Name Me One Country Where Capitalism Works: A Thirty-Year Reckoning



When I first considered myself a socialist revolutionary in 1970, I was hounded by free marketers’ challenge: “name me one country where socialism works”. These market fundamentalists would then hold up the most strident expectations for socialism:

  • Everyone is exactly equal with no classes.
  • There is an abundance of goods which are conveniently circulated.
  • Political rule is not dictatorial.
  • All competition is banished.
  • There are no capitalist markets.
  • People are working together, collectively and creatively.
  • The state has withered away.
  • Anything less than this was proof that it didn’t work.

Without really understanding how difficult it is to create any of these conditions when surrounded by a sea of capitalist sharks, I was at first intimidated. I was driven away from examining Russia, China and Cuba because they were “authoritarian”. Without realizing it, I had accepted that more than one political candidate was the ultimate measuring rod. I didn’t know how high the literacy rate was in socialist countries, that they had health care systems that were affordable or free, low-cost housing, free education, and there was little or no unemployment. What mattered was there was a single party rule. I was intimidated by that argument, without knowing that for the people in those countries having two parties to vote for instead of one was not their priority. As first an anarchist and then a council communist, I then would refer to the workers’ councils that existed during the Paris Commune, the Russian Revolution, the Spanish Revolution and say, “here you are, that works”. While I was right that workers’ councils were a stunning achievement, the rebuttal would be “why didn’t they last?” At 20 years old I didn’t really have an answer for this.

Ten years later things got really bad when capitalism seemed to be restored in China in the 1980s and when the Soviet Union fell apart ten years later.  Now I would hear: “the Cold War is over, capitalism has won.” Writers like Francis Fukuyama would announce this in his book End of History and Samuel Huntington would crow about the glories of the West.

Six varieties of socialism

There are at least six socialist tendencies on the left. Moving from right to left, the first school is social democracy, typified by the SPD in Germany in the late 19th and early 20th centuries; the Socialist Party of Debs in Yankeedom at the turn of the 20th century and then the Social Democratic Labor Party in power in Sweden from the 1930s to the 1970s. There are three varieties of Leninism – Trotskyism and Stalinism, typified by Russia and Cuba, and Maoism, mostly prevalent in China from 1949-1976. Then there are small grouplets of council communists who were prevalent during the Russian and Spanish revolutions and among the Dutch and Germans.  Lastly, anarchism was prevalent during the Russian and Spanish revolutions and in Rojava today. The criticism that capitalists usually make of socialism is really only of the Stalinist or Maoist version. They are also the only types of socialism that ever succeeded in defeating the bourgeoisie—at least for a while, and built powerful and in many regards extraordinary nations.

Adam Smith’s Criteria for a well-functioning capitalist society.

Well, it has been 30 years since the “fall of communism”. Thirty years in which capitalists could show the world why Margaret Thatcher was right when she said, “There is no alternative (TINA)”. No more communist menaces to gum up the free market. What do we have? What do capitalists have to show the world after their so-called victory?

Adam Smith —in his time seen, like many of his peers, as a “moral philosopher” trying to discover the “maximum social good”—is considered by capitalists to be their founding father. His criteria for a highly functioning capitalist society is a high standard of living, not just for the elites but for the middle classes, the working classes and gradually the poor; a decrease in the amount of work done because of high technology; opportunities for anyone to start a small business who wants to; and a relatively stable economic life. No reason for wars because the invisible hand of the market would benefit all countries and make fighting over resources a thing of the past.

The purpose of this article is to assess what capitalism has done. The books I’ll be referring to are Introduction to Political Economy by Zachary, Schneider and Knoedler; David Harvey’s The Seventeen Contradictions and the End of Capitalism; Michael Roberts The Long Depression; Michael Parenti’s Blackshirts and Reds and Naomi Klein’s The Shock Doctrine.


Capitalism has always existed

One of the first things you will be told about capitalism is that it has always existed. This is claimed by Adam Smith as well as the neoclassical economists. This is hardly the case for the entire school of Marxists and economic institutionalists who will tell you that capitalism is roughly 500 years old. In addition, no anthropologist will agree that tribal societies or even agricultural civilizations like Egypt, Mesopotamia, China or India had purely capitalist economic exchanges within their societies. Even external trade cannot be characterized as capitalist. The merchants in these civilizations were given lists of goods to buy by temple administrators. They did not “truck, barter and exchange” independently of the ruling elite.

Capitalism commences when hardworking, thrifty, shrewd capitalists take risks

Smith claims that capitalism starts when frugal, hard-working, shrewd traders identify a need and invest capital in land, goods or services. In the best of all possible worlds, the product sells and the budding capitalist makes a profit. This capitalist has to compete with other traders and the results of this competition are better products for everyone. Smith called this process “the invisible hand” of the market. Today Smith might be surprised to find out that the wealth capitalists possessed was less the result of personal ingenuity but more based on inheritance. Last time I checked, about 2/3 of capitalist got their wealth from the inheritance they received.

Marxists and post-Keynesians contest that the origin of capitalism begins with trade. Marx argued that capitalism begins with what he called “the primitive accumulation of capital” when peasants are thrown off the land (to create enclosures) and their tools and animals are taken away from them. The capitalist uses the land for commercial farming, growing coffee, sugar, cotton and tobacco which are tended by slaves. Meanwhile, former peasants are driven to work in cities and eventually in factories the capitalists built in the 19th century. Michael Perelman in his book The Invention of Capitalism describes how Smith papered over the primitive accumulation process.

Specialization of labor is justified because it produces a high volume of cheap projects

Adam Smith was sensitive to the cost the specialization of labor might have on the body and mind of the worker that resulted in alienation on the job. Despite that, he felt that the volume of goods that would result from specialization was worth that cost. If capitalists today wished to have a stable, satisfied work-force they would pay attention to what factory work does to workers. The most obvious effect of aliening conditions on workers is that as a class, working-class men die on the average at about 67-72 years of age, which is at least seven years earlier than middle-class men and women. That’s seven years of lost labor and the training of labor for capitalists.

Workers are lazy and need a carrot to motivate them

Capitalists imagine that people are generally stupid, unmotivated and shortsighted and it is only the few, heroic, risk-taking capitalists who show creativity and ingenuity. But capitalists take how workers behave in their leisure time, after they are exhausted from 50 hours a week (or more) of work, as their point of departureThese workers do want to cool-out, sleep, watch a ballgame or get drunk. But capitalists pay no attention to the fact that workers will work on their cars, build engines and create all kinds of crafts with their free time without being paid at all. Capitalists also ignore the fact that in cases when workers have control of what, how and when they produce – as in worker self-management or worker cooperative experiments – they have higher rates of productivity than they do when working for a capitalist.

Competition between capitalists leads to better products and lower costs

Adam Smith believed that the fruits of competitive capitalism would lead to lower prices for consumers. This is not what has happened.  Competition between capitalists leads to a concentration of capital in a few corporations and the elimination of smaller capitalists. As Marxists Baran and Sweezy point out, corporate capitalists agree not to engage in cut-throat competition and the prices of commodities are pretty much the same. Corporations compete through advertising, not on the prices themselves.

The state is minimally necessary in the orchestration of capitalism

State intervention was extremely important in helping to get the United States out of the depression through the New Deal programs. Furthermore, today the lack of state intervention is directly connected to the amplification and spreading of COVID-19 because there has been no national plan developed at the federal level. Additionally, their professed but rarely implemented ideology of patriotism notwithstanding, capitalists are globalists, and they need the state to intervene in the process of both subordinating workers in colonized countries and attacking and overthrowing governments who do not want to hand over all their natural resources to foreign corporations. Capitalists require a visible fist to work hand and glove with the invisible hand.

The abundance of goods and services is what justifies capitalist profits

In Adam Smith’s time, making a profit on material [consumer] goods was the only way to make a profit. However, after World War II, capitalists realized that there were great profits to be made on war industries – and that it was far less risky. In addition, with the rise of the banks in the 20th century, it was profitable to make money based on the speculation of stock and bonds. This means that today capitalists are far more interested in making a profit in defense of spending and stock-market speculation than investing in commodities or building infrastructures. The fickle moods of the spending public are too dangerous to invest in on their own. So too, profits made on infrastructure is too slow a turn-around time to wait for. This is the reason Yankeedom has trillions of dollars of infrastructural work that sits waiting. One problem for capitalists is that profits made on the military destroy productive forces and the wealth made on paper transactions produces no social wealth. Yet both are counted as profits along with the real wealth based on selling goods and services. The result is a society whose profit claims are wildly exaggerated if wealth is judged the way Adam Smith thought best.

 The wealth of capitalists will have a trickle-down effect on workers

Roughly 50 years ago, Yankeedom was rated around fifth in the world in the steepness of its stratification system. Today it is number one. The standard of living for the average working-class person today is nowhere near what it was in 1970. The average work-week is at minimum 10 hours longer. One of the clearest indicators of the decline in the standard of living is the amount of debt working-class people have been accumulating over the past 50 years. This is because their wages or salaries cannot keep up with the cost of living.

Capitalism works for all social classes

Capitalism has never worked for people in poverty, which over the last 70 years has fluctuated between 10% and 20%. Capitalism (in America and then gradually in Western Europe) has worked for white working-class people within a window of time between 1948-1970. [That was an anomaly caused by the devastation of industrial capacity and financial ruin in most nations during WW2 which made the US the world’s chief center of production for consumer and capital goods).  Since then, it has ceased to benefit white working-class people. Since the crash of 2008, political economist Richard Wolff has said that those who have benefited from capitalism are the upper middle class (10%), the upper class (5%), and the ruling class (1%). Actually, the actual ruling class is far more concentrated than 1% of the population, an arbitrary figure chosen by the Occupy Wall Street activists for the sake of expedient propaganda. A more realistic estimate is between 0.2 and 0.01% of the total population. As of today, capitalism works for less than 20% of the population.

Capitalism shrinks racial tensions because it doesn’t pay to exclude skilled workers

This is the argument made by neo-classical economist Gary Becker. Judging from the behavior of Trump followers, the militarization of the police and the number of racial minorities killed by the police or in prison, race relations have gotten worse than they were 60 years ago. Far from refining their work skills to compete with white prison workers, minorities work for slave wages. The lack of class mobility for working- class whites and minorities has inflamed race relations as many working-class whites have blamed minorities (including “illegal” immigrants) for a decline in their standard of living. A far better explanation for inflamed race relations is that capitalists benefit from racial competition for jobs, by a divide-and-conquer strategy:

  • By paying white workers a little more;
  • By keeping a pool of unemployed minorities available to work in order to keep wages low and undermine strikes by white working-class workers. This is part of the “army of the unemployed” mentioned in Marxist literature, never quite eliminated by the capitalists since it acts as a wage depressant and facilitates working class docility. 

There are no significant capitalist downturns, it’s just the oscillation of business cycles

Michael Roberts in his book The Long Depression, names four major global capitalist crises: the long depression of the 1870s; the Great Depression of the 1930s; the Great Recession of the 1970s and the Great Financial crisis of 2007 – which we are still in. For Roberts, when there is a recovery, it is not truly a recovery in that it returns us to previous levels. It starts at a lower level. The concept of “business cycles” is a flat denial of long-term irreversible capitalist crisis.

Economics can be best understood by separating it from politics

Neoclassical economics, unlike Adam Smith, imagine that economic exchanges can be understood as separate from politics. This completely ignores all the money capitalists invest in controlling their political parties. William Domhoff in his book Who Rules America and the Powers that Be researched all the mediating institutions that influence both the Republican and Democratic parties long before the population actually votes. These mediating organizations include universities, foundations, think tanks, policy campaigns, news dissemination, book publications and lobbyists. Capitalists absolutely need to be in control of politics in order to control the state’s domestic and foreign policies.

The invisible hand: the pursuit of individual self-interest leads to economic order

The Yankee population satisfies their self-interest by driving their big cars and paying their taxes to a military that is the world’s greatest polluter. The collective result is extreme weather and fires. Another example is that some people find it convenient to not wear masks during the pandemic while others do wear them. Each produces what seems to be in their short-term self-interest, but the result is an expansion of the virus, the loss of work and the shutting down of small businesses. The invisible hand in the present leads to a long-term collective disaster.

People have unlimited individual wants and needs and the market scurries to satisfy them all. The consumer is king.

If this were true, there would be no need for advertising. Through advertising wants are artificially created and then are turned into perceived “needs”. Many actual wants are neglected if the rate of profit on them is too low. Planned obsolescence makes sure that products don’t last too long.

Economics is a science

If neoclassical economics were a science, it would have an agreed-upon explanation for the causes of previous depressions and it would predict what is likely to happen in the future. Mainstream economics is propaganda for a particular school of economics – neoclassical economics. The use of mathematical formulas does not make neoclassical economics a science. It only obscures all the myths we have been challenging.

The size of the income is directly proportional to contributions to production and choosing work over leisure

Income is hardly proportional to contributions to production. In the case of doctors, architects or lawyers this may be true. Conversely, there are jobs that are highly dangerous that have low compensation. Working class exposure to hazardous waste is an example. On the other hand, the salaries of those in the insurance industry, real estate, and finance is completely disproportionate to the goods and services they actually produce.

Poverty and unemployment are linked to bad individual choices between leisure and work

Unemployment is a necessary part of the capitalist system. An unemployed army of workers is necessary to keep workers from working together and joining unions to raise wages and better their working conditions. Many workers are in poverty, not because they “choose” to stay home, watch tv and play poker. The “choice” of workers is between working at various kinds of low wage job or starving.

Causes of downturns are “externalities”: bad crops, bad weather

Neoclassical economists deny that there are any built-in problems intrinsic to the capitalist economy. It is claimed that “externalities” such as bad weather or crop failure can be overcome by changes in monetary policy. But in this “externalities” claim neoclassical economists are in the vast minority. Marxians, post-Keynesians and Keynesians all agree that downturns are internal to the capitalist system. Keynes said downturns are due to inadequate spending by capitalists on infrastructure and wages. Wages are too low for workers to buy products off the shelf.  Institutionalists like Thorstein Veblen would say the problem is in the gap between industrial wealth and pecuniary wealth (conspicuous consumption). Michael Hudson would say that crises are due to the accumulating bubble between finance and industrial capital. Marxians like Michael Roberts and Anwar Shaikh say crisis is due to the tendency of the rate of profit to fall.


Capitalism appeals to rationality and is the opposite of fascism

As it turns out, there is an invisible fist of fascism behind the invisible hand. Apologists of capitalism treat fascism as having nothing to do with capitalism. They would say it was just a spontaneous irruption of irrationality as a result of the existence of conflicts within “mass society”. In fact, capitalists have been very friendly to fascists both before and after World War II and continue to be so today. Franz Neumann has argued that fascism is a product of monopoly, finance capital. Fascism provides a simplistic outlet for some working-class whites and large numbers of small business owners who are being crushed by large corporations. The outlet is to blame religious or racial minorities for their problems rather than capitalists.

Michael Parenti tells us that in Germany the greatest source of Hitter’s wealth was a secret slush fund to which the leading German industrialists regularly contributed. Fascism in Germany was favorably looked on in Yankeedom. Henry Ford traveled to Rome to pay homage to and strike economic deals with Mussolini. Mussolini was hailed by the press in Yankeedom throughout the 1920s and 1930s including Fortune Magazine, the Wall Street journal, the Saturday Evening Post, the New York Times, the Chicago Tribune and the Christian Science Monitor. They hailed Mussolini as the bearer of order to Italy. Newspaper giant William Randolph Heart instructed his correspondents in Germany to only file positive reports about Hitler’s regime. They even opened their columns to the occasional writings of major Nazi leaders like Alfred Rosenberg and Hermann Goring. During the early war years, western capitalist states were still cooperating with fascism. English prime minister Chamberlain was on very good terms with Hitler and like many members of the ruling class saw fascism as a defense against communism.

The Rockefellers’ Chase Manhattan Bank used its Paris office in France to launder German money to facilitate Nazi trade during the war. Corporations like DuPont, Ford, General Motors and ITT owned factories in enemy territories that produced fuel, tanks and planes. Pilots were given instruction not to hit factories that were owned by US firms including those that produced military equipment for the Nazis. See Charles Higham’s Trading With the Enemy for more.

Within a year after the war, almost all Italian fascists were released from prison while the communists who fought the fascists languished in prison. According to Parenti, “under the protection of the Yankee occupation authorities, the police, the courts, military, security agencies and bureaucracy remained largely staffed by those who had served the former fascists regimes.” (18). After World War II, the United States brought the top military and scientists from fascist Germany to the United States to work for them. See Martin Lee’s The Beast Reawakens for more on this. Between 1945-1975 the Yankee rulers helped to keep fascism afloat in Italy, suppling roughly $75 million to right-wing organizations in Italy.

The modernization process is inevitably good for all societies

Modernization theory divided modern societies into western Europe and the United States and the rest were “traditional societies”. Fascist and communist societies were excluded from the category of modernization. Traditional societies (tribal and agricultural societies) were seen as economically and technologically backward, superstitious and driven by irrational customs. Modernization theorists believe modernization would improve traditional societies. In fact, modernization is relatively good for Western Europe and the United States core. Modernization theory ignores the fact that an increasing number of traditional societies have been colonized and this is the reason for their lack of material resources. Andre Gunder Frank’s book The Capitalism and Underdevelopment in Latin America demonstrates this. 

Nation-states are autonomous from each other and whether their country is wealthy or poor depends on the economic policies of that country

Capitalism is a global system that is far more powerful than any individual nation-state. Capitalism constantly needs new markets and imperialistically exploits countries on the periphery in the core states’ quest for cheap land, natural resources and labor. Nation-states are interdependent.

Western societies have created a model for modernization because of something inherent to them

There is nothing in the inherent make-up of western societies that makes them more suitable to modernization. It is true that western societies developed capitalism first because their adequate rainfall and mountainous terrain made it unnecessary to develop a unitary empire based on centralized irrigation system. Merchants were not beholden to emperors or kings as in the great agricultural civilizations. But that was happenstance and had nothing to do with any immanent “European miracle”.

Western European societies developed capitalism without any pressure or colonization from other parts of the world. Countries outside of Western Europe that are striving to modernize have to overcome their history of colonization by western societies. Furthermore, it is difficult to develop a scientific and engineering base. Many of these colonized nations are in debt and beholden to the IMF and World Bank for loans. These banks do not want colonized countries to develop an independent scientific base because those scientists and engineers might develop a resource base that is separate and might make obsolete the resource bases of the west.

Economic history and cross-cultural economics are not very important

Since neoclassical economists like to think that capitalism has always existed, they tend to play down the history of European economic systems. They also are not very aware of the comparative economic systems of tribal societies or agricultural states. Both the study of history and other cultures from around the world give a relativity to the current capitalist system that works against its propaganda.

International trade benefits all nations: theory of comparative advantage

In her book The Shock Doctrine, Naomi Klein identifies “the Chicago Boys” (meaning the followers of Milton Friedman) as initiating the economics of Chile, Argentina, Bolivia, Poland, Russia, South Africa and Iraq for the glories of market fundamentalism. Was the result what Adam Smith would have expected? Hardly. These economies had their social safety nets decimated, conditions for workers resulted in insecure jobs, lower income, longer hours and growing debt to the World Bank or the International Monetary Fund. They were given loans for the support of the tourist industry, growing of cash crops rather than for subsistence or taking care to develop industries that were most efficient in developing the natural resources of their own country.

History has proven that capitalism works and socialism is a failure

This assessment is purely propaganda. When a neoclassical economist picks a capitalist society it picks the most favorable example, such as the United States in the 1960s or Germany in the 1990s. It fails to acknowledge that since most of the world is capitalist, this includes authoritarian capitalist dictatorships that exist in many parts of the world, especially the so-called “capitalist periphery”, places such as Indonesia ruled by military tyrants and oligarchic cliques beholden to foreign interests. These dictators were installed by core capitalists to repress rebellion. Conversely, when a neoclassical economist picks a socialist country it usually refers to the worst time periods in Russian, Chinese, Cuban, Venezuelan or North Korean history. It conveniently ignores Sweden, Norway or Denmark in their best periods (even if these Scandinavian nations were still far more capitalist than socialist) or the achievements of Russia, China or Cuba in their best periods.


I am not a Leninist but since capitalists insist that Leninism is the only kind of socialism, Leninism is worth defending. To do this I will be guided by Michael Parenti’s book Blackshirts and Reds. One of the things Parenti points out is that capitalists make unfalsifiable claims, putting state socialist countries in a position of “damned if you do, damned if you don’t.” For example:

“If Soviets refuse to negotiate a point, they were intransient and belligerent.
If they appeared willing to make concessions, this was a skillful ploy to put us off our guard.

By opposing arms limitations, they would have demonstrated their aggressive intent; but when in fact they supported most armament treaties, it was because they were mendacious and manipulative.

If the churches in the USSR were empty, this demonstrated that religion was suppressed; but if the churches were full, this meant the people rejected the regime’s atheistic ideology.

If the workers went on strike, this was evidence of their alienation from the collectivist system; if they didn’t go on strike, this was because they were intimidated and lacked freedom

A scarcity of consumer goods demonstrated the failure of the economic system; an improvement in consumer supplies meant only that the leaders were attempting to placate a restive population.” (pgs. 41-42)

So, in other words, capitalists fail to state the conditions in which they could be proven wrong.

The performance of socialist states must be compared to the political economy of the country before socialism came to power

What is not considered by capitalists in challenging socialist institutions is those countries that became socialist societies were far worse off before socialism arrived. So, for example, whatever the shortcomings of state socialism under Leninist/Stalinist/Maoist rule in Russia, China, and Cuba must be seen against what life was like for workers and peasants under Czarist Russia, China under Chiang Kai-shek or Cuba under Battista. Other countries were subjected to the miseries of colonial rule by the West before becoming socialist. Relative to those conditions socialism in those countries was a clear improvement.

Cuba: Improvements in housing, schools, literacy, sanitation, health clinics, jobs, human services, life expectancy

Speaking of Cuba, Michael Parenti writes:

For all its mistakes and abuses, the Cuban Revolution brought sanitation, schools, health clinics, jobs, housing and human services to a level not found throughout most of the Third World and in many parts of the first world.

Life expectancy rose from 55 to 75. Smallpox, malaria, tuberculosis, typhoid, polio and numerous other diseases have been wiped out by improved living standards. Cuba has enjoyed a level of literacy higher than the US. The Cuban revolution has sent teachers, doctors, and workers to dozens of Third World countries without charging a penny. It is the country with the most teachers and doctors per capita of all counties. Most third world capitalist regimes are far more oppressive. (38-39)

In Russia less stratification between classes in income housing and gender relations

In Russia within thirty years after the Bolshevik revolution, the Soviets made industrial advances equal to what capitalism took a century to accomplish. In communist countries there was less economic inequality than under capitalism. Parenti continues:

The perks enjoyed by party and government elites were modest by corporate CEO standards in the West as were their personal incomes and lifestyles.

Soviet leaders live in large apartments in a large housing project near the Kremlin, set-aside for government leaders.

The income spread between the highest and lowest earner in the Soviet Union was about five to one. In the US the spread is 10,000 to one.

There is guaranteed education, employment, housing and medical assistance.

(Blackshirts and Reds, 45)

The fall of the Soviet Union had a negative impact on revolutionary movements all over the world

With capitalist fundamentalism having taken over Russia, that meant that any liberation struggles on the capitalist periphery were on their own. In the past they had received aid from Russia (and its allies in the Soviet sphere of influence, such as Eastern Germany, Poland, etc.). In addition, capitalists would no longer have to convince workers or national leaders of liberation movements that they offered a better way of life than communism. They seemed to be the only game in town.


Why the standard of living is not higher and political governance less democratic

It must be said that all socialist countries are not free upgrades for the living standards of their population in a timely way. All socialist countries are under constant attack from capitalist countries and have to devote a great deal of their economy to building up their military. All this is revenue taken away from domestic infrastructure projects and consumer goods. Additionally, socialist states have to be extremely cautious in both setting up their political systems and holding elections. Capitalists will do everything they can to overthrow socialism as a system as well as the socialist leaders. Given the record of the CIA attempting to overthrow roughly 60 governments since its inception, socialist revolutionaries have good reason for being cautious and less willing to have elections resembling a free-for-all. Yet, there were a number of difficulties that seemed inherent in the system itself.

Despite his sympathy for Russia, Parenti is no true believer. He says “The exigencies of the revolutionary survival did not make inevitable”:

  • The heartless execution of hundreds of Old Bolshevik leaders.
  • The suppression of party-political life through terror, or peer pressure.
  • The eventual silencing of debate regarding the pace of industrialization and collectivization.
  • The ideological regulation of all intellectual and cultural life. 
  • The mass deportation of suspect nationalities. (57)

In his book Inventing Reality, Parenti admits:

“The truth is, in the USSR there exist serious problem of labor productivity, industrialization, urbanization, bureaucracy, corruptions and alcoholism. There are production and distribution bottlenecks, plan failures, consumer scarcities, criminal abuses of power, and the suppression of dissidents.“ (287)

Limits of centralized planning

Parenti points out the centralized planning in some historical periods is better than others:

“Central planning was useful and even necessary in the earlier period of siege socialism to produce steel, wheat and tanks to build an industrial base and withstand the Nazi onslaught. But it eventually hindered technological development and growth.  No system could gather and process the immense range of detailed information needed to make correct decisions about millions of production tasks.” (59-60)

Had they tapped the collective creative energy of the workers and included them in the planning process via workers councils, things might have been different.

Disincentives for innovation

Managers were little inclined to pursue technological paths that might lead to their own obsolescence. Managers received no rewards for taking risks. Experimentation increased the chances one might miss their quotas.

Improvements in production would lead only to an increase in one’s productive quota. In effect, well-run factories were punished with greater workloads. There would be deliberate slowdowns so as to not surpass the quotas. Or they would work faster, finish the job in 4-6 hours and go somewhere to work for extra money. High-priced quality goods and luxury items were hard to come by. All this affected work performance. Why work hard to earn more when there was not that much to buy? There was strong resentment concerning consumer scarcities, the endless shopping lines and housing shortages.

Greater affluence rather than political democracy mattered

Usually there were relatively prosperous craftsmen, small entrepreneurs, well-educated engineers, architects and intellectuals that were the most aggressive about becoming richer. It was this desire for greater affluence rather than the quest for political freedom that motivated most of those who emigrated to the West.


In my article Like a Rowboat in a Typhoon I’ve identified 12 crises that face Western capitalism. Each crisis was either there before the 1990 breakup of the Soviet Union and has continued to become worse during the next thirty years of the free reign of market fundamentalism or the crisis is new and the result of neo-liberal economic policies.

COVID-19 has expanded rather than leveled off because the nation-state is not allowed to have a national plan since that is against the ideology of neoliberal economics. Local states are left to fend for themselves and the results are an incoherent mess. Large parts of the Yankee population, full of rugged individualism, are in denial there even is a pandemic. They are ignoring what scientists say and are spreading the virus as they dance together in clubs and on beaches. Other countries have risen to the occasion with half the resources. Socialist countries like Cuba, China, Venezuela and North Vietnam have responded well and admirably.

Extreme weather is a very serious problem that has been building for 50 years, if not longer, but it has become especially obvious in the last 20 years. There is no long-term plan to address this problem either. Every year we have record-breaking heat in the summer, along with fires and in the winters, record cold spells in the east and north-central states. Glaciers are melting and water is rising. Has the absence of the Soviet Union unleashed market forces to solve this extreme weather problem? No.

Police departments have turned into state terrorist organizations which have been gathering more and more weapons for the last 50 years. There is no structural reform, as the police are handed bloated budgets while they are trained to mutilate and kill as a matter of course. Now that neoliberal capitalism does not have to worry about communism, have they reigned in the police? Is it a new day for racial minorities to enjoy the blessings of the free market as its minority citizenry? Far from it. The problems with the police have only gotten worse.

There is an open rebellion against police terror which the ruling class has failed to address structurally. Besides police attacks there is the prison industrial complex, filled with a disproportionate number of minorities, many in for minor crimes. Any claim for reparation for minorities is like spitting in the wind. This has gotten even worse since the killing of Oscar Grant in Oakland in 2011. Since 1990, when the capitalists thought they won, things have gotten worse. Kamala Harris refused to let non-violent prisoners out, because capitalists who have invested in prison labor needed the workers!

Has market fundamentalism, triumphant since 1990, given the working class and small business owners a better life? The answer is a resounding no. In fact, it has attracted them to fascism. Openly armed fascistic groups publicly wave confederate flags and white power signs. We know better than to think these groups originated with Trump. With its policy mantra of austerity at home and abroad, it is more likely that white working-class people and small business owners will continue to be drawn to fascism – with or without Trump. Their economic circumstances have deteriorated particularly since 2008, especially because of the absence of a socialist alternative here.

We are in the worst capitalist crisis in history because the Coronavirus has crippled the physical economy: political economist Jack Rasmus says the real unemployment rate is between 25-30%. Those who are working are working at reduced workloads. Consumer spending is very low. Both parties sing a capitalist tune that workers might die so the economy can live. This is an economic policy? This is what capitalists say we can look forward to with its happy victory over socialism?

For Adam Smith, capitalist wealth was based on building infrastructures, goods and services and making life easier for the lower classes. Free market fundamentalists since 1990 has continued to ignore these things. After 1970 finance capital got increasingly out of control. Has the absence of the Soviet Union allowed neo-classical economists to reign in the banks? Fat chance. Today fictitious capital greatly outstrips industrial capital in terms of its claim on social wealth. The banks were responsible for the crash in 2008.

The ruling class made a decision shortly after World War II that more stable (bigger) profits could be made from the military than investing in commodities. After all, we have to defend ourselves against the Cold War nemesis – the Soviet Union – that wants world communism. Surely by the mid 1990s the military budget would shrink because after all, capitalism had slain the communist dragon. What do we have today? The US military budget is larger than the whole world military budget combined.

Now that capitalists no longer had to worry about the communist menace, we might think the role of the Federal Reserve would be smaller because markets would be stable after 1990. Today 30 years after the reign of market fundamentalism the Federal Reserve has to pump blood transfusions (money) on a regular basis into financial markets to keep them from tanking. Would Adam Smith think there might be something wrong with printing more money as an economic policy? We think he would be horrified.

Politically, both major political parties are hated by their populations with the winning party not being able to attract more than about a third of the vote. More people don’t vote than do vote. Has the absence of the Soviet Union and a world socialist threat (to the capitalists not the people of the US at large) brought more people out to vote? I would think that if under capitalism “all boats will rise”, the voter turnout would be more active because voting is an expression of faith in the system.  It hasn’t brought more people out to vote. In fact, the Democratic Party in the wake of the 2016 debacle developed a conspiracy theory that they lost the elections because of the Russians. But these Russians aren’t even communists anymore. Yoo-hoo, Democratic Party, you can’t have an evil red menace if you’ve already slain the communist menace.

Now that the Western Free World has triumphantly won over communism, it can set its sights on dealing with long-term problems, ecological, climatic, infrastructural and political. Has this happened since the evil Russians were defeated? Capitalists—for whom short-term thinking is natural and endemic— continue to not expand their vision beyond “quarterly objectives”. They want their assets liquid and ready to move at any time. Is this the economic rationality capitalist are yammering about?


The origins of capitalist mythology go back to Adam Smith’s Wealth of Nations. This mythology is told and retold in introductory economic classes at the undergraduate college level. The trouble is, market fundamentalism today is nothing like what Smith argued for. I’ve exposed 25 myths of Smith’s that have been broken by the neoclassical, finance, monopoly capitalism of today. At the same time, I’ve tried to show that the socialism of Lenin-Stalin had some commendable qualities as well as shortcomings.

Lastly, I’ve named twelve crises that economies all over the world must face. How well has market fundamentalism solved them since 1990 when it had triumphed over socialism? The answer is that many of the crises have predated the capitalist restoration, but neoliberal capitalism has done nothing to solve them and, in most cases, made things worse. In addition, some crises are new and broke out after 1990 when market fundamentalism had control.

So, I ask you, name me one capitalist society that works? “Works” means it does what Adam Smith promised. A high standard of living not just for the elites but for the middle classes, the working classes and gradually the poor. A decrease in the amount of work done because of high technology. Opportunities for anyone to start a small business who wants to and a relatively stable economic life. Where is this happening? The United States? Hardly. The standard of living has been declining for 50 years. Germany? Up until about seven years ago, this claim might have been valid. No more. Japan? They have never recovered from the 1987 crash. Brazil, possibly for a while under Lula but no more. Argentina? Decades ago, but not since they were visited by the Chicago boys and now buried in debt. It’s a similar case as Chile. Western capitalism all over is a failure, it is incapable of solving the 12 problems I identified. It is collapsing.

Meanwhile, whether we call China state-capitalist or “socialism with Chinese characteristics”, it is clearly becoming a powerhouse. With its infrastructural projects including the Belt Road Initiative, it is providing selective countries with infrastructure and work. Through its alliance with Russia and Iran, it is helping the besieged socialist countries like Cuba and Venezuela survive the collapse of western capitalism and the constantly rising imperialist threats. Western capitalism is a collapsing failure and all the king’s’ horses and all the king’s’ men won’t be able to put Humpty together again.

Bruce Lerro has taught for 25 years as an adjunct college professor of psychology at Golden Gate University, Dominican University and Diablo Valley College. He has applied a Vygotskian socio-historical perspective to his four books: From Earth-Spirits to Sky-Gods: the Socio-ecological Origins of Monotheism, Individualism and Hyper-Abstract Reasoning Power in Eden: The Emergence of Gender Hierarchies in the Ancient World Co-Authored with Christopher Chase-Dunn Social Change: Globalization from the Stone Age to the Present and Lucifer’s Labyrinth: Individualism, Hyper-Abstract Thinking and the Process of Becoming Civilized He is also a representational artist specializing in pen-and-ink drawings. Bruce is a libertarian communist and lives in Olympia WA.

Originally published in Planning Beyond Capitalism



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