Really? There are tons of people who learn while working, which is what I assmue you are advocating for rather than literally "eliminat[ing] the distinction between education and production," which would include school children working. This is especially true in the top end of fields like medicine. Surgeons create and learn new surgeries, for example. And I don't think Sergey Brin took a course on how to create Google in university, and the Google engineers did not learn how to scale it there either. See also the massive research arms of Google et al. So "every single human being" is trivialy false.

But even in the general case, college does not directly prepare you for your profession (nor is it meant to) and you are expected to learn on the job. And if what you say is true that you are not learning while working there would be no reason for companies to seek employees with experience.