The “Communism Ruins the Economy” Lie

It’s unfortunate that we even have to spend so much time refuting these lies, but as I’ve noted previously, under US capitalism, we essentially live in as propagandistic a state as the USSR. Sure, there’s stuff that violates the Elite – Ruling Class line, but you really have to dig around to get it, as you will never hear or see it in any large newspaper or major newsmagazine. You will also not hear it on 99

So the capitalist Elite – Ruling Class has the propaganda thing pretty well locked down. They’ve got all of the large papers and newsmagazines, 99

Sure, there are other places to find this stuff, but it’s outside the MSM, so it’s very hard to find. There are small magazines that are anti-US Ruling Class, but they have small circulations, are hard to find, and you often need to pay for a subscription, which hardly anyone will do. There is public radio, pretty progressive around here, but it’s only one station on the dial. There are no alternatives for TV and a daily newspaper.

The rare and hard to find anti-Ruling Class voices are similar to the underground press in the USSR. Back then, keep in mind that there were samizdat presses all through the East Bloc, but like a copy of The Nation, they were hard to come across most people hardly ever read one.

One of the lies that almost all of us, believe, including yours truly, a Leftist, is that Communism was an economic disaster. After all, why has the whole world abandoned it in favor of capitalism?

Like so many things that everyone believes to be true, this statement is, in a general way, false. Via Entitled To An Opinion, a link to the Less Wrong blog (great title by the way) which proves that actually, Communism was not an economic disaster at all. Nor was it a miracle. On the contrary, economic growth in the Communist Bloc during the period covered by the surveys was right around the global average, nothing special, nothing too bad. Just typical.

The problem with Eastern Europe was that they were comparing themselves to Western Europe. From 1945-1990, Western Europe grew at a rate faster than the global average, while Eastern Europe grew at the global average. It become apparent that Western Europe was beating the Communists, but only because the Communists could not excel in the same way that the West did. When one excels and another is average, the one who excels wins. But in no way can the East Bloc be said to an economic failure.

Looking specifically at West Germany and East Germany, it is hard to make the case that West Germany had a better economy. They started out better, and at the end, they were still better, but it was all due to boost at the starting line.

In 1950 West Germany to East Germany GDP per capita ratio was 2.04:1.00. In 1989 it was almost identical – 2.14:1.00. So 40 years of capitalism hardly widened the gap. It did widen it a tiny bit – by 10

The capitalists like to throw in North Korea, but North Korea appears to be an outlier even among Communist countries. Up until 1980, they had a bigger economy than South Korea. Then South Korea started beating them. After 1990, the price of oil went up 10X overnight. Imagine if that happened here in the US. Gas would go from $2.90/gallon to $29/gallon overnight. How would the US economy handle that? How would you handle that? Would you still be able to drive your car?

Anyway, that price shock was unaffordable, and North Korea just ran out of oil. Oil was needed to run the factories and the heavily mechanized agricultural economy, so the whole thing collapsed. Not only that, but the entire capitalist world would not lift one finger to help them, as the West has been embargoing North Korea from Day One.

In addition to Western Europe, East Asia was the big winner. They grew even faster than Western Europe. So the two prizes of the capitalist system, East Asia and Western Europe, have actually been performing abnormally well for decades now. Holding these champs up as representing world capitalism in praxis is most dishonest.

The big losers in economic growth over the period were all capitalist countries – India, Indonesia, Peru and most of Latin America, Argentina, Chile, the UK and New Zealand – going from poorest to richest. It’s interesting that we never think of these economies as being economic failures, but they have been.

One can argue that Communism failed not in terms of economic growth per se, which was quite average, but in terms of supplying good products for its citizens. Surely one should not have to wait in line 5 years to buy a refrigerator or 10 years to buy a car in an economy with decent economic growth. There were also long-term problems with housing – most Communist housing was small and cramped, and there were chronic housing shortages. There were also chronic shortages of many to most of the items one buys in a store, even foodstuffs, though in general folks had plenty to eat.

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6 thoughts on “The “Communism Ruins the Economy” Lie”

  1. They never tire of telling us how many people starved to death under Stalin or Mao, but they never blame Ghandi or Nehru for the starvation in India in their times. Seems it’s only a problem if you try to do something about it.

  2. A couple of random comments from a non-expert on this field:

    1. At the IQ and the wealth of nations website, there’s a graph of estimated national IQ against GDP.

    See that outlier hanging below what looks like the baseline? That’s China. Unfortunately, the authors don’t have IQ data from North Korea, but if it’s the same as South Korea, their dot would be right next to China’s.

    2. Could it be that the issue isn’t so much communism as an over-sized military? My own belief is that America’s next great societal change will occur when we can create ethanol from the NON-edible part of corn plants and eliminate the half of the (peacetime) military budget that goes to protecting oil supplies.

  3. Sorry about the link. It needs a slash between where the line-break occured.

    (Further attempts to paste it into this submission window produced the same as above.)

  4. Dear Robert
    In 1939, there was no vast income gap between what became West Germany and what became East Germany. The statement that in 1950 per capita income in West Germany was 2.04 times higher than in East Germany is totally unbelievable.
    West Germany had to accept a proportionally higher number of refugees from areas from which Germans were ethnically cleansed after 1945. Of West Germany’s population of 50 million in 1950, 10 million were refugees. Of East Germany’s 18 million, only 2 million were refugees.
    The real argument against communism is that communism seems to have innovated very little and relied instead on borrowing new technology from abroad. Ultimately, economic growth results from technological progress. If communism can’t generate technological progress but has to import it, this implies that, if the whole world were communist, there would be no economic growth.
    Regards. James

  5. Capitalist reforms in China were associated with a big change in growth rate. But, the government ceasing to cause extreme terror was also roughly contemporaneous. So it’s hard to tell what created the big change.

    I agree that Russia/USSR does not seem to be doing much better with capitalism. I think the high corruptibility of that people (though they are a great and noble people) makes it really hard for them to come up with a $45,000 per capita GDP using present technology.

    What about Vietnam? It seems to have been stable since 1976 (no big war, no Mao-like terror government). It seems to have grown much better since the pro-market changes in 1986, as described here:

    However, communism got only 10 years (’76-86) to try to do its thing. And those 10 years came just after 30 years of war. So it is not necessarily clear whether communism got a fair chance.

    I agree that it’s extremely stupid to just look flatly at who had better growth rates, thus making a ceteris paribus assumption that is quite false. IQ is a variable of huge importance.

    Obviously, the bolshevik industrialization of the USSR worked, more or less. Mao’s industrialization didn’t work at all. Even if the perfect planned economy is as good as capitalism or fairly close, or at least not terribly far, any given planned economy might not have the perfect plan. You might get Stalin (evil but fairly economically effective), but you might get Mao (not effective at all). Since capitalism is not really controlled by anyone, you can’t really get a Mao-like failure. Capitalism always works about the same. There seems to be no example of capitalism ever producing a long no-growth period, a complete failure, in any country possessed of the potential for growth.

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