Why Communism failed

 

Why Communism failed

 At the outset, let me just say that unchecked Capitalism does not work, leading to monopolies and oligarchies and extreme inequality. It is incumbent on the government to ensure that the economic benefits are distributed fairly and flows (not trickle) to all sections of the population.

This needs to be done thru what I call as Welfare Capitalism. Some may call it democratic socialism, but I prefer not to use the word socialism, as many people fear the word Socialism due to constant fear mongering by powerful media and due to varying interpretations.

Welfare Capitalism would entail a market economy with:

• Progressive taxation – the more you earn, higher the tax rate
• Wealth tax on extreme wealth and Inheritance tax
• Ensure affordable food, education, housing and healthcare for all. Subsidize as needed
• Protect workers rights in terms of reasonable work hours, liveable wages etc.
• Protect environment, consumer rights etc.

 Now to the critique of communism:

I have a problem with the communist ideal of allocating resources based on need.

Who decides what is a need? 

I can understand that safety, food, education and healthcare are basic needs.

But who will decide if the food I need is curd rice or biriyani. Whether I just need bread or pizza sometimes. Do I really need to consume an egg everyday? Do I need a tiny apartment or a nice house with garden to live in? Do I need a Nokia or an iPhone? Do i need a 20" or a 40" TV? Do I need a small fridge or a big one? Do I need air conditioning? How much of travel and tourism do I need? Do I need to go to theatres? Do I need to need to own a musical instrument? Do I need a car? Do I need a small car or an SUV? It is impossible to say what a person needs..

If the government or a collection of people is going to decide what I need, then I reject such a system. Apart from needs, I also have wants, for an enjoyable life.

Generally, such needs or wants are expressed thru purchase decisions in a market economy, and the price we are willing to pay is a signal that helps decide how much to produce. Markets play a wonderful role in demand discovery. When supply is low and demand is high, prices go up and indicate the need to produce more. 

Fixed prices in a semi-communist system or lack of pricing in a communist system doesn’t help convey the level of demand. You then have to look at the queues to decide which products are in demand.

It is impossible for a central authority or a community to decide how much of each product or service a person needs and when, produce it and make it available in time. Also, the needs and wants of a person change over time.

Corruption in allocation: When someone allocates according to needs of the people, there is inevitable corruption. The people who are in power, allocate the best houses, vehicles, home needs and other resources to their friends and family. Every country that has tried communism has fallen prey to enormous corruption. That is not to say that there is no corruption in capitalist societies. But if EVERY resource has to be allocated to a population group based on the decision of a person or group of persons, based on perceived needs, the level of corruption shoots through the roof., especially when there is scarcity, which is always the case due to reason mentioned below.

 Each producing according to his ability - leads to scarcity

When everyone is paid nearly the same or all their needs are met regardless of the quality and quantity of work, incentive to work hard is lost and productivity suffers. What was planned doesn’t get produced, leading to scarcity. Also, innovation, risk taking and entrepreneurial spirits are diminished in such a system where everyone gets nearly the same pay.

In addition, there will be no takers for difficult jobs like working in offshore oil rigs, dangerous jobs, jobs with health hazards, jobs that require staying away from family etc. These jobs will require state coercion to get people to work on. (as opposed to economic coercion or economic inducement in the form of higher wages, on the capitalist side)

There are no successful implementations of communism. We use Soviet Union as an example, because it was a HUGE continent sized nation, spanning 1/6^th of the world area, with all the resources that are ever needed for a closed system, without a need to import anything (unlike India that imports 90% of oil, for example). Even with all the resources, the resources were misallocated based on the perceptions of central authority and a hierarchy of corrupt bureaucrats, rather than actual needs. Thus, ending up in a scenario where they could not meet the food and other real needs of the people in a timely manner.

And finally, 

Communist ideals are great in a selfless society, and the ideas can serve to inspire us to work for a better outcome for all. But we must face the fact that we humans are selfish, jealous, racist, tribal and corrupt, especially when resources are scarce. How do I know that? Paying tax is one way to provide for the needs of the many, but most people crib and complain about paying taxes. Most people would not pay higher delivery charges for food delivery. Most people would not pay their maids a respectable wage.

In conclusion:

A communist system is impractical and only leads to more scarcity, more corruption and state coercion. I would rather stick to the much-maligned capitalism, albeit with sufficient government regulations to ensure fair distribution of benefits.