What you just described is exactly how communist China killed millions of people in famines. Among other things, they made industrial production of steel a nati

What you just described is exactly how communist China killed millions of people in famines. Among other things, they made industrial production of steel a national goal (trying to beat the UK), and because it didn't work out as expected (lack of industry and mining at the time), small owners of tools like farmers were forced to melt their iron, effectively destroying their necessary tools and wasting their labour time.