Capitalism and Communism: An Overview

Capitalism has been rightly criticized for creating inequality and encouraging greedy and selfish behavior. The rapid expansion of capitalism in the nineteenth century due to the Industrial Revolution brought with it profound changes to the world. Machines were now able to do large amounts of work that skilled tradespeople had been doing by hand for centuries. The result of this was the development of large factories in major cities that employed large workforces of people to operate the equipment. During this time wages were low and working conditions were very poor, and employees had few (if any) rights. Workers in factories (including underage children) labored for long hours in dangerous conditions; many of them became injured or died because of these poor working conditions. However, the small number of people who owned these large factories and capitalistic industries became very wealthy as a result of this, even though the common people who worked in these factories worked in grueling conditions. Over time, society began to notice the inequality of this capitalist system and people started to advocate for changes to be made to the system. Labor unions and employment protection laws eventually came into existence as a result of the inequality that capitalist industries produced. The rise of capitalism also brought into existence a new political theory, known as communism (also referred to as Marxism), presented by the European intellectual, Karl Marx. He was highly critical of capitalism and he believed that it created an imbalance of inequality between those who owned the means of production and those who labored for it. Marx came to the understanding that capitalism was unsustainable and that it would eventually collapse and be replaced by a communist utopia in where the workers would control the means of production and be the owners of society as opposed to a handful of wealthy elites. In his writings, Marx openly advocated for the workers (also referred to as the proletariat) to overthrow the capitalist rulers (called the bourgeoisie) in a world revolution. He believed that this communist revolution would spread around the world, leading to the end of capitalism and the inequality that came with it. As can be seen seen here, Karl Marx was no friend of the capitalist system and openly called for its demise. Many years after his death, his vision did become somewhat of a reality: several nations did experience communist revolutions in which their ruling classes were replaced by a communist forms of government. This was most notable in the countries of Russia, China, North Korea, Vietnam, Laos, and Cuba, as well as parts of Eastern Europe and Latin America. In the middle of the 20th century, at the end of the Second World War, it seemed that communism was the fastest growing form of government and was becoming widely accepted among large parts of the world population. The popularity of communism at this time was most likely due to the extreme poverty that many countries were faced with after the war, and communism seemed to be an easy solution to rectify this problem. The rise of communist governments at this time was greatly disturbing to the United States and the rest of the Western world that did not support this form of government. For roughly the next forty-five years, the United States engaged in a bitter struggle against the communist world, led by the Soviet Union (formerly Russia and several smaller states), known as the Cold War. During this time, the democratic and capitalist Western world actively competed for influence in other countries against the authoritarian, communist world. Near the end of the 1980s, the Soviet Union was unable to compete against the economically prosperous United States, especially under President Ronald Reagan. The Soviet Union collapsed a few years later, along with many of its communist satellite countries, and the new governments chose to implement free-market reforms. The nation of Cuba was hurt economically from the collapse of the Soviet Union, from which it had relied heavily upon for foreign aid; China, although remaining communist, implemented several major free-market reforms and saw its economy grow substantially. North Korea remained communist and continued to isolate itself from the outside world, and it has continued to struggle economically ever since. With the end of the Cold War resulting in the defeat of the Soviet Union and its allies, it seemed as if the capitalist, democratic system had prevailed. This was especially true since many of these former communist states ended up introducing free market reforms and then saw their economies expand as a result.

After this it seemed that the communist ideals had been proven not to work and that the free market system had succeeded yet again. The world economy over the following years became even more interconnected, as globalization became the new normal. While large parts of the world did become communist in the twentieth century, most of these systems collapsed, or became more capitalist, with the holdouts fairing poorly. Communist systems also have gained a bad reputation for their widespread human rights abuses and mass atrocities. Thus, communism has an overall poor track record, considering the fact that it failed to accomplish its aims everywhere it was implemented, leading to the movement’s overall demise.

So what is the overall lesson that can be learned from this? Well, it must be said that capitalism is not a perfect system, and it does lead to economic inequality among different social classes. However, from a long-term perspective, capitalism is much more effective than communism (or other government-managed systems). Communist systems do not work and cause more problems than they solve. Capitalism, on the other hand, can eliminate inefficiencies within economies and allows for ordinary people to lift themselves out of a poor economic situation. Government-managed systems never allow for this, as a person’s fate is already pre-determined, and the common person has little, if any, opportunity to advance their own quality of life.

If you are interested in learning more about these ideas, please get your own copy of Isolation Moderation.