An Economic Lesson Worth Remembering: Communism Was Pretty Terrible

 

Much of my writing is about the transformative power of innovative, market capitalism. But maybe it would be worthwhile to expend a few more words on the alternative. What about the terrible history of centrally planned economies? Apparently, the great lessons from those experiences must be relearned. I mean, clearly the message isn’t getting through when some folks — as I’ve seen on Twitter — can look at a chart showing the steep decline in global poverty and view it as an endorsement of the Chinese communist party rather than market reforms and decentralization.

Yet as noted in the new paper “From workers to capitalists in less than two generations” by Li Yang, Filip Novokmet, and Branko Milanovic, China’s economic transformation is “a unique event in world economic history: never have so many people over such a relatively short period of time increased their income so much.” And it happened as “China moved from the still predominantly command economy of the 1980s, with only timid attempts at reforms, towards more comprehensive marketization of the country observed today.”

Even a bit of economic freedom can produce amazing results. George Will in his new book, “The Conservative Sensibility,” highlights this analysis from political scientist Francis Fukuyama:

As it happens, I had just read that Fukuyama quote when I read the following passage from the excellent new biography of Mikhail Gorbachev. It describes the future Soviet leader’s summers as a teenager operating a “mammoth combine harvester” in the field with his father:

That powerful childhood lesson may well have informed Gorbachev’s realizing that the Soviet economy and political system needed dramatic reform and restructuring. Of course, I am describing communism here, not democratic socialism — something Gorbachev hoped Soviet communism would evolve into. But what is democratic socialism? A recent JP Morgan report attempted to determine how democratic socialism works in the real world. But the author ran into a problem:

With Nordic countries firmly rooted in capitalism and free markets, if I wanted to find examples of democratic socialism in practice, I’d have to look elsewhere. … I couldn’t find any country that ticked all these democratic socialist boxes, but I did find one that came close: Argentina, which has defaulted 7 times since its independence in 1816, which has seen the largest relative standard of living decline in the world since 1900, and which is on the brink of political and economic chaos again in 2019. Here my journey ended, halfway around the world from Scandinavia where it began. A real-life proof of concept for a successful democratic socialist society, like the Lost City of Atlantis, has yet to be found.

Published in Economics
Like this post? Want to comment? Join Ricochet’s growing community of conservatives and be part of the conversation. Get your first month free.

There are 7 comments.

  1. Unsk Member

    Good post, James. 

    • #1
    • August 13, 2019, at 5:00 PM PDT
    • 1 like
  2. Dr. Bastiat Member

    They had to pay taxes on their fruit trees, whether or not they bore fruit. So the peasants cut down their orchards.” – Mikhail Gorbachev

    I really, really, REALLY don’t understand Democrat voters. 

    Especially Bernie and AOC voters, of course. But remember that Hillary couldn’t describe the difference between the Democrat party policies and socialist policies when she was running against Bernie.

    So I don’t understand any of them. It’s hard to debate something that makes no sense.

    They may say, “Well, of course, our government doesn’t do that! We have nice socialism, not mean socialism!”

    But our government does it all the time. Businessmen take the risks. Government skims the profits. Which, naturally, discourages risk taking. Which causes a constant, unseen drag on the economy.

    The Russian version of the same phenomenon caused decreased risk taking as well, in the form of cutting down fruit trees, in case they might not produce well one year. The ensuing hunger in Russia was seen, although not by us. So the Bastiat principle of seen vs unseen can be manipulated by our media, I suppose.

    But how on earth can anyone think that Democrat policies could possibly make sense? It’s just so bizarre.

    • #2
    • August 14, 2019, at 6:43 AM PDT
    • 1 like
  3. James Gawron Thatcher

    James Pethokoukis: With Nordic countries firmly rooted in capitalism and free markets, if I wanted to find examples of democratic socialism in practice, I’d have to look elsewhere. … I couldn’t find any country that ticked all these democratic socialist boxes, but I did find one that came close: Argentina, which has defaulted 7 times since its independence in 1816, which has seen the largest relative standard of living decline in the world since 1900, and which is on the brink of political and economic chaos again in 2019. Here my journey ended, halfway around the world from Scandinavia where it began. A real-life proof of concept for a successful democratic socialist society, like the Lost City of Atlantis, has yet to be found.

    JimP,

    I have been thinking about Hayek’s Fatal Conceit again. What Hayek is really saying (this my personal take) is that the only economy that exists is the market economy. Take the market economy away completely and you get an economic implosion rapidly. If you only cripple the market economy with half measures (so-called democratic socialism) then the implosion takes more time but it is inevitable.

    Wishful thinking is a very common disease that we all suffer from. When we realize that we are suffering from wishful thinking we must immediately try to cure it by facing up to hard-headed reality.

    Regards,

    Jim

    • #3
    • August 14, 2019, at 7:44 AM PDT
    • 2 likes
  4. TeamAmerica Member

    Good Article. Slightly off-topic, but I’ve been reading lately about Modern Market Theory, and I wondered if you have anything to say about its practicality. Since the U.S., Japan and Britain run huge deficits without inflation, does that validate it?

    • #4
    • August 14, 2019, at 9:11 AM PDT
    • Like
  5. Henry Castaigne Member

    Dr. Bastiat (View Comment):

    They had to pay taxes on their fruit trees, whether or not they bore fruit. So the peasants cut down their orchards.” – Mikhail Gorbachev

    I really, really, REALLY don’t understand Democrat voters.

    Especially Bernie and AOC voters, of course. But remember that Hillary couldn’t describe the difference between the Democrat party policies and socialist policies when she was running against Bernie.

    So I don’t understand any of them. It’s hard to debate something that makes no sense.

    They may say, “Well, of course, our government doesn’t do that! We have nice socialism, not mean socialism!”

    But our government does it all the time. Businessmen take the risks. Government skims the profits. Which, naturally, discourages risk taking. Which causes a constant, unseen drag on the economy.

    The Russian version of the same phenomenon caused decreased risk taking as well, in the form of cutting down fruit trees, in case they might not produce well one year. The ensuing hunger in Russia was seen, although not by us. So the Bastiat principle of seen vs unseen can be manipulated by our media, I suppose.

    But how on earth can anyone think that Democrat policies could possibly make sense? It’s just so bizarre.

    I know that Doctors are busy people but word for word, Thomas Sowell’s a Conflict of Visions is the best book on politics ever. As Marianne Williamson so clearly demonstrated on David Rubin’s show, lefties believe that evil has to be explained. Humans aren’t corrupt, dumb and selfish creatures and reality isn’t harsh and demanding. Wars and poverty are unnatural expressions of corrupt societies rather than the fallen state of man.

    Furthermore, there is no religious and very little emotional appeal in capitalism or neoliberalism. Capitalism lets you make money and then you need to figure out what Church to go to and what to believe in. It doesn’t give you purpose or meaning. It’s not intended to give you purpose or meaning. It’s meant to protect you and let you yourself make your own meaning.

    For people without meaning and purpose who feel lost, like for example, intellectuals who have abandoned G-d, socialism (particularly the more nasty variants) fulfill that hole in the heart.

    • #5
    • August 14, 2019, at 1:26 PM PDT
    • 2 likes
  6. Randy Weivoda Moderator

    James Pethokoukis:

     

    Interesting that in the whole world, Sub-Saharan Africa is the only region that is increasing the number of desperately poor. I guess just like Bernie Sanders, they aren’t ready to give up socialism yet.

    • #6
    • August 17, 2019, at 2:39 PM PDT
    • 1 like
  7. Henry Castaigne Member

    Randy Weivoda (View Comment):

    James Pethokoukis:

     

    Interesting that in the whole world, Sub-Saharan Africa is the only region that is increasing the number of desperately poor. I guess just like Bernie Sanders, they aren’t ready to give up socialism yet.

    Keep in mind that their population is increasing. The actual proportion of the people living in poverty is going down from what I’ve heard. 

    • #7
    • August 17, 2019, at 5:56 PM PDT
    • Like