Monday, May 8, 2017

Communism's Unintended Consequences

Karl Marx’s famous slogan is “from each according to their ability, to each according to their need.” That’s a good way of expressing the spirit of communism, but think about what happens once we apply the first lesson of economics. What is punished? Hard work, because the guy who makes twenty widgets per day gets paid the same as the guy who makes just five widgets per day. What is rewarded? Shirking, because you’ll make a good wage even if you don’t do any work. Communism punishes hard work and rewards shirking. So we predict that communism damages the work ethic and the economy along with it.

Sure enough, that’s exactly what happened. John McMillan explains in Reinventing the Bazaar (2002, p.94-110). In communist China, peasants put Marx’s slogan into practice. They worked the fields collectively and they each got an equal share of the harvest. The peasants who worked hard got just as much food as the ones who shirked on the job. Needless to say, the outcome was a lot more shirking! And since no one wants to be the only sucker, even the hard workers started shirking once they realized that everyone else was doing it. The Chinese Anhui province was known as the granary of China, but after communism the people could not even feed themselves. 

Things got so bad that in 1978 people from the Xiaogang village met in secret. They decided to divide the commune into privately owned lots, one lot for each villager. In other words, they switched from communism to capitalism. One farmer explained, “You can’t be lazy when you work for your family and yourself.” Sure enough, their harvests skyrocketed. The people weren’t poor anymore. Neighboring villages followed suit and their harvests skyrocketed too. Luckily the villagers began their experiment at a time when reformers were challenging the old guard of the Communist party; otherwise they might have been killed or imprisoned. Instead the reformers let the experiments continue and by 1984 there were no communes left. 

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