Everything the Communists Said About Their System was False ... Unfortunately, Some of What They Said About Capitalism Was True → Washingtons Blog
Everything the Communists Said About Their System was False ... Unfortunately, Some of What They Said About Capitalism Was True - Washingtons Blog

Saturday, March 5, 2011

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.


  1. The URSS was never a "communist" system. A communist system is per (Marx') definition an anarchist system. Marx and co. forecast an eventual socialist revolution in developed countries like West Europe, where there was a strong working class, not in underdeveloped countries like Russia or China used to be.

    The party in power, claiming to push for communism (participative integral democracy in a decentralized post-state context) adopted the name "communist party" (originally they were Social-Democrats (majority fraction)) but before the 1950s (when Stalin went totally nuts a la Gaddafi) the did not dare to claim to have achieved communism but mere socialism. Lenin actually declared his initial satisfaction of having lead a bourgeois revolution, as he thought socialism, not to mention communism, was impossible in the feudal conditions of Russia.

    But, under that banner, similar nationalist systems have arisen elsewhere, notably China (but also Cuba, Vietnam, etc.) Why? Because the fake "communist" system we better call Stalinism, as it's a sui generis regime, worked well under the conditions of Fordism (not really under Toyotism and that's why the USSR collapsed). Their Capitalist drift is, I'd say, normal and responds to two needs of such a sui generis system:

    1. That the bureaucrats can become a true bourgeois class by appropriating the once public capital in private hands, typically their own, so they can make their power inheritable.

    2. The needs of national capitalism as a force on its own right. After all that was what Stalin did: accumulating capital in underdeveloped Russia. Mao copied him in China. The capital was at first accumulated in public hands (the state) but that has happened now and again in every other capitalist country as needs demanded. The relatively "pure" British and US capitalist systems are actually anomalies that can only exist because of their imperialist hegemony.

    So talking communist and discussing the Stalinist ONLY is a waste of time. An empty act of capitalist propaganda that Stalin himself would cherish.

  2. Maju, you seem to be confusing Marx, who was an authoritarian, with Bakunin who represented the libertarian wing in the First International. Even if he did predict the state would
    wither", Marx was never an Anarchist. Marx gained control of the First International, but Bakunin's ideas concerning libertarian communism did take root in Ukraine, France, Italy and especially Spain.

    During the Spanish Revolution, Communists and liberals both attempted to undermine the Anarchosyndicalists.

    "Communism" was really nothing more than state capitalism. Hence, these supposed opposites are actually just sides of the same coin. As shown repeatedly, if there is one thing state and private capitalists don't like it is unions.

    "Freedom without socialism is privilege and injustice, and socialism without freedom is slavery and brutality."

  3. GW said: “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”.

    I agree with you on that point GW but you are painting “free market capitalism” with to wide of a brush. American free market capitalism grew in stages, has structure and a history.

    What dominates the economy today in the United States is not “free market capitalism” but a “monopolistic Multinational Corporatism” that has no allegiance to our national Democracy, national economy or to the United States and strives for world power beyond any government control or regulation.

    Main Street Free Market Capitalism, on the other hand, with a competitive free market, fair trade, free enterprise free from monopolies, equal opportunity and freedom of self determination, is near death as our Democracy is near death.

    The United States has been through this before: The Great Depression.

    The Roosevelt’s pulled the United States from the fire and saved the nation by leveling the business playing field with fair business regulation and taxation so that mega-corporations would not rule by monopoly the free market and destroy the environment by exploitation.
    The federal government, on behalf of the people, built our public owned electric grids, schools, water and purification plants, sewers, highways, dams, libraries and other public owned infrastructure. It worked and the world’s largest economy grew as a result.

    Today, Free Market Main Street Capitalism is back to where it was before the Great Depression only this time the corporations have grown to become multinational corporations that have spread their monopolies throughout the world and are beyond any regulation or control from governments.

    In reality our Democracy and Science was re-corrupted and lost shortly after Eisenhower’s presidency. I remember it well when the corrupted government decided that our Natural Resources would no longer be managed by Science on a Sustained Yield Principle but would be exploited for economic expediency by the new corporate empire. That was the end to the Roosevelt’s New Deal beginning; the criminals were back in control of our government.

    JFK was Democracy and Main Street Free Market Capitalist last hope in reining in the monopolistic and subversive corporate empire. JFK was on his way to doing away with the Federal Reserve by allowing government printing of our own money and breaking up of corporate monopolies when he was murdered by them. Think of how different the US would be today if President Kennedy would have curbed the beast and lived to lead us into a more humane world.

    Ross Perot was our last great American leader to give his all for his country. As a billionaire, he knew that NAFTA would be the end of our Independence and American economy and tried to right the spilled cart but to no avail and we continued on our course to self destruction with great promises (lies) for the future (today).

    There is no Roosevelt’s on the scene today to bring the criminals to Justice, break-up the monopolies and to restore Democracy. The total corruption of the Free Press, Congress and our institutions is too great for any correction and so we the people have only one alternative and that is revolution to restore our Democracy and Main Street Free Market Capitalism economy.

    Sadly, for Americans our lives are being dismantled, the best years of our lives has already happened and there is only revolution and struggle for us in the future; enjoy your last few days of comfort! The multinational banksters and Big Oil will kill us all rather than capitulate, first they want to drain you of your last dime and enslave you and your children to debt.

    We are not going to evolve as humans but be thrown back into animal bondage and despair with only a hope for Democracy. There is nothing unusual about that, it is merely history repeating itself! Do not go quietly into the dark!

  4. Right off the bat we see trade cannot be ‘free,’ whatever ‘free’ really means. Trade inherently requires deep trust and interdependency, and is an inescapable consequence of specialisation (prior to abundance). It is complex, involved, embedded in community and custom, can only be free of, or uninfluenced by, those factors which are irrelevant to it. Trade implies, in its simplest form, cooperation, which requires agreed rules. The competition associated with trade arises when people specializing in what you do, trade where you trade. Like all things, this is ‘good’ and ‘bad.’ ‘Good,’ because it can motivate improvements in quality and prevent monopoly/oligopoly build up, and offer more choice, etc.; ‘bad,’ because it inspires cheating, cost cutting, keeping knowledge secret from the community to maintain competitive advantage, etc.

    Naturally, the community trading in the early form of market here conceptualized shares a language and a religion of some form. Its members will therefore have similar sensitivities to fairness and just price, and fair knowledge about the labour of their trading partners – knowledge, though, which is far from full; by definition specialization makes “information asymmetry” inevitable.

    This sketched community, because it is small, can establish relatively uncontroversial and simple laws, or rules of trade, that keep things more or less on an even keel. But change is the only constant, no matter how ‘free from interference' our market place is. As time moves on the trading sphere expands. Laws become increasingly complex as trade reaches out across cultures and religions and as media of exchange enable more complex trade. This ‘mission creep’ is inescapable, because, contrary to economics’ assumption of the total uniformity of all market participants (human beings), people are in fact very differently motivated and skilled, and reality is far beyond human control. Furthermore, there is an ever-present pressure to game the system (being rich is definitionally better than being poor), which means a corresponding requirement to ‘interfere’ in the market to ensure stability over time. That bears repeating; there is an ever-present pressure to game the system. Intervention of some kind or another is an increasing necessity, regardless of the inherent ‘intervention’ of establishing ground rules for even the smallest market, ground rules which themselves can only grow out of the soil of pre-existing cultural sensitivities.

  5. So we come to intervention. What is it? I think of it like this; you can’t not interfere. For example, I’m walking along the riverbank and notice a drowning child. I can rescue her, because I’m a good swimmer. If I choose not too, am I intervening or not? My choice, whichever it is, affects the flow of events. I might feel guilty for the rest of my life if I don’t dive in, or, if I do, become a hero and marry my childhood sweetheart. Maybe the rescued girl grows up to be an actor. Maybe she becomes a murderer, and so on.

    Doing and not-doing are both choices which have consequences. ‘Non-interference’ is a choice, a preference, a style if you will, with consequences which differ from its so-called opposite. That is to say, non-interference is an interference at the level of affecting outcome. ‘Non-interference’ is as much a conscious choice as ‘interference’ is, if there is awareness that a choice is to be made. If there is no such awareness, then there’s nothing to debate, nothing to talk about, no issue to address. The point becomes moot, the supposed dichotomy vanishes.

    So what is ‘free?’ I honestly don’t know. People deploy the word when Pavlov rings his liberty bell, not fully sure why they’re drooling it out. I don’t believe anyone knows what a ‘free’ market really is. As soon as you start to describe such in detail, the ‘freedom,’ perceived dimly in the distance, evaporates like morning mist. The perfectly competitive market, that Camelot which in economic theory prevents the build up of market-manipulating power, has preposterous, supernatural properties, not one of which is even remotely possible in the real world.

    And thus I have absolutely no idea what a ‘free market’ is, or could be. I have not answered my own question. Epic fail. Yet I cannot accept the claim that an unplanned, unmanaged market is 'free,' or even that there can be such a thing. There is always planning, there is always management, and with money running the show, there is always concentrated power lobbying the playing field in its favour. Interference is the name of the game, and it's no surprise that the side in control of the MSM frames the debate. Bleat after me: "Freedom! FREEDOM! FREEEEEEDOM!!!"

    A cynical thought just struck. What if 'free markets' are insisted upon by those who benefit from the system. 'Free' could be code for 'keep you hands off my damn money!' Hmmm … Could that be what Freedom™ is? Elite freedom from the mucky masses?

    From the 'Econosophy' blog by Toby Russell

  6. "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."

    This proves that the author himself should first try to understand the basic principles and morality of a free market capitalism! LOL

  7. "Specifically, while I know next to nothing about Marx, Engels or other communist thinkers ..."

    Hmm, surely you could at least read Das Kapital?

  8. Re: SRL,

    But Socialism with Freedom is an oxymoron, because instead of productive land and wealth in the hands of fewer moneyed interests they are operated by the government for it's own interests.

    The actual answer is a system closer to the family structures that have worked for centuries. One that recognizes that productive business and land needs to be in the hands of many instead of the few.

    That system is Distributism, popularized by G.K. Chesterton and Hilaire Belloc in books such as the Outline of Sanity. One website for information on Distributism is The Distributist Review.


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