“However, if the average factory worker knows his money will just be stolen, he works less…”

You put your finger on another problem, the reference to “average factory worker.” Socialists/communists will assure that once a product is produced and produced a certain way and by certain people that it will tend to remain so. Afterall, it is the role of goverment to “protect” the jobs of “average workers.” Hence economic stagnation. A freely functioning economy will assure the free flow of capital, with jobs disappearing and re-appearing in new form, heartlessly, relentlessly, to the immediate detriment of some, the immediate benefit of some and ultimately to the benefit of the nation and all its citizens.