Spoiler: Communist leaders promised people in their countries to build socialist paradises. But life in the Soviet Union and its satellite states were miserable. People were poorer and did not live as long as people in the west. People in communist countries died earlier not only because of the mass executions, slave labour in- and outside of prison camps and regime-made famines but also because of environmental disasters causing diseases among the populations.
Everything in this post should go without saying since the suffering of people in communist countries was well known by the time of the collapse of the Berlin Wall. However, fact denial sects seem to be on the rise again as the tweet below shows.
Strangely enough, communism has become increasingly popular. Hence, this post about why communism doesn’t work. It didn’t work in the past, it doesn’t work now and it won’t work in the future.
The failures of communist regimes to fulfil their leaders’ promises of not only catching-up with capitalist countries but also surpass them has been proven many times. Below are a few illustrations of how countries that were subject to communist rule fared compared to countries which were not. The countries in question had similar levels of development before communism. The countries are Austria vs Czechoslovakia, Finland vs the Soviet Union, East vs West Germany, South Korea vs North Korea and Hong Kong and Taiwan vs China.
Life under communism was shorter….
Finland and the Baltic countries provide illuminating examples of how life under communist rule affects people lives. Life expectancy in Latvia was higher than in the other four countries during Tsarist Russia in 1900. Until independence in 1920, life expectancy rates in the Baltics increased and were higher than in Finland. But this changed as Estonia, Latvia and Lithuania became occupied by the Soviet Union. At the time of Soviet’s collapse, life expectancy in Finland was at least five years longer than in Lithuania, c.f. Table 1.
Table 1. Life expectancy in Finland, the Baltic countries and Russia before, during and at the collapse of Soviet Union.
Source: Our World in Data: https://ourworldindata.org/life-expectancy#the-interactive-world-map-of-life-expectancy Note: a: 1922 b: 1896 c:1924 d: 1925.
Old communists often claim that the collapse of Soviet Union and “capitalism” had deteriorating effects for the people. It is true that life expectancy in the Soviet Union decreased at the collapse, but it decreased also during the time of Soviet Union. It decreased from 68 years in 1970 to 67.8 in 1983 and remained stagnant until 199l. During the same time, life expectancy in market economies such as Finland kept increasing. While life expectancy in Austria kept rising, it decreased in Czechoslovakia in the beginning of the 1960s. After a few years of stagnation, it increased again and was not affected by the end of communism in 1989. South Korea’s life expectancy has kept rising while it has been more volatile in North Korea. Statistics for the latter is also less reliable and should probably be revised downwards taking the regime-made famines also before 1990 into account. Mao’s “Great leap forward” better known as the Great Famine 1959-1962 resulted not only in lower life expectancy in China but also in a decrease of the world’s population growth, c.f. Figure 1.
Figure 1. Life expectancy in communist countries compared to market economies.
Source: Our World in Data: https://ourworldindata.org/life-expectancy#the-interactive-world-map-of-life-expectancy
People in communist countries were also poorer than people in market economies. A comparison of pairs of countries over time shows that communist regimes could not provide their citizens with the same living standard as people in market economies could enjoy. As expected, the introduction of pro-market reforms in China after mass murderer Mao’s death, resulted in an unprecedented growth of GDP per capita in China, c.f. Table 2.
Table 2. GDP per capita in non-communist countries relative to communist countries at different periods of time.
Source: Madisson Project Database version 2018. www.ggd.net/maddison for all country pairs except for West Germany/East Germany (1936) for which Madisson (2005) ant the Conference Board Total Economy Database (1950 and 1989) are the sources. Note: a: 1948, b: 1989, c: 1991, d: 1936. Madisson offers another estimate. According to that, East Germany’s GDP per capita in 1990 only amounted to 0.27 percent of West Germany in 1990 which in terms of West/East amounts to 3.7. 
And here’s a picture of the Korean peninsula which I found at NASA’s webpage. While South Korea is well illuminated, you don’t see a lot of the worker’s socialist paradise North Korea.
Source: NASA Earth observatory. The Koreas at night. 2014-01-30. https://earthobservatory.nasa.gov/images/83182/the-koreas-at-night
Since almost all socialist economies were relatively poor at the beginning of communist rule, one would expect that massive investments in heavy industries supplied with moving labour from agriculture would narrow the gap significantly. It turned out that they didn’t. And market economies which had comparable levels of GDP per capita in 1950 grew faster, c.f. Figure 2.
Figure 2. GDP growth rates 1950-1989 vs 1950 level of GDP per capita.
Source: The Conference Board. 2015. The Conference Board Total Economy Database™, May 2015, http://www.conference-board.org/data/economydatabase/Note: GDP per capita in 1990 US$ (converted at Geary Khamis PPPs)
The figure above shows two things. Firstly, that the relatively poor communist countries did not grow faster than the richer market economies despite growing from a lower level and secondly that market economies with the same GDP per capita in 1950, grew much faster.
The figure above compares growth rates with the 1950 level. Crafts and Hjortshøj O’Rouke (2013) show that Eastern Europe and the Soviet Union grew faster than the West and Western Europe 1913-1950 but lagged 1950-1973 and especially 1973-1990. Therefore, Eastern Europe’s and the Soviet Union’s share of world GDP remained at 13% in 1950 and 1973 but fell to below 10% thereafter. The communist countries just weren’t as productive as market economies.
…because productivity growth was lower in the plan economies…
Looking instead at labour productivity growth during decades since 1950, confirm that conclusion. And again, the pro-market reforms after Disaster-Mao’s death show up clearly in the statistics, c.f. Table 3.
Table 3. Relative labour productivity growth in non-communist countries relative to communist countries at different periods of time.
Source: The Conference Board. 2015. The Conference Board Total Economy Database™, May 2015, http://www.conference-board.org/data/economydatabase/Note: Labour productivity per person employed. Labour productivity per person employed in 1990 US$ (converted at Geary Khamis PPPs). Labour productivity in China was negative, -0.02%, 1970-1980. In order to avoid a negative number, I replaced it with 0.01.
Labour productivity growth can be decomposed into contributions of increased factor intensities and of total factor productivity (TFP), i.e. technical progress.
…since production in communist countries were much less efficient compared to market economies…
The low technical progress and sometimes chocking inefficiency of the planned economies is well documented by Kornai (1992). He had first-hand experience of the planning system and access to detailed statistics from his time in Hungary during communism. One often-cited example from his 1992 book is a comparison between East and West German production per employee of coal, gas and electric power. West German production per employee was more than twice as high than in East Germany.
Going from the specific to general, Kornai shows that while technical progress in the West manifested itself in innovations or improved quality of existing goods or services, the communist countries were unable to invent or innovate unless it was ordered by the leaders of the Communist Party. Sputnik was an impressive achievement and the Soviet Union was also good at producing satellites and military equipment but was apart from that unable to invent new products or produce high quality products. Everything else was invented in the west. Table 12.7 in Kornai (1992) illustrates the market economies’ superiority.
The reason for lower labour productivity growth in the communist countries was lower TFP growth. Crafts and Tonioli (2010) analyses show that communist countries in central and eastern Europa should have grown by additional 1.3 percentage point per year hadn’t the contribution from TFP been low. Also, Crafts & Hjortshøj O’Rouke (2013) who show that, compared to Western Europe, Soviet TFP contributed never contributed more than 1.6% per year to labour productivity and output growth. TFP in market economies in the West and Asia exceeded that by far. Also, Vonyo and Klein (2017) find higher growth rates of labour productivity and TFP for market economies, Austria and West Germany, than for the three communist countries, Czechoslovakia, Hungary and Poland between 1950 and 1990.
…and communist countries used more resources than market economies to increase production …
While growth in market economies to a large extent is intensive, i.e. takes place through technical progress, growth in communist countries is normally extensive. Extensive growth is based on quanititative increases of production factors and other resources. Vonyo and Klein (2017) also find that factor intensity contributed much more to productivity is needed than TFP in communist countries. And that the inefficiency also meant that communist countries used more of intermediate inputs is well documented by Kornai (1992). Energy and steel intensities were twice as large and use of other intermediate inputs at least 25% higher in communist countries, c.f. Table 4.
Table 4. Energy, steel and material intensities in communist countries and market economies.
Source: Sources cited in Kornai (1992), tables 12.4 and 12.5. Note: a:1979 b: 1980 c: years around 1975. Industry encompasses mining, manufacturing and energy producing industries. Energy intensity was measured in kg/coal equivalent consumed per 1 000 1979 US dollars of output. Steel intensity was measured in kg of steel consumed per 1 000 1980 US dollars of output.
Even Soviet sources discussed the lower efficiency in Soviet production. The Swedish historian Kristian Gerner (1988) cites an article in Kommunist the same year. The article’s author, the vice president of the Academy of Science, describes the failure to lower energy efficiency in the Soviet Union. While production plants in market economies had managed to decrease energy efficiency, the consumption of energy in production of steel, paper, coal and oil had increased significantly over the years.
The energy production in the Soviet Union was also far more polluting than in the West. Emissions from power plants fuelled by coal contained many times more sulfur and polluting particles than in the west. And since Soviet authorities did not care about the health effects or environmental damage, emission standards remained the same during the Soviet era. The emission standards were even raised for nitrogen.
…which made life under communism dirtier and turned large parts of the communist countries into ecological disaster areas…
As Piatkowski (2018) points out “Communism was one of the most environmentally destructive economic systems ever developed.” The above-mentioned wasteful production methods led to more damages of the environment than production in market economies. The reasons were also absence of private property rights, low administrative energy prices, obsession of growth and fulfilling quantitative production targets and an oppressive political system where environmental organisations were prohibited.
This turned many geographical areas in communist countries into ecological disaster areas. The examples below mention only a tiny fraction of the damages done to environment and people by the communist regimes’ indifferences.
The concentration of benzopyrenet in the air was ten times higher in Silesia, Poland, than in the west causing high rates of respiratory diseases and premature death. Silesia and Kraków were the two worst of twenty seven ecological danger zones officially listed by the Polish government in 1990 . The danger zones covered 11 percent of Poland’s territory and affected 35 percent of its population.
Bitterfeld, was classified as the dirtiest place in the most polluted country in the world, East Germany, according to statistics and by Greenpeace in 1990. Its chemical industry emitted 15 times as much as the West German average of sulfur dioxide. The effect on the population’s health was devastating. Children fell ill soon after birth and life expectancy was five and eight years shorter than the national averages for men and women respectively.
This post is depressing. It needs a furry animal.
Gerner (1988) was among the first scholars to study the extent of the environmental destruction in the Soviet Union. Perhaps the most known example of environmental destruction is the Aral Sea. It’s been shrinking since the 1960s due to the idiotic projects aiming at diverting the rivers that fed it. As discussed in Gerner (1988), millions of hectares of the soil in Central Asia Soviet republics and elsewhere in Soviet Union has been destroyed by excessive use of pesticides and fertilizers. Water purification was far below the standard in the West in Soviet Union and especially poor or non-existent in its Central Asian republics. The excessive use of pesticides and salt in the cotton industry made the ground water toxic and caused epidemic diseases among the population. Also, large parts of the Black Sea, Ladoga, the White Sea, the Lake Baikal where the Soviet paper mills discharged waste directly into the sea, were destroyed. Also, large parts of the Baltic Sea bottom is considered dead as a consequence of the Soviet indifference.
…which was a consequence of the Plan.
The communist regimes had a well elaborated Plan which created perverse incentives which inhibited innovations, made quality improvements costly, cost reductions meaningless but encouraged waste. In the communist economic system where factors of production were not allocated and rewarded according to their productivity, the result could only be inefficiency, waste and shortages.
The plan’s incentive structures were the real problem behind the disappointing economic development, low technical progress and the environmental destruction and administratively determined prices, soft budget restrictions and absence of property rights were key ingredients in the recipe for failure.
But there was some creativity in the system after all as Kragh (2014) and Svensson (2017) illustrate with some examples. Production targets were specified in terms of tons. Firms that were ordered to produce furniture, produced as heavy chairs, tables, beds and sofas as possible. Transportation firms could have targets specified in number of kilometre tons. Those firms met their targets by filling their trucks as much as possible and had their trucks driven back and forth on the same road until their targets were met.
Crafts, N. & Hjortshøj O’Rourke, K. (2013). ”Twentieth Century Growth”. University of Warwick, Working Paper Series, No. 153.
Gerner, K. (1988). Svårt att vara ryss. På väg mot postsovjetismen. Sex essäer om ryska identitetsproblem. Signum.
Gerner, K. (2017). Rysslands historia. Historiska media.
Kornai, J. (1992). The Socialist System: The political economy of communism. Oxford University Press.
Kragh, M. (2014). Rysslands historia. Från Alexander II till Vladimir Putin. Dialogos.
Madisson, A. (2005) Monitoring the economy.
Piatkowski, M. (2018). Europe’s Growth Champion. Insights from the Economic Rise of Poland. Oxford University Press. Oxford.
Svensson, M. (2017). Vad kan vi lära oss av planekonomin? Timbro förlag.
Vonyo, T. (2016). ”War and socialism: why eastern Europé fell behind between 1950 and 1989.” Economic History Review, 00, 0, pp. 1-27.
Vonyo, T. & Klein, A. (2019). “Why did socialist economies fail? The role of factor inputs reconsidered” Economic History Review, 72, 1, pp. 317-45.
 GDP for East Germany appear to have been especially inflated according to Madisson (2005). According to Maddison were previously by Alton (1975,1985 and 1990) estimated growth rates and GDP per capita levels significantly higher than for Hungary and especially Czechoslovakia not plausible taking the similarity in pre-war development, industry structures and human capital endowments between the three countries into account. Apparently, East German authorities were known to have understated the degree of inflation. Madisson claims that a correction of Alton’s estimate of East Germany’s GDP per capita of 12 530 should be corrected by more than a third. This was justified by using the same growth rates as for Czechoslovakia.
 The extent of the environmental disaster created by East Germany’s communist regime did not become fully known until after its fall. And before that, the regime did what it could to hush down reports. In 1986, the ecologist Sten Nilsson was kicked out of East Germany when he collected data on forest death in East Germany. According to his data many forests were dead and the country on the verge of ecological collapse. The regime knew about this but did not want to close or invest in new less harmful production. Instead, scientists were ordered to develop species of trees that would resist the pollutants.