Communism is an ideology espousing collective ownership of the means of production and an egalitarian distribution of social goods and services. In theory, this model would lead to a classless society in which everyone worked toward the common good, but in practice, it has led to inefficient economies, repressive governments, and massive resource misallocation—leading many to conclude that communism was never really viable to begin with. For example, China’s economic growth has accelerated since it transformed from a rigid communist system into one that is partly capitalist. The following are some reasons why communism failed:
When the Soviet Union was established in 1922, its economy was a mess. It had been ravaged by World War I and the civil war that followed it. The new government immediately set about trying to fix this problem by implementing central planning as a way of organizing economic activity.
This is a system where the government controls all aspects of production and distribution—including what gets produced, how much gets produced, where it is distributed geographically, who has access to it and how much they pay for it. In this way, central planning is similar to command economies like those implemented in China under Mao Zedong or North Korea today: everything is handled by officials at the top without any input from consumers or producers themselves (or anyone else).
For example, the USSR was unable to properly invest because it could not allocate capital. Capital goods (which are goods used in production) were in short supply and could not be allocated efficiently due to central planning. In addition, there was no mechanism for transferring resources from one sector of the economy to another when needed. For example, if agriculture failed because of bad weather or pests and the government did not allow farmers to use their own land as collateral for loans from banks or other private institutions, then farmers would be unable to borrow money should they need it in order to plant crops that year.
Mismatch between economic and political incentives
- The CP leadership were not accountable to the people. Because of their privileges and power, party officials had little incentive to improve the economy.
- The Party elite’s interests were not aligned with the interests of their citizens (e.g., peasants, who made up 90% of the population).
There are three main reasons communism failed
While communism has its own set of benefits, it also comes with many flaws. There are three main reasons why communism failed:
- Central planning – This system went against the principles of capitalism, where prices are determined by markets. While central planners thought they could determine what people needed, this process often led to shortages and misallocation of resources.
- Inefficient investment – When you have a centrally planned economy, there’s no profit incentive for people to invest in businesses that would produce goods and services that people want or need in the future (unless you’re willing to pay higher prices). This was proven when companies in command economies saw lower levels of productivity because there was no way for them to make money off their investments or products—they just had to make whatever they were told by government officials without any regard for demand or innovation.
- Mismatch between economic and political incentives – It’s easy enough for governments to control what happens politically; however, it becomes much harder when everyone is working together toward common goals instead of competing against each other like how things work under capitalism (or even socialism).
It’s clear that there are several major reasons why communism failed. Some were related to the system itself, while others were related to how it was implemented. Either way, it’s important to understand these failures if we want to avoid repeating them in the future.