Everything the Communists Said About Their System was False … Unfortunately, Some of What They Said About Capitalism Was True

The Russians proved that communism is a joke.

And when China moved towards a mixed capitalist-socialist system, it was the nail in the coffin for communism worldwide. Whose left? North Korea?

So more or less everything the Russians and Chinese said about communism was wrong. It failed.

Unfortunately, a lot of what they said about capitalism was right.

Specifically, while I know next to nothing about Marx, Engels or other communist thinkers, it seems pretty obvious that the U.S. is in a phase of “late stage capitalism” where financial speculation by huge companies has replaced productive investment, capital improvements, innovation, and job creation, and the financial sector has grown so big – and inequality has grown so large – that it has destroyed democracy like a malignant cancer.

As economist Kimball Corson wrote last year at Seeking Alpha:

In a nutshell and stripped of his own inflammatory terminology and technical economic errors, Marx had this to say in his book, Das Kapital.

Marx argued that at capitalism would succeed in its initial stages quite well in promoting growth by means of capital investment in new technology and improved means of production. Everyone would prosper. As capitalism developed, however, he argued that capitalists would appropriate to themselves more and more of the profits or income from the economy and that laborers would come to have increasingly less.

Over time, in time and such circumstances, Marx claimed that, first, capitalistic economies would undergo ever more vicious cyclical swings from boom to bust. These cycles and the on-going process of capitalism would, second, result in ever richer capitalists and ever poorer working classes, until, finally, at some point, laborers would revolt and take over the means of production, causing Socialism to ensue as a result. Socialism, in turn, was merely a transitional step to Communism.


What we observe of the American economy, at its present stage, is exceptionally close to what Marx described, whether we like it or not. Let me describe the ways:

1. Earlier in our history, up until about 30 years ago, capitalism as it was practiced in the United States did do very well and materially aided a good standard of living for most Americans.

2. Since then, real wages have stagnated and income has become seriously concentrated in the upper income households. The top 1/10 of 1%, get 6% of all income. As Harvard Professor Elizabeth Warren explains it, for long stretches of time in recent years, the growth in the nation’s GDP has gone almost entirely to the top 1% or less of the population. The top 40% get about 78% of all income. Now couple this with the following fact:

3. Productivity Growth Quarter in 4Q 2009 was 6.2%. For the year, it came to 5.1%. As Brad DeLong describes this current slice of reality, “The flip side of the jobless recovery is a high productivity-growth recovery–and, with stagnant wages, a rise in the profit share (read, capitalist’s take). This is becoming more prevalent.

4. The distribution of income and wealth in the U.S. has progressively become worse over the last several decades as real wages have stagnated or declined a bit.

5. So to have our cyclical booms and busts become more severe over the last decade. We have had the dot com boom and bust and now the housing boom and bust. We are anything but stable, especially now as we are loaded up with debt and deficits.

6. The share of income or profits being generated by small business is falling and the share of total profits being generated by large businesses is increasing.

7. Government has enacted much special interest legislation contrary to the public interest, to aid the concentration of wealth and income in the hands of the wealthiest and feather representatives own beds.

8. Now, what we see with increased productivity and the maldistribution of income and wealth is a growing surplus of labor or the unemployed.

9. We are beginning to see embryonic development of reactionary grass roots political movements, such as the Tea Party crowd. While now small, without good leadership and ill-focused, grass root movements do not have to stay that way. Once started, they can change quickly and gain good focus and leadership.

10. As a matter of public policy, we are adamantly and deliberately ignoring entirely too much that is important here, all to our prospective detriment. In short, we are asking for public upheaval and revolt.

11. The public, both right and left, are truly exasperated with our federal government, frustrated with our economy, mad at Congress and the Administration and ripe for something new that offers us all a better prospect.

Indeed, polls show that the percentage of Americans who view socialism favorably has skyrocketed since the credit crisis. See this, this and this.

However, unlike Marx (or Corson), I don’t think that transitioning from a broken form of capitalism to communism would be a good thing. Do you want to live under a brutal tyrant like Stalin, Mao, Pol Pot or Kim Jong Il? I don’t.

As I wrote in an essay called “Don’t Blame Capitalism for Wall Street’s Corruption and Lawlessness”:

When Mahatma Gandhi was asked what he thought about Western civilization, he answered:

I think it would be a good idea.

I feel the same way about free market capitalism.

It would be a good idea, but it is not what we have now. Instead, we have either socialism, fascism or a type of looting.

If people want to criticize capitalism and propose an alternative, that is fine . . . but only if they understand what free market capitalism is and acknowledge that America has not practiced free market capitalism for some time.

As I wrote last year:

Does this mean that free market capitalism is dead?

No. And I’m not sure that there is any better alternative.

But capitalism has to grow up and become less naive, relying less on a blind faith in “the invisible hand” and more on an understanding of human nature, including insights from the field of behavioral economics.

It must include sophisticated checks and balances to make sure that the system is not gamed, instead of childish ideas about the “inherent stability” of the market.

And it must make sure that the poker game doesn’t suddenly end when one of the players gets all of the chips.

Of course, with high-frequency trading dominating the market (and see this), frontrunning, permanent bailouts (and see this), government-sponsored credit rating scams and enterprises, the creation and maintenance by the government of banks so big that their very size warps the entire system, socialism for the big boys, and all of the other shenanigans going on, we don’t currently have free market capitalism.

Of course, even Adam Smith didn’t believe in unrestrained free market capitalism. And a free market is not possible without strong laws against fraud.

So the bottom line is really that the communist philosophers accurately predicted that capitalism would become corrupted … just as communism became corrupted by rulers who lived in the lap of luxury and gave themselves all the perks while they imposed poverty and extreme oppression on their people.

Indeed, anyone who assumes that any system – communism, capitalism or any other “ism” – is infallible and that its leaders don’t have to be held accountable is just a useful idiot.

I think a large part of the problem with both communism and late stage capitalism is too much power in too few hands – whether in the hands of the “Party” or of the oligarchy of big banks (made enormous by the government, not by free market capitalism), the outcome is the same … the little guy gets shafted.

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  • alan2102

    “The Russians proved that communism is a joke.”



    Social Democracy, Soviet Socialism and the Bottom 99 Percent

    October 30, 2011

    By Stephen Gowans


    The Soviet Counter-Example

    It is instructive to consider Soviet social welfare, to
    understand what capitalist democracies once competed against,
    and to appreciate its breadth and depth. Although it is
    certainly unfashionable in capitalist democracies to say so,
    it is true all the same that the Soviet Union was organized to
    serve the interests of the mass of its people, and not to
    enrich an elite of bankers, major investors and corporate
    titans, as is true in our own societies, and in Russia and
    other countries of the former Soviet Union today.

    Some will object that the USSR was organized to serve the
    interests of the Community Party elite, and that it too was
    divided between the 99 percent and the one percent. To be
    sure, the Soviet Union was not built along anarchist lines.
    There was an elite, but the advantages the elite enjoyed were
    picayune by the standards of capitalist democracies. The elite
    lived in modest apartments and had incomes relative to the
    average industrial worker that were no greater than the
    incomes of physicians in the United States relative to the
    average US industrial wage. Top Communist Party officials did
    not own productive property and therefore could not transfer
    it, and neither could they transfer position or privilege
    across generations to their children. Moreover, the very mild
    level of income disparity in the Soviet Union was mitigated by
    the reality that many necessities were available free of
    charge or at highly subsidized rates. (5)

    Employment in the USSR was guaranteed — indeed, obligated (an
    important point to correct one of the cruder misconceptions
    that socialism amounts to the unemployed collecting welfare
    cheques.) Work was considered a social duty. Living off of
    rent, profits, speculation or the black market — social
    parasitism — was illegal. Education was free through
    university, with living stipends for post-secondary students.
    The USSR had a lower teacher to student ratio than the United
    States. Healthcare was free, and drugs prescribed in the
    hospital or for chronic illness were also free. The Soviet
    Union had the greatest number of doctors per capita of any
    country in the world and had more hospital beds per person
    than the United States or Britain. That US citizens have to
    pay for their healthcare was considered extremely barbaric in
    the Soviet Union, and Soviet citizens “often questioned US
    tourists quite incredulously on this point.” (6) Soviet
    workers received an average of three weeks of paid vacation
    per year. Necessities, such as food, clothing, transportation
    and housing were subsidized. By law, rent could exceed no more
    than five percent of a citizen’s income, compared to 25 to 30
    percent or more in the United States. Women were granted paid
    maternity leave as early as 1936. The constitution of 1977
    guaranteed that “The state (would help) the family by
    providing and developing a broad system of childcare, by
    paying grants on the birth of a child, by providing children’s
    allowances and benefits for large families.” All Soviet
    citizens were eligible for generous retirement pensions — men
    at age 60, women at 55. Concerning women’s rights: “The Soviet
    Union was the first country to legalize abortions, develop
    public child care, and bring women into top government jobs.
    The radical transformation of women’s position was most
    pronounced in the traditionally Islamic areas, where an
    intense campaign liberated women from extremely repressive
    conditions.” (7) The work week was limited to 41 hours and
    overtime work was prohibited except under special
    circumstances. Night-shift workers worked only seven hours per
    day (but were paid for eight), and people who worked at
    dangerous jobs (coal miners, for example) or jobs that
    required constant alertness (physicians, for example) worked
    shorter shifts but received full pay. (8)

    To be sure, life could be harder in the Soviet Union compared
    to what it was for middle- and upper-income citizens of the
    rich capitalist democracies (but not the poor of these
    countries nor the millions of Blacks and Hispanics in US
    ghettoes nor the denizens of the capitalist global south,
    i.e., the bulk of humanity.) Housing was guaranteed and rents
    extremely low, but the housing stock was limited. The Nazis
    had destroyed much of the country’s living accommodations, and
    the USSR’s emphasis on heavy industry slowed the building of
    replacement stock. Incomes, too, were lower, but the Soviet
    Union had started at a particularly low level of economic
    development, and despite rapid gains, had not caught up to the
    West at the point of its demise. Still, life was more certain.
    And on such human development measures as infant mortality,
    life expectancy, doctors per capita, adult literacy, daily
    calories per person, and educational attainment, the Soviet
    Union and other communist countries performed at the same
    level as richer, industrialized capitalist countries, and
    better than capitalist countries at the same level of economic
    development. (9)

    But didn’t the Soviet Union come to an end because its
    publicly-owned and planned economy broke down? Not at all.
    Excluding the war years, the Soviet economy grew every year
    from the point socialism was introduced in 1928 until the last
    Soviet leader Mikhail Gorbachev began to dismantle it in the
    late 1980s. And for most of those years it grew much faster
    than the capitalist economies of North America and Western
    Europe. (10) Indeed, by the mid 1970s, there was serious
    concern in Washington that the Soviet economy would soon
    surpass that of the United States. (11)

    The Soviet Union’s demise is more aptly described as a
    capitulation (some say suicide (12)) rather than an economic
    collapse. The torrid pace of Soviet economic growth began to
    slow in the 1970s, for a variety of reasons. An exhaustive
    examination of all the reasons would require more space than
    is available here. But there is one reason worth quickly
    mentioning. The country’s efforts to keep pace militarily with
    the United States and NATO monopolized research & development,
    depriving the civilian economy of the fuel it needed to
    innovate to overtake the US economy. (13) (Complaints may have
    frequently been made about the quality of Soviet consumer
    goods, but no one complained about the quality of Soviet
    military hardware. (14)) If the Soviets failed to surpass
    capitalism, or worse, fell behind, the commitment of Soviet
    citizens to socialism would weaken. What’s more, the country’s
    ability to defend itself would either atrophy, or the country
    would be called upon to allocate increasingly large
    proportions of its budget to defence. Neither option was

    […snip… references are at the link…..]