What is communism (short definition)
– Communism is a political and economic doctrine that seeks to create a classless society by replacing private ownership of productive assets with communal or state ownership. In theory, production and distribution are organized so that goods are shared “according to need” rather than allocated by market prices or private property rights.
Key terms (defined)
– Means of production: factories, land, natural resources and other assets used to produce goods and services.
– Proletariat: the working class who sell their labor for wages.
– Bourgeoisie: owners of capital and the means of production.
– Vanguardism: the idea that a dedicated, politically advanced minority must lead the working class toward socialism and, eventually, communism.
– Central planning: a system where a central authority sets production targets, prices, and allocation of resources instead of markets.
Brief historical outline
– Early roots: Communal ownership ideas predate modern politics (religious and communal experiments in history advocated shared property).
– 19th century theory: Karl Marx and Friedrich Engels formulated a materialist analysis of history and class conflict. They argued that capitalism produces a working-class (proletariat) opposed to capital owners (bourgeoisie). They envisaged a progression: capitalism → socialism → communism (a final, classless stage where the state would no longer be needed).
– 20th century practice: Revolutionary movements inspired by Marxism led to the formation of communist states. After the 1917 revolution in Russia, Lenin’s Bolsheviks established a one-party state that pursued rapid socialization of industry and agriculture. Later leaders like Joseph Stalin centralized power, pursued forced collectivization and political purges, and ran multi-year economic plans.
– Cold War and global effects: Communist states became principal rivals to western capitalist democracies. The Soviet Union’s model emphasized heavy industry and state control; it achieved periods of rapid industrial growth but also chronic shortages of consumer goods. Reforms in the 1980s (perestroika for economic restructuring and glasnost for greater openness) failed to prevent the Soviet state’s dissolution in 1991.
– China’s path: The Chinese Communist Party (CCP) took power in 1949. Under Mao Zedong, policies like the Great Leap Forward (late 1950s–early 1960s) and the Cultural Revolution (1966–1976) caused mass hardship and political purges; the Great Leap Forward was followed by a catastrophic famine with very high mortality estimates. After Mao’s death, leaders such as Deng Xiaoping implemented market-oriented reforms while the CCP retained political control; today China combines significant private and market activity with large state-owned enterprises and restricted political freedoms.
Ideas from the Communist Manifesto (in brief)
– History is interpreted as class conflict.
– Capitalism concentrates control of production in a bourgeois minority; workers sell labor and are exploited.
– A socialist transition would abolish private control of the means of production; communism would be the endpoint where class distinctions dissolve and the state “withers away.”
– Slogan summarizing ideal: allocate according to ability and need.
How communism was implemented (typical features)
– Single-party rule under a communist party.
– Large-scale nationalization or collectivization of land, industry and banking.
– Central planning via multi-year plans setting output targets and prices.
– Political repression of dissent and limited freedom of expression.
– Heavy emphasis on industrialization at the expense of consumer production in many cases.
Checklist: How to recognize a regime claiming to be communist
– Is political power monopolized by a party that explicitly identifies as communist?
– Are major industries or resources owned/controlled by the state or collective entities?
– Is economic allocation governed by central planning rather than market prices?
– Is political dissent restricted and independent media subdued?
– Have policies included collectivization of agriculture or large industrial targets (e.g., multi-year plans)?
If most answers are “yes,” the country practices a form of state socialism or state-dominated communism rather than a purely market system.
Worked numeric example: How allocation choices can create consumer shortages
Assume an economy produces 1,000 resource units per year. The central plan allocates 80% to heavy industry and 20% to consumer goods. A market-driven allocation might be 40% heavy industry and 60% consumer goods.
– Central plan: heavy industry =
800 units; consumer goods = 200 units.
Market-driven allocation:
– heavy industry = 400 units
– consumer goods = 600 units
Now add a simple demand assumption to illustrate shortages and per-capita effects.
Step-by-step numeric example
1) Total production = 1,000 units (fixed for the year).
2) Assume “required” consumer-goods demand = 1,000 units (this is an illustrative benchmark—equal to total production).
3) Central-plan supply of consumer goods = 200 units → shortage = required − supply = 1,000 − 200 = 800 units (an 80% shortfall).
4) Market-driven supply of consumer goods = 600 units → shortage = 1,000 − 600 = 400 units (a 40% shortfall).
5) If population = 1,000 people, per-capita consumer-goods:
– central plan: 200 / 1,000 = 0.20 units per person
– market-driven: 600 / 1,000 = 0.60 units per person
– benchmark need: 1.00 unit per person
Interpretation (what the numbers mean)
– “Shortage” (when supply 15.625, expected capital (and hence expected output next period) would rise.
Check the implied consumption choices:
– If the planner invests I = 15, consumption C0 = Y0 − I = 20 − 15 = 5 (as given).
– If the planner invests the break‑even I* = 15.625, consumption would be C0 = 20 − 15.625 = 4.375.
Summary checklist for solving similar problems
1. Write the law of motion for expected capital: E[K1] = (1 − δ)K0 + (1 − f)φ I.
2. For break‑even investment set E[K1] = K0 and solve for I*. That yields I* = δK0/[(1 − f)φ].
3. Compare any candidate I to I*:
– I I* → expected capital rises; consumption lower today but higher future output.
4. Plug I back into Y = A·K (if production is linear) to get expected output and compute current consumption C0 = Y0 − I.
Assumptions to note
– Production is linear in capital: Y = A·K.
– Project success probability (1 − f) and efficiency φ are constant and known.
– Depreciation δ is constant and applies deterministically.
– No explicit time preference, utility function, or stochastic utility—this is a one‑period expected capital accounting exercise.
Worked numeric recap (compact)
– Given: K0 = 100, δ = 0.10, f = 0.20, φ = 0.80, A = 0.20, I = 15.
– E[K1] = 0.9·100 + 0.64·15 = 99.6 → E[Y1] = 0.20·99.6 = 19.92.
– Break‑even I* = 10 / 0.64 = 15.625 → C0 if I* chosen = 20 − 15.625 = 4.375.
Educational disclaimer
This is an illustrative macroeconomic calculation to show the trade‑off between current consumption and expected capital accumulation. It is not individualized investment advice or a forecast of asset prices.
References
– Investopedia — Solow Growth Model: https://www.investopedia.com/terms/s/solowgrowthmodel.asp
– Britannica — Solow growth model: https://www.britannica.com/topic/Solow-growth-model
– Khan Academy — Macroeconomics: economic growth: https://www
khanacademy.org/economics-finance-domain/macroeconomics/macroeconomics-economic-growth
– Economics Online — Solow growth model: https://www.economicsonline.co.uk/Managing_the_economy/Solow_growth_model.html