Reinventing history, part 1532

Wow, you find out the coolest things on the Internet. Such as the fact that the failures of communism are due to the fact that communism has never been tried. And the failures of capitalism are due to the fact that pure capitalism has never been tried.

Now, as we all know, pure capitalism works only if everybody is honest. If you have loan brokers misrepresenting the properties that secure loans and misrepresenting the borrowers to the mortgage companies who are providing the funding, if you have mortgage companies misrepresenting the quality of the loans they're selling to mortgage-backed-security pools, if you have bonding agencies misrepresenting the quality of those mortgage backed securities, if everybody is lying in other words, things go to hell in a handbasket as a housing spiral starts up then inevitably collapses once the loans start foreclosing. The only losers are honest people -- the folks who bought those mortgage-backed securities for their retirement funds thinking they were prime grade debt.

So we don't have -- and can't have -- pure capitalism because it simply does not work. It ignores a central fact of human beings: that human beings lie, either deliberately or due to irrational exuberance. Pure capitalism could only work in a perfect world where all human beings tell the truth, the whole truth, and nothing but the truth.

So now let's look at communism. For the sake of discussion, I'm going to break out the system of government used in, e.g., the old USSR (which was authoritarian dictatorship) from the method of economic organization (communism). Okay, first thing we find out is that the kulaks won't voluntarily join into communes. They're not living the best of lives, life is still hard for them, but they still don't want to join their meagre properties and possessions with that of others into a commune. So what you end up with is either a) a very small minority join into communes, which tend to be short-lived due to leadership and "deadbeat" issues except for the religious-oriented ones like the kibutzen or Amish/Mennonite communities (see James Eliot's notes below), or b) someone has to exert power to force the kulaks to join together into communes, which tends to result in both dictatorship and economic disaster since the kulaks would rather destroy their possessions rather than contribute them to the commune.

Okay, so let's do some hand-waving and imagine a society where there are no kulaks. There have been some of those, after all. For example, most Native American societies basically had no concept of "private property" prior to the intervention of Europeans. They basically were already organized into communes of a sort. The problem here is that economic activity is very low in such societies. The inevitable end result is that other societies end up competing for the same economic assets as populations rise and the collectivist societies get out-competed by more capitalist societies.

But, objects the modern communist, that's not what modern communism is about. Modern communism is about industrial societies. Like the United States used to be. In Karl Marx's time, a textile factory got some raw cotton cloth from a cloth factory, and created clothes out of it. The cloth factory got raw cotton fiber from a cotton plantation and created cloth out of it. So you had three sets of people involved -- the plantation, the cloth factory, and the clothing factory. It is fairly easy to collectivize each one of these and handle the movement of goods between them.

Well, thing is, we don't live in Karl Marx's time. I am a software engineer. I am in Sunnyvale, California. My engineering team is in Shanghai, China. The appliance that we sell is made in Taiwan. The CPU is made in Chandler, Arizona and the chipset is made in Leixlip, Ireland, with Ethernet chips made in Hudson, New York. The hard drive is made in Thailand, using media substrate made in Malaysia and with firmware designed in Orange County, CA. The actual main microchip on that circuit board is made in Taiwan, while the ancillary circuitry such as amplifiers and such are made in Costa Rica, Malaysia, Thailand, and China. The case that the appliance is installed into is made in South Korea. The power supply within that case is made in Taiwan from parts from multiple nations all over the world, including Japan, El Salvador, China, Malaysia, Costa Rica, South Korea, Thailand, and Taiwan.

In short, for one of our appliances, there are thousands of parts from a dozen different nations. And we sell a dozen different types of appliances, each of which has a different mix of parts. Making sure all these parts all make it together requires some intermediary to govern the production and flow of parts. We call this intermediary "currency". And no, you can't do this all with computerized JIT (Just In Time) manufacturing and avoid all the intermediary stuff. Not yet, anyhow. At my last employer, where I set up the manufacturing system, our orders to the outsourced assembly facility were *faxed*. You'd be amazed at how uncomputerized actual manufacturing facilities are even today.

So this, then, explains why communism as an economic system has failed every time it has been tried. It assumes Karl Marx's world, where manufacturing had few inputs. This is why the Soviet Union was spending 60% of its GDP on its military as it approached collapse... as military weapons became more and more complex, mediating the inputs to those weapons became more and more inefficient. Similarly, this explains why every attempt at communism has been a dismal failure at providing things like medicines, medical equipment, and consumer goods to its people. As these items became more complicated to manufacture, the lack of effective mediation resulted in inefficient and slow manufacturing and distribution of these items. But it also explains why the things communism *has* succeeded in are those things which have few intermediaries. For example, communist nations have typically been very good at education and have produced large numbers of scientists, doctors, and engineers. Education is an example of an industry where there are few intermediaries.

Now: Please note that I am differentiating between communism as an economic system, and communism as a political system. The political system practiced in the Soviet Union, Cuba, China, etc. was authoritarian dictatorship. When communists say that "real communism has not been tried", what they're talking about is the political system called anarchic socialism (or "anarcho-socialism")s, where people are self-organized into worker communes or syndics that provide goods and services to other worker communes or syndics according to the others' needs and are provided goods and services according to their own needs, and governance takes place via consensus of the commune. That, then, is when we run into two problems:

1. No society is a hermetic bubble. There are other societies that compete for the same resources. This requires an organization (we might call it "government") to provide for national defense (at the very least) and which has the ability to requisition resources from everybody else in order to provide that service. I.e., has priority over civilian use of resources -- but only up to the amount needed for national defense. How to make this happen without capitalism (where taxes to support the military make it clear that it's the military sucking up too many resources) is thus far a problem that has not been solved -- in every large-scale attempt at communism, the military ended up sucking down the entire economy after a period of time.
2. Governance of syndics or communes is a serious problem. Thus far every attempt we've made to do this kind of thing has fallen apart within a matter of years due to infighting and schism -- the problem of power that I talk about below -- and eventually devolved to a leader-follower model where a charismatic leader is in charge and uses his subjects for his own enrichment. The main exception is in religious communities which are governed by a "higher power" (i.e., which push the problem of power to a "higher power").

And I had a point, but I think I lost it sometime ago. But the deal is: We've tried capitalism. It didn't work. We've tried communism (anarcho-socialism) on a small scale, and run into problems. Apologists for either form of economic organization who claim that these failures are just because our attempts weren't "pure" or "perfect" enough are ignoring the fact that human beings are incapable of perfection. They just are. If your system of economic organization depends upon being "pure" or "perfect" in order to work properly, then it is a failure by definition.

So what is the "perfect" way to organize an economy? Well... we'll have to discuss that some more, eh?

-- Badtux the Socioeconomics Penguin