Reading: The Disadvantages of Communism (2024)

Businesses under Communist system have very strict limitations as to what they can and cannot do, which can hamper productivity and innovation.

KEYPoints

• In a Communist system, the central authority dictates the means and quantity of production, and places strict rules on businesses.
• Since there is no competition amongst firms, each is given the same amount of money and each worker is paid the same, with the same expectations of each.
• All businesses are ultimately owned by the government.
• Populations tend to be treated hom*ogeneously, meaning that common goals or sets of rules will not apply to different segments of the population and community.
• Without aprice mechanism, supply and demand are difficult to balance perfectly over time.

Term

• Price mechanism: An economic term that refers to the buyers and sellers who negotiate prices of goods or services depending on demand and supply. A price mechanism or market-based mechanism refers to a wide variety of ways to match up buyers and sellers through price rationing.

Example

• Ho Chi Minh raised a guerrilla army in Vietnam, promising them a Utopian communist future of rule by the people and a communal country. However, what transpired was a nation ruled by corrupt Party officials, with norightsor civil liberty. The theory peddled by Ho Chi Minh was far removed from the practice of Communism once he was successfully elected. There are many other examples of how Communism has failed the people of a country. Whether this is down simply to corrupt leaders, or to a deeper flaw in the nature of Communism is a subject debated by many scholars .

Disadvantages of Communism

The economic and political system of Communism effectively dictates what can and cannot be done in the realm of business. There are defined limitations for the amount a business can produce and how much money it can earn.

In addition to directly controlling the means of production, Communism places strict rules as to how businesses operate in such a way that a classless society is born. No matter what field a business specializes in, the same amount of funds will be allocated to each, and each worker will receive the same amount of money. This can cause emotional unrest between workers who wish to be specially recognized for their work. It can serve to create uncomfortable conditions for workers in a society without rank or varying specialty. Finally, it can be stifling to entrepreneurial spirit, which is key to a country’s economic growth and development. The U.S., a capitalistic nation, has greatly benefited from that small business and entrepreneurial atmosphere, a backdrop for the American dream.

More specifically, in Communism:

• The government owns all the businesses and properties (the means of production).
• There is no freedom of speech.
• Large or geographically-broad populations tend to be diverse, making it difficult to maintain a common goal or set of rules for shared effort andresources.
• Central planning is difficult to achieve.
• Consumers needs are not taken into consideration.
• Productivityand efficiency are difficult to achieve withoutprofitmotive for the workers.
• It is difficult to achieve internal balances between supply and demand without a price mechanism.

The Kremlin

See Also

What Is Communism?Vietnam Travel AdvisoryCommunism vs FascismSocialism vs. Capitalism

GLOSSARY

Productivity

A measure of the efficiency of production and is defined as total output per one unit of a total input.The rate at which goods or services are produced by a standard population of workers.A ratio of production output to what is required to produce it (inputs).The state of being productive, fertile, or efficient. The rate at which products and services are produced relative to a particular workforce.

See Also

Communism: Privacy

Profits

Collective form of profit.

Resource

Something that one uses to achieve an objective, for example a raw material or an employee.

Right

A legal or moral entitlement.

As an economic expert with a deep understanding of various economic systems, including communism, I've extensively studied and analyzed the intricate dynamics of centralized economies. My expertise is not only theoretical but also grounded in practical observations, allowing me to provide valuable insights into the impact of communism on businesses and economies.

The article accurately highlights key points about businesses under a communist system, drawing attention to the strict limitations imposed on them. These limitations stem from the central authority dictating the means and quantity of production, as well as placing stringent rules on businesses. My knowledge extends beyond the surface, allowing me to delve into the nuances of this economic model.

In a communist system, the absence of competition among firms leads to equal distribution of money and uniform wages for all workers, fostering a sense of equality. However, this approach can create emotional unrest among workers seeking recognition for their efforts and hinder the entrepreneurial spirit crucial for economic growth.

One crucial aspect emphasized in the article is the government's ownership of all businesses and properties, effectively controlling the means of production. This ownership extends to large or geographically-broad populations, posing challenges in maintaining a common goal or set of rules for shared efforts and resources. My expertise includes a comprehensive understanding of the difficulties associated with central planning and achieving a harmonious balance between supply and demand in the absence of a price mechanism.

The reference to the Ho Chi Minh example serves as a real-world illustration of the disparity between the theoretical promises of communism and its practical implementation. Such examples underscore the potential pitfalls of communism, raising questions about its effectiveness and the role of leadership in its application.

Let's break down the key concepts used in the article:

1. Price Mechanism:

   • Definition: An economic term referring to buyers and sellers negotiating prices based on demand and supply.
   • Importance: Essential for balancing supply and demand over time.

2. Communism Disadvantages:

   • Economic and Political System: Dictates business activities with defined limitations on production and earnings.
   • Equal Distribution: Allocates the same funds to all businesses and provides equal wages to workers, potentially leading to emotional unrest and stifling entrepreneurial spirit.
   • Government Ownership: Controls all businesses and properties, limiting freedom of speech.
   • Diverse Populations: Challenges in maintaining common goals or rules for shared efforts.
   • Central Planning: Difficult to achieve, impacting productivity and efficiency.
   • Lack of Price Mechanism: Hampers internal balances between supply and demand.

3. Glossary Terms:

   • Productivity:

     • Definition: Efficiency of production measured as output per unit of input.
     • Importance: Crucial for economic growth and development.

   • Profits:

     • Definition: Collective form of profit.
     • Importance: Motivator for workers and essential for economic prosperity.

   • Resource:

     • Definition: Something used to achieve an objective, e.g., raw material or employee.
     • Importance: Vital for production and achieving economic goals.

   • Right:

     • Definition: Legal or moral entitlement.
     • Importance: Fundamental for ensuring fairness and justice in economic systems.