How can communism be improved

Figure 8. Dollars Adjusted for Purchasing Power Parity. Of course, skeptics would not be incorrect to point out that so far we have only given a post hoc, ergo propter hoc argument in favor of rapid reforms. In fact, early econometric studies, including a paper by Stanley Fischer, Ratna Sahay, and Carlos Vegh of the International Monetary Fund, found that reforms had a strong effect on economic growth — as did good institutions.

Let us now turn to foreign direct investment FDI. Ordinarily, countries that attract more FDI per capita do so because of a better investment climate. Such countries will then benefit from higher economic growth and strong export performance. The values shown are not annual.

Instead, they show a cumulative total since the ex-communist countries opened up to global trade and investment. The differences between countries are overwhelming, with the two reformist blocs receiving much more than the rest of the ex-communist countries. The similarity between the amount of FDI flowing into gradual reformers and laggards may seem surprising. A large part of the explanation rests with Turkmenistan's enormous gas reserves.

As always, petroleum attracts large investments, notwithstanding the nature of the political regime. In a strange contrast, Russia has received little FDI, in spite of having large petroleum reserves. That happened because Russia has pursued a policy of maximizing state control over the oil reserves and also because Russia does not provide an attractive investment climate for its very large, and relatively advanced, manufacturing sectors. There is also a high degree of correlation between market liberalization and export performance.

Let us now turn to the social outcomes of transition. Observers of the transition process will recall the heated discussions about the social pain that rapid reforms were supposed to have caused and the soul-searching about the optimal transition strategy to follow. Thus Adam Przeworski, an expert on Latin American democracy, wrestled with what he saw as a potential inconsistency between democracy and rapid economic reforms.

The Przeworski hypothesis stated that rapid economic reforms would inevitably cause a lot of pain to the population. Given the newly established democratic decisionmaking, the reformist governments, Przeworski reasoned, would lose in the next elections and economic reforms would be reversed or at least halted.

As we explain in the next section of this paper, Przeworski's hypothesis was only half right. Table 3 summarizes, by country groups, the trends in inequality as measured by the Gini coefficient. The Gini coefficient measures the income distribution among country's residents. The coefficient ranges from zero, which indicates complete equality i. Note first that the Gini coefficient in the socialist camp was much lower than in most market economies — with a partial exception of the Nordic countries.

While the official Soviet estimates implied a Gini coefficient in the low. Searching through internal writings by Soviet academics, scholars have discovered that rural and low-income regions had a much wider income distribution. Table 3 includes adjusted figures for the FSU. Clearly, all transition countries saw a widening of income distribution. That was to be expected, given the earlier artificial suppression of different outcomes and the lack of capital-based income for individuals.

However, the extent of the widening was by far greater in the gradual and lagging reformers. That is consistent with the early finding of Branko Milanovic, who showed in that the "worst" deterioration of income distribution was not in the Central European countries, but in the FSU.

A similar story can be told by looking at an alternative indicator of distribution of income: the poverty ratio i. The differences between rapid reformers on the one hand, and gradualists and laggards on the other hand, are dramatic. All ex-communist countries saw some worsening at the outset of the post-communist recession that lasted from about to about All experienced a return to lower poverty ratios. But the gap between country groups is far greater than was the case with the Gini coefficient.

The Central European and Baltic countries, and even the countries in Southeast Europe, saw their poverty ratios remain at very low levels, while both FSU groups peaked at more than 40 percent before falling back again, although gradualists and laggards have yet to match the other groups by this measure. This evidence strongly confirms the view that rapid reforms caused less — not more — transitional poverty than gradual reforms.

Figure 9. Like all subjective or composite indices that have become common over time, the HDI has its problems. When it comes to social conditions, all transition countries suffered some initial deterioration as incomes fell and unemployment rose.

But this deterioration was quite minimal in Central Europe. By the mid s, HDI was on the rise again. Once again, the Baltic countries performed better than other ex-Soviet countries. By , reforming countries reached their pre-transition levels.

To sum up, different measures of "outputs," covering many dimensions of economic, political, and social life, consistently point in the same direction — early and rapid reformers outperformed those countries that moved more gradually.

A literal interpretation of the positive correlation between reforms and performance would imply worse performance among the laggards than among gradual reformers. The slightly better economic performance of the laggards remains one of the still-unresolved puzzles of the transition period.

Many writers have suggested possible explanations. Turkmenistan, for example, has large gas reserves that can pay for the policy mistakes of the Turkmen government. Belarus receives direct and implicit subsidies from Russia amounting to between 10 percent and 20 percent of GDP.

Even then, however, Russian subsidies do not fully resolve the Belarusian puzzle. Still, these very special cases are not enough to undermine the overall trend. Let us now sum up our main findings. The first key finding is that, with the exception of Belarus, all the non-Asian post-communist transition economies have moved a long way from centrally planned socialist regimes towards market-based capitalist systems.

Second, the EBRD data shows sharp divergence between the most advanced countries and the slower reformers. While all ex-communist countries started from about the same position that is, very far from a market economy , by the mids the differences among them were huge and kept growing. It is important to note that the gap grew because countries that led from the start continued to move resolutely forward, while the gradualists moved less quickly.

Third, the basic pattern — of who led the reform process and who lagged behind — was set within the first four to five years. It has stayed that way ever since, with, perhaps, one significant exception: Georgia has been steadily catching up after its Rose Revolution.

But once the wars stopped, the ex-Yugoslav countries moved faster in an effort to catch up to the transition leaders in Central Europe and the Baltics. Fourth, institutional development in ex-communist countries did, in fact, lag behind economic liberalization. However, no country has followed the recommendation of the advocates of gradualism and put in place good institutions before liberalizing although many leaders in the gradual and lagging countries explained the delays by saying that they must first develop good institutions.

Thus, the leaders of both Belarus and Uzbekistan have frequently stated that their aim was a so-called "social market economy" and that the first stage of this process involved development of conditions in which markets can function properly. From the late s, some countries started to move a little faster in terms of institutional development, but those countries were not gradualist. In fact, countries that moved the fastest and farthest in terms of institutional development turned out to be the very same countries that had moved earliest and most forcefully in terms of market liberalization.

Fifth, the CEB countries that led in market liberalization have also followed a consistent path to democratization. This is important because democratization and economic transformation are linked. In practice, democracy was so restricted by the incumbent government that it came to be labelled by political scientists as "managed democracy. However, only in Georgia did the color revolution lead to real changes in the economic direction of the country.

Sixth, transition in some countries has led to the rise of an oligarchic class, which uses nontransparent means to influence policy, protects its monopoly-like status, and impedes a truly open and competitive market economy. The use of money in market economies for lobbying in order to obtain special treatment with regard to taxes, licenses, and exemptions is well-known historically and internationally.

Oligarchic support for favored political parties or entities is also not unique to ex-communist countries. What troubles a lot of observers of transition is that oligarchs in ex-communist countries go far beyond the usual rent-seeking activities and use their influence to determine the general philosophical direction of government, reform policies, and geostrategic decisions. There is some evidence that oligarchies are stronger in countries that followed gradual and slow reforms.

For example, the Baltic countries and CEE have 0. Delays in liberalization, in other words, seemed to have allowed for stronger oligarchy formation and entrenchment. Seventh,"inputs and output" are positively correlated. Countries that did the most to liberalize achieved the highest GDP per capita increases, experienced the least widening income distribution, suffered the lowest poverty ratio increase, and achieved the best scores in the HDI.

That is to say, all countries that saw a decline in output in their first years experienced a worsening of welfare and a widening of the income gap between rich and poor. Yet as soon as GDP recovery began, social deterioration stopped. Since the early reformers were the first to experience a recovery of economic output, they also experienced the least social costs.

They were additionally the first to enjoy the benefits of transition — higher income, an end to shortages, access to a wide variety of goods, and improved quality of goods. The most important question facing ex-communist nations was whether to opt for gradual or rapid reforms.

If economic performance is the main measure of success, the data speaks loudly. Countries that moved early and rapidly on reforms have performed far better. Soon, they enriched themselves through corrupt privatization schemes. In a word, the gradualist model was too easily abused. Moreover, rapid reforms, including price liberalization, trade liberalization, and business deregulation, quickly induced resource reallocation from inefficient communist dinosaurs to new firms, and that led to an early recovery of output.

Even in Poland and Slovenia, where the privatization of large state enterprises was long delayed, economic recovery came between and As mentioned, institutional development in big-bang countries lags behind market liberalization, although it trends upward. But they matter more for sustaining growth over the long term than for jumpstarting growth after a recession.

So a complete establishment of good institutional structure was not initially needed. That it took centuries, not years, to build institutions in today's advanced market economies is one of the key lessons from the pioneer of the NIE school, the Nobel laureate economist Douglass North.

The evidence on sequencing also points to the fact that political leaders in gradualist countries may have been less than sincere. In spite of their frequent protestations that going slowly was necessary to allow time to build proper market institutions, nothing of the sort has happened see Figure 5.

There is not a single case of a country where improved institutional quality preceded liberalization. Critics of rapid reforms contended that the stress on economic fundamentals caused international financial institutions to ignore institutional development. Again, Figure 5 contradicts that contention. The countries that took care of fundamentals early that is, countries that achieved financial stabilization and market liberalization , also moved earlier and more resolutely in terms of institutional development.

But cars and appliances required long waits. In fact, lines were a part of daily life. Shopping was an ordeal, especially in the Soviet Union. Every day, women would go from shop to shop to get items. It is estimated that a Soviet woman spent two hours in line every day, seven days a week.

Shoppers paid in cash. People did not have credit cards, charge accounts, or checking accounts. In the workplace, almost everyone had a job. Wages, however, lagged far behind those in the Western democracies. A common joke was, "They pretend to pay us, and we pretend to work. Most industrial workers belonged to labor unions.

But the unions were run by the government mainly to help factory managers achieve their production goals. Farmers resented having to give up their land and work for the government on collective farms. Many left to work in city factories for higher pay or better working conditions. Housing, built mainly by the government or group cooperatives, was always in short supply.

Often, two or three generations of a family lived in a three-room apartment. Newlyweds usually had to wait years for a small apartment of their own. But everyone had a home. Homelessness was not a problem. Public transportation was affordable and extensive. Most cities had a web of subway, streetcar, and bus lines that carried people everywhere in the city.

Railroad transportation between cities was also low priced. Officials, however, forbid travel outside the Eastern bloc. The government subsidized entertainment. The government paid the salaries of theater companies and athletes. Box office prices were low. Everyone could afford to go to the theater, movies, the opera, the ballet, or sporting events.

Universal public health systems "socialized medicine" covered everyone. The government and state-owned businesses paid the costs of doctors, health clinics, and hospitals. As a result, the health of the population generally improved. The quality of health care, however, still fell short of that provided by public health systems in most Western European nations.

The communist governments offered many benefits for child care. They provided paid maternity leave, grants of money for childbirth, monthly childcare allowances, and low-cost pre-school. All education--from elementary school through college--was free. The government in most Eastern European countries required all children to attend school until age At the end of the eighth grade, they entered high schools. Students who wanted to go to special language or science schools took exams for entry.

As in most Western European countries, a government education ministry created a uniform curriculum taught in all the schools. Entrance exams and students' high school records determined admission to the state universities. By the s, illiteracy had been eliminated in most Eastern European countries. All Eastern European countries established a social security system.

It included government health insurance, welfare services, and pensions. In most countries, men could retire as early as 60; the retirement age for women was generally a few years earlier. The rate of violent crime was low. The streets were safe. But crimes of corruption, such as bribery, flourished. People paid off officials and even shop clerks to get ahead in line or get an item in short supply.

In all countries, those with incomes at or higher than the country median are more likely to approve of these changes than are those with incomes below the country medians.

The transition from a state-controlled economy to a capitalist one is much more highly regarded now than in , during the recession. Perhaps because of an improved economic outlook see Chapter 5 , many more now see the economic benefits of the new system compared with communism. However, there are sharp divides across countries on how the change affected most people. Despite no universal agreement on whether the economic situation is better today than it was under communism, the belief that it is better has become more common in every country since , except Russia.

However, in Russia fewer people now say the economic situation is better than under communism. In Poland, the Czech Republic and Lithuania, majorities say the economic situation for most people is better today than it was under communism.

In Hungary and Slovakia, more people say it is better, but substantial minorities still say it is worse. And in Bulgaria, Ukraine and Russia, more than half believe the economic situation is worse today than it was under communism.

This question was not asked in Germany. Only three-in-ten disagree with the statement. Russians who lived most of their lives under the Soviet Union are more likely to say its dissolution was a great misfortune than are those who grew up under the new system.

Germans are in strong agreement that the unification of East and West was a good thing for Germany. Roughly nine-in-ten Germans, living in both the regions that correspond with the former West Germany and East Germany, agree with this statement.

However, when asked whether East and West Germany have achieved the same standard of living since unification, only three-in-ten Germans say this is the case. Since there has not been much overall movement on this question in Germany as a whole. In former East Germany, however, people are about twice as likely now to say the standard of living is equal to that of the West than they were the last time this question was asked.

Still, majorities of Germans from both regions say the East has not yet achieved equal economic footing with the West. Majorities in all the former Soviet orbit countries surveyed say politicians and business people have benefited a great deal or fair amount since the fall of communism. And in all cases, more people say political and business leaders have prospered than say changes have benefited ordinary people. People are especially inclined to believe politicians have benefited.

Publics are less inclined to believe ordinary people have been the beneficiaries of such changes. The part of the universe being studied, arbitrarily defined to any size desired. Skip to main content. Module 3: Different Strokes …. Political and Economic Systems Around the Globe. Search for:. Reading: The Benefits of Communism Communism ideology supports widespread universal social welfare, including improvements in public health and education. KEY points The theoretical advantages of communism are built around equality and strong social communities.

Communist ideology advocates universal education with a focus on developingthe proletariat with knowledge, class consciousness, and historical understanding. Terms Communism : A political philosophy or ideology advocating holding the production of resources collectively Antithetic: Diametrically opposed.

Bourgeois: Of or relating to capitalist exploitation of the proletariat. Proletariat: The working class or lower class. Examples In theory, Communism seems to have some very desirable characteristics. In practice, however, it has many drawbacks, and historically it seems that only the most corrupt members of Communist governments have gained advancement within systems.

When a system depends on an entire community but is controlled by a few corrupt bureaucrats, it cannot be successful. However, this is not to say that state run enterprises in certain areas are a bad idea. Publicly-owned utilities such as water, electricity, and postal services have proven to be beneficial in countries, even when no communist system exists. The Benefits of Communism Theoretically, there are many benefits that can be achieved through a communist society.

Other theoretically beneficial ideas characteristic of communist societies include: People are equal. In a communist regime, people are treated equally in the eyes of the government regardless of education, financial standing, et cetera. Every citizen can keep a job.