Thanks for bringing this up as a topic of discussion. It begs a deeper question that has bothered me from the beginning of the novel.
Rand seems to imply that only the top producers are capable of 'finding a way' to produce under adverse circumstances. From my observations, this is way off the mark, there are many people who, while not being a top producer, will find a way to be productive in an adverse environment.
The importance of this is most obvious when viewing the world of Atlas Shrugged with our present world conjointly.
The meeting in which this conversation takes place is toward the end of a long destructive feeding frenzy hosted by the looters. There are few crumbs left (not that Rearden is a crumb, mind you :) and Rearden is one of the last to be targeted. In our world, however, the people who can be productive in adverse situations is seemingly unlimited. This changes the dynamics and the toughest crumbs will never be sought out. There are far too many easy targets. Though I agree with Rands take on 'the guiltiest man in the room' idea, I submit that those who would provide sustenance to the Looters are 'the guiltiest people in the nation'. As to the problem of the latter group having a simultaneous epiphany, well, it just won't happen.
On that note, we can look at history. Even in harsh systems with slavery, humans built the pyramids, the Taj Mahal, Notre Dame. How did it work? IMHO, it worked because people still believed in a God or Gods, in allegiance to a King (who was God on Earth). In other words, there was some motivation for them to continue. Those who design such creations, were often members of a noble class, thus they had greater freedom.
What I think Rand is describing the world of the old Soviet Union, or China during Mao. Or the more modern society of North Korea. In those times, the "Group" was all, and those societies produced nothing that they didn't steal first.
What Rand is saying is that when the "People" become predominant in a person's mind, the motivation of the human spirit dies. The drive to be creative is squashed by the overwhelming power of the group mind. You will do as you are told and what has been planned for you. As this death of motivation spreads, all progress will stop.
This is the danger our current society faces. From our leaders (you know the names) who extol us to "give back to the community", who plan how to control every aspect of your life from what temperature you can keep your home to what food you are allowed to eat, to when you allowed to have children. Progress may not stop entirely, but it could slow to an imperceptible level. A new Dark Age is never out of the question. That is what Rand is warning us about.