Paul Krugman: Capitalism's Mysterious Triumph

This is something Paul Krugman wrote about how capitalism defeated communism, "the basic problem was not technical, but moral":

Capitalism's Mysterious Triumph, by Paul Krugman: Recently my local public television station has been showing a fascinating series entitled "Russia's War" - a history, produced in Russia, of the Soviet Union's struggle in World War II. It is not a pretty story: the producers do not hesitate to tell the full story of Stalin's brutality, and they do not try to mask the ugliness of war with patriotic romanticism. Yet this stark honesty in a way makes the account of the Soviet Union's wartime achievement all the more impressive. The Soviet Union did not win through military genius: most of its trained officers had been purged in political witch-hunts, and while the war eventually threw up a new set of leaders, they were competent rather than brilliant - and their advice was often overruled by a dictator whose military judgement was usually disastrous. Russian soldiers fought with dogged heroism - but then so did the Germans. Why did the Russians prevail?

The answer is surprising, given the way the 20th century has actually turned out. The Soviet triumph in World War II was, above all, a victory of production. Despite huge losses in the first months of the war, despite mass dislocations of population and the German occupation of many of the country's key manufacturing centers, Soviet industry managed to build tanks, artillery, and aircraft that were technologically a match for Germany's weapons, and to do so at a rate that consistently exceeded anything their opponents thought was possible. Indeed, the decisive German defeats at Stalingrad and Kursk came about precisely because the Germans launched offensives against what they imagined to be a weaker opponent, and were taken by surprise when counterattacked by thousands of tanks whose existence they had never suspected.

What does this have to do with the world of [today]? Well, nowadays we take the triumph of capitalism as something preordained by the superiority of our economic system. After all, it now seems obvious to everyone except North Korea and Cuba that a market economy is vastly more productive than one controlled from the center - and the Cuban economy is imploding, while the North Koreans are quite literally starving to death. Moreover, every time a Communist regime collapses, it turns out that the actual state of the economy it governed was far worse than anyone had imagined. For example, typical estimates of the GDP of East Germany before the old regime collapsed put its real GDP per capita at 70 or 80 percent of the West German level - meaning that East Germany was actually richer than some regions in the West. Yet after the fall of the Berlin Wall, visiting Westerners found something that looked like a Third World economy, with antiquated factories (and disastrous environmental problems) producing consumer goods of ludicrously low quality (like the notorious East German Trabant, an automobile that makes a Honda or Ford seem like a Mercedes). We used to think that the Soviet Union had an economy about half as large as America's, that is, bigger than Japan's; nowadays Russia seems to have less economic power than, say, Italy. We used to think that there was a real technological race between socialism and capitalism; nowadays the symbol of Russian technology is the hapless Mir space station. It seems obvious to many people in retrospect that the productive and technological triumphs that Communists used to claim - all those heroic photgraphs of dams and posters of muscular steelworkers - were mere propaganda; in reality, we think we have learned, socialism is a system that just can't deliver the goods, while capitalism is a system that can.

But one lesson of "Russia's War" is that matters are not that simple. Were the supposed productive triumphs of the Soviet Union under Stalin merely a hoax? Tell that to the soldiers of Germany's Army Group Center - the few who survived. The fact is that Stalin did transform Russia into a massive industrial power - a power tested in the most unambiguous way imaginable. And his successors did achieve real technological triumphs - not just showy triumphs like sending cosmonauts into orbit, but the creation of a highly sophisticated scientific and engineering establishment. True, Russia was never any good at producing high-quality consumer goods. But it was not always the bumbling, incompetent system we now imagine. What this means is that the collapse of Communism and the triumph of capitalism need more of an explanation than the stories we usually hear. It is not enough to explain all the reasons why a market economy is more efficient than a centrally planned one. Those explanations are basically right - but the question is why a system that functioned well enough to compete with capitalism in the 1940s and 50s fell apart in the 1980s. What went wrong?

One possible answer is that changing technology changed the rules. When the communist leader Joseph Dzhugashvili changed his name to Stalin - "man of steel" - he reflected the times in which he lived, an era in which heavy industry ruled, in which giant steel plants were the symbol of progress. These days, of course, steel-producing regions throughout the world - not just in the old Soviet Union - are depressed; try visiting southeastern Belgium.And it's not just steel: the age when countries or companies grew rich by making heavy products in big factories seems to have passed. One can make a case that whereas old-fashioned heavy industry was susceptible to central planning, new technologies, especially in microelectronics, favor free-wheeling competition over centralized control. Russia could at least appear to hold its own in a technological race defined by the ability to build giant rockets; it was left completely flatfooted when the West started putting powerful computers on a chip. In fact, in the last few years even Japan's great corporations have started to look a bit like dinosaurs, lumbering helplessly in pursuit of the little startups of Silicon Valley.

Another possible answer is that capitalism triumphed because of "globalization" - a process everyone talks about but which we really don't fully understand. For some reason - perhaps some synergistic interaction among declining tariffs, cheaper transportation, and better communications - it has become possible in the last generation for many countries to industrialize rapidly, not through massive programs of government-led investment, but simply by throwing themselves open to the world market and letting events take their course. Socialist economies could not avail themselves of this new opportunity, and so they began to fall beind instead of catching up.

But neither technological change nor globalization can explain the fact that socialist economies did not merely lag the West: they actually went into decline, and then collapse. Why couldn't they at least hold on to what they had?

I don't think anyone really knows the answer, but let me make a conjecture: the basic problem was not technical, but moral. Communism failed as an economic system because people stopped believing in it, not the other way around.

A market system, of course, works whether people believe in it or not. You may dislike capitalism, even feel that as a system it will eventually fail, yet do your job well because your family needs the money you earn. Capitalism can run, even flourish, in a society of selfish cynics. But a non-market economy cannot. The personal incentives for workers to do their jobs well, for managers to make good decisions, are simply too weak. In the later years of the Soviet Union, workers knew that they would be paid regardless of how hard they tried; managers knew that promotions would depend more on political connections than on performance; and nobody was offered rewards large enough to justify taking unpopular positions or any sort of serious risk. (There can't have been more than a few dozen people in the Soviet Union - all of them politicians - who had the kind of lavish life style enjoyed by tens of thousands of successful entrepreneurs and executives in the United States). So why did the system ever work? Because people believed in it. I don't mean that people went singing to their jobs, praising the motherland. I do mean that they did not take as much advantage of the system as they might have (and did, in the system's later years). And I also mean that because people in authority believed in the system, they were willing to impose brutal punishments on those who did try to take advantage. (Stalin used to shoot unsuccessful generals).

We see this kind of thing all the time, in microcosm. The market does not require people to believe in it; but the centrally planned economies that live inside a market economy, known as corporations, do. Everybody knows that financial incentives alone are not enough to make a company succeed; it must also build morale, a sense of mission, which makes people work at least somewhat for the good of the company rather than think only of what is good for them. Luckily, under capitalism an individual company can fail without taking the whole society down with it - or it can be reformed without a bloody revolution.

Why did people stop believing in socialism? Part of the answer is simply the passage of time: you can't expect revolutionary fervor to last for 70 years. But perhaps also the unexpected resurgence of capitalism played a role. By the 1980s Russia's elite was all too aware that the country, instead of overtaking the capitalist nations, was slipping behind - that Russia was failing to take advantage of new technology, that if anyone was challenging the West it was the rising nations of Asia. Communism lost any claim to the mandate of history well before it actually fell apart, and perhaps that is why it fell apart.

In the end, then, capitalism triumphed because it is a system that is robust to cynicism, that assumes that each man is out for himself. For much of the past century and a half men have dreamed of something better, of an economy that drew on man's better nature. But dreams, it turns out, can't keep a system going over the long term; selfishness can.

Comments

[tom s.]

"A market system, of course, works whether people believe in it or not."

I have a groundless belief that a large amount of American success is the result of employees whose interests do not align with their employers believing that they do - and as a result providing better service and working harder than employees in more realistic/cynical countries. Belief in this alignment - that is, belief in the fairness of the market system - mistaken though it may be, produces a healthier capitalist economy.

No, I have no evidence for this.

[Jim Harrison]

Economists tend to ignore moral (and morale) factors because they have absorbed the desire of people to do meaningful work into the boundary conditions. The editors at a publishing company have to want to publish books as well as make money. The line workers in a car factory have to want to make cars. In fact you couldn't even run a salt mine unless the peons were trying to mine salt. We think it's all carrots and sticks because we've methodologically hidden the motivating role of the task itself, which, though obviously very hard to a quantify, is absolutely essential. We're human beings who have a need for meaning, not termites who simply react to pheromones.

[Jed Harris]

Excellent analysis, and the example of promoting corporate loyalty is convincing. But people in a functioning capitalist system believe in something without which the system would not work -- probably something like the Horatio Alger story and related morality.

Consider an alternative scenario: Everyone believes that everyone else will steal office supplies, lie about the work they did, shortchange customers, default on contracts, take bribes for favors, etc. as long as they can get greater benefits than penalties.

In that context greed and cynicism can't produce a functioning system, they produce a morass of corruption. Enforcement costs skyrocket, and the general quality of work nose-dives. Some very corrupt (but "free") economies are quite a bit like this.

Perhaps an amended version of your story works: In a Soviet-style, top-down system, once a loss of faith sets in, there's no local counteraction that can stop the slide. But in a sufficiently effective capitalist society, people have options for local action. Others can see that the more honest, hard working groups often do better, and that the cynical exploitative ones often collapse. So there are (very imperfect) forces supporting the collective belief in morality needed to keep things running.

[Altruism]

"In the end, then, capitalism triumphed because it is a system that is robust to cynicism..."

Yes. Many people are altruistic, but not everyone. Any system that fails to harness the vast sea of self interested people will fall behind a system that only harnesses the altruistic.

[Altruism]

Er, make that: Any system that fails to harness the vast sea of self interested people will fall behind a system that engages virtually everyone in productive activity.

[Gil]

Good article. It should be obvious that people don't really care about other people outside their nearest and dearest. The fact that two groups would do to each other that which would be unthinkable to do with fellow members is a reminder that no one really cares. Likewise, hearing about the death of a nearest/dearest member in a car crash versus seeing someone on the news dead from a car crash . . .

[Bruce Wilder]

The monolithic nature of a system, where the Party is the Government and the Government is the Economy, creates an incentive bound, which prevents effective discipline in the system. In a sense, Stalin's insanity broke the incentive bound -- he was able to impose punishments outside the bounds set by the output of the system. But, once sane people ran the system, it was no longer possible reach beyond the output constraint of the system, itself. It is the same problem confronted by an individual seeking self-discipline -- all of the costs and benefits accrue to the same actor, and the result is a muddle; self-discipline can be achieved only thru some doctrine of self-sacrifice.

Capitalism solves the incentive bound problem in a variety of ways, and the result is an economy, where effective discipline to achieve high quality, etc. is readily available. The classic form of the business firm, with a capitalist entrepreneur taking the residual, and managing employee-agents earning an efficiency wage, is an example. The employee does the work, bears the burden of work, and follows direction, because continued employment at a higher-than-labor-market-wage is contingent on compliance. The output of the firm is not an incentive bound, because the capitalist entrepreneur is employing others conditionally, and because the capitalist entrepreneur has access to the capital markets.

Beyond the capital market, the government is also outside the incentive bound of the firm's output. The government, through regulation, criminal law, etc., can intervene, selectively. The mere fact that the government and the firm are separate entities, matters a lot, to preserving the ability to act decisively.

It is commonplace to complain about the burden government regulation imposes on business, but, imagine, for a moment how different our banking crisis would be, how different the government's policy response would be, if the banks were already, simply, another department of government. (Some would say that is already the case -- see Paulson, Henry, but I think it merely serves to illustrate the point further.)

[billy]

"but the question is why a system that functioned well enough to compete with capitalism in the 1940s and 50s fell apart in the 1980s. What went wrong?"

the war was over. but the system could maintain its high production rate only under war conditions, which give necessary motivation to the enslaved workers.

[SanFranciscoJim]

Yes, I too think the answer lies in the motivation of the workers. Soon after revolution, everyone is full of revolutionary fervor and production is high. During wartime, the true emergency brings people together and they are willing to sacrifice for the common good. But in the rest of the time, the hard workers slowly become demoralized by the lazy ones, especially when there is no incentive to work hard other than your own moral compass.

[reason]

I wonder if there isn't another side to this story. The lack of effective regulation in the soviet system. In a capitalist system as Bruce Wilder eloquently points out, regulatory authorities are independent. It is not just that their is no competition, there is no effective complaints process. So pollution goes unpunished. Falling safety standards uncorrected. Poor quality products go unimproved. The role of Chernobyl in the collapse of the whole soviet bloc is often underestimated. Feedback processes are important. Don't underestimate them (also applies to capitalism).

[hari]

Finally the Slavic-man has tried to explain why Soviet Union dismantled under Communism. It's the belief system, stupid, which didn't deliver the goods (the masses believed in). And, of course, even under dictatorship of the proletariat, there's a moral hazard in play - all the time.

Paul didn't deliver a defintive verdict on WHY. However, his cultural knowledge of the Slavic-man allows him to dig deep into the fissures of the Stalinist moral predicament -as an international economist.

I suspect, he's closer than he thinks to what went wrong in the Soviet-style socialist system.

[hari]

In a way, one could also argue that Globalization has given capitalism a brand new lease on life. Paul is alluding to it - without going into details of why. My reading reinforces the thesis that mainland China and India are not only implicitly but explicitly extending the life of capitalism, with an Asian character to boot.

The moral predicament will always remain the central policy problem for economists and political leaders - namely, how to avoid giving vent to social stratification and, as a result, class conflicts.

That, I consider, is the next phase of academic pursuit by behavioral economists.

[billy]

hari,

what do you mean by "Globalization"?

[Carolyn Kay]

So is every person for him or herself without restriction what must be considered capitalism? I don't think so, and having read Krugman for years, I don't think he thinks so, either.

I hope Prof. Krugman will clarify his thoughts on this topic and include a discussion of John Nash's mathematical proof that pure selfishness alone is not what's best for the group.

“Adam Smith's theory is incomplete. Self-interest alone can lead to disaster for all, Nash demonstrated mathematically. Self-interest coupled with concern for the good of the group is most likely to benefit everyone.” -
Marjorie Kelly, “Waving goodbye to the invisible hand: How the Enron mess grew and grew,” San Francisco Chronicle, February 24, 2002

What we need is a BALANCE between selfishness and greed, not either one to the exclusion of the other.

Carolyn Kay
MakeThemAccountable.com

[Brenda Roser]

Oh! Paul Krugman thinks capitalism is 'the market'. What are we seeing in the financial industry then?

(I hate reading articles that refer to abstract concepts and never bother to define them. )

[Real Person from the Real World]

I think there is one more factor. How easy was it in the Soviet Era, to start an individual business? One thing the US always has had, were people with ideas, who struggled to start a business, or started a me-too business of some sort. I suspect, that these guys got lost in the shuffle of communist bureaucracy. That's not to say that PK isn't right, but there are a lot of factors that aren't always apparent in economic models.

[oops]

another large contributor to the collapse of the ussr was the oil crash of the 80's. the ussr was one of the world's leading oil producers. oil export revenues plummeted. after the ussr fell the oil service companies that went in there said they had overproduced and damaged a lot of fields near the end of the regime.

now some just think that that oil crash was a cartel eventuality but since it was led by kuwait and the saudis, who were vehemently anit-soviet, i tend to believe that it was coordinated and encouraged by western govt's intelligence agencies.

[James]

A diversely intelligent and adapting system will defeat an inefficient centrally planned system hands down, in any environment where change is a factor, all other things being equal. That can be proven mathematically.

Its the 'all other things being equal' where the grey areas exist, and that is what we are probing in our 'market economy' today, in addition to the constant interfering with the market's decisions by the government and the increasingly pervasive corporate oligarchy.

[ken melvin]

Since it seems economic systems are based on human psychology; can not psychology change? Is the psychology of the Russians the same as ours? That of the Chinese? Again, we see this interchanging of capitalism and free markets. Are they really the holy duality? What role does producing what the public wants have to do with it? I mean, the production of goods and producing what is wanted and needed aren’t really the same thing, are they?

I agree that communism failed because after so long without producing on the promises, the people gave up on it. They simply could no longer believe. What if capitalism were to fail? What if capitalist countries came to no longer believe for whatever reason? What are some of the possible reasons for them to decide that capitalism wasn’t the answer? What would happen?

[bakho]

What about investment? How much did the FSU have to invest and how did it invest post-WWII? This is key to understanding the economic outcomes.

In 1900, the FSU not industrialized and had very little infrastructure for manufacturing. What changed prior to WWII and into the 60s was massive government investment in infrastructure. This investment built the FSU into a modern industrial nation. Post WWII, the FSU made a number of poor infrastructure investments and failed to fully invest in its research capability.

The US dumped how much money into a phalanx of top research university and provided free education to millions of returning soldiers? (Note the Chinese are pursuing this strategy currently).

The FSU did not have as many soldiers returning that could be freed for other tasks. The FSU kept its massive army intact after WWII to prevent another war, making those people unavailable for other more productive tasks. In addition, they had to repair a lot of damaged infrastructure. In contrast, the US built a modern highway system and new suburbs.

The FSU lost 20 million people in WWII, about 10 % of its population and well over half of men between 18 and 40. Those kinds of losses cause loss of institutional memory, loss of mentors and are difficult to replace. Much of Eastern Europe was a battleground that was destroyed by six years of destructive warfare. In contrast, war in France was actively fought for less than 2 years total, no battles occurred in England and the US suffered almost no domestic infrastructure destruction.

It is not surprising then that post-WWII, the FSU had to put much of its resources into rebuilding to return to their pre-war condition and maintaining a military that could prevent the next war. The undamaged US placed more of its resources into research for the future. Japan ditched its military altogether and invested all its resources into consumer economy. Not only did the FSU not invest as large a percentage in education and consumer research, their system had barriers to free communication that retarded growth.

[ken melvin]

Today’s means of production are very sophisticated. Much of the development of same was done here in the US only to be revised based on innovations by the Japanese in the seventies. Our systems had become antiquated, and they didn’t change due internal pressure. This entrepreneur thing is probably a myth. It’s certainly overrated. Sometimes, innovation has more to do with not being hidebound.

[Lafayette]

Intrinsic Pragmatism

Article: Those explanations are basically right - but the question is why a system that functioned well enough to compete with capitalism in the 1940s and 50s fell apart in the 1980s. What went wrong?

Good question, but the following argument is a bit thin.

Article: And it's not just steel: the age when countries or companies grew rich by making heavy products in big factories seems to have passed.

Russia has enormous mineral reserves. It can dig them out and send them to China, or it can do what China does, add value as a more finished product. It has the energy that is required in nuclear technological resources.

If I had Poutin’s ear (which I don’t, because I’d tell him what a scoundrel he is), I would tell him to not necessarily accept the above conclusion. Russia needs its Base Industries -- if for nothing else, to build upon.

Wage rates are relatively low and the manpower skills are there. (What more do they need – the German Army at the gates of Moscow? ;^)

After all, if the Italians, with much higher wage rates, can survive in specialty steel markets, then why not Russia in more basic steels? If I had Poutin’s ear, I’d give him Lakshmi N. Mittal’s phone number.

Article: One can make a case that whereas old-fashioned heavy industry was susceptible to central planning, new technologies, especially in microelectronics, favor free-wheeling competition over centralized control

One can, but neither does it tell the whole story. Technological comparative advantage requires other attributes as well.

What holds Russia back, I submit, is that it develops too many bright researchers (mathematicians, physicists, etc.) and not enough bright engineers. The latter are needed to take good R&D and turn it into great products that the market wants. It has not net generated a VC-mentality willing to fund high-risk start-ups.

The Russians haven’t understood that … not yet. Poutin is so wrapped up in maintaining power that he has overlooked the long-term natural constraints of Industrial Russia. The Russians have not yet learned how to take risk.

This is due to the Russia's historical/hysterical Centralization of Power that resulted in mindless Thought Control in the decision making process. It is still pervasive in Russia, though, in fact, centralized control of production capacity no longer exists.

And, given his KGB background as a control-freak, there is little likelihood that Russian technology will get much beyond it’s niche markets (space, aircraft, some optics, military). He is obsessed by the idea of returning Russia to its former glory as a World Power.

That’s a dead end, particularly for the Russian people who just want a decent standard of living.

Article: Socialist economies could not avail themselves of this new opportunity, and so they began to fall behind instead of catching up.

Well, the largest Socialist economy in the world did just that! China saw where the ripe, low hanging fruit were – consumer products for the home. They are low-tech, require nimble fingers at low cost. China has plenty of both.

It is now pushing itself up the technology competence ladder whilst we are stuck like spoiled kids in the "wailing and gnashing of teeth". It's our own damn fault.

Article: In the end, then, capitalism triumphed because it is a system that is robust to cynicism, that assumes that each man is out for himself

Yes, and I’d add one more factor, that of NIH (Not Invented Here). This is what screwed Europeans in many industries; that since an innovative technology was not conceived at home it had no real value vis-à-vis the homegrown product. Hubris at its best ...

Which was a colossal prejudice to new ideas. The US does not have such preconceptions, and we should be thankful of that fact. That is, American business has an Intrinsic Pragmatism generally as a cultural attribute.

[Gil]

I think free-market types have the answer to 'what if people stop 'believing in Capitalism?'. They'd say there no such thing as the collective for people to collectively believe in or disbelieve in. If heaps and heaps of people wanted to go back to the family farm that much that industry and technology suffered (i.e. those who don't want to family farm have to do so anyway because there aren't enough people to run a modern society) then the response, I'd guess, would go something along the lines of 'well if people make their free choices and most people want to go back to the family farm and turn their back on technology then that's the free market at work because they did so out of their own free will, or conversely, weren't coerced/enslaved by the government to keep modern society running.

[typekey pseudonym]

I read a book about 10 years ago that examined what was happening to the Soviet economy in the 1970s and 80s. Unfortunately, I cannot recall its name or authors, and cannot find anything resembling it in web searches (other clues: 2 authors, one a journalist, the other an economist at an elite (probably NESCAC) New England liberal arts college; published in the mid to late 1990s). The main points of the book were:

1) per capita GDP continued to grow, slowly, through the political collapse of the USSR;

2) Soviet managers had a better standard of living than the average citizen, but the relative advantage for the elite was much less than in the west, esp. the US.

3) This was made up by giving managers all sorts of non-pecuniary advantages in terms of power and perks.

4) Perestroika threatened these advantages, so Gorbachev lost the support of the managerial elite, which overlapped substantially with the CP.

5) This was substantially compounded by the rapid growth of inequality in the West that had recently accelerated, because the beneficiaries of this trend were the western counterparts of the Soviet managers. They were facing a loss of power and benefits at the same time that their peers in the West were gaining more and more.

If correct, Krugman is right about the loss of faith being key, etc., but the group to focus on is not "Soviet Man" but those who already had a comfortable standard of living and both power and authority in the old system, and were facing its loss. A parallel situation in the west would be for our corporate managers to lose faith in capitalism, to suspect that they would experience a declining standard of living (relative and absolute) and a drop in status even if they played by the rules.

[Linus]

When Soviet Union sold large steel plants to India, they sold them for "per ton" of the weight of the plant. What, to me, was amazing was that computers and controls were also included in these "per ton" calculations. So, the price of a computer that ran a steel plant was Rs 10lakhs per ton. Uh! Uh!

That was axiomatic of the role of technology in the Soviet world. It was something that killed Soviet Union, with their realizing that.

[evagrius]

I suppose that Mr. Krugman has not heard of Emmanuel Todd who, at 25, in 1976, predicted the collapse of the Soviet Empire based on demographic projections. The collapse of the birth rate of Russians, in comparison to other ethnic groups in the empire, was , for Todd, the key factor.

The demographic collapse is still continuing.

[robertdfeinman]

This is just wrong on so many levels it's hard to know where to begin. Fortunately there are two articles in the March 3 edition of "The Nation" which come to the rescue. They review four books which study the Soviet period in detail: "The Unknown Gulag" by Lynne Viola, "The Whisperers" by Orlando Figes, "The Bolsheviks in Power" by Alexander Rabinowich and "Tear Off the Masks!" by Sheila Fitzpatrick.

The first two document the life of the average Soviet citizen and should address Krugman's "moral" issues. The second two deal with the rise of the Soviet system. The two book review articles do an adequate job of presenting the authors' theses, so one doesn't have to read all the books to get the gist.

The problem with the USSR was not communism, it was that it was a centralized command and control system run by a madman. There are other top down societies which have done quite well without being "market" economies - the favorite example is Singapore.

Both Lenin and Stalin chose to treat whole classes of people as stereotypes and punish them for who they were or even who their parents were. Mao did the same thing with similar disastrous consequences.

Why these societies failed was not because the workers lost the vision, but because the entire country was forced to lie to itself. If you thought you would end up in a gulag if your factory didn't meet its quota and the quota was impossible to meet then you lied.

The Medvedev brothers wrote several books detailing the follies of production during the Soviet era. One that sticks in mind was Khrushchev's attempt to reproduce US style corn and hog production in the Steppes which led to all the top soil being lost after three or four years.

The problem was not communism it was that the USSR was a kleptocracy run by the nomenklatura. The parallels to a certain North American superpower should give people pause.

Perhaps Krugman should read more than one book before launching into a grand generalization. There are actual experts in this field, afterall.

[Dubreuil]

Its funny to write this just when capitalism is imploding, mostly because of moral hazard stuff : all the reckless financial innovation with selfish cynics killing capitalism just like they killed communism.

[piglet]

I suppose the collapse of the Soviet Union had absolutely nothing to do with the following facts:

- Russia before the revolution was a backward, inefficient, semifeudal society with hardly any industrialisation, that had just been humiliated in the first world war.

- The people of the Soviet Union bore the burden of the fight against Nazism more than anybody else. They lost tens of millions of people in that fight, thousands of towns and cities were destroyed, whole regions (some of the most productive) subjected to scorched earth. That they won the war under these conditions (a fact that is rarely even recognized in the West) is impressive, as Krugman rightly notes. But it is absurd to assume (as Krugman does) that the heavy prize paid during WWII had no lasting impact on the Soviet Union's postwar development.

- The Soviet Union was during every moment of its existence threatened by hostile outside forces, a situation that is pretty unique in history. This started with the revolution, when Western powers directly intervened in the civil war to support counterrevolutionary forces, and it continued during WWII and the cold war up to Reagan's gigantic military buildup that the SU finally couldn't match any more. You can say all you want about the superiority of American entrepreneurship: if the US had been constantly under assault, constantly under threat of annihilation, don't you think US history would have played out rather differently? Since the war of independence, nobody has ever seriously challenged the US in its political autonomy. Even the Japanese attack was not an attempt at subduing the US, rather they wanted to gain a free hand to pursue their imperialistic ambitions in Asia. And contrary to popular belief, the SU has never had much of an ambition of imposing socialism on other countries by force.

When you think of the impact 9/11 has had on US politics, maybe you can appreciate what a real, credible, vital threat can do to a society. Just look at Cuba for an example close to home.

[btg]

germany failed to defeat russia in part because of luck (the coldest winter in decades) and partly because hitler made a whole variety of mistakes himself, including the redirecting his forces away from Moscow to the south - had moscow fallen, most railway lines radiated out from moscaow, same as berlin, paris etc.) and this alone could have turned the war. there was also his failure to equip his troops for winter - they lacked decent coats! another one was the fact that germany continued producing a wide variety of consumer goods well into the war - not much different than the US during vietnam, or now. there was a book or tv series about hitler's top mistakes - always something that makes an interesting debate.

in a time of war (or rebuilding in the immediate aftermath), communism might work better than capitalism, in part because of the advantages of central planning when the state is both the major consumer of goods, and the supplier. i recall one of galbraith's books talking about how wasteful capitalism can be - producing all sorts of novelty goods - plastic jesus's and such, while the fundamental needs of many people in a society go unmet.

control of the press and supression of dissent is another factor that clearly impacts the "moral", again, unlike the vietnam war.

and communism does fall short when it comes to small things, and finding new opportunities - "decentalised" capitalism and the ability of individuals to quickly identify and exploit gaps in supply and demand for profit. something i read ages ago put it down to capitalism getting prices right, but also, information not flowing to those who need it within a communist system.

given the billions of dollars the US has wasted on contractors - haliburton and others, and the inability of the US to defeat a bunch of gun-toting extremists in afghanistan and iraq , as well as the viet cong previously, it is clear that capitalism isn't very good at defeating people driven by "moral" reasons like nationalism or religion...

and in effect, communism was a religion and the fervor did wain, but that alone wasn't enough to doom it.

says...

rdf, with this Perhaps Krugman should read more than one book before launching into a grand generalization. There are actual experts in this field, afterall. suggests that PK is not contributing to the extant literature. But as an educator, he is doing pretty well so far stirring up the pot and making us rethink those old rough ideas about those Germans, good with machines and those Russians, good with cabbages, yes?
What about this PK note:I don't think anyone really knows the answer, but let me make a conjecture: the basic problem was not technical, but moral. which I read as the "moral" in the sense of building the troops' moral...not the kind that bears on whether you've been good or bad.

[Bruce Wilder]

Atrios had a nice reflection on blog comments, which claim to reveal the one, true cause of some complex set of phenomena, and the people, who assert such, so aggressively.

Both Krugman's essay and some of the comments, including my own above, could easily slip toward that kind of doctrinaire narcissism. But, it is also true that, sometimes, things are not so complex, as they are just noisy and messy. That why abstract reasoning can be so valuable -- because it separates the fog from the landscape, without confusing the two, without mistaking confusion for complexity.

Krugman's assertion, "A market system, of course, works whether people believe in it or not." attracted several critics among the commenters. And, I believe they were right. A market system absolutely requires the right faith and system of cultural moral values and expectations.

The Russians had a morally critical view of capitalist market economies imbued into their culture by years of propaganda, aimed at making their socialist system work, as well as countering the competition with the West. Those cultural expectations and values were a disaster for Russia, when a capitalist market economy was introduced. In short, the Russians believed that only gangsters and criminals would run a capitalist system and prosper. And, it became a self-fulfilling prophecy.

The belief that a market facilitates cooperation among self-interested individuals (true) gets transmuted into a doctrine that the market safely channels greed and ruthlessness, at the peril of the whole society. It is just not true.

John Holbo at Crooked Timber reminds us that a lot of people, circa 1940, were wondering if market Capitalism would survive in the long-run, in the competition with Socialism. It was an open question, and the consensus view, even from the Right, was maybe-not.

The 1920's and 1930's were not a time, that made capitalism's triumph look all that inevitable, to the people, who lived through them.

That market capitalism did prosper mightily in the 1950's and 1960's needs explanation, laying a foundation for further global expansion in later decades, just as much as the epic failures of the Soviet Union.

I am actually surprised that Krugman would not latch onto the most obvious explanation: FDR.

Of course, FDR was a charismatic leader, who gave great, inspiring speeches, but was a bit of a kitchen-sink, throw-it-against-the-wall-and-see-what-sticks guy, when it came to policy. Great speeches, questionable policy analysis. Hmmm.

Bush, our anti-FDR, has succeeded in going a long way toward destroying the system of international cooperation, the system of domestic economic regulation and the integrity of the Federal government. And, of course, the consequences and the cynicism have not threatened the very existence of market capitalism . . . yet.

[Person]

Mark_Thoma, just a real quick question: do you ever intend to turn your blog into something other than "lengthy quotes of other people with no analysis on your part, often to bypass a pay barrier"?

It's really ... kind of pathetic.

says...

I tracked down the book I mentioned above:

Revolution from Above: The Demise of the Soviet System, by David M. Kotz and Fred Weir.
Imprint London ; New York : Routledge, 1997.

[anne]

Mark Thoma is a wonder, an absolute wonder of a teacher on social-economic affairs and a social-economic analyst, even extending to repeated consideration of biological-ecological analyses. The blog is simply a treasure, simply a stunning resource.

[anne]

Also, I cannot find a publication date for Paul Krugman's essay from the MIT post or a publication record beyond the blog.

[anne]

Though Paul Krugman's essay is interesting alone, notice how succinctly and cleverly the essay is framed for focus:

"This is something Paul Krugman wrote about how capitalism defeated communism, 'the basic problem was not technical, but moral.' "

[kharris]

Krugman has been working with this basic notion for years now. He is fleshing it out a bit. The notion that corporations are command structures is not new, but he has now worked that notion into his story about the collapse of the Soviet economy.

I don't know whether this story is right. It is a story about inevitability, and as is pointed out above, other economies that fit roughly into the description of "command economy" have survived nicely, though we might want to make room for the vast differences between various "command economies" such as the ability to start new firms. I don't think the end of the war or the demographic changes in the USSR do much harm to Krugman's notion that faith in the system is an issue for a command economy. These could simply be complimentary issues. Optimism and fertility surely share some causal feedback. The influence of territorial thinking goes very deep, and could extend to our views of our rulers and the system they employ to rule.

[piglet]

"In short, the Russians believed that only gangsters and criminals would run a capitalist system and prosper. And, it became a self-fulfilling prophecy."

Bruce, now you are surprising me. The privatization of the Russian economy, its appropriation by a class of corrupt profiteers, was neither god-given nor was it a choice that the people of Russia made for themselves. It was called "shock therapy" and reduced the country's GDP by almost half in no time. A "self-fulfilling prophecy" it was only to its Western proponents, who could hardly hide their glee - "see how ineffective socialism is!" - after having destroyed the Russian economy through "transformation".

[Vader]

Yea, Sans FDR, capitalism, would have been a quaint theory. Without FDR, the US would have been torn by some kind of revolution and likely resolved into either communist or extreme right wing. Without the US, the rest of the would would have likely fallen under some other economic theory.

In current news, Russia is abandoning Capitalism as well as South America.

It is likely that nominally non capitalist societies such as China and various Arab countries, have subsidized the US by buying debt and delaying the resolution of the contractions in US capitalism where worker income was declining yet the elites were able to increase their standard of living by providing the workers with easy debt.

That is ending.

With China in ascendancy and the US headed for a sharp downturn, one wonders if the current flavor of capitalism can survive.

[Lafayette]

About loss of faith in political systems

Comment: A parallel situation in the west would be for our corporate managers to lose faith in capitalism

Given their remuneration, it’s not this class of citizen that is losing or has lost faith in capitalism. It is Joe Sixpack who has had his manufacturing job dislocated to China. Or Jane Sixpack who Systems Analyst position was transferred to Bangalore.

For far too long, our country has been a haven of relative peace and a long history of well remunerated work. This has built the foundations of the American Dream. That one could have a house in the suburbs, with 2.3 children and a car. (Of course, now, it's a car for everyone above 16 and 1.8 children.)

We took that lifestyle, or one vaguely similar to it, for granted. We'd been living in a cocoon.

Then – badaboom! – the paradigm changes.

Paradigms change all the time. The Russian paradigm changed. The Chinese paradigm changed, to Communism, and now de facto Capitalism. England no longer rules the waves. Rome is … a great place to eat out.

The only consistency in all of this is change. What a powerful word that is, particularly in the mouth of politicians. But, as the French say, the more things change the more they remain the same.

How do you know when a politician is lying? Whenever he mentions the word “change”. We gotta change this, and we gotta change that.

They haven’t the foggiest notion of the complexity of change, its brutality and how it disconnects whole political and economic systems. If they did, they’d be more concerned about how change brings as much pain for some as well-being for others.

Change is pretty much a zero-sum game.

[cm]

reason: The art is to channel the feedback so that the leadership can anticipate and avoid major problems. If those feedback channels are suppressed and/or the leadership can effectively isolate itself from them (including avoiding leadership change), which was a major preoccupation and arguably the very purpose of every "communist" security apparatus, then you leave yourself to "dealing" with the hard to reverse consequences.

We can see similar tendencies in the Western world in how the elites are acting. I would even go as far as contending this type of leadership failure facilitated every social decline in history, by neutralizing society's capacity to effectively deal with challenges, internal or external.

[anne]

Paul Krugman's essay would be dated in fall 1996.

[cm]

Bruce Wilder: Your analysis involving punishment and compliance is incomplete -- the problem with managing an effective stick is that enforcing compliance can generally only go as far to have people do your bidding, but not beyond it.

When you are incapable of harnessing the creative force and initiative-taking in people, you cannot progress, and in the long run not even maintain a previously achieved high standard.

The only reason anything works for a while is that it takes a while for young people to become disillusioned and they thus contribute for some time, and a certain number of the nominally-disillusioned refuse to resign to non-action, for the sake of the public interest.

But generally a command system can only sustain things (at scale) that run largely on auto pilot and in push-button mode (metaphorically), i.e. which are well understood and can be sustained without major new insight.

The Soviet military industry was a state-inside-a-state where things were kept up by providing participants with marginally better rewards than outsiders. But even that didn't work in the long run, in the bigger picture.

[hari]

May be the meltdown of Soviet Communism was more simple than we're (still) able to comprehend because of the interim cold war and whatnot.

First, remember Soviet communism was imposed from above - and Trotsky was rather successful in gaining control of the 1917 uprising (with Lenin still out in Zurich Library!). If Stalin (Georgian!) was not able to dislodge Trotsky, and take control of the party apparatus, I'm not sure what direction the October Revolution would have taken - should Trotsky have taken supreme control...

Second, Germans put on a special train to get Lenin in time to Petrograd to take over the revolution. Why was Lenin not there when Trotsky took charge of the uprising?

Third, neither Marx nor Engles expected a communist revolution in feudal Russia - their target was always the Rhur (Germany's steel making heartland!). The dictatorship of the proleterait...

Therefore, the October revolution may've been more a distinct failure of the ruling aristoracts in Petrograd - and not necessarily the Bolsheviky guards. If you've studied the "seven days that shook the world", there're no clear demarcation lines as the revolt began...

Paul knows a lot about the Slavic soul and what actually transpired under the Soviets...and morally you can understand the masses didn't respond to the gov of the day...and finally ransaked the authority of the state apparatus. Bolscheviks took over from there...under Trotsky. [And it needs to be pointed out Russians are historically anti-semetic.].

So the simple reason why the SU dismantled was not the success of Regan and his militarization budget policy, but more because the soviet social system collapsed under the nomenklature...that was it!

[me again]

> nowadays the symbol of Russian technology
> is the hapless Mir space station.

This is a haplessly dated statement. Was it really written that long ago?

The symbol of Russian technology today is the reliable Progress and Salyut spacecraft, without which Alpha (the current International Space Station) would have had to be abandoned and deorbited by now.
http://www.spaceref.com/news/viewsr.html?pid=27017
http://science.ksc.nasa.gov/shuttle/missions/51-l/docs/rogers-commission/Appendix-F.txt

[hari]

@ billy -

I use globalization as a synonym for "free trade" under Gatt/WTO rules.

[agricanto]

Piglet: makes some important observations that are often easy to ignore in the triumphalist west. My problem w/ Kruggs is exactly that.. It's market triumphalism post-cold war where almost anything said about capitalism is dripping with virtue and superiority. I find the "moral superiority" arguments made by hardcore defenders of capitalism to be the most self-serving of all Western ostrich acts. I prefer Marx's observation that the resilience of capitalism is found in its ability to transform crisis into timely reform while leaving intact its fundamental social relations.

As for Person: oi vei, if ya don't like da blog, go git one of yerr own. Dis blog rocks. Most of us hang out here daily and learn more than 8 yrs of grad school. Thoma is doing the right on professorial thing. If you don't like him, you have that most capitalist of recourses: choice!

[Spectator]

Its funny to write this just when capitalism is imploding, mostly because of moral hazard stuff : all the reckless financial innovation with selfish cynics killing capitalism just like they killed communism.

Could not agree more. There's a real danger of capitalism being tainted by the financial industry welfare system we have today. Somehow many cannot see monetary central planning for what it is - a neo socialism that depends on private banks to be believers in the greater good.

[anne]

Agricanto:

"I prefer Marx's observation that the resilience of capitalism is found in its ability to transform crisis into timely reform while leaving intact its fundamental social relations."

Do you happen to recall where the observation was made? I would like to use this.

[anne]

"Oi vei, if ya don't like da blog, go git one of yerr own."

Ah, another typical Yiddish, cowpoke, rapster's mix.

[john c. halasz]

Two points: Hayek demonstrated that, due to information gathering and coordination problems, a centrally planned economy was essentially impossible. Even if his presentation was highly tendentious and his conclusions badly overdrawn, his basic epistemic point was correct. It follows that what was left as a legacy system of Stalinist forced industrialization and mass terror was not simply a centrally planned economy, but really relied for what limited functionality and durability it had on implicit supplementary mechanisms and systems. To a considerable extent, the U.S.S.R. was not really a centrally planned economy, (since everybody really knew the official statistics were fake, including Gosplan), but rather an industrial barter economy. In fact, given the constraints that they were under, the Soviet Union actually had an highly energetic and resourceful class of industrial managers, who kept the whole "thing" going, in addition to plentiful, if quite stiffled stocks of "human capital". One of Gorbachov's basic mistakes was attempting to reform and shore up the central planning and control apparatus by partly decentralizing it, which only undermined the actual workings of the economy. What followed in the '90's was a massive looting and exporting of the capital of the former-U.S.S.R., (while leaving its reserves of "human capital" stranded), in the name of instituting the supposed virtues of a market economy, (instantaneously and in quite top-down Bolshevik manner), rather than attending to the longer term need to reorganize its productive organizations in ways that preserved, if revalued, its human and physical capital. Given that the horrific results were readily foreseeable, one can only wonder whether the results of imposing "shock therapy" were not deliberately intended by some.

It is generally considered by historians that Stalin's Gulag system was utterly uneconomic; that is, it subtracted from and reduced the net distributable surplus. (Campaigns against "saboteurs", i.e. trained engineers and managers, readily illustrate, though don't exhaust the point). Thus, it can't really be explained in terms of economic causes, nor historical "necessity". Unlike American slavery, the slave labor of the Gulag was uneconomic, i.e. a drag on productive output, consuming more resources than it porduced. Rather than functionning as a system of negative sanctions to instill labor discipline, the inculcation of mass terror, the "moral" factor, should perhaps more be viewed as a means of supplementing the lack of functional connections in the system. But the maintenance of such terror, ably assisted by the Nazi invasion, could not last forever, but would give way to the readaptions of generational change and the experience of its survival. The result was the suppression of any public sphere, inherent in the doctrine of the Leninist party-state, and its substitution by a sham public sphere, in which no one quite believed, but to which the broad masses, in their various sectors and niches, "privately' counter-adapted. So long as the limited functionality of the system could be sustained, and the accumulation of dysfunctional consequences didn't overwhelm its functional capacities, the charade could be maintained, but once the crisis tendencies became all too apparent, the lack of legitimation resources in the system, absent the memory of a now ineffective terror, resulted in its rapid collapse. Somewhat contrary to Bruce Wilder's 1st post, it was not just the lack of countervailing institutional differentiations in the system, but the lack of any public sphere to provide legitimation resources and the articulation of problems, with which to sustain institutional structures and the coordinations and differentiations that they require, that proved fatal to the system, such that the supposed monolith simply evaporated, even faute de mieux. (Brad DeLong, with his usual smug hypocrisy, recently quoted Rosa Luxemburg's critique of Leninism, as a stick to beat up on Castro, but, regardless of the perverse motive, the cite of Red Rosa was cogent and eloquent).

Capitalist corporations, by functionally focusing exclusively on the bottom line, the efficiency of economic output, bear lesser legitimation burdens than public-political processes, which is, indeed, part of their 'efficiency". But the mass withdrawal of legitimation, i.e. public trust and cooperation, from capitalist organizations and institutions is by no means impossible, especially as their unchecked operations generate their own accumulation of dysfunctions and imbalances, threatening financial disruption and melt-down, together with massive and uncontrollable maldistributions and inequities. That capitalist markets depend on decentralized self-interested individuals,- (surely a half-truth, which fails to take into account the socialized nature and communal networks and dependencies of those individuals),- does not immunize them from failure of coordination, losses of information, and withdrawal of unmobilized resources.

[Fred]

This black and white comparison of capitalism versus socialism long ago lost ceased to be realistic. The primary and secondary education system in the united states is socialized, the health care system is partially socialized, social security is socialized, the military, courts and police are socialized in every society that has ever existed, etc.

As for the Soviet Union and other communist regimes, there are many explanations for their demise. Lack of democracy and hence an inability to get rid of incompetent rulers is the common theme, as I see it.

A more interesting question is that of explaining motivation in general. What motivates Paul Krugman to write these long essasys, for example? He makes more money than he would if he were a slacker, but does he eat any better due to working hard and being successful? If not better food, then what is the carrot in front or stick behind that motivates him to put forth effort?

[Fred]

john c. halasz says...
Two points: Hayek demonstrated that, due to information gathering and coordination problems, a centrally planned economy was essentially impossible

Hey John, explain to me how Exxon works. Do the roughnecks in the field just decide to drill when and where they please, or do the orders regarding capital investment come down from the central office? Sounds like central planning to me.

[outsider]

The decisive tank battle at Minsk pitted many Soviet tanks, gasoline powered and subject to explosions and fire with inferior tank cannon against the heavily armored and 88 cannon of the Panzer. The Russian shells bounced off and they lost tread if they turned too sharply.

The tactic became to ram the panzer and try to escape before you burned alive...in effect the kamikazi tactic.

Russian productivity, though massive, was inferior in quality, depending on the biological imperative of fighting on your home territory

[skeptonomist]

No, capitalism does not work whether people believe in it or not. It did not work in pre-revolutionary Russia or China, and it does not work well in latin America or Africa. India is improving, but still hardly a capitalist powerhouse. Thriving capitalism, like democracy, was and is uncommon, and depends on special conditions.

Capitalism failed the US and the industrialized world in the Great Depression, and it was considered necessary to partly socialize the country to avoid a revolution. Why was the Depression so bad? Mostly because people did not believe that free-market mechanisms would work.

Capitalism did not win WW II - all major nations involved adopted a centrally-directed economy. In times of national emergency everyone recognizes that the selfish orientation of capitalism must be put aside.

[Fred]

In times of national emergency everyone recognizes that the selfish orientation of capitalism must be put aside.

The essence of capitalism is NOT selfishness. Selfishness exists everywhere. The essence of capitalism is just what the term suggests: the system is focused on capital, aka money. In national emergencies, money loses its primacy, as it becomes clear that money is merely a means to an end(such as survival) rather than an end in itself.

[Denis Drew]

Anne,
Are you still out there -- or in there -- somewhere? I have come across a 1993 book that may be ideal for researching just how Europeans get themselves paid a lot better that Americans:
Labor and an Integrated Europe
by Lloyd Ulman, Barry J. Eichengreen, William T. Dickens, editors

I'd like to read it myself but I am already satisfied with sector-wide as the general way to go -- I wont be the one to work out the details -- always good to delve deeper, of course, but I've ready got a few in the pipeline and deeply want to read Eichengreen's new China, Asia and the New World Economy (having read his The European Economy since 1945). At $110 a pop I guess I'll have to make a deal with a local dope fiend to lift it for me -- oh, no; I forgot, I'm no longer living in New York. :-[

[Randy Kirk]

The moral argument is fine but what are morals exactly? -- the best I've seen in Kant's argument. What is Kant's moral philosophy? Briefly: First, propose a moral law, second, make that law the rule for all of humanity and third, see if society works or breaks down under this law. (see: for more detail: http://plato.stanford.edu/entries/kant-moral/)

Fine, to say the USSR broke down because people did not believe in it, so that is pretty much saying that Communism's moral law "We will all work for the glory of the state" was not believed, -- not much argument there after about the 1960's -- but then something like "we pretend to work and they pretend to pay us" was the real moral law. So this under Kant is not difficult to see would lead to a dysfunctional state. Not believing one moral law means you are not following it but some other moral law. Under Communism it is easy to see how people just were not motivated to work, from a moral standpoint.

But I would argue that under capitalism, there is a potential moral threat as well -- not necessarily so easily fixed -- as long most people in the capitalist system believe :"If we work hard and add value, we will be rewarded commensurately" This requires good governance, patent protection, lack of bribing, etc. If under capitalism we slip into "Greed is good" -- not difficult to see how capitalism would slip into Greed is good mode -- then this is dysfunctional under Kant. Good governance, less corruption (penalties towards bribing, back room dealing, etc) laws, patent systems all encourage "adding value and reaping rewards" verses hoarding of money.

[Tom L]

I talked to a Soviet planner who visited the United States and gave a lecture about the use of input-output matrices in Soviet planning. He said prices (for use in the matrices) of new, innovative items were very difficult to determine, and required a laborious committee process. Perhaps the lack of ability to easily price new technologies ultimately led to the collapse of the Soviet Union.

[Alex Tolley]

Lafayette: "For far too long, our country has been a haven of relative peace and a long history of well remunerated work. This has built the foundations of the American Dream. That one could have a house in the suburbs, with 2.3 children and a car. (Of course, now, it's a car for everyone above 16 and 1.8 children.)"

Bruce Wilder: "John Holbo at Crooked Timber reminds us that a lot of people, circa 1940, were wondering if market Capitalism would survive in the long-run, in the competition with Socialism. It was an open question, and the consensus view, even from the Right, was maybe-not.....
The 1920's and 1930's were not a time, that made capitalism's triumph look all that inevitable, to the people, who lived through them. ..... That market capitalism did prosper mightily in the 1950's and 1960's needs explanation, laying a foundation for further global expansion in later decades, just as much as the epic failures of the Soviet Union.....I am actually surprised that Krugman would not latch onto the most obvious explanation: FDR."

Perhaps it is not coincidental that the belief in the systems failed for the same reason - the majority of the populace saw that only a privileged elite got any of the benefits.

Capitalism changed with FDR under the new deal, and Krugman's last book goes into this and the subsequent turnaround to conditions rivaling the gilded age. Analogously, Europe went more socialist after WWII.

If Krugman wants to call that the moral reason for the soviet decline, all well and good. We are probably facing something similar today, especially in the US, where it is becoming increasingly obvious that life is not getting better. If we don't find a way to change things again, then perhaps when teh historians write about the "collapse of the US capitalist system", they might say the same things about belief in the system compared to the new economic winners.

[john c. halasz]

Fred:

I utterly fail to see your point. I'm not unaware of the role of giant oligopolies in capitalist economies, nor of the fact that economic affairs always involve planning by numerous agents and agencies. That's a different issue from centrally planning an economy as a whole, that is, assuming a single centralized and authoritative administrative structure that would coordinate and reconcile all economic sectors and processes from above and expect to impose its "solutions" effectively with respect to optimizing output. (And I don't think that such central planning is really tantamount to 'socialism", nor that it exhausts the possibilities that might be adumbrated under the auspices of that historical term). And, if you'd bothered to notice, my comment was directed against any simplistic opposition between "free markets" and Soviet Communism, as if those were the only two conceivable and possible alternatives. Still Hayek did make a decisive argument, which didn't so much demostrate the unquestionable superiority and virtue of "free markets" as the effective impossibility of central planning, (which was the point I was adopting), and the notable point about his argument is that it is an informational one, not a motivational one, i.e. one resting on epistemic grounds rather than claims about alignments of incentives, (which I don't think can necessarily be well-known, and which I think economists often exaggerate their effective knowledge of). And it doesn't, in its negative form, depend upon hyperbolic Hayekian claims about spontaneous orders, the unique efficacy of market price signals as conveying information, or the unique role of markets as discovery processes, all of which can be contradicted on Hayek's own grounds, since they could all be boiled down to information as produced by the reflexive self-monitoring of the agents' interaction with their environments, which is not something unique to market participants, but rather admits of potentially different functionally equivalent modes of organization.

Oh, and, by the way, capital is not equivalent to money, but, if there's one thing that could specify the 'nature" of capitalism, it would be the private ownership, organization and control of real capital stocks, i.e. "the means of production", as dominating the economy and its development.

[anne]

Thank you, Denis Drew. That was kind, and I will look to the Lloyd Ulman, Barry J. Eichengreen, William T. Dickens anthology in the coming few days.

[Fred]

john c. halasz:
There is private ownership of real capital in pre-capitalist economies. Cattle and sheep, for example, are the primary forms of capital among herders. What distiguishes Capitalism with a capital C, as in 19th century England, is the overwhelming focus on money. And money is indeed commonly used as a synonym for real capital, because of how money is able to control the distribution of real capital. In conditions of national emergency, it becomes very evident that money is just a means to get access to real capital and that real capital is itself just a means to stay alive. That was the point I made in response to idea that selfishness is the essence of capitalism. If you want to nitpick about the equivalencing of money and capital, fine.

As for the comment about Exxon, go read it again. It's quite clear. Central planning works fine for Exxon, Walmart, Microsoft, ergo it can be made to work for an economy as a whole. The communists all botched things but that doesn't prove that central planning doesn't work, anymore than the fact that lots of corporations go bankrupt proves that the corporate form is necessarily bad.

[Bruce Wilder]

cm: "the problem with managing an effective stick is that enforcing compliance can generally only go as far to have people do your bidding, but not beyond it.

"When you are incapable of harnessing the creative force and initiative-taking in people, you cannot progress, and in the long run not even maintain a previously achieved high standard."

It is a point well taken.

Mark Thoma had a post a while back, where some scholars were speculating that the gulag functioned to discipline "shirking" in the absence of unemployment. It prompted me to remember that the gulag started with Stalin's persecution of the kulaks -- basically an effort to stamp out self-employment and petite entrepreneurship, which Communist regimes found threatening.

Just as a market economy cannot be a zero-sum game, and prosper, so even an hierarchical organization can not distribute power in a zero-sum relation, and function effectively and adaptively.

[LetsTryMutualism]

Is it possible that neither communism nor capitalism is the preferrable economic type?

Communism failed because once the revolutionary fervor was over centralized planning only got people doing what they were required to do and nothing else.

The lesson centralized planning squelches individual initiative.

The same can be said of corporations, centralized economies within the market economy. Since employees are simply given a wage from their boss, and do not own the means of production they have no incentive for innovation. If they owned the means of production then they would be more innovative, because if the business does better they (and all other employees) get more money. If people stop believing in capitalism employees will lose company loyalty and capitalism but not necessarily the free market will crumble.

In short I am suggesting we have a market economy with free competition of worker-owned enterprises with property ownership based on possession and use. This idea is often accredited to P.J. Proudhon and is called mutualism. He was also the father of anarchism. However, I am not suggesting anarchism. One could theoretically have a mutualist economy but still have a government, except of course anything owned by the government wouldn't be entirely mutualist.

This would decentralize the economy and lead to more innovation and growth and at the same time a more even distribution of resources. Some objections are whether it would be efficiently managed. Yet worker-ownership doesn't mean there will be no management. Like any owners they could hire (elect) people to these positions. Since majority would rule it would encourage workers to innovate more in order to get the coveted management positions.

[agricanto]

Anne: The Marx quote is not a quote actually. It comes form my Reading Kapital seminar in Berkeley (mid 1980s). I think the David Harvey digest of Kapital has the idea well spelled out. It is usually advanced by Marxists as explanation for the ability of capitalism to survive crises. This is the distinction made between crisis and contradiction. Capital resolves crises and indefinitely postpones a reckoning with its fundamental contradiction which is found in its social relations. Marx discusses workplace reform, limits to the working day, and minimal wages which all in turn revolutionize the organic composition of capital but not the social relations of capital. The ability of capital to revolutionize the means of production without altering its ownership is the secret to its success. Given the ability of capital to outlive most Marxian prognosis, many neo-Marxists now attribute the future end of the system to its "second contradiction" (environmental). This would be the James O'Conner group at UC Santa Cruz.

[agricanto]

Actually the distinction most often ignored in discussing capitalism as a system different from others is in the "commodification" of labor and not in its reliance on markets or private property. These are historic antecedents to capitalism. Free, mobile, inter-changeable labor as a commodity is the core of the capitalist revolution. It can't be undone. Changing the ownership of the means of production can be changed and in the process labor can be de-commodified. But it's hard to find any socialist or communist system that actually achieved that. State ownership as proxy to worker ownership is often a real bad cartoon of Marx.

[anne]

Nice; then I will credit your sense and explanation which appeal to me.

[realpc]

"capitalism triumphed because it is a system that is robust to cynicism, that assumes that each man is out for himself. For much of the past century and a half men have dreamed of something better, of an economy that drew on man's better nature."

This is bull. Capitalism assumes that everyone is out for himself, and everyone is ALSO part of a greater community. Capitalism assumes that, for the most part, people can trust each other to follow the laws and to be fair and reasonable.

Krugman is just working too hard at framing capitalism as evil, although successful, and communism as a lovely ideal that only failed because people aren't good enough.

It's a pathetic attempt. Workers under communism were helpless slaves. Even if it worked and capitalism failed, capitalism would be better.

The nature of complex systems and the way they evolve determines that central planning cannot work.

Krugman sounds like a communist at heart, who grudgingly and sadly accepts capitalism. Like many academics, he hates things that humans cannot control with their intellects.

Well sorry, economies are complex systems. We will never learn how to control them, except in limited short-term ways.

[Fred]

Why do we call capitalism "capitalism" instead of "commodified laborism" if that is what distinguishes capitalism from worker ownership communism? Are you saying that under worker ownership communism the workers would no longer be free, mobile and essentially commodified? Sounds like a bad step backwards into serfdom to me.

No, the true essence of capitalism is that capital is free, mobile and commodified, and money becomes the means of controlling access to real capital. Banking and finance play a central role in capitalism, whereas they do not in pre-capitalist or post-capitalist systems. Show me any system where something like Wall Street or the City runs the show, and I'll show you a capitalist system. Whereas, without Wall Street or the City, it isn't capitalism.

In a non-capitalist system, which is what we are gradually moving towards, the focus shifts to non-tradeable capital, such as education, position in the institutional hierarchy, reputation among one's peer, etc. When capital is non tradeable, the role of money is greatly diminished and the very fact that there is such a thing as capital is obscured (it isn't immediately obvious that reputation among one's peer is capital, whereas it obvious that a steel factory is capital). The university, the military, the church, government bureaucracies of all sorts, are examples of organizations where money is a minor organizing and motivating factor. Also, within large corporations, money plays a minor role for most employees. That is, corporate employees strive for position, for the most part, rather than seeking to pile up money.

Capitalism has some life left in it, and there will never be a complete transition to post-capitalism. But I believe we have just seen the high water mark for Wall Street these past few years, and it's role in the economy is going to diminish henceforth.

[Bruce Wilder]

LTM: "employees . . . have no incentive for innovation. If they owned the means of production then they would be more innovative, because if the business does better they (and all other employees) get more money."

Innovation, in the Schumpeterian sense, can take shapes you don't dream of.

Innovation often destroys the value of the pre-existing means of production. Not good, if you derive both your wage-income and lodge your wealth in the same, obsolete production process.

Innovation, in execution, often requires the formation of, and management of, large-scale organizations. Think automotive assembly-line.

Innovation, and rapid increase in productivity, often result in rapid declines in price, due to expanding output. The need to shed resources is, also, not uncommon. Innovate and die would not be an inspiring motto, but it would be honest.

[ken melvin]

Bruce - a good description of the reality of the innovation thingee.

I submit that American's sense of fair play had more to her success than selfishness and such as the robber barons took advantage. They, these capitalists, are the aberrants.

[agricanto]

Fred, Your points are well taken. I have to agree that capitalism is a whole set of arrangements that have little historical precedent. I think that's where I was going with my thumbnail explanation that relied on what I think is its most "revolutionary" aspect, the commodification of labor (using revolutionary here in Marxian terms, revolution in the mode of production). The descrip you give of workers under communism is compelling since internal migration and international migration are often tightly controlled under central planning, if for no other reason to make sure labor is available where it is most needed and skills are matched to particular industries. Your argument for the centrality of money is also a distinctly capitalist feature.
Having said that I am not sure that what a system calls itself is what it is. Communism was hardly communal and capitalists do not have to be aware of the basis of the economy if they are busy watching the dance of the millions (stocks, bonds, prices, markets). I think crisis is endemic to systems (economic ones) that are not well understood by the people who participate in them (all of us). The distracting mechanisms of the economy are enough to capture our attention. We take for granted the chain link fence that uses private property to hide what goes on inside (the factory, the plant, etc.)… the transformation of commodities by the only commodity that must reproduce itself in order to survive, living human labor.

[anne]

"Given the ability of capital to outlive most Marxian prognosis, many neo-Marxists now attribute the future end of the system to its 'second contradiction' (environmental)."

This is an interesting idea beyond a necessary projection, but interesting in thinking of properly pricing environmental interactions. Do extend the idea when possible. An environmentalist bent seems inherently economically managed, as perversely a military bent simply has to be and always was even when armies lived by maurading.

[anne]

Pricing environmental interactions is especially difficult, and makes a certain mockery of market approaches to environmental safe-guards. I used to think such safe-guards could be set in cleverely shaped markets systems, but that is ever less clear to me and often seems impossible.

[kievite]

I think this moral-based argument is wrong. Yes, the loss of faith in the system and ideology was instrumental in the collapse of the system, but economical picture was dismal as well. Hypertrophied military-industrial complex, stagnation of industry outside armaments and heavy industry as well as wounds from WWII and blockade from the West were fatal factors too. It's amazing the the USSR survived for so long after WWII and managed to recover from the destruction that occurred. So the USSR was like terminally ill patient with several fatal diseases who lived in the house which was under fire from hostile neighbors.

Interestingly enough the collapse of leadership was also a visible factor: unsophisticated and naive new leadership was instrumental in speeding the collapse (Gorbachev was mediocre, intellectually and politically weak person who never managed to master his native language and who was universally despised in the USSR). Before Gorbachev the decision to occupy Afghanistan was a huge blunder and a sure sign of deteriorating leadership.

Collapse of faith (think about communist party as a religious sect -- a high demand pseudo Christian cult) was just a part of systemic collapse. It allowed the explosion of nationalistic forces (supported by the West) which lead to the actual dissolution of the USSR. It was a very dangerous game: thanks God it was a peaceful dissolution.

[Gil]

I heard there was a joke that apparently circulated in Russia during the '90s:

Q. Why has 7 years of Capitalism done that 70 years of Communism couldn't do?

A. Make Communism look good. :O

[Dickeylee]

Yes, the winter of 1941 was one of the coldest of the 20th century, and yes, Germany did not clothe or equip their troops for such devastating cold. But Germany planned on invading in June of '41, not late August. But the Italians got pushed back by the Greeks into a stalemate in May of '41, and Hitler had to divert 4 divisions (2 armor) south from Romania to complete the Greek occupation, which Germany thought vital to protect it's Romanian oil fields. And only one of the armored divisions then re-diverted back to the Russian campaign. This 90 day delay proved fatal. If Germany had reached Stalingrad in September instead of November, who knows?

[paine]

OUT OF HIS DEPTH

[anne]

Then explain, since this is a matter closer to you.

[cm]

Fred: "That is, corporate employees strive for position, for the most part, rather than seeking to pile up money."

Well, in my part of the (corporate) world, it's largely about the money, and "position" is merely a proxy to either gross income or income per unit of actual work done. As a perk, the degree of work challenge and satisfaction potential correlates positively with pay.

[gordon]

From what I have read on this and other US blogs, the waves of scandals from the 1980s to the subprime meltdown have destroyed the faith of a whole lot of people in capitalism. So if Prof. Krugman is right, we can expect the collapse of capitalism anytime now.

Or maybe I have misread the situation, maybe it's a loss of faith in democracy. In that case, we can expect Fascism anytime now.

[Brenda Rosser]

Capitalism/Communism. Why they are both prone to failure:

* Continuous growth in a finite world;
* Lack of democracy;
* The tendency to concentrate power and influence:
* Centralisation;
* Corporatism or bureacracy. Where the economic units at the upper end amalgamate and merge and become more powerful;
* The specialisation of entire economies;
* Cooperation becomes less and less prevalent over time.
* Inflationary tendencies with a general rise in prices over the long term;
* They create, promote and maintain the class structure of society. Wealth accumulates at the top and there is a tendency to widen the gap between the rich and the poor;
* The logic of the industrial machine.

[btg]

Despite everything that has been said here, it all still boils down to this:

A state will remain communist as long as:

1. the military is loyal to the party or the leader,
2. military discipline is maintained, and the average soldier is afraid of disobeying orders because of the consequences.
3. and the leader is willing to ruthlessly use force against his own people.

All 3 are still true of North Korea. Were a crisis to erupt in Cuba, possibly #2 might not hold.

Gorbachev was unwilling to continue to use force to the level required, violating rule number 3. Communism had held up before - even under Stalin despite the purges and mass starvation in the Ukraine, and in China despite massive starvation in 1960 under Mao, and during other periods of crisis as well.

The closest that the Soviet union came to the brink was actually in Czechoslovakia in 1968 - initially, Soviet troops were reluctant to surpress the Czechs, as many of the troops had lived there long enough and were sympathetic enough to not be brutal. The troops were initially withdrawn and the Soviet leadership brought in fresh troops, mostly from the Eastern part of the USSR - troops who weren't ethnically close to the czechs and slavs and who followed orders without question... so rule number 2 was almost violated in 1968.

[wjd123]

A market system, of course, works whether people believe in it or not. You may dislike capitalism, even feel that as a system it will eventually fail, yet do your job well because your family needs the money you earn. Capitalism can run, even flourish, in a society of selfish cynics. But a non-market economy cannot. The personal incentives for workers to do their jobs well, for managers to make good decisions, are simply too weak.

We see this kind of thing all the time, in microcosm. The market does not require people to believe in it; but the centrally planned economies that live inside a market economy, known as corporations, do. Everybody knows that financial incentives alone are not enough to make a company succeed; it must also build morale, a sense of mission, which makes people work at least somewhat for the good of the company rather than think only of what is good for them. Luckily, under capitalism an individual company can fail without taking the whole society down with it - or it can be reformed without a bloody revolution....

In the end, then, capitalism triumphed because it is a system that is robust to cynicism, that assumes that each man is out for himself. For much of the past century and a half men have dreamed of something better, of an economy that drew on man's better nature. But dreams, it turns out, can't keep a system going over the long term; selfishness can.--Paul Krugman

I see a weakness here with relying to heavily on the carrot and stick incentives of capitalism to control selfishness. It has to do with this kind of motivation in a democracy. Most people don't obey the law because they fear sanctions or because it's in their selfish interest. Although both are excellent motivators for people to obey the law neither is as effective in a democracy as people seeing the good in it.

In a democracy when people want relief from too much fear in the workplace or inequitable compensation they can turn to government to impose limits to this type of economic motivation. Capitalism's ability to maintain it's discipline of economic man isn't as sure handed as Krugman makes it out to be.

If the need for changes in the way economic man is disciplined are deeply felt by the majority of citizens yet blocked by the political manipulation of the powerful, the end result is maintaining a system that people no longer see the good in. The carrots and sticks that capitalism uses to keep economic man disciplined become a source of resentment.

Capitalism's ability to maintain the discipline of economic man without harming the system itself is largely contingent on how well democracy works.

Not being able to have ones grievences addressed can snowball. Management realizing that resentment in the work place grows when people experience the carrots and sticks of discipline as unfair sees a need to react. In order to counter this growing resentment more repressive measures have to be found to maintain discipline. Today those measures are greater surveillance in the workplace, background checks, and psychological profiles of employees. These measures may not apply to ones individual work situation but the door is open to their appearance. This open door effects how people view the whole system.

The logical safety valve to keep resentment from sabotaging the efficiency of a market that relies on punishments and rewards for motivation is for the government to step in and impose limits.

In a monolithic market the cost of rules and regulations apply to everyone, so competition isn't sacrificed. That's not true in a global economy. Faced with global competition business fights harder against the imposition of regulations least they become less competitive or have to move to another country while workers feel a certain reluctance to press for greater regulations despite their resentment.

Countries with the acutest resentment to the disciplinary techniques of capitalism get the worst of both worlds. Regulations to relieve resentment become harder to pass when businesses are faced with global competition, which in turn forces companies to spend more money on repressive measures to control the effects of resentment.

This allows workers in countries where resentment about capitalistic discipline isn't as acutely felt to have a moral comparative advantage over countries where resentment about such discipline is more acutely felt. No amount of economic modeling by economist is going to assuage the resentment of workers about this comparative advantage if it leads to even more odious discipline by the capitalist system.

A recent example of how former discipline practices become unacceptable can be found in the last MTA strike. For years the MTA workers here in NYC faced the possibility that when they called in sick someone from the transit authority would knock at their door to see that they actually were home sick. Workers began to feel that this treatment was humiliating and in their last contract they had this right of management done away with. The resentment of non-union employees or employees working in industries facing global competition isn't so easily assuaged.

So I'm not so sure as Krugman is that capitalism can't die because people no longer believe in it. In a undemocratic country it would appear to me that rules and regulations placing limits on a capitalistic system are hard to come by without violent revolution. Even in a democracy the inability to place limits on the way the market works because of a perceived dysfunction in the democratic process inself, leads a greater chance for lawlessness.

It also seems to me that whether you can call a system a market system or a capitalist one depends on your definition.

How many regulatory chains does the capitalist system have to have placed around it until it can no longer be considered a market economy? If the chains are placed there by people who believe that capitalism its working against their interests--individual or social--or resent its methods of discipline, then can't it be said that capitalism died because people no longer believed in it.

One other thing unorganized people working for their self interest don't stand much of a chance against organized people working for their group interests. In America today business does its best to keep labor from organizing. Weaker labor, therefore easier to discipline labor, is supposed to make the economy more efficient and workers more productive.

A hint that this belief is wrong lies with the productiveness of workers in France. There workers are particularly secure in their jobs yet are more productive than American workers. Shouldn't the production of the French workers be lower than American workers because the French are less fearful of losing their job. Where is their motivation to produce coming from?

Could it be that the French see the good in their social system which includes the rules and regulations guiding their economy more than we see the good in ours social system? Could it be that as individuals the French see their well being more a part of the society they live in than we do? Could it be that social morality is a more effective motivator than fear?

Couldn't the whole capital edifice fail because it relies to heavily on fear to make it work. How long will it take for people to no longer believe in a system that reinforces people to always put their individual interests over social interests? How long will it take until people can no longer see the good in it?

[ddt]

For anyone who hasn't yet seen it, a great little episode on Soviet central planning/technocracy from Adam Curtis's Pandora's Box series. The other episodes are pretty good as well:

http://www.youtube.com/watch?v=Bf0ORy4BzMY

[hari]

@wjd123 -

You know I like to follow through your threads...and this reaction includes a lot of different pieces which I think you should (sort out)or catalogue them separately and start puttting your thoughts together in detail (cf. rdf blog) and may be you'll get your first publication to boot! I'm serious.

[hari]

@wjd123 -

You know I like to follow through your threads...and this reaction includes a lot of different pieces which I think you should (sort out)or catalogue them separately and start puttting your thoughts together in detail (cf. rdf blog) and may be you'll get your first publication to boot! I'm serious.

[anne]

http://delong.typepad.com/sdj/2008/02/why-the-soviet.html

Why the Soviet Union Fell
By Brad DeLong

Mark Thoma reminds us of Paul Krugman's decade-old thoughts on the moral economy of communism....

The answer is surprising, given the way the 20th century has actually turned out. The Soviet triumph in World War II was, above all, a victory of production.... Soviet industry managed to build tanks, artillery, and aircraft that were technologically a match for Germany's weapons, and to do so at a rate that consistently exceeded anything their opponents thought was possible....

What does this have to do with the world of 1997? Well, nowadays we take the triumph of capitalism as something preordained by [its] superiority.... [E]very time a Communist regime collapses, it turns out that the actual state of the economy it governed was far worse than anyone had imagined. For example, typical estimates of the GDP of East Germany before the old regime collapsed put its real GDP per capita at 70 or 80 percent of the West German level - meaning that East Germany was actually richer than some regions in the West. Yet after the fall of the Berlin Wall, visiting Westerners found something that looked like a Third World economy, with antiquated factories (and disastrous environmental problems) producing consumer goods of ludicrously low quality.... We used to think that there was a real technological race between socialism and capitalism.... It seems obvious to many people in retrospect that the productive and technological triumphs that Communists used to claim - all those heroic photgraphs of dams and posters of muscular steelworkers - were mere propaganda....

[hari]

Remember the CIA dossiers on Soviet Union during the height of Cold War!

People like Robert Gates/ C Rice were contributing to that type of micro analysis for policy makers in WH.

[Lafayette]

wjd: Regulations to relieve resentment become harder to pass when businesses are faced with global competition, which in turn forces companies to spend more money on repressive measures to control the effects of resentment.

Very dramatic. Seems like it is out of James Bond?

The is not the way well-managed businesses react to Global Competition. Their investments are spent on technological innovation and market expansion when faced with an internal threat.

For instance, more than 60% of France's CAC40 (think Dow Jones 50) make their profits from operations abroad. These profits are used to keep domestic employment constant. No, people are not fired to better P/E ratios, they are maintained to mitigate the social disharmony, which simply weakens internal Demand.

Yes, the companies do not add jobs internally but globally. The move lessens internal pressures on management, employees grin and bear it, salary increases are very modest (less than 1% per annum). But, people keep their jobs, so they stay quiet and the economy keeps humming along in lower gear.

[cm]

wjd123: In allegedly "socialist" European models (e.g. France, Germany) the populace enjoys a higher "baseline" material living standard than say in the US, due to the presence of a stronger safety net and risk pooling.

However, a relative scale of living standards and social status is still present, and that's all that is required to enforce compliance and (labor) performance standards/pressures not too different from those in the US.

The ostracism and stigma that comes with un/underemployment, a languishing career, or declining real wages (and the tangible consequences thereof) are pretty much as strong, and don't require that the unsuccessful physically live in the gutter.

[Lafayette]

cm: ... and don't require that the unsuccessful physically live in the gutter.

Well put, the entire comment.

I might add, European "social democracy" also results in that human life is given a modicum of individual dignity, without which nothing separates us from the free-for-all of a commercial jungle.

Maybe Americans will understand when they throw their spreadsheets away and take a few lessons in the essentials of humanitarian morality. Or, simply put, secular humanism.

Ummm ... the publication of Morality for Dummies? (In the meantime ... go here. or, here)

[paine]

star turn:

"What we need is a BALANCE between selfishness and greed, not either one to the exclusion of the other."

that in its spoony way
gets at a real sense of the briar
of inner contradictions
most production monads manifest serially

we got lots of insider internalized treason
to contend with
not just
"you're your own worse agent bub "
bruce wilder's
beware your inner slacker
is a nice jump off
but deep depths await us

[reason]

cm...
In a way I'm disappointing we get an essay from you on this. As far as I know you are the only one of the commentators here who saw this from the other side, as it were. Data doesn't capture everything. What did and didn't work behind the iron curtain? I know from my brief time travelling as a tourist through East Berlin and Prague that it was different than I expected. For instance: You needed to know the right way of going about things, or things didn't work at all. But usually it seems you could get around impasses if you knew how. The people didn't seem as oppressed as I expected (you could just talk to people on the street and they didn't always look over their shoulder).

[kharris]

john h.,

Good to have you back. I haven't seen you on the blogs in a long time.

[cm]

reason, what precisely disappoints you? In my latest comment I have been referring to the (newly installed in the East) "Western" social model, which I have seen from the inside for a while. Are you disputing that at least certain classes of the "unsuccessful" are facing stigma and ostracism?

(When I said "allegedly socialist" I was alluding to charges of "socialism" that we here from various commenters here. Maybe that was not clearly phrased.)

[cm]

reason, maybe it was my allegation that workers, of all descriptions, are pushed pretty hard too, at least in Germany. As I heard from professional people coming from or living in France, it's nowhere close to a slacker's paradise. Anxiety over social descent is at rather high levels, even when factually the fall may not be to the same depths as elsewhere. People apply relative standards.

[cm]

I should perhaps have made a better effort at a coherent presentation, but I'm on the way out the door, and as a so far final remark, the upshot is, yes, Central Europeans do enjoy a higher standard of living, certainly when it comes to basics missing in the US, and arguably a larger group of workers enjoys a higher quality of life (more difficult to quantify), but the relentless performance pressures are there nonetheless, even with a "smaller stick".