Communism Don\’t Work

This is something I\’ve said a lot. Nice to see a real economist making the same points:

What does this have to do with the world of 1997? Well, nowadays we take the triumph of capitalism as something preordained by the superiority of our economic system. After all, it now seems obvious to everyone except North Korea and Cuba that a market economy is vastly more productive than one controlled from the center – and the Cuban economy is imploding, while the North Koreans are quite literally starving to death. Moreover, every time a Communist regime collapses, it turns out that the actual state of the economy it governed was far worse than anyone had imagined. For example, typical estimates of the GDP of East Germany before the old regime collapsed put its real GDP per capita at 70 or 80 percent of the West German level – meaning that East Germany was actually richer than some regions in the West. Yet after the fall of the Berlin Wall, visiting Westerners found something that looked like a Third World economy, with antiquated factories (and disastrous environmental problems) producing consumer goods of ludicrously low quality (like the notorious East German Trabant, an automobile that makes a Honda or Ford seem like a Mercedes). We used to think that the Soviet Union had an economy about half as large as America\’s, that is, bigger than Japan\’s; nowadays Russia seems to have less economic power than, say, Italy.

10 comments on “Communism Don\’t Work

  1. The countries quoted there all have/had socialist economies according to Lenin’s taxonomy in his seminal analysis: The State and the Revolution (1917):
    http://www.marxists.org/archive/lenin/works/1917/staterev/

    Supposedly, these countries are/were striving to reach a state of Communism – where each comrade works according to their ability and receives according to need – but the countries haven’t made it or didn’t make it. They are/were only at the stage where each works according to their ability but gets paid according to the work done, which is Socialism, not Communism according to the official classification.

    In fact, it’s bureaucratically quite straight forward to make the transition to Communism. Just hike all income tax rates to 100 per cent and put all workers on a state pension, where the amount of pension is assessed according to personal or family needs.

    Recall that according to Engels, Marx really believed that in England we could reach a state of Communism by “peaceful and legal means”.

    “Surely, at such a moment, the voice ought to be heard of a man whose whole theory is the result of a lifelong study of the economic history and condition of England, and whom that study led to the conclusion that, at least in Europe, England is the only country where the inevitable social revolution might be effected entirely by peaceful and legal means. He certainly never forgot to add that he hardly expected the English ruling classes to submit, without a ‘pro-slavery rebellion,’ to this peaceful and legal revolution.”
    http://www.marxists.org/archive/marx/works/1867-c1/p6.htm

    Amazingly, there seems to be little popular support for Communism, which is presumably where the gulags and psychiatric treatment come in.

  2. The remaining advocates for communism in the USA say that it has never worked only because we haven’t tried it here.

  3. On this very day in 1956:

    “The Soviet leader, Nikita Khrushchev, has denounced Joseph Stalin as a brutal despot.
    In a sensational speech to the 20th Congress of the Communist Party Mr Khrushchev painted a graphic picture of a regime of ‘suspicion, fear, and terror’ built up under the former dictator who died three years ago. . . He revealed that in 1937 and 1938, 98 out of the 139 members of the Central Committee were shot on Stalin’s orders. . . ”
    http://news.bbc.co.uk/onthisday/hi/dates/stories/february/25/newsid_2703000/2703581.stm

  4. I’m surprised, very surprised, that you (Tim) refer to Krugman as a “real economist.”

    I know that he’s got the title and the recognition but, even in reading the linked piece, it’s quite obvious that the man wishes to salvage whatever he can of the reputation of the USSR and its communist regime and, in doing so, to also do what he is able to obscure the differences between freedom and the servile state of men.

    I don’t know the guy’s history or how long he goes back in association with the NYT and their long-established propagandizing and cover-up for commie regimes in general but for the USSR in particular. They certainly fit and deserve one another.

  5. I’ve got, read and refer to several of Krugman’s books and it has never, never, occurred to me that he had or has any sympathy for past Marxist regimes and their peculiar economies. I’ve even attended a lecture he gave at Oxford University in the early 1990s.

    His economic analysis is focused very largely on the functioning of market and emerging market economies so I’m at a real loss to know how anyone could regard him as a crypto-commie. But there you are. I’ll take care to look under my bed tonight and into the wardrobe just in case he is there, lurking.

  6. I agree with gene berman. Your quote out of context gives a completely different impression. Indeed it is immediately followed by

    But one lesson of “Russia’s War” is that matters are not that simple.

    There is a brilliant non sequitur:

    because people in authority believed in the system, they were willing to impose brutal punishments on those who did try to take advantage [of the system]. (Stalin used to shoot unsuccessful generals).

    I wonder how those generals were taking advantage?

  7. Krugman could have borrowed what I might call Worstall’s Law – it is consumption that makes us rich, not production – and applied it to the Soviet Union. The Soviets excelled at what someone else has called Conspicuous Production. All those lovely statistics on steel production for instance. The vast majority of which went into the Military-Industrial Complex. The Soviet Union excelled at producing many, low-tech but highly effective weapons. Of course the Soviets, or the East Germans, did not *consume* that production, the military did. So I have seen a comparison that says East Germany was probably about as rich when it collapsed as Mexico.

  8. Sadly missing from most pieces on the collapse of communism in the former Soviet Union is economic literacy. Probably the primary reason why I rarely read blogs dealing with Russian affairs is because the author is usually economically illiterate, and if you don’t understand basic economics, there’s not much point in talking about Russia then and now.

  9. Economic illiteracy is more widespread than is often supposed – and the Soviet were less stupid than is often supposed. One of their main problems was that they believed “politics trumps economics”. But they weren’t the only politicians who believed that – remember that Winston Churchill, as a minister prior to WWI, created “Wage Councils” to stop low pay.

    In the early 1960s, I went to a seminar given by the late Professor Alec Nove who was one of Britain’s leading academic experts on the Soviet Union at the time. He was a native Russian speaker and closely followed the Russian press. One of the main themes of his presentation was how the Soviet system of paying bonuses to state-owned enterprises which had exceeded production targets handed down by Gosplan distorted resource allocation. This was a recognised problem in the Soviet Union and discussed in the press after Khrushchev blew the whistle on Stalin in 1956.

    An example Nove cited was a target set for roofing materials set in metric tonnes. The result was that state enterprises were more inclined to produce heavy-weight roofing, rather than light-weight, because production targets could be fulfilled with fewer units of roofing. Nove even produced a copy of a cartoon from Krocodil, an officially approved satirical magazine, showing a nail factory wheeling out its annual nail to meet the factory’s production target.

    The Soviets had no sharp ideas about how to resolve the problem. After Khrushchev was deposed in 1964, Brezhnev introduced a series of market-friendly reforms – like setting targets of profit rates – but I’d moved on and didn’t get to hear Nove’s assessment of these reforms.

    All that is history now but the really alarming insight is that the targets set in Britain’s National Health Service in the late 1990s by the New Labour government introduced the very distortions in resource allocation which the Soviet had come to recognise back in the late 1950s. A prime example was the targets for cuts in official hospital waiting lists with dire threats from ministers if hospitals failed to achieve the targets. The result was that hospitals gave priority to dealing with simple and easy cases first and left the complex cases till later. Surprise, surprise. Evidently, no one had read up about production targets in Nove’s book: The Soviet Economy.

  10. Bob B.:

    Leave Krugman aside for the moment. I’ll even retract the epithet “commie,” if it’ll mollify you somewhat. But forget about looking “under the bed or in the wardrobe”; the culprit will be right there in bed with you, no matter how solitary you sleep.

    You do exactly the same thing as does Krugman.
    You use obvious intellect and education to confuse matters vital to general economic well-being for narrow political ends, though I do not presume to explain whether due merely to true ignorance or to short-sighted self-interest.

    It is true, as you say above, that “economic illiteracy is more widespread than is often supposed.” And, from that knowing vantage point, one not so illiterate, we should presume, should try to improve the understanding of the ignorant. Yet, if one already ignorant reads your further comments, nothing whatever is added to understanding but, rather, a good many other points–about which confusion and argument may arise –are added.

    A truly economic argument, one designed to acquaint a popular audience (with a wide range of economic understanding) with the basic, functional truth, is actually simpler than can be illustrated by any number of examples.

    “Economic calculation,” by which is meant the dollars-and-cents consideration of an entrepreneur contemplating a marketplace action, presupposes a market for what are termed “goods of higher orders.” Such calculation is natural and automatic whether the entrepreneur is a magnate or a street vendor. But its benefit is denied where no such market exists or where the assets of the contemplator (an authority of some sort) cannot bring about either private profit nor loss as a result.
    Authority is blindered quite as completely as the private entity is informed.

    One might go further in instruction of the ignorant. Might point out that striving for profit and avoiding loss are exactly the same thing: doing one’s best under the circumstances presented. And, further, that the outcome of successful contemplation (as described above) results in the most sparing consumption of the stuff on which well-being depends (that’s why we call it ‘economics”). And, while mistakes in such calculation are made with great frequency, the costs are relatively minor in the “grand scheme,” self-correcting (by loss recognition) and, over time, a “Darwinian” process of “entrepreneur selection” whose chief beneficiaries are the consuming public and the satisfaction of their wants as expressed in prices of the market.

    `

    And never the twain shall meet.

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