What It Is, How It Works, and Comparing it to Capitalism and Socialism
Communism is an economic system where the group owns the factors of production. In countries, the government represents the group. The means of production are labor, entrepreneurship, capital goods, and natural resources. Although the government doesn't legally own the labor force, the central planners tell the people where they should work. German philosopher Karl Marx developed the theory of communism.
He said it was, "From each according to his ability, to each according to his need." In his view, capitalistic owners would no longer siphon off all the profits. Instead, the proceeds would go to the workers. To Marx, this meant that people would work at what they loved and did well. They would happily contribute these skills for the good of all. The economy would prosper because they would work harder than in capitalism.
"To each according to his need" meant the community would take care of those who couldn't work. It would distribute goods and services to everyone as they required them. Those who were able to work would be motivated by enlightened self-interest.
10 Characteristics of Communism in Theory
In the Communist Manifesto, Marx and co-author Friedrich Engels outlined the following 10 points.
- Abolition of property in land and application of all rents of land to public purposes
- A heavy progressive or graduated income tax
- Abolition of all right of inheritance
- Confiscation of the property of all immigrants and rebels
- Equal liability of all to labor and establishment of industrial armies (especially for agriculture)
- The gradual abolition of the distinction between town and country
- Free education for all children in public schools and abolition of children's factory labor
- Centralization of credit in the hands of the state
- The state would control communication and transportation
- The state factories and instruments of production would cultivate wastelands and improve the soil
The manifesto mentions state ownership in its last three points, which makes even this pure vision of communism sound like socialism. But Marx argued that state ownership is a valid stage in the transition to communism.
In a true communist economy, the community makes decisions. In most communist countries, the government makes those decisions on their behalf. This system is called a command economy.
The leaders create a plan that outlines their choices, and it's executed with laws, regulations, and directives. The goal of the plan is to give to "each according to his need." Communist countries have free health care, education, and other services. The plan also seeks to increase the nation's economic growth, secure national defense, and maintain infrastructure.
The state owns businesses on behalf of the workers, which, in effect, means the government owns a monopoly. The government rewards company managers for meeting the targets detailed in the plan. In communism, central planners replace the forces of competition and the laws of supply and demand that operate in a market economy, as well as the customs that guide a traditional economy.
Difference Between Communism, Socialism, Capitalism, and Fascism
Communism is most similar to socialism. In both, the people own the factors of production. The most significant difference is that output is distributed according to need in communism, and according to ability under socialism. Communism is most different from capitalism, where private individuals are the owners, but it is similar to fascism in that both use central plans. Fascism allows individuals to retain factors of production, and many countries turned to fascism to ward off communism.
Communism has a centrally planned economy; it can quickly mobilize economic resources on a large scale, execute massive projects, and create industrial power. It can move so effectively because it overrides individual self-interest and subjugates the welfare of the general population to achieve critical social goals.
Communist command economies can wholly transform societies to conform to the planner's vision.
Examples include Stalinist Russia, Maoist China, and Castro's Cuba. Russia's command economy built up the military strength to defeat the Nazis, and then quickly rebuilt the economy after World War II.
Some say communism's advantages mean it is the next obvious step for any capitalistic society. They see income inequality as a sign of late-stage capitalism and believe that capitalism's flaws mean it has evolved past its usefulness to society. They don't realize that capitalism's flaws are endemic to the system, regardless of the phase it is in.
America's Founding Fathers included promotion of the general welfare in the Constitution to balance these flaws. It instructed the government to protect the rights of all to pursue their idea of happiness, as outlined in the American Dream. It's the government's role to create a level playing field to allow that to happen.
The most significant disadvantage of communism stems from its elimination of the free market. The laws of supply and demand don't set prices—the government does. Planners lose the valuable feedback these prices provide about what the people want. They can't get up-to-date information about consumers' needs, and as a result, there is often a surplus of one thing and shortages of others.
To compensate, citizens create a black market to trade the things the planners don't provide, which destroys the trust in Marx's pure communism. People no longer feel the government can give "to each according to his needs."
The last five remaining Communist countries are China, Cuba, Laos, North Korea, and Vietnam. They aren't pure communism but are transitioning from socialism, where the state owns the components of supply. According to Marx, that is a necessary midway point between capitalism and the ideal communist economy. Modern communist societies rely on a mixed economy.
In October 1949, Mao Tse Tung established the Chinese Communist party. In the late 1970s, China began moving toward a mixed economy. It phased-out collective farms and allowed private businesses, but it still strictly follows a five-year economic plan. The government's policies favor state-owned enterprises in sectors vital to its goals. In 2009, China became the world's largest exporter. In 2014, it became the world's largest economy.
In October 1965, the Partido Communista de Cuba became the country’s official ruling party. The Soviet Union gave economic support to the impoverished country, and in return, Cuba supported its patron in the Cold War against its neighbor, the United States. After the fall of the USSR, Cuba suffered, and in April 2011, it began allowing economic reforms. Cubans can now buy appliances, cell phones, real estate, and cars, and more than 500,000 Cubans are registered as self-employed. For example, farmers can now sell goods to hotels.
In 1949, the nation won independence from France. In 1986, it began decentralizing control and encouraging private businesses. It's created tax incentives to encourage foreign direct investment because it wants to expand its economy beyond exporting its natural resources.
In 1953, its allies China and Russia helped create North Korea to end the Korean War. The country followed strict central planning with communal farming. It suffered famine and poor living conditions in the 1990s and 2000s, and in 2002, it allowed semi-private markets to sell some goods.
In 1945, communist leader Ho Chi Minh declared his country's independence from France. The French, backed by the United States, seized southern Vietnam. Ho, backed by China, took the northern part. In 1954, the French agreed to divide Vietnam at the 17th parallel, but in 1964, Ho led Viet Cong soldiers to reunite the country.
In 1975, the communists were successful, and in 1986, Vietnam began transitioning towards a more market-based economy. It still needs to reform state-owned enterprises, reduce red tape, and increase financial sector transparency.
Other Examples in History
In 1922, the Union of Soviet Socialist Republics was established with six communist countries: Russia, Belorussia, Ukraine, and the Transcaucasian Federation. In 1936, the Federation became Georgia, Azerbaijan, and Armenia.
By 1991, when it dissolved, the USSR contained 15 total countries. The additional nine were Estonia, Latvia, Lithuania, Kazakhstan, Kyrgyzstan, Moldova, Tajikistan, Turkmenistan, and Uzbekistan.
In 1955, the USSR created the Warsaw Pact with other communist military allies. They included Albania, Bulgaria, East Germany, Hungary, Poland, and Romania.
The USSR had many other communist allies. Many became communist in the 1970s but shifted to another form of government after the USSR collapsed. They included Afghanistan, Angola, Benin, Congo, Ethiopia, Mongolia, Mozambique, Somalia, South Yemen, and Yugoslavia. Cambodia was a communist country from 1975–1979.
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