Man, I hate this kind of statement. The implicit assumption here is that Communism is a superior system for enlightened, selfless, good human beings, and that we only need capitalism because we aren’t ‘fit’ for something better.
Rubbish. Hogwash. Nonsense. That statement is wrong on so many levels that it’s hard to even know where to begin. But I’ll give it a try.
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Looking out for one’s own interests is not ‘greedy’. It’s the natural state of mankind. People care about themselves, their children, their extended family and friends, and then society. And that’s the way it should be. Man is not intended to be a slave. Society is not an end unto itself. Man exists and lives and dies and has a right to life, liberty, and the pursuit of happiness while doing it. Society is nothing more than a means to achieve those goals.
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Communism would STILL fail even if every person in the world was Mother freaking Teresa. It’s not just ‘greed’ that dooms Communism - it is its inherent inability to allocate resources efficiently.
Here’s the key insight into capitalism - people are best able to determine the right course of action for those things closest to them. The guy actually making that chair over there is the best judge of whether his tools are too dull or not. So find a way to leave the decision-making in his hands, while somehow directing him into a course of action that benefits others. The market and the price system act both as a means of information transfer to coordinate the actions of large groups, and as an incentive form to ensure that people must trade with others and provide benefits to others in order to improve their own lot.
Communism, on the other hand, removes that incentive and replaces it with either ‘good will’ or an over-reaching bureacracy. So you have decisions on whether the chair-makers tools are too dull being made by a bureaucrat 1000 miles away. It’s inefficient. And if you leave the judgement up to the chair-maker without incentives to be efficient, he’s ALWAYS want new tools. Finding the most efficient compromise is damned near impossible. Oh, and this isn’t because the chair-maker is ‘greedy’. It’s because he has no way of knowing whether he should have better tools or not. All he knows is that his tools could be better, and he’d like them to be better. But what if the chair makers 2000 miles away have even worse tools? How are they going to know? And there are never enough tools for everyone to have all that they want. So some way of allocating them is necessary. In Communism, the actual decision winds up being made A) by the least qualified person (i.e. a central manager somewhere), and B) after a long time lag as information moves around.
- A corrolary to 2. Communism doesn’t scale well. It works pretty well in a very small group where everyone is in constant communication, and information can be shared readily between everyone (including information about who’s being a lazy bastard).
But as you add larger groups, you have to organize into more complex structures. That means more and more information has to be passed around. Eventually the system simply can’t keep up. Information bottlenecks are a hallmark of all communist systems, and the end result, even accounting for the best intentions of everyone is shortages, gluts, inefficiency, and a huge, ensnarling bureaucracy.
Capitalism, on the other hand, leaves decision-making at the lowest levels, and uses the price system to transmit information instantly and efficiently throughout the economy. It is a much more efficient way to organize the activities of hundreds of millions of people.
For example, in a Communist system where everyone is benevolent and selfless, the following will still occur:
- Shortages of a certain product (say, shoes) appear.
- The local manager informs the higher-ups that shoes are in short supply.
- The next person sends in a request for greater shoe manufacture.
- The government sends out the order to the shoe companies to step up production.
- The shoe company is now short of rubber, and informs the bureau.
- The bureau orders more rubber production.
- Rubber production is increased, which requires more trucks, more factories, and more resources all around. The rubber company puts in a request for these resources.
- The bureaucracy orders the companies who provide those resources to increase production.
- Those companies in turn start listing their demands for more raw products and other requirements for greater production.
- Suddenly there is a truck shortage because of the trucks diverted to the rubber plants. Now goods are sitting in warehouses and can’t get where they need to go.
- Now there’s a steel shortage, because of increased truck production. So now we order more steel mining…
And so it goes. Trying to organize and efficiently use the assets of a modern economy through central command simply does not work. And this assumes everyone agrees on what needs to be done. In the real world, there will be a shortage of shoes, and the guy will request increased manufacturing. But when that request gets to the top, it’ll be in a pile of 500 other requests for more goods, and someone has to decide which ones should be honored. That same decision has to be made at every step along the way. That one request for more shoes may cause 1000 other requests for changes along the way, and at every step someone has to decide whether or not to approve it. Get too many of those choices wrong, and you have big problems. And information is lost along the way, too.
Now, let’s look at how Capitalism deals with the same problem.
- There is a shortage of shoes.
- THe price of shoes goes up. This acts as an immediate disincentive for people who don’t really need shoes right now to wait for a while. So the shortage isn’t as bad right off the top.
- The increased price of shoes stimulates production as profit levels increase.
- The companies who increase production buy new trucks and factories on the market. This stimulates production of those. But note that the truck manufacturer doesn’t know anything about the shoes, and couldn’t care less. Extraneous information is stripped out, and only the essential information (that there is an increased demand for trucks) goes to the truck manufacturer.
- As the truck manufacturer buys more raw materials, prices subtly shift throughout the marketplace. Information travels like a web at the lowest levels, propagating through the system. And at each level, all the unnecessary information is stripped out by the price system. Eventually, a new stability is reached amongst all the various goods and services.
Think about it this way - a capitalist economy is a stable system. When something comes along to upset it (a new demand for products, new populations, whatever), information travels back and forth in negative feedback loops or in waves, like a ringing bell. Eventually, it all settles down to a new stasis.
In a communist system, it’s like trying to balance a pen on your finger. It’s dynamically unstable. When someone upsets the allocation of goods and resources, the system starts to become unstable. The bureaucracy reacts (with imperfect information, and after much delay), and fixes the original problem, but in so doing causes an instability in other areas. Just like you can never stop moving to keep a pen balanced on your fingertip, the government is always trying to play catch-up. And it never can.