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Comment by nikhilgk | Hacker News Reader

In a communist society, the state owns everything. They own all natural resources, the industries that processes them, the supply chains, the labor and the economy. Profits and margins are not the objectives and there is no competition. So overall, the expenses to the state are far lesser than in a capitalistic society. Imagine if the US government owned IBM, Boeing, Lockheed, all the mines, had the cheapest yet most skilled labor then the cost of an ICBM would have been significantly lesser.

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The problem is that people under this system are not motivated to do things efficiently. Competition itself is responsible for reducing expenses, because companies compete to lower them. Without the competition, there's no reason to.

Prices in a capitalist system are information signals that inform the system how to allocate resources. If you do away with the pricing information (by setting mandatory prices, for example), you break this and usually end up with large surpluses or shortages. Getting other people to inspect the system for inefficiency and remove it is less efficient than using prices for the same purpose.

Except that, in the united States at least, it doesn't work that way. Public works are significantly less efficient than private works. It is very common in the US for a public entity to spend many times as much on a work as a private company. The incentive systems in the private sector are just that much much better. This is in fact one of the arguments for a capitalist society.

If a command economy were capable of producing on the same level of efficiency as a private one, then Stalin's various five year plans would not have starved millions and the collective farms might have actually worked. As it is, they didn't and Soviet Communism just wasn't very efficient.

Public work in the US cannot be a good comparison. Workers in communist Russia must have other motivations to be efficient - patriotism and pride in their work for some, but more likely, fear of the state and lack of alternatives. Either way, my point was not that they had an efficient or scalable model, but that the government can throw in any resource they have at making more weapons - even at the expense of starving millions.

You might not know (or forget) Stalin's various purges of some of the most brilliant and effective people the USSR (along with millions of others), not to mention the tens of millions of Soviet citizens who died when their country was ravaged during WW2.

There was also the fear and terror the country was ruled by, resulting in a state of constant paranoia among the citizenry. Not to mention the cronyism inherent in that system, by which only the most "loyal" (not to the state, but to their bosses) had any kind of future. And then there was the massive and vicious oppression and persecution of various minorities across the nation, and of the nationals of the various countries which the Soviet Union invaded and absorbed.

And even at the start of the Soviet Union, there were the millions who were killed during the Russian revolutions, which radically restructured the societies which made up the Soviet Union.

All these factors and many more contributed to the downfall of the Soviet Union. It's just not nearly as simple as saying that "capitalism is more efficient than communism".

You just explained part of why a centralized system is less efficient, though even if you remove all those problems a centralized system still can not beat a capitalistic system with its superior capital allocation via pricing mechanisms. But those things are an intrinsic part of having a fully centralized system. Somebody not in the favored central government is going to want to be in the favored central government clique, and in the absence of other mechanisms to keep them in check (like letting the market decide who wins or even having both win), it's going to turn to violence. Proponents of centralized government can't ignore this aspect of their proposals and thereby forget they are talking about governing humans, and not abstract beings without ambition, happy to be drones.

"You just explained part of why a centralized system is less efficient,"

Um.. No. I explained some of the reasons why the Soviet Union collapsed. No other "centralized system" had the particular history that the Soviet Union had. It was absolutely unique. And I can see no reason why any other "centralized system" must have all, or even any, of those negative factors which caused the Soviet Union to collapse.

"even if you remove all those problems a centralized system still can not beat a capitalistic system with its superior capital allocation via pricing mechanisms"

This statement of yours sounds like an avowal of ideology (an ideology that's sadly all too prevalent on HN), rather than any sort of argument in favor of capitalism or against communism.

"Somebody not in the favored central government is going to want to be in the favored central government clique, and in the absence of other mechanisms to keep them in check (like letting the market decide who wins or even having both win), it's going to turn to violence."

Are you saying that "favored central government cliques" and violence aren't possible in capitalist systems? Even a superficial look at a model capitalist country like the US will reveal their presence.

"This statement of yours sounds like an avowal of ideology (an ideology that's sadly all too prevalent on HN), rather than any sort of argument in favor of capitalism or against communism."

No, it's a reflection of Economics 101, really. You simply can not replicate the amount of information in a price in a centralized system, it's actually impossible.

Walk through the first few chapters of http://www.daviddfriedman.com/Academic/Price_Theory/PThy_ToC... . No, seriously, do it. The first few chapters are very basic and if you can just wave them away as "ideological" then we're done here anyhow. Prices contain a lot of information and no central authority can match it. They especially can't match it if they believe prices are a moral issue and they ignore the basis of them in the first place.

"Are you saying that "favored central government cliques" and violence aren't possible in capitalist systems? Even a superficial look at a model capitalist country like the US will reveal their presence."

First, the US is not a model capitalist country and has not been in a long time. The idea that the US is some sort of unrestricted capitalist paradise is propaganda, not fact. Second, your logic here is terrible. When I say that the only outlet for advancement is one or another form of violence in a centralized system, therefore I am claiming that in a capitalistic system it is never a form of advancement? If you're not even reading my actual points and you're willing to bend what I'm saying that hard, or you can't even see the grievous crime against logic you just committed, that's not even worth replying to.

I most certainly don't forget, (I have a degree in this :)) Stalin's purges happened long before the Soviet Union's collapse and actually precipitated its high-point. Not to mention that the economic difficulties of collectivism actually preceded the atrocities. The Soviet Union found out extremely early on that centralized economies don't work. During the first wave of collectivization, the economy collapsed and millions starved. (This is on top of the economic difficulties already afforded by the war and revolution.) Lenin was forced to institute the NEP which was a limited free market system in order for the economy to recover. The purges themselves were responses to the failures of collectivization. They targeted scapegoats such as the Kulaks (who, if you take Soviet policy as any kind of guide, were a sort of fictional minority group,) in order to distract from the deeper problems with the system. You can actually poke through the early Soviet economic history and see a pattern of attempted collectivization, famine and revolts, loosening of market controls, and finally recovery of the economy. The history of the Soviet Union is actually a pretty strong condemnation of extreme collectivism.

It's not like the USSR was unique historically. China, Vietnam, and North Korea also attempted similar systems. Of the three, two have effectively admitted defeat and are now pursuing progressively free-market systems while the third hasn't, and is a Hell-hole as a result.

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