union he states that

"The price at which enterprises were sold stunned Russian society (...). The greater part of the basic productive finds of Russia are being sold for somewhere around $5 billion. Even if one considers that in Russia, the price of the basic means of production is equal to her gross domestic product [in the West, it usually is at least 2.6 times higher] ... in effect, 300 to 400 billion dollars, the sun realised in privatisation is minimal."

Aren't the means of production the costs to run a company? How can they be equal or higher, whilst keeping a profit?

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The means of production is a (left-wing and more politically-associated than economically) term for all the assets needed to run a firm (company) [1]. The canonical example is a factory building full of factory equipment, though nowadays, it could also include some rather intangible items like Twitter accounts. It does not include raw material inputs but rather fixed assets such as equipment. The firm already owns these assets and does not need to buy them. If you want to start a new firm, you have to buy them.

One would imagine that the equipment needed to produce say, \$100 million of goods per year would cost something more like \$1 billion. If \$100 million of goods can be produced with only \$100 of assets, the goods are very overpriced; lots of people should realize they can get rich quick making these goods, start making them, and the price should come down massively. This is the basic principle of supply and demand. Even if it needs \$10 million of assets, there are still enough wealthy investors who could buy these assets and make enough goods to recover their cost within only a few months.

In the reverse scenario, where the amount of goods is fixed and the assets are for sale, there should be a bidding war; I would happily pay \$100 for a machine that produces \$100 million of goods every year; someone else would happily pay \$1000; ...; some very wealthy investor (or group of investors) would begrudgingly pay about \$1 billion.

(The multiplier, in this example 10, is related to interest rates and risk, and I will not go into it here)

The book is saying that it is surprising this did not happen at the fall of the Soviet Union. The total price for all the means of production was only about 1/100 of what it logically should have been. Some people lost a huge amount of potential money by selling for such a low price, and some other people gained a huge amount of potential money by buying for such a low price.

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    $\begingroup$ note: apart from the definition of "means of production", as the question is rather basic, this answer only references common knowledge in economics, and therefore, does not require further citations according to the policy $\endgroup$ May 5, 2023 at 20:40
  • $\begingroup$ My apologies for the basic question, I had not thought of it as a long term thing and was being quite silly. Your answer makes perfect sense. $\endgroup$ May 6, 2023 at 13:48
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    $\begingroup$ @user7077252 I have to write that comment, because a certain moderator has a grudge against me for some reason, and otherwise, the answer would get a note saying "please add sources" even though the rules say that sources are not required for basic economic knowledge. $\endgroup$ May 7, 2023 at 5:30

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