Essay: Economic Failures of Communism

The Economic Failures of Communism is an essay explaining and outlining the ways in which the political and historical theory of Communism has repeatedly failed when enacted.

Communism is a materialist philosophy, meaning that it emphasizes material conditions. This is in contrast to idealist philosophies that prioritize ideas as the basis for change. Specifically, Communism is a dialectical materialist philosophy that believes that progress happens through the conflict between competing economic classes.

Communist theory divides society into two primary economic classes: owners and workers, or sometimes called the bourgeoisie and the proletariat. Communism claims to be seeking the advancement of the downtrodden workers, called the proletariat.

These ideas originate from Karl Marx (1818-1883) and were subsequently advanced by Friedrich Engels (1820-1895), and then further developed by Vladimir Lenin, Joseph Stalin, Leon Trotsky, Mao Zedong, Antonio Gramsci, Georg Lukacs, Herbert Marcuse, among others. These authors have advanced an evolving critique of Capitalism that suggests Communism as the only answer, and sometimes the inevitable answer, to the supposed inconsistencies of Capitalism.

History has repeatedly proven these individuals wrong. Empirical evidence has repeatedly shown Communism to be a failure as an economic model, and that in practice it primarily serves as a political critique that leads to strife and division within a society, and serves as a theory to govern a nation with totalitarian policies driven by a desire for power over any other consideration.

Key Failed Communist Economic Assumptions:

Labor Theory of Value: That the value of a good or service is derived from the amount of time labor put into the good or service.

The Necessity of Prices: Prices in a free market reflect supply and demand dynamics, providing simple, critical, immediate, signals for resource allocation. Without this mechanism, planned economies suffered chronic inefficiencies. Without prices, the exchange of goods is greatly complicated and made inefficient.

The Use of Debt: In a communist economic system, private citizens do not need access to personal debt because the state provides for basic needs and eliminates the necessity of private credit. Since wealth and means of production are collectively owned, borrowing for personal consumption or investment is deemed unnecessary.

The Profit Motive & Incentives: Evidence shows that lack of financial incentives and competition often leads to lower productivity, inefficiency, and stagnation. Historical examples include Soviet-era industries and collective farms, where poor incentives led to food shortages and low-quality goods.

Class Theory: Communists believe people operate on the basis of their economic class, and do not coalesce or have meaning to their religious, ethnic, national, or other classes or that some people can be completely independently-minded.

Profit Signals: Profit in a market economy allows entrepreneurs to steer capital in order to pursue those anticipated profits. Profits operate as a signal for the allocation of capital. Whereas in Communist systems, there is a complicated process to direct capital resources.

Central Planning: Communists believe that central planners and bureaucrats can operate more effective and efficient markets than private enterprise. Central planners often lack the localized knowledge needed to make efficient economic decisions, leading to overproduction, shortages, and mismatches in supply and demand

Abolition of Private Property: Private property is a motivator for productivity, investment, and innovation. Additionally, state-controlled resources often led to bureaucratic corruption and new forms of inequality.

Standardization and the Elimination of Market Choices: Communist theory encourages the elimination of minor variations of the same commodity or good. Yet human preferences are diverse and constantly evolving. Attempts to homogenize consumption (e.g., by offering standardized products) led to widespread dissatisfaction.

Forced Equalization of Wealth: Communist theory reduces any wealth variation in the population and seeks that as a good policy. While this might appeal to some who seek the abstraction of equality, it means that people who work harder, longer, and smarter than others end up with no incentive or benefit to do so. In this way economic equality results in a lowering of standards rather than a raising of economic outputs.

Key Failed Psychological Assumptions:

• The Usefulness of Coercion for Productivity:

Communism assumes that people can be coerced into sustained productivity through fear, quotas, and punishments. However, coercion may increase short-term output but leads to resentment, inefficiency, and eventual resistance. Productivity and innovation require a sense of ownership, purpose, and personal reward—elements that coercion undermines.

• Humans are Primarily Material Beings:

Communism posits that humans are mainly motivated by economic and material needs such as food, shelter, and physical comfort. This assumption ignores the human pursuit of meaning, purpose, identity, and spiritual fulfillment, which cannot be satisfied solely by material conditions.

• Altruism Can Replace Self-Interest:

Communism assumes that people will willingly prioritize the collective good over personal gain. However, while altruism exists, many individuals tend to act in their self-interest, especially when faced with communal resources, leading to free-riding and reduced productivity.

• Suppression of Ambition and Individualism:

The system assumes that individual ambition can be redirected toward collective goals and that people will accept equal outcomes regardless of effort or contribution. In reality, humans often seek recognition, reward, and differentiation based on achievement, and suppressing ambition stifles creativity and innovation.

• Coerced Equality Creates Contentment:

Communism assumes that economic equality will eliminate envy and create social harmony. However, enforced equality often leads to resentment due to new forms of inequality (e.g., political privilege) and fails to address people's desire for personal advancement and status.

• The "New Man" Can Be Engineered:

Communist ideology holds that a new, selfless "socialist man" can be created through education, propaganda, and ideological conditioning. History shows that attempts to reshape human nature through coercion or indoctrination have failed, as humans resist being molded against their natural instincts and values.

• Humans Do Not Need Ownership for Motivation:

Communism assumes that people can remain motivated without private ownership, as long as their basic needs are met by the state. However, ownership provides psychological benefits such as pride, responsibility, and long-term investment, which are critical for sustained motivation and productivity.

• Suppression of Competition Improves Cooperation:

Communist theory assumes that eliminating competition fosters collective cooperation and reduces conflict. In reality, competition drives innovation and improvement. When competition is suppressed, individuals and institutions often become complacent, leading to inefficiency and stagnation.

• The Wisdom of Bureaucratic Elites vs. the Wisdom of Crowds:

Communist systems assume that a centralized, educated elite can effectively plan and allocate resources for the population. This assumption overlooks the "wisdom of crowds," wherein decentralized decision-making by individuals often results in more efficient resource allocation and innovation.

• People Will Accept Uniform Standards of Living Without Resentment:

Communism assumes that people will be content with equalized living standards. However, humans are inclined to compare themselves to others and strive for progress. When advancement is stifled, dissatisfaction often leads to black markets, corruption, and other forms of resistance.

• Failure to Recognize the Need for Marketing:

Communism assumes that quality goods and services do not require marketing because consumers will naturally seek what they need. In practice, marketing serves to inform, create demand, build loyalty, and foster innovation. The absence of marketing in communist economies led to mismatched supply and demand, poor product quality, and consumer apathy.

Communist Countries:

• Afghanistan: 1978-1992
• Angola: 1975-1992
• Benin: 1975-1990
• Bulgaria: 1946-1990
• Cambodia: 1975-1980
• China: 1949-Present
• Cuba: 1959-Present
• Czechoslovakia: 1948-1989
• East Germany: 1949-1990
• Ethiopia: 1974-1991
• Grenada: 1979-1983
• Hungary: 1949-1989
• Laos: 1975-Present
• Mongolia: 1924-1992
• Mozambique: 1975-1990
• North Korea: 1945-Present
• Poland: 1947-1989
• Romania: 1947-1989
• South Yemen: 1967-1990
• The Soviet Union: 1917-1991
• Venezuela: 1999-Present
• Vietnam: 1945-Present
• Yugoslavia: 1945-1992

Common Characteristics of Communist Economies

• Black Markets
• Centralization
• Corruption
• Credit Markets Abolished
• Hyperinflation
• Nationalization
• Price Controls
• Scarcity
• Single-Party Control / Elections
• Stagnation
• Underinvestment in Research, Innovation, Infrastructure

Everywhere that Communism has been tried, in every iteration, has been an abject failure. Liberals and sympathetic socialists have tried to deflect and deny the economic failures of Communism by excusing it as having been imposed under duress, imposed incorrectly or without a necessary period of industrialization, which are all versions of the "true Communism has never been tried" meme. This is part of the left-wing tendency to use sophistry and word play in order to evade losing intellectual arguments and to escape the social liability of the policies they promote.

Communist countries have murdered nearly 100 million people through a variety of methods, including: executions, assassinations, incarceration, overwork, starvation.

The malaise and backwardness of Communist countries is why many flee or defect from such countries to the more prosperous West. The West guaranteed religious freedom, absence of political persecution, freedom of thought, freedom of speech, and free markets. Those freedoms inspired people to risk their lives to escape Communist rule in dramatic instances such as those who tried to escape Berlin, the Vietnamese 'boat people' who fled from Communist rule, North Korean defectors and refugees, among many others.

Communist countries are chronically experiencing reduced economic output and inefficiencies.

Over the past 40 years, China has notably attempted to escape the systemic and structural backwardness of communist economic thought to avoid the same fate. China's economy has largely been subsidized by slave labor and industrialization policies, though it still suffers from a great deal of central planning mistakes, corruption, crime, and black markets.