But his income increased by a mere 25C or by 0. Moreover, the income of the other members also increased by 25c even though they did not work any harder and their productivity did not increase. While the benefits of the extra production were diffused throughout the commune, the costs were concentrated on Clem. In short, the distributional policies of socialism penalize industrious behavior.
Deeper insight into socialist incentives can be obtained by looking at the situation from a different angle. Assume that the conditions of the commune are the same as described above. But now assume that instead of increasing his production Clem begins to slough off, to shirk. Assume that he cuts his production from the average of bushels a year to only What are the effects? The total output of the commune drops from , bushels to 99, bushels.
Yet, they have not, we are assuming, reduced their workloads. But he has cut his workload in half. This is a great deal for Clem!
He has obtained a 50 percent increase in leisure at a cost to himself of only 25c, or a 0. The problem, of course, is that there is no mason why this is limited to Clem.
It applies with equal force to all members of the commune. But if all members shirk, little or nothing will be produced and the commune will quickly find itself in dire straits. The basic problem of socialism is the imbalance or asymmetry it creates between costs and benefits. At times the costs are diffused throughout the entire community while the benefits are concentrated on one or a few members.
At other times it is the costs that are concentrated while the benefits are diffused. The result is that socialism, by its very nature, rewards sloth and indolence and penalizes diligence and hard work. It therefoR establishes incentives that are incompatible with its self-proclaimed goal of material prosperity.
There are two distinct methods by which this can be accomplished: private property or coercion. Assume that instead of living in a commune Clem lives in a market society and owns his own farm. If Clem would increase his production, just as he did in the commune, from to bushels, he would receive the full benefit of the additional output.
In doing so it creates incentives that automatically penalize indolence and reward hard work and productivity. These are the exact opposite of the incentives generated by socialism. To permit private property would be to acknowledge the failure of socialism. As a result, socialist systems have allowed private property only grudgingly and on a very restricted basis. Rather than admit failure socialists have usually opted for the other means to internalize externalities: coercion.
To counteract the incentive to shirk, the socialist rulers can establish production quotas for Clem and the other members of the commune and then threaten them with penalties for failure to meet the quotas.
Since coercion will stimulate production only if the penalties are severe enough to counteract the incentive to shirk, socialism must reduce the population to virtual slavery.
But even if coercion does stimulate production the increase will be far less than under private property. Since it ensures that each producer will receive the total value of his production, private property provides the incentive to maximize production. Obviously one single person intentionally killed by a government is one victim too many.
The material in this chapter is certainly not offered to excuse or minimize the crimes and atrocities committed by governments claiming to uphold the institutions of private property and free markets. Yet many people have simply never heard the facts, and do not realize that the totalitarian socialist regimes of the 20th century became internal killing machines on a scale that places them in a different category altogether.
You are no doubt familiar with the atrocities committed by the National Socialists in Germany under the leadership of Adolf Hitler. You may not realize that in terms of numbers, communist regimes were actually much worse. Many of the authors were formerly communist historians detailing the new knowledge of the activities of communist regimes after archives were made public with the fall of the U.
Having gone beyond individual crimes and small-scale ad-hoc massacres, the Communist regimes, in order to consolidate their grip on power, turned mass crime into a fullblown system of government. After varying periods, ranging from a few years in Eastern Europe to several decades in the U.
However, the memory of the terror has continued to preserve the credibility, and thus the effectiveness, of the threat of repression. These crimes tend to fit a recognizable pattern even if the practices vary to some extent by regime. Nonetheless, we have to start somewhere.
The following rough approximation, based on unofficial estimates, gives some sense of the scale and gravity of these crimes:. This policy was a recipe for creating famine on a massive scale. Remember that in the period after , only Communist countries experienced such famines, which led to the deaths of hundreds of thousands, and in some cases millions, of people. And again in the s, two African countries that claimed to be Marxist-Leninist, Ethiopa and Mozambique, were the only such countries to suffer these deadly famines.
As we noted in the disclaimer at the beginning of this lesson, in truth there can be no controlled experiments in the social sciences in general, or in economics in particular. People cannot be completely controlled by the experimenter, so that it is impossible to repeat a particular experiment with the same initial conditions except for one minor tweak.
When it comes to the horrible legacy of communist regimes, some apologists have argued that the crimes were the result of a particularly violent or oppressed people. For example some have argued that after being oppressed by the czars for so long, it is no wonder that the Bolshevik revolutionaries took things too far once they gained power.
But if full-blown socialism were implemented in a civilized, democratic society, the socialist could claim, things would be much different. The closest we can come to testing such a claim is to look at regions that were very similar in all other respects except for their institutional framework.
An even starker illustration of the difference between extreme socialism and moderate capitalism is the case of Korea. Journalist Barbara Demick provides compelling anecdotal evidence in her book Nothing to Envy, based on interviews she conducted with defectors from North Korea.
Here is an excerpt from the opening chapter:. Next to this mysterious black hole, South Korea, Japan, and now China fairly gleam with prosperity. Even from hundreds of miles above, the billboards, the headlights and streetlights, the neon of the fast-food chains appear as tiny white dots signifying people going about their business as twenty-first-century energy consumers. Then, in the middle of it all, an expanse of blackness nearly as large as England.
It is baffling how a nation of 23 million people can appear as vacant as the oceans. North Korea is simply a blank. North Korea faded to black in the early s. Power stations rusted into ruin.
The lights went out. Hungry people scaled utility poles to pilfer bits of copper wire to swap for food. When the sun drops low in the sky, the landscape fades to gray and the squat little houses are swallowed up by the night.
Entire villages vanish into the dusk. Even in parts of the showcase capital of Pyongyang, you can stroll down the middle of a main street at night without being able to see the buildings on either side. But North Korea is not an undeveloped country; it is a country that has fallen out of the developed world. You can see the evidence of what once was and what has been lost dangling overhead alongside any major North Korean road—the skeletal wires of the rusted electrical grid that once covered the entire country.
North Koreans beyond middle age remember well when they had more electricity and for that matter food than their pro-American cousins in South Korea, and that compounds the indignity of spending their nights sitting in the dark. Back in the s, the United States offered to help North Korea with its energy needs if it gave up its nuclear weapons program. But the deal fell apart after the Bush administration accused the North Koreans of reneging on their promises.
North Koreans complain bitterly about the darkness, which they still blame on the U. But the dark has advantages of its own.
When adults go to bed, sometimes as early as P. The darkness confers measures of privacy and freedom as hard to come by in North Korea as electricity. Wrapped in a magic cloak of invisibility, you can do what you like without worrying about the prying eyes of parents, neighbors, or secret police. I met many North Koreans who told me how much they learned to love the darkness, but it was the story of one teenage girl and her boyfriend that impressed me most.
She was twelve years old when she met a young man three years older from a neighboring town. Her family was low-ranking in the byzantine system of social controls in place in North Korea. So their dates consisted entirely of long walks in the dark. There was nothing else to do anyway; by the time they started dating in earnest in the early s, none of the restaurants or cinemas were operating because of the lack of power. The photo showed striking South Korean workers who were at a protest, and the point of course was to demonstrate the miserable condition of laborers in the exploitative capitalist society.
But the North Korean told Demick that three things jumped out at him from the photo, which eventually made him risk his life by fleeing the country. First, the photo showed that average people in South Korea had cars. This was not the case in North Korea.
Second, the photo showed that the striking worker—though clearly enraged with his fist clenched in the air—had a pen in his shirt pocket. This too was unheard-of among the average people of North Korea at the time.
Third, the fact of the rally showed that the workers in South Korea were allowed to protest. That too was an alien concept to North Koreans. As the case of North Korea perhaps makes clearer than any other single comparison, socialism has the power to devastate entire economies and literally starve whether intentionally or accidentally millions of people.
It is crucial to know sound economics because civilization itself is at stake. Father and son were experts in absolutely everything, be it geology or farming. The country lurched from one harebrained scheme to another. Skip to main content. Week 8: Debates over Macroeconomic Policy. Search for:. The Failures of Socialism The Vision of Pure Socialism In this lesson, we will explain the idea of a pure command economy, or what is also called a command-and-control economy.
Political economy is something that the bourgeoisie always tries to mystify. They tell us in school or on the news that economic crises, inflation, soaring interest rates are so complicated that no one can explain them.
And because economics is so confusing, we have to live with the system the way it is. So I was really pleased to see another article on political economy to really break it down. But I read the section with all the formulas three or four times and I was still lost.
What the article really needed was a couple of concrete examples to explain these concepts. Now the CWP has historically held the leading role in the struggle against revisionism, particularly the exposure of the coup in China and upholding the line of Chairman Mao. Yet, with the exception of one brief article, there has been virtual silence on the issues raised by the sham trials in China.
The American people are watching the trials and the media is doing its best to slander Chairman Mao and confuse us on the basic issues. Los Angeles, CA Your letter raises good questions. Before we believed that the Soviet Union had turned away from socialism and gone back to capitalism.
But through our study of political economy, and most important, critically looking at the problems raised by our practice in trying to make revolution in this country, our understanding has changed. The Soviet Union, China and many others are socialist countries. We now have a deeper understanding of the fundamental strength of socialism as well as a more mature perspective on the weaknesses socialism inherits from the old society.
What is our position on material incentives, bourgeois right, the Cultural Revolution and the trial of the four in China? All of these topics and more are addressed comprehensively in a book written by Jerry Tung, our General Secretary, and will be published soon. There is an ad for the book in this issue of WV , and we urge you and all our readers to order a copy. However, we would like to talk a little about material incentives. Material incentives are connected with the way society distributes its wealth under socialism.
In any society, whoever owns the factories, mines and mills the means of production determines how the wealth produced by society will be distributed.
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